UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended June 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
______________________ to ______________________
Commission File Number: 033-73160
CALPINE CORPORATION
(A Delaware Corporation)
I.R.S. Employer Identification No. 77-0212977
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date:
$0.001 par value Common Stock 19,939,233 shares outstanding on August 12, 1997
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
For the Quarter Ended June 30, 1997
INDEX
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996..........................3
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996............4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996......................5
Notes to Condensed Consolidated Financial Statements.........6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings..................................20
ITEM 2. Change in Securities...............................20
ITEM 3. Defaults Upon Senior Securities....................20
ITEM 4. Submission of Matters to a Vote of Security
Holders............................................20
ITEM 5. Other Information..................................21
ITEM 6. Exhibits and Reports on Form 8-K...................21
Signatures....................................................................29
Exhibit Index.................................................................30
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 23,436 $ 100,010
Accounts receivable from related parties ................. 1,718 2,826
Accounts receivable from others .......................... 49,623 39,962
Notes receivable from related parties, current portion ... 15,564 --
Collateral securities, current portion ................... 6,056 5,470
Prepaid operating lease .................................. 13,652 12,668
Other current assets ..................................... 5,617 10,251
---------- ----------
Total current assets ................................. 115,666 171,187
Property, plant and equipment, net .......................... 691,444 650,053
Investments in power projects ............................... 78,451 13,937
Collateral securities, net of current portion ............... 85,453 89,806
Notes receivable from related parties, net of current portion 150,902 18,182
Notes receivable from Coperlasa ............................. 16,353 17,961
Restricted cash ............................................. 25,735 55,219
Other assets ................................................ 17,064 13,870
---------- ----------
Total assets ......................................... $1,181,068 $1,030,215
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of non-recourse project financing ........ $ 156,379 $ 30,627
Notes payable and short-term borrowings .................. 7,135 6,865
Accounts payable ......................................... 11,852 18,363
Accrued payroll and related expenses ..................... 3,393 3,912
Accrued interest payable ................................. 7,115 7,332
Other accrued expenses ................................... 6,972 7,870
---------- ----------
Total current liabilities ............................ 192,846 74,969
Long-term line of credit .................................... 14,300 --
Non-recourse project financing, net of current portion ...... 264,480 278,640
Senior Notes ................................................ 285,000 285,000
Deferred income taxes, net .................................. 129,932 100,385
Deferred lease incentive .................................... 76,737 78,521
Other liabilities ........................................... 8,265 9,573
---------- ----------
Total liabilities .................................... 971,560 827,088
---------- ----------
Stockholders' equity
Common stock ............................................. 20 20
Additional paid-in capital ............................... 166,433 165,412
Retained earnings ........................................ 43,055 37,695
Total stockholders' equity ........................... 209,508 203,127
---------- ----------
Total liabilities and stockholders' equity ........... $1,181,068 $1,030,215
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 1997 and 1996
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Electricity and steam sales ................ $ 62,639 $ 46,255 $ 96,326 $ 72,030
Service contract revenue ................... 1,715 2,848 3,529 5,434
Income from unconsolidated investments in
power projects ........................... 2,131 298 4,164 1,713
Interest income on loans to power projects . 1,259 920 2,956 2,817
--------- --------- --------- ---------
Total revenue .......................... 67,744 50,321 106,975 81,994
--------- --------- --------- ---------
Cost of revenue:
Plant operating expenses, depreciation,
operating lease expense and production
royalties................................ 35,537 27,363 64,276 46,835
Service contract expenses .................. 1,669 2,627 3,519 4,484
--------- --------- --------- ---------
Total cost of revenue .................. 37,206 29,990 67,795 51,319
--------- --------- --------- ---------
Gross profit .................................. 30,538 20,331 39,180 30,675
Project development expenses .................. 1,786 894 3,947 1,410
General and administrative expenses ........... 4,373 3,234 8,584 5,874
--------- --------- --------- ---------
Income from operations ................. 24,379 16,203 26,649 23,391
Other expense (income):
Interest expense ........................... 13,168 10,446 26,145 18,665
Other income, net .......................... (4,292) (2,244) (7,893) (2,777)
--------- --------- --------- ---------
Income before provision for income taxes 15,503 8,001 8,397 7,503
Provision for income taxes .................... 6,103 3,284 3,037 3,080
--------- --------- --------- ---------
Net income ............................. $ 9,400 $ 4,717 $ 5,360 $ 4,423
========= ========= ========= =========
Primary earnings per share:
Weighted average shares outstanding ........ 20,998 13,362 20,425 12,007
========= ========= ========= =========
Earnings per share ......................... $ 0.45 $ 0.35 $ 0.26 $ 0.37
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
CALPlNE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Net cash provided by operating activities ...................................... $ 16,800 $ 5,035
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment ................................ (57,616) (8,061)
Acquisition of Texas Cogeneration Company ................................... (36,411) --
Purchase of loans for Texas City and Clear Lake Power Plants ................ (155,622) --
Repayment of loans by Texas City and Clear Lake Power Plants ................ 5,737 --
Investment in King City, net of cash on hand ................................ -- (4,877)
Investment in King City collateral securities ............................... -- (98,414)
Acquisition of Calpine Gas Company .......................................... (7,621) --
Investments in power projects and capitalized costs ......................... (416) (2,983)
Loans to Coperlasa .......................................................... -- (12,104)
Maturities of collateral securities ......................................... 5,350 --
Decrease in restricted cash ................................................. 29,484 1,150
Other, net .................................................................. (3,382) (762)
--------- ---------
Net cash used in investing activities ................................. (220,497) (126,051)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of Senior Notes Due 2006 ............................. -- 180,000
Borrowings from line of credit .............................................. 14,300 33,800
Repayments of line of credit ................................................ -- (53,651)
Borrowings from bank ........................................................ -- 45,000
Repayments to bank .......................................................... -- (46,177)
Borrowings of non-recourse project financing ................................ 128,300 --
Repayments of non-recourse project financing ................................ (16,247) (66,600)
Proceeds from issuance of preferred stock ................................... -- 50,000
Proceeds from issuance of common stock ...................................... 954 --
Financing costs ............................................................. (251) (4,763)
Other, net .................................................................. 67 --
--------- ---------
Net cash provided by financing activities ............................. 127,123 137,609
--------- ---------
Net increase (decrease) in cash and cash equivalents ........................... (76,574) 16,593
Cash and cash equivalents, beginning of period ................................. 100,010 21,810
--------- ---------
Cash and cash equivalents, end of period ....................................... $ 23,436 $ 38,403
========= =========
Supplementary information -- cash paid during the period for:
Interest .................................................................... $ 27,039 $ 16,517
Income taxes ................................................................ $ 435 955
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
1. Organization and Operation of the Company
Calpine Corporation ("Calpine"), a Delaware corporation, and subsidiaries
(collectively, the "Company") are engaged in the development, acquisition,
ownership and operation of power generation facilities and the sale of
electricity and steam in the United States and selected international markets.
The Company has interests in and operates natural gas- fired cogeneration
facilities, geothermal steam fields and geothermal power generation facilities.
2. Summary of Significant Accounting Policies
Basis of Interim Presentation -- The accompanying interim condensed consolidated
financial statements of the Company have been prepared by the Company, without
audit by independent public accountants, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
condensed consolidated financial statements include all and only normal
recurring adjustments necessary to present fairly the information required to be
set forth therein. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements pursuant to such
rules and regulations and, accordingly, should be read in conjunction with the
audited consolidated financial statements of the Company included in the
Company's annual report on Form 10-K for the year ended December 31, 1996. The
results for interim periods are not necessarily indicative of the results for
the entire year.
Earnings Per Share -- Earnings per share is calculated using the weighted
average number of common shares and common equivalent shares, unless
antidilutive, using the treasury stock method for outstanding stock options. For
1996, net income per share also gives effect to common equivalent shares from
convertible preferred shares from the original date of issuance that
automatically converted to common shares upon completion of the Company's
initial public offering in September 1996 (using the if-converted method).
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share, which simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion ("APBO") No. 15. SFAS
No. 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share, which excludes dilution. SFAS No. 128
also requires dual presentation of basic and diluted earnings per share on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation. Diluted earnings per share is computed similarly
to fully diluted earnings per share pursuant to APBO No. 15. SFAS No. 128 must
be adopted for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. SFAS No.
128 requires restatement of all prior-period earnings per share data presented.
For the three and six months ended June 30, 1997, basic and diluted earnings per
share would not be materially different than the earnings per share presented in
the accompanying condensed consolidated statement of operations.
Capitalized interest -- The Company capitalizes interest on projects during the
construction period. For the three and six months ended June 30, 1997, the
Company capitalized $723,000 and $1.3 million, respectively, of interest in
connection with the construction of the Pasadena Power Plant. No interest was
capitalized in 1996.
Derivative Financial Instruments -- The Company engages in activities to manage
risks associated with changes in interest rates. The Company has entered into
swaps to reduce exposure to interest rate fluctuations in connection with
certain debt commitments. The instruments' cash flows mirror those of the
underlying exposures. Unrealized gains and losses relating to the instruments
are being deferred over the lives of the contracts. The premiums paid on the
instruments, as measured at inception, are being amortized over their respective
lives as components of interest expense. Any gains or losses realized upon the
early termination of these instruments are deferred and recognized in income
over the remaining life of the underlying exposure.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
At June 30, 1997, the Company had $151.7 million of interest rate swaps on
non-recourse project financing and $182.0 million of treasury rate locks and
enhanced forwards on senior notes issued by the Company in July 1997. During
July 1997, the Company extinguished non-recourse project financing related to
$64.2 million of interest rate hedges and terminated one swap related to $9.2
million of hedged debt.
Reclassifications -- Prior year amounts in the consolidated condensed financial
statements have been reclassified where necessary to conform to the 1997
presentation.
3. Accounts Receivable and Notes Receivable
Accounts receivable from related parties as of June 30, 1997 and December 31,
1996 are comprised of the following (in thousands):
June 30, December 31,
1997 1996
------ ------
(unaudited)
O.L.S. Energy-Agnews, Inc. ....... $ 833 $ 687
Geothermal Energy Partners, Ltd. . 191 350
Sumas Cogeneration Company, L.P. . 351 590
Texas Cogeneration Company ("TCC") 29 --
Electrowatt Ltd. and subsidiaries 314 1,199
------ ------
$1,718 $2,826
====== ======
Notes receivable from related parties as of June 30, 1997 and December 31, 1996
are comprised of the following (in thousands):
June 30, December 31,
1997 1996
--------- --------
(unaudited)
Darrel Jones ..................... $ 18,781 $ 18,182
Cogenron, Inc. (subsidiary of TCC) 47,688 --
Clear Lake Cogeneration, L.P. .....
(subsidiary of TCC) ............ 99,997 --
--------- --------
$166,466 $ 18,182
========= ========
Darrel Jones is the sole shareholder of Sumas Energy, Inc., the Company's
partner in Sumas Cogeneration Company, L.P. (see Note 4). See Note 5 for
information regarding TCC.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
4. Investments in Power Projects
The Company has unconsolidated investments in power projects which are
accounted for under the equity method. Unaudited financial information for the
six months ended June 30, 1997 and 1996 related to these investments is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------------------- ------------------------------------------
Sumas O.L.S. Geothermal Sumas O.L.S. Geothermal
Cogeneration Energy- Energy Texas Cogeneration Energy- Energy
Company, Agnews, Partners, Cogeneration Company, Agnews, Partners,
L.P. Inc. Ltd. Company L.P. Inc. Ltd.
-------------- --------- ------------- ------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue .............. $19,354 $ 6,020 $11,584 $ 5,786 $21,561 $ 4,604 $ 9,576
Operating expenses ... 7,325 5,654 4,982 4,855 12,752 4,349 6,219
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations ......... 12,029 366 6,602 931 8,809 255 3,357
Other expenses, net .. 5,167 1,170 1,784 236 5,098 1,040 2,444
------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 6,862 $ (804) $ 4,818 $ 695 $ 3,711 $ (785) $ 913
======= ======= ======= ======= ======= ======= =======
Company's share of net
income (loss) ...... $ 3,906 $ (124) $ 224 $ 158 $ 1,855 $ (179) $ 37
======= ======= ======= ======= ======= ======= =======
</TABLE>
5. Texas Cogeneration Company Transaction
On June 23, 1997, Calpine completed the acquisition of a 50% equity interest in
the Texas City cogeneration facility (the "Texas City Power Plant") and the
Clear Lake cogeneration facility (the "Clear Lake Power Plant") for a total
purchase price of $35.4 million, subject to final adjustments. The Company
acquired its 50% interest in these plants through the acquisition of 50% of the
capital stock of Enron Dominion Cogen Corp. ("EDCC") from Enron Power Corp., a
wholly owned subsidiary of Enron Corp. ("Enron"). EDCC was subsequently renamed
Texas Cogeneration Company ("TCC"). The other 50% shareholder interest in TCC is
owned by Dominion Cogen, Inc. In addition to the purchase of 50% of the stock of
TCC, Calpine, through its wholly owned subsidiary, Calpine Finance Company
("CFC"), purchased from the existing lenders the $155.6 million of outstanding
non-recourse project debt of the Texas City Power Plant (approximately $53.0
million) and the Clear Lake Power Plant (approximately $102.6 million). The
acquisition of the capital stock of TCC and the purchase of the outstanding debt
from the existing lenders were financed with approximately $125.0 million of
non-recourse debt provided by The Bank of Nova Scotia, $14.3 million of
borrowings from the revolving line of credit, and $55.8 million of equity
provided by the Company (see Notes 7 and 8 for more information regarding the
revolving line of credit and the $125.0 million of non-recourse debt).
The Company accounts for its investment in TCC under the equity method because
control of TCC is deemed to be shared with Dominion Cogen, Inc. The Texas City
and Clear Lake Power Plants are operated by the Company under a one-year
contract with automatic renewal provisions.
Texas City Power Plant -- The Texas City Power Plant is a 450 megawatt natural
gas-fired combined-cycle cogeneration facility located in Texas City, Texas. The
Texas City Power Plant commenced commercial operation in June 1987.
Electricity generated by the Texas City Power Plant is sold under two separate
long-term agreements to (i) Texas Utilities Generating Company ("TUEC") under an
original 12-year power sales agreement terminating in June 1999 and (ii) Union
Carbide Company ("UCC") under an original 12-year power sales agreement
terminating in June 1999. Each power sales agreement contains provisions for
capacity and energy. The TUEC power sales agreement provides for a firm capacity
payment for 410 megawatts. The UCC power sales agreement provides for a firm
capacity payment for 20 megawatts.
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
Natural gas requirements for the Texas City Power Plant are allocated between
UCC, DEI Texas, Inc. ("DEI"), an affiliate of Dominion Cogen Inc., and Enron
Capital and Trading Corporation ("ECT") pursuant to a contractual arrangement.
UCC and DEI currently provide approximately 25% and 56%, respectively, of the
fuel requirements of the Texas City Power Plant. The three fuel contracts are
effective through June 1999. Under the fuel contracts, approximately 19% of the
total fuel requirements of the Texas City Power Plant is supplied at spot market
prices. The remainder is purchased at fixed rates which are currently above spot
market prices.
Clear Lake Power Plant -- The Clear Lake Power Plant is a 377 megawatt natural
gas/hydrogen-fired combined-cycle cogeneration facility located in Pasadena,
Texas. The Clear Lake Power Plant commenced commercial operation in December
1984.
Electricity generated by the Clear Lake Power Plant is sold under three
separate long-term agreements to (i) Texas New Mexico Power Company ("TNP")
under an original 20-year power sales agreement terminating in 2004, (ii)
Houston Light & Power Company ("HL&P") under an original 10-year power sales
agreement terminating in 2005, and (ii) Hoescht Celanese Chemical Group ("HCCG")
under an original 10-year power sales agreement terminating in 2004. Each power
sales agreement contains provisions for capacity and energy payments.
The TNP power sales agreement provides for a firm capacity payment of
production between 200 and 250 megawatts based on 98% of HL&P's tariff under its
TNP contract. The HL&P power sales agreement provides for firm capacity payment
for 50 megawatts for the term of the agreement, subject to adjustment under
certain specified conditions. The HCCG power sales agreement provides for firm
capacity payment for 35 megawatts for the term of the agreement. The TNP energy
price is based on 98% of HL&P's tariff under its TNP contract. HL&P's and HCCG's
energy payments are based on HL&P's weighted average cost of gas, or contractual
heat rates and operations and maintenance adder.
The natural gas for the Clear Lake Power Plant is purchased primarily from TCC,
which receives its fuel from ECT on a tiered price basis consisting of a fixed
priced tier escalating at 5% annually and two index-priced tiers. A small
portion of the natural gas requirements is purchased from ECT at index prices.
In addition, the facility burns hydrogen provided by HCCG, amounting to
approximately 5% of the Clear Lake Power Plant's total fuel requirements.
6. Calpine Gas Company Transaction
On January 31, 1997, the Company acquired the outstanding capital stock of
Montis Niger, Inc., a natural gas production company, and certain gas reserves
from Radnor Power, a wholly-owned subsidiary of LFC Financial Corp., for $7.1
million. In addition, the Company paid $824,000 for certain working capital
items. The Company's allocation of the purchase price is subject to final
adjustments. Montis Niger, subsequently renamed to Calpine Gas Company, owns
proven natural gas reserves and an 80-mile pipeline system which provides gas to
the Company's Greenleaf 1 and 2 Power Plants in northern California. The Company
paid $7.6 million in cash for a portion of the purchase price and working
capital items, and recorded a $600,000 liability for the remainder of the
purchase price due upon completion of certain drilling obligations.
7. Revolving Credit Facility
At June 30, 1997, the Company had a $50.0 million credit facility available
with a consortium of commercial lending institutions which include The Bank of
Nova Scotia, International Nederlanden U.S. Capital Corporation, Sumitomo Bank
of California and Canadian Imperial Bank of Commerce. At June 30, 1997, the
Company had $14.3 million of borrowings and $2.7 million of letters of credit
outstanding under the credit facility. Borrowings bear interest at The Bank of
Nova Scotia's base rate plus an applicable margin or at the London Interbank
Offered Rate ("LIBOR")
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<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
plus an applicable margin (approximately 9.4% at June 30, 1997). Interest is
paid on the last day of each interest period for such loans, but not less often
than quarterly. The credit agreement expires in September 1999.
On July 1, 1997, the Company had an additional $6.0 million of letters of
credit outstanding related to the purchase of firm capacity and energy between
HL&P and the Clear Lake Power Plant. On July 8, 1997, the Company repaid the
$14.3 million of borrowings with proceeds from the 8-3/4% Senior Notes Due 2007
(see Note 9).
8. Non-Recourse Project Financing
Note Payable to Bank -- On June 23, 1997, the Company entered into a $125.0
million non-recourse financing with The Bank of Nova Scotia, the proceeds of
which were utilized for the acquisition of the 50% interest in TCC and the
purchase from the lenders of $155.6 million of outstanding non-recourse project
debt (see Note 5). The $125.0 million non-recourse financing matures on June 22,
1998 and is expected to be repaid prior to maturity with the proceeds of a
planned refinancing of the $155.6 million non-recourse project debt. On June 30,
1997, $119.3 million of borrowings were outstanding which bear interest at The
Bank of Nova Scotia's base rate plus an applicable margin or at LIBOR plus an
applicable margin (approximately 7.0% at June 30, 1997). In July 1997, the
Company utilized existing swap arrangements to minimize the impact of potential
changes in interest rates on the project debt. The effective interest rate
including the effect of the existing swap arrangement was approximately 8.4%.
Senior-Term and Junior Term Loans -- The Company entered into the Senior-Term
and Junior Term Loans in connection with the Company's acquisition of Calpine
Geysers Company in 1993. On June 30, 1997, $102.7 million of such loans were
outstanding. On July 8, 1997, the Company repaid all Senior-Term and Junior-Term
Loans before their maturity date from the proceeds of the 8-3/4% Senior Notes
Due 2007 (see Note 9). In connection with this transaction, the Company
terminated one swap transaction and retained one swap transaction. The Company
had entered into these swap transactions to minimize the impact of changes in
interest rates on a portion of the Senior- Term loans and had an effective rate
of 9.9% on June 30, 1997.
9. Senior Notes Due 2007
On July 8, 1997, the Company issued $200.0 million aggregate principal amount
of 8-3/4% Senior Notes Due 2007. The net proceeds of $195.0 million were used as
follows: (i) $102.7 million to repay non-recourse project financing related to
Calpine Geysers Company, (ii) $6.4 million to repay a note payable to Natomas
Energy Company related to the purchase of Thermal Power Company which matures in
September 1997, (iii) $14.3 million to repay borrowings under The Bank of Nova
Scotia Revolving Credit Facility, (iv) $728,000 to repay a note payable to Santa
Fe Geothermal, Inc. which matures in December 1997, and (v) approximately $70.9
million for general corporate purposes. Transaction costs incurred in connection
with the debt offering were recorded as a deferred charge and are amortized over
the ten-year life of the 8-3/4% Senior Notes Due 2007 using the effective
interest rate method.
In May and June 1997, the Company executed five interest rate hedging
transactions related to debt with a notational value of $182.0 million and
designed to eliminate interest rate risk for the period from May 1997 to July 8,
1997 when the 8-3/4% Senior Notes Due 2007 were priced. These interest rate
hedging transactions were designated as a hedge of the anticipated bond
offering, and the resulting $3.0 million cost resulting from the hedges is
amortized over the life of the bond. The effective interest rate after the
hedging transactions and the amortization of deferred costs is 9.0%.
The 8-3/4% Senior Notes Due 2007 will mature on July 15, 2007. The Company has
no sinking fund or mandatory redemption obligations with respect to the 8-3/4%
Senior Notes Due 2007. Interest is payable semi-annually on January 15 and July
15 of each year while the 8-3/4% Senior Notes Due 2007 are outstanding,
commencing on January 15, 1998.
- 10 -
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
10. Preferred Share Purchase Rights
On June 5, 1997, the Board of Directors adopted a Stockholders Right Plan to
strengthen the Board's ability to protect Calpine's stockholders. The Rights
Plan is designed to protect against abusive or coercive takeover tactics that
are not in the best interests of Calpine and its stockholders. To implement the
Rights Plan, the Board of Directors declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock, par value
$0.001 per share, held on record as of June 18, 1997. On June 30, 1997, there
were 19,905,233 Rights outstanding. Each Right initially represents a contingent
right to purchase, under certain circumstances, one one-thousandth of a share (a
"Unit") of Series A Junior Participating Preferred Stock, par value $0.001 per
share (the "Preferred Stock"), of the Company at a price of $80.00 per Unit,
subject to adjustment. The Rights become exercisable and trade independently
from Calpine's Common Stock upon the public announcement of the acquisition by a
person or group of 15% or more of the Company's Common Stock, or ten days after
commencement of a tender or exchange offer that would result in the acquisition
of 15% or more of the Company's Common Stock. Each Unit of Preferred Stock
purchased upon exercise of the Rights will be entitled to a dividend equal to
any dividend declared per share of Common Stock and will have one vote, voting
together with the Common Stock. In the event of liquidation, each unit of
Preferred Stock will be entitled to any payment made per share of Common Stock.
If Calpine is acquired in a merger or other business combination transaction
after a person or group has acquired 15% or more of the Company's Common Stock,
each Right will entitle its holder to purchase, at the Right's exercise price, a
number of the acquiring company's common shares having a market value of twice
such exercise price. In addition, if a person or group acquires 15% or more of
Calpine's Common Stock, each Right will entitle its holder (other than the
acquiring person or group) to purchase, at the Right's exercise price, a number
of fractional shares of Calpine's Preferred Stock or shares of Common Stock
having a market value of twice such exercise price.
The Rights expire June 18, 2007 unless redeemed earlier by Calpine's Board of
Directors. The rights can be redeemed by the Board at a price of $0.01 per Right
at any time before the Rights become exercisable, and thereafter only in limited
circumstances.
11. Contingencies
CPUC Restructuring -- Electricity and steam sales agreements with PG&E are
regulated by the California Public Utilities Commission ("CPUC"). In December
1995, the CPUC proposed the transition of the electric generation market to a
competitive market beginning January 1, 1998, with all consumers participating
by 2003. Since the proposed restructure results in widespread impact on the
market structure and requires participation and oversight of the Federal Energy
Regulatory Commission ("FERC"), the CPUC has sought to build a California
consensus involving the legislature, the Governor, public and municipal
utilities and customers. The consensus has resulted in filings with the FERC
which should permit both the CPUC and FERC to collectively proceed with
implementation of the new competitive market structure. On September 23, 1996,
state legislation was passed, AB 1890 (the "Bill"), which codified much of the
CPUC decision and directed the CPUC to proceed with implementation of
restructure no later than January 1, 1998. The Bill accelerated the transition
period to a fully competitive market from five years to four years with all
consumers participating by the year 2002. The Bill provided for an electricity
rate freeze for the period of transition and mandated through issuance of rate
reduction bonds a 10% rate reduction for small commercial and residential
customers effective January 1, 1998. The proposed restructuring provides for
phased-in customer choice (direct access), development of a non-discriminatory
market structure, full recovery of utility stranded costs, sanctity of existing
contracts, and continuation of existing public policy programs including funds
for enhancement of in-state renewable energy technologies during the transition
period. In May 1997, the CPUC ruled that all utility customers will be able to
choose their electricity supplier beginning January 1, 1998. The Company cannot
predict the final form or timing of the proposed restructuring and the impact,
if any, that such restructuring would have on the Company's
- 11 -
<PAGE>
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1997
existing business or results of operations. The Company believes that any such
restructuring would not have a material effect on its power sales agreements
and, accordingly, believes that its existing business and results of operations
would not be materially adversely affected, although there can be no assurance
in this regard.
Litigation -- The Company is involved in various claims and legal actions
arising out of the normal course of business. Management believes that these
matters will not have a material impact on the financial position or results of
operations of the Company, although there can be no assurance in this regard.
- 12 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for historical financial information contained herein, the matters
discussed in this quarterly report on Form 10-Q may be considered
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended and subject to the safe harbor created by the Securities Litigation
Reform Act of 1995. Such statements include declarations regarding the intent,
belief or current expectations of the Company and its management. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties; actual results could differ materially from those indicated by
such forward-looking statements. Among the important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements are: (i) that the information is of a preliminary nature and may be
subject to further adjustment, (ii) the possible unavailability of financing,
(iii) risks related to the development, acquisition and operation of power
plants, (iv) the impact of avoided cost pricing and energy price fluctuations,
(v) the impact of curtailment, (vi) the seasonal nature of the Company's
business, (vii) start-up risks, (viii) general operating risks, (ix) the
dependence on third parties, (x) risks associated with international
investments, (xi) risks associated with the power marketing business, (xii)
changes in government regulation, (xiii) the availability of natural gas, (xiv)
the effects of competition, (xv) the dependence on senior management, (xvi)
volatility in the Company's stock price, (xvii) fluctuations in quarterly
results and seasonality, and (xviii) other risks identified from time to time in
the Company's reports and registration statements filed with the Securities and
Exchange Commission.
OVERVIEW
Calpine is engaged in the acquisition, development, ownership and operation of
power generation facilities and the sale of electricity and steam in the United
States and selected international markets. The Company has interests in 17 power
generation facilities and steam fields having an aggregate capacity of 1,874
megawatts. In addition, Calpine has a 240 megawatt gas-fired power generation
facility under construction in Pasadena, Texas and pending acquisitions, subject
to the fulfillment of all required conditions, of 50% interests in two gas-fired
facilities with an aggregate capacity of 390 megawatts in Virginia and Florida.
On January 31, 1997, the Company acquired the Calpine Gas Fields (formerly the
Montis Niger Gas Fields) for a total price of approximately $7.1 million plus
$824,000 for certain working capital items. The Calpine Gas Fields have 9.7
billion cubic feet of estimated proven gas reserves and an 80-mile pipeline
system which provide gas to the Company's Greenleaf 1 and 2 Power Plants.
In February 1997, the Company commenced construction of a 240 megawatt
gas-fired cogeneration project at the Phillips Houston Chemical Complex ("HCC")
located in Pasadena, Texas (the "Pasadena Cogeneration Project"). The Company
has entered into an agreement to supply HCC with approximately 90 megawatts,
with the remainder of available electricity output to be sold into the
competitive market. The Pasadena Cogeneration Project is the first merchant
power plant to be financed with non-recourse project debt and is scheduled to be
operational in 1998. In February 1997, the Company announced the development of
a 480 megawatt gas-fired cogeneration project in Sutter County, in northern
California (the "Sutter Cogeneration Project"). The Sutter Cogeneration Project
would be northern California's first merchant power plant. The Sutter
Cogeneration project is expected to provide electricity to the deregulated
California power market commencing in the year 2000. The Company is currently
pursuing regulatory agency permits for this project.
On May 16, 1997, the Company entered into agreements to acquire 50% interests
in the 240 megawatt Gordonsville Power Plant located west of Richmond, Virginia
and the 150 megawatt Auburndale Power Plant located outside of Orlando, Florida.
The Company currently expects to complete the acquisition upon the fulfillment
of all required conditions. However, there can be no assurances that the Company
will successfully complete this acquisition.
- 13 -
<PAGE>
On June 23, 1997, the Company completed the acquisition of a 50% equity
interest in the 450 megawatt Texas City Power Plant and the 377 megawatt Clear
Lake Power Plant for an aggregate purchase price of $35.4 million. As a part of
that acquisition, the Company entered into a $125.0 million non-recourse
financing agreement with The Bank of Nova Scotia, the proceeds of which were
utilized for the acquisition of the 50% equity interest and the purchase of
$155.6 million of outstanding non-recourse project debt associated with the
Texas City and Clear Lake Power Plants. The Company accounts for its 50% share
of earnings from the Texas City and Clear Lake Power Plants under the equity
method of accounting and such earnings are included in "income from
unconsolidated investments in power projects".
Included in the results of operations for the three and six months ended June
30, 1997 are the King City and Gilroy Power Plants which each have a generating
capacity of 120 megawatts. The King City Power Plant has been included in the
Company's consolidated results of operations since the May 2, 1996 effective
date of the operating lease, and the Gilroy Power Plant since its acquisition on
August 29, 1996. As scheduled by PG&E and in accordance with their respective
power sales agreements, the King City and Gilroy Power Plants did not generate
electricity during the four months ended April 30, 1997. As scheduled, both
power plants resumed operation on May 1, 1997.
Each of the Company's consolidated power plants produces electricity for sale
to a utility or, in certain instances, other third-party purchasers. Thermal
energy produced by the gas-fired cogeneration facilities is sold to governmental
and industrial users, and steam produced by the geothermal steam fields is sold
to utility-owned power plants. The electricity, thermal energy and steam
generated by these facilities are typically sold pursuant to long-term,
take-and- pay power or steam sales agreements generally having original terms of
20 or 30 years. The Company has a net interest of 421 megawatts of the aggregate
capacity generated by nine power plants that deliver electricity to Pacific Gas
and Electric Company ("PG&E") under separate long-term power sales agreements.
Each of these agreements provides for both capacity payments and energy payments
for the term of the agreement. During the initial ten-year period of certain
agreements, PG&E pays a fixed price for each unit of electrical energy according
to schedules set forth in such agreements (which represent 17%, or 73 megawatts,
of such net interest). The fixed price periods under these power sales
agreements expire at various times from 1998 through 2000. After the fixed price
periods expire, while the basis for the capacity and capacity bonus payments
under these power sales agreements remains the same, the energy payments adjust
to PG&E's then avoided cost of energy, which is determined and published each
month by the utility. The term "avoided cost" refers to the incremental costs
that an electric utility would incur to produce or purchase an amount of power
equivalent to that purchased from QFs. On December 9, 1996, the CPUC approved a
new methodology for the calculation of short-run avoided cost ("SRAC"), which
was effective retroactive to October 1, 1996 and will continue until the
independent power exchange has commenced operations and is functioning properly.
The independent power exchange is scheduled to commence operations on January 1,
1998. Thereafter, the SRAC will become the energy clearing price of the
independent power exchange. The currently prevailing SRAC is substantially lower
than the fixed energy prices under these power sales agreements and is generally
expected to remain so. While SRAC does not affect capacity payments under the
power sales agreements, in the event that the SRAC does not increase
significantly, the Company's energy revenues under these power sales agreements
would be materially reduced at the expiration of the fixed price period. Such
reduction may have a material adverse effect on the Company's results of
operations. The Company cannot predict the likely level of SRAC prices at the
expiration of the fixed price periods. The majority of the capacity revenues are
paid during the months of May through October. Prices paid for the steam
delivered by the Company's steam fields are based on a formula that partially
reflects the price levels of nuclear and fossil fuels, and therefore, a
reduction in the price levels of such fuels may reduce revenue under the steam
sales agreements for the steam fields.
Certain of the Company's power and steam sales agreements contain curtailment
provisions under which the purchasers of energy or steam are entitled to reduce
the number of hours of energy or amount of steam purchased thereunder. For the
year ended December 31, 1996, certain of the Company's power generation
facilities experienced maximum curtailment primarily as a result of low gas
prices and a high degree of precipitation during the period which resulted in
high levels of energy generation by hydroelectric power facilities that supply
electricity. For the three and six months ended June 30, 1997, such facilities
experienced a reduced amount of curtailment compared to the same periods in
1996. Due to an amendment to the power sales contracts executed in April 1997,
the Company currently does not expect curtailment during the remainder of the
term of the power sales agreements for these power plants.
- 14 -
<PAGE>
Many states are implementing or considering regulatory initiatives designed to
increase competition in the domestic power generation industry. In December
1995, the CPUC issued an electric industry restructuring decision which
envisions commencement of deregulation and implementation of customer choice of
electricity supplier by January 1, 1998. Legislation implementing this decision
was adopted in September 1996. As part of its policy decision, the CPUC
indicated that power sales agreements of existing qualifying facilities would be
honored. The Company cannot predict the final form or timing of the proposed
restructuring and the impact, if any, that such restructuring would have on the
Company's existing business or results of operation. The Company believes that
any such restructuring would not have a material effect on its power sales
agreements and, accordingly, believes that its existing business and results of
operations would not be materially adversely affected, although there can be no
assurance in this regard.
SELECTED OPERATING DATA
Set forth below is certain selected operating information for the power plants
and steam fields for which results are consolidated in the Company's statement
of operations. The information set forth under power plants consists of the
results for the West Ford Flat and Bear Canyon Power Plants, the Greenleaf 1 and
2 Power Plants, the Watsonville Power Plant, the King City Power Plant since May
2, 1996, and the Gilroy Power Plant since August 29, 1996. The information set
forth under steam fields consists of the results for the PG&E Unit 13 and Unit
16 Steam Fields, the SMUDGEO #1 Steam Fields and the Calpine Thermal Steam
Fields (dollar amounts in thousands, except per kilowatt hour amounts).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Power Plants
Electricity revenues
Energy $ 25,293 $ 19,022 $ 44,270 $ 34,362
Capacity $ 26,762 $ 18,208 $ 31,943 $ 19,774
Megawatt hours produced 552,057 408,413 820,666 739,088
Average energy rate per
kilowatt hour produced $ 0.0458 $ 0.0466 $ 0.0539 $ 0.0465
Steam Fields
Steam revenues $ 10,584 $ 9,025 $ 20,113 $ 17,895
Megawatt hours produced 672,233 485,389 1,279,071 1,041,428
Average energy rate per
kilowatt hour produced $ 0.0157 $ 0.0186 $ 0.0157 $ 0.0172
</TABLE>
Electric energy and capacity revenue increased for the three and six months
ended June 30, 1997 compared to the same periods in 1996, primarily due to the
Gilroy and King City Power Plants.
Megawatt hours produced by power plants increased in 1997 compared to the same
periods in 1996, primarily due to 121,000 megawatt hours produced by the Gilroy
Power Plant for the three and six months ended June 30, 1997. The Gilroy Power
Plant was acquired by the Company in August 1996. During the six months ended
June 30, 1997, Greenleaf 1 Power Plant production declined by 51,000 megawatt
hours as it did not operate for the period from January 1 to February 26, 1997
due to flooding in the vicinity of the power plant. The average energy rate per
kilowatt hour produced for all power plants declined for the three months ended
June 30, 1997 compared to the same period in 1996, primarily due to lower priced
Gilroy energy production. The average energy rate per kilowatt hour produced for
all power plants increased for the six months ended June 30, 1997 compared to
the same period in 1996, reflecting increases in the average energy prices per
kilowatt hour produced during 1997 at certain gas-fired power plants.
Steam field megawatt hours produced increased for the three and six months
ended June 30, 1997 compared to the same periods in 1996, primarily due to more
production and less curtailment during 1997. During 1996, PG&E Unit 13 was shut
down from March 23 to May 25 for installation of a new turbine rotor. In
addition, the SMUDGEO#1 power plant was shut down from April 21 to June 5, 1996
for a scheduled overhaul. The average
- 15 -
<PAGE>
energy rates per kilowatt hour produced during 1997 were lower than the prices
for the comparable periods in 1996, primarily due to lower prices in accordance
with the power sales agreements.
OTHER FINANCIAL DATA AND RATIOS
Set forth below are certain other financial data and ratios for the periods
indicated (in thousands, except ratio data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
----------- --------- --------- --------
<S> <C> <C> <C> <C>
Depreciation and amortization $ 12,216 $ 8,475 $ 23,548 $15,350
Interest expense per indenture $ 14,453 $ 11,528 $ 28,621 $20,081
EBITDA $ 43,218 $ 27,783 $ 62,697 $41,136
EBITDA to interest expense per indenture 2.99x 2.41x 2.19x 2.05x
</TABLE>
EBITDA is defined as income from operations plus depreciation, capitalized
interest, other income, non-cash charges and cash received from investments in
power projects, reduced by the income from unconsolidated investments in power
projects. EBITDA is presented not as a measure of operating results, but rather
as a measure of the Company's ability to service debt. EBITDA should not be
construed as an alternative either (i) to income from operations (determined in
accordance with generally accepted accounting principles) or (ii) to cash flows
from operating activities (determined in accordance with generally accepted
accounting principles).
Interest expense per indenture is defined as total interest expense plus
one-third of all operating lease obligations, dividends paid in respect to
preferred stock and cash contributions to any employee stock ownership plan used
to pay interest on loans to purchase capital stock of the Company.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 1997 Compared to Three and Six Months Ended
June 30, 1996
Revenue. Total revenue was $67.7 million and $107.0 million for the three and
six months ended June 30, 1997 compared to $50.3 million and $82.0 million for
the comparable periods in 1996. Electricity and steam sales revenue increased
35% and 34% to $62.6 million and $96.3 million for the three and six months
ended June 30, 1997 compared to $46.3 million and $72.0 million for the
comparable periods in 1996. The increase for the three months ended June 30,
1997 was primarily due to $11.0 million of revenue from the Gilroy Power Plant
acquired in August 1996, $1.4 million of higher revenue from the King City Power
Plant (included in Company operations since May 1996), and $3.4 million of
higher revenue from the Company's geothermal facilities. The increase for the
six months ended June 30, 1997 was primarily due to $13.5 million of revenue
from the Gilroy Power Plant, $2.6 million of higher revenue from the King City
Power Plant, $5.9 million of higher revenue from the Company's geothermal power
plants, and $2.4 million due to increased prices or production at other Company
gas-fired power plants. As scheduled, the King City and Gilroy Power Plants did
not generate electrical energy and did not earn energy revenue during the four
months ended April 30, 1997. Included in geothermal revenue are revenue from the
West Ford Flat and Bear Canyon Power Plants which increased by $1.8 million and
$3.7 million for the three and six months ended June 30, 1997 compared to the
same periods in 1996, primarily due to increased kilowatt hour generation. The
West Ford Flat and Bear Canyon Power Plants were curtailed under their power
sales agreements for approximately $251,000 and $1.9 million of revenue during
the three and six months ended June 30, 1997, compared to approximately $2.3
million and $4.9 million of revenue during the same periods in 1996. Thermal
Power Company also contributed $859,000 and $1.8 million more revenue for the
three and six months ended June 30, 1997 than the same periods in 1996 due to
increased steam sales under the alternative pricing agreement entered into with
PG&E in March 1996. Service contract revenue decreased 39% and 35% to $1.7
million and $2.8 for the three and six months ended June 30, 1997 compared to
$3.5 and $5.4 million primarily due to overhauls at the Aidlin and Agnews power
plants during 1996. Income from unconsolidated investments in power projects
increased to $2.1 million and $4.2 million for the three and six months ended
June 30, 1997 compared to $298,000 and $1.7 million for the same periods in
1996. The increase is primarily attributable to increased equity income from the
Company's investment
- 16 -
<PAGE>
in Sumas Cogeneration Company, L.P. ("Sumas"). The increase in Sumas income was
primarily due to lower operating costs in 1997 as the plant operated at minimum
capacity from February to June 1997 in accordance with the the power sales
agreement. However, Sumas also received a higher price for energy sold and
certain other payments from Puget Sound Power and Light Company under the power
sales agreement. In addition, operating costs were lower in 1997 Interest income
on loans to power projects increased 41% and 4% to $1.3 million and $3.0 million
for the three and six months ended June 30, 1997 compared to $920,000 and $2.8
million for the comparable periods in 1996, primarily related to interest income
on the loans to the sole shareholder of Sumas Energy, Inc., the Company's
partner in the Sumas project.
Cost of revenue. Cost of revenue increased 24% and 32% to $37.2 million and
$67.8 million for the three and six months ended June 30, 1997 compared to $30.0
million and $51.3 million for the comparable periods in 1996. The increase was
primarily due to plant operating, depreciation and operating lease expenses
attributable to the operations of the King City and Gilroy Power Plants which
have been included in the Company's operations since May 2, 1996 and August 29,
1996, respectively.
Project development expenses increased to $1.8 million and $3.9 million for the
three and six months ended June 30, 1997 compared to $894,000 and $1.4 million
for the same periods in 1996. The increase was due primarily to expanded
business acquisition and development activities.
General and administrative expenses. General and administrative expenses
increased 38% and 46% to $4.4 million and $8.6 million for the three and six
months ended June 30, 1997 compared to $3.2 million and $5.9 million for the
same periods in 1996. The increase in 1997 was due to additional personnel and
related expenses necessary to support the Company's expanded operations.
Interest expense. Interest expense increased to $13.2 million and $26.1 million
for the three and six months ended June 30, 1997 compared to $10.4 million and
$18.7 million for the comparable periods in 1996. The 27% increase for the three
months ended June 30, 1996 compared to the same period in 1996 was attributable
to $2.4 million of interest on debt related to the Gilroy Power Plant acquired
in August 1996 and $2.4 million of increased interest on the 10 1/2% Senior
Notes Due 2006 issued in May 1996, offset by $723,000 of interest capitalized
for the construction of the Pasadena Power Plant and a $1.5 million decrease in
interest expense primarily as a result of repayments of principal on certain
non-recourse project financings and other short-term borrowings. The 40%
increase for the six months ended June 30, 1997 compared to the same period in
1996 was attributable to $7.3 million of increased interest expense related to
the 10 1/2% Senior Notes Due 2006 issued in May 1996 and $4.7 million of
interest on debt related to the Gilroy Power Plant acquired in August 1996,
offset by $1.3 million of interest capitalized for the construction of the
Pasadena Power Plant and a $3.2 million decrease in interest expense primarily
as a result of repayments of principal on certain non-recourse project
financings and other short-term borrowings.
Other income, net. Other income, net increased to $4.3 million and $7.9 million
for the three and six months ended June 30, 1997 compared to $2.2 million and
$2.8 million for the same periods in 1996 due to interest earned on higher cash
and cash equivalent balances and interest income earned on the collateral
securities for the King City Power Plant.
Provision for income taxes. The effective income tax rate was approximately 39%
and 36% for the three and six months ended June 30, 1997. The effective tax rate
differs from the federal statutory rate due to the effect of state tax rates
offset by depletion in excess of tax basis benefits at the Company's geothermal
facilities. The effective rate for the three and six months ended June 30, 1996
was 41% which approximates federal and state statutory tax rates.
- 17 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the Company cash flow activities for the periods
indicated (in thousands):
Six Months Ended
June 30,
1997 1996
---------- ----------
Cash flows from:
Operating activities $ 16,800 $ 5,035
Investing activities (220,497) (126,051)
Financing activities 127,123 137,609
---------- ----------
Total $ (76,574) $ 16,593
========== ==========
Operating activities provided $16.8 million for the six months ended June 30,
1997 consisting of approximately $5.4 million of net income from operations,
$1.9 million in deferred income taxes, $21.8 million of depreciation and
amortization, $15.7 million net decrease in operating assets and liabilities,
$6.1 million partnership distribution from unconsolidated investments in power
projects and $1.6 million distribution from Coperlasa, offset by $4.2 million of
income from unconsolidated investments in power projects.
Investing activities used $220.5 million during the six months ended June 30,
1997, primarily due to $192.0 million for the acquisition of Texas Cogeneration
Company and the related notes receivable, $39.7 million of capital expenditures
related to the construction of the Pasadena Power Plant, $17.9 million of other
capital expenditures, $7.6 million for the acquisition of Calpine Gas Company,
offset by a $5.7 million loan payment from Texas City and Clear Lake Power
Plants, $5.3 million of collateral security maturities in connection with the
King City Power Plant and a $29.5 million decrease in restricted cash, primarily
related to the Pasadena Power Plant.
Financing activities provided $127.1 million of cash during the six months ended
June 30, 1997 consisting of $139.3 million of borrowings for the acquisition of
Texas Cogeneration Company and the related debt, $3.3 million of borrowings for
contingent consideration in connection with the acquisition of the Gilroy Power
Plant, offset by $15.9 million repayment of non-recourse project debt.
As of June 30, 1997, cash and cash equivalents were $23.4 million and working
capital was a negative $77.2 million. For the six months ended June 30, 1997,
cash and cash equivalents decreased by $76.6 million and working capital
decreased by $173.4 million as compared to the period ended December 31, 1996.
The decrease in working capital is primarily due to the use of available cash
and proceeds from a non-recourse project financing due June 1998 in the
acquisition of Texas Cogeneration Company and in the purchase of the
non-recourse project financing of the Texas City and Clear Lake Power Plants.
As a developer, owner and operator of power generation projects, the Company may
be required to make long-term commitments and investments of substantial capital
for its projects. The Company historically has financed these capital
requirements with borrowings under its credit facilities, other lines of credit,
non-recourse project financing or long-term debt.
At June 30, 1997, the Company had outstanding $105.0 million of 9 1/4% Senior
Notes Due 2004 which mature on February 1, 2004 and bear interest payable
semi-annually on February 1 and August 1 of each year. In addition, the Company
had $180.0 million of 10 1/2% Senior Notes Due 2006 which mature on May 15, 2006
and bear interest payable semi-annually on May 15 and November 15 of each year.
Under the provisions of the applicable indentures, the Company may, under
certain circumstances, be limited in its ability to make restricted payments, as
defined, which include dividends and certain purchases and investments, incur
additional indebtedness and engage in certain transactions. On July 8, 1997, the
Company issued $200.0 million of 8 3/4% Senior Notes Due 2007 which mature on
July 15, 2007 and bear interest payable semi-annually of January 15 and July 15
of each year, beginning January 1, 1998. Of the $195.0 million of net proceeds
from the sale of the Senior Notes, the Company repaid approximately $124.1
million of existing indebtedness (see Note 9 for use of proceeds and further
information). The Company anticipates that a portion of the remaining net
proceeds will be used to finance potential future acquisitions.
- 18 -
<PAGE>
At June 30, 1997, the Company had $301.5 million of non-recourse project
financing associated with power generating facilities and steam fields at the
West Ford Flat Power Plant, the Bear Canyon Power Plant, the PG&E Unit 13 and
Unit 16 Steam Fields, the SMUDGEO #1 Steam Fields, the Greenleaf 1 and 2 Power
Plants and the Gilroy Power Plant. Utilizing a portion of the net proceeds from
the sale of the 8 3/4% Senior Notes Due 2007, on July 8, 1997 the Company
extinguished $102.7 million of non-recourse project financing related to the
Company's geothermal assets. After such early extinguishment, the annual
maturities for all non-recourse project financing were $8.3 million for the
remainder of 1997, $9.7 million for 1998, $8.7 million for 1999, $10.4 million
for 2000, $10.6 million for 2001 and $149.8 million thereafter.
At June 30, 1997, the Company had $119.3 million of non-recourse borrowings from
The Bank of Nova Scotia in connection with the acquisition of 50% equity
interests in the Texas City and Clear Lake Power Plants. Such debt matures on
June 22, 1998 and is expected to be repaid prior to maturity with the proceeds
of a planned refinancing of the $155.6 million non-recourse project debt owed by
the Texas City and Clear Lake Power Plants.
The Company currently has a $50.0 million revolving credit agreement with a
consortium of commercial lending institutions led by The Bank of Nova Scotia,
with borrowings bearing interest at either LIBOR or at The Bank of Nova Scotia
base rate plus a mutually agreed margin. At June 30, 1997, the Company had $14.3
million of borrowings outstanding and $2.7 million of letters of credit
outstanding under the revolving credit facility (see Note 7). The Company repaid
the $14.3 million of borrowings on July 8, 1997. The Bank of Nova Scotia credit
facility contains certain restrictions that significantly limit or prohibit,
among other things, the ability of the Company or its subsidiaries to incur
indebtedness, make payments of certain indebtedness, pay dividends, make
investments, engage in transactions with affiliates, create liens, sell assets
and engage in mergers and consolidations.
The Company has a $1.2 million working capital line with a commercial lender
that may be used to fund short-term working capital commitments and letters of
credit. At June 30, 1997, the Company had no borrowings under this working
capital line and $974,000 of letters of credit outstanding. Borrowings bear
interest at prime plus 1%.
At June 30, 1997, the Company had outstanding a non-interest bearing promissory
note to Natomas Energy Company in the amount of $6.5 million representing a
portion of the September 1994 purchase price of Thermal Power Company. This note
had been discounted to yield 8% per annum and was due September 9, 1997. On July
10, 1997, the Company extinguished this debt with the payment of $6.4 million
(see Note 9).
The Company intends to continue to seek the use of non-recourse project
financing for new projects, where appropriate. The debt agreements of the
Company's subsidiaries and other affiliates governing the non-recourse project
financing generally restrict their ability to pay dividends, make distributions
or otherwise transfer funds to the Company. The dividend restrictions in such
agreements generally require that, prior to the payment of dividends,
distributions or other transfers, the subsidiary or other affiliate must provide
for the payment of other obligations, including operating expenses, debt service
and reserves. However, the Company does not believe that such restrictions will
adversely affect its ability to meet its debt obligations.
At June 30, 1996, the Company had commitments for capital expenditures in 1997
totaling $44.2 million related to various projects at its geothermal facilities.
The Company intends to fund capital expenditures for the ongoing operation and
development of the Company's power generation facilities primarily through the
operating cash flow of such facilities. Capital expenditures for the six months
ended June 30, 1997 of $57.6 million included $39.7 million for the construction
of the Pasadena Power Plant, $8.2 million related to the geothermal facilities
and the remaining $9.7 million at the gas-fired power plants.
The Company continues to pursue the acquisition and development of new power
generation projects. The Company expects to commit significant capital in future
years for the acquisition and development of these projects. The Company's
actual capital expenditures may vary significantly during any year.
The Company believes that it will have sufficient liquidity from cash flow from
operations and borrowings available under the lines of credit and working
capital to satisfy all obligations under outstanding indebtedness, to finance
anticipated capital expenditures and to fund working capital requirements
through December 31, 1997.
- 19 -
<PAGE>
Impact of Recent Accounting Pronouncement
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share, which
simplifies the standards for computing earnings per share previously found in
APBO No. 15. SFAS No. 128 replaces the presentation of primary earnings per
share with a presentation of basic earnings per share, which excludes dilution.
SFAS No. 128 also requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all entities with complex capital
structures and requires a reconciliation. Diluted earnings per share is computed
similarly to fully diluted earnings per share pursuant to APBO No. 15. SFAS No.
128 must be adopted for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. SFAS No. 128 requires restatement of all prior-period earnings per
share data presented. For the three months ended June 30, 1997, basic and
diluted earnings per share would not be materially different to the earnings per
share presented in the accompanying condensed consolidated statement of
operations.
In June 1997, the FASB issued SFAS No.130, Reporting Comprehensive Income, which
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in non- condensed
general-purpose financial statements. SFAS No.130 requires classification of
other comprehensive income by their nature in a financial statement, and the
display of the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS No.130 is effective for fiscal years
beginning after December 15, 1997. The Company believes this pronouncement will
not have a material effect on its financial statements.
In June 1997, the FASB also issued SFAS No.131, Disclosures about Segments of an
Enterprise and Related Information, which established standards for the way
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports to
shareholders. SFAS No.131 also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS No.131
is effective for fiscal years beginning after December 15, 1997, although
earlier application is encouraged. The Company believes this pronouncement will
not have a material effect on its financial statements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on June 5, 1997 (the
"Annual Meeting") in San Jose, California. At the Annual Meeting, stockholders
voted on two matters: (i) the election of three Class I directors for a term of
three years expiring in 2000 and (ii) the ratification of the appointment of
Arthur Andersen LLP as independent auditors for the Company for the year ending
December 31, 1997. The stockholders elected management's nominees as the Class I
directors in an uncontested election and ratified the appointment of independent
auditors by the following votes, respectively:
- 20 -
<PAGE>
(i) Election of Class I directors for a three year term expiring in 2000:
Votes Votes
For Withheld
--------------- --------------
Jeffrey E. Garten 13,404,368 18,815
George J. Stathakis 13,403,700 19,483
John O. Wilson 13,404,568 18,615
The Company's Board of Directors is currently comprised of seven members
that are divided into three classes with overlapping three-year terms. The
term of the Class II directors (Ann B. Curtis and V. Orville Wright) will
expire at the annual meeting of stockholders to be held in 1998, and the
Class III directors (Peter Cartwright and Susan C. Schwab) will expire at
the annual meeting to be held in 1999.
(ii) Ratification of appointment of Arthur Andersen LLP as independent auditors:
Votes Votes
For Against Abstain
--------------- -------------- --------------
13,384,188 913 38,082
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith unless otherwise indicated:
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation of Calpine
Corporation, a Delaware corporation. (l)
3.2 Amended and Restated Bylaws of Calpine Corporation, a Delaware
corporation. (l)
4.1 Indenture dated as of February 17, 1994 between the Company and Shawmut
Bank of Connecticut, National Association, as Trustee, including form
of Notes. (a)
4.2 Indenture dated as of May 16, 1996 between the Company and Fleet
National Bank, as Trustee, including form of Notes. (m)
- 21 -
<PAGE>
4.3 Indenture dated as of July 8, 1997, between Calpine Corporation and The
Bank of New York, as Trustee, including form of Notes. *
4.4 Registration Rights Agreement dated as of July 1, 1997 by and between
Calpine Corporation and Credit Suisse First Boston Corporation, Morgan
Stanley & Co. Incorporated, Salomon Brothers Inc., Scotia Capital
Markets (USA) Inc., BancAmerica Securities, Inc. and CIBC Wood Gundy
Securities Corp. *
10.1 Financing Agreements
10.1.1 Term and Working Capital Loan Agreement, dated as of June 1, 1990,
between Calpine Geysers Company, L.P. (formerly Santa Rosa Geothermal
Company, L.P.) and Deutsche Bank AG, New York Branch. (a)
10.1.2 First Amendment to Term and Working Capital Loan Agreement, dated as of
June 29, 1990, between Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.) and Deutsche Bank AG, New York Branch.
(a)
10.1.3 Second Amendment to Term and Working Capital Loan Agreement, dated as
of December 1, 1990, between Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.) and Deutsche Bank AG, New York
Branch. (a)
10.1.4 Third Amendment to Term and Working Capital Loan Agreement, dated as of
June 26, 1992, between Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.), Deutsche Bank AG, New York Branch,
National Westminster Bank PLC, Union Bank of Switzerland, New York
Branch, and The Prudential Insurance Company of America. (a)
10.1.5 Fourth Amendment to Term and Working Capital Loan Agreement, dated as
of April l, 1993, between Calpine Geysers Company, L.P. (formerly Santa
Rosa Geothermal Company, L.P.), Deutsche Bank AG, New York Branch,
National Westminster Bank PLC, Union Bank of Switzerland, New York
Branch, and The Prudential Insurance Company of America. (a)
10.1.6 Construction and Term Loan Agreement, dated as of January 30, 1992,
between Sumas Cogeneration Company, L.P., The Prudential Insurance
Company of America and Credit Suisse, New York Branch. (a)
10.1.7 Amendment No. 1 to Construction and Term Loan Agreement, dated as of
May 24, 1993, between Sumas Cogeneration Company, L.P., The Prudential
Insurance Company of America and Credit Suisse, New York Branch. (a)
10.1.8 Credit Agreement-Construction Loan and Term Loan Facility, dated as of
January 10, 1990, between Credit Suisse and O.L.S. Energy-Agnews. (a)
10.1.9 Amendment No. 1 to Credit Agreement-Construction Loan and Term Loan
Facility, dated as of December 5, 1990, between Credit Suisse and
O.L.S. Energy-Agnews. (a)
10.1.10 Participation Agreement, dated as of December 1, 1990, between O.L.S.
Energy-Agnews, Nynex Credit Company, Credit Suisse, Meridian Trust
Company of California and GATX Capital Corporation. (a)
10.1.11 Facility Lease Agreement, dated as of December 1, 1990, between
Meridian Trust Company of California and O.L.S. Energy-Agnews. (a)
10.1.12 Project Revenues Agreement, dated as of December 1, 1990, between
O.L.S. Energy-Agnews, Meridian Trust Company of California and Credit
Suisse. (a)
- 22 -
<PAGE>
10.1.13 Project Credit Agreement, dated as of June 30, 1995, between Calpine
Greenleaf Corporation, Greenleaf Unit One Associates, Greenleaf Unit
Two Associates, Inc. and The Sumitomo Bank, Limited. (g)
10.1.14 Lease dated as of April 24, 1996 between BAF Energy A California
Limited Partnership, Lessor, and Calpine King City Cogen, LLC, Lessee.
(j)
10.1.15 Credit Agreement, dated as of August 28, 1996, among Calpine Gilroy
Cogen, L.P. and Banque Nationale de Paris. (l)
10.1.16 Credit Agreement, dated as of September 25, 1996, among Calpine
Corporation and The Bank of Nova Scotia. (m)
10.1.17 Credit Agreement, dated December 20, 1996, among Pasadena Cogeneration
L.P. and ING (U.S.) Capital Corporation and The Bank Parties Hereto.
(n)
10.1.18 Credit Agreement, dated as of June 23, 1997, among Calpine Finance
Company and Certain Commercial Lending Institutions, and The Bank of
Nova Scotia as the Agent for the Lenders. *
10.1.19 Purchase agreement dated as of July 1, 1997, among Calpine Corporation
and The Bank of New York as the Trustee. *
10.2 Purchase Agreements
10.2.1 Purchase Agreement, dated as of April 1, 1993, between Sonoma
Geothermal Partners, L.P., Healdsburg Energy Company, L.P. and
Freeport-McMoRan Resource Partners, Limited Partnership. (a)
10.2.2 Stock Purchase Agreement, dated as of June 27, 1994, between Maxus
International Energy Company, Natomas Energy Company, Calpine
Corporation and Calpine Thermal Power, Inc., and amendment thereto
dated July 28, 1994. (b)
10.2.3 Share Purchase Agreement dated March 30, 1995 between Calpine
Corporation, Calpine Greenleaf Corporation, Radnor Power Corp. and LFC
Financial Corp. (e)
10.2.4 Asset Purchase Agreement, dated as of August 28, 1996, among Gilroy
Energy Company, McCormick & Company, Incorporated and Calpine Gilroy
Cogen, L.P. (m)
10.2.5 Noncompetition / Earnings Contingency Agreement, dated as of August 28,
1996, among Gilroy Energy Company, McCormick & Company, Incorporated
and Calpine Gilroy Cogen, L.P. (m)
10.2.6 Purchase and Sale Agreement dated as of March 27, 1997 between Enron
Power Corp. and Calpine Finance Company. *
10.3 Power Sales Agreements
10.3.1 Long-Term Energy and Capacity Power Purchase Agreement relating to the
Bear Canyon Facility, dated November 30, 1984, between Pacific Gas &
Electric and Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.), Amendment dated October 17, 1985, Second
Amendment dated October 19, 1988, and related documents. (a)
10.3.2 Long-Term Energy and Capacity Power Purchase Agreement relating to the
Bear Canyon Facility, dated November 29, 1984, between Pacific Gas &
Electric and Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.), and Modification dated November 29, 1984,
Amendment dated October 17, 1985, Second Amendment dated October 19,
1988, and related documents. (a)
- 23 -
<PAGE>
10.3.3 Long-Term Energy and Capacity Power Purchase Agreement relating to the
West Ford Flat Facility, dated November 13, 1984, between Pacific Gas &
Electric and Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.), and Amendments dated May 18, 1987, June 22,
1987, July 3, 1987 and January 21, 1988, and related documents. (a)
10.3.4 Agreement for Firm Power Purchase, dated as of February 24, 1989,
between Puget Sound Power & Light Company and Sumas Energy, Inc. and
Amendment thereto dated September 30, 1991. (a)
10.3.5 Long-Term Energy and Capacity Power Purchase Agreement, dated April 16,
1985, between O.L.S. Energy-Agnews and Pacific Gas & Electric Company
and amendment thereto dated February 24, 1989. (a)
10.3.6 Long-Term Energy and Capacity Power Purchase Agreement, dated November
15, 1984, between Geothermal Energy Partners, Ltd. and Pacific Gas &
Electric Company, and related documents. (a)
10.3.7 Long-Term Energy and Capacity Power Purchase Agreement, dated November
15, 1984, between Geothermal Energy Partners, Ltd. and Pacific Gas &
Electric Company (see Exhibit 10.3.6 for related documents). (a)
10.3.8 Long-Term Energy and Capacity Power Purchase Agreement, dated December
12, 1984, between Greenleaf Unit One Associates, Inc. and Pacific Gas
and Electric Company. (f)
10.3.9 Long-Term Energy and Capacity Power Purchase Agreement, dated December
12, 1984, between Greenleaf Unit Two Associates, Inc. and Pacific Gas
and Electric Company. (f)
10.3.10 Long-Term Energy and Capacity Power Purchase Agreement, dated December
5, 1985, between Calpine Gilroy Cogen, L.P. and Pacific Gas and
Electric Company, and Amendments thereto dated December 19, 1993, July
18, 1985, June 9, 1986, August 18, 1988 and June 9, 1991. (l)
10.3.11 Amended and Restated Energy Sales Agreement, dated December 16, 1996,
between Phillips Petroleum Company and Pasadena Cogeneration, L.P. (n)
10.4 Steam Sales Agreements
10.4.1 Geothermal Steam Sales Agreement, dated July 19, 1979, between Calpine
Geysers Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.),
and Sacramento Municipal Utility District, and related documents. (a)
10.4.2 Agreement for the Sale and Purchase of Geothermal Steam, dated March
23, 1973, between Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.) and Pacific Gas & Electric Company, and
related letter dated May 18, 1987. (a)
10.4.3 Thermal Energy and Kiln Lease Agreement, dated as of January 16, 1992,
between Sumas Cogeneration Company, L.P. and Socco, Inc., and Amendment
thereto dated May 24, 1993. (a)
10.4.4 Amended and Restated Energy Service Agreement, dated as of December l,
1990, between the State of California and O.L.S. Energy-Agnews. (a)
10.4.5 Agreement for the Sale of Geothermal Steam, dated as of July 28, 1992,
between Thermal Power Company and Pacific Gas & Electric Company. (c)
10.4.6 Amendment to the Agreement for the Sale of Geothermal Steam, dated as
of August 9, 1995, between Union Oil Company of California, NEC
Acquisition Company, Thermal Power Company, and Pacific Gas and
Electric Company. (h)
- 24 -
<PAGE>
10.5 Service Agreements
10.5.1 Operation and Maintenance Agreement, dated as of April 5, 1990, between
Calpine Operating Plant Services, Inc. (formerly Calpine-Geysers Plant
Services, Inc.) and Calpine Geysers Company, L.P. (formerly Santa Rosa
Geothermal Company, L.P.). (a)
10.5.2 Amended and Restated Operating and Maintenance Agreement, dated as of
January 24, 1992, between Calpine Operating Plant Services, Inc. and
Sumas Cogeneration Company, L.P. (a)
10.5.3 Amended and Restated Operation and Maintenance Agreement, dated as of
December 31, 1990, between O.L.S. Energy-Agnews and Calpine Operating
Plant Services, Inc. (formerly Calpine Cogen-Agnews, Inc.). (a)
10.5.4 Operating and Maintenance Agreement, dated as of January 1, 1995,
between Calpine Corporation and Geothermal Energy Partners, Ltd. (h)
10.5.5 Amended and Restated Operating Agreement for the Geysers, dated as of
December 31, 1993, by and between Magma-Thermal Power Project, a joint
venture composed of NEC Acquisition Company and Thermal Power Company,
and Union Oil Company of California. (c)
10.6 Gas Supply Agreements
10.6.1 Gas Sale and Purchase Agreement, dated as of December 23, 1991, between
ENCO Gas, Ltd. and Sumas Cogeneration Company, L.P. (a)
10.6.2 Gas Management Agreement, dated as of December 23, 1991, between
Canadian Hydrocarbons Marketing Inc., ENCO Gas, Ltd. and Sumas
Cogeneration Company, L.P. (a)
10.6.4 Natural Gas Sales Agreement, dated as of November 1, 1993, between
O.L.S. Energy-Agnews, Inc. and Amoco Energy Trading Corporation. (a)
10.6.5 Natural Gas Service Agreement, dated November 1, 1993, between Pacific
Gas & Electric Company and O.L.S. Energy-Agnews, Inc. (a)
10.7 Agreements Regarding Real Property
10.7.1 Office Lease, dated March 15, 1991, between 50 West San Fernando
Associates, L.P. and Calpine Corporation. (a)
10.7.2 First Amendment to Office Lease, dated April 30, 1992, between 50 West
San Fernando Associates, L.P. and Calpine Corporation. (a)
10.7.3 Geothermal Resources Lease CA 1862, dated July 25, 1974, between the
United States Bureau of Land Management and Calpine Geysers Company,
L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.4 Geothermal Resources Lease PRC 5206.2, dated December 14, 1976, between
the State of California and Calpine Geysers Company, L.P. (formerly
Santa Rosa Geothermal Company, L.P.). (a)
10.7.5 First Amendment to Geothermal Resources Lease PRC 5206.2, dated April
20,1994, between the State of California and Calpine Geysers Company,
L.P. (formerly Santa Rosa Geothermal Company, L.P.). (a)
10.7.6 Industrial Park Lease Agreement, dated December 18, 1990, between Port
of Bellingham and Sumas Energy, Inc. (a)
- 25 -
<PAGE>
10.7.7 First Amendment to Industrial Park Lease Agreement, dated as of July
16, 1991, between Port of Bellingham, Sumas Energy, Inc., and Sumas
Cogeneration Company, L.P. (a)
10.7.8 Second Amendment to Industrial Park Lease Agreement, dated as of
December 17, 1991, between Port of Bellingham and Sumas Cogeneration
Company, L.P. (a)
10.7.9 Amended and Restated Cogeneration Lease, dated as of December 1, 1990,
between the State of California and O.L.S. Energy-Agnews. (a)
10.8 General
10.8.1 Limited Partnership Agreement of Sumas Cogeneration Company, L.P.,
dated as of August 28, 1991, between Sumas Energy, Inc. and Whatcom
Cogeneration Partners, L.P. (a)
10.8.2 First Amendment to Limited Partnership Agreement of Sumas Cogeneration
Company, L.P., dated as of January 30, 1992, between Whatcom
Cogeneration Partners, L.P. and Sumas Energy, Inc. (a)
10.8.3 Second Amendment to Limited Partnership Agreement of Sumas Cogeneration
Company, L.P., dated as of May 24, 1993, between Whatcom Cogeneration
Partners, L.P. and Sumas Energy, Inc. (a)
10.8.4 Second Amended and Restated Shareholders' Agreement, dated as of
October 22, 1993, among GATX Capital Corporation, Calpine Agnews, Inc.,
JGS-Agnews, Inc., and GATX/Calpine-Agnews, Inc. (a)
10.8.5 Amended and Restated Reimbursement Agreement, dated October 22, 1993,
between GATX Capital Corporation, Calpine Agnews, Inc., JGS-Agnews,
Inc., GATX/Calpine-Agnews, Inc., and O.L.S. Energy-Agnews, Inc. (a)
10.8.6 Amended and Restated Limited Partnership Agreement of Geothermal Energy
Partners Ltd., L.P., dated as of May 19, 1989, between Western
Geothermal Company, L.P., Sonoma Geothermal Company, L.P., and
Cloverdale Geothermal Partners, L.P. (a)
10.8.7 Assignment and Security Agreement, dated as of January 10, 1990,
between O.L.S. Energy-Agnews and Credit Suisse. (a)
10.8.8 Pledge Agreement, dated as of January 10, 1990, between
GATX/Calpine-Agnews, Inc., and Credit Suisse. (a)
10.8.9 Equity Support Agreement, dated as of January 10, 1990, between Calpine
Corporation and Credit Suisse. (a)
10.8.10 Assignment and Security Agreement, dated as of December 1, 1990,
between O.L.S. Energy-Agnews and Meridian Trust Company of California.
(a)
10.8.11 First Amended and Restated Limited Partner Pledge and Security
Agreement, dated as of April 1, 1993, between Sonoma Geothermal
Partners, L.P., Healdsburg Energy Company, L.P., Calpine Geysers
Company, L.P. (formerly Santa Rosa Geothermal Company, L.P.),
Freeport-McMoRan Resource Partners, L.P., and Meridian Trust Company of
California. (a)
10.9.1 Calpine Corporation Stock Option Program and forms of agreements
thereunder. (a)
10.9.2 Calpine Corporation 1996 Stock Incentive Plan and forms of agreements
thereunder. (l)
10.9.3 Calpine Corporation Employee Stock Purchase Plan and forms of
agreements thereunder. (l)
- 26 -
<PAGE>
10.10.1 Amended and Restated Employment Agreement between Calpine Corporation
and Mr. Peter Cartwright. (l)
10.10.2 Senior Vice President Employment Agreement between Calpine Corporation
and Ms. Ann B. Curtis. (l)
10.10.3 Senior Vice President Employment Agreement between Calpine Corporation
and Mr. Lynn A. Kerby. (l)
10.10.4 Vice President Employment Agreement between Calpine Corporation and Mr.
Ron A. Walter. (l)
10.10.5 Vice President Employment Agreement between Calpine Corporation and Mr.
Robert D. Kelly. (l)
10.10.6 Amended Consulting Contract between Calpine Corporation and Mr. George
J. Stathakis. (o)
10.11 Form of Indemnification Agreement for directors and officers. (l)
------------------------------------
* Filed herewith.
(a) Incorporated by reference to Registrant's Registration Statement on
Form S-1 (Registration Statement No. 33-73160).
(b) Incorporated by reference to Registrant's Current Report on Form 8-K
dated September 9, 1994 and filed on September 26, 1994.
(c) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated September 30, 1994 and filed on November 14, 1994.
(d) Incorporated by reference to Registrant's Annual Report on Form 10-K
dated December 31, 1994 and filed on March 29, 1995.
(e) Incorporated by reference to Registrant's Current Report on Form 8-K
dated April 21, 1995 and filed on May 5, 1995.
(f) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1995 and filed on May 12, 1995.
(g) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1995 and filed on August 14, 1995.
(h) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated September 30, 1995 and filed on November 14, 1995.
(i) Incorporated by reference to Registrant's Annual Report on Form 10-K
dated December 31, 1995 and filed on March 29, 1996.
(j) Incorporated by reference to Registrant's Current Report on Form 8-K
dated May 1, 1996 and filed on May 14, 1996.
(k) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1996 and filed on May 15, 1996.
(l) Incorporated by reference to Registrant's Registration Statement on
Form S-1 (Registration Statement No. 333-07497).
- 27 -
<PAGE>
(m) Incorporated by reference to Registrant's Current Report on Form 8-K
dated August 29, 1996 and filed on September 13, 1996.
(n) Incorporated by reference to Registrant's Annual Report on Form 10-K
dated December 31, 1996 and filed on June 30, 1997.
(o) Incorporated by reference to Registrants Quarterly Report on Form 10-Q
dated March 31, 1997 and filed on May 12, 1997.
(b) Reports on Form 8-K
Current report dated June 5, 1997 and filed on June 17, 1997
Item 5. Other Events -- Preferred Share Purchase Rights
Current report dated June 24, 1997 and filed on July 1, 1997
Item 5. Other Events -- Proposed Rule 144A offering of
$200.0 million principal amount of Senior Notes Due 2007
Current report dated July 2, 1997 and filed on July 7, 1997
Ite 5. Other Events -- Pricing of Rule 144A offering of
$200.0 million principal amount of 8-3/4% Senior
Notes Due 2007
- 28 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALPINE CORPORATION
By: /s/ Ann B. Curtis Date: August 13, 1997
-------------------------------
Ann B. Curtis
Senior Vice President
(Chief Financial Officer)
By: /s/ Gloria S. Gee Date: August 13, 1997
------------------------------
Gloria S. Gee
Corporate Controller
(Chief Accounting Officer)
- 29 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
11 Computation of Earnings Per Share
27 Financial Data Schedule
4.3 Indenture dated as of July 8, 1997, between Calpine
Corporation and The Bank of New York, as Trustee,
including form of Notes.
4.4 Registration Rights Agreement dated as of July 1, 1997 by
and between Calpine Corporation and Credit Suisse First
Boston Corporation, Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc., Scotia Capital Markets (USA) Inc.,
BancAmerica Securities, Inc. and CIBC Wood Gundy
Securities Corp.
10.1.18 Credit Agreement, dated as of June 23, 1997, among
Calpine Finance Company and Certain Commercial Lending
Institutions, and The Bank of Nova Scotia as the Agent for
the Lenders.
10.1.19 Purchase agreement dated as of July 1, 1997, among Calpine
Corporation and The Bank of New York as the Trustee.
10.2.6 Purchase and Sale Agreement dated March 27, 1997
between Enron Power Corp. and Calpine Finance Company.
- 30 -
<PAGE>
EXHIBIT 11
CALPINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ 9,400 $ 4,717 $ 5,360 $ 4,423
========= ========= ========= =========
Primary earnings per share
Weighted average number of
common shares outstanding 19,911 10,388 19,882 10,388
Conversion of preferred stock -- 2,179 -- 1,221
Common shares issuable upon
exercise of stock options using
the treasury method 1,087 795 543 398
--------- --------- --------- ---------
20,998 13,362 20,425 12,007
========= ========= ========= =========
Primary earnings per share $ 0.45 $ 0.35 $ 0.26 $ 0.37
========= ========= ========= =========
Fully diluted earnings per share
Weighted average number of
common shares outstanding 19,911 10,388 19,882 10,388
Conversion of preferred stock -- 2,179 -- 1,221
Common shares issuable upon
exercise of stock options using
the treasury method 1,106 795 1,106 795
--------- --------- --------- ---------
21,017 13,362 20,988 12,404
========= ========= ========= =========
Fully diluted earnings per share $ 0.45 $ 0.35 $ 0.26 $ 0.36
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CALPINE
CORPORATION'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND
FROM THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916457
<NAME> Calpine Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 23,436
<SECURITIES> 6,056
<RECEIVABLES> 51,341
<ALLOWANCES> 0
<INVENTORY> 2,859
<CURRENT-ASSETS> 115,666
<PP&E> 814,826
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,181,068
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<CGS> 64,276
<TOTAL-COSTS> 67,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,145
<INCOME-PRETAX> 8,397
<INCOME-TAX> 3,037
<INCOME-CONTINUING> 5,360
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</TABLE>
INDENTURE dated as of July 8, 1997, between Calpine
Corporation, a Delaware corporation (the "Company"), and The Bank of New York, a
New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the holders of the Company's 8
3/4% Senior Notes Due 2007:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time at which such Person became a Subsidiary and not incurred
in connection with, or in contemplation of, such Person becoming a Subsidiary.
Acquired Indebtedness shall be deemed to be Incurred on the date the acquired
Person becomes a Subsidiary.
"Additional Assets" means (i) any property or assets related
to the Line of Business which will be owned and used by the Company or a
Restricted Subsid iary; (ii) the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary or (iii) Capital Stock constituting
a minority interest in any Person that at such time is a Restricted Subsidiary.
"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 Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securi ties, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 3.11 and 3.12 only, "Affiliate" shall also mean any
beneficial owner of 5% or more of the total Voting Shares (on a Fully Diluted
Basis) of the Company or of rights or warrants to purchase such stock (whether
or not currently exercisable) and any Person who would be an
1
<PAGE>
Affiliate of any such beneficial owner pursuant to the first sentence hereof.
For purposes of Section 3.3, "Affiliate" shall also mean any Person of which the
Company owns 5% or more of any class of Capital Stock or rights to acquire 5% or
more or any class of Capital Stock and any Person who would be an Affiliate of
any such Person pursuant to the first sentence hereof.
"Agent" means any Registrar, Paying Agent, authenticating
agent, co-registrar or additional paying agent.
"Asset Sale" means any sale, transfer or other disposition
(includ ing by way of merger, consolidation or sale leaseback transactions, but
excluding (except as provided for in the provisions described in the last
paragraph of Section 3.12(b)) those permitted by Article IV hereof and those
permitted by Section 3.6 hereof) in one or a series of transactions by the
Company or any Re stricted Subsidiary to any Person other than the Company or
any Wholly Owned Subsidiary, of (i) all or any of the Capital Stock of the
Company or any Restrict ed Subsidiary, (ii) all or substantially all of the
assets of any operating unit, Facility, division or line of business of the
Company or any Restricted Subsidiary or (iii) any other property or assets or
rights to acquire property or assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded annually) of the total obliga
tions of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of (A) the numbers of years from the date
of determi nation to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption or similar payment with respect to
such In debtedness or Preferred Stock multiplied by (B) the amount of such
payment by (ii) the sum of all such payments.
"Bank Credit Agreement" means the Credit Agreement, dated
September 25, 1996, among the Company, certain commercial lending institutions
named therein and The Bank of Nova Scotia, as agent for the lenders, as amend
ed, refinanced, renewed or extended from time to time.
"Board of Directors" means the Board of Directors of the Compa
ny or any authorized committee thereof.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation or any and all equivalent ownership interests in a Person (other
than a corporation).
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty; and "Capitalized
Lease Obligations" means the rental obligations, as aforesaid, under such lease.
"Change of Control" means the occurrence of any of the
following events: (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than Parent or an underwriter engaged in a
firm commit ment underwriting on behalf of the Company, is or becomes the
beneficial owner (as such term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (i) a person shall be
deemed to have beneficial ownership of all shares that such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 40% of the total Voting
Shares of the Company; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election by the Board of
Directors or whose nomination for election by the stockholders was approved by a
vote of 66-2/3% of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; (iii) all or substantially
all of the Company's and its Restricted Subsidiaries' assets are sold, leased,
exchanged or otherwise transferred to any Person or group of Per
2
<PAGE>
sons acting in concert; or (iv) the Company is liquidated or dissolved or adopts
a plan of liquidation.
"Change of Control Triggering Event" means (A) if a Rating
Agency maintains a rating of the Securities at the time a Change of Control
occurs, the occurrence of a Change of Control and the occurrence of a Rating
Decline or (B) if no Rating Agency maintains a rating of the Securities at the
time a Change of Control occurs, the occurrence of a Change of Control.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in the Indenture until
a successor replaces it pursuant to the terms and conditions of the Indenture
and thereafter means the successor.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters to (ii) the Consolidated Interest
Expense (excluding interest capitalized in connection with the construction of a
new Facility which interest is capitalized during the construction of such
Facility) for such four fiscal quarters; provided, however, that if the Company
or any Restrict ed Subsidiary has Incurred any Indebtedness since the beginning
of such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, both EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to (x) such
new Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and (y) the repayment, redemption, repurchase, defeasance or
discharge of any Indebtedness repaid, redeemed, repurchased, defeased or
discharged with the proceeds of such new Indebtedness as if such repayment,
redemption, repurchase, defeasance or discharge had been made on the first day
of such period; provided, further, that if within the period during which EBITDA
or Consolidated Interest Expense is measured, the Company or any of its
Restricted Subsidiaries shall have made any Asset Sales, (x) the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets or Capital Stock which are the subject of such Asset
Sales for such period, or increased by an amount equal to the EBITDA (if
negative), directly attributable thereto for such period and (y) the
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly
attributable to any Indebtedness for which neither Company nor any Restricted
Subsidiary shall continue to be liable as a result of any such Asset Sale or
repaid, redeemed, defeased, discharged or otherwise retired in connection with
or with the proceeds of the assets or Capital Stock which are the subject of
such Asset Sales for such period; and provided, further, that if the Company or
any Restrict ed Subsidiary shall have made any acquisition of assets or Capital
Stock (occur ring by merger or otherwise) since the beginning of such period
(including any acquisition of assets or Capital Stock occurring in connection
with a transaction causing a calculation to be made hereunder) the EBITDA and
Consolidated Interest Expense for such period shall be calculated, after giving
pro forma effect thereto (and without regard to clause (iv) of the proviso to
the definition of "Consolidated Net Income"), as if such acquisition of assets
or Capital Stock took place on the first day of such period. For all purposes of
this definition, if the date of determination occurs prior to the completion of
the first four full fiscal quarters following the Issue Date, then "EBITDA" and
"Consolidated Interest Ex pense" shall be calculated after giving effect on a
pro forma basis to the Offering as if the Offering occurred on the first day of
the four full fiscal quarters that were completed preceding such date of
determination.
"Consolidated Current Liabilities," as of the date of
determination, means the aggregate amount of liabilities of the Company and its
Consolidated Restricted Subsidiaries which may properly be classified as current
liabilities (including taxes accrued as estimated), after eliminating (i) all
inter-company items between the Company and any Consolidated Subsidiary and (ii)
all current maturities of long-term Indebtedness, all as determined in
accordance with GAAP.
"Consolidated Income Tax Expense" means, for any period, as
applied to the Company, the provision for local, state, federal or foreign
income taxes on a Consolidated basis for such period determined in accordance
with GAAP.
"Consolidated Interest Expense" means, for any period, as
applied to the Company, the sum of (a) the total interest expense of the Company
and its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP, including, without limitation, (i) amortization of debt
issuance costs or of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting, (ii) accrued interest, (iii)
noncash interest payments, (iv) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Compa
3
<PAGE>
ny or any such Subsidiary under any guarantee of Indebtedness or other obliga
tion of any other Person and (vi) net costs associated with Interest Rate Agree
ments (including amortization of discounts) and Currency Agreements, plus (b)
all but the principal component of rentals in respect of Capitalized Lease
Obliga tions paid, accrued, or scheduled to be paid or accrued by the Company or
its Consolidated Restricted Subsidiaries, plus (c) one-third of all Operating
Lease Obligations paid, accrued and/or scheduled to be paid by the Company and
its Consolidated Restricted Subsidiaries, plus (d) capitalized interest, plus
(e) dividends paid in respect of Preferred Stock of the Company or any
Restricted Subsidiary held by Persons other than the Company or a Wholly Owned
Subsid iary, plus (f) cash contributions to any employee stock ownership plan to
the extent such contributions are used by such employee stock ownership plan to
pay interest or fees to any person (other than the Company or a Restricted
Subsidiary) in connection with loans incurred by such employee stock ownership
plan to pur chase Capital Stock of the Company.
"Consolidated Net Income (Loss)" means, for any period, as
applied to the Company, the Consolidated net income (loss) of the Company and
its Consolidated Restricted Subsidiaries for such period, determined in
accordance with GAAP, adjusted by excluding (without duplication), to the extent
included in such net income (loss), the following: (i) all extraordinary gains
or losses; (ii) any net income of any Person if such Person is not a Domestic
Subsidiary, except that (A) the Company's equity in the net income of any such
Person for such period shall be included in Consolidated Net Income (Loss) up to
the aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution and (B) the equity of the Company or a Restricted Subsidiary in a
net loss of any such Person for such period shall be included in determining
Consolidated Net Income (Loss); (iii) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such income is not at the time
thereof permitted, directly or indi rectly, by operation of the terms of its
charter or by-laws or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its stockholders; (iv) any net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of such
combination; (v) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its Restricted
Subsidiaries (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of business
and any gain (but not loss) realized upon the sale or other disposition by the
Company or any Restricted Subsidiary of any Capital Stock of any Person,
provided that losses shall be included on an after-tax basis; and (vi) the
cumulative effect of a change in accounting principles; and further adjusted by
subtracting from such net income the tax liability of any parent of the Company
to the extent of payments made to such parent by the Company pursuant to any tax
sharing agreement or other arrangement for such period.
"Consolidated Net Tangible Assets" means, as of any date of
determination, as applied to the Company, the total amount of assets (less
accumulated depreciation or amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) which would
appear on a Consolidated balance sheet of the Company and its Consolidated Re
stricted Subsidiaries, determined on a Consolidated basis in accordance with
GAAP, and after giving effect to purchase accounting and after deducting
therefrom, to the extent otherwise included, the amounts of: (i) Consolidated
Current Liabilities; (ii) minority interests in Consolidated Subsidiaries held
by Persons other than the Company or a Restricted Subsidiary; (iii) excess of
cost over fair value of assets of businesses acquired, as determined in good
faith by the Board of Directors; (iv) any revaluation or other write-up in value
of assets subsequent to December 31, 1993 as a result of a change in the method
of valuation in accordance with GAAP; (v) unamortized debt discount and expenses
and other unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or developmental expenses
and other intangible items; (vi) treasury stock; and (vii) any cash set apart
and held in a sinking or other analogous fund established for the purpose of
redemp tion or other retirement of Capital Stock to the extent such obligation
is not reflected in Consolidated Current Liabilities.
"Consolidated Net Worth" means, at any date of determination,
as applied to the Company, stockholders' equity as set forth on the most
recently available Consolidated balance sheet of the Company and its
Consolidated Re stricted Subsidiaries (which shall be as of a date no more than
60 days prior to the date of such computation), less any amounts attributable to
Redeemable Stock or Exchangeable Stock, the cost of treasury stock and the
principal amount of any promissory notes receivable from the sale of Capital
Stock of the Company or any Subsidiary.
"Consolidation" means, with respect to any Person, the consolida
tion of accounts of such Person and each of its subsidiaries if and to the
extent the accounts of such Person and such subsidiaries are consolidated in
accordance with GAAP. The term "Consolidated" shall have a correlative meaning.
"Controlled Non-Subsidiary Investment" means any Investment of
the type specified in clause (iv) of Section 3.3(a) which is made by the Company
or its Restricted Subsidiaries in an Affiliate other than a Subsidiary; provided
that (i) at the time such Investment is made, no Default or Event of Default
shall have occurred and be continuing (or would result therefrom); (ii) after
giving effect to the Investment and to the Incurrence of any Indebtedness in
connection therewith on a pro forma basis, the Consolidated Coverage Ratio is at
least 1.75:1; (iii) after giving effect to the Investment, the aggregate
Investment made by the Company and its Subsidiaries in Controlled Non-Subsidiary
Investments does not exceed $100,000,000; (iv) the Person in which the
Investment is made is engaged only in the business described in Section 3.18
including Unrelated Businesses to the extent permitted by Section 3.18; (v) the
Company, directly or through its Restricted Subsidiaries is entitled to (A) in
the case of an Investment in Capital Stock, receive dividends or other
distributions on its Investment at the same time as or prior to, and on a basis
pro rata with, any other holder or holders of Capital Stock of such Person and
(B) in the case of an Investment other than in Capital Stock, receive interest
thereon at a rate per annum not less than the rate on the Securities, and, on
the liquidation or dissolution of such Person, receive repay ment of the
principal thereof prior to the payment of any dividends or distribu tions on
Capital Stock of such Person; (vi) the Company directly or through its
Restricted Subsidiaries, either (x) controls, under an operating and management
agreement or otherwise, the day to day management and operation of such Person
and any Facility of the Person in which the Investment is made or (y) has signif
icant influence over the management and operation of such Person and any
Facility of such Person in all material respects (significant influence to
include the right to control or veto any material act or decision) in connection
with such management or operation; and (vii) any encumbrances or restrictions on
the ability of the Person in which the Investment is made to make the payments,
distributions, losses, advances or transfers referred to in clauses (i) through
(iii) under Section 3.5, in the written opinion of the President or Chief
Financial Officer of the Company (x) is required in order to obtain necessary
financing, (y) is customary for such financings and (z) applies only to the
assets of or revenues of the Person in whom the Investment is made.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
currency values to or under which the Company or any Restricted Subsidiary is a
party or a beneficiary on the Issue Date or becomes a party or beneficiary
thereafter.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"defaulted interest" means any interest on any Security which
is payable, but is not punctually paid or duly provided for on any Interest
Payment Date.
"Depositary" means The Depositary Trust Company, its nominees,
and their respective successors until a successor Depositary shall have become
such pursuant to the applicable provisions of this Indenture and thereafter "De
positary" shall mean or include each Person who is then a Depositary hereunder.
"Domestic Subsidiary" means a Restricted Subsidiary that is not a
Foreign Subsidiary.
"EBITDA" means, for any period, as applied to the Company, the
sum of Consolidated Net Income (Loss) (but without giving effect to adjustments,
accruals, deductions or entries resulting from purchase accounting,
extraordinary losses or gains and any gains or losses from any Asset Sales),
plus the following to the extent included in calculating Consolidated Net Income
(Loss): (a) Consoli dated Income Tax Expense, (b) Consolidated Interest Expense,
(c) depreciation expense, (d) amortization expense and (e) all other non-cash
items reducing Consolidated Net Income, less all non-cash items increasing
Consolidated Net Income, in each case for such period; provided that, if the
Company has any Sub sidiary that is not a Wholly Owned Subsidiary, EBITDA shall
be reduced (to the extent not otherwise reduced by GAAP) by an amount equal to
(A) the consoli dated net income (loss) of such Subsidiary (to the extent
included in Consolidated Net Income (Loss)) multiplied by (B) the quotient of
(1) the number of shares of outstanding common stock of such Subsidiary not
owned on the last day of such period by the Company or any Wholly Owned
Subsidiary of the Company divided by (2) the total number of shares of
outstanding common stock of such Subsidiary on the last day of such period.
"Exchangeable Stock" means any Capital Stock which by its
terms is exchangeable or convertible at the option of any Person other than the
Compa ny into another security (other than Capital Stock of the Company which is
neither Exchangeable Stock nor Redeemable Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means the 8 3/4% Senior Notes Due 2007
to be issued by the Company, and containing terms identical to those of the
Initial Securities (except that such Exchange Securities (i) shall have been
issued in an exchange offer registered under the Securities Act and (ii) shall
have an interest rate of 8 3/4% per annum (9 1/4% per annum if such exchange
offer is not consum mated before January 5, 1997), without provision for
adjustment as provided in paragraph 1 on the reverse of the Initial Securities),
that are issued and ex changed for the Initial Securities pursuant to the
Registration Rights Agreement and this Indenture or any indenture or indentures
supplemental hereto.
"Facility" means a power generation facility or energy
producing facility, including any related fuel reserves.
"Foreign Asset Sale" means an Asset Sale in respect of the
Capital Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of
the type de scribed in Section 936 of the Code to the extent that the proceeds
of such Asset Sale are received by a Person subject in respect of such proceeds
to the tax laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorpo rated in a jurisdiction other than the United States of America or a
State thereof or the District of Columbia.
"Fully Diluted Basis" means after giving effect to the
exercise of any outstanding options, warrants or rights to purchase Voting
Shares and the conversion or exchange of any securities convertible into or
exchangeable for Voting Shares.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect and, to the extent optional, adopted by
the Company on the Issue Date, consistently applied, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board.
"guarantee" means, as applied to any obligation, contingent or
otherwise, of any Person, (i) a guarantee, direct or indirect, in any manner, of
any part or all of such obligation (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (ii) an agree
ment, direct or indirect, contingent or otherwise, the practical effect of which
is to insure in any way the payment or performance (or payment of damages in the
event of nonperformance) of any part or all of such obligation, including the
payment of amounts drawn down under letters of credit.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means, as applied to any obligation, to create, incur,
issue, assume, guarantee or in any other manner become liable with respect to,
contin gently or otherwise, such obligation, and "Incurred," "Incurrence" and
"Incur ring" shall each have a correlative meaning; provided, however, that any
Indebt edness or Capital Stock of a Person existing at the time such Person
becomes (after the Issue Date) a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary; and provided, further, that any amendment,
modification or waiver of any provision of any document pursuant to which
Indebtedness was previously Incurred shall not be deemed to be an Incurrence of
Indebtedness as long as (i) such amendment, modification or waiver does not (A)
increase the principal or premium thereof or interest rate thereon, (B) change
to an earlier date the Stated Maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness may or shall be redeemed, (C) if such Indebtedness is contractually
subordinated in right of payment to the Securities, modify or affect, in any
manner adverse to the Holders, such subordination, (D) if the Company is the
obligor thereon, provide that a Restricted Subsidiary shall be an obligor, (E)
if such Indebtedness is Non- Recourse Debt, cause such Indebtedness to no longer
constitute Non-Recourse Debt or (F) violate, or cause the Indebtedness to
violate, the provisions of Sections 3.5 or 3.7 and (ii) such Indebtedness would,
after giving effect to such amendment, modification or waiver as if it were an
Incurrence, comply with clause (i) of the first proviso to the definition of
"Refinancing Indebtedness."
"Indebtedness" of any Person means, without duplication, (i)
the principal of and premium (if any such premium is then due and owing) in
respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (ii) all Capitalized
Lease Obligations of such Person; (iii) all obligations of such Person Incurred
as the deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement; (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of busi ness of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) Redeemable Stock of such Person and, in the case of any
Subsidiary, any other Preferred Stock, in either case val ued at, in the case of
Redeemable Stock, the greater of its voluntary or involun tary maximum fixed
repurchase price exclusive of accrued and unpaid dividends or, in the case of
Preferred Stock that is not Redeemable Stock, its liquidation preference
exclusive of accrued and unpaid dividends; (vi) contractual obligations to
repurchase goods sold or distributed; (vii) all obligations of such Person in re
spect of Interest Rate Agreements and Currency Agreements; (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons and all divi dends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any guarantee; and (ix) all
obligations of the type referred to in clauses (i) through (viii) of other
Persons secured by any Lien on any prop erty or asset of such Person (whether or
not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured; provided, however, that Indebtedness shall
not include trade accounts payable arising in the ordinary course of business.
For purposes hereof, the "maximum fixed repur chase price" of any Redeemable
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Stock as if such Redeemable Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Stock, such fair market
value to be determined in good faith by the Board of Directors. The amount of
Indebtedness of any Person at any date shall be, with respect to unconditional
obligations, the outstanding balance at such date of all such obliga tions as
described above and, with respect to any contingent obligations (other than
pursuant to clause (vi) above, which shall be included to the extent reflected
on the balance sheet of such Person in accordance with GAAP) at such date, the
maximum liability determined by such Person's board of directors, in good faith,
as, in light of the facts and circumstances existing at the time, reasonably
likely to be Incurred upon the occurrence of the contingency giving rise to such
obliga tion.
"Indenture" means this Indenture as amended or supplemented
from time to time in accordance with the applicable provisions hereunder.
"Initial Securities" means the 8 3/4% Senior Notes Due 2007
issued by the Company under this Indenture or pursuant to any indenture or
indentures supplemental hereto.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an
install ment of interest on the Securities.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect against fluctuations in interest rates to or
under which the Company or any of its Restricted Subsidiaries is a party or
beneficiary on the Issue Date or becomes a party or beneficiary thereunder.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any other investment
in any other Person, or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or assets issued or
owned by any other Person (whether by merger, consolidation, amalgamation, sale
of assets or otherwise). For purposes of the definition of "Unrestricted
Subsidiary" and the provisions set forth in Section 3.3, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude
the fair market value of the net assets of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and
(ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, in each case as
determined by the Board of Directors in good faith. For purposes of determining
the aggregate amount of Investments in Controlled Non-Subsidiary Investments,
the amount of such Investments shall be reduced by an amount equal to the net
payments of interest on Indebtedness, dividends, repayments of interest on
Indebtedness, divi dends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary from any Person
in whom a Con trolled Non-Subsidiary Investment has been made, not to exceed in
the case of any Controlled Non-Subsidiary Investment the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person.
"Investment Grade" means, with respect to the Securities, a
rating of Baa3 or higher by Moody's together with a rating of BBB- or higher by
S&P, provided that neither of such entities shall have announced or informed the
Company that it is reviewing the rating of the Securities in light of
downgrading the rating thereof.
"Issue Date" means the date on which the Initial Securities
are originally issued under this Indenture.
"Lien" means any mortgage, lien, pledge, charge, or other
security interest or encumbrance of any kind (including any conditional sale or
other title retention agreement and any lease in the nature thereof).
"Line of Business" means the ownership, acquisition,
development, construction, improvement and operation of Facilities.
"Moody's" means Moody's Investors Service, Inc. and its succes
sors.
"Net Available Cash" means, with respect to any Asset Sale,
the cash or cash equivalent payments received by the Company or a Subsidiary in
connection with such Asset Sale (including any cash received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as or when received and also including the proceeds of other property
received when converted to cash or cash equivalents) net of the sum of, without
duplication, (i) all reasonable legal, title and recording tax expenses,
reasonable
commissions, and other reasonable fees and expenses incurred directly relating
to such Asset Sale, (ii) all local, state, federal and foreign taxes required to
be paid or accrued as a liability by the Company or any of its Restricted
Subsidiaries as a consequence of such Asset Sale, (iii) payments made to repay
Indebtedness which is secured by any assets subject to such Asset Sale in
accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or by applicable
law, be repaid out of the proceeds from such Asset Sale and (iv) all
distributions required by any contract entered into other than in contemplation
of such Asset Sale to be paid to any holder of a minority equity interest in
such Restricted Subsidiary as a result of such Asset Sale, so long as such
distributions do not exceed such minority holder's pro rata portion (based on
such minority holder's proportionate equity interest) of the cash or cash
equivalent payments described above, net of the amounts set forth in clauses
(i)-(iii) above.
"Net Cash Proceeds" means, with respect to any issuance or
sale of Capital Stock by any Person, the cash proceeds to such Person of such
issuance or sale net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultancy and
other fees actually incurred by such Person in connection with such issuance or
sale and net of taxes paid or payable by such Person as a result thereof.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any Capital Stock of such corporation which is not convertible into
another security other than non-convertible common stock of such corporation;
provided, however, that Non-Convertible Capital Stock shall not include any
Redeemable Stock or Exchangeable Stock.
"Non-U.S. Person" means a person who is not a U.S. Person as
that term is defined in Regulation S.
"Non-Recourse Debt" means Indebtedness of the Company or any
Restricted Subsidiary that is Incurred to acquire, construct or develop a
Facility provided that such Indebtedness is without recourse to the Company or
any Re stricted Subsidiary or to any assets of the Company or any such
Restricted Subsidiary other than such Facility and the income from and proceeds
of such Facility.
"Offering" means the offering and sale of the Initial
Securities pursuant to the Purchase Agreement dated July 1, 1997 among the
Company, Credit Suisse First Boston Corporation, Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc, Scotia Capital Markets (USA) Inc.,
CIBC Wood Gundy Securities Corp. and BancAmerica Securities, Inc.
"Officer" means the Chairman, the President, any Vice President,
the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the
Secretary, any Assistant Treasurer, any Assistant Secretary or the Controller of
the Company.
"Officers' Certificate" means a certificate signed by two
Officers, one of whom must be the President, the Treasurer or a Vice President
of the Company. Each Officers' Certificate (other than certificates provided
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e).
"Operating Lease Obligations" means any obligation of the
Compa ny and its Restricted Subsidiaries on a Consolidated basis incurred or
assumed under or in connection with any lease of real or personal property
which, in accordance with GAAP, is not required to be classified and accounted
for as a capital lease.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel, if so acceptable, may be
an employee of or counsel to the Company or the Trustee. Each such Opinion of
Counsel shall include the statements provided for in TIA Section 314(e).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corpora tion, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Security means the principal of the Security plus,
if applicable, the premium on the Security.
"Private Placement Legend" means the legend set forth on the
Initial Securities in the form set forth in Section 2.1(c).
"Public Equity Offering" means an underwritten primary public
offering of equity securities of the Company pursuant to an effective
registration statement under the Securities Act.
"PUHCA" means the Public Utility Holding Company Act of
1935, as amended.
"PURPA" means the Public Utility Regulatory Policies Act of
1978, as amended.
"QIB" means a "qualified institutional buyer" as that term is
defined in Rule 144A.
"Rating Agencies" is defined to mean S&P and Moody's.
"Rating Category" is defined to mean (i) with respect to S&P,
any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or
equivalent successor categories) and (ii) with respect to Moody's, any of the
following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent
successor categories). In determining whether the rating of the Securities has
decreased by one or more gradations, gradations within Rating Categories (+ and
- - for S&P; 1, 2 and 3 for Moody's) shall be taken into account (e.g., with
respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+,
will constitute a decrease of one gradation).
"Rating Decline" is defined to mean the occurrence of (i) or
(ii) below on, or within 90 days after, the earliest of (A) the Company having
become aware that a Change of Control has occurred, (B) the date of public
notice of the occurrence of a Change of Control or (C) the date of public notice
of the intention by Parent or the Company to approve, recommend or enter into,
any transaction which, if consummated, would result in a Change of Control
(which period shall be extended so long as the rating of the Securities is under
publicly announced consideration or possible downgrade by either of the Rating
Agencies), (i) a decrease of the rating of the Securities by either Rating
Agency by one or more rating gradations or (ii) the Company shall fail to
promptly advise the Rating Agencies, in writing, of such occurrence or any
subsequent material developments or shall fail to use its best efforts to
obtain, from at least one Rating Agency, a written, publicly announced
affirmation of its rating of the Securities, stating that it is not downgrading,
and is not considering downgrading, the Securities.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that (a) by its terms, by the terms of any security into which it
is convertible or exchangeable or otherwise is, or upon the happening of an
event or passage of time would be, required to be redeemed (in whole or in part)
on or prior to the first anniversary of the Stated Maturity of the Securities,
(b) is re deemable at the option of the holder thereof at any time on or prior
to the first anniversary of the Stated Maturity of the Securities (other than on
a Change of Control or Asset Sale, provided that such Change of Control or Asset
Sale shall not yet have occurred) or (c) is convertible into or exchangeable for
Capital Stock referred to in clause (a) or clause (b) above or debt securities
at any time prior to the first anniversary of the Stated Maturity of the
Securities.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness of the Company or a Restrict
ed Subsidiary existing on the Issue Date or Incurred in compliance with the
Indenture (including Indebtedness of the Company that refinances Indebtedness of
any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refi nances Indebtedness of another Restricted Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness; provided, however, that
(i) if the Indebted ness being refinanced is contractually subordinated in right
of payment to the Securities, the Refinancing Indebtedness shall be
contractually subordinated in right of payment to the Securities to at least the
same extent as the Indebtedness being refinanced, (ii) if the Indebtedness being
refinanced is Non-Recourse Debt, such Refinancing Indebtedness shall be
Non-Recourse Debt, (iii) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Indebtedness being refinanced or (b) after the
Stated Maturity of the Securities, (iv) the Refi nancing Indebtedness has an
Average Life at the time such Refinancing Indebted ness is Incurred that is
equal to or greater than the Average Life of the Indebt edness being refinanced
and (v) such Refinancing Indebtedness is in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price) that is equal to
or less than the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding (plus fees and
expenses, including any premium, swap breakage and defeasance costs) under the
Indebtedness being refinanced; and provided, further, that Refinancing
Indebtedness shall not include (x) Indebtedness of a Subsidiary of the Company
that refinances Indebtedness of the Company or (y) Indebtedness of the Company
or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsid iary.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 1, 1997, by and among the Company, Credit Suisse
First Boston Corporation, Morgan Stanley & Co. Incorporated, Salomon
Brothers Inc, Scotia Capital Markets (USA) Inc., CIBC Wood Gundy Securities
Corp. and BancAmerica Securities, Inc.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Related Assets" means electric power plants that, on the
Issue Date, produce electricity solely by utilizing steam from steam fields
owned and operated by a Restricted Subsidiary that is a Wholly Owned Subsidiary
on the Issue Date.
"Related Asset Indebtedness" means Non-Recourse Debt of a
Restricted Subsidiary that is a Wholly Owned Subsidiary on the Issue Date, the
proceeds of which are used by such Restricted Subsidiary to finance the acqui
sition of Related Assets by such Restricted Subsidiary; provided, however, that
(i) such Related Asset Indebtedness is Incurred contemporaneously with a
Refinanc ing of all of the Non-Recourse Debt of such Restricted Subsidiary then
outstand ing and (ii) the principal amount of such Related Asset Indebtedness
shall not exceed the purchase price of the Related Assets plus reasonable
out-of-pocket transaction costs and expenses of the Company and its Restricted
Subsidiaries required to acquire, or finance the acquisition of, such Related
Assets.
"Restricted Subsidiary" means any Subsidiary of the Company
that is not designated an Unrestricted Subsidiary by the Board of Directors.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Corporation and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Subsidiary
transfers such property to a Person and leases it back from such Person, other
than leases for a term of not more than 36 months or between the Company and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Initial Securities and the Exchange
Securi ties that are issued under and pursuant to the terms of this Indenture
and any indenture or indentures supplemental hereto, as amended or supplemented
from time to time. For purposes of this Indenture and any indenture or
indentures supplemental hereto, all Initial Securities and Exchange Securities
shall be treated as a single class and shall vote together as one series of
Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Senior Indebtedness" means (i) all obligations consisting of
the principal of and premium, if any, and accrued and unpaid interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not post-filing interest is
allowed in such proceeding), whether existing on the Issue Date or thereafter In
curred, in respect of (A) Indebtedness of the Company for money borrowed and (B)
Indebtedness evidenced by notes, debentures, bonds or other similar instru ments
for the payment of which the Company is responsible or liable; (ii) all
Capitalized Lease Obligations of the Company; (iii) all obligations of the Compa
ny (A) for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (B) under Interest Rate Agreements and
Currency Agreements entered into in respect of any obligations described in
clauses (i) and (ii) or (C) issued or assumed as the deferred purchase price of
property, and all conditional sale obligations of the Company and all
obligations of the Company under any title retention agreement; (iv) all
guarantees of the Company with respect to obligations of other persons of the
type referred to in clauses (ii) and (iii) and with respect to the payment of
dividends of other Persons; and (v) all obligations of the Company consisting of
modifications, renewals, extensions, replacements and refundings of any
obligations described in clauses (i), (ii), (iii) or (iv); unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinated in right of
payment to the Securities, or any other Indebtedness or obligation of the
Company; provided, however, that Senior Indebtedness shall not be deemed to
include (1) any obligation of the Company to any Subsidiary, (2) any liability
for Federal, state, local or other taxes or (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabili ties).
"Significant Subsidiary" means any Subsidiary (other than an
Unrestricted Subsidiary) that would be a "Significant Subsidiary" of the Company
within the meaning of Rule 1-02 under Regulations S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency).
"Subordinated Indebtedness" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
contractually subordinated or junior in right of payment to the Securities or
any other Indebtedness of the Company.
"Subsidiary" means, as applied to any Person, any corporation,
limited or general partnership, trust, association or other business entity of
which an aggregate of at least a majority of the outstanding Voting Shares or an
equiva lent controlling interest therein, of such Person is, at the time,
directly or indirectly, owned by such Person and/or one or more Subsidiaries of
such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Section 77aaa-77bbbb) as in effect on the date first above written.
"Trustee" means the party named as such above until a
successor replaces it and thereafter means the successor.
"Trust Officer" means any officer of the Trustee assigned by
the Trustee to administer its corporate trust matters or to whom any corporate
trust matter is referred because of that officer's knowledge of and familiarity
with the particular subject.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrelated Business" means any business other than the Line of
Business.
"Unrestricted Subsidiary" means (i) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other Subsidiary that is not a
Subsidiary of the Subsidiary to be so designated; provided, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted pursuant to Section 3.3. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided,
however, that imme diately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness pursuant to Section 3.4(a)
and (y) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the board resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions; provided, however, that the
failure to so file such resolution and/or Officers' Certificate with the Trustee
shall not impair or affect the validity of such designation.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obliga tion by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable before the maturity thereof.
"Voting Shares," with respect to any corporation, means the
Capital Stock having the general voting power under ordinary circumstances to
elect at least a majority of the board of directors (irrespective of whether or
not at the time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary (other than an
Unrestricted Subsidiary) all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly Owned Subsid iary.
"Working Capital Credit Agreement" means the Line of Credit
Note, dated as of June 4, 1993, between the Company and The Bank of Califor nia,
N.A., as amended, refinanced, renewed or extended from time to time.
SECTION 1.2 Other Definitions.
Term Defined in Section
"Application Period".................................................. 3.12
"Asset Sale Offer".................................................... 3.12
"Asset Sale Offer Amount"............................................. 3.12
"Asset Sale Purchase Date"............................................ 3.12
"Bankruptcy Law"...................................................... 5.1
"Change of Control Offer"............................................. 3.8
"Change of Control Purchase Date"..................................... 3.8
"Custodian"........................................................... 5.1
"Event of Default".................................................... 5.1
"Global Note" ........................................................ 2.1(b)
"Legal Holiday"....................................................... 10.7
"Notice of Default"................................................... 5.1
"Offer Period"........................................................ 3.12
"Paying Agent"........................................................ 2.3
"Registrar"........................................................... 2.3
"Restricted Payment".................................................. 3.3(a)
"Successor Corporation"................................................ 4.1(i)
SECTION 1.3 Incorporation by Reference of
Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Holder or Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings assigned to them.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) generally accepted accounting principles" means,
and any accounting term not otherwise defined has the meaning assigned
to it and shall be construed in accordance with, GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular;
(e) provisions apply to successive events and transactions;
(f) "including" means including, without limitation;
(g) unsecured debt shall not be deemed to be subordinate
or junior to secured debt merely by virtue of its nature as unsecured debt;
(h) the principal amount of any non-interest bearing or
other discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer dated such
date pre pared in accordance with generally accepted accounting
principles and accretion of principal on such security shall be deemed
to be the Incurrence of Indebtedness; and
(i) the principal amount (if any) of any Preferred
Stock shall be the greatest of (i) the stated value, (ii) the
redemption price or (iii) the liquidation preference of such Preferred
Stock.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
(a) The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A annexed hereto,
which is part of this Indenture. The Exchange Securities and the Trustee's
certificate of authorization shall be substantially in the form of Exhibit B
annexed hereto, which is part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of Securities
annexed hereto as Exhibit A and Exhibit B shall constitute, and are expressly
made, a part of this Indenture. 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.
(b) Securities offered and sold in reliance on Rule 144A
and securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Securities in registered form, substantially in the form of Exhibit A
hereto, with such applicable legends as are provided in Exhibit A hereto (the
"Global Note"), deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggre gate principal amount of the Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
(c) Unless and until an Initial Security is exchanged for an
Exchange Security in connection with an effective Registration Statement
pursuant to the Registration Rights Agreement, the Global Note, shall bear the
following legend on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTI TUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS AC QUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT, WITHIN TWO YEARS AF TER THE LATER OF THE ORIGINAL ISSUANCE
OF THIS SECURI TY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY
AN AFFILIATE OF THE COMPANY, RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COM PLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVID ED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATE MENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE ON
WHICH THIS SECURITY WAS HELD BY AN AFFILIATE OF THE COMPANY, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH HEREIN RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO THE TRUSTEE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNIT
4
<PAGE>
ED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall bear
the following legend on the face thereof:
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS RE QUESTED 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 REPRESENTA TIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HERE OF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS SECURITY SHALL BE LIMITED TO TRANS FERS 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 SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN SECTION 2.8 OF THE INDENTURE.
SECTION 2.2 Execution and Authentication.
Two Officers shall sign the Securities for the Company by
manual or facsimile signature. The Company's seal shall be impressed, affixed,
imprint ed or reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Trustee. The signature shall
be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Securities for
original issue in an aggregate principal amount of $200,000,000 and (ii)
Exchange Securities for issue only in exchange pursuant to the Registration
Rights Agreement, for a like principal amount of Initial Securities, in each
case, upon a written order of the Company signed by two Officers. Such order
shall specify the amount of the Securities to be authenticated and the date on
which the original issue of Securi ties is to be authenticated and whether the
Securities are to be Initial Securities or Exchange Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed
$275,000,000 except as provided in Section 2.9.
The Trustee shall initially act as authenticating agent and
may subsequently appoint another Person acceptable to the Company as
authenticating agent to authenticate Securities. Unless limited by the terms of
such appoint ment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
Provided that the authentication agent has entered into an agreement with the
Company concerning the authentication agent's duties, the Trustee shall not be
liable for any act or any failure of the authenticating agent to perform any
duty either required herein or authorized herein to be performed by such person
in accordance with this Indenture.
The Securities shall be issued only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent and the term "Registrar" includes any
co-registrar.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture.
The agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall promptly notify the Trustee of the name and
address of any such agent and any change in the address of such agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as
such and shall be entitled to appropriate compensation therefor pursuant to
Section 6.7. The Company or any Subsidiary or Affiliate of the Company may act
as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.4 Paying Agent To Hold Money in Trust.
On or prior to 11:00 a.m., eastern standard time, on each due
date of the principal and interest on any Security (including any redemption
date fixed under the terms of such Security or this Indenture) the Company shall
deposit with the Paying Agent a sum of money, in immediately available funds,
sufficient to pay such principal and interest in funds available when such
becomes due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the pay ment of principal of or interest on the Securities (whether such money
has been paid to it by the Company or any other obligor on the Securities) and
shall notify the Trustee of any default by the Company (or any other obligor on
the Securi ties) in making any such payment. If the Company or a Subsidiary or
an affiliate of the Company acts as Paying Agent, it shall segregate the money
held by it as Paying Agent and hold it as a separate trust fund for the benefit
of the Securityholders. If the Company defaults in its obligation to deposit
funds for the payment of principal and interest the Trustee may, during the
continuation of such default, require a Paying Agent to pay all money held by it
to the Trustee. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed by it.
Upon doing so, the Paying Agent (other than the Company or a Subsidiary or
Affiliate of the Company) shall have no further liability for the money
delivered to the Trustee.
SECTION 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Securityholders, and the Company shall otherwise comply with
TIA Sec 312(a).
SECTION 2.6 Transfer and Exchange.
(a) The Securities shall be transferable only upon the sur-
render of a Security for registration of transfer. When a Security is presented
to the Registrar or a co-registrar with a request to register a transfer, the
Registrar shall register the transfer as requested if the requirements of
Section 8-401(1) of the Uniform Commercial Code are met (and the Registrar shall
be entitled to assume such requirements have been met unless it receives written
notice to the contrary), the requirements of Section 2.7 or Section 2.8 of this
Indenture, if applicable, are met and, if so required by the Trustee or the
Company, if the Security presented is accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Company, duly executed by
the registered owner or by his or her attorney duly authorized in writing. When
Securities are presented to the Registrar or a co-registrar with a request to
exchange them for an equal principal amount of Securities of other authorized
denominations (including on exchange of Initial Securities for Exchange
Securities), the Regis trar shall make the exchange as requested if the same
requirements are met; provided that no exchanges of Initial Securities for
Exchange Securities shall occur until a Registration Statement shall have been
declared effective by the SEC and that any Initial Securities that are exchanged
for Exchange Securities shall be cancelled by the Trustee. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-registrar's
request. The Depositary shall, by acceptance of a Global Note, agree that
transfers of beneficial interests in such Global Note may be effected only
through a book-entry system maintained by the Depositary (or its agent), and
that ownership of a beneficial interest in the Global Note shall be required to
be reflected in a book entry.
No service charge shall be made for any registration of
transfer or exchange of the Securities, but the Company may require payment of a
sum suffi
5
<PAGE>
cient to cover any transfer tax or similar governmental charge payable in connec
tion therewith (other than any such transfer taxes or similar governmental
charge payable upon exchange pursuant to Section 2.12 or 8.5 of this Indenture).
The Company shall not be required to make and the Registrar
need not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or for a period of 15 days before a selection of Securities
to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
SECTION 2.7 Book-Entry Provisions for Global Note.
-------------------------------------
(a) The Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.1(c).
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Note and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note, for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authoriza tion furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
(b) Transfers of the Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the Depositary, its
successors or their respective nominees. Beneficial interests in the Global Note
may be transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 2.8 hereof.
(c) The registered holder of the Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which such
holder is entitled to take under this Indenture or the Securities.
SECTION 2.8 Special Transfer Provisions.
Unless and until an Initial Security is exchanged for an
Exchange Note, or the Initial Securities are registered for sale in connection
with an effective Registration pursuant to the Registration Rights Agreement,
the follow ing provisions shall apply:
(a) Transfers to QIBs and to Non-U.S. Persons. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to a QIB and transfers to or by
Non-U.S. Persons:
(i) The Registrar shall register the
transfer if such transfer is being made by a proposed
transferor who has checked the box provided for on the form of
Initial Security stating, or has otherwise advised the Company
and the Registrar in writing sub stantially in the form of
Exhibit C hereto, that the sale has been made in compliance
with the provisions of Rule 144A to a transfer ee who has
signed the certification provided for on the form of Initial
Security stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Initial
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 QIB within the meaning of Rule 144A, 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 it has request ed pursuant to Rule
144A or has determined not to request such information and
that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) The Registrar shall register the
transfer of any Initial Security if the proposed transferee is
a Non-U.S. Person and the proposed transferor has delivered to
the Registrar a certificate substantially in the form of
Exhibit D hereto.
(b) Private Placement Legend. Upon the transfer, ex
change or replacement of Securities not bearing the Private Placement
Legend, the Registrar shall deliver Securities that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall
deliver only Securities that bear the Private Placement Legend unless
there is delivered to the Registrar an opinion of counsel reasonably
satisfactory to the Company and the Registrar to the effect that
neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the
Securities Act.
(c) General. By its acceptance of any Security
bearing the Private Placement Legend, each holder of such Security
acknowledges the restrictions on transfer of such Security set forth in
this Indenture and in the Private Placement Legend and agrees that it
will transfer such Security only as provided in this Indenture. The
Registrar shall not register a transfer of any Security unless such
transfer complies with the restrictions on transfer of such Security
set forth in this Indenture, provided, however, that the Registrar
shall register the transfer of any Initial Security, whether or not
such Initial Security bears the Private Placement Legend, if the
requested transfer is at least two years after the later of the
original Issue Date of the Initial Security and the last date on which
such Initial Security was held by an affiliate of the Company. In
connection with any transfer of Securities, each holder agrees by its
acceptance of the Initial Securities to furnish the Registrar or the
Company such certifications, legal opinions or other information as
either of them may reasonably require to confirm that such transfer is
being made pursuant to an exemption from, or a transaction not subject
to, the registration requirements of the Securities Act; provided that
the Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of
any such certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.7 hereof or this
Section
2.8. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 2.9 Replacement Securities.
If a mutilated Security is surrendered to the Registrar or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrong fully taken and the Holder furnishes to the Company and the Trustee
evidence to their satisfaction of such loss, destruction or wrongful taking, the
Company shall issue and the Trustee shall, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, authenti cate a replacement Security if the requirements of Section
8-405 of the Uniform Commercial Code are met (and the Registrar shall be
entitled to assume such requirements have been met unless it receives written
notice to the contrary) and if there is delivered to the Company and the Trustee
such security or indemnity as may be required to save each of them harmless,
satisfactory to the Company or the Trustee, as the case may be. The Company and
the Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.10 Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.9, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If all the principal and interest on any Securities are
considered paid under Section 3.1, such Securities cease to be outstanding under
this Inden ture and interest on such Securities shall cease to accrue.
If the Paying Agent (other than the Company or a Subsidiary or
an Affiliate of the Company) holds in accordance with this Indenture on a redemp
tion date or maturity date money sufficient to pay all principal and interest
due on
that date then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue (unless there shall be a default in such
pay ment).
If a Security is called for redemption, the Company and the
Trustee need not treat the Security as outstanding in determining whether
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent.
Subject to Section 2.11, a Security does not cease to be
outstanding because the Company or an Affiliate thereof holds the Security.
SECTION 2.11 Determination of Holders' Action.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, amendment, waiver or
consent, Securities owned by or pledged to the Company, any other obligor upon
the Securities or any Affiliate of the Company, or such other obligor shall be
disregarded and deemed not to be outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned or pledged shall be so disregarded.
SECTION 2.12 Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee, upon the written order of the Company signed by two Officers, shall
authenticate definitive Securities in exchange for temporary Securities. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so ex changed, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
SECTION 2.13 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration of
transfer, exchange, payment or cancellation and shall return such cancelled
securities to the Company. The Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for cancellation.
SECTION 2.14 Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay defaulted interest, plus any interest payable on the
defaulted interest to the extent permitted by law, in any lawful manner. It may
pay the defaulted interest to the Persons who are Securityholders on a
subsequent special record date which date shall be at least five Business Days
prior to the payment date. The Company shall fix the special record date and
payment date. At least 15 days before the special record date, the Company (or
the Trustee, in the name of and at the expense of the Company) shall mail to
Securityholders a notice that states the special record date, payment date and
amount of interest to be paid.
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Securities.
The Company shall pay the principal of and interest on the
Securi ties on the dates and in the manner provided in the Securities. The
Company shall pay interest on overdue principal at the rate borne by the
Securities; it shall pay interest on overdue installments of interest at the
rate borne by the Securities to the extent lawful. Principal and interest shall
be considered paid on the date due (including a redemption date) if the Trustee
or the Paying Agent (other than the Company or a Subsidiary or an Affiliate of
the Company) has received from or on behalf of the Company on or prior to 11:00
a.m., eastern standard time, on that date, in immediately available funds, money
sufficient to pay all principal and interest then due.
SECTION 3.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment 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 to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 10.2 of this Indenture.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such designa
tions; 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 Borough of Manhattan, the City of New York, for such purposes. The Company
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agen
cy.
SECTION 3.3 Limitation on Restricted Payments.
(a) So long as any of the Securities are outstanding, the
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, (i) declare or pay any dividend on or make any distribution or
similar payment of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving the Company) to
the direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Non-Convertible Capital Stock or rights to
acquire its Non-Convertible Capital Stock and dividends or distributions payable
solely to the Company or a Restricted Subsidiary and other than pro rata
dividends paid by a Subsidiary with respect to a series or class of its Capital
Stock the majority of which is held by the Company or a Wholly Owned Subsidiary
that is not a Foreign Subsidiary), (ii) purchase, redeem, defease or otherwise
acquire or retire for value any Capital Stock of the Company or of any direct or
indirect parent of the Company, or, with respect to the Company, exercise any
option to exchange any Capital Stock
that by its terms is exchangeable solely at the option of the Company (other
than into Capital Stock of the Company which is neither Exchangeable Stock nor
Redeemable Stock), (iii) purchase, repurchase, redeem, defease or otherwise ac
quire or retire for value, prior to scheduled maturity or scheduled repayment
thereof or scheduled sinking fund payment thereon, any Subordinated Indebted
ness (other than the purchase, repurchase or other acquisition of Subordinated
Indebtedness purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition) or (iv) make any Investment, other than a Controlled Non-
Subsidiary Investment or a payment described in clause (vi) of the second
sentence of Section 3.11, in any Unrestricted Subsidiary or any Affiliate of the
Company other than a Restricted Subsidiary or a Person which will become a
Restricted Subsidiary as a result of any such Investment (each such payment de
scribed in clauses (i)-(iv) of this paragraph, a "Restricted Payment"), unless
at the time of and after giving effect to the proposed Restricted Payment:
(1) no Default or Event of Default shall have occurred and
be continuing (or would result therefrom);
(2) the Company would be permitted to Incur an additional
$1 of Indebtedness pursuant to the provisions of Section 3.4(a); and
(3) the aggregate amount of all such Restricted Payments
subsequent to the Issue Date shall not exceed the sum of:
(A) 50% of aggregate Consolidated Net Income accrued during
the period (treated as one accounting period) from January 1, 1994 to
the end of the most recent fiscal quarter for which financial
statements are avail able (or if such Consolidated Net Income is a
deficit, minus 100% of such deficit), and minus 100% of the amount of
any write-downs, write-offs, other negative reevaluations and other
negative extraordinary charges not otherwise reflected in Consolidated
Net Income during such period;
(B) if the Securities are Investment Grade immediately
following the Restricted Payment in connection with which this
calculation is made, an additional 25% of Consolidated Net Income for
any period of one or more consecutive completed fiscal quarters ending
with the last fiscal quarter completed prior to the date of such
Restricted Payment during which the Securities were Investment Grade
for the entire period;
(C) the aggregate Net Cash Proceeds received by the Company
after January 1, 1994 from the sale of Capital Stock (other than Redeem
able Stock or Exchangeable Stock) of the Company to any person other
than the Company, any of its Subsidiaries or an employee stock
ownership plan;
(D) the amount by which the principal amount of, and any
accrued interest on, Indebtedness of the Company or its Restricted
Subsidiaries is reduced on the Company's Consolidated balance sheet
upon the conversion or exchange (other than by a Subsidiary) subsequent
to the Issue Date of any Indebtedness of the Company or any Restricted
Subsidiary converted or exchanged for Capital Stock (other than
Redeemable Stock or Ex changeable Stock) of the Company (less the
amount of any cash, or the value of any other property, distributed by
the Company or any Restricted Subsidiary upon such conversion or
exchange);
(E) an amount equal to the net reduction in Investments in
Unre stricted Subsidiaries resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each
case as provided in the definition of "Investments"), not to exceed in
the case of any Unrestricted Subsidiary the amount of Investments
previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary; and
(F) $15 million.
(b) The failure to satisfy the conditions set forth in clauses
(2) and (3) of Subsection 3.3(a) shall not prohibit any of the following as long
as the condition set forth in clause (1) of Subsection 3.3(a) is satisfied
(except as set forth below):
(i) notwithstanding clause (1) of Section 3.3(a), the
occurrence or existence of a Default at the time of payment of
dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with
Subsection 3.3(a); shall not prohibit the payment of such dividends;
(ii) any purchase, redemption, defeasance, or other
acquisi tion or retirement for value of Capital Stock or Subordinated
Indebtedness of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Redeemable Stock or Exchangeable Stock and other
than stock issued or sold to a Subsidiary or to an employee stock
ownership plan), provided, however, that notwithstanding clause (1) of
Subsection 3.3(a), the occur rence or existence of a Default or Event
of Default shall not prohibit, for purposes of this Section, the making
of such purchase, redemption, defea sance or other acquisition or
retirement, and provided, further, such purchase, redemption,
defeasance or other acquisition or retirement shall not be included in
the calculation of Restricted Payments made for purpos es of clause (3)
of Subsection 3.3(a) and provided, further, that the Net Cash Proceeds
from such sale shall be excluded from sub-clause (C) of clause (3) of
Subsection 3.3(a);
(iii) any purchase, redemption, defeasance or other
acqui sition or retirement for value of Subordinated Indebtedness of
the Compa ny made by exchange for, or out of the proceeds of the
substantially concurrent Incurrence of for cash (other than to a
Subsidiary), new In debtedness of the Company, provided, however, that
(A) such new Indebtedness shall be contractually subordinated in right
of payment to the Securities at least to the same extent as the
Indebtedness being so re deemed, repurchased, defeased, acquired or
retired, (B) if the Indebt edness being purchased, redeemed, defeased
or acquired or retired for value is Non-Recourse Debt, such new
Indebtedness shall be Non-Re course Debt, (C) such new Indebtedness has
a Stated Maturity either (1) no earlier than the Stated Maturity of the
Indebtedness redeemed, repur chased, defeased, acquired or retired or
(2) after the Stated Maturity of the Securities and (D) such
Indebtedness has an Average Life equal to or greater than the Average
Life of the Indebtedness redeemed, repurchased, defeased, acquired or
retired, and provided, further, that such purchase, redemption,
defeasance or other acquisition or retirement shall not be included in
the calculation of Restricted Payments made for purposes of clause (3)
of Subsection 3.3(a);
(iv) any purchase, redemption, defeasance or other
acqui sition or retirement for value of Subordinated Indebtedness upon
a Change of Control or an Asset Sale to the extent required by the
indenture or
other agreement pursuant to which such Subordinated Indebtedness was
issued, but only if the Company (A) in the case of a Change of Control,
has made an offer to repurchase the Securities as described under
Section 3.8 or (B) in the case of an Asset Sale, has applied the Net
Available Cash from such Asset Sale in accordance with the provisions
described under Section 3.12; and
SECTION 3.4 Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness, except that the
Company may Incur Indebtedness if, after giving effect thereto, the Consolidated
Coverage Ratio would be greater than 2:1.
(b) Notwithstanding the foregoing, this Section shall not
limit the ability of the Company or any Restricted Subsidiary to Incur the
following Indebtedness:
(i) Refinancing Indebtedness (except with respect to Indebt
edness referred to in clause (ii), (iii) or (iv) below);
(ii) in addition to any Indebtedness otherwise
permitted to be Incurred hereunder, Indebtedness of the Company at any
one time out standing in an aggregate principal amount not to exceed
$25,000,000 and provided that the proceeds of such Indebtedness shall
not be used for the purpose of making any Restricted Payments pursuant
to clause (i) or (ii) of Section 3.3(a);
(iii) Indebtedness of the Company which is owed to
and held by a Wholly Owned Subsidiary and Indebtedness of a Wholly
Owned Subsidiary which is owed to and held by the Company or a Wholly
Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of
such Indebtedness (other than to the Company or a Wholly Owned Subsid
iary) shall be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the Company or by a Wholly Owned Subsidiary, as
the case may be;
(iv) Indebtedness of the Company under the Bank Credit
Agreement which, when taken together with the aggregate amount of
Indebtedness Incurred pursuant to clause (viii) of this subsection, is
not in excess of $50,000,000, and Indebtedness of the Company under the
Working Capital Credit Agreement not in excess of $25,000,000;
(v) Acquired Indebtedness; provided, however, that
the Company would have been able to Incur such Indebtedness at the time
of the Incurrence thereof pursuant to Section 3.4(a);
(vi) Indebtedness of the Company or a Restricted
Subsidiary outstanding on the Issue Date (other than Indebtedness
referred to in clause (iv) above and Indebtedness being repaid or
retired with the pro ceeds of the Offering);
(vii) Non-Recourse Debt of a Restricted Subsidiary
(other than a Restricted Subsidiary existing on the Issue Date), the
proceeds of which are used to acquire, develop, improve or construct a
new Facility of such Restricted Subsidiary;
(viii) guarantees by the Company of Indebtedness of
Re stricted Subsidiaries which, but for such guarantees, would be
permitted to be Incurred pursuant to clause (vii) of this Section
3.4(b), provided that the aggregate principal amount of Indebtedness
Incurred pursuant to this clause (viii), when taken together with
outstanding Indebtedness Incurred under the Bank Credit Agreement
pursuant to clause (iv) of this Section 3.4(b), is not in excess of
$50,000,000;
(ix) Related Asset Indebtedness, provided that at the
time of the Incurrence thereof, giving pro forma effect to the
Incurrence thereof, Moody's and S&P shall have affirmed their
respective ratings of the Securities in effect prior to the Incurrence
of such Related Asset In debtedness; and
(x) the Securities.
(c) Notwithstanding Sections 3.4(a) and (b), the Company shall
not Incur any Indebtedness if the proceeds thereof are used, directly or
indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any
Subordinated Indebtedness unless such repayment, prepayment, redemption,
defeasance, retire ment, refunding or refinancing is not prohibited by Section
3.3 or unless such In
6
<PAGE>
debtedness shall be contractually subordinated to the Securities at least to the
same extent as such Subordinated Indebtedness.
SECTION 3.5 Limitation on Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends to or make any other distributions on its Capital Stock, or pay
any Indebtedness or other obligations owed to the Company or any other
Restricted Subsidiary, (ii) make any Investments in the Company or any other
Restricted Subsidiary or (iii) transfer any of its property or assets to the
Company or any other Restricted Subsidiary; provided, however, that the
foregoing shall not apply to:
(a) any encumbrance or restriction existing pursuant to this
Indenture or any other agreement or instrument as in effect or entered into on
the Issue Date;
(b) any encumbrance or restriction with respect to a
Subsidiary pursuant to an agreement relating to any Acquired Indebtedness;
provided, however, that such encumbrance or restriction was not Incurred in
connection with or in contemplation of such Subsidiary becoming a Subsidiary;
(c) any encumbrance or restriction pursuant to an agreement
effecting a refinancing of Indebtedness referred to in clause (a) or (b) above
or contained in any amendment or modification with respect to such Indebtedness;
provided, however, that the encumbrances and restrictions contained in any such
agreement, amendment or modification are no less favorable in any material re
spect with respect to the matters referred to in clauses (i), (ii) and (iii)
above than the encumbrances and restrictions with respect to the Indebtedness
being refi nanced, amended or modified;
(d) in the case of clause (iii) above, customary
non-assignment provisions of (A) any leases governing a leasehold interest, (B)
any supply, license or other agreement entered into in the ordinary course of
business of the Company or any Subsidiary or (C) any security agreement relating
to a Lien permitted by Section 3.7(l), that, in the reasonable determination of
the President or Chief Financial Officer of the Company (x) is required in order
to obtain such financing referred to in Section 3.7(l) and (y) is customary for
such financings;
(e) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary pending the
closing of such sale or disposition;
(f) any encumbrance imposed pursuant to the terms of Indebted
ness incurred pursuant to Section 3.4(b)(vii), provided that such encumbrance in
the written opinion of the President or Chief Financial Officer of the Company,
(x) is required in order to obtain such financing, (y) is customary for such
financings and (z) applies only to the assets of or revenues of the applicable
Facility; or
(g) any encumbrance or restriction existing by reason of applicable
law.
SECTION 3.6 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction unless (i) the Company
or such Subsidiary would be entitled to create a Lien on such property securing
Indebtedness in an amount equal to the Attributable Debt with respect to such
transaction without equally and ratably securing the Securities pursuant to
Section 3.7 or (ii) the net proceeds of such sale are at least equal to the fair
value (as determined by the Board of Directors) of such property and the Company
or such Subsidiary shall apply or cause to be applied an amount in cash equal to
the net proceeds of such sale to the retirement, within 30 days of the effective
date of any such arrangement, of Senior Indebtedness or Indebtedness of a
Restricted Subsidiary; provided, however, that in addition to the transactions
permitted pursuant to the foregoing clauses (i) and (ii), the Company or any
Restricted Sub sidiary may enter into a Sale/Leaseback Transaction as long as
the sum of (x) the Attributable Debt with respect to such Sale/Leaseback
Transaction and all other Sale/Leaseback Transactions entered into pursuant to
this proviso, plus (y) the amount of outstanding Indebtedness secured by Liens
Incurred pursuant to the final proviso to Section 3.7, does not exceed 10% of
Consolidated Net Tangible Assets as determined based on the consolidated balance
sheet of the Company as of the end of the most recent fiscal quarter for which
financial statements are available; and provided, further, that a Restricted
Subsidiary that is not a Re stricted Subsidiary on the Issue Date may enter into
a Sale/Leaseback Transaction with respect to property owned by such Restricted
Subsidiary, the proceeds of
which are used to acquire, develop, construct, or repay (within 365 days of the
commencement of commercial operation of such Facility) Indebtedness Incurred to
acquire, develop or construct, a new Facility of such Restricted Subsidiary, as
long as neither the Company nor any other Restricted Subsidiary shall have any
obligation or liability in connection therewith.
SECTION 3.7 Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, incur or permit to exist any Lien of any
nature whatsoever on any of its properties (including, without limitation,
Capital Stock), whether owned at the date of such Indenture or thereafter
acquired, other than (a) pledges or deposits made by such Person under workers'
compensation, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
statutory or regulatory obligations of such Person or deposits of cash of United
States Gov ernment bonds to secure surety, appeal or performance bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case Incurred in the ordinary course
of business; (b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens, in each case, arising in the ordinary course of business and
with respect to amounts not yet due or being contested in good faith by
appropriate legal pro ceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; or other Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be diligently prosecut ing appeal or other proceedings for review; (c)
Liens for property taxes not yet subject to penalties for non-payment or which
are being contested in good faith and by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made; (d) Liens in favor of issuers or surety bonds or letters of credit issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; provided, however, that such letters of credit may not
constitute Indebtedness; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or liens
incidental to the conduct of the business of such Person or to the ownership of
its properties which were not Incurred in connection with
Indebtedness or other extensions of credit and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (f) Liens securing
Indebted ness Incurred to finance the construction or purchase of, or repairs,
improve ments or additions to, property, which shall include, without
limitation, Liens on the stock of the Restricted Subsidiary that has purchased
or owns such property, provided, however, that the Lien may not extend to any
other property owned by the Company or any Restricted Subsidiary at the time the
Lien is incurred, and the Indebtedness secured by the Lien may not be issued
more than 270 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien; (g) Liens existing on the Issue Date (other
than Liens relating to Indebtedness or other obligations being repaid or liens
that are otherwise extinguished with the proceeds of the Offering); (h) Liens on
property or shares of stock of a Person at the time such Person becomes a
Subsidiary; provided, however, that any such Lien may not extend to any other
property owned by the Company or any Restricted Subsidiary; (i) Liens on
property at the time the Company or a Subsidiary acquires the property,
including any acquisition by means of a merger or consolidation with or into the
Company or a Subsidiary; provided, however, that such Liens are not incurred in
connection with, or in contemplation of, such merger or consolidation; and
provided, further, that the Lien may not extend to any other property owned by
the Company or any Restricted Subsidiary; (j) Liens securing Indebtedness or
other obligations of a Subsidiary owing to the Company or a Wholly Owned
Subsidiary; (k) Liens incurred by a Person other than the Company or any
Subsidiary on assets that are the subject of a Capitalized Lease Obligation to
which the Company or a Subsidiary is a party; provided, however, that any such
Lien may not secure Indebtedness of the Company or any Subsid iary (except by
virtue of clause (ix) of the definition of "Indebtedness") and may not extend to
any other property owned by the Company or any Restricted Subsidiary; (l) Liens
incurred by a Restricted Subsidiary on its assets to secure Non-Recourse Debt
Incurred pursuant to Section 3.4(b)(vii), provided that such Lien (A) is
Incurred at the time of the initial Incurrence of such Indebtedness and (B) does
not extend to any assets or property of the Company or any other Restricted
Subsidiary; (m) Liens not in respect of Indebtedness arising from Uni form
Commercial Code financing statements for informational purposes with re spect to
leases Incurred in the ordinary course of business and not otherwise pro hibited
by this Indenture; (n) Liens not in respect of Indebtedness consisting of the
interest of the lessor under any lease Incurred in the ordinary course of
business and not otherwise prohibited by this Indenture; (o) Liens which consti
tute banker's liens, rights of set-off or similar rights and remedies as to
deposit accounts or other funds maintained with any bank or other financial
institution, whether arising by operation of law or pursuant to contract; (p)
Liens to secure any refinancing, refunding, extension, renewal or replacement
(or successive refinancings, refundings, extensions, renewals or replacements)
as a whole, or in part, of any Indebtedness secured by any Lien referred to in
the foregoing clauses (f), (g), (h) and (i), provided, however, that (x) such
new Lien shall be limited to all or part of the same property that secured the
original Lien (plus improvements on such property) and (y) the Indebtedness
secured by such Lien at such time is not increased (other than by an amount
necessary to pay fees and expenses, including premiums, related to the
refinancing, refunding, extension, renewal or replacement of such Indebtedness);
and (q) Liens by which the Securities are secured equally and ratably with other
Indebtedness pursuant to this Section 3.7; in any such case without effectively
providing that the Securities shall be secured equally and ratably with (or
prior to) the obligations so secured for so long as such obligations are so
secured; provided, however, that the Company may incur other Liens to secure
Indebtedness as long as the sum of (x) the amount of outstanding Indebtedness
secured by Liens incurred pursuant to this proviso plus (y) the Attributable
Debt with respect to all outstanding leases in connection with Sale/Leaseback
Transactions entered into pursuant to the first proviso to Section 3.6 does not
exceed 10% of Consolidated Net Tangible Assets as determined with respect to the
Company as of the end of the most recent fiscal quarter for which financial
statements are available.
SECTION 3.8 Change of Control.
In the event of a Change of Control Triggering Event, the
Compa ny shall make an offer to purchase (the "Change of Control Offer") the
Securities then outstanding at a purchase price equal to one hundred one percent
(101%) of the principal amount (excluding any premium) thereof plus accrued and
unpaid interest to the Change of Control Purchase Date (as defined below) on the
terms set forth in this Section. The date on which the Company shall purchase
the Securities pursuant to this Section (the "Change of Control Purchase Date")
shall be no earlier than 30 days, nor later than 60 days, after the notice
referred to below is mailed, unless a longer period shall be required by law.
The Company shall notify the Trustee in writing promptly after the occurrence of
any Change of Control Triggering Event of the Company's obligation to offer to
purchase all of the Securities.
Notice of a Change of Control Offer shall be mailed by the
Company to the Holders of the Securities at their last registered address (with
a
copy to the Trustee and the Paying Agent) within thirty (30) days after a Change
in Control Triggering Event has occurred. The Change of Control Offer shall
remain open from the time of mailing until a date not more than five (5)
Business Days before the Change of Control Purchase Date. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Securities (in whole or in part) pursuant to the Change of Control Offer.
The notice, which shall govern the terms of the Change of Control Offer, shall
state:
(a) that the Change of Control Offer is being made pursu
ant to this Section;
(b) the purchase price and the Change of Control Purchase
Date;
(c) that any Security not surrendered or accepted for pay
ment will continue to accrue interest;
(d) that any Security accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date;
(e) that any Holder electing to have a Security
purchased (in whole or in part) pursuant to a Change of Control Offer
will be required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Security
completed, to the Paying Agent at the address specified in the notice
(or otherwise make effective delivery of the Security pursuant to
book-entry procedures and the related rules of the applicable
depositories) at least five (5) Business Days before the Change of
Control Purchase Date; and
(f) that any Holder will be entitled to withdraw his
or her election if the Paying Agent receives, not later than three (3)
Business Days prior to the Change of Control Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security the Holder delivered for
purchase and a statement that such Holder is withdrawing his or her
election to have the Security purchased.
On the Change of Control Purchase Date, the Company shall (i)
accept for payment Securities or portions thereof surrendered and properly
tendered, and not withdrawn, pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent, no later than 11:00 a.m. eastern standard time,
money, in immediately available funds, sufficient to pay the purchase price of
all Securities or portions thereof so accepted and (iii) deliver to the Trustee,
no later than 11:00 a.m. eastern standard time, Securities so accepted together
with an Officers' Certificate stating that such Securities have been accepted
for payment by the Company. The Paying Agent shall promptly, and in any event
within one (1) Business Day following the deposit and delivery specified in
clauses (ii) and (iii) of the immediately preceding sentence, mail or deliver to
Holders of Securi ties so accepted payment in an amount equal to the purchase
price. Holders whose Securities are purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
appli cable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 3.9 Compliance Certificate.
The Company shall, within 120 days after the close of each
fiscal year following the issuance of the Securities, file with the Trustee an
Officer's Certificate, provided that one Officer executing the same shall be the
principal executive officer, the principal financial officer or the principal
accounting officer of the Company, covering the period from the date of issuance
of the Securities to the end of the fiscal year in which the Securities were
issued, in the case of the first such certificate, and covering the preceding
fiscal year in the case of each subsequent certificate, and stating whether or
not, to the knowledge of each such executing Officer, the Company has complied
with and performed and fulfilled all covenants on its part contained in this
Indenture and is not in default in the performance or observance of any of the
terms or provisions contained in this Indenture, and, if any such signer has
obtained knowledge of any default by the Company in the performance, observance
or fulfillment of any such covenant, term or provision specifying each such
default and the nature thereof. For the purpose of this Section 3.9, compliance
shall be determined without regard to any grace period or requirement of notice
provided pursuant to the terms of this Indenture.
SECTION 3.10 SEC Reports.
The Company shall, to the extent required by TIA Sec 314(a),
file with the Trustee, within 15 days after the filing with the SEC, copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is
at any time no longer subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, it shall, for so long as the Securities remain
outstanding, file with the Trustee and the SEC and mail to each Securityholder
at such Securityholder's registered address, within 15 days after the Company
would have been required to file such documents with the SEC, copies of the
annual reports and of the information, documents and other reports which the
Company would have been required to file with the SEC if the Company had
continued to be subject to such Sections 13 or 15(d). The Company also shall
comply with the other provisions of TIA Sec 314(a).
SECTION 3.11 Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, permit to exist, renew or
extend any transaction or series of transactions (including, without limitation,
the sale, purchase, exchange or lease of any assets or property or the rendering
of any services) with any Affiliate of the Company unless (i) the terms of such
transac tion or series of transactions are (A) no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than would be obtainable in a
compa rable transaction or series of related transactions in arm's-length
dealings with an unrelated third party and (B) set forth in writing, if such
transaction or series of transactions involve aggregate payments or
consideration in excess of $1,000,000, and (ii) with respect to a transaction or
series of transactions involving the sale, purchase, lease or exchange of
property or assets having a value in excess of $5,000,000, such transaction or
series of transactions has been approved by a majority of the disinterested
members of the Board of Directors or, if there are no disinterested members of
the Board of Directors, the Board of Directors of the Company shall have
received a written opinion of a nationally recognized investment banking firm
stating that such transaction or series of transactions is fair to the Company
or such Restricted Subsidiary from a financial point of view. The foregoing
provisions do not prohibit (i) the payment of reasonable fees to
directors of the Company and its subsidiaries who are not employees of the
Company or its subsidiaries; (ii) any transaction between the Company and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries otherwise
permitted by the terms of the Indenture; (iii) the payment of any Restricted Pay
ment which is expressly permitted to be paid pursuant to Section 3.3(b); (iv)
any issuance of securities or other reasonable payments, awards or grants, in
cash or otherwise, pursuant to, or the funding of, employment arrangements
approved by the Board of Directors; (v) the grant of stock options or similar
rights to employ ees and directors of the Company pursuant to plans approved by
the Board of Di rectors; (vi) loans or advances to employees in the ordinary
course of business; (vii) any repurchase, redemption or other retirement of
Capital Stock of the Company held by employees of the Company or any of its
Subsidiaries upon death, disability or termination of employment at a price not
in excess of the fair market value thereof approved by the Board of Directors;
(viii) any transaction between or among the Company and any Subsidiary in the
ordinary course of business and consistent with past practices of the Company
and its Subsidiaries; (ix) payments pursuant to Existing Agreements and payments
of principal, interest and commitment fees under the Bank Credit Agreement; and
(x) any agreement to do any of the foregoing. Any transaction which has been
determined, in the written opinion of an independent nationally recognized
investment banking firm, to be fair, from a financial point of view, to the
Company or the applicable Restricted Subsidiary shall be deemed to be in
compliance with this Section.
SECTION 3.12 Sales of Assets.
(a) Neither the Company nor any Restricted Subsidiary shall
consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least equal to the fair
market value, as determined in good faith by the Board of Directors, of the
shares or assets subject to such Asset Sale, (ii) at least 60% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or cash equivalents which are promptly converted into cash
by the Person receiving such payment and (iii) an amount equal to 100% of the
Net Available Cash is applied by the Company (or such Subsidiary, as the case
may be) as set forth herein. The Company shall not permit any Unrestricted
Subsidiary to make any Asset Sale unless such Unrestricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the shares or assets so disposed of as determined in good faith by the
Board of Directors.
(b) Within three hundred sixty-five (365) days (such 365 days
being the "Application Period") following the consummation of an Asset Sale, the
Company or such Restricted Subsidiary shall apply the Net Available Cash from
such Asset Sale as follows: (i) first, to the extent the Company or such
Restrict ed Subsidiary elects, to reinvest in Additional Assets (including by
means of an investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another Restricted Subsidiary); (ii)
second, to the extent of the balance of such Net Available Cash after
application in accor dance with clause (i), and to the extent the Company or
such Restricted Subsid iary elects (or is required by the terms of any Senior
Indebtedness or any Indebt edness of such Restricted Subsidiary), to prepay,
repay or purchase Senior Indebtedness (other than Securities) or Indebtedness
(other than any Preferred Stock) of a Restricted Subsidiary (in each case other
than Indebtedness owed to the Company or an Affiliate of the Company); (iii)
third, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (i) and (ii), and to the extent the Company or such
Restricted Subsidiary elects, to purchase Securities; and (iv) fourth, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (i), (ii) and (iii), to make an offer to purchase Securities
pursuant to and subject to the conditions of Section 3.12(c); provided, however,
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (ii), (iii) or (iv) above, the Company or such Restricted
Subsidiary shall retire such Indebtedness and cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. To the extent that any Net Available Cash from any
Asset Sale remains after the applica tion of such Net Available Cash in
accordance with this paragraph, the Company or such Restricted Subsidiary may
utilize such remaining Net Available Cash in any manner not otherwise prohibited
by the Indenture.
To the extent that any or all of the Net Available Cash of any
Foreign Asset Sale is prohibited or delayed by applicable local law from being
repatriated to the United States, the portion of such Net Available Cash so
affect ed shall not be required to be applied at the time provided above, but
may be retained by the applicable Restricted Subsidiary so long, but only so
long, as the applicable local law will not permit repatriation to the United
States (the Compa ny hereby agreeing to promptly take or cause the applicable
Restricted Subsidiary to promptly take all actions required by the applicable
local law to permit such repatriation). Once such repatriation of any of such
affected Net Available Cash is permitted under the applicable local law, such
repatriation shall be immediately effected and such repatriated Net Available
Cash will be applied in the manner set forth in this Section as if such Asset
Sale had occurred on the date of such repatriation.
Notwithstanding the foregoing, to the extent that the Board of
Directors determines, in good faith, that repatriation of any or all of the Net
Available Cash of any Foreign Asset Sale would have a material adverse tax
consequence to the Company, the Net Available Cash so affected may be retained
outside of the United States by the applicable Restricted Subsidiary for so long
as such material adverse tax consequence would continue.
Notwithstanding the foregoing, this Section shall not apply
to, or prevent any sale of assets, property, or Capital Stock of Subsidiaries to
the extent that the fair market value (as determined in good faith by the Board
of Directors) of such asset, property or Capital Stock, together with the fair
market value of all other assets, property, or Capital Stock of Subsidiaries
sold, transferred or otherwise disposed of in Asset Sales during the twelve
month period preceding the date of such sale, does not exceed 5% of Consolidated
Net Tangible Assets as determined as of the end of the most recent fiscal
quarter for which financial statements are available, (it being understood that
this provision shall only apply with respect to the fair market value of such
asset, property or Capital Stock in excess of 5% of consolidated Net Tangible
Assets), and no violation of this provision shall be deemed to have occurred as
a consequence thereof.
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company as an entirety to a Person in a
transaction permitted under Article IV, the Successor Corporation shall be
deemed to have sold the properties and assets of the Company not so transferred
for purposes of this Section 3.12, and shall comply with the provisions of this
Section 3.12 with respect to such deemed sale as if it were an Asset Sale.
(c) Subject to the last sentence of this paragraph, in the
event of an Asset Sale that requires the purchase of Securities pursuant to
clause (iii) of the first paragraph of Section 3.12(b), the Company will be
required to purchase Securities tendered pursuant to an offer by the Company for
the Securities (the "Asset Sale Offer") at a purchase price of not less than
their principal amount plus accrued interest to the Asset Sale Purchase Date in
accordance with the procedures (including proration in the event of
oversubscription) set forth in Section 3.12(d). If the aggregate purchase price
of Securities tendered pursuant to the Asset Sale Offer is less than the Net
Available Cash allotted to the pur chase of the Securities, the Company shall
apply the remaining Net Available Cash in accordance with the last sentence of
the first paragraph of Section 3.12(b). The Company shall not be required to
make an Asset Sale Offer for
Securities pursuant to this Section if the Net Available Cash available therefor
(after application of the proceeds as provided in Section 3.12(b)(i) and (ii))
is less than $1,000,000 for any particular Asset Sale (which lesser amounts
shall not be carried forward for purposes of determining whether an Asset Sale
Offer is required with respect to the Net Available Cash from any subsequent
Asset Sale).
(d) (1) Promptly, and in any event prior to the 360th day
after the later of the date of each Asset Sale as to which the Company must make
an Asset Sale Offer or the receipt of Net Available Cash therefrom, the Company
shall be obligated to deliver to the Trustee and send, by first-class mail to
each Holder, a written notice stating that the Holder may elect to have his
Securities purchased by the Company either in whole or in part (subject to
proration as hereinafter described in the event the Asset Sale Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days, nor more than 60 days, after the date of such notice (the "Asset
Sale Purchase Date") and shall contain the information required in a notice for
a Change of Control Offer, to the extent applicable.
(2) Not later than the date upon which written notice of an
Asset Sale Offer is delivered to the Trustee as provided below, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Asset Sale Offer (the "Asset Sale Offer Amount"), (ii) the allocation of the
Net Avail able Cash from the Asset Sales pursuant to which such Asset Sale Offer
is being made and (iii) the compliance of such allocation with the provisions of
Section 3.12(a). On such date, the Company shall also deposit with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust) funds in an amount equal to the Asset Sale Offer Amount to be held for
payment in accordance with the provisions of this Section. Upon the expiration
of the period for which the Asset Sale Offer remains open (the "Offer Period"),
the Company shall deliver, or cause to be delivered, to the Trustee the
Securities or portions thereof which have been properly tendered to and are to
be accepted by the Company. Paying Agent shall promptly, and in any event within
one (1) Business Day following the Asset Sale Purchase Date, mail or deliver
payment to each tendering Holder in the amount of the purchase price. In the
event that the aggregate purchase price of the Securities delivered, or caused
to be delivered, by the Company to the Trustee is less than the Asset Sale Offer
Amount, the Paying Agent shall deliver the excess to the Company immediately
after the expiration of the Offer Period and the delivery to the Trustee of the
Securities, or portions thereof that have been properly tendered to and are to
be accepted for payment by the Company.
(3) Holders electing to have a Security purchased will be
required to surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security duly completed, to the Company or
the Paying Agent, as specified in, and at the address specified in, the notice
at least ten Business Days prior to the Asset Sale Purchase Date. Holders will
be entitled to withdraw their election if the Trustee or the Paying Agent
receives, not later than three Business Days prior to the Asset Sale Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities surrendered by Holders
exceeds the Asset Sale Offer Amount, the Company shall select the Securities to
be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securi ties in denominations of $1,000,
or integral multiples thereof, shall be purchased) and shall notify the Trustee
of its selection in a writing signed by two Officers. Holders whose Securities
are purchased only in part will be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surren dered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company will also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursu ant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Paying Agent, directly or through an agent, mails or delivers payment therefor
to the surrendering Holder.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the appli cable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 3.13 Corporate Existence.
Except as permitted under Article IV, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate existence of each Restricted
Subsidiary in accordance with the respective organizational documents of the
Company and of each Restricted Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company and the Restricted
Subsidiaries necessary or appropri ate to carry out their businesses; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate existence of any Restricted Subsidiary,
if the preservation thereof is no longer desirable in the conduct of the
business of the Company and the Restricted Subsidiaries taken as a whole; and
provided, further, that any Restricted Subsid iary may consolidate with, merge
into, or sell, convey, transfer, lease or other wise dispose of all or part of
its property and assets to the Company or any Wholly Owned Subsidiary to the
extent otherwise permitted under this Indenture.
SECTION 3.14 Payment of Taxes and Other Claims.
The Company shall pay or discharge, or cause to be paid or
discharged, before any material penalty accrues thereon all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
Restricted Subsidiary or upon the income, profits or property of the Compa ny or
any Restricted Subsidiary; provided, however, that the Company shall not be
required to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves, if the same shall be required in accordance with GAAP, have been made.
SECTION 3.15 Notice of Defaults and Other Events.
In the event that any Indebtedness of the Company or any
Signifi cant Subsidiary having an outstanding principal amount of $1,000,000 or
more individually or $2,500,000 or more in the aggregate has been or could be de
clared due and payable before its maturity because of the occurrence of any
event of default under such Indebtedness (including any Default under this
Indenture), the Company, promptly after it becomes aware thereof, will give
written notice thereof to the Trustee.
SECTION 3.16 Maintenance of Properties and Insurance.
The Company shall cause all properties used or useful in the
conduct of its business or the business of each Restricted Subsidiary and
material to the Company and the Restricted Subsidiaries taken as a whole to be
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment; provided, however, that nothing in this Section
3.16 shall prevent the Company or any Restricted Subsidiary from discontinuing
the use, operation or maintenance of any of such properties or disposing of any
of them, if such discontinuance or disposal is, in the judgment of an Officer
(or other employee of the Company or any Restricted Subsidiary) of the Company
or such Restricted Subsidiary having managerial responsibility for any such
property, appropriate.
The Company shall provide or cause to be provided, for itself
and the Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, product liability insurance and public liability insurance with
reputable insurers or with the government of the United States of America, or an
agency or instrumen tality thereof, of such kinds, and in such amounts, with
such deductibles and by such methods as the Company in good faith shall
determine to be reasonable and appropriate in the circumstances.
SECTION 3.17 Limitation on Issuance of Capital Stock and Incurrence
of Indebtedness of Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, and shall not permit any Person other
than the Company or a Wholly Owned Subsidiary to own (except to the extent that
any such Person may own on the Issue Date), any shares of such Restricted
Subsidiary's Capital Stock (including options, warrants or other rights to
purchase shares of Capital Stock) except, to the extent otherwise permitted by
the Inden ture, (i) to the Company or another Restricted Subsidiary that is a
Wholly Owned Subsidiary of the Company, or (ii) if, immediately after giving
effect to such issuance and sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary for purposes of the Indenture; provided,
however, that a Restricted Subsidiary that has an interest in a Facility may
sell shares of NonConvertible Stock that is not Preferred Stock if, after giving
effect to such sale,
the Company or a Wholly Owned Subsidiary continues to hold at least a majority
of each class of Capital Stock of such Restricted Subsidiary. The Company shall
not permit any Restricted Subsidiary, directly or indirectly, to Incur
Indebtedness other than pursuant to Section 3.4(b).
SECTION 3.18 Limitation on Changes in the Nature of the Business.
The Company and its Subsidiaries shall engage only in the
business of acquiring, constructing, managing, developing, improving, owning and
operating Facilities, as well as any other activities reasonably related to the
foregoing activities (including acquiring and holding reserves), including but
not limited to investing in Facilities; provided that up to 10% of the Company's
Consolidated total assets may be used in Unrelated Businesses without constitut
ing a violation of this Section. In addition, the Company will, and will cause
its Subsidiaries, to conduct their respective businesses in a manner so as to
maintain the exemption of the Company and its Subsidiaries from treatment as a
public utility holding company under PUHCA or an electric utility or public
utility under any federal, state or local law; provided, however, to the extent
that any such law is amended following the Issue Date in such a manner that
would (absent application of this proviso) make compliance with this Section
3.18 result in a material adverse effect on the Company's results of operations
or financial condition, then the Company shall not be required to comply with
this Section 3.18, but only to the extent of actions or failures to act that
would (absent application of this proviso) constitute violations of this
Covenant solely as a result of such amendment.
SECTION 3.19 Limitation on Subsidiary Investments.
The Company will not permit any Subsidiary with an interest in
a Facility to make any investment in or merge with any other person with an
interest in a power generation facility or, except in connection with the
acquisi tion of Related Assets by such Subsidiary, in an Unrelated Business.
ARTICLE IV
CONSOLIDATION, MERGER AND SALE
SECTION 4.1 Merger and Consolidation of Company.
The Company shall not in a single transaction or through a
series of related transactions consolidate with or merge with or into any other
corpora tion or sell, assign, convey, transfer or lease or otherwise dispose of
all or substantially all of its properties and assets as an entirety to any
Person or group of affiliated Persons, unless:
(i) either (A) the Company shall be the continuing
Person, or (B) the Person (if other than the Company) formed by such
consolida tion or into which the Company is merged or to which the
properties and assets of the Company as an entirety are transferred
(the "Successor Corporation") shall be a corporation organized and
existing under the laws of the United States or 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 and
substance reasonably satisfactory to the Trustee, all the obligations
of the Company under this Indenture and the Securities;
(ii) immediately before and immediately after giving
effect to such transaction on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the Company (or the
Successor Corpora tion if the Company is not the continuing obligor
under this Indenture) or any Restricted Subsidiary as a result of such
transaction as having been Incurred by such Person at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) the Company shall have delivered, or caused to
be delivered, to the Trustee an Officers' Certificate and, as to legal
matters, an Opinion of Counsel, each in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation,
merger or transfer and such supplemental indenture comply with this
Indenture and that all conditions precedent herein provided for
relating to such transaction have been complied with;
(iv) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness which
becomes an obliga tion of the Company (or the Successor Corporation if
the Company is not the continuing obligor under this Indenture) or a
Restricted Subsidiary in connection with or as a result of such
transaction as having been Incurred by such Person at the time of such
transaction), the Company (or the Successor Corporation if the Company
is not the continuing obligor under this Indenture) shall have
Consolidated Net Worth in an amount which is not less than the
Consolidated Net Worth of the Company immediately prior to such
transaction; and
(v) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness which
becomes an obliga tion of the Company (or the Successor Corporation if
the Company is not the continuing obligor under the Indenture) or a
Restricted Subsidiary in connection with or as a result of such
transaction as having been Incurred by such Person at the time of such
transaction), the Consolidated Cover age Ratio of the Company (or the
Successor Corporation if the Company is not the continuing obligor
under the Indenture) is at least 1.10:1, or, if less, equal to the
Consolidated Coverage Ratio of the Company immedi ately prior to such
transaction; provided that, if the Consolidated Coverage Ratio of the
Company before giving effect to such transaction is within the range
set forth in column (A) below, then the pro forma Consolidated Coverage
Ratio of the Company (or the Successor Corporation if the Company is
not the continuing obligor under the Indenture) shall be at least equal
to the lesser of (1) the ratio determined by multiplying the percentage
set forth in column (B) below by the Consolidated Coverage Ratio of the
Company prior to such transaction and (2) the ratio set forth in column
(C) below:
(A) (B) (C)
1.11:1 to 1.99:1......................................... 100% 1.6:1
2.00:1 to 2.99:1......................................... 90% 2.1:1
3.00:1 to 3.99:1......................................... 80% 2.4:1
4.00:1 or more........................................... 70% 2.5:1
Notwithstanding the foregoing paragraphs (ii), (iv) and (v), any
Restricted Subsidiary (other than a Subsidiary having an interest in a Facility)
may consolidate with, merge into or transfer all or part of its properties and
assets to the Company or any Wholly Owned Subsidiary or Wholly Owned
Subsidiaries (other than a Subsidiary or Subsidiaries which have an interest in
a Facility) and no violation of this Section shall be deemed to have occurred as
a consequence thereof, as long as the requirements of paragraphs (i) and (iii)
are satisfied in connection therewith.
SECTION 4.2 Successor Substituted.
(a) Upon any such consolidation or merger, or any conveyance,
transfer, or disposition of all or substantially all of the properties or assets
of the Company in accordance with Section 4.1, but not in the case of a lease,
the Successor Corporation shall succeed to and be substituted for the Company
under this Indenture and the Securities, and the Company shall thereupon be
released from all obligations hereunder and under the Securities and the
Company, as the predecessor corporation, may thereupon or at any time thereafter
be dissolved, wound up or liquidated. The Successor Corporation thereupon may
cause to be signed, and may issue either in its own name or in the name of the
Company, all or any of the Securities issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee; and, upon the
order of the Successor Corporation instead of the Company and subject to all the
terms, conditions and limitations prescribed in this Indenture, the Trustee
shall authenti cate and shall deliver any Securities which the Successor
Corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accor dance with the terms of this Indenture as though all
such Securities had been issued at the date of the execution hereof.
(b) In the case of any consolidation, merger or transfer
described in Section 4.2(a) above, such changes in form (but not in substance)
may be made in the Securities thereafter to be issued as may be appropriate.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.1 Events of Default.
An "Event of Default" means any of the following events:
(a) default in the payment of interest on any
Security when the same becomes due and payable, and such default
continues for a period of 30 days;
(b) default in the payment of the principal of any
Security when the same becomes due and payable at maturity or otherwise
or a failure to redeem or purchase Securities when required pursuant to
this Indenture or the Securities;
(c) default in performance of any other covenants or
agree ments in the Securities or this Indenture and the default
continues for 30 days after the date on which written notice of such
default is given to the Company by the Trustee or to the Company and
the Trustee by Holders of at least 25% in principal amount of the
Securities then outstanding hereun der;
(d) there shall have occurred either (i) a default by
the Company or any Subsidiary under any instrument or instruments under
which there is or may be secured or evidenced any Indebtedness of the
Company or any Subsidiary of the Company (other than the Securities)
having an outstanding principal amount of $2,000,000 (or its foreign
currency equivalent) or more individually or $5,000,000 (or its foreign
currency equivalent) or more in the aggregate that has caused the
holders thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity or (ii) a default by the Company or any
Subsidiary in the payment when due of any portion of the principal
under any such instru ment, and such unpaid portion exceeds $2,000,000
(or its foreign currency equivalent) individually or $5,000,000 (or its
foreign currency equivalent) in the aggregate and is not paid, or such
default is not cured or waived, within any grace period applicable
thereto, unless such Indebtedness is dis charged within 20 days of the
Company or a Restricted Subsidiary becom
7
<PAGE>
ing aware of such default; provided, however, that the foregoing shall
not apply to any default on Non-Recourse Indebtedness;
(e) any final judgment or order (not covered by
insurance) for the payment of money shall be rendered against the
Company or any Significant Subsidiary in an amount in excess of
$2,000,000 (or its foreign currency equivalent) individually or
$5,000,000 (or its foreign currency equivalent) in the aggregate for
all such final judgments or orders against all such Persons (treating
any deductibles, self-insurance or retention as not so covered) and
shall not be discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order in
excess of $2,000,000 (or its foreign currency equivalent) individually
or that causes the aggregate amount for all such final judgments or
orders outstanding against all such Persons to exceed $5,000,000 (or
its foreign currency equivalent) during which a stay of enforcement of
such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(f) the Company or any Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its credi
tors, or
(v) admits in writing its inability to generally pay its debts
as such debts become due;
or takes any comparable action under any foreign laws relating to insol
vency;
(g) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of its property, or
(iii) orders the winding up or liquidation of the Company
or any Significant Subsidiary;
or any similar relief is granted under any foreign laws; and the order or decree
remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11 of the United States
Code or any similar Federal or State law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
Any notice of Default given by the Trustee or Securityholders
under this Section must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice of any event which with the giving of
notice or the lapse of time or both would become an Event of Default under
clause (c), (d), (e) or (g) hereof.
Subject to the provisions of Section 6.1 and 6.2, the Trustee
shall not be charged with knowledge of any Event of Default unless written
notice thereof shall have been given to the Trustee by the Company, the Paying
Agent, any Holder or an agent of any Holder.
SECTION 5.2 Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (f) and (g) of Section 5.1 with respect to the Company)
occurs and is continuing, the Trustee by notice to the Company, or the Holders
of at least 25% in principal amount of the Securities by notice to the Company
and the Trustee, may declare the principal of and accrued and unpaid interest on
all the Securities to be due and payable. Upon such declaration the principal
and interest shall be
due and payable immediately. If an Event of Default specified in clause (f) or
(g) of Section 5.1 with respect to the Company occurs, the principal of and
interest on all the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Securityholders. The Holders of a majority in principal amount of the
Securities by 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. No such rescis sion shall affect any subsequent or other Default
or Event of Default or impair any consequent right.
SECTION 5.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal or interest
on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 5.4 Waiver of Past Defaults.
The Holders of a majority in principal amount of the
Securities by notice to the Trustee may waive an existing Default and its
consequences except (a) a Default in the payment of the principal of or interest
on any Security or (b) a Default in respect of a provision that under Section
8.2 cannot be amended without the consent of each Securityholder affected. When
a Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any consequent right.
SECTION 5.5 Control by Majority.
The Holders of a majority in principal amount of the
Securities may 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
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, or, subject to Section 6.1, that the Trustee determines
is unduly prejudicial to the rights of other Securityholders, or would involve
the Trustee in personal liability; provided, however, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification reasonably satisfactory to it against all risk, losses and
expenses caused by taking or not taking such action. Subject to Section 6.1, 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 the
Securityholders pursuant to this Indenture, unless such Securityholders shall
have provided to the Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities which might be incurred in
compliance with such request or direction.
SECTION 5.6 Limitation on Suits.
A Securityholder may pursue a remedy with respect to this
Inden ture or the Securities only if:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee security
reasonably satisfactory to it or indemnity against any loss, liability or
expense;
(d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of security
or indemnity; and
(e) the Holders of a majority in principal amount of
the Securities do not give the Trustee a direction inconsistent with
the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder. SECTION 5.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Security to receive payment of principal and interest
on the Security, on or after the respective due dates expressed in the Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
SECTION 5.8 Collection Suit by Trustee.
If an Event of Default specified in Section 5.1(a) or (b)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid (together with interest on such unpaid
interest to the extent lawful) and the amounts provided for in Section 6.7.
SECTION 5.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents and take such other actions including participating as a member or
otherwise in any committees of creditors appointed in the matter as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the amounts provided in Section 6.7) and the Securityholders allowed
in any judicial proceedings relative to the Company, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make 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, ex penses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 6.7. To the
extent that the pay ment of any such amount due to the Trustee under Section 6.7
out of the estate in any such proceeding shall be denied for any reason, payment
of the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, divi dends, money, securities and other properties which the
Holders of the Securities may be entitled to receive in such proceeding whether
in liquidation or under any plan of reorganization or arrangement or otherwise.
SECTION 5.10 Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.7;
Second: to Securityholders for amounts due and unpaid on the
Securities for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall give written notice to each Securityholder
and the Trustee of the record date, the payment date and amount to be paid.
SECTION 5.11 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 or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discre tion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 5.7, or a suit by Holders of more than 10% in
principal amount of the Securities.
SECTION 5.12 Waiver of Stay or Extension Laws.
The Company shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
exten sion 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
hereby expressly waives all benefit or advantage of any such law, and shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE VI
TRUSTEE
SECTION 6.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that
are specifically set forth in this Indenture and no others and no
implied covenants or obligations shall be read into this Indenture
against the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. Howev er, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b)
of this Section.
(ii) The Trustee shall not be liable for any error of
judg ment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.2, 5.4 or 5.5.
(iv) 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, unless it receives
indemnity satisfactory to it against any risk, loss, liability or
expense.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee, in its capacity as Trustee and Registrar and
Paying Agent, shall not be liable to the Company, the Securityholders or any
other Person for interest on any money received by it, including, but not
limited to, money with respect to principal of or interest on the Securities,
except as the Trustee may agree with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
SECTION 6.2 Rights of Trustee.
(a) The Trustee may rely on any document reasonably believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate, an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on any such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsi ble for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers provided, however, that the Trustee's conduct does not
constitute wilful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice of such counsel.
(f) The Trustee shall not be obligated to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instru ment, opinion, report, notice, request, direction, consent,
order, bond, debenture or any other paper or document.
SECTION 6.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
6.10 and 6.11.
SECTION 6.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representa tion as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement in the
Securities other than its authenti cation. The Trustee shall have no duty to
ascertain or inquire as to the perfor mance of the Company's covenants in
Article III hereof.
SECTION 6.5 Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and if it is actually known to a Trust Officer of the Trustee, the Trustee shall
mail to Securityholders a notice of the Default or Event of Default within 90
days after a Trust Officer of the Trustee has actual knowledge of the occurrence
thereof. Except in the case of a Default in any payment on any Security, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 6.6 Reports by Trustee to Holders.
Within 60 days after the reporting date stated in Section
10.10, the Trustee shall mail to Securityholders a brief report dated as of such
date that complies with TIA Sec 313(a) if required by that Section. The Trustee
also shall comply with TIA Sec 313(b)(2).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange on which the
Securities are listed. The Company shall promptly notify the Trustee when the
Securities are listed on any stock exchange and of any delisting thereof.
SECTION 6.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its services as the parties shall agree. The Trustee's compensa
tion shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket disbursements, expenses and advances incurred by it. Such expenses
shall include the reasonable compensation and out-of-pocket disburse ments and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss, liability or expense, including reasonable
attorneys' fees, disbursements and expenses, incurred by it arising out of or in
connection with the administration of this trust and the performance of its
duties hereunder including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expens es of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 5.1(f) or (g) occurs, the expenses and the
compensation for the services are intended to constitute expenses of adminis
tration under any Bankruptcy Law.
The Company's obligations under this Section 6.7 and any Lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article VII of this Indenture
and the termination of this Indenture.
SECTION 6.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign at any time by so notifying the
Company. The Holders of a majority in principal amount of the Securities may, by
written notice to the Trustee, remove the Trustee by so notifying the Trustee
and the Company. The Company, by notice to the Trustee, shall remove the Trustee
if:
(a) the Trustee fails to comply with Section 6.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 6.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the resigna
tion or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 6.7.
SECTION 6.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 6.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sec 310(a)(1). The Trustee shall always have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent pub
lished annual report of condition. The Trustee shall comply with TIA Sec 310(b).
Nothing herein shall prevent the Trustee from filing with the SEC the
application referred to in the second-to-last paragraph of TIA Sec 310(b).
SECTION 6.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Sec 311(a), except with
respect to any creditor relationship listed in TIA Sec 311(b). A Trustee who has
resigned or been removed is subject to TIA Sec 311(a) to the extent indicated.
ARTICLE VII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 7.1 Discharge of Liability on Securities; Defeasance.
If (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.9) for
cancellation or (ii) all outstanding Securities have become due and payable and
the Company irrevoca bly deposits with the Trustee as trust funds solely for the
benefit of the Holders for that purpose funds sufficient to pay at maturity the
principal of and all accrued interest on all outstanding Securities (other than
Securities replaced pursuant to Section 2.9), and if in either case the Company
pays all other sums payable hereunder by the Company, then, subject to Sections
7.2 and 7.7, this Indenture shall cease to be of further effect. The Trustee
shall acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompa nied by an Officers' Certificate and an Opinion of Counsel and
at the cost and expense of the Company.
SECTION 7.2 Termination of Company's Obligations.
Except as otherwise provided in this Section 7.2, the Company
may terminate its obligations under the Securities and this Indenture if:
(i) the Securities mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (ii) the Company irrevocably
depos its in trust with the Trustee or Paying Agent (other than the Company or a
Subsidiary or Affiliate of the Company) under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds
solely for the benefit of the Holders for that purpose, money or U.S. Government
Obli gations that, through the payment of interest and principal in respect
thereof in accordance with its terms, will provide, not later than one (1)
Business Day prior to the applicable payment date, money sufficient (in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certif ication thereof delivered to the Trustee), without
consideration of any reinvest ment of interest, to pay principal and interest on
the Securities to maturity or redemption, as the case may be, and to pay all
other sums payable by it hereun der, (iii) no Default shall have occurred and be
continuing on the date of such
deposit, (iv) such deposit will not result in or constitute a Default or result
in a breach or violation of, or constitute a default under, any other agreement
or in strument to which the Company is a party or by which it is bound and (v)
the Company has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, in each case stating that all conditions precedent provided for
herein relating to the satisfaction and discharge of this Indenture have been
complied with; provided that the Trustee or Paying Agent shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of such principal and interest with
respect to the Secu rities.
With respect to the foregoing, the Company's obligations in
Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.14, 3.1, 3.2, 6.7, 6.8, 7.5
and 7.6 shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Sections 6.7, 6.8 and 7.6 shall
survive. After any such irrevocable deposit and fulfillment of the other
requirements of this Section 7.2, the Trustee upon request shall acknowledge in
writing the discharge of the Company's obligations under the Securities and this
Indenture except for those surviving obligations specified above.
SECTION 7.3 Defeasance and Discharge of Indenture.
The Company will be deemed to have paid and will be discharged
from any and all obligations in respect of the Securities on the 123rd day after
the date of the deposit referred to in clause (i) hereof, and the provisions of
this Indenture will no longer be in effect with respect to the Securities, in
each case subject to the penultimate paragraph of this Section 7.3, and the
Trustee, at the reasonable request of and at the expense of the Company, shall
execute proper in struments acknowledging the same, except as to (a) rights of
registration of transfer and exchange, (b) substitution of apparently mutilated,
defaced, de stroyed, lost or stolen Securities, (c) rights of Holders to receive
payments of principal thereof and interest thereon, (d) the Company's
obligations under Section 3.2, (e) the rights, obligations and immunities of the
Trustee hereunder including, without limitation, those arising under Section 6.7
hereof, (f) the rights of the Holders as beneficiaries of this Indenture with
respect to the property so deposited with the Trustee payable to all or any of
them and (g) the rights, obligations and immunities which survive as provided in
the penultimate para graph of this Section 7.3; provided that the following
conditions shall have been satisfied:
(i) with reference to this Section 7.3, the Company
has irrevocably deposited or caused to be irrevocably deposited with
the Trustee (or another trustee satisfying the requirement of Section
6.10) or Paying Agent (other than the Company or a Subsidiary or
Affiliate of the Company) and conveyed all right, title and interest
for the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders, in and to, (A) money in an
amount, (B) U.S. Government Obligations that, through the payment of
interest and principal in respect thereof in accordance with their
terms, will provide, not later than one Business Day before the due
date of any payment referred to in this clause (i), money in an amount
or (C) a combination thereof in an amount sufficient, in the opinion of
a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee,
to pay and discharge, without consideration of any reinvestment of
interest and after payment of all federal, state and local taxes or
other fees, charges and assessments in respect thereof payable by the
Trustee or Paying Agent, the principal of and interest on the
outstanding Securities when due; provided that the Trustee or Paying
Agent shall have been irrevo cably instructed to apply such money or
the proceeds of such U.S. Gov ernment Obligations to the payment of
such principal and interest with respect to the Securities;
(ii) such deposit will not result in or constitute a
Default or result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company is a
party or by which it is bound;
(iii) no Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of deposit;
(iv) the Company shall have delivered to the Trustee
(A) either (1) a ruling directed to the Trustee received from the
Internal Revenue Service to the effect that the Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of its option under this Section 7.3
and will be subject to federal income tax on the same amount and in the
same manner and at the same
times as would have been the case if such option had not been exercised
or (2) an Opinion of Counsel (who may not be an employee of the Com
pany) to the same effect as the ruling described in clause (1)
accompanied by a ruling to that effect published by the Internal
Revenue Service, unless there has been a change in the applicable
federal income tax law since the date of this Indenture such that a
ruling from the Internal Revenue Service is no longer required and (B)
an Opinion of Counsel to the effect that (1) the creation of the
defeasance trust does not violate the Investment Com pany Act of 1940,
(2) after the passage of 123 days following the deposit (except, with
respect to any trust funds for the account of any Holder who may be
deemed to be an "insider" for purposes of Title 11 of the United States
Code, after one year following the deposit), the trust funds will not
be subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law in a case
commenced by or against the Company under either such statute, and
either (x) the trust funds will no longer remain the property of the
Compa ny (and therefore, will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (y) if a court were to rule
under any such law in any case or proceeding that the trust funds
remained property of the Company, (I) assuming such trust funds
remained in the possession of the Trustee prior to such court ruling to
the extent not paid to Holders, the Trustee will hold, for the benefit
of the Holders, a valid and perfected security interest in such trust
funds that is not avoidable in bankruptcy or otherwise except for the
effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case
under such statute and (II) the Holders will be entitled to receive
adequate protection of their interests in such trust funds if such
trust funds are used in such case or proceeding; and
(v) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating
that all condi tions precedent provided for herein relating to the
defeasance contemplated by this Section 7.3 have been complied with.
Notwithstanding the foregoing clause (i), prior to the end of
the 123-day period referred to in clause (iv)(B)(2) above, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day period with respect to this Section 7.3, the Company's obligations
in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.14, 3.1, 3.2, 6.7, 6.8,
7.6
and 7.7 shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Sections 6.7, 7.6 and 7.7
shall survive. If and
when a ruling from the Internal Revenue Service or Opinion of Counsel referred
to in clause (iv(A) above is able to be provided specifically without regard to,
and not in reliance upon, the continuance of the Company's obligations under
Section 3.1, then the Company's obligations under such Section 3.1 shall cease
upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance
with the other conditions precedent provided for herein relating to the
defeasance contemplated by this Section 7.3.
After any such irrevocable deposit and the fulfillment of the
other requirements of this Section 7.3, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 7.4 Defeasance of Certain Obligations.
The Company may omit to comply with any term, provision or
condition set forth in clauses (iv) and (v) of Section 4.1 and Sections 3.3
through 3.19, and clause (c) of Section 5.1 with respect to clauses (iv) and (v)
of Section 4.1 and Section 3.3 through 3.19, and clauses (d) and (e) of Section
5.1 shall be deemed not to be Events of Default, in each case with respect to
the outstanding Securities if:
(i) with reference to this Section 7.4, the Company
has irrevocably deposited or caused to be irrevocably deposited with
the Trustee (or another trustee satisfying the requirements of Section
6.10) or Paying Agent (other than the Company or a Subsidiary or
Affiliate of the Company) and conveyed all right, title and interest
for the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders, in and to, (A) money in an
amount, (B) U.S. Government Obligations that, through the payment of
interest and principal in respect thereof in accordance with their
terms, will provide, not later than one Business Day before the due
date of any payment referred to in this clause (i), money in an amount
or (C) a combination thereof in an amount, sufficient, in the opinion
of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee,
to pay
and discharge, without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or
other fees, charges and assessments in respect thereof payable by the
Trustee or Paying Agent, the principal of and interest on the
outstanding Securities when due; provided that the Trustee or Paying
Agent shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of such
principal and interest with respect to the Securities;
(ii) such deposit will not result in or constitute a
Default or result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company is a
party or by which it is bound;
(iii) no Default shall have occurred and be continuing on
the date of such deposit;
(iv) the Company has delivered to the Trustee an
Opinion of Counsel who is not employed by the Company to the effect
that (A) the creation of the defeasance trust does not violate the
Investment Company Act of 1940, (B) the Holders have a valid
first-priority security interest in the trust funds, (C) the Holders
will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and (D) after the passage of
123 days following the deposit (except, with respect to any trust funds
for the account of any Holder who may be deemed to be an "insider" for
purposes of the United States Bankruptcy Code, after one year following
the deposit), the trust funds will not be subject to the effect of
Section 547 of the United States Bankruptcy Code or Section 15 of the
New York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute, and either (1) the trust funds will
no longer remain the property of the Company (and therefore, will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganiza tion or similar laws affecting creditors' rights generally)
or (2) if a court were to rule under any such law in any case or
proceeding that the trust funds remained property of the Company, (x)
assuming such trust funds remained in the possession of the Trustee
prior to such court ruling to the extent not paid to Holders, the
Trustee will hold, for the benefit of the
Holders, a valid and perfected security interest in such trust funds
that is not avoidable in bankruptcy or otherwise except for the effect
of Section 552(b) of the United States Bankruptcy Code on interest on
the trust funds accruing after the commencement of a case under such
statute and (y) the Holders will be entitled to receive adequate
protection of their interests in such trust funds if such trust funds
are used in such case or proceeding; and
(v) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating
that all condi tions precedent provided for herein relating to the
defeasance contemplated by this Section 7.4 have been complied with.
SECTION 7.5 Application of Trust Money.
Subject to Section 7.7 of this Indenture, the Trustee or
Paying Agent shall hold in trust money or U.S. Government Obligations deposited
with it pursuant to Section 7.2, 7.3 or 7.4 of this Indenture, as the case may
be, and shall apply the deposited money and the money from U.S. Government
Obliga tions in accordance with this Indenture to the payment of principal of
and interest on the Securities. The Trustee shall be under no obligation to
invest such money or U.S. Government Obligations except as it may agree with the
Company and in no event shall the Trustee have any liability for, or in respect
of, any such investment made as agreed with the Company.
SECTION 7.6 Repayment to Company.
Subject to Sections 6.7, 7.2, 7.3 and 7.4 of this Indenture,
the Trustee and the Paying Agent shall promptly pay to the Company upon written
request any excess money held by them at any time and thereupon shall be
relieved from all liability with respect to such money. The Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years; provided, however, that the Company shall if requested by the Trustee or
the Paying Agent, give the Trustee or such Paying Agent indemnification reason
ably satisfactory to it against any and all liability which may be incurred by
it by reason of such payment; and provided, further, that the Trustee or such
Paying Agent before being required to make any payment may cause to be published
at the request and expense of the Company once in a newspaper of general circula
tion in the City of New York or mail to each Holder entitled to such money at
such Holder's address as set forth in the Security Register notice that such
money remains unclaimed and that after a date specified therein (which shall be
at least 30 days from the date of such publication or mailing) any unclaimed
balance of such money then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates another
person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 7.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 7.2, 7.3 or 7.4 of this
Indenture, as the case may be, by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining, restrain
ing or otherwise prohibiting such application, the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 7.2, 7.3 or 7.4 of this Indenture, as
the case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
7.2, 7.3 or 7.4 of this Indenture, as the case may be; provided that, if the
Company has made any payment of principal of or interest on any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS
SECTION 8.1 Without Consent of Holders.
The Company and the Trustee may amend this Indenture or the
Securities or enter into an indenture or indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as then in effect)
without notice to or the consent of any Securityholder for one or more of the
following purposes:
(a) to cure any ambiguity, omission, defect or
inconsistency;
(b) to comply with Article IV;
(c) to provide for uncertificated Securities in
addition to certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as amended, or in
a manner such that the uncertificated Securities are described in
Section 163(f)(2)(B) of the Code;
(d) to add additional guarantees with respect to the Securi
ties or to secure the Securities;
(e) 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;
(f) to comply with the requirements of the SEC in con
nection with qualification of the Indenture under the TIA;
(g) to make any change that does not adversely affect the
rights of any Securityholder; or
(h) to provide for the issuance of additional
Securities in an aggregate principal amount not to exceed $75,000,000;
provided, howev er, the aggregate principal amount of Securities
outstanding at any time may not exceed $275,000,000.
After an amendment or supplement under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly describing
such amendment or supplement. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or supplement under this Section.
SECTION 8.2 With Consent of Holders.
The Company and the Trustee may amend or supplement this
Indenture or the Securities with the written consent of the Holders of a
majority in principal amount of the Securities. However, without the consent of
each Securityholder affected, an amendment or supplement under this Section may
not:
(a) reduce the amount of Securities the Holders of which
must consent to an amendment or supplement;
(b) reduce the rate of or change the time for payment of
interest on any Security;
(c) reduce the principal of or change the Stated Maturity of
any Security;
(d) reduce the premium payable upon the redemption of
any Security or change the time at which any Security may or shall be
redeemed in accordance with Article IX;
(e) make any Security payable in currency or consideration
other than that stated in the Security;
(f) make any change in Section 5.4, Section 5.7 or
this second sentence of this Section 8.2.
It shall not be necessary for the consent of the Holders under
this Section 8.2 to approve the particular form of any proposed amendment,
supple ment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment or supplement under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly describing
such amendment or supplement. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or supplement under this Section.
SECTION 8.3 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the
Securities shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
SECTION 8.4 Revocation and Effect of Consents.
Until an amendment or supplement under this Article or a waiver
under Article VI becomes effective, a consent to it by a Holder of a Security is
a continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his Security
or portion of a Security if the Trustee receives the notice of revocation before
the date the amendment, supplement or waiver becomes effective.
After an amendment or supplement becomes effective, it shall
bind every Securityholder.
SECTION 8.5 Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee
may require the Holder of the Security to deliver it to the Trustee. The Trustee
may place an appropriate notation on the Security regarding the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
deter mines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment.
SECTION 8.6 Trustee To Sign Amendments.
The Trustee shall sign any supplemental indenture which sets
forth an amendment or supplement authorized pursuant to this Article if the
amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but need
not sign it. In signing such supplemental indenture the Trustee shall be
entitled to receive, and (subject to Section 6.1) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such supplemental indenture is authorized or permitted by this Indenture and,
with respect to an amendment or supplement pursuant to Section 8.2, evidence of
the consents of Holders required in connec tion therewith.
SECTION 8.7 Fixing of Record Dates.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to take any action
under this Indenture by vote or consent. Except as provided herein, such record
date shall
be the later of 30 days prior to the first solicitation of such consent or vote
or the date of the most recent list of Securityholders furnished to the Trustee
pursuant to Section 2.5 prior to such solicitation. If a record date is fixed,
those Persons who were Securityholders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to take such
action by vote or consent or to revoke any vote or consent previously given,
whether or not such Persons continue to be Holders after such record date;
provided, however, that unless such vote or consent is obtained from the Holders
(or their duly designated proxies) of the requisite principal amount of
outstanding Securities prior to the date which is the 120th day after such
record date, any such vote or consent previously given shall automatically and
without further action by any Holder be canceled and of no further effect.
ARTICLE IX
REDEMPTION
SECTION 9.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities it shall notify the Trustee of the redemption date
and the princi pal amount (not including any premium in respect thereof) of
Securities to be redeemed and the paragraph of the Securities pursuant to which
the redemption will occur.
The Company shall give the notices provided for in this
Section at least 40 days before the redemption date (unless a shorter period
shall be satisfac tory to the Trustee). Such notice shall be accompanied by an
Officers' Certificate to the effect that such redemption will comply with the
conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not less than 15 days after the
date of notice to the Trustee.
SECTION 9.2 Selection of Securities To Be Redeemed.
If fewer than all the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed pro rata or by lot or by any
other method that complies with applicable legal and securities exchange
requirements, if any, and that the Trustee considers, in its sole discretion,
fair and appropriate
and in accordance with methods generally used at the time of selection by
fiduciaries in similar circumstances. The Trustee shall make the selection not
more than 75 days before the redemption date from outstanding Securities not
previously called for redemption. The Trustee may select for redemption por
tions of the principal of Securities that have denominations larger than $1,000.
Securities and portions of them selected by the Trustee shall be in amounts of
$1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 9.3 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail a notice of redemption to each Holder whose
Securities are to be redeemed at the address set forth for such Holder on the
register referred to in Section 2.3.
The notice shall identify the Securities to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(e) if fewer than all the outstanding Securities are
to be redeemed, the identification and principal amounts of the
particular Securities to be redeemed;
(f) that, unless the Company defaults in making the
re demption payment, interest on Securities called for redemption
ceases to accrue on and after the redemption date; and
(g) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Securities.
At the Company's written request, made at least 45 days before
a redemption date, unless a shorter period shall be satisfactory to the Trustee,
the Trustee shall give the notice of redemption provided for in this Section in
the Company's name and at its expense.
SECTION 9.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemp tion become due and payable on the redemption date at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
re demption price stated in the notice, plus accrued and unpaid interest to the
redemption date.
SECTION 9.5 Deposit of Redemption Price.
Prior to 11:00 a.m., eastern standard time, the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued and unpaid interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancel lation.
SECTION 9.6 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Compa ny shall execute and the Trustee shall authenticate for the Holder (at the
Company's expense) a new Security equal in principal amount to the unredeemed
portion of the Security surrendered.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by any of TIA Secs 310 to 317, inclusive,
through operation of TIA Sec 318(c), such imposed duties shall control. SECTION
10.2 Notices.
Any notice or communication shall be in writing and delivered
in person, or mailed by first-class mail (certified, return receipt requested),
ad dressed as follows:
if to the Company:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Corporate Secretary
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10271
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications. Any notice to the Trustee under this Indenture shall be deemed
given only when received by the Trustee at the address specified in this Section
10.2.
Any notice or communication to a Securityholder shall be
mailed by first-class mail to the Securityholder's address shown on the register
kept by the Registrar. Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its sufficiency with respect
to other Securityholders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to
Securityholders, it shall mail a copy to the Trustee and each Agent at the same
time.
SECTION 10.3 Communication by Holders with Other
Holders.
Securityholders may communicate pursuant to TIA Sec 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA Sec 312(c).
SECTION 10.4 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall, if requested by the
Trustee, furnish to the Trustee:
(a) an Officers' Certificate in form and substance
reason ably satisfactory to the Trustee stating that, in the opinion of
the signers, all conditions precedent (including any covenants
compliance with which constitutes a condition precedent), if any,
provided for in this Indenture relating to the proposed action have
been complied with; and
(b) an Opinion of Counsel in form and substance
reason ably satisfactory to the Trustee stating that, in the opinion of
such counsel (which may rely upon an Officers' Certificate as to
factual matters), all such conditions precedent have been complied
with.
SECTION 10.5 Statements Required in Certificate or
Opinion.
Each Officers' Certificate or Opinion of Counsel with respect
to compliance with a condition or covenant provided for in this Indenture other
than certificates provided pursuant to Section 3.9 shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person,
he or she has made such examination or investigation as is necessary to
enable him or her 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 or not, in the opinion
of such Person, such condition or covenant has been complied with.
SECTION 10.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a
meeting of Securityholders. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 10.7 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York or the
State(s) in which the offices of the Trustee and the Paying Agent are located.
If a payment date is a Legal Holiday, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
regular record date shall not be affected.
SECTION 10.8 Successors; No Recourse Against Others.
(a) All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of the Trustee in this Inden
ture shall bind its successor.
(b) All liability of the Company described in the Securities
insofar as it relates to any director, officer, employee or stockholder, as
such, of the Company is waived and released by each Securityholder.
SECTION 10.9 Duplicate Originals.
The parties may sign any number of copies of this Indenture.
One signed copy is enough to prove this Indenture.
SECTION 10.10 Other Provisions.
The first certificate pursuant to Section 3.09 shall be for
the fiscal year ending on December 31, 1997.
The reporting date for Section 6.6 is July 15 of each year. The first
reporting date is July 15, 1998.
SECTION 10.11 Governing Law.
The laws of the State of New York govern this Indenture and
the Securities, without regard to the conflicts of laws rules thereof.
0173469.05-01S6a
8
<PAGE>
SIGNATURES
CALPINE CORPORATION
By
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By
Name:
Title:
Dated: July 8, 1997
9
<PAGE>
EXHIBIT A
(Form of Face of Initial Security)
[UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTA TIVE 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.
TRANSFERS OF THIS SECURITY SHALL BE LIMITED TO TRANS FERS 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 SECURITY SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.8
OF THE INDENTURE (AS DEFINED BELOW).]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISI TION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURI TIES ACT) OR (B)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULA TION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY AN
AFFILIATE OF THE COMPANY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLI ANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEG
END. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUANCE OF THIS
SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY
AN AFFILIATE OF THE COMPANY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
HEREIN RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO THE
TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
- --------
This legend should only be added if the Security is issued as a Global
Note.
A-1
<PAGE>
CALPINE CORPORATION
8 3/4% Senior Note Due 2007
No. S-1 $200,000,000
CUSIP: 131347AE6
ISIN: US131347AE66
Calpine Corporation, a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Two Hundred Million Dollars on
July 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Security are set forth on the reverse
hereof.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Date:
CALPINE CORPORATION
By
Name:
Title:
By
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION:
The Bank of New York, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
By: _________________________ Dated: ______________________
Authorized Signature
(Form of Reverse of Initial Security)
Calpine Corporation
8 3/4% Senior Note Due 2007
(1) Interest. Calpine Corporation, a Delaware corporation
(such corpora tion, and its successors and assigns under the Indenture referred
to below, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at 8 3/4% per annum (subject to adjustment as
provided below). The Company will pay interest semiannually on January 15 and
July 15 of each year. Interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from July 8, 1997. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
If an exchange offer registered under the Securities Act (as
defined in the Indenture) is not consummated, or a registration statement under
the Securities Act with respect to resales of the Securities is not declared
effective by the SEC (as defined in the Indenture), by the 180th calendar day
following the initial sale of the Securities, in accordance with the terms of a
Registration Rights Agreement dated July 1, 1997 by and among the Company,
Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc and Scotia Capital Markets (USA) Inc., BancAmerica
Securities, Inc. and CIBC Wood Gundy Securities Corp. interest due per annum on
the Securities shall be permanently increased by one-half of one percent, com
mencing as of January 5, 1998 (the 181st calendar day following the initial sale
of the Securities). The holder of this Security is entitled to the benefits of
such Registration Rights Agreement.
(2) Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the persons who are registered Holders
of Securities at the close of business on the record date next preceding the
interest payment date even though Securities are canceled after the record date
and on or before the interest payment date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
(3) Paying Agent, Registrar. Initially, The Bank of New York, a New
York banking corporation (the "Trustee"), will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-registrar
without notice. The Company may act as Paying Agent, Registrar or co-registrar.
(4) Indenture. The Company issued the Securities under an
Indenture dated as of July 8, 1997 (the "Indenture") between the Company and the
Trustee. The Securities are unsecured general obligations of the
Company limited to $275,000,000 in aggregate principal amount. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Secs 77aaa-77bbbb) (the "TIA"). Capitalized terms used herein but not defined
herein are used as defined in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and the TIA for a
statement of such terms.
(5) Optional Redemption. Except as set forth in the following
paragraph, the Company may not redeem the Securities prior to July 15, 2002. On
and after such date, the Company may redeem the Securities at any time as a
whole, or from time to time in part, at the following redemption prices
(expressed in percentages of principal amount), plus accrued interest to the
redemption date, if redeemed during the 12-month period beginning July 15,
Year %
2002 . . . . . . . . . . 104.3750%
2003 . . . . . . . . . . 102.1875%
2004 and thereafter . . 100.000%
The Company may redeem up to $70,000,000 principal amount of
Securi ties with the proceeds of one or more Public Equity Offerings following
which there is a Public Market, at any time in whole or from time to time in
part, at a price (expressed as a percentage of principal amount), plus accrued
interest to the redemption date, of 108.75% if redeemed at any time prior to
July 15, 2000.
(6) Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder of Securi ties to be redeemed at the address set forth for such Holder on
the register referred to in Section 2.3 of the Indenture. Unless the Company
shall default in payment of the re demption price plus accrued interest, on and
after the redemption date interest ceases to accrue on such Securities or
portions of them called for redemption. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000.
(7) Denominations; Transfer; Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption (except, in the
case of a Security to be redeemed in part, the portion thereof not to be
redeemed) or any Securities for a period of 15 days before a selection of
Securities to be redeemed, or 15 days before an interest payment date.
(8) Put Provisions. Upon a Change of Control Triggering Event,
any Holder of Securities will have the right to cause the Company to repurchase
all or any part of the Securities of such Holder at a repurchase price equal to
101% of the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase as provided in, and subject to the terms of,
the Indenture.
(9) Defeasance. Subject to certain conditions, the Company at
any time may terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money and/or U.S.
Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
(10) Persons Deemed Owners. The registered Holder of a
Security may be treated as its owner for all purposes, except that interest
(other than defaulted interest) will be paid to the person that was the
registered Holder on the relevant record date for such payment of interest.
(11) Amendments and Waivers. Subject to certain exceptions,
(i) the Indenture or the Securities may be amended or supplemented with the
consent of the Holders of a majority in principal amount of the Securities; and
(ii) any existing default may be waived with the consent of the Holders of a
majority in principal amount of the Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended or supplemented
to cure any ambiguity, omission, defect or incon sistency, to provide for
assumption of Company obligations to Securityholders or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
to provide for guarantees with respect to, or security for, the Securities, or
to comply with the TIA or to add additional covenants or surrender Company
rights, or to make any change that does not adversely affect the rights of any
Securityholder.
(12) Remedies. If an Event of Default occurs and is
continuing, the Trustee or Holders of at least 25% in principal amount of the
Securities may declare all the Securities to be due and payable immediately.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require an indemnity before it
enforces the Indenture or the Securities. Subject to certain limita tions,
Holders of a majority in principal amount of the Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance certificate to the
Trustee.
(13) Trustee Dealings with Company. Subject to the provisions
of the TIA, the Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
The Trustee will initially be The Bank of New York.
(14) 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 Securityholder 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.
(15) Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(16) Abbreviations. Customary abbreviations may be used in the
name of a Securityholder 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).
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture, which has in it the text of
this Security in larger type. Requests may be made to: Secretary, Calpine
Corporation, 50 West San Fernando Street, San Jose, California 95113.
A-2
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: Signed:
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent 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.
MANNER OF TRANSFER (Check one)
Transfer to Calpine Corporation o
Transfer to Qualified Institutional Buyer o
Transfer outside the United States in
compliance with Rule 904 under
the Securities Act of 1993 o
OPTION OF HOLDER TO ELECT PURCHASE FORM
If you wish to elect to have this Security purchased by the Company
pursuant to Section 3.8 or 3.12 of the Indenture, check this box: |_|
If you wish to elect to have only part of this Security purchased by
the Company pursuant to Section 3.8 or 3.12 of the Indenture, state the amount:
$
*As set forth in the Indenture, any purchase pursuant to Section 3.12
is subject to proration in the event the offer is oversubscribed.
Dated: Signed:
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent 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-3
<PAGE>
EXHIBIT B
(Form of Face of Exchange Security)
[UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS 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 SECURITY SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.8
OF THE INDENTURE (AS DEFINED BELOW).]
- --------
This legend should only be added if the Security is issued as a Global
Note.
B-1
<PAGE>
CALPINE CORPORATION
8 3/4% Senior Note Due 2007
No. $200,000,000
CUSIP: 131347AE6
ISIN: US131347AE66
Calpine Corporation, a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Two Hundred Million Dollars on
July 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Security are set forth on the reverse
hereof.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Date:
CALPINE CORPORATION
By
Name:
Title:
By
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION:
The Bank of New York, as Trustee, certifies that this is one of the Securities
referred to in the Indenture.
By: _________________________ Dated: ____________________
Authorized Signature
B-2
<PAGE>
(Form of Back of Exchange Security)
Calpine Corporation
8 3/4 Senior Note Due 2007
(1) Interest. Calpine Corporation, a California corporation
(such corpora tion, and its successors and assigns under the Indenture referred
to below, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at 8 3/4 per annum. The Company will pay
interest semiannually on January 15 and July 15 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from July 8, 1997. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months.
(2) Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the persons who are registered Holders
of Securities at the close of business on the record date next preceding the
interest payment date even though Securities are canceled after the record date
and on or before the interest payment date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by check payable in such money. It may mail an interest
check to a Holder's registered address.
(3) Paying Agent, Registrar. Initially, The Bank of New
York, a New York banking corporation (the "Trustee"), will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-registrar without notice. The Company may act as Paying Agent, Registrar or
co-registrar.
(4) Indenture. The Company issued the Securities under an
Indenture dated as of July 8, 1997 (the "Indenture") between the Company and the
Trustee. The Securities are unsecured general obligations of the Company limited
to $275,000,000 in aggregate principal amount. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code Secs 77aaa-77bbbb)
(the "TIA"). Capitalized terms used herein but not defined herein are used as
defined in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms.
(5) Optional Redemption. Except as set forth in the following
paragraph, the Company may not redeem the Securities prior to July 15, 2002. On
and after such date, the Company may redeem the Securities at any time as a
whole, or from time to time in part, at the following redemption prices
(expressed in percentages of principal amount), plus accrued interest to the
redemption date, if redeemed during the 12-month period beginning July 15,
Year %
2002 . . . . . . . . . . 104.3750%
2003 . . . . . . . . . . 102.1875%
2004, and thereafter . . 100.00%
The Company may redeem up to $70,000,000 principal amount of
Securities with the proceeds of one or more Public Equity Offerings at any time
in whole or from time to time in part, at a price (expressed as a percentage of
principal amount), plus accrued interest to the redemption date, of 108.75% if
redeemed at any time prior to July 15, 2000.
(6) Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at the address set forth for such Holder on
the register referred to in Section 2.3 of the Indenture. Unless the Company
shall default in payment of the redemption price plus accrued interest, on and
after the redemption date interest ceases to accrue on such Securities or
portions of them called for redemption. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000.
(7) Denominations; Transfer; Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption (except, in the case
of a Security to be redeemed in part, the portion thereof not to be redeemed) or
any Securities for a period of 15 days before a selection of Securities to be
redeemed, or 15 days before an interest payment date.
(8) Put Provisions. Upon a Change of Control Triggering Event,
any Holder of Securities will have the right to cause the Company to repurchase
all or any part of the Securities of such Holder at a repurchase price equal to
101% of the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase as provided in, and subject to the terms of,
the Indenture.
(9) Defeasance. Subject to certain conditions, the Company at
any time may terminate some or all of its obligations under the Securities and
the Indenture if the Company deposits with the Trustee money and/or U.S.
Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
(10) Persons Deemed Owners. The registered Holder of a
Security may be treated as its owner for all purposes, except that interest
(other than defaulted interest) will be paid to the person that was the
registered Holder on the relevant record date for such payment of interest.
(11) Amendments and Waivers. Subject to certain exceptions,
(i) the Indenture or the Securities may be amended or supplemented with the
consent of the Holders of a majority in principal amount of the Securities; and
(ii) any existing default may be waived with the consent of the Holders of a
majority in principal amount of the Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended or supplemented
to cure any ambiguity, omission, defect or inconsistency, to provide for
assumption of Company obligations to Securityholders or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
to provide for guarantees with respect to, or security for, the Securities, or
to comply with the TIA or to add additional covenants or surrender Company
rights, or to make any change that does not adversely affect the rights of any
Securityholder.
(12) Remedies. If an Event of Default occurs and is
continuing, the Trustee or Holders of at least 25% in principal amount of the
Securities may declare all the Securi ties to be due and payable immediately.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require an indemnity before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in principal amount of the Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance certificate to the
Trustee.
(13) Trustee Dealings with Company. Subject to the
provisions of the TIA, the Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not Trustee. The Trustee will initially be The
Bank of New York.
(14) 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 Securityholder 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.
(15) Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(16) Abbreviations. Customary abbreviations may be used in the
name of a Securityholder 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).
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge a copy of the Indenture, which has in it the text of
this Security in larger type. Requests may be made to: Secretary, Calpine
Corporation, 50 West San Fernando Street, San Jose, California 95113.
- --------
9 1/4% if the exchange offer is not consummated before January 5, 1998.
B-3
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: Signed:
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent 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.
OPTION OF HOLDER TO ELECT PURCHASE FORM
If you wish to elect to have this Security purchased by the Company
pursuant to Section 3.8 or 3.12 of the Indenture, check this box: |_|
If you wish to elect to have only part of this Security purchased by
the Company pursuant to Section 3.8 or 3.12 of the Indenture, state the amount:
$
*As set forth in the Indenture, any purchase pursuant to Section 3.12
is subject to proration in the event the offer is oversubscribed.
Dated: Signed:
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent 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.
B-4
<PAGE>
EXHIBIT C
Form of Certificate to be Delivered
In Connection with Transfer
Pursuant to Rule 144A
The Bank of New York, as Depositary
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Calpine Corporation (the "Company")
8 3/4% Senior Notes due 2007 (the "Securities")
Dear Sirs:
In connection with our proposed sale of $________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with a transaction meeting the requirements of
Rule 144A under the Securities Act of 1933, as amended (the "Act"). We hereby
certify that we are and the transferee is a "qualified institutional buyer" (as
defined in Rule 144A under the Act) and that we are acting for our own account
or for the account of one or more qualified institutional buyers, and,
accordingly, we agree (or if we were acting for the account of one or more
qualified institutional buyers, each such qualified institutional buyer has
confirmed to us that it agrees) that we or the transferee will not offer, sell,
pledge or otherwise transfer the Notes except (A) to a Person who we reasonably
believe (or the transferee and anyone acting on its behalf reasonably believes)
is a qualified institutional buyer in a transaction meeting the requirements of
Rule 144A, or (B) pursuant to the exemption from registration under the Act
provided by Rule 144 (if available), in each case in accordance with any
applicable securities laws of the states of the United States.
If we are a broker-dealer, we further certify that we are
acting for the account of our customer and that our customer has confirmed the
accuracy of the representations contained herein that are applicable to it
(including the representations with respect to beneficial ownership).
This certificate and the statements contained herein are made
for the benefit of the Company and the Initial Purchasers. Terms used in this
certificate and not otherwise defined in the Indenture have the meanings set
forth in Regulation S under the Securities Act.
Dated: [Insert Name of Transferor]
By:
Name:
Title:
C-1
<PAGE>
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------, ----
The Bank of New York
101 Barclay Street
New York, New York 10026
Attention: Corporate Trust Department
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Corporate Secretary
Re: Calpine Corporation (the "Company")
8 3/4% Senior Notes Due 2007 (the "Securities")
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________
Authorized Signature
D-1
<PAGE>
CALPINE CORPORATION
and
THE BANK OF NEW YORK, Trustee
Indenture
Dated as of July 8, 1997
$275,000,000
8 3/4% Senior Notes Due 2007
D-2
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE................................... 1
SECTION 1.1 Definitions........................................... 1
SECTION 1.2 Other Definitions..................................... 23
SECTION 1.3 Incorporation by Reference of Trust Indenture Act..... 23
SECTION 1.4 Rules of Construction................................. 24
ARTICLE II
THE SECURITIES............................................................... 25
SECTION 2.1 Form and Dating........................................ 25
SECTION 2.2 Execution and Authentication........................... 27
SECTION 2.3 Registrar and Paying Agent............................. 28
SECTION 2.4 Paying Agent To Hold Money in Trust.................... 29
SECTION 2.5 Securityholder Lists................................... 30
SECTION 2.6 Transfer and Exchange.................................. 30
SECTION 2.7 Book-Entry Provisions for Global Note.................. 31
SECTION 2.8 Special Transfer Provisions............................ 32
SECTION 2.9 Replacement Securities................................. 34
SECTION 2.10 Outstanding Securities................................ 34
SECTION 2.11 Determination of Holders' Action...................... 35
SECTION 2.12 Temporary Securities.................................. 35
SECTION 2.13 Cancellation.......................................... 35
SECTION 2.14 Defaulted Interest.................................... 36
ARTICLE III
COVENANTS.................................................................... 36
SECTION 3.1 Payment of Securities.................................. 36
SECTION 3.2 Maintenance of Office or Agency........................ 37
SECTION 3.3 Limitation on Restricted Payments...................... 37
SECTION 3.4 Limitation on Incurrence of Indebtedness............... 41
SECTION 3.5 Limitation on Payment Restrictions Affecting
Subsidiaries........................................... 43
SECTION 3.6 Limitation on Sale/Leaseback Transactions.............. 44
SECTION 3.7 Limitation on Liens.................................... 45
SECTION 3.8 Change of Control...................................... 47
SECTION 3.9 Compliance Certificate................................. 49
SECTION 3.10 SEC Reports........................................... 50
SECTION 3.11 Transactions with Affiliates.......................... 50
SECTION 3.12 Sales of Assets....................................... 51
SECTION 3.13 Corporate Existence................................... 55
SECTION 3.14 Payment of Taxes and Other Claims..................... 56
SECTION 3.15 Notice of Defaults and Other Events................... 56
SECTION 3.16 Maintenance of Properties and Insurance............... 57
SECTION 3.17 Limitation on Issuance of Capital Stock and Incurrence
of Indebtedness of Restricted Subsidiaries... 57
SECTION 3.18 Limitation on Changes in the Nature of the Business... 58
SECTION 3.19 Limitation on Subsidiary Investments.................. 58
ARTICLE IV
CONSOLIDATION, MERGER AND SALE............................................... 59
SECTION 4.1 Merger and Consolidation of Company. .................. 59
SECTION 4.2 Successor Substituted.................................. 61
ARTICLE V
DEFAULTS AND REMEDIES........................................................ 62
SECTION 5.1 Events of Default...................................... 62
SECTION 5.2 Acceleration........................................... 64
SECTION 5.3 Other Remedies......................................... 65
SECTION 5.4 Waiver of Past Defaults................................ 65
SECTION 5.5 Control by Majority.................................... 65
SECTION 5.6 Limitation on Suits.................................... 66
SECTION 5.7 Rights of Holders To Receive Payment................... 67
SECTION 5.8 Collection Suit by Trustee............................. 67
SECTION 5.9 Trustee May File Proofs of Claim....................... 67
SECTION 5.10 Priorities............................................ 68
SECTION 5.11 Undertaking for Costs................................. 68
SECTION 5.12 Waiver of Stay or Extension Laws...................... 68
ARTICLE VI
TRUSTEE...................................................................... 69
SECTION 6.1 Duties of Trustee...................................... 69
SECTION 6.2 Rights of Trustee...................................... 70
SECTION 6.3 Individual Rights of Trustee........................... 71
SECTION 6.4 Trustee's Disclaimer................................... 71
SECTION 6.5 Notice of Defaults..................................... 71
SECTION 6.6 Reports by Trustee to Holders.......................... 72
SECTION 6.7 Compensation and Indemnity............................. 72
SECTION 6.8 Replacement of Trustee................................. 73
SECTION 6.9 Successor Trustee by Merger, etc....................... 74
SECTION 6.10 Eligibility; Disqualification......................... 74
SECTION 6.11 Preferential Collection of Claims Against Company. .. 74
ARTICLE VII
SATISFACTION AND DISCHARGE OF INDENTURE...................................... 75
SECTION 7.1 Discharge of Liability on Securities; Defeasance....... 75
SECTION 7.2 Termination of Company's Obligations................... 75
SECTION 7.3 Defeasance and Discharge of Indenture.................. 76
SECTION 7.4 Defeasance of Certain Obligations...................... 79
SECTION 7.5 Application of Trust Money............................. 81
SECTION 7.6 Repayment to Company................................... 81
SECTION 7.7 Reinstatement.......................................... 82
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS................................................... 82
SECTION 8.1 Without Consent of Holders............................. 82
SECTION 8.2 With Consent of Holders................................ 83
SECTION 8.3 Compliance with Trust Indenture Act.................... 84
SECTION 8.4 Revocation and Effect of Consents...................... 84
SECTION 8.5 Notation on or Exchange of Securities.................. 85
SECTION 8.6 Trustee To Sign Amendments............................. 85
SECTION 8.7 Fixing of Record Dates................................. 85
ARTICLE IX
REDEMPTION................................................................... 86
SECTION 9.1 Notices to Trustee..................................... 86
SECTION 9.2 Selection of Securities To Be Redeemed................. 86
SECTION 9.3 Notice of Redemption................................... 87
SECTION 9.4 Effect of Notice of Redemption......................... 88
SECTION 9.5 Deposit of Redemption Price............................ 88
SECTION 9.6 Securities Redeemed in Part............................ 88
ARTICLE X
MISCELLANEOUS................................................................ 88
SECTION 10.1 Trust Indenture Act Controls.......................... 88
SECTION 10.2 Notices............................................... 89
SECTION 10.3 Communication by Holders with Other Holders........... 90
SECTION 10.4 Certificate and Opinion as to Conditions Precedent.... 90
SECTION 10.5 Statements Required in Certificate or Opinion......... 90
SECTION 10.6 Rules by Trustee and Agents........................... 91
SECTION 10.7 Legal Holidays........................................ 91
SECTION 10.8 Successors; No Recourse Against Others................ 91
SECTION 10.9 Duplicate Originals................................... 91
SECTION 10.10 Other Provisions..................................... 92
SECTION 10.11 Governing Law........................................ 92
SIGNATURES................................................................... 93
EXHIBIT A....................................................................A-1
EXHIBIT B....................................................................B-1
EXHIBIT C....................................................................C-1
EXHIBIT D....................................................................D-1
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of July 1, 1997
by and between
CALPINE CORPORATION
and
CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SALOMON BROTHERS INC
SCOTIA CAPITAL MARKETS (USA) INC.
BANCAMERICA SECURITIES, INC.
CIBC WOOD GUNDY SECURITIES CORP.
-------------------------------
8 3/4% Senior Notes Due 2007
1
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of July 1, 1997, by and among Calpine Corporation, a
Delaware corporation (the "Company"), and Credit Suisse First Boston
Corporation, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc, Scotia
Capital Markets (USA) Inc., BancAmerica Securities, Inc. and CIBC Wood Gundy
Securi ties Corp. (the "Purchasers").
This Agreement is made pursuant to the Purch ase Agreement,
dated of even date herewith (the "Purch ase Agreement"), between the Company and
the Purchasers, which provides for the sale by the Company to the Pur chasers of
an aggregate of $200,000,000 principal amount of the Company's 8 3/4% Senior
Notes Due 2007 (the "Senior Notes"). In order to induce the Purchasers to enter
into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agree ment. The execution of this Agreement is a
condition to the Closing under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without defini tion shall have
their respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 4(o).
Closing Date: July 8, 1997, or such other
date as may be agreed upon for the sale and purchase of
the Senior Notes pursuant to the Purchase Agreement.
Company: Calpine Corporation, a Delaware
corporation.
Exchange Act: The Securities Exchange Act of
1934, as amended, and the rules and regulations of the
SEC promulgated thereunder.
Exchange Offer: The exchange offer by the
Company of Exchange Notes for Registrable Securities pursuant to Section 3(d)
hereof.
Exchange Offer Registration: A registration
under the Securities Act effected pursuant to Section
3(d) hereof.
Exchange Offer Registration Statement: An
-------------------------------------
exchange offer registration statement on Form S-4 or
Form S-1 (or, if applicable, on another appropriate
form) and all amendments and supplements to such regis
tration statement, in each case including the Prospectus
contained therein, all exhibits thereto and all material
incorporated by reference or deemed to be incorporated
by reference therein.
Exchange Notes: Securities issued by the Company under an
indenture containing terms identical to the Senior Notes (except that such
Exchange Notes (i) shall have been issued in an Exchange Offer and (ii) shall
have an interest rate of 8 3/4% per annum (9 1/4% per annum if such Exchange
Offer is not consummated by January 4, 1998), without provision for adjustment
as provided in paragraph 1 on the reverse of the Senior Notes), to be offered to
holders of Senior Notes in exchange for Senior Notes pursuant to the Exchange
Offer.
Indenture: The Indenture, dated as of July 8, 1997, between
the Company and The Bank of New York, as Trustee, pursuant to which the Senior
Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
regis tration statement in reliance upon Rule 430A), as amend ed or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement or
of the Exchange Notes, as the case may be, and all other amendments and
supplements to the Prospec tus, including post-effective amendments and all
materi al incorporated by reference or deemed to be incorporat ed by reference
in such Prospectus.
Registrable Securities: All Senior Notes
which are Restricted Securities.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration
statement of the Company which covers any of the Ex change Notes or Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration state ment,
including post-effective amendments, all exhibits, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
state ment.
Restricted Securities: Any and all Senior Notes upon original
issuance thereof and at all times subsequent thereto until, as to any Senior
Note, (i) the sale of such Senior Note has been effectively registered under the
Securities Act and such Senior Note has been disposed of in accordance with the
Registration State ment relating thereto or (ii) it is distributed to the public
pursuant to Rule 144(k) (or any similar provision then in force, but not Rule
144A) under the Securities Act or (iii) an Exchange Offer Registration has been
declared effective and such Senior Note has been ex changed for an Exchange Note
by a person who is not then deemed to be an Underwriter as defined in Section
2(11) of the Securities Act.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933,
as amended, and the rules and regulations promulgated by
the SEC thereunder.
Shelf Registration: See Section 3 hereof.
Special Counsel: Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel to the Purchasers or such other special counsel as may be
designated by the holders of a majority in aggregate principal amount of
Registrable Securities outstanding.
TIA: The Trust Indenture Act of 1939, as
amended.
2. Securities Subject to this Agreement; Holders
(a) The securities entitled to the bene
fits of this Agreement are the Registrable Securities.
(b) A Person is deemed to be a holder of
Registrable Securities whenever such Person beneficially owns Registrable
Securities; provided, that only Regis trable Securities of holders who are
registered holders of Registrable Securities shall be counted for purposes of
calculating any proportion of holders of Registrable Securities entitled to take
action or give notice pursu ant to this Agreement.
3. Shelf Registrations; Exchange Offers
(a) Shelf Registrations. As promptly
as practicable and in no event later than December 1, 1997, the Company shall
prepare and file with the SEC a Registration Statement under the Securities Act
for an offering to be made on a continuous basis pursuant to Rule 415 (or any
similar rule that may be adopted by the SEC) under the Securities Act covering
all the Registra ble Securities (the "Shelf Registration").
(b) The Shelf Registration shall be on
Form S-1 or another appropriate form permitting regis tration of such
Registrable Securities for resale by such holders in the manner or manners
designated by them.
(c) The Company shall use its best ef
forts to cause the Shelf Registration to become effec tive under the Securities
Act in accordance with Section 3(a) hereof and shall keep the Shelf Registration
con tinuously effective for a period of two years from the Closing Date or such
shorter period which will terminate when all Registrable Securities covered by
the Shelf Registration are no longer Restricted Securities. The Company shall
also supplement or make amendments to any Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used by
the Company or if required by the Securities Act or if reasonably requested by
holders of a majority of the principal amount of the Registrable Securities then
outstanding covered by the Shelf Registration.
(d) Exchange Offer. Notwithstanding the
provisions of Section 3(a), at the option of the Compa ny, to the extent any
applicable law or applicable interpretation of the staff of the SEC would permit
holders thereafter to resell Exchange Notes without restriction, the Company
may, in lieu of complying with Section 3(a), cause to be filed an Exchange Offer
Regis tration Statement covering the offer by the Company to
the holders of Senior Notes to exchange all of the Registrable Securities for
Exchange Notes, to have such Exchange Offer Registration Statement declared
effective
by the SEC not later than January 4, 1998 and to have
such Registration Statement remain effective until the
closing of the Exchange Offer. The Company shall com
mence the Exchange Offer promptly after the Exchange Offer Registration
Statement has been declared effective by the SEC by mailing the related exchange
offer Pro spectus and accompanying documents to each holder of Senior Notes
stating, in addition to such other disclo sures required by applicable law:
(i) that the Exchange Offer is
being made pursuant to this Agreement and that all
Registrable Securities validly tendered will be
accepted for exchange;
(ii) the date of acceptance for
exchange (which shall be a period of at least 60 days from the date
such notice is mailed) (the "Exchange Date");
(iii) that any Registrable Security
not tendered will remain outstanding and continue to accrue interest
but, except as set forth in the last paragraph of this Section 3(d),
will not re tain any rights under this Agreement;
(iv) that holders of Senior Notes
electing to have a Registrable Security exchanged pursuant to the
Exchange Offer will be required to surrender such Registrable Security,
together with the enclosed letters of transmittal, to the insti tution
and at the address (located in the Borough of Manhattan, The City of
New York) specified in the notice prior to the close of business on the
last Exchange Date; and
(v) that holders of Senior Notes
will be entitled to withdraw their election not later than the close of
business on the last Ex change Date, by sending to the institution and
at the address (located in the Borough of Manhattan, The City of New
York) specified in the notice a telegram, telex, facsimile transmission
or letter setting forth the name of such holder, the princi pal amount
of Registrable Securities delivered for exchange and a statement that
such holder is with
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drawing its election to have such Senior Notes ex
changed.
As soon as practicable after the Exchange Date, the Company
shall:
(i) accept for exchange Registrable
Securities or portions thereof tendered and not
validly withdrawn pursuant to the Exchange Offer;
and
(ii) deliver, or cause to be deliv
ered, to the Trustee for cancellation all Registra ble Securities or
portions thereof so accepted for exchange by the Company and issue, and
cause the trustee under the indenture governing the Exchange Notes to
promptly authenticate and mail to each holder, a new Exchange Note, as
the case may be, equal in principal amount to the principal amount of
the Registrable Securities surrendered by such Holder.
The Company shall use its best efforts to com plete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the Securi ties Act, the Exchange Act and other applicable laws
in connection with the Exchange Offer. The Exchange Offer shall not be subject
to any conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the staff of the SEC. The
Company shall inform the Purchasers of the names and addresses of the holders of
Senior Notes to whom the Ex change Offer is made, and the Purchasers shall have
the right to contact such holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
In connection with the Exchange Registration, the Company will
provide a letter to the staff of the SEC that contains statements and
representations sub stantially in the form set forth in Mary Kay Cosmetics, Inc.
(no-action letter available June 5, 1991), Morqan Stanley & Co. Incorporated
(no-action letter available June 5, 1991), Warnaco, Inc. (no-action letter
available October 11, 1991), Shearman & Sterling (no-action letter available
July 2, 1993), Grupo Financiero InverMexico, S.A. (no-action letter available
April 4, 1995) and no- action letters to similar effect.
As provided in the Indenture, in the event that neither the
Shelf Registration nor the Exchange Offer Registration Statement is declared
effective by January 4, 1998, the interest rate on the Senior Notes shall be
permanently increased, beginning at such time, by 1/2% per annum.
4. Registration Procedures
In connection with the Company's registration obligations
pursuant to Section 3 hereof, the Company shall use its best efforts to effect
such registrations to permit the consummation of the Exchange Offer or the sale
of such Registrable Securities in accordance with the intended method or methods
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the SEC,
within the time period specified in Section 3, a Regis tration Statement or
Registration Statements on any appropriate form under the Securities Act, which
form, in the case of a Shelf Registration, shall be available for the sale of
the Registrable Securities by the hold ers thereof in accordance with the
intended method or methods of distribution thereof, and use its best ef forts to
cause each such Registration Statement to become effective and remain effective
as provided here in; provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto (including
documents which would be incorporated or deemed to be incorporated therein by
reference and amendments to such documents, other than documents required to be
filed pursuant to the Exchange Act), the Company shall furnish to the Special
Counsel copies of the Registration Statement or Prospectus and all such
documents in the form proposed to be filed at least five business days prior
thereto and with respect to amend ments or supplements thereof, at least two
business days prior thereto, which documents will be subject to the review of
the Special Counsel, and the Company shall not file any such Registration
Statement or amendment there to or any Prospectus or any supplement thereto
(includ ing such documents which, upon filing, would be incorpo rated or deemed
to be incorporated by reference therein and amendments to such documents, other
than documents required to be filed pursuant to the Exchange Act) to which the
Special Counsel shall reasonably object on a
timely basis, unless the Company is advised by its counsel that such
Registration Statement or amendment thereto or any Prospectus or supplement
thereto is required to be filed by applicable law;
(b) prepare and file with the SEC such
amendments and post-effective amendments to each Regis tration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable period; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securi ties Act;
(c) notify the selling holders of Regis
trable Securities (except in the cases of clauses (ii) and (iii) hereof) and
their Special Counsel promptly, and (if requested by any such person) confirm
such notice in writing, (i) when a Prospectus or any Prospec tus supplement or
post-effective amendment related to such Registrable Securities has been filed,
and, with respect to a Registration Statement or any post-effec tive amendment
related to such Registrable Securities, when the same has become effective, (ii)
of the receipt of any comments from the SEC, (iii) of any request by the SEC for
amendments or supplements to a Registration Statement or related Prospectus or
for additional infor mation, (iv) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (v) if at any time the representations and
warranties of the Company contained in any agreement contemplated by paragraph
(1) below in connection with the sale of Restricted Securities by selling
holders thereof cease to be true and correct, (vi) of the re ceipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale or
exchange in any jurisdiction of the United States of America or the initiation
of any proceeding for such purpose, (vii) of the happening of any event which
makes any statement of a material fact made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue or which requires the making of any changes in a
Registration Statement or related Prospectus so that such documents will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circum stances under which they were made, not
misleading, and (viii) of the Company's determination that a post effective
amendment to a Registration Statement would be appropriate;
(d) use every reasonable effort to
obtain the withdrawal of any order suspending the effec tiveness of a
Registration Statement or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale or
exchange in any jurisdiction of the United States of America, as promptly as
practicable;
(e) if reasonably requested by any
holder of Registrable Securities covered by a Registra tion Statement, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment such
information as such holder reasonably requests to be included there in as may be
required by applicable law, (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
such post-effective amendment, and (iii) supplement or make amendments to any
Registration Statement if reasonably requested by any holder of Registrable
Securities covered by such Registration Statement as may be required by
applicable law;
(f) in the case of a Shelf Registration,
furnish to each selling holder of Registrable Securities and the Special
Counsel, without charge, at least one conformed copy of the Registration
Statement or State ments and any post-effective amendment thereto, includ ing
financial statements and schedules, all documents incorporated therein by
reference or deemed incorporated therein by reference and all exhibits
(including those previously furnished or incorporated by reference), at the
earliest practicable time under the circumstances after the filing of such
documents with the SEC;
(g) in the case of a Shelf Registration,
deliver to each selling holder of Registrable Securities and the Special
Counsel, without charge, as many copies of the Prospectus or Prospectuses
(including each pre liminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the
Company consents to the use of such Prospectus or any amendment or supplement
thereto in accordance with applicable law by each of the selling holders of
Regis trable Securities in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto in accordance with applicable law;
(h) prior to any public offering or ex
change of Registrable Securities, to use its best ef forts to register or
qualify or cooperate with the selling holders of Registrable Securities and
their Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale or exchange, as the case may be, under the
securities or blue sky laws of such state or local jurisdictions as any seller
reasonably requests in writing; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things neces sary
or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; provided, howev er,
that the Company will not be required to (A) qualify generally to do business in
any jurisdiction where it is not then so qualified, (B) take any action which
would subject it to general service of process in any such jurisdiction where it
is not then so subject or (C) register or qualify securities prior to the
effective date of any Registration Statement under Section 3 hereof;
(i) in the case of a Shelf Registration,
cooperate with the selling holders of Registrable Secu rities to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restric tive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names, in all cases consistent with the requirements set
forth in the Indenture, as the holders may request;
(j) subject to the exceptions contained
in (A), (B) and (C) of subsection (h) hereof, cause the Registrable Securities
covered by the applicable Regis tration Statement to be registered with or
approved by such other federal, state and local governmental regula
tory agencies or authorities in the United States as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such Registrable
Securi ties and cooperate with each seller of Registrable Securities in
connection with any filings required to be made with the National Association of
Securities Deal ers, Inc.;
(k) upon the occurrence of any event
contemplated by Section 4(c)(vii) or 4(c)(viii) above, as promptly as
practicable thereafter, prepare and file with the SEC a supplement or
post-effective amendment to the applicable Registration Statement or a
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
Prospectus will 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, in light of the circumstances under which they were made,
not misleading;
(l) in the case of a Shelf Registration,
enter into such customary agreements and take all such other actions in
connection therewith (including those reasonably requested by the holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Secu rities including, but not
limited to, an underwritten offering and in such connection, (i) to the extent
possible, make such representations and warranties to the holders and any
underwriters of such Registrable Securities with respect to the business of the
Company and its subsidiaries, the Registration Statement, Pro spectus and
documents incorporated by reference or deemed incorporated by reference, if any,
in each case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to the Company (which counsel and
opinions, in form, scope and substance, shall be reason ably satisfactory to
Special Counsel) addressed to each selling holder and underwriter of Registrable
Securi ties, covering the matters customarily covered in opin ions requested in
underwritten offerings, (iii) obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountant of any subsidiary
of the Company, or of any business acquired by the Company for which financial
statements and financial data is or is required to be included in the Registra
tion Statement) addressed to each selling holder and underwriter of Registrable
Securities, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connec tion with
underwritten offerings, and (iv) deliver such documents and certificates as may
be reasonably request ed by the holders of a majority in principal amount of the
Registrable Securities being sold to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause (i) above
and to evidence compliance with any customary conditions con tained in an
underwriting agreement;
(m) in the case of a Shelf Registration,
make available for inspection by a representative of the holders of Registrable
Securities being sold, Special Counsel and an accountant retained by such
selling hold ers, in a manner designed to permit underwriters to sat isfy their
due diligence investigation under the Securi ties Act, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the officers, directors and employees of the Company and its subsidiaries to
supply all information reasonably requested by any such representative, attor
ney or accountant in connection with such registration; provided, however, that
any records, information or documents that are designated by the Company as
confi dential at the time of delivery of such records, infor mation or documents
shall be kept confidential by such persons, unless (i) such records, information
or docu ments are in the public domain or otherwise publicly available, (ii)
disclosure of such records, information or documents is required by court or
administrative order, (iii) disclosure of such records, information or
documents, in the written opinion of counsel to such person, is otherwise
required by law (including, without limitation, pursuant to the requirements of
the Securi ties Act) or (iv) disclosure of such records, informa tion or
document is necessary to avoid or correct a misstatement or omission in the
Registration Statement, Prospectus supplement or any post-effective amendment;
(n) provide an indenture trustee for the
Registrable Securities or Exchange Notes, as the case may be, and cause the
indenture (or the indenture gov erning the Exchange Notes) to be qualified under
the TIA
not later than the effective date of any registration; and in connection
therewith, cooperate with the trustee to effect such changes to such indenture
as may be required for such indenture to be so qualified in accor dance with the
terms of the TIA and execute, and use its best efforts to cause the trustee to
execute, all docu ments as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner; and
(o) comply with all applicable rules and
regulations of the SEC and, in the case of a Shelf Registration, make generally
available to its security holders an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year), com mencing on the
first day of the first fiscal quarter of the Company commencing after the
effective date of a Registration Statement, which statement shall cover said
12-month period.
The Company may require each seller of Regis trable Securities
under a Shelf Registration to furnish to the Company such information regarding
the distribu tion of such Registrable Securities as the Company may from time to
time reasonably request in writing and each holder in acquiring such Registrable
Securities agrees to supply such information to the Company promptly upon such
request.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, in the event of a Shelf Registration, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 4(c)(iii), 4(c)(iv), 4(c)(vi), 4(c)(vii) or 4(c)(viii)
hereof, such holder will forthwith discontinue disposition of such Registra ble
Securities covered by such Registration Statement or Prospectus until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the appli cable Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated or deemed to be incorporated by reference in such Prospectus.
5. Registration Expenses
The Company shall pay all fees and expenses incident to the
performance of or compliance with this Agreement by the Company including,
without limitation, (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (in cluding reasonable fees and disbursements of counsel for any
underwriters or holders in connection with blue sky qualification of any of the
Exchange Notes or Regis
trable Securities), (iii) all expenses of any persons in preparing or assisting
in preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees and (v) the fees and disbursements of counsel for the
Company, Special Counsel to the holders of Registra ble Securities and of the
independent public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees of counsel to the underwriters
and underwriting dis counts and commissions and transfer taxes, if any, relating
to the sale or disposition of Registrable Securities by a holder of Registrable
Securities.
6. Indemnification
The Company agrees to indemnify and hold harm less the
Purchasers and each holder of Registrable Secu rities and each person, if any,
who controls the Pur chasers or any holder of Registrable Securities within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(includ ing, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a mate rial fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended and supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Purchas ers or any holder of Registrable Securities furnished to the
Company in writing by such Purchasers or holder of Registrable Securities
expressly for use therein.
In connection with any Shelf Registration in which a holder of
Registrable Securities is participat ing, in furnishing information relating to
such holder of Registrable Securities to the Company in writing expressly for
use in such Registration Statement, any preliminary prospectus, the Prospectus
or any amendments or supplements thereto, the holders of such Registrable
Securities agree severally and not jointly, to indemnify and hold harmless the
Purchasers and each person, if any, who controls the Purchasers within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act and the Company, its directors, its officers who sign a Registration
Statement and each person, if any, who controls the Company within the meaning
of either such Section, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses reason
ably incurred in connection with defending or investi gating any such action or
claim) caused by any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to such information relating to such holder of
Registrable Securities furnished in writing by or on behalf of such holder of
Registrable Securities expressly for use in the Registration State ment, any
preliminary prospectus, the Prospectus or any amendments or supplements thereto.
The Purchasers agree, severally and not joint ly, to indemnify
and hold harmless the Company, the holders of Registrable Securities, the
directors of the Company, the officers of the Company who sign the Regis tration
Statement and each person, if any, who controls
the Company or any holder of Registrable Securities within the meaning of either
Section 15 of the Securi ties Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabili ties (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defend ing or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with reference
to information relating to the Purchasers furnished to the Company in writing
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amend ments or supplements thereto.
In case any proceeding (including any govern mental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to any of the three preceding paragraphs, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnify ing party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemni fied party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemni fied
party shall have mutually agreed to the retention of such counsel or (ii) the
parties to any such proceed ing (including any impleaded parties) include both
the indemnifying party and the indemnified party and repre sentation of both
parties by the same counsel would be inappropriate due to the actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdic tion, be liable for (a) the fees and expenses of more than one
separate firm (in addition to any local coun
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<PAGE>
sel) for the Purchasers and all persons, if any, who control the Purchasers
within the meaning of either Sec tion 15 of the Securities Act or Section 20 of
the Exchange Act, (b) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers who
sign the Regis tration Statement and each person, if any, who controls the
Company within the meaning of either such Section and (c) the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
holders of Registrable Securities and all persons, if any, who control any
holders of Registrable Securities within the meaning of either such Section, and
that all such fees and expenses shall be reimbursed as they are incurred. In
such case involving the Purchasers and such control persons of the Purchasers,
such firm shall be designated in writing by Credit Suisse First Boston
Corporation. In such case involving the holders of Registrable Secu rities and
such controlling persons of holders of Regis trable Securities, such firm shall
be designated in writing by holders of a majority in aggregate principal amount
of Registrable Securities. In all other cases, such firm shall be designated by
the Company. The indemnifying party shall not be liable for any settle ment of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settle ment or judgment. Notwithstanding the
foregoing sen tence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indem nified party for fees and expenses of
counsel as contem plated by the second and third sentences of this para graph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent, provided that (i) such set
tlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement unless the indemni fying party has contested such
obligation and provides reasonable assurances that such payment can be made upon
resolution of such dispute. No indemnifying party shall, without the prior
written consent of the indemni fied party, effect any settlement of any pending
or threatened proceeding in respect of which any indemni
fied 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 claims
that are the subject matter of such proceeding.
If the indemnification provided for in the first, second or
third paragraph of this Section 6 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such propor tion as is appropriate to reflect the
relative fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that result ed in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
holders of Registrable Securi ties on the one hand and the Purchasers on the
other hand 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 holders
of Registrable Securities or by the Purchasers and the parties', relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Sec tion 6 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immedi ately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6, no holder of Registrable
Securities shall be required to indemnify or contribute any amount in excess of
the amount by which the total price at which the Registrable Securities sold by
such
holder of Registrable Securities and distributed to the public were offered to
the public exceeds the amount of any damages that such holder of Registrable
Securities has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or al leged omission. No person guilty of
fraudulent misrep resentation (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 misrep resentation. The remedies provided for in this
Section 6 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indem nified party at law or in equity.
The indemnity and contribution provisions con tained in this
Section 6 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Purchasers or any person controlling
the Purchasers, any holder of Registrable Securities or any person controlling
the holder of Registrable Securities, or the Company, its officers or directors
or any person controlling the Company.
7. Miscellaneous
(a) Remedies. In the event of a breach
by the Company of any of its obligations under this Agreement, each holder of
Registrable Securities, in addition to being entitled to exercise all rights
grant ed by law, including recovery of damages, will be enti tled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, they shall waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The
Company shall not, on or after the date of this Agree ment, enter into any
agreement with respect to its secu rities which is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof.
(c) Amendments and Waivers. The provi
sions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supple
mented, and waivers or consents to departures from the provisions hereof may not
be given, unless the Company has obtained the written consent of holders of a
majori ty of the then outstanding aggregate principal amount of Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter which relates exclusively to the
rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of other holders of Registrable Secu rities may be given by
holders of at least a majority in aggregate principal amount of the Registrable
Securities being sold by such holders.
(d) Notices. All notices and other com
munications provided or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, or telecopier:
(i) if to a holder of Registrable
Securities, at the most current address given by such holder to the
Company in accordance with the provisions of this Section 7(d), which
address ini tially is, with respect to the Purchasers, the ad dress set
forth on the first page of the Purchase Agreement; and
(ii) if to the Company, initially
at its address set forth on the first page of the Purchase Agreement
and thereafter by such other address, notice of which is given in
accordance with the provision of this Section 7(d).
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being sent by next-day solvent air courier; when answered back, if
telexed; and when re ceipt acknowledged, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the person giving the same to the Trustee
under the Inden ture at the address specified in such Indenture.
(e) Successors and Assigns. This Agree
ment shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties, in
3
<PAGE>
cluding without limitation and without the need for an express assignment,
subsequent holders of Registrable Securities.
(f) Counterparts. This Agreement may be
executed in any number of counterparts and by the par ties 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.
(g) Headings. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(h) 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.
(i) Severability. If any term, provi
sion, covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provi sions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantial ly the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipu lated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
(j) Entire Agreement. This Agreement is
intended by the parties as a final expression of their agreement, and is
intended to be a complete and exclu sive statement of the agreement and
understanding of the parties hereto in respect of the subject matter con tained
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein, with respect to the registration
rights granted by the Company with respect to the secu rities sold pursuant to
the Purchase Agreement. This Agreement supersedes all prior agreements and under
4
<PAGE>
standings between the parties with respect to such
subject matter.
(k) Securities Held by the Company or its Affiliates. Whenever
the consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
any of its affiliates (as such term is de fined in Rule 405 under the Securities
Act) (other than the Purchasers or subsequent holders of Registrable Securities
if such subsequent holders are deemed to be such affiliates solely by reason of
their holding of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the holders of such
required percentage or amount.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CALPINE CORPORATION
By:_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SALOMON BROTHERS INC
SCOTIA CAPITAL MARKETS (USA) INC.
BANCAMERICA SECURITIES, INC.
CIBC WOOD GUNDY SECURITIES CORP.
By: CREDIT SUISSE FIRST BOSTON
CORPORATION
By:_________________________________
Name:
Title:
6
U.S. $125,000,000
CREDIT AGREEMENT,
dated as of June 23, 1997,
among
CALPINE FINANCE COMPANY,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
and
THE BANK OF NOVA SCOTIA
as the Agent for the Lenders.
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 23, 1997, among
CALPINE FINANCE COMPANY, a Delaware corporation (the "Borrower"),
the various financial institutions as are or may become parties
hereto (collectively, the "Lenders"), and THE BANK OF NOVA SCOTIA
("Scotiabank"), as agent (the "Agent") for the Lenders,
W I T N E S S E T H:
WHEREAS, pursuant to a Purchase and Sale Agreement, dated as
of March 27, 1997 (as so originally executed and delivered, the
"Purchase Agreement"), between the Borrower and Enron Power
Corp., a Delaware corporation ("Seller"), Seller has agreed to
sell, and the Borrower has agreed to purchase, 7,095 shares of
Class A Common Stock of Enron/Dominion Cogen Corp., a Delaware
corporation ("EDCC"), constituting all of the issued and
outstanding shares of Class A Common Stock of EDCC (the "Stock
Purchase"), which constitutes 50% of the total issued and
outstanding shares of capital stock of EDCC, the other 50% being
held by Dominion Cogen, Inc., a Virginia corporation
("Dominion");
WHEREAS, EDCC owns 100% of the issued and outstanding stock
of Enron Cogeneration One Company, a Delaware corporation
("EC1"), which in turn owns 100% of the issued and outstanding
stock of Cogenron Inc., a Delaware corporation ("Cogenron");
WHEREAS, EDCC owns a 98% limited partnership interest in
Clear Lake Cogeneration Limited Partnership, a Texas limited
partnership ("Clear Lake") and 100% of Enron Cogeneration Three
Company, a Delaware corporation ("EC3") which owns a 2% general
partnership interest in Clear Lake;
WHEREAS, the Borrower has acquired all of the project
financed indebtedness of Cogenron incurred pursuant to the Credit
Agreement dated as of January 17, 1991 among Cogenron, Cogenron
Funding Corp., a Delaware corporation, the lenders named therein
(the "Cogenron Lenders") and The Bank of New York, as agent
("BONY") (the "Cogenron Credit Agreement") pursuant to an
Assignment Agreement dated June 23, 1997 among the Borrower, BONY
and the Cogenron Lenders (the "Cogenron Debt Acquisition");
WHEREAS, the Borrower has acquired all of the project
financed indebtedness of Clear Lake incurred pursuant to the
Amended and Restated Credit Agreement dated as of January 18,
1994 among Clear Lake, the lenders named therein (the "Clear Lake
Lenders") and Barclays Bank plc, as Agent ("Barclays") (the
"Clear Lake Credit Agreement") pursuant to an Assignment
Agreement dated June 23, 1997 among the Borrower, Barclays and
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<PAGE>
the Clear Lake Lenders (the "Clear Lake Debt Acquisition") (the
Cogenron Debt Acquisition and the Clear Lake Debt Acquisition are
referred to herein collectively as the "Debt Acquisitions") (the
Stock Purchase and the Debt Acquisitions are referred to
collectively as the "Transaction");
WHEREAS, EDCC owns 100% of the issued and outstanding stock
of Enron Cogeneration Five Company, a Delaware corporation
("EC5"), which in turn owns a 7.06% joint venture interest in
Cogen Technologies NJ Venture, a New Jersey joint venture ("Cogen
Venture");
WHEREAS, pursuant to the Reorganization Agreement, Dominion
receives all the economic benefits and undertakes all the
liabilities with respect to EDCC's indirect interest in Cogen
Venture;
WHEREAS, in connection with the Transaction, the Borrower
desires to obtain Commitments from the Lenders pursuant to which
Loans, in a maximum aggregate principal amount not to exceed
$125,000,000, will be made to the Borrower on the closing date;
and
WHEREAS, the Lenders are willing, on the terms and subject
to the conditions hereinafter set forth (including Article V), to
extend such Commitments and make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used
(a) to finance a portion of the Stock Purchase, in an
amount not to exceed $35,450,000 as adjusted pursuant to the
Purchase Agreement;
(b) to finance a portion of the Cogenron Debt
Acquisition, in a principal amount not to exceed $52,999,300
(plus accrued interest);
(c) to finance a portion of the Clear Lake Debt
Acquisition, in a principal amount not to exceed
$102,622,665 (plus accrued interest); and
(d) to finance a portion of the expenses incurred in
connection with the Transaction, in an amount not to exceed
$3,500,000;
NOW, THEREFORE, the parties hereto agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether
or not underscored) when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise
requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls, is controlled by or is under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan).
A Person shall be deemed to be "controlled by" any other Person
if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election
of directors or managing general partners; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or
otherwise.
"Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor
Agent pursuant to Section 9.4.
"Agreement" means, on any date, this Credit Agreement as
originally in effect on the Effective Date and as thereafter from
time to time amended, supplemented, amended and restated, or
otherwise modified and in effect on such date.
"Alternate Base Rate" means, on any date and with respect to
all Base Rate Loans, a fluctuating rate of interest per annum
equal to the higher of
(a) the rate of interest most recently announced by
Scotiabank at its Domestic Office as its base rate; and
(b) the Federal Funds Rate most recently determined by
the Agent plus 1/2 of 1%.
The Alternate Base Rate is not necessarily intended to be the
lowest rate of interest determined by the Scotiabank in
connection with extensions of credit. Changes in the rate of
interest on that portion of any Loans maintained as Base Rate
Loans will take effect simultaneously with each change in the
Alternate Base Rate. The Agent will give notice promptly to the
Borrower and the Lenders of changes in the Alternate Base Rate.
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<PAGE>
"Asset Sale" means any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter
acquired) by the Borrower or any of its Subsidiaries to any
Person excluding any sale, assignment, transfer or other
disposition of any equipment which, in the reasonable judgment of
the Borrower, has become obsolete, worn out or uneconomic in the
ordinary course of business, the proceeds of which are used to
purchase replacement equipment within 60 days from the date of
sale, assignment, transfer or other disposition.
"Assignee Lender" is defined in Section 10.11.1.
"Authorized Officer" means, relative to any Obligor, those
of its officers whose signatures and incumbency shall have been
certified to the Agent and the Lenders pursuant to Section 5.1.8.
"Barclays" is defined in the fifth recital.
"Base Rate Loan" means a Loan bearing interest at a
fluctuating rate determined by reference to the Alternate Base
Rate.
"Basic Documents" means the Loan Documents, the Purchase
Documents, the Debt Assignment Documents, the Project Loan
Documents and the Project Documents.
"BONY" is defined in the fourth recital.
"Borrower" is defined in the preamble.
"Borrowing" means the Loans of the same type and, in the
case of LIBO Rate Loans, having the same Interest Period made by
all Lenders on the same Business Day and pursuant to the same
Borrowing Request in accordance with Section 2.1.
"Borrowing Request" means a loan request and certificate
duly executed by an Authorized Officer of the Borrower,
substantially in the form of Exhibit B hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to
be closed in San Francisco, California or New York, New
York; and
(b) relative to the making, continuing, prepaying or
repaying of any LIBO Rate Loans, any day on which dealings
in Dollars are carried on in the London interbank market.
"Calpine" means Calpine Corporation, a Delaware corporation.
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<PAGE>
"Calpine Equity Contribution" means the cash contribution by
Calpine to the equity of the Borrower.
"Calpine Subordinated Indebtedness" means all Indebtedness
of the Borrower to Calpine which is subordinated pursuant to the
Subordination Agreement to the Obligations.
"Capitalized Lease Liabilities" means all rental obligations
of the Borrower or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, would be
classified as capitalized leases, and, for purposes of this
Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined
in accordance with GAAP, and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of the Indebtedness, maturing not
more than one year after such time, issued or guaranteed by
the United States Government or an agency or instrumentality
thereof;
(b) commercial paper, maturing not more than nine
months from the date of issue, which is issued by
(i) a corporation (excluding Affiliates of any
Obligor other than Credit Suisse) organized under the
laws of any state of the United States or of the
District of Columbia and rated A-l by Standard & Poor's
Corporation or P-l by Moody's Investors Service, Inc.,
or
(ii) any Lender (or its holding company or
Affiliate);
(c) any certificate of deposit or bankers acceptance,
maturing not more than one year after such time, which is
issued by either
(i) a commercial banking institution that is a
member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less
than $500,000,000, or
(ii) any Lender; or
(d) money market mutual funds registered with the
Securities and Exchange Commission;
-5-
<PAGE>
(e) corporate evidences of indebtedness rated A or
better by S&P or A2 or better by Moody's;
(f) any repurchase agreement entered into with any
Lender (or other commercial banking institution of the
stature referred to in clause (c)(i)) which
(i) is secured by a fully perfected security
interest in any obligation of the type described in any
of clauses (a) through (c); and
(ii) has a market value at the time such
repurchase agreement is entered into of not less than
100% of the repurchase obligation of such Lender (or
other commercial banking institution) thereunder.
"Cash Flow" means, for any period, as applied to the
Borrower, the amount of all cash received from all sources,
including (i) dividends or other distributions from EDCC, and
(ii) any Project Indebtedness Payments received from Cogenron or
Clear Lake under the Project Loan Documents, but excluding
payments and other amounts received by the Borrower pursuant to
the Project Loan Documents in its capacity as "Bank" of "Lender"
thereunder which, under the terms of the Project Loan Documents,
are to be applied (i) to payments under the Project Documents
prior to the payment of Project Indebtedness Payments or (ii)
which are to be deposited into reserve or similar accounts or
which are distributable to the respective borrowers under the
Project Loan Documents after the payment of Project Indebtedness
Payments.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System List.
"Change in Control" means (i)the acquisition by any Person,
or two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or
more of the outstanding shares of voting stock of Calpine,
(ii) the failure of Calpine to own, directly or indirectly, free
and clear of all Liens or other encumbrances (other than those
created pursuant to the Loan Documents), 100% of the issued and
outstanding shares of voting stock of the Borrower on a fully
diluted basis or (iii) the failure of the Borrower to own 50% of
the issued and outstanding shares of voting stock of EDCC on a
fully diluted basis.
"Clear Lake" is defined in the third recital.
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<PAGE>
"Clear Lake Credit Agreement" is defined in the fifth
recital.
"Clear Lake Debt Acquisition" is defined in the fifth
recital.
"Clear Lake Lenders" is defined in the fifth recital.
"Clear Lake Project" means the approximately 377 megawatt
gas-fired combined-cycle power plant located in Pasadena, Texas
and owned by Clear Lake.
"Clear Lake Standstill Agreement" means the Override and
Standstill Agreement dated as of June 23, 1997 among Clear Lake,
EC3, EDCC, DEI Texas, Inc., Dominion Cogen, Inc., Dominion
Energy, Inc., Dominion Resources, Inc. and the Borrower.
"Clear Lake Subordinated Indebtedness" means the
subordinated Indebtedness of Clear Lake to EDCC subordinated
pursuant to the Subordination Agreement (Clear Lake) to the
Indebtedness of Clear Lake under the Clear Lake Credit Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Cogen Venture" is defined in the sixth recital.
"Cogenron" is defined in the second recital.
"Cogenron Credit Agreement" is defined in the fourth
recital.
"Cogenron Debt Acquisition" is defined in the fourth
recital.
"Cogenron Lenders" is defined in the fourth recital.
"Cogenron Project" means the approximately 450 megawatt gas-
fired combined-cycle power plant located in Texas City, Texas and
owned by Cogenron.
"Cogenron Standstill Agreement" means the Override and
Standstill Agreement date as of June 23, 1997 among Cogenron,
Cogenron Funding Corp., EC1, EDCC, DEI Texas, Inc., Dominion
Cogen, Inc., Dominion Energy, Inc., Dominion Resources, Inc. and
the Borrower.
"Collateral" means the collective reference to all property,
and the proceeds thereof, described in the Collateral Security
Documents.
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<PAGE>
"Collateral Security Documents" means the Deposit and
Disbursement Agreement(s), the Pledge Agreement(s) and the
Security Agreements.
"Commitment" means, relative to any Lender, such Lender's
obligation to make Loans pursuant to Section 2.1.
"Commitment Amount" means $125,000,000.
"Contingent Liability" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment,
to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall be calculated on
a net basis (i.e., after taking into effect agreements,
undertakings and other arrangements between the Person whose
obligations are being guaranteed and the counterparty to such
Person's obligations) and shall (subject to any limitation set
forth therein) be deemed to be the outstanding net principal
amount (or maximum net principal amount, if larger) of the debt,
obligation or other liability guaranteed thereby, or, if the
principal amount is not stated or determinable, the maximum
reasonably anticipated net liability in respect thereof as
determined by the Person in good faith, provided that (y) the
amount of any Contingent Liability arising out of any
indebtedness, obligation or liability other than the items
described in clauses (a), (b) and (c) of the definition of
"Indebtedness" shall be deemed to be zero unless and until the
Borrower's independent auditors have quantified the amount of the
exposure thereunder (and thereafter shall be deemed to be the
amount so quantified from time to time), and (z) the amount of
any Contingent Liability consisting of a "keep-well", "make well"
or other similar arrangement shall be deemed to be zero unless
and until the Borrower is required to make any payment with
respect thereto (and shall thereafter be deemed to be the amount
required to be paid)..
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate duly executed by an
Authorized Officer of the Borrower, substantially in the form of
Exhibit C hereto.
"Controlled Group" means all members of a controlled group
of corporations and all members of a controlled group of trades
or businesses (whether or not incorporated) under common control
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<PAGE>
which, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section
4001 of ERISA.
"Debt Acquisitions" is defined in the fifth recital.
"Debt Assignment Documents" means the documents pursuant to
which the Debt Acquisitions are consummated.
"Default" means any Event of Default or any condition,
occurrence or event which, after notice or lapse of time or both,
would constitute an Event of Default.
"Deposit and Disbursement Agreement" means the Deposit and
Disbursement Agreement executed and delivered by the Borrower
pursuant to Section 5.1.11, substantially in the form of Exhibit
D hereto, as amended, supplemented, restated or otherwise
modified from time to time.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto as Schedule 1, as it may be amended, supplemented or
otherwise modified from time to time by the Borrower with the
written consent of the Agent and the Required Lenders.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Domestic Office" means, relative to any Lender, the office
of such Lender designated as such below its signature hereto or
designated in the Lender Assignment Agreement or such other
office of a Lender (or any successor or assign of such Lender)
within the United States as may be designated from time to time
by notice from such Lender, as the case may be, to each other
Person party hereto.
"Dominion" is defined in the first recital.
"EC1" is defined in the second recital.
"EC3" is defined in the third recital.
"EC5" is defined in the sixth recital.
"EDCC" is defined in the first recital.
"EDCC Distribution" means any distribution received by the
Borrower from EDCC or any of its Subsidiaries, whether in cash or
other property, and whether in respect of dividends, advances or
otherwise except any dividends issued pursuant to paragraph 1 of
Article FOURTH of the amended certificate of incorporation of
EDCC to the extent such dividends are required to and are
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<PAGE>
promptly recontributed to EDCC pursuant to a Recontribution
Agreement (as defined in such paragraph 1).
"Effective Date" means the date this Agreement becomes
effective pursuant to Section 10.8.
"Environmental Laws" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules, regulations and
guidelines (including consent decrees and administrative orders)
relating to public health and safety and protection of the
environment.
"Equity Issuance" means (a) any issuance or sale by the
Borrower or any of its Subsidiaries after the Effective Date of
(i) any capital stock, (ii) any warrants or options exercisable
in respect of capital stock, (iii) any other security or
instrument representing an equity interest (or the right to
obtain an equity interest) in the issuance or selling Person or
(b) the receipt by the Company or by any of its Subsidiaries
after the Effective Date of any capital contribution received
(whether or not evidenced by any equity security issued by the
recipient of such contribution).
"Equity Support Agreements" means the equity support and
guaranty agreements more specifically described in Schedule 8.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA also
refer to any successor sections.
"Event of Default" is defined in Section 8.1.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which
is a Business Day, the average of the quotations for such
day on such transactions received by Scotiabank from three
federal funds brokers of recognized standing selected by it.
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<PAGE>
"Financial Projections" means the pro forma financial
projections, dated April 1, 1997, a copy of which is attached
hereto as Schedule 7.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive
calendar months ending on December 31; references to a Fiscal
Year with a number corresponding to any calendar year (e.g. the
"1996 Fiscal Year") refer to the Fiscal Year ending on the
December 31 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Guaranty Agreement (By Enron)" means the Guaranty Agreement
(By Enron) dated as of March 27, 1997 issued by Enron Corp.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material or substance within
the meaning of any other applicable federal, state or local
law, regulation, ordinance or requirement (including consent
decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous,
toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements,
and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency
exchange rates.
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Agreement or any other Loan Document refer to
this Agreement or such other Loan Document, as the case may be,
as a whole and not to any particular Section, paragraph or
provision of this Agreement or such other Loan Document.
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"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower, any qualification or
exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) except with respect to EC5 and Cogen Venture,
which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification
of any item in such financial statement and which, as a
condition to its removal, would require an adjustment to
such item the effect of which would be to cause the Borrower
to be in default of any of its obligations under Section
7.2.4.
"including" means including without limiting the generality
of any description preceding such term, and, for purposes of this
Agreement and each other Loan Document, the parties hereto agree
that the rule of ejusdem generis shall not be applicable to limit
a general statement, which is followed by or referable to an
enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Income Tax Expense" means, for any period, as applied to
the Borrower, the provision for local, state, federal or foreign
income taxes on a consolidated basis for such period determined
in accordance with GAAP.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money
and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of
such Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with
GAAP, recorded as Capitalized Lease Liabilities;
(d) all other items other than deferred taxes,
deferred revenue and deferred leases which, in accordance
with GAAP, would be included as liabilities on the liability
side of the balance sheet of such Person as of the date at
which Indebtedness is to be determined;
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(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Contingent Liabilities of such Person in
respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner or a joint
venturer, unless the indebtedness of such partnership or joint
venture is expressly nonrecourse to such Person.
"Indemnification Agreement" means the Indemnification
Agreement executed and delivered by Calpine pursuant to Section
5.1.22, substantially in the form of Exhibit L hereto, as
amended, supplemented, restated or otherwise modified from time
to time.
"Indemnification and Allocation Agreement" means the
Indemnification and Allocation Agreement dated as of March 27,
1997 by and between the Borrower and the Seller.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Independent Engineer" means the Harris Group, or such other
independent engineering firm as shall be engaged by the Agent to
examine the Projects, and to advise and render such other reports
to the Agent concerning the Projects or in connection with the
Transaction or the Basic Documents as the Agent shall deem
necessary or advisable.
"Interest Coverage Ratio" means, for the four most recent
Fiscal Quarters (or the period from the Effective Date to the
date of determination, if four Fiscal Quarters have not occurred
since the Effective Date), the ratio of (x) Cash Flow during such
period to (y) Interest Expense incurred during such period.
"Interest Expense" means, for any period, as applied to the
Borrower, the sum of (a) the total interest expense of the
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Borrower and its consolidated Subsidiaries for such period as
determined in accordance with GAAP (other than interest expense
under the Calpine Subordinated Indebtedness that is not paid
currently or held under the Deposit and Disbursement Agreement as
provided in Section 7.2.6(b)(ii), plus (b) all but the principal
component of rentals in respect of Capitalized Lease Liabilities
paid, accrued, or scheduled to be paid or accrued by the Borrower
or its consolidated Subsidiaries, plus (c) capitalized interest
of the Borrower and its consolidated Subsidiaries (other than
capitalized interest under the Calpine Subordinated
Indebtedness).
"Interest Period" means, relative to any LIBO Rate Loans,
the period beginning on (and including) the date on which such
LIBO Rate Loan is made or continued as, or converted into, a LIBO
Rate Loan pursuant to Section 2.2 or 2.3 and ending on (but
excluding) the day which numerically corresponds to such date
one, three or six months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such
month), in either case as the Borrower may select in its relevant
notice pursuant to Section 2.2 or 2.3; provided, however, that
(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have
expiration dates occurring on more than five different
dates;
(b) Interest Periods commencing on the same date for
Loans comprising part of the same Borrowing shall be of the
same duration; and
(c) if such Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall
end on the next following Business Day (unless, if such
Interest Period applies to LIBO Rate Loans, such next
following Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end
on the Business Day next preceding such numerically
corresponding day).
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any
other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary
course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such
Person in any other Person.
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The amount of any Investment shall be the original principal or
capital amount thereof less all returns of principal or equity
thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal
to the fair market value of such property.
"Lender Assignment Agreement" means a Lender Assignment
Agreement substantially in the form of Exhibit I hereto.
"Lenders" is defined in the preamble.
"LIBO Rate" is defined in Section 3.2.1.
"LIBO Rate Loan" means a Loan bearing interest, at all times
during an Interest Period applicable to such Loan, at a fixed
rate of interest determined by reference to the LIBO Rate
(Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"LIBOR Office" means, relative to any Lender, the office of
such Lender designated as such below its signature hereto or
designated in the Lender Assignment Agreement or such other
office of a Lender as designated from time to time by notice from
such Lender to the Borrower and the Agent, whether or not outside
the United States, which shall be making or maintaining LIBO Rate
Loans of such Lender hereunder.
"LIBOR Reserve Percentage" is defined in Section 3.2.1.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in property
to secure payment of a debt or performance of an obligation or
other priority or preferential arrangement of any kind or nature
whatsoever.
"Loan" is defined in Section 2.1.
"Loan Document" means this Agreement, the Notes, the
Collateral Security Documents, the Subordination Agreement, the
Swap Agreements, the Indemnification Agreement and each other
agreement, document or instrument delivered in connection
therewith.
"Loan Purchase Agreement" means the Loan Purchase Agreement
executed and delivered by Calpine and the Borrower pursuant to
Section 5.1.21, substantially in the form of Exhibit K hereto, as
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amended, supplemented, restated or otherwise modified from time
to time.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon the Transaction,
either Project, or the financial condition, operations or assets
(including any power projects) of the Borrower and its
Subsidiaries taken as a whole; or (b) a material adverse change
in the ability of the Borrower or any other Obligor to perform
under any Loan Document.
"Monthly Payment Date" means the last day of each calendar
month or, if any such day is not a Business Day, the next
succeeding Business Day.
"Net Available Proceeds" means (i) in the case of any Asset
Sale, the gross cash proceeds available to the Borrower less all
transaction costs, and less the amount of all Indebtedness (other
than Loans) secured by the Property sold and repaid in connection
with such Asset Sale, (ii) in the case of any Equity Issuance,
the gross consideration available to the Borrower received by or
for account of the issuer less underwriting and brokerage
commissions, discounts and fees and other professional fees and
expenses relating to such issuance that are payable by the
issuer, and all transaction costs, and less all amounts paid by
the Borrower or its Subsidiaries to third parties under the
Project Documents and all Project Indebtedness Payments made with
the proceeds of such Equity Issuance and (iii) in the case of
Project Indebtedness Payments or EDCC Distributions, the gross
amount (except for netting of payments under Hedging Obligations)
received by the Borrower with respect thereto.
"Note" means a promissory note of the Borrower payable to
any Lender, in the form of Exhibit A hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Borrower to
such Lender resulting from outstanding Loans, and also means all
other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"Obligations" means all obligations (monetary or otherwise)
of the Borrower and each other Obligor arising under or in
connection with this Agreement, the Notes and each other Loan
Document.
"Obligor" means the Borrower or any other Person (other
than the Agent or any Lender) obligated under any Loan Document.
"Organic Document" means, relative to any Obligor, its
certificate of incorporation, its by-laws and all shareholder
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agreements, voting trusts and similar arrangements applicable to
any of its authorized shares of capital stock.
"Participant" is defined in Section 10.11.
"PBGC" means the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is
defined in section 3(2) of ERISA, which is subject to Title IV of
ERISA (other than a multiemployer plan as defined in section
4001(a)(3) of ERISA), and to which the Borrower or any
corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within
the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage
set forth opposite its signature hereto or set forth in the
Lender Assignment Agreement, as such percentage may be adjusted
from time to time pursuant to Lender Assignment Agreement(s)
executed by such Lender and its Assignee Lender(s) and delivered
pursuant to Section 10.11.
"Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means the Pledge Agreement executed and
delivered pursuant to Section 5.1.10, substantially in the form
of Exhibit G hereto, as amended, supplemented, restated or
otherwise modified from time to time.
"Process Agent" is defined in Section 10.13(b).
"Project Documents" means (i) the "Project Documents" as
defined in the Clear Lake Credit Agreement which have not
terminated, including those more specifically described in
Schedule 3 and (ii) "Material Project Contracts" as defined in
the Cogenron Credit Agreement which have not terminated,
including those more specifically described in Schedule 4.
"Project Indebtedness Payments" means payments of principal
and interest under the Project Loan Documents.
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"Project Loan Documents" means (i) the Clear Lake Credit
Agreement and each other "Credit Document" (as defined in the
Clear Lake Credit Agreement), including those more specifically
described in Schedule 5 and (ii) the Cogenron Credit Agreement
and each other "Loan Document" (as defined in the Cogenron Credit
Agreement), including those more specifically described in
Schedule 6.
"Project Swap Agreements" means (i) the Interest Rate and
Currency Exchange Agreement dated June 23, 1989 between Barclays
Bank PLC and Clear Lake and (ii) the Interest Rate and Currency
Exchange Agreement dated January 22, 1991 between The Bank of New
York and Cogenron.
"Projects" means the Clear Lake Project and the Cogenron
Project.
"Property" means any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
"Purchase Agreement" is defined in the first recital.
"Purchase Documents" means the Purchase Agreement, the
Guaranty Agreement (By Enron) and the Indemnification and
Allocation Agreement.
"Quarterly Payment Date" means the last day of each March,
June, September, and December or, if any such day is not a
Business Day, the next succeeding Business Day.
"Release" means a "release", as such term is defined in
CERCLA.
"Reorganization Agreement" means that certain Reorganization
Agreement dated as of April 14, 1989 by and among Dominion
Resources, Inc., Dominion, Enron Corporation and EDCC, as amended
by that certain Amendment to Reorganization Agreement dated as of
June 30, 1991 by and among such parties.
"Required Lenders" means, at any time, Lenders holding at
least 66 2/3% of the then aggregate outstanding principal amount
of the Notes then held by the Lenders, or, if no such principal
amount is then outstanding, Lenders having at least 66 2/3% of
the Commitments.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as
in effect from time to time.
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"Security Agreements" means the Security Agreement and the
Assignment and Security Agreement executed and delivered pursuant
to Section 5.1.12, substantially in the form of Exhibit E and
Exhibit F hereto, as amended, supplemented, restated or otherwise
modified from time to time.
"Seller" is defined in the first recital.
"Senior Debt" means the outstanding principal amount of all
Indebtedness of the Borrower and its Subsidiaries of the nature
referred to in clauses (a), (b), (c) and (f) of the definition of
"Indebtedness," but excluding Calpine Subordinated Indebtedness.
"Senior Debt to Cash Flow Ratio" means, for any period of
four Fiscal Quarters (or if four Fiscal Quarters have not passed
from the Effective Date, the period from the Effective Date to
the most recent Fiscal Quarter end), the ratio of (x) the
consolidated Senior Debt of the Borrower and its Subsidiaries as
of the end of the most recent Fiscal Quarter (after giving effect
to payments made as of the end of such Fiscal Quarter) to
(y) Cash Flow during such period (and, if four Fiscal Quarters
have not passed from the Effective Date, converted to an
annualized amount).
"Shareholder's Agreement" means the Stockholder's Agreement
dated as of June 27, 1988, among Enron Corp., Dominion Cogen,
Inc. and Dominion Resources, Inc., as assigned by Enron Corp. to
Calpine.
"Standstill Agreements" means the Clear Lake Standstill
Agreement and the Cogenron Standstill Agreement.
"Stated Maturity Date" means June 22, 1998.
"Stock Purchase" is defined in the first recital.
"Subordination Agreement" means the Subordination Agreement
executed and delivered by Calpine pursuant to Section 5.1.13,
substantially in the form of Exhibit H hereto, as amended,
supplemented, restated or otherwise modified from time to time.
"Subordination Agreement (Clear Lake)" means the Amended and
Restated Subordination Agreement dated as of January 18, 1994, by
and among Clear Lake, EDCC and Barclays Bank PLC, as agent, as
amended, supplemented, restated or otherwise modified from time
to time.
"Subsidiary" means, with respect to any Person, any
corporation of which 50% or more of the outstanding capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the
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time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more other Subsidiaries
of such Person, or by one or more other Subsidiaries of such
Person.
"Swap Agreements" means (i) the Interest Rate and Currency
Exchange Agreement dated concurrently herewith between the
Borrower and Scotiabank, relating to the Cogenron Project, and
(ii) the Interest Rate and Currency Exchange Agreement dated
concurrently herewith between the Borrower and Scotiabank
relating to the Clear Lake Project.
"Tangible Net Worth" means the consolidated net worth of the
Borrower and its Subsidiaries (including the Calpine Subordinated
Indebtedness) after subtracting therefrom the aggregate amount of
any intangible assets of the Borrower and its Subsidiaries,
including goodwill, franchises, licenses, patents, trademarks,
trade names, copyrights, service marks and brand names.
"Taxes" is defined in Section 4.6.
"Transaction" is defined in the fifth recital.
"type" means, relative to any Loan, the portion thereof, if
any, being maintained as a Base Rate Loan or a LIBO Rate Loan.
"United States" or "U.S." means the United States of
America, its fifty States and the District of Columbia.
"Welfare Plan" means a "welfare plan", as such term is
defined in section 3(1) of ERISA.
"Wholly Owned Subsidiary" means a Subsidiary all the capital
stock of which (other than directors' qualifying shares) is owned
by the Borrower or another Wholly Owned Subsidiary.
SECTION 1.2. Use of Defined Terms. Unless otherwise
defined or the context otherwise requires, terms for which
meanings are provided in this Agreement shall have such meanings
when used in the Disclosure Schedule and in each Note, Borrowing
Request, Continuation/Conversion Notice, Loan Document, notice
and other communication delivered from time to time in connection
with this Agreement or any other Loan Document. Unless the
context otherwise requires, references (i) to agreements shall be
deemed to mean and include such agreements as amended,
supplemented and otherwise modified from time to time in a manner
not in violation of the Loan Documents and (ii) to parties to
agreements shall be deemed to include the permitted successors
and assigns of such parties.
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SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to
any Article or Section are references to such Article or Section
of this Agreement or such other Loan Document, as the case may
be, and, unless otherwise specified, references in any Article,
Section or definition to any clause are references to such clause
of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations.
Unless otherwise specified, all accounting terms used herein or
in any other Loan Document shall be interpreted, all accounting
determinations and computations hereunder or thereunder
(including under Section 7.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall
be prepared in accordance with, those generally accepted
accounting principles ("GAAP") applied in the preparation of the
financial statements referred to in Section 6.5.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the
conditions of this Agreement (including Article V), each Lender
severally agrees to make Loans pursuant to the Commitments
described in this Section 2.1. On or before June 30, 1997, upon
the satisfaction or waiver of the conditions precedent set forth
in Article V, each Lender will make Loans (relative to such
Lender, and of any type, its "Loans") to the Borrower equal to
such Lender's Percentage of $125,000,000. The commitment of each
Lender described in this Section 2.1 is herein referred to as its
"Commitment". No amounts paid or prepaid with respect to any
Loans may be reborrowed.
SECTION 2.2. Borrowing Procedure. By delivering a
Borrowing Request to the Agent on or before 10:00 a.m., San
Francisco time, on a Business Day not later than June 30, 1997,
the Borrower may from time to time irrevocably request, on not
less than three Business Days' notice, in the case of LIBO Rate
Loans, or one Business Day's notice, in the case of Base Rate
Loans, that a Borrowing be made in the amount of $125,000,000.
On the terms and subject to the conditions of this Agreement,
each Borrowing shall be comprised of the type of Loans, and shall
be made on the Business Day, specified in such Borrowing Request.
On or before 11:00 a.m., San Francisco time, on such Business Day
each Lender shall deposit with the Agent same day funds in an
amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account which the
Agent shall specify from time to time by notice to the Lenders.
To the extent funds are received from the Lenders by such time,
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the Agent shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its
Borrowing Request by 12:00 p.m. on such Business Day. No
Lender's obligation to make any Loan shall be affected by any
other Lender's failure to make any Loan.
SECTION 2.3. Continuation and Conversion Elections. By
delivering a Continuation/Conversion Notice to the Agent on or
before 10:00 a.m., San Francisco time, on a Business Day, the
Borrower may from time to time irrevocably elect, on not less
than three nor more than five Business Days' notice that all, or
any portion in an aggregate minimum amount of $5,000,000, of any
Loans be, in the case of Base Rate Loans, converted into LIBO
Rate Loans or, in the case of LIBO Rate Loans, be converted into
a Base Rate Loan or continued as a LIBO Rate Loan (in the absence
of delivery of a Continuation/ Conversion Notice with respect to
any LIBO Rate Loan at least three Business Days before the last
day of the then current Interest Period with respect thereto,
such LIBO Rate Loan shall, on such last day, automatically
convert to a Base Rate Loan); provided, however, that (i) each
such conversion or continuation shall be prorated among the
applicable outstanding Loans of all Lenders, and (ii) no portion
of the outstanding principal amount of any Loans may be continued
as, or be converted into, LIBO Rate Loans when any Default has
occurred and is continuing. The Agent shall promptly transmit
the information in each Continuation/Conversion Notice to each
Lender.
SECTION 2.4. Funding. Each Lender may, if it so elects,
fulfill its obligation to make, continue or convert LIBO Rate
Loans hereunder by causing one of its foreign branches or
Affiliates (or an international banking facility created by such
Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to
have been made and to be held by such Lender, and the obligation
of the Borrower to repay such LIBO Rate Loan shall nevertheless
be to such Lender for the account of such foreign branch,
Affiliate or international banking facility; provided, further,
that each Lender shall use reasonable efforts in making any such
election to minimize the costs payable by Borrower hereunder with
respect to any Loan or Commitment. In addition, the Borrower
hereby consents and agrees that, for purposes of any
determination to be made for purposes of Sections 4.1, 4.2, 4.3
or 4.4, it shall be conclusively assumed that each Lender elected
to fund all LIBO Rate Loans by purchasing Dollar deposits in its
LIBOR Office's interbank eurodollar market.
SECTION 2.5. Notes. Each Lender's Loans under its
Commitment shall be evidenced by a Note payable to the order of
such Lender in a maximum principal amount equal to such Lender's
Percentage of the original Commitment Amount. The Borrower
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hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on the grid attached to such Lender's
Note (or on any continuation of such grid), which notations, if
made, shall evidence, inter alia, the date of, the outstanding
principal of, and the interest rate and Interest Period
applicable to the Loans evidenced thereby. Such notations shall
be conclusive and binding on the Borrower absent manifest error;
provided, however, that the failure of any Lender to make any
such notations shall not limit or otherwise affect any
Obligations of the Borrower.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower
shall repay in full the unpaid principal amount of each Loan upon
the Stated Maturity Date therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make
a voluntary prepayment, in whole or in part, of the
outstanding principal amount of any Loans; provided,
however, that
(i) any such prepayment shall be made pro rata
among Loans of the same type and, if applicable, having
the same Interest Period of all Lenders;
(ii) no such prepayment of any LIBO Rate Loan
may be made on any day other than the last day of the
Interest Period for such Loan, unless Borrower also
pays all losses and expenses as a result of such
prepayment as provided in Section 4.4;
(iii) all such voluntary prepayments shall
require at least three but no more than five Business
Days' prior written notice to the Agent; and
(iv) all such voluntary partial prepayments shall
be in an aggregate minimum amount of $500,000 and an
integral multiple of $500,000;
(b) shall, within two Business Day's after receipt of
Net Available Proceeds from (i) Asset Sales, (ii) Equity
Issuances, (iii) Project Indebtedness Payments (excluding
that portion of the first Project Indebtedness Payments made
after the Effective Date under the Clear Lake Credit
Agreement and the Cogenron Credit Agreement representing
interest accrued under each of the Clear Lake Credit
Agreement and the Cogenron Credit Agreement from the last
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principal payment date under each of the Clear Lake Credit
Agreement and the Cogenron Credit Agreement through the
Effective Date, which amounts may be used by the Borrower to
repay Calpine Subordinated Indebtedness or to pay a dividend
to Calpine), or (iv) EDCC Distributions, deposit any such
amounts with the Agent to be held pursuant to the Deposit
and Disbursement Agreement and applied first to repayment of
interest on the Loans, and then to repayment of the
principal amount of the Loans, such repayment to occur (A)
in the case of Base Rate Loans, on the third Business Day
after receipt of such Net Available Proceeds by the
Borrower, and (B) in the case of LIBO Rate Loans, on the
next day or days on which amounts are payable with respect
thereto without the payment of losses and expenses as
described in Section 4.4; and
(c) shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans pursuant to Section 8.2
or Section 8.3, repay all Loans, unless, pursuant to
Section 8.3, only a portion of all Loans is so accelerated.
Each prepayment of any Loans made pursuant to this Section
shall be without premium or penalty, except as may be required by
Section 4.4.
SECTION 3.2. Interest Provisions. Interest on the
outstanding principal amount of Loans shall accrue and be payable
in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Pursuant to an appropriately
delivered Borrowing Request or Continuation/Conversion Notice,
the Borrower may elect that Loans comprising a Borrowing accrue
interest at a rate per annum:
(a) on that portion maintained from time to time as a
Base Rate Loan, equal to the sum of the Alternate Base Rate
from time to time in effect plus a margin of .75%; and
(b) on that portion maintained as a LIBO Rate Loan,
during each Interest Period applicable thereto, equal to
the sum of the LIBO Rate (Reserve Adjusted) for such
Interest Period plus a margin of 1.25%.
The "LIBO Rate (Reserve Adjusted)" means, relative to any
Loan to be made, continued or maintained as, or converted into, a
LIBO Rate Loan for any Interest Period, a rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) determined
pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
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The LIBO Rate (Reserve Adjusted) for any Interest Period
for LIBO Rate Loans will be determined by the Agent on the basis
of the LIBOR Reserve Percentage in effect on, and the applicable
rates furnished to and received by the Agent from Scotiabank, two
Business Days before the first day of such Interest Period.
"LIBO Rate" means, relative to any Interest Period for LIBO
Rate Loans, the rate of interest equal to the average (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the rates
per annum at which Dollar deposits in immediately available funds
are offered to Scotiabank's LIBOR Office in the London interbank
market as at or about 11:00 a.m. London time two Business Days
prior to the beginning of such Interest Period for delivery on
the first day of such Interest Period, and in an amount
approximately equal to the amount of the LIBO Rate Loans and for
a period approximately equal to such Interest Period.
"LIBOR Reserve Percentage" means, relative to any Interest
Period for LIBO Rate Loans, the reserve percentage (expressed as
a decimal) equal to the maximum aggregate reserve requirements
(including all basic, emergency, supplemental, marginal and other
reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) specified under
regulations issued from time to time by the F.R.S. Board and then
applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D
of the F.R.S. Board, having a term approximately equal or
comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including
the first day of the applicable Interest Period to (but not
including) the last day of such Interest Period at the interest
rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any
principal amount of any Loan is due and payable (whether on the
Stated Maturity Date, upon acceleration or otherwise), or after
any other monetary Obligation of the Borrower shall have become
due and payable, the Borrower shall pay, but only to the extent
permitted by law, interest (after as well as before judgment) on
such amounts at a rate per annum equal to the Alternate Base Rate
plus a margin of 2.75%.
SECTION 3.2.3. Payment Dates. Interest accrued on each
Loan shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in
whole or in part, of principal outstanding on such Loan;
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(c) with respect to Base Rate Loans, on each
Quarterly Payment Date occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, the last day of
each applicable Interest Period (and, if such Interest
Period shall exceed 3 months, on each day which occurs
during such Interest Period every three months from the
first day of such Interest Period);
(e) with respect to any Base Rate Loans converted
into LIBO Rate Loans on a day when interest would not
otherwise have been payable pursuant to clause (c), on the
date of such conversion; and
(f) on that portion of any Loans the Stated Maturity
Date of which is accelerated pursuant to Section 8.2 or
Section 8.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising
under this Agreement or any other Loan Document after the date
such amount is due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise) shall be payable upon
demand.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender
shall determine (which determination shall, upon notice thereof
to the Borrower and the Lenders, be conclusive and binding on the
Borrower) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful, for
such Lender to make, continue or maintain any Loan as, or to
convert any Loan into, a LIBO Rate Loan, the obligations of all
Lenders to make, continue, maintain or convert any such Loans
shall, upon such determination, forthwith be suspended until such
Lender shall notify the Agent that the circumstances causing such
suspension no longer exist, and all LIBO Rate Loans shall
automatically convert into Base Rate Loans at the end of the then
current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If the Agent shall
have determined that
(a) Dollar certificates of deposit or Dollar
deposits, as the case may be, in the relevant amount and
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for the relevant Interest Period are not available to
Scotiabank in its relevant market; or
(b) by reason of circumstances affecting Scotiabank's
relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO
Rate Loans,
then, upon notice from the Agent to the Borrower and the Lenders,
the obligations of all Lenders under Section 2.2 and Section 2.3
to make or continue any Loans as, or to convert any Loans into,
LIBO Rate Loans shall forthwith be suspended until the Agent
shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The
Borrower agrees to reimburse each Lender for any increase in the
cost to such Lender of, or any reduction in the amount of any sum
receivable by such Lender in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain)
any Loans as, or of converting (or of its obligation to convert)
any Loans into, LIBO Rate Loans as a result in any change after
the Effective Date in applicable law, regulation, rule, decree or
regulatory requirement or in the interpretation or application by
any judicial or regulatory authority of any law, regulation,
rule, decree or regulatory requirement. Such Lender shall
promptly notify the Agent and the Borrower in writing of the
occurrence of any such event, such notice to state, in reasonable
detail, the reasons therefor and the additional amount required
fully to compensate such Lender for such increased cost or
reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt
of such notice, and such notice shall, in the absence of manifest
error, be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender
shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Lender to make, continue or
maintain any portion of the principal amount of any Loan as, or
to convert any portion of the principal amount of any Loan into,
a LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other
than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to Section 3.1 or
otherwise;
(b) any Loans not being made as LIBO Rate Loans in
accordance with the Borrowing Request therefor; or
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(c) any Loans not being continued as, or converted
into, LIBO Rate Loans in accordance with the Continuation/
Conversion Notice therefor,
then, upon the written notice of such Lender to the Borrower
(with a copy to the Agent), the Borrower shall, within five days
of its receipt thereof, pay directly to such Lender such amount
as will (in the reasonable determination of such Lender)
reimburse such Lender for such loss or expense. Such written
notice (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in,
or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having
the force of law) of any court, central bank, regulator or other
governmental authority causes the amount of capital required or
expected to be maintained by any Lender or any Person controlling
such Lender to be increased, and such Lender determines (in its
reasonable discretion) that the rate of return on its or such
controlling Person's capital as a consequence of its Commitment
or the Loans made by such Lender is reduced to a level below that
which such Lender or such controlling Person could have achieved
but for the occurrence of any such circumstance, then, in any
such case upon notice from time to time by such Lender to the
Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or
such controlling Person for such reduction in rate of return. A
statement of such Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail)
shall, in the absence of manifest error and if made in good
faith, be conclusive and binding on the Borrower. In determining
such amount, such Lender may use any method of averaging and
attribution that it (in its good faith discretion) shall deem
applicable.
SECTION 4.6. Taxes. All payments by the Borrower of
principal of, and interest on, the Loans and all other amounts
payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or
measured by any Lender's net income or receipts (such non-
excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant
to any applicable law, rule or regulation, then the Borrower will
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(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt
or other documentation satisfactory to the Agent evidencing
such payment to such authority; and
(c) pay to the Agent for the account of the Lenders
such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Lender will
equal the full amount such Lender would have received had
no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or
any Lender with respect to any payment received by the Agent or
such Lender hereunder, the Agent or such Lender may pay such
Taxes and the Borrower will promptly pay such additional amounts
(including any penalties, interest or expenses) as is necessary
in order that the net amount received by such person after the
payment of such Taxes (including any Taxes on such additional
amount) shall equal the amount such person would have received
had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent, for
the account of the respective Lenders, the required receipts or
other required documentary evidence, the Borrower shall indemnify
the Lenders for any incremental Taxes, interest or penalties that
may become payable by any Lender as a result of any such failure.
For purposes of this Section 4.6, a distribution hereunder by the
Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
Upon the request of the Borrower or the Agent, each Lender
that is organized under the laws of a jurisdiction other than the
United States shall, prior to the due date of any payments under
the Notes, execute and deliver to the Borrower and the Agent, on
or about the first scheduled payment date in each Fiscal Year,
one or more (as the Borrower or the Agent may reasonably request)
United States Internal Revenue Service Forms 4224 or Forms 1001
or such other forms or documents (or successor forms or
documents), appropriately completed, as may be applicable to
establish the extent, if any, to which a payment to such Lender
is exempt from withholding or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. Unless
otherwise expressly provided, all payments by the Borrower
pursuant to this Agreement, the Notes or any other Loan Document
shall be made by the Borrower to the Agent for the pro rata
account of the Lenders entitled to receive such payment. All
such payments required to be made to the Agent shall be made,
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without setoff, deduction or counterclaim, not later than 11:00
a.m., San Francisco time, on the date due, in same day or
immediately available funds, to such account as the Agent shall
specify from time to time by notice to the Borrower. Funds
received after that time shall be deemed to have been received by
the Agent on the next succeeding Business Day. The Agent shall
promptly remit in same day funds to each Lender its share, if
any, of such payments received by the Agent for the account of
such Lender. All interest and fees shall be computed on the
basis of the actual number of days (including the first day but
excluding the last day) occurring during the period for which
such interest or fee is payable over a year comprised of 360 days
(or, in the case of interest on a Base Rate Loan (other than when
calculated with respect to the Federal Funds Rate), 365 days or,
if appropriate, 366 days). Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such
payment shall (except as otherwise required by clause (c) of the
definition of the term "Interest Period" with respect to LIBO
Rate Loans) be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and
fees, if any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall
obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff or otherwise) on account of
any Loan (other than pursuant to the terms of Sections 4.3, 4.4
and 4.5) in excess of its pro rata share of payments then or
therewith obtained by all Lenders, such Lender shall purchase
from the other Lenders such participations in Loans made by them
as shall be necessary to cause such purchasing Lender to share
the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such
purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender
shall repay to the purchasing Lender the purchase price to the
ratable extent of such recovery together with an amount equal to
such selling Lender's ratable share (according to the proportion
of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
to
(b) the total amount so recovered from the purchasing
Lender)
of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another
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Lender pursuant to this Section may, to the fullest extent
permitted by law, exercise all its rights of payment with respect
to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. If
under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders entitled
under this Section to share in the benefits of any recovery on
such secured claim.
SECTION 4.9. Actions of Affected Lenders. Each Lender
agrees to use reasonable efforts (including reasonable efforts to
change the booking office for its Loans) to avoid or minimize any
illegality pursuant to Section 4.1 or any amounts which might
otherwise be payable pursuant to Sections 4.3 or 4.5; provided,
however, that such efforts shall not cause the imposition on such
Lender of any additional costs or legal or regulatory burdens
deemed by such Lender to be material. In the event that such
reasonable efforts are insufficient to avoid all such illegality
or all amounts that might be payable pursuant to Sections 4.3 or
4.5, then the Borrower may request such Lender (the "Affected
Lender") to transfer its Commitments hereunder to any other
Lender (which itself is not then an Affected Lender) or financial
institution designated by the Borrower; provided, however, that
such transfer shall not cause the imposition on such Affected
Lender of additional costs or legal or regulatory burdens deemed
by such Affected Lender to be material.
SECTION 4.10. Use of Proceeds. The Borrower shall apply
the proceeds of each Borrowing in accordance with the tenth
recital; without limiting the foregoing, no proceeds of any Loan
will be used to acquire any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or any "margin stock", as defined in F.R.S. Board
Regulation U.
ARTICLE V
CONDITIONS TO BORROWING
SECTION 5.1. Initial Borrowing. The obligations of the
Lenders to fund the initial Borrowing shall be subject to the
prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 5.1.
SECTION 5.1.1. Stock Purchase Consummated. The conditions
set forth in Section 6.1 of the Purchase Agreement to the
obligations of the Borrower to consummate the Stock Purchase
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shall have been satisfied in full (without amendment or waiver
of, or other forbearance to exercise any rights with respect to,
any of the terms or provisions thereof by the Borrower, except as
approved in writing by the Agent), and the Stock Purchase shall
have been consummated in accordance with Article VI of the
Purchase Agreement for an aggregate base purchase price
(excluding related fees and expenses and any post-closing
adjustments under the Purchase Agreement) not greater than
$35,450,000.
SECTION 5.1.2. Debt Acquisitions Consummated. The Debt
Acquisitions shall have been consummated for a purchase price of
not greater than $52,999,300 (plus accrued interest) for the
Cogenron Debt Acquisition and of not greater than $102,622,665
(plus accrued interest) for the Clear Lake Debt Acquisition, and
transaction fees and expenses for the Transaction shall not have
exceeded $3,500,000; and all Liens securing payment of any such
Indebtedness have been assigned to the Borrower and the Borrower
shall have received all Uniform Commercial Code Form UCC-2
assignment statements or other instruments as may be suitable or
appropriate in connection therewith.
SECTION 5.1.3. Consents. Cogenron, Clear Lake and, except
as set forth in Item 5.1.3 of the Disclosure Schedule, each other
party to any Project Loan Document (other than any lender or
agent thereunder) shall have consented to the assignment of such
Project Loan Documents to the Borrower and there shall be no
prohibition on the Borrower further assigning such Project Loan
Documents to the Agent. Except as set forth in Item 5.1.3 of the
Disclosure Schedule, there shall be no prohibition of any
assignment of any Project Document to the Borrower (or further
assignment from the Borrower to the Agent) as collateral for the
obligations under the Project Loan Documents.
SECTION 5.1.4. Government Approvals. All governmental
approvals necessary in connection with the Transaction, the
financing contemplated by this Agreement, and the continuing
operations of the Borrower and its Subsidiaries shall have been
obtained and be in full force and effect, and all applicable
waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain,
prevent or otherwise impose adverse conditions on the Transaction
or the financing contemplated by this Agreement.
SECTION 5.1.5. Project Swap Agreements. Arrangements
satisfactory to the Agent shall have been made with respect to
the Project Swap Agreements.
SECTION 5.1.6. Calpine Equity Contribution. The Calpine
Equity Contribution shall have been consummated and the Borrower
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shall have received Net Available Proceeds therefrom of at least
$35,425,000.
SECTION 5.1.7. Calpine Subordinated Indebtedness. The
Borrower shall have received at least $32,575,000 of cash
proceeds from issuance of the Calpine Subordinated Indebtedness;
provided, however, that such amount shall be increased on a
dollar for dollar basis to the extent that the Purchase Price (as
defined in the Purchase Agreement) is increased pursuant to
Section 2.3(B) of the Purchase Agreement.
SECTION 5.1.8. Resolutions, etc. The Agent shall have
received from each Obligor a certificate, dated the date of the
initial Borrowing, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in
full force and effect authorizing the execution, delivery
and performance of this Agreement, the Notes and each other
Loan Document to be executed by it; and
(b) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement,
the Notes and each other Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it
shall have received a further certificate of the Secretary of
such Obligor canceling or amending such prior certificate.
SECTION 5.1.9. Delivery of Notes. The Agent shall have
received, for the account of each Lender, its Note duly executed
and delivered by the Borrower.
SECTION 5.1.10. Pledge Agreement. The Agent shall have
received executed counterparts of the Pledge Agreement, dated as
of the date hereof, duly executed by the Borrower, together with
the certificates evidencing all of the issued and outstanding
shares of capital stock pledged pursuant to the Pledge Agreement,
which certificates shall in each case be accompanied by undated
stock powers duly executed in blank.
SECTION 5.1.11. Deposit and Disbursement Agreement. The
Agent shall have received the Deposit and Disbursement Agreement,
dated the date hereof, duly executed by the Borrower.
SECTION 5.1.12. Security Agreements. The Agent shall have
received executed counterparts of the Security Agreements, dated
as of the date hereof, duly executed by the Borrower, together
with
(a) acknowledgment copies of properly filed Uniform
Commercial Code financing statements (Form UCC-1), dated a
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date reasonably near to the date of the initial Borrowing,
or such other evidence of filing as may be acceptable to
the Agent, naming the Borrower as the debtor and the Agent
as the secured party, or other similar instruments or
documents, filed under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the opinion of the
Agent, desirable to perfect the security interest of the
Agent pursuant to the Security Agreements;
(b) executed copies of proper Uniform Commercial Code
Form UCC-3 termination statements, if any, necessary to
release all Liens and other rights of any Person in any
collateral described in the Security Agreements previously
granted by any Person; and
(c) certified copies of Uniform Commercial Code
Requests for Information or Copies (Form UCC-11), or a
similar search report certified by a party acceptable to
the Agent, dated a date reasonably near to the date of the
initial Borrowing, listing all effective financing
statements which name the Borrower (under its present name
and any previous names) as the debtor and which are filed
in the jurisdictions in which filings were made pursuant to
clause (a) above, together with copies of such financing
statements (none of which (other than those described in
clause (a), if such Form UCC-11 or search report, as the
case may be, is current enough to list such financing
statements described in clause (a)) shall cover any
collateral described in the Security Agreements).
SECTION 5.1.13. Subordination Agreement. The Agent shall
have received the Subordination Agreement, in form and substance
satisfactory to the Agent, from Calpine in respect of the Calpine
Subordinated Indebtedness.
SECTION 5.1.14. Opinions of Counsel. The Agent shall
have received opinions, dated the date of the initial Borrowing
and addressed to the Agent and all Lenders, from Joseph E. Ronan,
Jr., Washburn, Briscoe and McCarthy and Brobeck, Phleger &
Harrison, counsel to the Obligors, substantially in the form of
Exhibit J hereto.
SECTION 5.1.15. Purchase Documents. The Agent shall have
received a copy of the Purchase Documents and any supplements or
amendments thereto, certified by the Borrower as of the Effective
Date as being true, complete and correct and in full force and
effect.
SECTION 5.1.16. Project Documents and Project Loan
Documents. The Agent shall have received copies of each Project
Document and Project Loan Documents and any supplements or
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amendments thereto, certified by the Borrower as of the Effective
Date as being true, complete and correct and in full force and
effect.
SECTION 5.1.17. Projections. The Agent shall have
received the Financial Projections, in form and substance
satisfactory to the Agent, from the Borrower.
SECTION 5.1.18. Insurance Certificates. The Agent shall
have received copies of certificates of insurance signed by a
broker of nationally recognized standing certifying that all
insurance policies required under Section 7.1.4 are in full force
and effect and comply in all material respects with the
requirements of such section.
SECTION 5.1.19. Independent Engineer's Report. The Agent
shall have received the report of the Independent Engineer with
respect to the performance and operation of the Projects, in form
and substance satisfactory to the Agent.
SECTION 5.1.20. Financial Statements. The Agent shall
have received and approved the financial statements described in
Section 6.5 hereof. In addition, the Agent shall have received a
pro-forma opening consolidated balance sheet of the Borrower as
of the Effective Date, giving effect to the Transaction, which
balance sheet shall be satisfactory in all respects to the Agent.
SECTION 5.1.21. Loan Purchase Agreement. The Agent shall
have received the Loan Purchase Agreement, dated the date hereof,
duly executed by Calpine and the Borrower.
SECTION 5.1.22. Indemnification Agreement. The Agent
shall have received the Indemnification Agreement, dated the date
hereof, duly executed by Calpine.
SECTION 5.1.23. Due Diligence. The Agent shall have
satisfactorily completed its legal and financial due diligence
review of the assets, properties, facilities, business and
operations of EDCC, Cogenron and Clear Lake and the assets,
properties and facilities constituting the Projects.
SECTION 5.1.24. Closing Fees, Expenses, etc. The Agent
shall have received for its own account, or for the account of
each Lender, as the case may be, all fees, costs and expenses due
and payable pursuant to Sections 10.3 if then invoiced and any
amounts then owing pursuant to any fee letters among the parties.
SECTION 5.2. All Borrowings. The obligation of each
Lender to fund any Loan on the occasion of any Borrowing
(including the initial Borrowing) shall be subject to the
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satisfaction of each of the conditions precedent set forth in
this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default,
etc. Both before and after giving effect to any Borrowing (but,
if any Default of the nature referred to in Section 8.1.5 shall
have occurred with respect to any other Indebtedness, without
giving effect to the application, directly or indirectly, of the
proceeds thereof) the following statements shall be true and
correct
(a) the representations and warranties set forth in
Article VI (excluding, however, those contained in Section
6.7) shall be true and correct with the same effect as if
then made (unless stated to relate solely to an early date,
in which case such representations and warranties shall be
true and correct as of such earlier date);
(b) except as disclosed by the Borrower to the Agent
and the Lenders pursuant to Section 6.7
(i) no labor controversy, litigation,
arbitration or governmental investigation or
proceeding shall be pending or, to the knowledge of
the Borrower, threatened against the Borrower or any
of its Subsidiaries which has or may reasonably be
expected to have a Material Adverse Effect or which
purports to materially and adversely affect the
legality, validity or enforceability of this
Agreement, the Notes or any other Loan Document, or of
the Purchase Documents; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or
governmental investigation or proceeding disclosed
pursuant to Section 6.7 which has or may reasonably be
expected to have a Material Adverse Effect; and
(c) no Default shall have then occurred and be
continuing, and neither the Borrower nor any of its
Subsidiaries are in violation of any law or governmental
regulation or court order or decree which would reasonably
be expected to result in a Material Adverse Effect.
SECTION 5.2.2. Borrowing Request. The Agent shall have
received a Borrowing Request for such Borrowing. Each of the
delivery of a Borrowing Request and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by the Borrower that on the date of
such Borrowing (both immediately before and after giving effect
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to such Borrowing and the application of the proceeds thereof)
the statements made in Section 5.2.1 are true and correct.
SECTION 5.2.3. Satisfactory Legal Form. All documents
executed or submitted pursuant hereto by or on behalf of the
Borrower or any of its Subsidiaries or any other Obligor shall be
satisfactory in form and substance to the Agent and its counsel;
the Agent and its counsel shall have received all information,
approvals, opinions, documents or instruments as the Agent or its
counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into
this Agreement and to make Loans hereunder, the Borrower
represents and warrants unto the Agent and each Lender as set
forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of
its Subsidiaries is a corporation or partnership validly
organized and existing and in good standing under the laws of the
State of its formation, is duly qualified to do business and is
in good standing as a foreign corporation or partnership in each
jurisdiction where the nature of its business requires such
qualification, and has full power and authority and holds all
requisite governmental licenses, permits and other approvals to
enter into and perform its Obligations under this Agreement, the
Notes and each other Loan Document to which it is a party and to
own and hold under lease its property and to conduct its business
substantially as currently conducted by it.
SECTION 6.2. Due Authorization, Non-Contravention, etc.
The execution, delivery and performance by the Borrower of this
Agreement, the Notes and each other Loan Document executed or to
be executed by it, and the execution, delivery and performance by
each other Obligor of each Loan Document executed or to be
executed by it and the Borrower's and each such other Obligor's
participation in the consummation of the Transaction are within
the Borrower's and each such Obligor's corporate powers, have
been duly authorized by all necessary corporate action, and do
not
(a) contravene the Borrower's or any such Obligor's
Organic Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on
or affecting the Borrower or any such Obligor; or
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(c) result in, or require the creation or imposition
of, any Lien on any of any Obligor's properties, other than
Liens permitted under Section 7.2.3(a).
SECTION 6.3. Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or
other Person is required for the due execution, delivery or
performance by the Borrower or any other Obligor of this
Agreement, the Notes or any other Loan Document to which it is a
party, or for the Borrower's and each such other Obligor's
participation in the consummation of the Transaction, except for
the filings required under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 (the "HSR Act"), and the consents and
approvals listed in Schedules 4.1.3 and 4.1.7 attached to the
Purchase Agreement, all of which have been duly obtained or made
and are in full force and effect. Neither the Borrower nor any
of its Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or is
subject to regulation as a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of
1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes,
and the Notes and each other Loan Document executed by the
Borrower will, on the due execution and delivery thereof,
constitute, the legal, valid and binding obligations of the
Borrower enforceable in accordance with their respective terms,
except as enforceability may be subject to or limited by
(i) bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting the rights of
creditors or (ii) general principles of equity, including the
possible unavailability of specific performance or injunctive
relief; and each Loan Document executed pursuant hereto by each
other Obligor will, on the due execution and delivery thereof by
such Obligor, be the legal, valid and binding obligation of such
Obligor enforceable in accordance with its terms, except as
enforceability may be subject to or limited by (i) bankruptcy,
insolvency, reorganization, arrangement, moratorium or other
similar laws affecting the rights of creditors or (ii) general
principles of equity, including the possible unavailability of
specific performance or injunctive relief.
SECTION 6.5. Financial Information. The (i) balance sheet
of the Borrower, (ii) consolidated balance sheet of EDCC and each
of its Subsidiaries, (iii) balance sheet of Clear Lake, and (iv)
balance sheet of Cogenron, each as at December 31, 1996 (except
for the balance sheet of Borrower, which shall be prepared on a
proforma basis as of the Effective Date), and the related
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statements of earnings and cash flow (for all such entities
except the Borrower), copies of which have been furnished to the
Agent and each Lender, have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated
financial condition of the Persons covered thereby as at the
dates thereof and the results of their operations for the periods
then ended. On and as of the Effective Date, the Borrower has no
Indebtedness, other than (i) indebtedness incurred hereunder and
(ii) Calpine Subordinated Indebtedness.
SECTION 6.6. No Material Adverse Change. Since the date
of the financial statements described in Section 6.5 through the
Effective Date, there has been no material adverse change in the
financial condition, operations, assets, business, properties or
prospects of the Borrower and its Subsidiaries, except as
reflected in the Financial Projections.
SECTION 6.7. Litigation, Labor Controversies, etc. There
is no pending or, to the knowledge of the Borrower, threatened
litigation, action, proceeding, or labor controversy affecting
the Borrower or any of its Subsidiaries, or any of their
respective properties, businesses, assets or revenues, which may
materially adversely affect the financial condition, operations,
assets, business, properties or prospects of the Borrower or any
Subsidiary or which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any other Loan
Document, except as disclosed in Item 6.7 ("Litigation") of the
Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Borrower has no
Subsidiaries, except EDCC, EC1, Cogenron, EC3, Clear Lake and
EC5. EDCC has no Subsidiaries other than EC1, Cogenron, EC3,
Clear Lake and EC5. EC5 has a 7.06% equity investment in Cogen
Venture.
SECTION 6.9. Ownership of Properties. The Borrower and
each of its Subsidiaries owns good and marketable title to all of
its properties and assets, real and personal, tangible and
intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free and
clear of all Liens, charges or claims (including infringement
claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 7.2.3.
SECTION 6.10. Taxes. The Borrower and each of its
Subsidiaries has filed all tax returns and reports required by
law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such
taxes or charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
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SECTION 6.11. Pension and Welfare Plans. The Borrower has
never maintained a Pension Plan or a Welfare Plan.
SECTION 6.12. Environmental Warranties. Except as set
forth in Item 6.12 ("Environmental Matters") of the Disclosure
Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased
by the Borrower and its Subsidiaries in material compliance
with all Environmental Laws;
(b) there are no pending or threatened
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of
any Environmental Law which have not been resolved or
settled, or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding
potential liability under any Environmental Law which
have not been resolved or settled;
(c) there have been no unremediated Releases of
Hazardous Materials at, on or under any property now owned
or leased by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(d) the Borrower and its Subsidiaries have been
issued and are in material compliance with all permits,
certificates, approvals, licenses and other authorizations
relating to environmental matters and necessary for their
businesses;
(e) no property now owned or leased by the Borrower
or any of its Subsidiaries is listed or proposed for
listing (with respect to owned property only) on the
National Priorities List pursuant to CERCLA, on the CERCLIS
or on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks, active
or abandoned, including petroleum storage tanks, on or
under any property now owned or leased by the Borrower or
any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a Material
Adverse Effect;
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(g) neither Borrower nor any Subsidiary of the
Borrower has directly transported or directly arranged for
the transportation of any Hazardous Material except in
compliance with applicable Environmental Laws;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now owned or leased by the
Borrower or any Subsidiary of the Borrower that, singly or
in the aggregate, have, or may reasonably be expected to
have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property
now owned or leased by the Borrower which, with the passage
of time, or the giving of notice or both, would give rise
to liability under any Environmental Law which has or may
reasonably be expected to have a Material Adverse Effect.
For avoidance of doubt, properties acquired as a result of the
Transaction shall be considered "now owned".
SECTION 6.13. Regulations G, U and X. The Borrower is not
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Loans
will be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation G, U or X. Terms for
which meanings are provided in F.R.S. Board Regulation G, U or X
or any regulations substituted therefor, as from time to time in
effect, are used in this Section with such meanings.
SECTION 6.14. Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on
behalf of the Borrower in writing to the Agent or any Lender for
purposes of or in connection with this Agreement or any
transaction contemplated hereby (including copies of the Purchase
Documents and the Project Documents, true and complete copies of
which were furnished to the Agent and each Lender in connection
with their execution and delivery hereof, but excluding any
information contained in the Financial Projections), true and
complete copies of which were furnished to the Agent and each
Lender in connection with its execution and delivery hereof, is,
and all other such factual information hereafter furnished by or
on behalf of the Borrower to the Agent or any Lender will be,
true and accurate in every material respect on the date as of
which such information is dated or certified and as of the date
of execution and delivery of this Agreement by the Agent and such
Lender, and such information is not, or shall not be, as the case
may be, incomplete by omitting to state any material fact
necessary to make such information not misleading.
SECTION 6.15. Financial Projections. The Borrower
believes that the Financial Projections represent the Borrower's
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most likely estimate, as of the date of the Financial
Projections, of the projected results of operations of Clear Lake
and Cogenron for the periods covered thereby, and, as such, were
prepared by the Borrower in good faith, and, to the best of the
Borrower's knowledge, are based upon reasonable assumptions and
are complete in all material respects. The Borrower is not aware
of any facts or existing conditions that would require any
material change in the Financial Projections.
SECTION 6.16. Collateral Security Documents. Upon their
execution and delivery, the Collateral Security Documents will be
effective to create, in favor of the Agent on behalf of the
Lenders, legal, valid and enforceable Liens on and security
interests in the Collateral. Prior to or simultaneously with the
Closing Date, all necessary and appropriate recordings and
filings will have been duly effected in all appropriate public
offices so that each of the Collateral Security Documents will
constitute a valid and perfected first Lien on and first
perfected security interest in all right, title, estate and
interest of the Borrower in and to such portion of the Collateral
described in such Collateral Security Document. The recordings
and filings shown on Schedule 2 are all the recordings, filings
and other action necessary or appropriate in order to establish,
protect and perfect such first Lien on and security interest in
the Borrower's right, title and interest in the Collateral. The
descriptions of the Collateral set forth in the Collateral
Security Documents are true, complete, and accurate in all
respects and are adequate for the purpose of establishing,
preserving, perfecting and protecting such first Lien on and
security interest in Borrower's right, title and interest in the
Collateral.
SECTION 6.17. Principal Place of Business, etc. The
principal place of business and chief executive office of the
Borrower and the office where the Borrower keeps its records
concerning the Projects, the Collateral and all Basic Documents,
is located at 50 West San Fernando Avenue, San Jose, California
95113.
SECTION 6.18. Representations and Warranties Incorporated
from Purchase Agreement. Each of the representations and
warranties given by each of Seller and the Borrower in the
Purchase Agreement is true and correct in all material respects
as of the Effective Date, and such representations and warranties
are hereby incorporated herein by this reference with the same
effect as though set forth in their entirety herein, subject to
the qualifications thereto set forth in the Purchase Agreement.
ARTICLE VII
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COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees
with the Agent and each Lender that, until all Commitments have
terminated and all Obligations have been paid and performed in
full, the Borrower will perform the obligations set forth in this
Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices,
etc. The Borrower will furnish, or will cause to be furnished,
to each Lender and the Agent copies of the following financial
statements, reports, notices and information:
(a) as soon as available and in any event within 60
days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Borrower, a balance
sheet of the Borrower and consolidated and consolidating
balance sheets of EDCC and its Subsidiaries (as to EC1, EC3
and EC5, only to the extent otherwise available) as of the
end of such Fiscal Quarter and a statement of earnings and
cash flow of the Borrower and consolidated and
consolidating statements of earnings and cash flow of EDCC
and its Subsidiaries (as to EC1, EC3 and EC5, only to the
extent otherwise available) for such Fiscal Quarter and for
the period commencing at the end of the previous Fiscal
Year and ending with the end of such Fiscal Quarter,
certified by the chief financial Authorized Officer of the
Borrower or EDCC, as applicable;
(b) as soon as available and in any event within 120
days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report for such Fiscal Year for
the Borrower and for EDCC and its Subsidiaries (as to EC1,
EC3 and EC5, only to the extent otherwise available),
including therein a balance sheet of the Borrower and
consolidated and consolidating balance sheets of EDCC and
its Subsidiaries (as to EC1, EC3 and EC5, only to the
extent otherwise available) as of the end of such Fiscal
Year and a statement of earnings and cash flow of the
Borrower and consolidated and consolidating statements of
earnings and cash flow of EDCC and its Subsidiaries (as to
EC1, EC3 and EC5, only to the extent otherwise available)
for such Fiscal Year, in each case certified (without any
Impermissible Qualification, except as approved by the
Agent in writing) in a manner acceptable to the Agent and
the Required Lenders by Arthur Andersen & Company or other
independent public accountants acceptable to the Agent and
the Required Lenders;
(c) as soon as available and in any event within 45
days after the end of each Fiscal Quarter, a certificate,
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executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with
appropriate calculations and computations in all respects
satisfactory to the Agent) compliance with the financial
covenants set forth in Section 7.2.4.;
(d) as soon as possible and in any event within three
days after the Borrower obtains knowledge of each Default,
a statement of an Authorized Officer of the Borrower
setting forth details of such Default and the action which
the Borrower has taken and proposes to take with respect
thereto;
(e) as soon as possible and in any event within three
days after (x) the Borrower obtains knowledge of any
adverse development with respect to any litigation, action,
proceeding, or labor controversy described in Section 6.7
or (y) the commencement of any labor controversy,
litigation, action, proceeding of the type described in
Section 6.7, notice thereof and copies of all documentation
relating thereto;
(f) promptly after the sending or filing thereof,
copies of all reports which the Borrower sends to any of
its securityholders, and all reports and registration
statements which the Borrower or any of its Subsidiaries
files with the Securities and Exchange Commission or any
national securities exchange;
(g) immediately upon becoming aware of the
institution of any steps by the Borrower or any other
Person to terminate any Pension Plan, or the failure to
make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under section
302(f) of ERISA, or the taking of any action with respect
to a Pension Plan which could result in the requirement
that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event
with respect to any Pension Plan which could result in the
incurrence by the Borrower of any material liability, fine
or penalty, or any material increase in the contingent
liability of the Borrower with respect to any post-
retirement Welfare Plan benefit, notice thereof and copies
of all documentation relating thereto;
(h) information and notices which the Borrower
receives in its capacity as agent or lender under the
Project Loan Documents; and
(i) such other information respecting the condition
or operations, financial or otherwise, of the Borrower or
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any of its Subsidiaries as any Lender through the Agent may
from time to time reasonably request and which the Borrower
is legally or contractually permitted to provide to such
Lender.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower
will, and will cause each of its Subsidiaries to, comply in all
material respects with all applicable laws, rules, regulations
and orders, such compliance to include (without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent,
of all taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent being
diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. The Borrower
will, and will cause each of its Subsidiaries to, maintain,
preserve, protect and keep its properties in good repair, working
order and condition, and make necessary and proper repairs,
renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times
unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically
desirable.
SECTION 7.1.4. Insurance. The Borrower will, and will
cause each of its Subsidiaries to, maintain or cause to be
maintained with responsible insurance companies insurance with
respect to its properties and business (including business
interruption insurance) against such casualties and contingencies
and of such types and in such amounts as is customary in the case
of similar businesses and will, upon request of the Agent,
furnish to each Lender at reasonable intervals a certificate of
an Authorized Officer of the Borrower setting forth the nature
and extent of all insurance maintained by the Borrower and its
Subsidiaries in accordance with this Section.
SECTION 7.1.5. Books and Records. The Borrower will, and
will cause each of its Subsidiaries to, keep books and records
which accurately reflect all of its business affairs and
transactions and permit the Agent and each Lender or any of their
respective representatives, at reasonable times and intervals, to
visit all of its offices, to discuss its financial matters with
its officers and independent public accountant (and the Borrower
hereby authorizes such independent public accountant to discuss
the Borrower's financial matters with each Lender or its
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representatives whether or not any representative of the Borrower
is present) and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate
records. The Borrower shall pay any fees of one such independent
public accountant incurred in connection with the Agent's or any
Lender's exercise of its rights pursuant to this Section;
provided, however, after the occurrence and during the
continuance of any Default, the Borrower shall pay for all fees
of such independent accountants incurred with each exercise by
the Agent of its rights pursuant to this Section.
SECTION 7.1.6. Environmental Covenant. The Borrower will,
and will cause each of its Subsidiaries to,
(a) use and operate all of its facilities and
properties in material compliance with all Environmental
Laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental
matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and provide copies
upon receipt of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and
properties or compliance with Environmental Laws, and shall
promptly cure and have dismissed with prejudice to the
satisfaction of the Agent any actions and proceedings
relating to compliance with Environmental Laws; and
(c) provide such information and certifications which
the Agent may reasonably request from time to time to
evidence compliance with this Section 7.1.6.
SECTION 7.1.7. Resist Regulatory Change. If the Borrower
becomes aware that any federal, state, or local entity having
jurisdiction over the Projects or its operations has issued any
order, judgment, regulation, or decision the effect of which is
to rescind, terminate, repeal, invalidate, suspend, enjoin,
amend, or modify any of the Project Documents or any Governmental
Approval or any part of either thereof, and there shall exist a
reasonable possibility that such regulatory change will have a
Material Adverse Effect, the Borrowers shall give the Agent
notice thereof and shall, or shall cause its Subsidiaries to,
diligently and in a timely fashion (i) make all filings,
(ii) pursue all remedies and appeals, and (iii) take such other
lawful action, in each case as shall be necessary or desirable
(a) to prevent such regulatory change from becoming final and
nonappealable or otherwise irrevocable, (b) to postpone the
effectiveness of such regulatory change, and (c) to cause such
regulatory change to be revoked or amended or modified so as to
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eliminate the reasonable possibility of such material adverse
effect.
SECTION 7.1.8. Take-Out Financing; Assignments. The
Borrower shall use all reasonable efforts to arrange for and
obtain debt or equity financing sufficient to repay all loans by
not later than the Stated Maturity Date, and upon obtaining such
financing, shall repay the Loans. The Borrower shall use all
reasonable efforts to obtain (i) assignments of all Project
Documents listed on Item 5.1.3 of the Disclosure Schedule as
collateral for the obligations under the Project Loan Documents,
(ii) consents to such assignment from the parties to such Project
Documents (other than Clear Lake and Cogenron) in a customary
form for project financing transactions and (iii) amendments to
or separate agreements relating to any Project Documents or
Project Loan Documents requiring Calpine to maintain ownership of
the Borrower which modify such ownership requirement in a manner
which will enable the Agent and the Lenders to foreclose their
security interest in the stock of the Borrower under the Pledge
Agreement.
SECTION 7.2. Negative Covenants. The Borrower agrees with
the Agent and each Lender that, until all Commitments have
terminated and all Obligations have been paid and performed in
full, the Borrower will perform the obligations set forth in this
Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will
not, and will not permit any of its Subsidiaries to, engage in
any business activity other than acting as equity investor in
EDCC and project lender to Cogenron and Clear Lake, investing
(directly or indirectly) in Cogenron or Clear Lake and owning the
Projects, and such activities as may be incidental thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume
or suffer to exist or otherwise become or be liable in respect of
any Indebtedness, other than, without duplication, the following:
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by
suppliers on normal trade terms in connection with
purchases of goods and services, but excluding Indebtedness
incurred through the borrowing of money or Contingent
Liabilities);
(c) Calpine Subordinated Indebtedness in a principal
amount not to exceed $40,000,000 plus any amounts which the
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Borrower provides to EDCC under the Equity Support
Agreements;
(d) Indebtedness of Cogenron to the Borrower in a
principal amount not to exceed $52,999,300;
(e) Indebtedness of Clear Lake to the Borrower in a
principal amount not to exceed $102,622,665;
(f) Clear Lake Subordinated Indebtedness in a
principal amount not to exceed $30,000,000; and
(g) Indebtedness of the Borrower to a Subsidiary
(other than EC5) of the Borrower, of a Subsidiary (other
than EC5) of the Borrower to the Borrower, or of a
Subsidiary (other than EC5) of the Borrower to another
Subsidiary (other than EC5) of the Borrower, in each case
subordinated to the Obligations on terms and condition
reasonably satisfactory to the Agent.
SECTION 7.2.3. Liens. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) Liens securing payment of Indebtedness of the
type permitted and described in clauses (d) and (e) of
Section 7.2.2;
(c) Liens for taxes, assessments or other
governmental charges or levies not at the time delinquent
or thereafter payable without penalty or being diligently
contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have
been set aside on its books;
(d) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course
of business for sums not overdue or being diligently
contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have
been set aside on its books;
(e) Liens incurred in the ordinary course of business
in connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed
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money) entered into in the ordinary course of business or
to secure obligations on surety or appeal bonds;
(f) judgment Liens in existence less than 15 days
after the entry thereof or with respect to which execution
has been stayed or the payment of which is covered in full
(subject to a customary deductible) by insurance maintained
with responsible insurance companies;
(g) Zoning restrictions, easements, rights of way,
title irregularities and other similar encumbrances which
alone or in the aggregate do not materially detract from
the value of the property subject thereto;
(h) Banker's Liens and similar Liens (including set-
off rights) in respect of bank deposits; and
(i) Landlord's Liens and similar Liens with respect
to rental payments for real property which are not
delinquent and with respect to which foreclosure,
distraint, sale or other similar proceedings shall not have
been commenced.
SECTION 7.2.4. Financial Condition. The Borrower will not
permit:
(a) Its Tangible Net Worth to be less than
(i) $65,000,000 plus (ii) 50% of the consolidated net
income of the Borrower and its Subsidiaries (without giving
effect to any losses) for each Fiscal Quarter ending after
March 31, 1997 plus (iii) 100% of the Net Available
Proceeds from any Equity Issuance by the Borrower after
March 31, 1997.
(b) Its Senior Debt to Cash Flow Ratio to be greater
than 4.5 to 1.00 as of the end of any Fiscal Quarter
beginning with the Fiscal Quarter ending on September 30,
1996.
(c) Its Interest Coverage Ratio as of the end of any
Fiscal Quarter beginning with the Fiscal Quarter ending on
September 30, 1996 to be less than 2.00 to 1.00.
SECTION 7.2.5. Investments. The Borrower will not, and
will not permit any of its Subsidiaries to, make, incur, assume
or suffer to exist any Investment in any other Person, except:
(a) Investments existing on the Effective Date and
identified in Item 7.2.5(a) ("Ongoing Investments") of the
Disclosure Schedule;
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(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 7.2.2;
(d) Investments by the Borrower or any of its
Subsidiaries (other than EC5) in any of the Borrower's
Subsidiaries (other than EC5).
SECTION 7.2.6. Restricted Payments, etc. On and at all
times after the Effective Date:
(a) except as provided in Section 3.1(b), the Borrower
will not declare, pay or make any dividend or distribution
(in cash, property or obligations) on any shares of any
class of capital stock (now or hereafter outstanding) of
the Borrower or on any warrants, options or other rights
with respect to any shares of any class of capital stock
(now or hereafter outstanding) of the Borrower (other than
dividends or distributions payable in its common stock or
warrants to purchase its common stock or splitups or
reclassifications of its stock into additional or other
shares of its common stock) or apply, or permit any of its
Subsidiaries to apply, any of its funds, property or assets
to the purchase, redemption, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries
to purchase or redeem, any shares of any class of capital
stock (now or hereafter outstanding) of the Borrower, or
warrants, options or other rights with respect to any
shares of any class of capital stock (now or hereafter
outstanding) of the Borrower;
(b) the Borrower will not, and will not permit any of
its Subsidiaries to
(i) make any payment or prepayment of principal
of the Calpine Subordinated Indebtedness (except as
provided in Section 3.1(b)) or the Clear Lake
Subordinated Indebtedness, or which would violate the
subordination provisions of the Calpine Subordinated
Indebtedness or the Clear Lake Subordinated
Indebtedness; or
(ii) make any payment of interest on the Calpine
Subordinated Indebtedness (except as provided in
Section 3.1(b)) or the Clear Lake Subordinated
Indebtedness; provided, however, that the Borrower
may, so long as no Default or Event of Default exists,
make such payments on the stated, scheduled date for
such payment set forth in the Subordination Agreement
by depositing an amount equal to the amount of such
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interest into an account pledged to the Agent pursuant
to the Deposit and Disbursement Agreement (it being
understood that no such funds shall be released to
Calpine until all Obligations have been fully and
finally discharged); or
(iii) redeem, purchase or defease, any Calpine
Subordinated Indebtedness or Clear Lake Subordinated
Indebtedness; and
(c) the Borrower will not, and will not permit any
Subsidiary to, make any deposit for any of the foregoing
purposes.
SECTION 7.2.7. Rental Obligations. Except for the leases
described in Item 7.2.7 of the Disclosure Schedule, the Borrower
will not, and will not permit any of its Subsidiaries to, enter
into at any time any arrangement which does not create a
Capitalized Lease Liability and which involves the leasing by the
Borrower or any of its Subsidiaries from any lessor of any real
or personal property (or any interest therein), except
arrangements which, together with all other such arrangements
which shall then be in effect, will not require the payment of an
aggregate amount of rentals by the Borrower and its Subsidiaries
in excess of (excluding escalations resulting from a rise in the
consumer price or similar index) $500,000 for any Fiscal Year.
SECTION 7.2.8. Take or Pay Contracts. Except for any
existing arrangements under the Project Documents, the Borrower
will not, and will not permit any of its Subsidiaries to, enter
into or be a party to any arrangement for the purchase of
materials, supplies, other property or services if such
arrangement by its express terms requires that payment be made by
the Borrower or such Subsidiary regardless of whether such
materials, supplies, other property or services are delivered or
furnished to it.
SECTION 7.2.9. Consolidation, Merger, etc. The Borrower
will not, and will not permit any of its Subsidiaries to,
liquidate or dissolve, consolidate with, or merge into or with,
any other corporation, or purchase or otherwise acquire all or
substantially all of the assets of any Person (or of any division
thereof). The Borrower will not, and will not permit any of its
Subsidiaries to, create any Subsidiary, except with the prior
written consent of the Agent.
SECTION 7.2.10. Asset Dispositions, etc. The Borrower
will not, and will not permit any of its Subsidiaries to, sell,
transfer, lease, contribute or otherwise convey, or grant
options, warrants or other rights with respect to, all or any
substantial part of its assets (including accounts receivable and
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capital stock of Subsidiaries) to any Person, except for (i)
those matters described in Item 7.2.10 of the Disclosure Schedule
and (ii) sales in the ordinary course of business and sales of
assets or equipment which is obsolete, worn out or no longer
useful in the operation of the Projects, unless the net book
value of such assets, together with the net book value of all
other assets sold, transferred, leased, contributed or conveyed
otherwise than in the ordinary course of business by the Borrower
or any of its Subsidiaries pursuant to this clause since the
Effective Date, does not exceed $100,000.
SECTION 7.2.11. Modification of Certain Agreements.
Except as set forth in Item 7.2.11 to the Disclosure Schedule,
the Borrower will not, and will not permit any of its
Subsidiaries to, consent (to the extent it has any right to give
or withhold consent) to any release of collateral (including any
reserve accounts) securing indebtedness under the Project Loan
Documents, consent to any amendment, supplement, replacement,
waiver or other modification, or any cancellation or termination
(other than upon full performance of the obligations of the
parties thereto), of any of the terms or provisions contained in,
or applicable to, (i) the Purchase Documents; (ii) the Debt
Assignment Documents; (iii) the Project Loan Documents; (iv) the
Project Swap Agreements; (v) the Project Documents; (vi) the
Subordination Agreement (Clear Lake); (vii) the Shareholders
Agreement; (viii) the Equity Support Agreements; or (ix) the
Standstill Agreements, without the prior written consent of the
Agent. Notwithstanding the foregoing, (w) the Borrower and its
Subsidiaries may release Seller and its Affiliates from their
obligations under the Project Documents and the Project Loan
Documents provided that Calpine (with respect to obligations of
Enron Corp.) and the Borrower (with respect to obligations of the
Seller) are substituted therefor, (x) the Borrower may waive
immaterial defaults under the Project Documents and the Project
Loan Documents, (y) Clear Lake and Cogenron may amend (or
terminate and replace) the Project Documents so long as such
amended (or replacement) Project Documents (I) during the
presently existing term of such Project Documents have terms and
conditions no less favorable to Clear Lake, Cogenron, the
Borrower, the Agent and the Lenders than those in effect on the
Effective Date (after giving effect to any amendments or
terminations to be effective as of such date as described in Item
7.2.11 of the Disclosure Schedule) and (II) thereafter have terms
and conditions which are reasonably likely to produce net cash
flow of Cogenron or Clear Lake, as applicable, which is at least
equal to ninety percent (90%) of that shown in the Financial
Projections, and (z) the Borrower, Clear Lake, Cogenron and the
other parties to the Project Loan Documents may amend (or
terminate and replace) the Project Loan Documents so long as such
amended (or replacement) documents do not (I) extend the date
fixed for the payment of principal of or interest on any loan or
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fee thereunder, (II) reduce the amount of any such payment of
principal, (III) reduce the rate at which interest is payable
thereon or any fee is payable thereunder, (IV) alter the
obligations to prepay loans thereunder, (V) release any
collateral, guarantees or support agreements or (VI) adversely
affect the perfection or priority of any security interest in any
collateral or the rights of the Borrower as "Lender" or "Agent"
under the Clear Lake Credit Agreement or as "Bank" or "Agent"
under the Cogenron Credit Agreement to foreclose on any
collateral. Except as provided in Section 7.1.8, the Borrower
and its Subsidiaries will not enter into any additional material
Project Loan Document or (except as described above)Project
Document without the prior written consent of the Agent and the
Lenders.
To measure the effect of any amended or replacement Project
Documents, the Borrower shall, within a reasonable time prior to
entering into any such amended or replacement Project Document,
prepare and deliver to the Agent pro forma financial projections
showing the effect on an aggregate basis of such amended or
replacement Project Document, together with the then existing
Project Documents and any amended or replacement Project
Documents which have been entered into or are to be entered into
prior to the amendment or replacement then under consideration.
The Borrower will not, and will not permit any of its
Subsidiaries to, take any action in violation of this Section
7.2.11 notwithstanding its ability to otherwise do so under the
Standstill Agreements.
SECTION 7.2.12. Transactions with Affiliates. The
Borrower will not, and will not permit any of its Subsidiaries
to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any of its other Affiliates unless
such arrangement or contract is fair and equitable to the
Borrower or such Subsidiary and is an arrangement or contract of
the kind which would be entered into by a prudent Person in the
position of the Borrower or such Subsidiary with a Person which
is not one of its Affiliates. Without limiting the generality of
the foregoing or of Section 7.2.11, the Agent and the Lenders
hereby consent to (i) the performance of operation and
maintenance activities by Affiliates of the Borrower on
substantially the same terms and conditions as contained in the
Operations and Maintenance Agreements, each dated as of August 1,
1995, for the Projects, including any modifications thereto or
replacement agreements described in Item 7.2.11 of the Disclosure
Schedule, (ii) to the performance of administrative services by
Dominion or its Affiliates for EDCC, Clear Lake, Cogenron and EC5
on substantially the same terms and conditions as contained in
the Administrative Services Agreement dated as of August 1, 1995
by and among Enron Capital & Trade Resources Corp., EDCC, Clear
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Lake, Cogenron and EC5, including any modifications or
replacement agreements thereto described in Item 7.2.11 of the
Disclosure Schedule and (iii) to the purchase and sale of gas by
EDCC, Cogenron and Clear Lake under gas sales agreements between
EDCC and DEI Texas, Inc., between Clear Lake and EDCC, and
between Cogenron and DEI Texas.
SECTION 7.2.13. Negative Pledges, Restrictive Agreements,
etc. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any agreement (excluding this
Agreement, any other Loan Document and, with respect to
subparagraphs (a) and (b) below, any agreement governing any
Indebtedness permitted either by clause (d) and (e) of Section
7.2.2 as in effect on the Effective Date), prohibiting
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or
hereafter acquired;
(b) the ability of any Subsidiary to make any
payments, directly or indirectly, to the Borrower by way of
dividends, advances, repayments of loans or advances,
reimbursements of management and other intercompany
charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which
restricts the ability of any such Subsidiary to make any
payment, directly or indirectly, to the Borrower; or
(c) the ability of the Borrower or any other Obligor
to amend or otherwise modify this Agreement or any other
Loan Document.
SECTION 7.2.14. Change of Name or Office or Fiscal Year.
The Borrower shall not change its name, or the location of its
chief executive office or principal place of business or the
office where it keeps its records concerning the Projects and all
Basic Documents from that existing on the date of this Agreement
and specified in Section 6.19, unless (a) such Borrower shall
have given the Agent at least thirty (30) days' prior written
notice, and (b) all action necessary or advisable in the Agent's
opinion to protect and perfect the Liens and security interests
with respect to the Collateral created by the Collateral Security
Documents shall have been taken. The Borrower shall not change
its Fiscal Year from the calendar year.
SECTION 7.2.15. Pension and Welfare Plans. Neither
Borrower nor any Subsidiary shall create any Pension Plan or
Welfare Plan or become liable for any obligations of any Pension
Plan or Welfare Plan.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the
following events or occurrences described in this Section 8.1
shall constitute an "Event of Default".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower
shall default in the payment or prepayment when due of any
principal of or interest on any Loan, or the Borrower shall
default (and such default shall continue unremedied for a period
of five days) in the payment when due of any other Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or
warranty of the Borrower or any other Obligor made or deemed to
be made hereunder or in any other Loan Document executed by it or
any other writing or certificate furnished by or on behalf of the
Borrower or any other Obligor to the Agent or any Lender for the
purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered
pursuant to Article V) is or shall be incorrect when made in any
material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and
Obligations. The Borrower shall default in the due performance
and observance of any of its obligations under Section 7.2
(except for Section 7.2.4(a)) and such default shall continue
unremedied for a period of 10 days after the earlier of (i)
knowledge thereof by the Borrower and (ii) notice thereof has
been given to the Borrowers by the Agent or any Lender.
SECTION 8.1.4. Non-Performance of Other Covenants and
Obligations. Any Obligor shall default in the due performance
and observance of any other agreement contained herein or in any
other Loan Document executed by it, and such default shall
continue unremedied for a period of 30 days after notice thereof
shall have been given to the Borrower by the Agent or any Lender
(or such longer period as the Required Lenders in their
reasonable discretion, may agree, provided that such Obligor has
commenced such cure within such 30 day period and thereafter
diligently pursues such cure to completion).
SECTION 8.1.5. Default on Other Indebtedness. A default
shall occur in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any
Indebtedness (other than Indebtedness described in Section 8.1.1)
of the Borrower or any of its Subsidiaries having a principal
amount, individually or in the aggregate, in excess of $200,000,
or a default shall occur in the performance or observance of any
obligation or condition with respect to such Indebtedness if the
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effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or
holders of such Indebtedness, or any trustee or agent for such
holders, to cause such Indebtedness to become due and payable
prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the
payment of money in excess of $500,000 which is not subject to
indemnification from Seller, Dominion or their respective
Affiliates (provided that any such Person has acknowledged its
indemnification liability and has the financial capability to pay
its indemnification liability) or which is not fully covered by
insurance (subject to customary deductible amounts) shall be
rendered against the Borrower or any of its Subsidiaries and
either
(a) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order; or
(b) there shall be any period of 20 consecutive days
during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall
not be in effect.
SECTION 8.1.7. Control of the Borrower. Any Change in
Control shall occur.
SECTION 8.1.8. Bankruptcy, Insolvency, etc. The Borrower
or any of its Subsidiaries (other than EC5) or any other Obligor
shall
(a) become insolvent or generally fail to pay, or
admit in writing its inability or unwillingness to pay,
debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower or any of its Subsidiaries or
any other Obligor or any property of any thereof, or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of
a trustee, receiver, sequestrator or other custodian for
the Borrower or any of its Subsidiaries or any other
Obligor or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other
custodian shall not be discharged within 60 days, provided
that the Borrower, each Subsidiary and each other Obligor
hereby expressly authorizes the Agent and each Lender to
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appear in any court conducting any relevant proceeding
during such 60-day period to preserve, protect and defend
their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or
any dissolution, winding up or liquidation proceeding, in
respect of the Borrower or any of its Subsidiaries or any
other Obligor, and, if any such case or proceeding is not
commenced by the Borrower or such Subsidiary or such other
Obligor, such case or proceeding shall be consented to or
acquiesced in by the Borrower or such Subsidiary or such
other Obligor or shall result in the entry of an order for
relief or shall remain for 60 days undismissed, provided
that the Borrower, each Subsidiary and each other Obligor
hereby expressly authorizes the Agent and each Lender to
appear in any court conducting any such case or proceeding
during such 60-day period to preserve, protect and defend
their rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance
of, any of the foregoing.
SECTION 8.1.9. Impairment of Security, etc. Any Loan
Document, or any Lien granted thereunder, shall (except in
accordance with its terms), in whole or in part, terminate, cease
to be effective or cease to be the legally valid, binding and
enforceable obligation of any Obligor party thereto; the
Borrower, any other Obligor or any other party shall, directly or
indirectly, contest in any manner such effectiveness, validity,
binding nature or enforceability; or any Lien securing any
Obligation shall, in whole or in part, cease to be a perfected
first priority Lien without the fault or omission of the Agent or
any Lender, subject only to those exceptions expressly permitted
by such Loan Document.
SECTION 8.1.10. Public Utility Regulation. The Borrower
or any of its Subsidiaries or the Agent or any Lender shall, as a
result of any transaction contemplated hereby, become subject to:
regulation as a public utility, electric utility company or
holding company under the Public Utility Holding Company Act of
1935, as amended; regulation as a public utility under the
Federal Power Act, as amended, except for such regulation by the
Federal Energy Regulatory commission as may occur under sections
of such Act specified in 18 C.F.R. Sec. 292.601(c); or financial,
organizational or rate regulation as an electric utility,
electric company, public service company, public utility, or any
other similar entity under any state law or regulation.
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SECTION 8.2. Action if Bankruptcy. If any Event of
Default described in clauses (a) through (d) of Section 8.1.8
shall occur with respect to the Borrower or any Subsidiary (other
than EC5) or any other Obligor, the Commitments (if not
theretofore terminated) shall automatically terminate and the
outstanding principal amount of all outstanding Loans and all
other Obligations shall automatically be and become immediately
due and payable, without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any
Event of Default (other than any Event of Default described in
clauses (a) through (d) of Section 8.1.8 with respect to the
Borrower or any Subsidiary or any other Obligor) shall occur for
any reason, whether voluntary or involuntary, and be continuing,
the Agent, upon the direction of the Required Lenders, shall by
notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations
to be due and payable and/or the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due
and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the
case may be, the Commitments shall terminate.
SECTION 8.4. Restrictions on Off-Sets. The Borrower will
not, and will not permit any of its Subsidiaries to, take any
action or fail to take any action or allow to occur any reduction
in the amounts owing under the Clear Lake Credit Agreement or the
Cogenron Credit Agreement pursuant to the off-set provisions
under the Standstill Agreements at any time after the occurrence
of an Event of Default.
ARTICLE IX
THE AGENT
SECTION 9.1. Actions. Each Lender hereby appoints
Scotiabank as its Agent under and for purposes of this Agreement,
the Notes and each other Loan Document. Each Lender authorizes
the Agent to act on behalf of such Lender under this Agreement,
the Notes and each other Loan Document and, in the absence of
other written instructions from the Required Lenders received
from time to time by the Agent (with respect to which the Agent
agrees that it will comply, except as otherwise provided in this
Section or as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof,
together with such powers as may be reasonably incidental
thereto. Each Lender hereby indemnifies (which indemnity shall
survive any termination of this Agreement) the Agent, pro rata
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according to such Lender's Percentage, from and against any and
all liabilities, obligations, losses, damages, claims, costs or
expenses of any kind or nature whatsoever which may at any time
be imposed on, incurred by, or asserted against, the Agent in any
way relating to or arising out of this Agreement, the Notes and
any other Loan Document, including reasonable attorneys' fees,
and as to which the Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages,
claims, costs or expenses which are determined by a court of
competent jurisdiction in a final proceeding to have resulted
solely from the Agent's gross negligence or wilful misconduct.
The Agent shall not be required to take any action hereunder,
under the Notes or under any other Loan Document, or to prosecute
or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Agent shall be or
become, in the Agent's determination, inadequate, the Agent may
call for additional indemnification from the Lenders and cease to
do the acts indemnified against hereunder until such additional
indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Agent
shall have been notified by telephone, confirmed in writing, by
any Lender by 5:00 p.m., San Francisco time, on the day prior to
a Borrowing that such Lender will not make available the amount
which would constitute its Percentage of such Borrowing on the
date specified therefor, the Agent may assume that such Lender
has made such amount available to the Agent and, in reliance upon
such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have
made such amount available to the Agent, such Lender and the
Borrower severally agree to repay the Agent forthwith on demand
such corresponding amount together with interest thereon, for
each day from the date the Agent made such amount available to
the Borrower to the date such amount is repaid to the Agent, at
the interest rate applicable at the time to Loans comprising such
Borrowing.
SECTION 9.3. Exculpation. Neither the Agent nor any of
its directors, officers, employees or agents shall be liable to
any Lender for any action taken or omitted to be taken by it
under this Agreement or any other Loan Document, or in connection
herewith or therewith, except for its own wilful misconduct or
gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan
Document, nor for the creation, perfection or priority of any
Liens purported to be created by any of the Loan Documents, or
the validity, genuineness, enforceability, existence, value or
sufficiency of any collateral security, nor to make any inquiry
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respecting the performance by the Borrower of its obligations
hereunder or under any other Loan Document. Any such inquiry
which may be made by the Agent shall not obligate it to make any
further inquiry or to take any action. The Agent shall be
entitled to rely upon advice of counsel concerning legal matters
and upon any notice, consent, certificate, statement or writing
which the Agent believes to be genuine and to have been presented
by a proper Person.
SECTION 9.4. Successor. The Agent may resign as such at
any time upon at least 30 days' prior notice to the Borrower and
all Lenders. If the Agent at any time shall resign, the Required
Lenders may appoint another Lender as a successor Agent which
shall thereupon become the Agent hereunder. If no successor
Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the
retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent,
which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State
thereof) or a U.S. branch or agency of a commercial banking
institution, and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of
transfer and assignment as such successor Agent may reasonably
request, and shall thereupon succeed to and become vested with
all rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's
resignation hereunder as the Agent, the provisions of
(a) this Article IX shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
the Agent under this Agreement; and
(b) Section 10.3 (with respect to expenses incurred
prior to resignation) and Section 10.4 shall continue to
inure to its benefit.
SECTION 9.5. Loans by Scotiabank. Scotiabank shall have
the same rights and powers with respect to (x) the Loans made by
it or any of its Affiliates, and (y) the Notes held by it or any
of its Affiliates as any other Lender and may exercise the same
as if it were not the Agent. Scotiabank and its Affiliates may
accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or Affiliate
of the Borrower as if Scotiabank were not the Agent hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges
that it has, independently of the Agent and each other Lender,
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and based on such Lender's review of the financial information of
the Borrower, this Agreement, the other Loan Documents (the terms
and provisions of which being satisfactory to such Lender) and
such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to
extend its Commitment. Each Lender also acknowledges that it
will, independently of the Agent and each other Lender, and based
on such other documents, information and investigations as it
shall deem appropriate at any time, continue to make its own
credit decisions as to exercising or not exercising from time to
time any rights and privileges available to it under this
Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Agent shall give prompt
notice to each Lender of each notice or request required or
permitted to be given to the Agent by the Borrower pursuant to
the terms of this Agreement (unless concurrently delivered to the
Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and
copies of all other communications received by the Agent from the
Borrower for distribution to the Lenders by the Agent in
accordance with the terms of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of
this Agreement and of each other Loan Document may from time to
time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the
Borrower and the Required Lenders; provided, however, that no
such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any
particular action be taken by all the Lenders or by the
Required Lenders shall be effective unless consented to by
each Lender;
(b) modify this Section 10.1, change the definition
of "Required Lenders", increase the Commitment Amount or
the Percentage of any Lender, reduce any fees described in
Article III, release any Collateral, except as otherwise
specifically provided in Section 7.2.10, shall be made
without the consent of each Lender and each holder of a
Note;
(c) extend the due date for, or reduce the amount of,
any scheduled repayment or prepayment of principal of or
interest on any Loan (or reduce the principal amount of or
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rate of interest on any Loan) shall be made without the
consent of each Lender; or
(d) affect adversely the interests, rights or
obligations of the Agent qua the Agent shall be made
without consent of the Agent.
No failure or delay on the part of the Agent, any Lender or the
holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof or
the exercise of any other power or right. No notice to or demand
on the Borrower in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval
by the Agent, any Lender or the holder of any Note under this
Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
SECTION 10.2. Notices. All notices and other
communications provided to any party hereto under this Agreement
or any other Loan Document shall be in writing or by facsimile
and addressed, delivered or transmitted to such party at its
address or facsimile number set forth below its signature hereto
or set forth in the Lender Assignment Agreement or at such other
address or facsimile number as may be designated by such party in
a notice to the other parties. Any notice, if mailed and
properly addressed with postage prepaid or if properly addressed
and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be
deemed given when transmitted.
SECTION 10.3. Payment of Costs and Expenses. The Borrower
agrees to pay on demand all reasonable expenses of the Agent
(including the fees and out-of-pocket expenses of counsel to the
Agent and of local counsel, if any, who may be retained by
counsel to the Agent) in connection with
(a) the negotiation, preparation, execution and
delivery of this Agreement and of each other Loan Document,
including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to
this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the
transactions contemplated hereby are consummated; and
(b) the filing, recording, refiling or rerecording of
the Pledge Agreement and the Security Agreements and/or any
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Uniform Commercial Code financing statements relating
thereto and all amendments, supplements and modifications
to any thereof and any and all other documents or
instruments of further assurance required to be filed or
recorded or refiled or rerecorded by the terms hereof or of
the Pledge Agreement or the Security Agreements; and
(c) the preparation and review of the form of any
document or instrument relevant to this Agreement or any
other Loan Document.
The Borrower further agrees to pay, and to save the Agent and the
Lenders harmless from all liability for, any stamp or other taxes
(other than income taxes) which may be payable in connection with
the execution or delivery of this Agreement, the borrowings
hereunder, or the issuance of the Notes or any other Loan
Documents. The Borrower also agrees to reimburse the Agent and
each Lender upon demand for all reasonable out-of-pocket expenses
(including attorneys' fees and legal expenses) incurred by the
Agent or such Lender in connection with (x) the negotiation of
any restructuring or "work-out", whether or not consummated, of
any Obligations and (y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the
execution and delivery of this Agreement by each Lender and the
extension of the Commitments, the Borrower hereby indemnifies,
exonerates and holds the Agent and each Lender and each of their
respective officers, directors, employees and agents
(collectively, the "Indemnified Parties") free and harmless from
and against any and all actions, causes of action, suits, losses,
costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds
of any Loan;
(b) the entering into and performance of this
Agreement and any other Loan Document by any of the
Indemnified Parties (including any action brought by or on
behalf of the Borrower as the result of any determination
by the Required Lenders pursuant to Article V not to fund
any Borrowing but not including any breach of this
Agreement or any other Loan Documents by Agent or any of
the Lenders);
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(c) any investigation, litigation or proceeding
related to any acquisition or proposed acquisition by the
Borrower or any of its Subsidiaries of all or any portion
of the stock or assets of any Person, whether or not the
Agent or such Lender is party thereto;
(d) any investigation, litigation or proceeding
related to any environmental cleanup, audit, compliance or
other matter relating to the protection of the environment
or the Release by the Borrower or any of its Subsidiaries
of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or
releases from, any real property owned or operated by the
Borrower or any Subsidiary thereof of any Hazardous
Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising
under any Environmental Law), regardless of whether caused
by, or within the control of, the Borrower or such
Subsidiary,
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, the Borrower hereby agrees
to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 10.5. Survival. The obligations of the Borrower
under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the
obligations of the Lenders under Section 9.1, shall in each case
survive any termination of this Agreement, the payment in full of
all Obligations and the termination of all Commitments. The
representations and warranties made by each Obligor in this
Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan
Document.
SECTION 10.6. Severability. Any provision of this
Agreement or any other Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such Loan Document or
affecting the validity or enforceability of such provision in any
other jurisdiction.
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SECTION 10.7. Headings. The various headings of this
Agreement and of each other Loan Document are inserted for
convenience only and shall not affect the meaning or
interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness,
etc. This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be executed by the
Borrower and the Agent and be deemed to be an original and all of
which shall constitute together but one and the same agreement.
This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice
thereof satisfactory to the Agent) shall have been received by
the Agent and notice thereof shall have been given by the Agent
to the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. THIS
AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the
other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and
supersede any prior agreements, written or oral, with respect
thereto.
SECTION 10.10. Successors and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that:
(a) the Borrower may not assign or transfer its
rights or obligations hereunder without the prior written
consent of the Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of
the Lenders are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Note;
Participations in Loans and Note. Each Lender may assign, or
sell participations in, its Loans and Commitment to one or more
other Persons in accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Any Lender,
(a) with the written consents of the Borrower and the
Agent (which consents shall not be unreasonably delayed or
withheld and which consent, in the case of the Borrower,
shall be deemed to have been given in the absence of a
written notice delivered by the Borrower to the Agent, on
or before the tenth Business Day after receipt by the
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Borrower of such Lender's request for consent, stating, in
reasonable detail, the reasons why the Borrower proposes to
withhold such consent) may at any time assign and delegate
to one or more commercial banks or other financial
institutions; and
(b) with notice to the Borrower and the Agent, but
without the consent of the Borrower or the Agent, may
assign and delegate to any of its Affiliates or to any
other Lender
(each Person described in either of the foregoing clauses as
being the Person to whom such assignment and delegation is to be
made, being hereinafter referred to as an "Assignee Lender"), all
or any fraction of such Lender's total Loans and Commitment
(which assignment and delegation shall be of a constant, and not
a varying, percentage of all the assigning Lender's Loans and
Commitment) in a minimum aggregate amount of $10,000,000;
provided, however, that any such Assignee Lender will comply, if
applicable, with the provisions contained in the last sentence of
Section 4.6 and further, provided, however, that, the Borrower,
each other Obligor and the Agent shall be entitled to continue to
deal solely and directly with such Lender in connection with the
interests so assigned and delegated to an Assignee Lender until
(c) written notice of such assignment and delegation,
together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall
have been given to the Borrower and the Agent by such
Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and
delivered to the Borrower and the Agent a Lender Assignment
Agreement, accepted by the Agent; and
(e) the processing fees described below shall have
been paid.
From and after the date that the Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be
deemed automatically to have become a party hereto and to the
extent that rights and obligations hereunder have been assigned
and delegated to such Assignee Lender in connection with such
Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan
Documents, and (y) the assignor Lender, to the extent that rights
and obligations hereunder have been assigned and delegated by it
in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan
Documents with respect to obligations arising after the date of
assignment. Within five Business Days after its receipt of
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notice that the Agent has received an executed Lender Assignment
Agreement, the Borrower shall execute and deliver to the Agent
(for delivery to the relevant Assignee Lender) a new Note
evidencing such Assignee Lender's assigned Loans and Commitment
and, if the assignor Lender has retained Loans and its Commitment
hereunder, a replacement Note in the principal amount of the
Loans and Commitment retained by the assignor Lender hereunder
(such Note to be in exchange for, but not in payment of, that
Note then held by such assignor Lender). Each such Note shall be
dated the date of the predecessor Note. The assignor Lender
shall mark the predecessor Note "exchanged" and deliver it to the
Borrower. Accrued interest on that part of the predecessor Note
evidenced by the new Note, and accrued fees, shall be paid as
provided in the Lender Assignment Agreement. Accrued interest on
that part of the predecessor Note evidenced by the replacement
Note shall be paid to the assignor Lender. Accrued interest and
accrued fees shall be paid at the same time or times provided in
the predecessor Note and in this Agreement. Such assignor Lender
or such Assignee Lender must also pay a processing fee to the
Agent upon delivery of any Lender Assignment Agreement in the
amount of $3,000. Any attempted assignment and delegation not
made in accordance with this Section 10.11.1 shall be null and
void.
SECTION 10.11.2. Participations. Any Lender may at any
time sell to one or more commercial banks or other Persons (each
of such commercial banks and other Persons being herein called a
"Participant") participating interests in any of the Loans,
Commitment, or other interests of such Lender hereunder;
provided, however, that
(a) no participation contemplated in this
Section 10.11 shall relieve such Lender from its Commitment
or its other obligations hereunder or under any other Loan
Document;
(b) such Lender shall remain solely responsible for
the performance of its Commitment and such other
obligations;
(c) the Borrower and each other Obligor and the Agent
shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an
Affiliate of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any
Participant that such Lender will not, without such
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Participant's consent, take any actions of the type
described in clause (b) or (c) of Section 10.1; and
(e) the Borrower shall not be required to pay any
amount under Section 4.6 that is greater than the amount
which it would have been required to pay had no
participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for
purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4,
shall be considered a Lender.
SECTION 10.12. Other Transactions. Nothing contained
herein shall preclude the Agent or any other Lender from engaging
in any transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of
its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 10.13. Forum Selection and Consent to Jurisdiction
and Agent for Service of Process.
(a) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE
BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY may BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY may BE
FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK OR IN ANY MANNER
PROVIDED BY LAW. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT may HAVE OR HEREAFTER may HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE
AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER may ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
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HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) Nothing contained in this section shall preclude
the Agent or the Lenders from bringing any legal suit, action or
proceeding against the Borrower in the courts of any jurisdiction
where the Borrower may be found or located. To the extent
permitted by the applicable laws of any such jurisdiction, the
Borrower hereby irrevocably submits to the jurisdiction of any
such court and expressly waives, in respect of any such suit,
action or proceeding, the jurisdiction of any courts which now or
hereafter, by reason of its present or future domiciles, or
otherwise, may be available to it.
SECTION 10.14. Waiver of Jury Trial. THE AGENT, THE
LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY may HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS
OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT
IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
SECTION 10.15. Confidentiality. The Lenders shall hold
all non-public information (which has been identified as such by
the Borrower) obtained pursuant to the requirements of this
Agreement in accordance with their customary procedures for
handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event
may make disclosure to any of their examiners, their Affiliates,
outside auditors, counsel and other professional advisors in
connection with this Agreement or as reasonably required by any
bona fide transferee, participant or assignee or as required or
requested by any governmental agency or representative thereof or
pursuant to legal process; provided, however, that
(a) unless specifically prohibited by applicable law
or court order, each Lender shall notify the Borrower of
any request by any governmental agency or representative
thereof (other than any such request in connection with an
examination of the financial condition of such Lender by
such governmental agency) for disclosure of any such non-
public information prior to disclosure of such information;
(b) prior to any such disclosure pursuant to this
Section 10.15, each Lender shall require any such bona fide
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transferee, participant and assignee receiving a disclosure
of non-public information to agree in writing
(i) to be bound by this Section 10.15;
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
information to be similarly bound by this
Section 10.15; and
(c) except as may be required by an order of a court
of competent jurisdiction and to the extent set forth
therein, no Lender shall be obligated or required to return
any materials furnished by the Borrower or any Subsidiary.
SECTION 10.16. Limitations on Recourse. The Agent and the
Lenders agree that (except as hereinafter set forth) their rights
in respect of the Loans, and any claim or liability under any
Loan Document asserted against the Borrower by the Agent or any
Lender shall be limited to satisfaction out of, and enforcement
against the Collateral, and that after the Agent and the Lenders
have exhausted the Collateral, the Borrower shall have no
liability to the Agent or any Lender for the payment of any sums
now or hereafter owing by the Borrower under any Loan Document.
It is expressly understood and agreed that nothing
contained in this Section 10.16 shall in any manner or any way
constitute (or be deemed to be) a release of any Obligation
secured by, or impair the enforceability of, the Liens and
security interests and possessory rights created by or arising
from this Agreement and the Collateral Security Documents or
restrict the remedies available to the Agent and the Lenders to
realize upon the Collateral. In addition, this Section 10.16
shall not affect or diminish any legal rights of (i) any Person
against any other Person arising from fraud, waste,
misappropriation or misapplication of any funds or (ii) of the
Agent and the Lenders against any Obligor (other than the
Borrower) for breach of any Loan Document.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
CALPINE FINANCE COMPANY
By
Title:
Address: 50 West San Fernando Street
San Jose, California 95113
Facsimile No.: 408-995-0505
Attention: Asset Manager
THE BANK OF NOVA SCOTIA, as Agent
By
Title:
Address: 580 California Street
Suite 2100
San Francisco, California 94104
Attention: Eric Knight
with a copy to:
The Bank of Nova Scotia
600 Peachtree Street N.E.
Suite 2700
Atlanta, GA 30308
Attention: Norman Campbell
Administrative Agent -
Loan Administration
Facsimile No.: (404) 888-8998
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PERCENTAGE LENDERS
THE BANK OF NOVA SCOTIA
___%
By
Title:
Address: 580 California Street
Suite 2100
San Francisco, CA 94104
Facsimile No.: (415) 397-0791
Attention: Eric Knight
with a copy to:
The Bank of Nova Scotia
600 Peachtree Street N.E.
Suite 2700
Atlanta, GA 30308
Attention: Norman Campbell
Administrative Agent -
Loan Administration
Facsimile No.: (404) 888-8998
Domestic Office:
580 California Street
Suite 2100
San Francisco, CA 94104
Facsimile No.: (415) 397-0791
Attention: Eric Knight
LIBOR Office:
580 California Street
Suite 2100
San Francisco, CA 94104
Facsimile No.: (415) 397-0791
Attention: Eric Knight
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TABLE OF CONTENTS
SECTION PAGE
||
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS......................3
1.1. Defined Terms.........................................3
1.2. Use of Defined Terms.................................20
1.3. Cross-References.....................................21
1.4. Accounting and Financial Determinations..............21
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES..........21
2.1. Commitments..........................................21
2.2. Borrowing Procedure..................................21
2.3. Continuation and Conversion Elections................22
2.4. Funding..............................................22
2.5. Notes................................................23
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES...........23
3.1. Repayments and Prepayments...........................23
3.2. Interest Provisions..................................24
3.2.1. Rates................................................24
3.2.2. Post-Maturity Rates..................................25
3.2.3. Payment Dates........................................26
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS...............26
4.1. LIBO Rate Lending Unlawful...........................26
4.2. Deposits Unavailable.................................27
4.3. Increased LIBO Rate Loan Costs, etc..................27
4.4. Funding Losses.......................................27
4.5. Increased Capital Costs..............................28
4.6. Taxes................................................28
4.7. Payments, Computations, etc..........................30
4.8. Sharing of Payments..................................30
4.9. Actions of Affected Lenders..........................31
4.10. Use of Proceeds......................................31
ARTICLE V
CONDITIONS TO BORROWING..............................31
5.1. Initial Borrowing....................................32
5.1.1. Stock Purchase Consummated...........................32
5.1.2. Debt Acquisitions Consummated........................32
5.1.3. Consents.............................................32
5.1.4. Government Approvals.................................32
5.1.5. Project Swap Agreements..............................33
5.1.6. Calpine Equity Contribution..........................33
5.1.7. Calpine Subordinated Indebtedness....................33
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TABLE OF CONTENTS, continued
SECTION PAGE
5.1.8. Resolutions, etc.....................................33
5.1.9. Delivery of Notes....................................33
5.1.10. Pledge Agreement.....................................33
5.1.11. Deposit and Disbursement Agreement...................33
5.1.12. Security Agreements..................................34
5.1.13. Subordination Agreement..............................34
5.1.14. Opinions of Counsel..................................34
5.1.15. Purchase Documents...................................34
5.1.16. Project Documents....................................35
5.1.17. Projections..........................................35
5.1.18. Insurance Certificates...............................35
5.1.19. Independent Engineer's Report........................35
5.1.20. Financial Statements.................................35
5.1.21. Loan Purchase Agreement..............................35
5.1.22. Indemnification Agreement............................35
5.1.23. Due Diligence........................................35
5.1.24. Closing Fees, Expenses, etc..........................35
5.2. All Borrowings.......................................36
5.2.1. Compliance with Warranties, No Default, etc..........36
5.2.2. Borrowing Request....................................37
5.2.3. Satisfactory Legal Form..............................37
ARTICLE VI
REPRESENTATIONS AND WARRANTIES.......................37
6.1. Organization, etc....................................37
6.2. Due Authorization, Non-Contravention, etc............37
6.3. Government Approval, Regulation, etc.................38
6.4. Validity, etc........................................38
6.5. Financial Information................................39
6.6. No Material Adverse Change...........................39
6.7. Litigation, Labor Controversies, etc.................39
6.8. Subsidiaries.........................................39
6.9. Ownership of Properties..............................39
6.10. Taxes................................................40
6.11. Pension and Welfare Plans............................40
6.12. Environmental Warranties.............................40
6.13. Regulations G, U and X...............................41
6.14. Accuracy of Information..............................41
6.15. Financial Projections................................42
6.16. Collateral Security Documents........................42
6.17. Principal Place of Business, etc.....................42
6.18. Representations and Warranties Incorporated from
Purchase Agreement...................................43
ARTICLE VII
COVENANTS............................................................43
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TABLE OF CONTENTS, continued
SECTION PAGE
7.1. Affirmative Covenants................................43
7.1.1. Financial Information, Reports, Notices, etc.........43
7.1.2. Compliance with Laws, etc............................45
7.1.3. Maintenance of Properties............................45
7.1.4. Insurance............................................45
7.1.5. Books and Records....................................46
7.1.6. Environmental Covenant...............................46
7.1.7. Resist Regulatory Change.............................46
7.1.8. Take-Out Financing; Assignments......................47
7.2. Negative Covenants...................................47
7.2.1. Business Activities..................................47
7.2.2. Indebtedness.........................................47
7.2.3. Liens................................................48
7.2.4. Financial Condition..................................49
7.2.5. Investments..........................................50
7.2.6. Restricted Payments, etc.............................50
7.2.7. Rental Obligations...................................51
7.2.8. Take or Pay Contracts................................51
7.2.9. Consolidation, Merger, etc...........................51
7.2.10. Asset Dispositions, etc..............................52
7.2.11. Modification of Certain Agreements...................52
7.2.12. Transactions with Affiliates.........................53
7.2.13. Negative Pledges, Restrictive Agreements, etc........54
7.2.14. Change of Name or Office or Fiscal Year..............54
7.2.15. Pension and Welfare..................................55
ARTICLE VIII
EVENTS OF DEFAULT....................................55
8.1. Listing of Events of Default.........................55
8.1.1. Non-Payment of Obligations...........................55
8.1.2. Breach of Warranty...................................55
8.1.3. Non-Performance of Certain Covenants and
Obligations..........................................55
8.1.4. Non-Performance of Other Covenants and
Obligations..........................................55
8.1.5. Default on Other Indebtedness........................56
8.1.6. Judgments............................................56
8.1.7. Control of the Borrower..............................56
8.1.8. Bankruptcy, Insolvency, etc..........................56
8.1.9. Impairment of Security, etc..........................57
8.1.10. Public Utility Regulation............................57
8.2. Action if Bankruptcy.................................58
8.3. Action if Other Event of Default.....................58
Restrictions on Off-Sets.............................58
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TABLE OF CONTENTS, continued
SECTION PAGE
ARTICLE IX
THE AGENT............................................58
9.1. Actions..............................................58
9.2. Funding Reliance, etc................................59
9.3. Exculpation..........................................59
9.4. Successor............................................60
9.5. Loans by Scotiabank..................................61
9.6. Credit Decisions.....................................61
9.7. Copies, etc..........................................61
ARTICLE X
MISCELLANEOUS PROVISIONS.............................61
10.1. Waivers, Amendments, etc.............................61
10.2. Notices..............................................62
10.3. Payment of Costs and Expenses........................62
10.4. Indemnification......................................63
10.5. Survival.............................................64
10.6. Severability.........................................65
10.7. Headings.............................................65
10.8. Execution in Counterparts, Effectiveness, etc........65
10.9. Governing Law; Entire Agreement......................65
10.10. Successors and Assigns...............................65
10.11. Sale and Transfer of Loans and Note; Participations
in Loans and Note....................................65
10.11.1. Assignments..........................................66
10.11.2. Participations.......................................67
10.12. Other Transactions...................................68
10.13. Forum Selection and Consent to Jurisdiction and
Agent for Service of Process.........................68
10.14. Waiver of Jury Trial.................................69
10.15. Confidentiality......................................69
10.16. Limitations on Recourse..............................70
||
SCHEDULE 1 - Disclosure Schedule
SCHEDULE 2 - Filings for Collateral Documents
SCHEDULE 3 - Clear Lake Project Documents
SCHEDULE 4 - Cogenron Project Documents
SCHEDULE 5 - Clear Lake Project Loan Documents
SCHEDULE 6 - Cogenron Project Loan Documents
SCHEDULE 7 - Financial Projections
SCHEDULE 8 - Equity Support Agreements
EXHIBIT A - Form of Note
EXHIBIT B - Form of Borrowing Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Deposit and Disbursement Agreement
-iv-
<PAGE>
TABLE OF CONTENTS, continued
SECTION PAGE
EXHIBIT E - Form of Security Agreement
EXHIBIT F - Form of Assignment and Security Agreement
EXHIBIT G - Form of Pledge Agreement
EXHIBIT H - Form of Subordination Agreement
EXHIBIT I - Form of Lender Assignment Agreement
EXHIBIT J - Form of Opinion of Counsel to the Borrower
EXHIBIT K - Form of Loan Purchase Agreement
EXHIBIT L - Form of Indemnity Agreement72
-v-
$200,000,000
CALPINE CORPORATION
8 3/4% Senior Notes
PURCHASE AGREEMENT
July 1, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
As Representative of the Several Purchasers,
11 Madison Avenue,
New York, N.Y. 10010
Dear Sirs:
1. Introductory. Calpine Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"Purchasers") U.S.$200,000,000 principal amount of its 8 3/4% Senior Notes Due
2007 (the "Offered Securities") to be issued under an indenture dated as of July
8, 1997 (the "Indenture"), between the Company and The Bank of New York (the
"Trustee"), on a private placement basis pursuant to an exemption under Section
4(2) of the United States Securities Act of 1933 (the "Securities Act").
Holders (including subsequent transferees) of the Offered Securities
will have the registration rights set forth in the Registration Rights Agreement
of even date herewith (the "Registration Rights Agreement"), among the Company
and the Purchasers. Pursuant to the Registration Rights Agreement the Company
has agreed to file with the Securities and Exchange Commission (the
"Commission") (i) a registra tion statement (the "Exchange Offer Registration
Statement") under the Securities Act registering the offering of senior secured
notes (the "Exchange Securities") identical in all material respects to the
Offered Securities (except that the Exchange Securities will not contain terms
with respect to transfer restrictions) to be offered in exchange for the Offered
Securities (the "Exchange Offer") and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf
Registration Statement").
The Company hereby agrees with the Purchasers as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Purchasers that:
(a) A preliminary offering circular has been prepared and a
final offering circular relating to the Offered Securities will be
prepared by the Company. Such preliminary offering circular and
offering circular, as supplemented as of the date of this Agreement,
together with the documents listed in Schedule B hereto and any other
document approved by the Company for use in connection with the
contemplated resale of the Offered Securities, are hereinafter
collectively referred to as the "Offering Document". On the date of
this Agreement,
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the perliminary offering circular does not include and
the final offering circular in the form used by the Purchasers to
confirm sales and on the Closing Date will not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon
written information furnished to the Company by any Purchaser through
Credit Suisse First Boston Corporation ("CSFB") specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b). Except as disclosed in the
Offering Document, on the date of this Agreement, the Company's Annual
Report on Form 10-K most recently filed with the Commission and all
subsequent reports (collectively, the "Exchange Act Reports") which
have been filed by the Company with the Commission or sent to stock
holders pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") do not include any 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. Such documents, when they were filed with the Commission,
conformed in all material respects to the requirements of the Exchange
Act and the rules and regulations of the Commission thereunder. The
preceding sentence does not apply to statements in or omissions from
the Offering Document based upon written information furnished to the
Company by any Purchaser through CSFB specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(b).
(b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Offering Document; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its Subsidiaries (as defined below), taken as a whole.
(c) Each Subsidiary of the Company (i) other than those
Subsidiaries specified in clause (ii) of this paragraph (2)(c) has been
duly incorporated, is validly existing as a corpora tion in good
standing under the laws of the jurisdiction of its incorporation, and
has corporate power and authority to own its property and to conduct
its business as described in the Offering Document or (ii) that is not
a corporation is a limited partnership, has been duly formed and is
validly existing as a limited partnership in good standing under the
laws of the jurisdiction of its formation, and has full power and
authority to own its property and to conduct its business as described
in the Offering Document; and, in either case, is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
required such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole;
and the Company is not a general partner in any partnership. As used
herein, the term "Subsidiary" shall have the meaning ascribed to it in
the Indenture.
(d) The Indenture has been duly authorized by the Company; the
Offered Securities have been duly authorized by the Company; and when
the Offered Securities are delivered and paid for pursuant to this
Agreement and the Indenture on the Closing Date (as defined below), the
Indenture will have been duly executed and delivered (assuming due
authorization, execution and delivery by the Trustee), such Offered
Securities will have been duly executed, authenticated, issued and
delivered (assuming authentication by the Trustee in accordance with
the provisions of the Indenture) and will conform to the description
thereof contained in
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<PAGE>
the Offering Document and the Indenture and such
Offered Securities will constitute valid and legally binding
obligations of the Company (and the Offered Securities will be entitled
to the benefits in the Indenture), enforceable in accordance with their
terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(e) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Purchaser for a brokerage commission, finder's fee or other like
payment with respect to this Offering.
(f) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and (assuming due
authorization, execution and delivery by the Purchasers) constitutes a
valid and binding agreement of the Company, enforceable in accor dance
with its terms except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general ap
plicability.
(g) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplat ed by this
Agreement in connection with the issuance and sale of the Offered
Securities by the Company, except such as may be required by (i) the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Offered Securities and (ii) the securities or
Blue Sky laws of the various states and the Securities Act in
connection with the offer of the Exchange Securities.
(h) The execution, delivery and performance of the Indenture,
this Agreement, the Registration Rights Agreement, and the issuance and
sale of the Offered Securities and compliance with the terms and
provisions thereof will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any
statute, any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the
Company or any Subsidiary of the Company or any of their properties, or
any agreement or instrument to which the Company or any such Subsidiary
is a party or by which the Company or any such Subsidiary is bound or
to which any of the properties of the Company or any such Subsidiary is
subject, or the charter or by-laws of the Company or any such
Subsidiary, and the Company has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this
Agreement.
(i) This Agreement has been duly authorized, executed
and delivered by the Company.
(j) Except as disclosed in the Offering Document, the Company
and its Subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each
case 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 them; and except as disclosed in the Offering
Document, the Company and its Subsidiaries hold any leased real or
personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof
by them.
(k) The Company and its Subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the
3
<PAGE>
business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the
Company or any of its Subsidiaries, would individually or in the
aggregate have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(l) No labor dispute with the employees of the Company or any
Subsidiary exists or, to the knowledge of the Company, is imminent that
might have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(m) Except as disclosed in the Offering Document, neither the
Company nor any of its Subsidiaries is in violation of any statute, any
rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "environmen tal laws"), owns or
operates any real property contaminated with any substance that is
subject to any environmental laws, is liable for any off-site disposal
or contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a material adverse effect on the Company and its
Subsidiaries taken as a whole; and the Company is not aware of any
pending investigation which might lead to such a claim.
(n) Except as disclosed in the Offering Document, there are no
pending actions, suits or proceedings against or affecting the Company,
any of its Subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its Subsidiaries, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its Subsidiaries taken as a whole, or
would materially and adversely affect the ability of the Company to
perform its obligations under the Indenture or this Agreement, or which
are otherwise material in the context of the sale of the Offered
Securities; and no such actions, suits or proceedings are threatened
or, to the Company's knowledge, contemplated.
(o) The financial statements included in the Offering Document
present fairly the financial position of the Company and its
consolidated Subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and, except as
otherwise disclosed in the Offering Document, such financial statements
have been prepared in confor mity with the generally accepted
accounting principles in the United States applied on a consistent
basis and the assumptions used in preparing the pro forma financial
statements included in the Offering Document provide a reasonable basis
for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
(p) The statistical and market-related data (other than
market-related data and statistical data provided by the Company)
included in the Offering Document are based on or derived from sources
which the Company believes to be reliable and accurate, it being
understood, however, that the Company has conducted no independent
investigation of the accuracy thereof.
(q) Except as disclosed in the Offering Document, since the
date of the latest audited financial statements included in the
Offering Document there has been no material adverse change, nor any
development or event involving a prospective material adverse change,
in the
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<PAGE>
condition (financial or other), business, properties or results of
operations of the Company and its Subsidiaries taken as a whole, and,
except as disclosed in or contemplated by the Offering Document, there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(r) The Company is not 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 (the "Investment Company Act"), nor is
it a closed-end investment company required to be registered, but not
registered, thereunder; and the Company 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" as defined in the Investment Company Act.
(s) 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.
(t) The offer and sale of the Offered Securities by the
Company to the several Purchasers in the manner contemplated by this
Agreement will be exempt from the registra tion requirements of the
Securities Act by reason of Section 4(2) thereof; and it is not
necessary to qualify the Indenture in respect of the Offered Securities
under the United States Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
(u) Neither the Company, nor any of its affiliates (as defined
in Rule 501(b) of Regulation D under the Securities Act), nor any
person acting on its or their behalf (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 under
the Securities Act) 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 (A) in the United States by means
of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act or (B) with respect to
any securities sold in reliance on Rule 903 of Regulation S, by means
of any directed selling efforts within the meaning of Rule 902(b) of
Regulation S. The Company has not entered and will not enter into any
contractual arrange ment with respect to the distribution of the
Offered Securities except for this Agreement.
(v) Neither the Company nor any of its Subsidiaries is (i)
subject to regulation as a "holding company" or a "Subsidiary company"
of a holding company or a "public utility company" under Section 2(a)
of the Public Utility Holding Company Act of 1935 ("PUHCA"), (ii)
subject to regulation under the Federal Power Act, as amended ("FPA"),
other than as contemplated by 18 C.F.R. Sec 292.601(c) or (iii) subject
to any state law or regulation with respect to rates or the financial
or organizational regulation of electric utilities, other than as
contemplated by 18 C.F.R. Sec 292.602(c).
(w) Each of the power generation projects in which the Company
or its Subsidiaries has an interest (the "Projects") which is subject
to the requirements under the Public Utility Regulatory Policies Act of
1978, as amended (16 U.S.C. Sec 796, et seq.), and the regulations of
the Federal Energy Regulatory Commission ("FERC") promulgated
thereunder, as amend ed from time to time, necessary to be a
"qualifying cogeneration facility" and/or a "qualifying small power
production facility" meets such requirements.
(x) The Company is subject to Section 13 or 15(d) of the
Exchange Act.
5
<PAGE>
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Company, at a purchase price of 99.6353% of the principal amount
thereof plus accrued interest from July 8, 1997 to the Closing Date (as
hereinafter defined) the respective principal amount of Offered Securities set
forth opposite the names of the several Purchasers in Schedule A hereto.
The Company will deliver against payment of the purchase price the
Offered Securities in the form of one or more permanent global securities in
definitive form (the "Global Securities") deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent Global Securities
will be held only in book-entry form through DTC, except in the limited
circumstances described in the Offering Document. Payment for the Offered
Securities shall be made by the Purchasers in Federal (same day) funds by
official check or checks or wire transfer to an account previously designated to
CSFB by the Company at a bank acceptable to CSFB at the office of Skadden, Arps,
Slate, Meagher & Flom LLP at 10:00 A.M. (New York time), on July 8, 1997, or at
such other time not later than seven full business days thereafter as CSFB and
the Company determine, such time being herein referred to as the "Closing Date",
against delivery to the Trustee as custodian for DTC of the Global Securities
representing all of the Offered Securities. The Global Securities will be made
available for inspection at the above office of Skadden, Arps, Slate, Meagher &
Flom LLP at least 24 hours prior to the Closing Date.
4. Representations by Purchasers; Resale by Purchasers.
(a) Each Purchaser severally represents and warrants to the
Company that it is an "accredited investor" within the meaning of Regulation D
under the Securities Act.
(b) Each Purchaser severally acknowledges 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 in accordance with
Regulation S or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser severally represents
and agrees that it has offered and sold the Offered Securities and will
offer and sell the Offered Securities (i) as part of their distribution
at any time and (ii) otherwise until the later of the commencement of
the offering and the Closing Date, only in accordance with Rule 144A
("Rule 144A") or Rule 903 under the Securities Act. Accord ingly,
neither such Purchaser nor its affiliates, nor any persons acting on
its or their behalf, have engaged or will engage in any directed
selling efforts with respect to the Offered Securities, and such
Purchaser, its affiliates and all persons acting on its or their behalf
have complied and will comply with the offering restrictions
requirement of Regulation S. Terms used in this paragraph (b) have the
meanings given to them by Regulation S.
(c) Each Purchaser severally agrees that it and each of its
affiliates has 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 Purchasers or
affiliates of the other Purchasers or with the prior written consent of
the Company.
(d) Each Purchaser severally agrees that it and each of its
affiliates will not 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, 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. Each Purchaser
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<PAGE>
severally agrees, with respect to resales made in reliance on Rule 144A
of any of the Offered Securities, 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.
5. Certain Agreements of the Company. The Company agrees with the
several Purchasers that:
(a) The Company will arrange for the qualification of the
Offered Securities for sale and the determination of their eligibility
for investment under the laws of such states in the United States as
CSFB designates and will continue such qualifications in effect so long
as required for the resale of the Offered Securities by the Purchasers
provided that the Company will not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
such state.
(b) During the period of two years hereafter, the Company will
furnish to CSFB and, upon request, to each of the other Purchasers, as
soon as practicable after the end of each fiscal year, a copy of its
annual report to shareholders for such year; and the Company will
furnish to CSFB and, upon request, to each of the other Purchasers (i)
as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Exchange
Act or mailed to shareholders and (ii) from time to time, such other
information concerning the Company as CSFB may reasonably request.
(c) During the period of two years after the Closing Date, the
Company will, upon request, furnish to CSFB, each of the other
Purchasers and any holder of Offered Securities a copy of the
restrictions on transfer applicable to the Offered Securities.
(d) During the period of two years after the Closing Date, the
Company 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.
(e) During the period of two years after the Closing Date, the
Company 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 Investment Company
Act, and is not, and will not be or become, a closed-end investment
company required to be registered, but not registered, under the
Investment Company Act.
(f) The Company will pay all expenses incidental to the
performance of its obliga tions under this Agreement, the Indenture and
the Registration Rights Agreement, including (i) the fees and expenses
of the Trustee and its 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 Offered Securities, the Indenture, the
Registration Rights Agreement, 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) the cost of
qualifying the Offered Securities for trading in the
Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) market and any expenses incidental thereto and (iv) the cost
of any advertising approved by the Company in connection with the issue
of the Offered Securities. The Company will reimburse the Purchasers
for any expenses (including fees and disbursements of counsel) incurred
by them in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions as CSFB designates 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
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of the Purchasers and the Company's officers and employees and any
other expenses of the Purchasers and the Company in connection with
attending or hosting meetings with prospec tive purchasers of the
Offered Securities and for expenses incurred in distributing the
Offering Document (including any amendments and supplements thereto) to
the Purchasers.
(g) In connection with the offering, until CSFB shall have
notified the Company and the other Purchasers of the completion of the
resale of the Offered Securities, neither the Company nor any of its
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.
(h) Except as contemplated by the Indenture and the
Registration Rights Agreement, for a period of 30 days after the date
of the initial offering of the Offered Securities by the Purchasers,
the Company will not offer, sell, contract to sell, pledge, or
otherwise dispose of, directly or indirectly, any United States
dollar-denominated debt securities issued or guaran teed by the Company
and having a maturity of more than one year from the date of issue. The
Company 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 Securities.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchas ers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representa tions and warranties on the part of
the Company herein, to the accuracy of the statements of officers of the Company
made pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a) The Purchasers shall have received:
(i) letters, dated the date of this Agreement and the Closing
Date, of Arthur Andersen substantially in the form of Exhibit A
hereto to the Purchasers concerning certain of the financial
information with respect to the Company as set forth in the
Offering Document;
(ii)letters, dated the date of this Agreement and the Closing
Date, of Moss Adams LLP substantially in the form of Exhibit B
hereto to the Purchasers concerning certain of the financial
information with respect to the Company set forth in the Offering
Document; and
(iii) letters, dated the date of this Agreement and the
Closing Date, of Ernst & Young LLP substantially in the form of
Exhibit C hereto to the Purchasers concerning certain of the
financial information with respect to the company as set forth in
the Offering Docu ment.
(b) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred (i) any
change, or any development or event involving a prospective change, in
the condition (financial or other), business, properties or results of
operations of the Company or its Subsidiaries which, in the judgment of
a majority in interest of the Purchasers, including CSFB, is material
and adverse and 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
of the Company by
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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 of the Company (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
Company 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 Congress or any
other substantial national or international calamity or emergency if,
in the judgment of a majority in interest of the Purchasers including
CSFB, 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.
(c) You shall have received on the Closing Date a certificate or
certificates, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in clause (b)(ii) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied on or before the Closing Date.
The officers signing and delivering such certificate or
certificates may rely upon the best of their knowledge as to
proceedings threatened.
(d) The Purchasers shall have received an opinion, dated the
Closing Date, of Brobeck, Phleger & Harrison LLP, counsel for the
Company, that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
State of Delaware, has the corporate power and au thority to own
its property and to conduct its business as described in the
Offering Document, and is duly qualified to transact business and
is in good standing in each juris diction in which the conduct of
its business or its ownership or leasing of property re quires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its Subsid iaries, taken as a whole;
(ii)this Agreement has been duly authorized, executed and
delivered by the Company;
(iii) the Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of
the Company, enforceable in accordance with its terms except as
(a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally
and (b) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applica
bility; and the Indenture is in such form that it may be
qualified under the Trust Inden ture Act, in compliance with the
terms of the provisions of the Registration Rights Agree ment
without material modification;
(iv) the Offered Securities have been duly authorized by the
Company and, when the Offered Securities are executed by the
Company and authenticated by the Trustee in accordance with the
provisions of the Indenture and delivered to and paid for by the
Purchasers in accordance with the terms of this Agreement, the
Offered Securities will be entitled to
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<PAGE>
the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their
terms except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of
general applicability;
(v) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and (assuming
due authorization, execution and delivery by the Purchasers)
constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bank ruptcy, insolvency
or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies
may be limited by equitable prin ciples of general applicability;
(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this
Agreement, the Offered Securities, the Indenture and the
Registration Rights Agreement will not contravene any provision of
applicable law or the certificate of incorporation, bylaws,
partnership agreement or other organizational documents of the
Company or any Subsidiary of the Company or, to such counsel's
knowledge, any agreement or other instrument binding upon the
Company or any Subsid iary of the Company that is material to the
Company or its Subsidiaries taken as a whole, or, to such
counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Company or any Subsidiary of the Company, and no consent,
approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Offered
Securities, the Indenture and the Registra tion Rights Agreement,
except such as may be required by (i) the securities or Blue Sky
laws of the various states in connection with the offer and sale
of the Offered Securities and (ii) the securities or Blue Sky laws
of the various states and the Securities Act in connection with
the offer of the Exchange Securities;
(vii) the statements in the Offering Document under the
captions "Description of Notes," "Plan of Distribution" and
"Transfer Restrictions," insofar as such statements constitute
summaries of the legal matters, documents and proceedings referred
to therein, fairly present the information called for with respect
to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein;
(viii) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which
the Company or any of its Subsidiaries is a party or to which any
of the properties of the Company or any of its Subsidiaries is
subject other than proceedings fairly summarized in all material
respects in the Offering Document and proceedings which such
counsel believes are not likely to have a material adverse effect
on the Company and its Subsidiaries taken as a whole, or on the
power or
ability of the Company to perform its obligations under this
Agreement, the Indenture, the Offered Securities and the
Registration Rights Agreement or to consummate the transac tions
contemplated by the Offering Document;
(ix) based upon the representations, warranties and agreements
of the Company in paragraphs 2(s) and 2(u) of this Agreement and
of the Purchasers in paragraph 4 of this Agreement and on the
representations and agreements in the Offering Document under the
caption "Transfer Restrictions," it is not necessary in connection
10
<PAGE>
with the offer, sale and delivery of the Offered Securities to the
Purchasers under this Agreement or in connection with the initial
resale of such Offered Securities by the Purchasers in accordance
with paragraph 4 of this Agreement to register the Offered
Securities under the Securities Act or to qualify the Indenture
under the Trust Indenture Act, it being understood that no opinion
is expressed as to any subsequent resale of any Offered
Securities; and
(x) the Company is not an "investment company" or an entity
"controlled" by an "in vestment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
Such counsel shall also include a statement to the effect that no facts
have come to such counsel's attention that would lead such counsel to believe
that (except for financial statements, sched ules and other financial and
statistical information as to which such counsel need not express any be lief)
the Offering Document when issued did not, and as of the date such opinion is
delivered does not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(e) You shall have received on the Closing Date an opinion of
Joseph E. Ronan, Jr., General Counsel of the Company, to the effect
that:
(i) each Subsidiary of the Company (x) other than those
Subsidiaries specified in clause (y) of this paragraph (6)(e)(i)
has been duly incorporated, is validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, and has corporate power and authority to own its
property and to conduct its business as described in the Offering
Document or (y) that is not a corporation is a limited partner
ship, has been duly formed and is validly existing as a limited
partnership in good standing under the laws of the jurisdiction of
its formation, and has full power and authority to own its
property and to conduct its business as described in the Offering
Document and, in either case, is duly qualified to transact
business and is in good stand ing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; and the Company is not a general
partner in any partner ship;
(ii)the Company and each of its Subsidiaries has obtained all
necessary consents, authorizations, approvals, orders, licenses,
certificates and permits of and from, and has made all
declarations and filings with, all foreign, federal, state, local
and other gov ernmental authorities, all self-regulatory
organizations and all courts and other tribunals, required to own,
lease, license, operate and use its properties and assets and to
conduct its business in the manner described in the Offering
Document, except to the extent that the failure to obtain, declare
or file would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole;
(iii) the contracts and agreements of the Company and its
Subsidiaries and affiliates described in the Offering Document
under "Business -- Description of Facilities -- Power Plants"
conform in all material respects to the descriptions thereof
contained in the Offering Document, and the statements in the
Offering Document under the captions "Management," "Business ---
Legal Proceedings" and "Business -- Government Regula tions" in
each case insofar as such statements constitute summaries of the
legal matters, documents and proceedings referred to therein,
fairly present the information called for with respect to such
legal matters, documents and proceedings and fairly summarize the
matters referred to therein;
11
<PAGE>
(iv) such counsel is of the opinion that the Company and each
Subsidiary of the Company (i) is in compliance with any and all
applicable environmental laws, (ii) has received all permits,
licenses or other approvals required of it under applicable
environ mental laws to conduct its business and (iii) is in
compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with environ
mental laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company; and
(v) neither the Company nor any of its Subsidiaries is (i)
subject to regulation as a "holding company" or a "Subsidiary
company" of a holding company or an "affiliate" of a Subsidiary or
holding company or a "public utility company" under Section 2(a)
of PUHCA, (ii) subject to regulation under the FPA, other than as
contemplated by 18 C.F.R. Sec 292.601(c) or (iii) subject to any
state law or regulation with respect to the rates or the financial
or organizational regulation of electric utilities, other than as
contemplated by 18 C.F.R. Sec 292.602(c).
(f) You shall have received on the Closing Date an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the
Purchasers, dated the Closing Date, covering the matters referred to in
subparagraphs (ii), (iii), (iv), (v), (vii) (but only as to the
statements in the "Description of the Senior Notes," "Plan of
Distribution" and "Transfer Restrictions") and (ix), and subparagraph
(x) of paragraph (d) above.
With respect to the final subparagraph of paragraph (d) above, Brobeck,
Phleger & Harrison LLP and Skadden, Arps, Slate, Meagher & Flom LLP may state
that their belief is based upon their participation in the preparation of the
Offering Document and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification except as specified. With respect to matters of fact, such counsel
may rely on certificates of officers of the Company and of governmental
officials, in which case their opinion is to state that they are so doing and
that the Purchasers are justified in relying on such opinions or certificates
and copies of said opinions or certificates are to be attached to the opinion.
The opinion of Brobeck, Phleger & Harrison LLP described in paragraph
(d) above shall be rendered to you at the request of the Company and shall so
state therein.
The Company will furnish the Purchasers and their special counsel with
such conformed copies of such opinions, certificates, letters and documents as
the Purchasers and their special counsel reasonably request. CSFB may in its
sole discretion waive on behalf of the Purchasers compliance with any conditions
to the obligations of the Purchasers hereunder.
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Purchaser against
any losses, claims, damages or liabilities, joint or several, to which such
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 Document, or any
amendment or supplement thereto, or any related preliminary offering circular 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 will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability
12
<PAGE>
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 Company by any
Purchaser through CSFB specifically for use therein, it being understood and
agreed that the only such information consists of the information described as
such in paragraph (b) below. The indemnity agreement contained in this Section
7(a) with respect to any untrue statements or omission in any preliminary
offering circular shall not inure to the benefit of any Purchaser if the person
asserting such losses, liabilities, claims, damages, or expenses purchased the
Offered Securities which is the subject thereof if at or prior to the written
confirmation of the initial resale of the Offered Securities a copy of the final
offering circular (or the final offering circular as amended or supplemented)
was not sent or delivered to such person and the final offering circular (or the
final offering circular as amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities.
(b) Each Purchaser will severally and not jointly indemnify and
hold harmless the Company, its directors, its officers and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company 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 Document, or any amendment or supplement thereto, or
any related preliminary offering circular, or arise out of or are based upon the
omission or the alleged omission to state therein 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, 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 Company by such
Purchaser through CSFB specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Company 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 any Purchaser consists of the following information in
the Offering Document furnished on behalf of each Purchaser: (i) the last
paragraph at the bottom of the cover page concerning the terms of the offering
by the Purchasers, (ii) the legend on page 3 concerning the stabilization and
overallotment by the Purchasers, (iii) the third sentence contained in the
second paragraph under the caption "Plan of Distribution" concerning the role of
the Purchasers in the offering, (iv) the second sentence of the third paragraph
under the caption "Plan of Distribution" concerning sales of the Offered
Securities, (v) the fourth paragraph under the caption "Plan of Distribution"
concerning sales of the Offered Securities to persons in the United Kingdom,
(vi) the second sentence of the sixth paragraph under the caption "Plan of
Distribution" concerning the intention of the Purchasers to make a market in the
Offered Securities, (vii) the first sentence of the seventh paragraph under the
caption "Plan of Distribution" concerning transactions engaged in by the Company
and the Purchasers and their affiliates, (viii) the third sentence of the
seventh paragraph under the caption "Plan of Distribution" concerning the
affiliation of the Bank of Novia Scotia with one of the Purchasers, and (ix) the
first sentence of the eighth paragraph under the caption "Plan of Distribution"
concerning overallotments and stabilizing.
(c) Promptly after receipt by an indemnified party under this
paragraph 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 paragraph (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 paragraph (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnify ing party of
the commencement thereof, the indemnifying party will be entitled to participate
therein
13
<PAGE>
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying 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 paragraph for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, 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
uncondition al release of such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this paragraph is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (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 paragraph (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the 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 Company on the one hand and the 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 consider
ations. The relative benefits received by the Company on the one hand and the
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
Company bear to the total discounts and commissions received by the Purchasers
from the Company 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 Company or the 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 paragraph (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 paragraph (d). Notwithstanding the provisions of this
paragraph (d) no Purchaser shall be required to contribute any amount in excess
of the amount by which the total price at which the Offered Securities purchased
by it were resold exceeds the amount of any damages which such Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Purchasers' obligations in this
paragraph (d) to contribute are several in proportion to their respective
purchase obligations and not joint.
(e) The obligations of the Company under this paragraph shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and condi tions, to each person, if any, who
controls any Purchaser within the meaning of the Securities Act or the Exchange
Act; and the obligations of the Purchasers under this paragraph shall be in
addition to any liability which the respective Purchasers may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
principal amount of the Offered Securities that such defaulting Purchaser or
Purchasers agreed but failed to purchase does not exceed 10% of the total
principal amount of the Offered Securities, CSFB may make arrangements
satisfactory to the Company
14
<PAGE>
for the purchase of such Offered Securities by other persons, including any of
the Purchas ers, but if no such arrangements are made by the Closing Date, the
non-defaulting Purchasers shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Purchasers agreed but failed to purchase on such Closing Date. If any
Purchaser or Purchasers so default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total principal amount of the Offered Securities and arrangements
satisfactory to CSFB and the Company 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 Purchaser or
the Company, except as provided in paragraph 9. As used in this Agreement, the
term "Purchaser" includes any person substituted for a Purchaser under this
Section. Nothing herein will relieve a defaulting Purchaser from liability for
its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agree ments, representations, warranties and other statements of
the Company or its officers and of the several Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Purchaser, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to paragraph 8 or if for any reason the purchase of the Offered Securities by
the Purchasers is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to paragraph 5 and the
respective obligations of the Company and the Purchasers pursuant to paragraph 7
shall remain in effect. If the purchase of the Offered Securities by the
Purchasers is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to paragraph 8 or the occurrence of any
event specified in clause (iii), (iv) or (v) of paragraph 6(b), the Company will
reimburse the 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.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to
the Purchasers c/o Credit Suisse First Boston Corporation, 11 Madison Avenue,
New York, N.Y. 10010, Attention: Investment Banking Department Transactions
Advisory Group, or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at Calpine Corporation 50 West San Fernando
Street, San Jose, California 95113 Attention: Joseph E. Ronan, Jr.; provided,
however, that any notice to a Purchaser pursuant to paragraph 7 will be mailed,
delivered or telegraphed and confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in paragraph 7, and no other person will have
any right or obligation hereunder, except that holders of Offered Securities
shall be entitled to enforce the agreements for their benefit contained in the
second and third sentences of paragraph 5(c) hereof against the Company as if
such holders were parties hereto.
12. Representation of Purchasers. CSFB will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by CSFB will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
15
<PAGE>
14. Applicable 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.
16
<PAGE>
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
several Purchasers in accordance with its terms.
Very truly yours,
CALPINE CORPORATION
By:
Name:
Title:
The foregoing Purchase Agreement is hereby confirmed and accepted as of the date
first above written.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
Acting on behalf of themselves and as
the Representative of the
several Purchasers.
By:
Name:
Title:
17
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SCHEDULE A
Principal
Amount of
Securities
Purchaser
Credit Suisse First Boston Corporation................. $ 100,000,000
Morgan Stanley & Co. Incorporated ..................... $ 30,000,000
Salomon Brothers Inc................................... $ 30,000,000
Scotia Capital Markets (USA) Inc....................... $ 20,000,000
BancAmerica Securities, Inc............................ $ 10,000,000
CIBC Wood Gundy Securities Corp........................ $ 10,000,000
-----------------------
Total.............. $ 200,000,000
=======================
18
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SCHEDULE B
List of Documents Delivered with
Offering Circular
None
19
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") for the purchase and sale of
all of the shares of Class A Common Stock of Enron/Dominion Cogen Corp., a
Delaware corporation (the "Company"), is made as of the 27th day of March, 1997,
by and between Enron Power Corp., a Delaware corporation ("Seller"), and Calpine
Finance Company, a Delaware corporation ("Buyer").
WHEREAS, Seller is the owner of 7,095 shares of Class A Common Stock of the
Company, which constitutes all of the issued and outstanding shares of Class A
Common Stock of the Company (the "Class A Common Stock"); and
WHEREAS, Seller wishes to sell all of the Class A Common Stock, and Buyer wishes
to purchase all of the Class A Common Stock, on the terms herein set forth; and
WHEREAS, concurrently with the purchase of the Class A Common Stock pursuant to
this Agreement, Buyer wishes to purchase the Long Term Debt (hereinafter
defined) at the Facilities (hereinafter defined) from the lenders thereof
pursuant to an Assignment Agreement to be entered into among Buyer and such
lenders (the "Assignment of Notes");
NOW, THEREFORE, in consideration of the mutual promises made herein, and subject
to the conditions hereinafter set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The terms set forth below shall have the meanings ascribed to
them in this Article I or in the part of this Agreement referred to below:
Administrative Services Agreement: means the Administrative Services Agreement
dated as of August 1, 1995, among ECT, the Company, EC5, Clear Lake and
Cogenron.
Affiliate: means with respect to an entity, any other entity controlling,
controlled by or under common control with such entity. As used in this
definition, the term "control," including the correlative term "controlling,"
"controlled by" and "under common control with" shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management or policies of an entity, whether through ownership of voting
securities, by contract or otherwise. For the avoidance of doubt, neither the
Company nor any of the Subsidiaries is, nor shall be deemed to be, Affiliates of
Seller.
Agreement: as defined in the preamble.
Assignment Agreements: as defined in Section 2.2.
-1-
<PAGE>
Assignment and Assumption Agreement: as defined in Section 2.2.
Assignment of Notes: as defined in the preamble.
Auditor: as defined in Section 2.3.
Average Severance Cost: as defined in Section 5.3.4.
Base Purchase Price: as defined in Section 2.2
Best Efforts: means a party's best efforts in accordance with reasonable
commercial practice and without the incurrence of unreasonable expense.
Business Day: means any day other than a Saturday, a Sunday or a day on which
banks in Houston, Texas are authorized or required by law to be closed.
Buyer: as defined in the preamble.
Buyer Indemnified Loss: as defined in Section 7.1.
Buyer's Plans: as defined in Section 5.3.4.
Bylaws: as defined in Section 4.1.7.
Certificate of Incorporation: as defined in Section 4.1.7.
Claim Notice: as defined in Section 7.4.
Class A Common Stock: as defined in the preamble.
Class B Common Stock: as defined in Section 4.1.5.
Clear Lake: means Clear Lake Cogeneration Limited Partnership, a Texas limited
partnership.
Clear Lake Facility: the 377 megawatt gas-fired, combined-cycle power plant
located in Pasadena, Texas and owned by Clear Lake.
Clear Lake O & M Agreement: the Operations and Maintenance Agreement dated as of
August 1, 1995, among EOC, the Company and Clear Lake.
Closing: as defined in Article III.
Closing Date: as defined in Article III.
COBRA: as defined in Section 5.3.4.
-2-
<PAGE>
Code: means the Internal Revenue Code of 1986, as amended, or any amending or
superseding tax laws of the United States of America.
Cogenron: means Cogenron Inc., a Delaware corporation.
Cogen Venture: means Cogen Technologies NJ Venture, a New Jersey joint venture.
Company: as defined in the preamble.
Confidentiality Agreement: as defined in Section 5.2.3.
Credit Support Obligations: as defined in Section 5.3.1.
December 31 Balance Sheet: as defined in Section 4.1.9.
Dominion: means Dominion Cogen, Inc., a Virginia corporation.
Dominion Energy: means Dominion Energy, Inc., a Virginia corporation.
Dominion Resources: means Dominion Resources, Inc. , a Virginia corporation.
EC1: means Enron Cogeneration One Company, a Delaware corporation.
EC3: means Enron Cogeneration Three Company, a Delaware corporation.
EC5: means Enron Cogeneration Five Company, a Delaware corporation.
ECT: means Enron Capital & Trade Resources Corp., a Delaware corporation.
Effective Date: as defined in Section 2.3.
Effective Date Balance Sheet: as defined in Section 2.3.
EIPI: as defined in Section 5.3.4.
Election Period: as defined in Section 7.4.
Employee Schedule: as defined in Section 5.3.4.
Environmental Legal Requirements: means any and all applicable Legal
Requirements and orders, restrictions and authorizations of a Governmental
Entity, including the Clean Air Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), the Federal Water Pollution
Control Act, the Occupational Safety and Health Act of 1970, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), the Safe Drinking Water Act, the
Toxic Substances Control Act, the Hazardous & Solid Waste Amendments Act of
1984, the
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Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, and any similar law, regulation, or requirement of any
Governmental Entity; in each case as amended through and in effect on the date
hereof.
EOC: means Enron Operations Corp., a Delaware corporation.
ERISA: means the Employee Retirement Income Security Act of 1974, as amended.
Excluded Assets and Liabilities: as defined in Section 2.3.
Facilities: the Clear Lake Facility and the Texas City Facility.
Facilities Employees: as defined in Section 5.3.4.
FERC: means the Federal Energy Regulatory Commission.
Financial Statements: as defined in Section 4.1.9.
GAAP: as defined in Section 2.3.
Governmental Entity: means any court, governmental department, commission,
council, board, agency or other instrumentality of the United States of America
or any state, county, municipality or local government.
Hazardous Substance: means any substance presently listed, defined, designated
or classified as "hazardous substances" under CERCLA, "hazardous wastes" under
RCRA, "hazardous materials" under the Hazardous Materials Transportation Act, or
"toxic substances" under the Toxic Substances Control Act.
HCC: Hoechst Celanese Chemical Corporation.
HSR Act: means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indemnity Notice: as defined in Section 7.4.
Indemnified Party: as defined in Section 7.4.
Indemnifying Party: as defined in Section 7.4.
Insurance: as defined in Section 4.1.20.
Knowledge, when used in the phrases "to Seller's knowledge," "to Buyer's
knowledge," or "to its [Seller's or Buyer's] knowledge" or "if Seller had
knowledge" means, and shall be limited to, the actual knowledge of the
appropriate individuals set forth for Seller or Buyer, respectively, on Schedule
1.1(A).
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Legal Requirement: means all applicable laws, rules, regulations, codes,
ordinances, permits, bylaws, variances, orders, conditions, and licenses of a
Governmental Entity.
Lien: means any lien, charge, mortgage, pledge, hypothecation, conditional sales
contract, or security interest (other than any of the foregoing listed on or
referenced in Schedule 4.1.10, governmental permits, licenses, consents and
approvals, encumbrances imposed by federal or state securities laws and
restrictions imposed by the Certificate of Incorporation, the Bylaws or the
Stockholders' Agreement).
Long Term Debt: as defined in Section 4.2.8.
Losses: as defined in Section 7.1.
Material Adverse Effect: means any adverse effect on the business, assets or
financial condition of the Company or any of the Subsidiaries that is material
in light of the business, assets or financial condition of the Company and the
Subsidiaries taken as a whole.
Notices: as defined in Section 9.6.
Partnership Agreement: as defined in Section 4.1.5.
Past Service: as defined in Section 5.3.4.
Plans: means "employee benefit plan," as such term is defined in Section 3(3) of
ERISA, including each "multiemployer plan," as such term is described 4001(a)(3)
and Section 3(37) of ERISA, and any terminated employee benefit plan.
Prime Rate: means a rate per annum equal to the lesser of (i) a varying rate per
annum that is equal to the interest rate publicly quoted by Citibank, N.A. from
time to time as its prime commercial or similar reference interest rate, with
adjustments in that varying rate to be made on the same date as any change in
that rate or (ii) the maximum rate permitted by applicable law.
Proposed Effective Date Balance Sheet: as defined in Section 2.3.
Purchase Price: as defined in Section 2.2.
PURPA: as defined in Section 4.1.17.
PURPA Regulations: as defined in Section 4.1.17.
PURPA Requirements: as defined in Section 4.1.17.
Self-Certification Notices: as defined in Section 4.2.7.
Seller: as defined in the preamble.
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Seller Indemnified Loss: as defined in Section 7.2.
Seller's Interest: as defined in Section 2.3.
Severance Plan: as defined in Section 5.3.4.
Stockholders' Agreement: means that certain Stockholders' Agreement dated as of
June 27, 1988, among Seller (as successor to Enron Corp.), Dominion Resources
and Dominion.
Subsidiaries: EC1, EC3, Clear Lake and Cogenron.
Surety Agreement: means the Surety Agreement dated as of June 12, 1985, between
Enron Corp. (as successor to InterNorth Inc.) and Texas Utilities Electric
Company.
Tax Returns: as defined in Section 4.1.14.
Taxes: means all federal, state, local, Indian nation or foreign taxes,
assessments or other governmental charges, together with any interest or
penalties thereon.
Texas City Facility: means the 450 megawatt gas-fired combined-cycle power plant
located in Texas City, Texas and owned by Cogenron.
Texas Facilities: means, collectively, the Clear Lake Facility and the Texas
City Facility.
Texas City O & M Agreement: the Operations and Maintenance Agreement (Cogenron
Inc.) dated as of August 1, 1995, as amended, among EOC, the Company and
Cogenron.
Texas Plant Sites: means, collectively, the physical locations of the Texas
Facilities.
Third Party Claim: as defined in Section 7.4.
UCC Guaranty Agreement: the Guaranty Agreement dated as of June 12, 1985, as
amended, between Cogenron and Union Carbide Corporation.
Unaudited Financial Statements: as defined in Section 4.1.9.
Working Capital: as defined in Section 2.3.
Year End Financials: as defined in Section 4.1.9.
1.2 Terminology. All article, section, subsection, schedule and exhibit
references used in this Agreement are to this Agreement unless otherwise
specified. All schedules and exhibits attached to this Agreement constitute a
part of this Agreement and are incorporated herein. Unless the context of this
Agreement clearly requires otherwise, (i) the singular shall include the plural
and the plural shall include the singular wherever and as often as may be
appropriate, (ii) the words
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"includes" or "including" shall mean "including without limitation," and (iii)
the words "hereof," "herein," "hereunder," and similar terms in this Agreement
shall refer to this Agreement as a whole and not any particular section or
article in which such words appear. Currency amounts referenced herein are in
United States Dollars. References to "generally accepted accounting principles"
herein shall refer to such principles in effect in the United States of America
as of the date of the statement to which such phrase refers.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Class A Common Stock. Upon the terms and subject to the
conditions of this Agreement, at the Closing Seller will sell, assign, convey,
transfer and deliver to Buyer free and clear of Liens, and Buyer will purchase
and accept from Seller, the Class A Common Stock.
2.2 Purchase Price. (A) The purchase price (the "Purchase Price") to be paid by
Buyer for the Class A Common Stock shall be an amount equal to Thirty-Five
Million Four Hundred Twenty-Five Thousand Dollars ($35,425,000) (the "Base
Purchase Price"), as adjusted pursuant to Section 2.3 and as Buyer and Seller
may otherwise agree.
(B) Upon the terms and subject to the conditions of this Agreement, at
the Closing, (i) Seller will deliver to Buyer, and Buyer will accept, one or
more stock certificates representing all of the Class A Common Stock, against
payment therefor by Buyer to Seller of the Base Purchase Price, in immediately
available funds by wire transfer to one or more bank accounts designated by
Seller, and (ii) Buyer or Calpine Corporation will assume the rights and
obligations of Seller and its Affiliates under the agreements set forth on
Schedule 4.1.10(C) pursuant to the Omnibus Assignment and Assumption Consent,
Novation and Amendment Agreements in the form of Exhibit A hereto (the
"Assignment and Assumption Agreements"), and an agreement regarding the
Stockholders' Agreement in form and substance satisfactory to Buyer and Seller,
pursuant to which Enron Corp. or Seller will assign, and Calpine Corporation or
Buyer will assume, all of Enron Corp.'s rights and obligations under the
Stockholders' Agreement. In addition, but subject to Seller's rights under
Section 8.1(v) and subject to obtaining consents to such assignments from Clear
Lake and Cogenron, respectively, and from the respective holders of Long Term
Debt secured by each of the Facilities, Seller shall cause EOC to assign its
rights and interests as operator under the Clear Lake O & M Agreement and the
Texas City O & M Agreement to Calpine Corporation or one of its Affiliates
designated by Buyer pursuant to assignment and assumption agreements in form and
substance satisfactory to Seller and Buyer. The agreements described in this
Section 2.2(B) pursuant to which rights and obligations are to be assigned and
assumed are collectively referred to as the "Assignment Agreements."
2.3 Determination of Purchase Price. (A) As promptly as practicable following
the Closing Date, but in any event within 90 days after the Closing Date, Buyer
shall submit to Seller a proposed balance sheet prepared by the Company as of
the close of business on March 31, 1997 (the "Effective Date"), for the Company
and the Subsidiaries, excluding all items relating to EC5 or Cogen Venture
(including (i) all cash received by EC5 or from Cogen Venture in the three
months
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ending March 31, 1997, which is payable to Dominion pursuant to Section 2 of the
Amendment to Reorganization Agreement dated as of June 30, 1991, and (ii) any
associated account payable to Dominion or its Affiliates related to cash
receipts by EC5 or from Cogen Venture which is then outstanding (the "Excluded
Assets and Liabilities")) (the "Proposed Effective Date Balance Sheet"),
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") and otherwise on a basis consistent with the
December 31 Balance Sheet (defined in Section 4.1.9(B)), together with
appropriate supporting calculations and documentation setting forth, in
reasonable detail, the preparation of the balance sheet. If Seller disputes the
correctness of the Proposed Effective Date Balance Sheet, Seller shall notify
Buyer of its objections in writing within 30 days after receipt of the Proposed
Effective Date Balance Sheet, which notice shall set forth in reasonable detail
the reasons for Seller's objections. If Seller fails to deliver such notice
within such 30-day period, Seller shall be deemed to have accepted the Proposed
Effective Date Balance Sheet (including Buyer's calculations therein). Buyer and
Seller shall endeavor in good faith to resolve any disputed items within 30 days
after Buyer's receipt of Seller's notice of objections. If they are unable to do
so, each party shall have the right to refer the dispute to Deloitte & Touche
(the "Auditor") for resolution and determination of the Proposed Effective Date
Balance Sheet to reflect what is required by this Section 2.3. Such
determination by the Auditor shall be conclusive and binding on the parties. The
fees of the Auditor incurred in resolving any such dispute shall be shared
equally by Seller and Buyer, unless the Auditor determines that, as a whole, the
positions taken by Buyer in the Proposed Effective Date Balance Sheet or by
Seller in its objections to the Proposed Effective Date Balance Sheet were
without merit, in which case the party making the unmeritorious assertion shall
pay the Auditor's entire fee. The balance sheet as of the Effective Date as
finally determined pursuant to this Section 2.3 (whether by failure of Seller to
deliver notice of objection, by agreement of the parties or by determination by
the Auditor) is referred to herein as the "Effective Date Balance Sheet".
(B) The Purchase Price shall be calculated as follows. To the extent
that Working Capital (defined below) on the Effective Date Balance Sheet exceeds
Working Capital on the December 31 Balance Sheet (the December 31 Balance Sheet
not being adjusted for the items described on Schedule 4.1.9(C)), or to the
extent that the Company or the Subsidiaries have made unscheduled principal
payments (i.e., payments other than those required to be made under the
applicable amortization schedule) of Long Term Debt since December 31, 1996, the
Purchase Price shall be increased above the Base Purchase Price to the extent of
Seller's Interest (defined below) in the differences thereof. To the extent that
Working Capital on the Effective Date Balance Sheet is less than Working Capital
on the December 31 Balance Sheet (the December 31 Balance Sheet not being
adjusted for the items described on Schedule 4.1.9(C)), the Purchase Price shall
be reduced below the Base Purchase Price to the extent of Seller's Interest in
the differences thereof. If the Purchase Price is greater than the Base Purchase
Price, Buyer shall pay Seller the difference thereof. If the Purchase Price is
less than the Base Purchase Price, Seller shall pay Buyer the difference
thereof. All amounts owed for Purchase Price adjustments pursuant to this
Section 2.3 shall be netted as appropriate so that only one payment shall be
made, all such amounts shall bear interest at the Prime Rate from and including
the Closing Date through and excluding the date of payment, and all adjustments
shall be made without duplication. Any payment shall be made not later than two
Business Days after final determination of the Effective Date Balance Sheet
pursuant to this
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Section 2.3 in immediately available funds by wire transfer to a bank account
designated by the party entitled to receive the payment.
(C) For purposes of this Agreement, (i) "Working Capital" means current
assets (including without limitation cash and cash equivalents, accounts
receivable, materials and supplies, and prepaid expenses) minus current
liabilities (including without limitation accounts payable and other accrued
current liabilities, but excluding current maturities of long term debt),
excluding any items related to EC5 or Cogen Venture (including the Excluded
Assets and Liabilities) and determined in accordance with GAAP; and (ii)
"Seller's Interest" means, with respect to changes in Working Capital and
unscheduled principal payments of Long Term Debt, 50%.
ARTICLE III
CLOSING DATE
The consummation of the purchase and sale of the Class A Common Stock shall be
held at a meeting (the "Closing") at the offices of Vinson & Elkins, L.L.P. at
10:00 A.M., Houston, Texas time, three Business Days after the date on which the
last condition contained in Article VI is satisfied or waived, or at such other
time, date and place as may be mutually agreed to in writing by the parties. The
date on which the Closing actually occurs is referred to herein as the "Closing
Date."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer as follows:
4.1.1 Organization and Good Standing. Seller is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under the laws of the States of Delaware and Texas.
4.1.2 Authority of Seller. Seller has all requisite corporate power and
authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. The execution, delivery and performance of this Agreement by
Seller and the transactions contemplated hereby to be consummated by Seller have
been duly authorized by all requisite corporate action by Seller. This Agreement
has been duly executed and delivered by Seller and constitutes a valid and
binding agreement of Seller enforceable against Seller in accordance with its
terms subject to applicable bankruptcy, insolvency and other similar laws
relating to or affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
4.1.3 No Violations With Respect to Seller. Except as set forth in
Schedule 4.1.3, the execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby to be consummated by Seller
or its Affiliates do not: (i) violate or conflict with
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any of the provisions of the certificate of incorporation or bylaws of Seller;
(ii) conflict with, result in a breach of, or constitute a default under, or
accelerate or permit the acceleration of the performance required by, or require
any consent, authorization or approval under any material agreement or other
instrument to which Seller is a party or by which Seller or its properties are
bound; (iii) violate or conflict in any material respect with any Legal
Requirements or any foreign law, rule, regulation, code, ordinance, material
permit or material license; or (iv) constitute an event which, with notice,
lapse of time or both would result in any such material violation, conflict,
breach or default.
4.1.4 Approvals and Consents for Seller. No filing, consent,
authorization or approval under any Legal Requirement binding upon Seller is
required to be made or obtained by Seller in order to execute or deliver this
Agreement or to consummate the transactions contemplated hereby by Seller,
except with respect to the filings required under the HSR Act and except for any
filings, consents, authorizations or approvals that, if not made or obtained, in
the aggregate would not have a Material Adverse Effect.
4.1.5 Ownership.
(A) Schedule 4.1.5 (A) sets forth all of the classes of capital stock
of the Company, the number of authorized shares of such classes, the number of
issued and outstanding shares of such classes and the par value thereof.
(B) Seller owns beneficially and of record 7,095 shares of the Class A
Common Stock. All of such shares of Class A Common Stock have been duly
authorized, validly issued and are fully paid and non-assessable. Upon delivery
of and payment for the Class A Common Stock as provided herein, at the Closing
Buyer will acquire good title to the Class A Common Stock free and clear of all
Liens other than Liens created by, through or under Buyer or its Affiliates.
(C) Except as provided in this Agreement, the Bylaws and the
Stockholders' Agreement, no subscription, option, warrant, conversion right,
call or other agreement or commitment of any character is outstanding obligating
Seller, the Company or (assuming that neither Buyer nor its Affiliates have
entered into any such agreement or commitment) any subsequent owner of the Class
A Common Stock to deliver or sell any Class A Common Stock or any securities,
options, rights or warrants exchangeable for or convertible into the Class A
Common Stock or any other class of capital stock of the Company. Except as
provided in the Stockholders' Agreement, there are no voting agreements with
respect to the Class A Common Stock or other agreements restricting the right of
the owner of the Class A Common Stock to sell, transfer, grant a Lien on, or
otherwise dispose of the Class A Common Stock, assuming that neither Buyer nor
its Affiliates have entered into any such agreement.
(D) Dominion owns of record 7,095 shares of Class B Common Stock of the
Company (the "Class B Common Stock"). The Class A Common Stock and the Class B
Common Stock together constitute all of the issued and outstanding capital stock
of the Company. To Seller's knowledge, except for the Stockholders' Agreement,
there are no voting agreements with respect to the Class B Common Stock.
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(E) The Subsidiaries, EC5 and Cogen Venture constitute all of the
corporations, partnerships, joint ventures and other entities in which the
Company directly or indirectly owns an equity interest. The total number of
shares of authorized capital stock, and the classes and par values thereof, and
the number of issued and outstanding shares of each such class owned by the
Company, of each Subsidiary that is a corporation are set forth on Schedule
4.1.5 (E). Other than as provided in this Agreement, no subscription, option,
warrant, conversion right, call or other agreement or commitment of any
character is outstanding obligating the Company, any of the Subsidiaries that is
a corporation, or EC5 to deliver or sell any equity interest in any Subsidiary
that is a corporation or in EC5 or any securities, options, rights or warrants
exchangeable for or convertible into any such equity interest. Except as set
forth on Schedule 4.1.5 (E), neither the Company, the Subsidiaries nor EC5 has
any outstanding indebtedness for borrowed money or any other issued and
outstanding securities.
(F) The Company owns a 98% limited partner interest in Clear Lake and
EC3 owns a 2% general partner interest in Clear Lake. Other than as provided in
the Agreement of Limited Partnership dated January 29, 1988, between the Company
and EC3 (the "Partnership Agreement"), there are no outstanding subscriptions,
options, warrants or calls of any kind issued or granted by, or binding upon the
Company, EC3 or Clear Lake to purchase or otherwise acquire (whether directly or
through the purchase of any option or convertible security) any security of or
equity interest in Clear Lake.
4.1.6 Company and Subsidiaries:
(A) The Company and each of the Subsidiaries that is a corporation is
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is in good standing in the States of Delaware and Texas.
EC5 is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and is in good standing in the states of
Delaware and New Jersey. Neither the Company, any of the Subsidiaries nor EC5 is
qualified to do business as a foreign corporation in any other jurisdiction.
Neither the character of the properties now owned or leased by the Company, the
Subsidiaries or EC5 nor the nature of the business now conducted by any of them
require them to be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect.
(B) Clear Lake is a limited partnership duly formed and validly
existing under the laws of the State of Texas and is in good standing in the
State of Texas. Clear Lake is not qualified to do business as a foreign limited
partnership in any other jurisdiction. Neither the character of the properties
now owned or leased by Clear Lake nor the nature of the business now conducted
by it requires it to be so qualified, except where the failure to be so
qualified would not have a Material Adverse Effect.
4.1.7 No Violation With Respect to Company and Subsidiaries. Seller has
previously furnished Buyer with correct and complete copies of the Certificate
of Incorporation of the Company (the "Certificate of Incorporation"), the Bylaws
of the Company (the "Bylaws"), the Stockholders' Agreement, certificates of
incorporation and bylaws of each Subsidiary that is a corporation, the
certificate of incorporation of EC5, the Partnership Agreement, the certificate
of limited partnership
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of Clear Lake and the Amended and Restated Joint Venture Agreement of Cogen
Venture. Except as set forth on Schedule 4.1.7 hereto, the execution and
delivery hereof by Seller does not, and the performance and compliance with the
terms and conditions hereof by it and the consummation of the transactions
contemplated hereby by Seller or its Affiliates will not:
(A) violate or conflict with any provision of the certificates of
incorporation or bylaws of the Company, the Subsidiaries, EC5, the Stockholders'
Agreement, or the Partnership Agreement;
(B) violate or conflict with any provision of or, except with respect
to the HSR Act, require any material filing, consent, authorization or approval
under any Legal Requirements binding upon the Company, the Subsidiaries or EC5;
(C) in any material respect, conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse of time or both),
or accelerate or permit the acceleration of the performance required by, or
require any consent, authorization or approval or trigger any preferential right
of purchase under (i) any mortgage, indenture, loan or credit agreement or any
other material agreement or instrument evidencing indebtedness for money
borrowed, or any financing lease to which the Company, any Subsidiary or EC5 is
a party or by which any of them is bound or to which any of their respective
properties is subject or (ii) any other material lease, contract, agreement or
instrument to which any of them is a party or by which any of them is bound or
to which any of their respective properties is subject; or
(D) except as set forth in agreements entered into after the date
hereof that are approved by Buyer, result in the creation or imposition of any
Lien upon any material asset of the Company, the Subsidiaries or EC5;
in the case of clauses (B) through (D), except for any matters that in the
aggregate would not have a Material Adverse Effect.
4.1.8 No Default; Legal Requirements. Except as set forth in
Schedule 4.1.8 hereto:
(A) Neither the Company, the Subsidiaries nor EC5 is in breach or
violation of, or in default under, and no condition exists that with notice or
lapse of time or both would constitute such a default under, (i) any mortgage,
indenture, loan or credit agreement, evidence of indebtedness or other material
instrument evidencing or securing borrowed money, or any financing lease to
which any of them is a party or by which any of their respective properties is
bound, (ii) any judgment, order or injunction of any court or governmental
agency or (iii) any other agreement, contract, lease, license or other
instrument; except for breaches, violations, defaults and conditions that
individually or in the aggregate would not have a Material Adverse Effect; and,
to Seller's knowledge, no such breaches, violations or defaults have been
asserted in writing against the Company, the Subsidiaries or EC5; and
(B) Neither the Company, the Subsidiaries nor EC5 is in violation of
any Legal Requirement, except for violations that individually or in the
aggregate would not have a Material Adverse Effect.
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4.1.9 Financial Statements.
(A) Seller has delivered to Buyer the audited financial statements of
the Company as of December 31, 1993, December 31, 1994, and December 31, 1995
(the "Year End Financials") certified by the Auditor. The Year End Financials
were prepared in accordance with GAAP and present fairly in all material
respects, the financial position, results of operations and changes in cash
flows of the Company at the dates and for the periods therein indicated.
(B) Seller has also delivered to Buyer the unaudited financial
statements of the Company as of December 31, 1996, including a balance sheet as
of December 31, 1996, a copy of which is attached hereto as Schedule 4.1.9(B)-1,
(the "December 31 Balance Sheet") and income and cash flow statements as of such
date (the unaudited financial statements collectively are referred to as the
"Unaudited Financial Statements," and collectively with the Year End Financials,
the "Financial Statements"). The Unaudited Financial Statements were prepared
from the Company's and the Subsidiaries' books and records in accordance with
GAAP and, with respect to the December 31 Balance Sheet, as adjusted by the
numbers reflected on Schedule 4.1.9(C) hereby, present fairly in all material
respects the financial position, results of operations and changes in cash flow
of the Company and the Subsidiaries at the dates and for the period therein
indicated, except to the extent such statements would be affected by year end
and audit adjustments and except that such statements do not contain footnotes.
Except as set forth on Schedule 4.1.9(B)-2 hereto, the contingent liabilities
described in the footnotes to the audited financial statements of the Company as
of December 31, 1996 will not materially and adversely differ from the
contingent liabilities described in the Company's audited financial statements
as of December 31, 1995.
(C) Except as set forth on Schedule 4.1.9(C), the Company and the
Subsidiaries have no liabilities exceeding $100,000 in the aggregate that would
be required to be reflected on a balance sheet (not including the footnotes
thereto) prepared in accordance with GAAP applied on a basis consistent with the
Financial Statements, except for (i) liabilities reflected on the December 31
Balance Sheet, (ii) liabilities incurred since December 31, 1996 in the ordinary
course of business and (iii) liabilities with respect to which separate
agreements have been entered into between Seller or its Affiliates and Buyer or
its Affiliates concurrently with the execution of this Agreement.
(D) Since December 31, 1996, (i) the Company has neither declared,
provided for nor made any dividends or distributions to its shareholders, and
(ii) neither the Company nor the Subsidiaries has (a) made any material changes
in its accounting methods, or (b) sold or otherwise disposed of any material
portion of its assets, except for sales or dispositions in the ordinary course
of business or pursuant to contracts listed on Schedule 4.1.10 (A).
4.1.10 Leases; Contracts; Agreements and Commitments. (A) Schedule
4.1.10(A) sets forth a list of the following written leases, contracts,
agreements, and contractual commitments to which the Company, any Subsidiary or
EC5 is a party or by which any of them or their respective assets are bound,
correct and complete copies of which have previously been made available to
Buyer:
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(i) each lease, easement, right of way and license with respect to real
property that is necessary to conduct, in all material respects, their
respective businesses as they are currently being conducted and any other
material agreement with respect to real property;
(ii) each lease of personal property providing for rental payments
in excess of $50,000 per year;
(iii) each agreement involving $25,000 or more to contribute, lend or
advance funds to, or to purchase any additional equity interest in any other
person;
(iv) each agency agreement involving more than $50,000 in any one year;
(v) each mortgage, indenture, note, loan agreement, pledge agreement,
security document, installment obligation, or other instrument, credit
agreement, or reimbursement agreement for or relating to any borrowing (other
than short-term borrowing in the ordinary course of business) in an amount in
excess of $50,000;
(vi) each collective bargaining agreement, employment agreement or
consulting agreement;
(vii) each guaranty, reimbursement agreement, bond, surety, or any
other direct or indirect agreement to pay or perform any obligation of any
person or entity given by the Company, any Subsidiary or EC5, excluding
endorsements in the ordinary course of business;
(viii) each agreement that expressly prohibits the Company, any
Subsidiary or EC5 from competing with the counterparty in such a manner as to
materially restrict the right of any of them to engage in any material business
in which any of them is now engaged;
(ix) each partnership, joint venture, shareholders or similar
agreement;
(x) each agreement for a duration of greater than 30 days for the
purchase or sale of fuel, electric energy or capacity, or steam or the
transportation of fuel, wheeling of power or interconnection agreements that
would be in effect on the Closing Date;
(xi) each agreement providing for the purchase or option to purchase
all or substantially all of the assets of the Company, any Subsidiary or EC5;
(xii) each material agreement between Seller, Dominion or their
respective Affiliates, on the one hand, and the Company, any Subsidiary, or EC5,
on the other hand, other than agreements that will be terminated on or before
the Closing Date and for which the Company will have no liability thereafter;
and
(xiii) all other agreements of a duration of greater than 90 days that
cannot be terminated without a penalty to the Company or any Subsidiary and that
have a total consideration of more than $50,000 during the primary contract term
that would be in effect on the Closing Date.
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(B) Schedule 4.1.10(B) sets forth a list of each agreement to which
Seller or any of its Affiliates is a party that directly relates to the Company
and that, if the obligations thereunder are not performed, could have a Material
Adverse Effect.
(C) Schedule 4.1.10(C) sets forth a list of certain contracts,
agreements, or contractual commitments to which Seller or its Affiliates are a
party and the rights and obligations under which Buyer or Buyer's Affiliates
will assume pursuant to the Assignment Agreements. Except as disclosed on
Schedule 4.1.10(C), Seller and such Affiliates are not in default under any such
agreement or commitment, except where such defaults in the aggregate would not
have a Material Adverse Effect or, with respect to obligations of Seller or its
Affiliates under such contracts, agreements or commitments to be assumed by
Buyer or its Affiliates that provide equity support in respect of the Company or
the Subsidiaries, that would not have a material adverse effect on the
obligations of Buyer and its Affiliates as successors to Seller and its
Affiliates under such contracts, agreements or commitments. Except for
agreements to be assumed pursuant to the Assignment Agreements, Buyer will not
assume any liabilities or obligations of Seller or its Affiliates.
4.1.11 Litigation. Schedule 4.1.11 sets forth a list of all lawsuits
and administrative proceedings pending or, to the knowledge of Seller,
threatened against the Company, any Subsidiary or EC5. Schedule 4.1.11 also sets
forth a list of all lawsuits and administrative proceedings pending, or to the
knowledge of Seller, threatened against Seller or its Affiliates that directly
relate to the Company, any Subsidiary or EC5. To Seller's knowledge, there are
no material investigations by any Governmental Entity pending or threatened
against the Company, any Subsidiary or EC5.
4.1.12 Government Permits. Each of the Company and the Subsidiaries
have all permits, licenses, consents and approvals from Governmental Entities
required to be obtained by any of them that are necessary to conduct their
business in accordance with Legal Requirements as it is currently being
conducted, except where the failure to have same would not have a Material
Adverse Effect.
4.1.13 Employee Benefits. Each of the Company, the Subsidiaries and EC5
(i) is not, and has never been treated as being a "single employer" under
Section 414 of the Code with any other Person which has maintained or
contributed to or had any liability (contingent or otherwise) to, under or based
upon any Plan, (ii) does not have, and never has had, any "employees" as defined
in Section 3(6) of ERISA, and (iii) does not, and has never maintained,
contributed to or had any liability (contingent or otherwise) to, under or based
upon any Plan, including Plans maintained by any member of a "controlled group"
(as defined in Section 414 of the Code) or any plan that is a "multiemployer
plan" (as defined in ERISA).
4.1.14 Tax Matters. Except as set forth in Schedule 4.1.14:
(i)(a) All returns and reports ("Tax Returns") of or with respect to
any and all Taxes which are required to be filed on or before the Closing Date
(taking into account any extensions permitted under Section 5.3.2) by the
Company and the Subsidiaries have been duly and timely filed (taking into
account any extensions permitted under Section 5.3.2);
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(b) All Taxes which have become due by the Company or the Subsidiaries
(taking into account any extensions permitted under Section 5.3.2) with respect
to the period covered by each such Tax Return have been timely paid in full
(taking into account any extensions permitted under Section 5.3.2); and
(ii) There is no pending written claim against the Company or the
Subsidiaries for any Taxes that are due and payable, and no assessment,
deficiency or adjustment has been asserted or, to Seller's knowledge, proposed
with respect to any Tax Return of the Company or the Subsidiaries. There are no
audits or investigations pending or, to Seller's knowledge, threatened against
the Company or the Subsidiaries.
4.1.15 Real Property. Schedule 4.1.15 hereto sets forth legal
descriptions of the Facilities as they appear in the leases with respect
thereto. Neither the Company nor any Subsidiary owns fee simple title to any
real property. To Seller's knowledge, such legal descriptions accurately
describe, in all material respects, the real property on which the Clear Lake
Facility and the Texas City Facility are located.
4.1.16 Environmental Matters. Except as set forth on Schedule 4.1.16
hereto and except where any of the following would not have a Material Adverse
Effect, (i) neither the Company nor the Subsidiaries are in violation of any
Environmental Legal Requirement as a result of the operation of the business by
the Company or the Subsidiaries, (ii) no Hazardous Substances are present on, at
or under the Texas Plant Sites as a result of the operation of the business by
the Company or the Subsidiaries in quantities, concentrations, or locations that
require remedial action by any of them under Environmental Legal Requirements,
and, to Seller's knowledge, no such Hazardous Substances are present on, at or
under the Texas Plant Sites as a result of any other source or cause that would
require such remedial action, (iii) neither Seller nor the Company has received
any written notice, demand letter, or request for information from any
Governmental Entity or any third party indicating that Seller, the Company or
the Subsidiaries may be in violation of, or liable under, Environmental Legal
Requirements, which matter has not been finally resolved or settled, (iv) no
Hazardous Substance has been disposed of or transported from the business while
owned or operated by the Company or the Subsidiaries except as permitted under
applicable Environmental Legal Requirements or has been released on or from the
business by the Company or the Subsidiaries or the Texas Plant Sites while owned
or operated by the Company or the Subsidiaries which requires remediation under
applicable Environmental Legal Requirements, and (v) there has been no exposure
of any person or property to Hazardous Substances in connection with the
business by the Company or the Subsidiaries, which exposure has (i) resulted in
a material claim against the Company or the Subsidiaries or (ii) to Seller's
knowledge, would be the basis for such a claim. This Section 4.1.16 is intended
to, and shall be, the sole representation and warranty in this Agreement with
respect to environmental matters and no other representation and warranty in
this Agreement shall be construed as covering any environmental matters.
4.1.17 Regulatory Matters.
(A) Neither Seller, the Company, nor any of the Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
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(B) Each of the Seller, the Company and the Subsidiaries is not subject
to, or is exempt from regulation as, an "electric utility company", a "holding
company," a "subsidiary company" of a "holding company," an "affiliate" of a
"holding company," or an "affiliate" of a "subsidiary company" of a "holding
company," in each case as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
(C) Each of the Facilities is a "qualifying cogeneration facility," as
such term is defined in the Federal Power Act, as amended by the Public Utility
Regulatory Policies Act of 1978 ("PURPA"), the regulations of FERC thereunder
("PURPA Regulations"), and the current interpretations of FERC and courts of
competent jurisdiction of PURPA and such regulations (collectively, PURPA, the
regulations and all such interpretations, the "PURPA Requirements").
4.1.18 Sole Purpose; Nature of Business. Neither the Company nor any
Subsidiary has conducted or is conducting any business other than business
relating to the development, financing, acquisition, construction, ownership,
operation and maintenance of the Facilities and the sale of energy produced from
the Facilities.
4.1.19 Brokerage or Finders Fees. All negotiations relating to this
Agreement and the transactions contemplated hereby have been conducted without
the intervention of any person or entity acting on behalf of Seller, its
Affiliates or the Company in such a manner as to give rise to a valid claim
against Buyer, the Company or any Subsidiary for any broker's or finder's
commission, fee or similar compensation.
4.1.20 Insurance. Set forth on Schedule 4.1.20 is a correct and
complete list of all operating insurance applicable to the Facilities and
maintained on behalf of the Company and the Subsidiaries (the "Insurance"),
listing the types of coverages, amounts of coverage and deductibles. Such
insurance is in full force and effect and complies in all materials respects
with all material requirements of all material agreements binding on the
Company, either Subsidiary or EOC, as operator under the Clear Lake O&M
Agreement and the Texas City O&M Agreement.
4.1.21 Material Assets and Properties. Except for assets and properties
listed on Schedule 4.1.21 hereto, and except for assets and properties provided
pursuant to the Administrative Services Agreement, each of the Subsidiaries owns
or otherwise has the right to use the assets and properties reasonably necessary
to conduct their respective businesses as they are now conducted; except where
the failure to have same would not have a Material Adverse Effect.
4.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:
4.2.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2.2 Authority of Buyer. Buyer has all requisite corporate power and
authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. The execution, delivery and performance of this
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Agreement by Buyer and the transactions contemplated hereby to be consummated by
Buyer have been duly authorized by all requisite corporate action by Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and binding agreement of Buyer enforceable against Buyer in accordance with its
terms subject to applicable bankruptcy, insolvency and other similar laws
relating to or affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
4.2.3 No Violations. The execution and delivery of this Agreement by
Buyer and the consummation of the transactions contemplated hereby to be
consummated by Buyer do not and will not: (i) violate or conflict with any of
the provisions of the certificate of incorporation or bylaws of Buyer; (ii) in
any material respect conflict with, result in a breach of, or constitute a
default under, or accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under any
material agreement or other instrument to which Buyer is a party or by which
Buyer or its properties are bound; (iii) violate or conflict in any material
respect with any Legal Requirements or any foreign law, rule, regulation, code,
ordinance, material permit or material license; or (iv) constitute an event
which, with notice, lapse of time or both would result in any such material
violation, conflict, breach or default.
4.2.4 Approvals and Consents. No material filing, consent,
authorization or approval under any Legal Requirement binding upon Buyer is
required to be made or obtained by Buyer in order to execute or deliver this
Agreement or to consummate the transactions contemplated by hereby by Buyer,
except with respect to the filings required under the HSR Act.
4.2.5 Acquisition as Investment. Buyer is acquiring the Class A Common
Stock for its own account as an investment without the present intent to sell,
transfer or otherwise distribute the Class A Common Stock to any other person or
entity.
4.2.6 Brokerage or Finders Fees. All negotiations relating to this
Agreement and the transactions contemplated hereby have been conducted without
the intervention of any person or entity acting on behalf of Buyer or its
Affiliates in such a manner as to give rise to a valid claim against Seller, the
Company or any Subsidiary for any broker's or finder's commission, fee or
similar compensation.
4.2.7 No Electric Utility Ownership. Assuming Seller's representation
in Section 4.1.17(C) is accurate, Buyer is not (i) an "electric utility" or an
"electric utility holding company" or a wholly or partially owned subsidiary of
either, within the meaning of Part 292 of the PURPA Regulations (18 C.F.R. Part
292) and FERC's decisions thereunder or (ii) otherwise engaged in the generation
or sale of electric power (other than electric power solely from "cogeneration
facilities" or "small power production facilities" (both within the meaning of
Part 292 of the PURPA Regulations or the current interpretations of FERC and the
courts of competent jurisdiction of such regulation)). At or before the Closing,
Buyer will have ratified all written agreements between Clear Lake or Cogenron,
on the one hand, and Buyer, Seller, DRI or their respective Affiliates, on the
other. Within 30 days after the Closing Date, Buyer will have caused each of
Clear Lake and Cogenron to file a notice of self-certification ("collectively,
the "Self-Certification Notices"), the purpose of which is to reflect
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the change in ownership of the Company, which notices shall describe the
non-utility status of Calpine.
4.2.8 Available Funds. Buyer has, and at the Closing will have,
sufficient funds available to it to purchase the Class A Common Stock pursuant
to this Agreement and to purchase the existing long-term project debt on the
Facilities (the "Long Term Debt") pursuant to the Assignment of Notes for a cash
purchase price equal to the outstanding principal balance, plus accrued
interest, as of the Closing Date, which principal and interest, as of the date
hereof, is expected to total approximately $157,000,000.
4.2.9 Knowledgeable Buyer. Buyer (i) is represented by competent legal,
tax and financial counsel in connection with the negotiation, execution, and
delivery of this Agreement, (ii) together with its Affiliates, has sufficient
knowledge and experience in owning, managing, and operating power generating
facilities to enable it to evaluate the Facilities, the Company, each
Subsidiary, EC5 and Cogen Venture, and the businesses of each of them, and the
technical, commercial, financial, legal, regulatory, and other risks associated
with owning the Class A Common Stock, (iii) acknowledges that pursuant to this
Agreement it will have, prior to the Closing Date, performed all due diligence
that it desires to perform to enable it to evaluate the risks and merits of
consummating the transactions contemplated hereby, and that in making the
decision to enter into this Agreement and the Assignment of Notes and to
consummate the transactions contemplated hereby and thereby, it has relied
solely on the basis of its own independent investigation, analysis and
evaluation of the Company and the Subsidiaries and their properties, assets,
business, financial condition and prospects and upon the express
representations, warranties and covenants in this Agreement and in any
certificate delivered at the Closing, and (iv) together with its Affiliates, is
financially capable of owning the Class A Common Stock and the Long Term Debt
and performing its obligations under this Agreement, the Assignment of Notes and
the Assignment Agreements. Nothing discovered (or which should have been
discovered) by Buyer in the course of due diligence will be considered a waiver
of or will reduce Seller's rights under Article VII; provided that, prior to the
Closing, Buyer has disclosed to Seller any inaccuracy in Seller's
representations and warranties or any errors in or omissions from the schedules
to this Agreement of which Buyer has knowledge, and further provided that the
foregoing does not extend the time period in which a claim may be made under
Article VII or affect Seller's rights under Section 7.6. Buyer acknowledges that
neither Seller, its Affiliates nor any other person or entity has made any
representation or warranty, express or implied, as to the Company or the
Subsidiaries except for those expressly set forth in Section 4.1 or in any
certificate by Seller or its Affiliates delivered at the Closing.
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Covenants of Seller. Seller covenants and agrees with Buyer as follows:
5.1.1 Certain Changes. Except as may be permitted hereunder or as
otherwise contemplated in this Agreement and except as set forth on Schedule
5.1.1, from the date hereof through the Closing Date, without first obtaining
the written consent of Buyer, which consent shall
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not be unreasonably withheld, Seller shall, to the extent within its reasonable
control, cause the Company and the Subsidiaries not to:
(i) make any material change in the conduct of its business or
operations or make any change in its financial or tax accounting principles or
practices;
(ii) merge into or with or consolidate with any other entity or acquire
all or substantially all of the business or assets of any corporation, person or
entity;
(iii) make any change in their respective organizational documents;
(iv) purchase any securities of any corporation, person or entity
except for investments of cash and other funds in the ordinary course of
business or issue any debt or equity securities;
(v) mortgage, pledge or subject to any new Lien any of their respective
material assets, tangible or intangible, except pursuant to any agreement
disclosed on Schedule 4.1.10; or sell, transfer or dispose of all or any
material portion of their assets, except for sales, transfers or dispositions in
the ordinary course of business or other dispositions of equipment or inventory
items that are obsolete or not of material value;
(vi) take any action or enter into any commitment with respect to or in
contemplation of any liquidation, dissolution, recapitalization, reorganization
or other winding up of its business or operation;
(vii) enter into any settlement of or commence any material pending or
threatened litigation;
(viii) consent to the entry of any decree or order by a Governmental
Entity;
(ix) set aside, declare or pay any dividends;
(x) incur or guarantee any indebtedness for borrowed money in excess of
$50,000 or forgive any indebtedness for borrowed money or make any advances or
loans to third parties;
(xi) form any new subsidiaries or engage in any new businesses;
(xii) enter into any new material agreement or amend or terminate any
material agreement; or
(xiii) provide any new (meaning not pursuant to an existing agreement
disclosed on Schedule 4.1.10(A)) severance or other employee benefits to any
employee of or consultant to the Company or any Subsidiary, except for
extensions of existing consulting agreements on substantially the same terms.
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From the date hereof through the Closing Date, except as permitted hereunder or
contemplated hereby or as consented to in writing by Buyer, Seller will not
enter into any guarantees or other support agreements in respect of the Company
or the Subsidiaries. With respect to those matters set forth on Schedule 5.1.1,
Seller shall consult, and shall use its Best Efforts to cause the Company and
the Subsidiaries to consult, with Buyer with respect to any negotiations with
third parties and any new agreements or amendments or modifications to
agreements contemplated by the matters listed on Schedule 5.1.1, and shall use
its good faith efforts to incorporate any revisions to agreements requested by
Buyer in such negotiations, agreements, amendments and modifications.
5.1.2 Operation of Business. From the date hereof until the Closing
Date, except as permitted hereunder or contemplated hereby or as consented to in
writing by Buyer, Seller shall use its Best Efforts to cause the Company and the
Subsidiaries to carry on their respective businesses in the usual and ordinary
course except where the failure to do so would not have a Material Adverse
Effect, including the purchase of spare parts for the Facilities and the
performance of maintenance, repairs and similar activities in accordance with
the normal current schedule therefor, and the payment of amounts due under the
Long Term Debt as and when due under the applicable amortization schedule.
Seller shall not cause EOC or ECT to change the performance of their obligations
under the Clear Lake O & M Agreement, the Texas City O & M Agreement or the
Administrative Services Agreement.
5.1.3 Insurance. From the date hereof until the Closing Date, Seller
will use its Best Efforts to cause the Company to maintain the Insurance for
itself and the Subsidiaries. Buyer recognizes and acknowledges that the
Insurance will terminate upon the Closing and that the Company and the
Subsidiaries will need to obtain new insurance. All insured claims or losses
arising or occurring on or before the Closing with respect to the Company or the
Subsidiaries shall be for the account of the Company or the Subsidiaries under
the insurance policies maintained pursuant to the applicable operating and
maintenance agreements or credit facilities relating to the Long Term Debt,
regardless of when such claims or losses are reported to the applicable
insurance carrier; provided that with respect to Insurance constituting
liability insurance,. all such claims and losses shall be reported no later than
the first anniversary of the Closing Date.
5.1.4 Access. Seller will afford to Buyer and its authorized
representatives, at Buyer's sole expense, risk and cost, reasonable access from
the date hereof through the Closing Date, during normal business hours, to its
and the Company's personnel, properties, books and records relating to the
Facilities, the Company, the Subsidiaries and EC5 and will furnish to Buyer such
additional financial and operating data and other information relating to any of
them as Buyer may reasonably request, to the extent that such access and
disclosure would not violate the terms of any agreement to which Seller, the
Company, any Subsidiary or EC5 is bound or any Legal Requirement; provided,
however, that the confidentiality of any data or information so acquired shall
be maintained by Buyer and its Affiliates and their representatives in
accordance with Section 5.2.3; and further provided that all requests for access
shall be directed to Brad Petzold (713) 853-1611, or such other persons as
Seller may designate from time to time. During said period, Seller will also
allow Buyer such access to the documents within its possession or to which it
has reasonable access relating directly to Cogen JV.
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5.1.5 Antitrust Notification and Other Governmental Filings. Seller or
its Affiliate will, as promptly as practicable (and, in any event, within 10
days after the execution hereof) file with the Federal Trade Commission and the
Department of Justice the notification and report form required to be filed by
it for the transactions contemplated hereby (and shall request early termination
of the waiting period) and any supplemental information which may be reasonably
requested in connection therewith pursuant to the HSR Act.
5.1.6 Confidentiality. After the Closing Date, Seller shall not,
directly or indirectly, use, disclose or provide to any other person or entity
any information of a confidential or proprietary nature concerning the business
or assets of the Company, the Subsidiaries or EC5 except (i) as is required in
governmental filings or judicial, administrative or arbitration proceedings or
by Legal Requirements, (ii) information that was or becomes in the public domain
without breach of any obligation of confidentiality by Seller or its Affiliates,
or (iii) as is reasonably necessary to enforce its rights or defend its
obligations in connection with the Facilities.
5.1.7 Public Announcements. Subject to applicable securities law or
stock exchange requirements, at all times until the Closing Date, Seller shall
promptly advise, and obtain the approval (which may not be withheld
unreasonably) of, Buyer before issuing, or permitting any of its directors,
officers, employees, agents or investment bankers, or any of its Affiliates to
issue, any press release or other announcement with respect to this Agreement or
the transactions contemplated hereby; provided that no further approval shall be
required for press releases or other announcements which are substantially
similar to previously approved releases or announcements provided a copy of such
release or announcement is furnished promptly to Buyer.
5.1.8 Transaction Costs. Seller shall bear and pay all of the costs,
fees and expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement.
5.1.9 Noncompetition. For a period of one year after the Closing Date,
neither Seller nor any of its Affiliates shall sell or enter into any contract
to sell and, upon request by Buyer, shall immediately cease any activities or
attempts to sell or enter into any contract to sell, steam to Union Carbide
Corporation for use at its facility adjacent to the Texas City Facility or to
Hoechst Celanese Corporation for use at its facility adjacent to the Clear Lake
Facility.
5.1.10 Satisfaction of Closing Conditions. Seller shall use its Best
Efforts to cause satisfaction of the conditions precedent to Closing set forth
in Sections 6.1.3, 6.1.7 through 6.1.10, and, subject to Section 8.1(v),
Sections 6.1.6 and 6.2.7 through 6.2.9.
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5.2 Covenants of Buyer. Buyer covenants and agrees with Seller as follows:
5.2.1 Antitrust Notification and Other Governmental Filings. Buyer or
its Affiliate will as promptly as practicable (and, in any event, within 10 days
after the execution hereof) file with the Federal Trade Commission and the
Department of Justice the notification and report form required for the
transactions contemplated hereby (and shall request early termination of the
waiting period) and any supplemental information which may be reasonably
requested in connection therewith pursuant to the HSR Act.
5.2.2 Public Announcements. Subject to applicable securities law or
stock exchange requirements, at all times until the Closing Date, Buyer shall
promptly advise, and obtain the approval (which may not be withheld
unreasonably) of, Seller before issuing, or permitting any of Buyer's directors,
officers, employees, agents or investment bankers, or any of Buyer's Affiliates
to issue, any press release or other announcement with respect to this Agreement
or the transactions contemplated hereby; provided that no further approval shall
be required for press releases or other announcements which are substantially
similar to previously approved releases or announcements provided a copy of such
release or announcement is furnished promptly to Seller.
5.2.3 Confidential Information. In the event that this Agreement is
terminated or, if not terminated, until the Closing Date, the confidentiality of
any data or information received by Buyer regarding the business and assets of
the Company, Seller and their respective Affiliates shall be maintained by Buyer
and its representatives in accordance with the Confidentiality Agreement dated
March 10, 1997 executed by Calpine Corporation and Seller (the "Confidentiality
Agreement").
5.2.4 Transaction Costs. Buyer shall bear and pay all of the costs,
fees and expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement, including the filing fees under the
HSR Act.
5.2.5 Satisfaction of Closing Conditions. Buyer shall use its Best
Efforts to cause satisfaction of the conditions precedent to Closing set forth
in Sections 6.2.3, 6.2.4, and 6.2.7 through 6.2.9.
5.2.6 Bank Account and Line of Credit. Buyer has heretofore delivered
to Seller a letter from Bank of Nova Scotia (the "Bank") stating that Buyer (i)
has deposited sufficient funds in a deposit account maintained by it at the Bank
and (ii) has sufficient funds available to be drawn under the line of credit
provided by the Bank, to complete the purchase of the Class A Common Stock and
Long Term Debt as contemplated hereby. Buyer hereby agrees that prior to the
termination of this Agreement as permitted hereunder, it shall not (a) withdraw
or use funds from such account or (b) draw down on or use funds from such line
of credit except to purchase the Class A Common Stock and the Long Term Debt,
which withdrawal or use in the aggregate would reduce the total amount available
in such account and under such line of credit to less than the sum of the Base
Purchase Price and the amount of the principal and interest outstanding under
the Long Term Debt. From the date hereof through the Closing, Buyer shall not,
and shall cause its Affiliates not to, take any action that would cause the
terms and conditions to utilizing funds under such line of credit not to be
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satisfied. Nothing in this Section 5.2.6 is intended to, nor shall it, modify
Section 4.2.8 or imply that Buyer's obligations under this Agreement are subject
to financing.
5.2.7 Certain FERC Matters. At or before the Closing, Buyer shall
ratify all written agreements between Clear Lake and Cogenron, on the one hand,
and Buyer, Seller, DRI or their respective Affiliates, on the other, and shall
furnish Seller with a valid resolution of Buyer evidencing such ratification.
Within 30 days after the Closing Date, Buyer shall cause Clear Lake and Cogenron
to file the Self-Certification Notices with FERC.
5.3 Mutual Covenants. Buyer and Seller covenant and agree as follows:
5.3.1 Release. Prior to the Closing, without limiting Seller's rights
under Sections 6.2.7 through 6.2.9, and 8.1(v), Buyer and Seller shall use their
Best Efforts to have Seller and their Affiliates released from all obligations
under the agreements listed on Schedule 4.1.10(C) (including the agreements
listed as Credit Support Obligations therein (the "Credit Support
Obligations")). In addition, Buyer shall provide financial information and offer
to furnish substantially equivalent credit support obligations to the obligees
under the Credit Support Obligations to effect such release pursuant to
agreements that are mutually satisfactory to Buyer and Seller. To the extent
that Seller and its Affiliates are not released from all of the Credit Support
Obligations pursuant to agreements reasonably satisfactory to Seller in form and
substance, Buyer shall indemnify Seller and its Affiliates pursuant to Section
7.2(B) with respect thereto.
5.3.2 Tax Returns. Seller, in cooperation with the Company, shall cause
to be prepared and timely filed (taking into account any extensions permitted
hereunder) each income Tax Return of the Company that includes a taxable period
ending on or before the Closing Date which is required to be filed after the
Closing Date, and pursuant to Section 9.4(B), Buyer shall provide records and
assistance to enable Seller to make such filings. Seller shall not cause or
permit the Company to extend the filing date for such Tax Returns without
Buyer's prior written consent.
5.3.3 Administrative Services Agreement. Seller shall cause ECT to
agree (i) to offer to the Company to amend the Administrative Services Agreement
to provide that it will terminate on a date designated by the Company which is
not more than 90 days after the Closing Date, (ii) to continue to perform ECT's
duties and obligations under the Administrative Services Agreement through and
including such designated termination date and (ii) upon such termination date,
to deliver and turn over to the Company non-proprietary software, electronic
data and books and records relating primarily to the Company or the Subsidiaries
and any other items as are mutually agreed upon by ECT and the Company.
5.3.4 Employment Matters.
(A) Facilities Employees. Schedule 5.3.4(A) (the "Employee Schedule")
to be attached to this Agreement will contain the names of employees of Enron
International Payroll, Inc. ("EIPI") who are engaged in the operation and
maintenance of the Facilities (the "Facilities Employees"), their current
salaries and work location. Seller shall deliver the Employee Schedule of
Facilities Employees on a confidential basis to the Manager, Human Resources of
Buyer, no more than five
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business days after this Agreement is executed. The Employee Schedule shall set
forth substantially the same number of employees, types and numbers of jobs at
each Facility and at the Company, current salary amounts and years of past
service credit as the information previously provided to Buyer by Seller or its
Affiliates. The Employee Schedule shall show the name, job position, work
location, current salary and years of past service credit for each of the
Facilities Employees. In addition, Seller will provide Buyer on a confidential
basis relevant written information in Seller's possession regarding each
individual's work qualifications, training history, and prior jobs held while
employed by any affiliate of Seller. The average severance cost for these
Facilities Employees is $25,272 (the "Average Severance Cost"). Buyer, in its
sole discretion, may make offers of employment to any of the Facilities
Employees. Buyer understands that offers of employment which are not at least at
the current salary and at the same location of any Facilities Employee may be
declined by such employee and such employee, if terminated by EIPI, would be
entitled to a severance benefit under the Enron Corp. Severance Pay Plan (the
"Severance Plan"), a copy of which Seller has provided to Buyer. With respect to
Facilities Employees who become entitled to a severance benefit under the
Severance Plan as a result of Buyer's not having made offers of employment to
such employees at their current salaries and at the same location, Seller shall
be financially responsible for the first nine Facilities Employees who are paid
a severance benefit under the Severance Plan, and Buyer shall promptly, without
delay, upon receipt of written notification by Seller, pay to Seller an amount
equal to the number of such Facilities Employees in excess of nine, who within
90 days after the Closing, are paid a severance benefit under the Severance Plan
multiplied by the Average Severance Cost. If any such Facilities Employee is
terminated by Seller and receives severance under the Severance Plan, and within
12 months after the termination of the Facilities Employee by Seller, Buyer
employs such Facilities Employee, then Buyer shall promptly pay to Seller an
amount equal to all or a portion of the severance benefit, if any, paid to such
Facilities Employee by either Seller or EIPI in connection with such employee's
termination of employment with either Seller or EIPI, determined by multiplying
the amount of such severance benefit by a fraction, the numerator of which is
the number 12 reduced by the number of full months that have passed from the
Closing Date to the employment date, and the denominator of which is the number
12.
(B) COBRA Continuation Coverage. Seller shall be responsible for the
health care claims of any Facilities Employees that are not employed by Buyer as
of the Closing Date who receive continuation of health care coverage, as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
under medical plans by which they are covered. Buyer shall be responsible for
providing health care continuation coverage, if any, as required by COBRA to any
of the Facilities Employees who are employed by Buyer as of or subsequent to the
Closing Date and who cease employment with Buyer for any reason thereafter.
(C) Participation In Buyer's Plans. Subsequent to the Closing, upon
employment with Buyer, the Facilities Employees employed by Buyer shall be
eligible for participation in all employee benefit plans (within the meaning of
Section 3(3) of ERISA) for which similarly situated employees of Buyer are
eligible ("Buyer's Plans"). Under Buyer's Plans, the Facilities Employees
employed by Buyer will be given credit for Past Service (defined below) for
purposes of determining (i) eligibility for participation in the retirement,
short or long term disability, severance and vacation plans (including, without
limitation, eligibility for early retirement), and (ii) the duration and amount,
if any, of short or long term disability and severance benefits. "Past Service"
means (i) service as
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an employee of EIPI or any of its affiliates and (ii) service as an employee of
any other entity, but only to the extent that such service is recognized under
the applicable and similar plan of EIPI or its Affiliates, and is continuous
through the Closing Date.
(D) No Medical Preexisting Condition. No preexisting condition
limitations shall be applicable to Facilities Employees employed by Buyer under
any employee benefit plan of Buyer provided that, with respect to each
Facilities Employee and his or her other covered dependents, such Facilities
Employee and each covered dependent enrolls in such plan within 30 days of the
Facilities Employee commencing employment with Buyer; and further provided that
such person has been covered under a medical plan for the six-month period
preceding the Closing. Additionally, any Facilities Employee or covered
dependent expenses applied toward deductibles in the year in which the Closing
occurs and any out-of-pocket limitations under EIPI's medical and dental plans
in the year in which the Closing occurs shall be recognized under Buyer's
medical and dental plans and applied respectively toward any deductibles or
out-of-pocket limits thereunder in such year.
(E) Responsibility for Claims. Employee benefit claims for expenses
incurred by, or for services provided to, Facilities Employees or their
dependents which occur prior to the date of the Closing shall be the financial
obligation of Seller. Employee benefit claims for expenses incurred by, or for
services provided to, Facilities Employees employed by Buyer or their covered
dependents which occur on or after the Closing Date shall be covered under
Buyer's Plans. The amount and type of benefits payable in any case shall be
determined in accordance with the terms of the applicable employee benefit plan.
(F) Severance Benefits. Buyer shall cause the Facilities Employees
employed by Buyer to be eligible for severance benefits, to be paid to such a
Facilities Employee if within one year after the Closing the Facilities Employee
either has a reduction in base pay and elects within 30 days thereof to
terminate employment or is terminated by Buyer for a reason other than
termination for cause, in the sum of (i) two weeks of base pay for each year of
Past Service and additional service, or portion thereof, credited with Buyer,
and (ii) two weeks of base pay for each Ten Thousand Dollars, or portion
thereof, of annualized base pay, up to a maximum total severance payment equal
to 52 weeks of base pay. "Termination for cause" as used in this paragraph shall
mean termination for such reasons as Buyer may reasonably determine constitutes
cause which is serious enough to result in a legitimate business need for
termination of employment instead of warning, probation or counseling. Failure
to meet established performance expectations shall not be such a cause for
termination unless the Facilities Employee has been counseled about the
unacceptable performance and has had an opportunity to improve performance for
at least 30 days.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Buyer's Obligation to Close. Buyer's obligation to close under this
Agreement is subject to the fulfillment, on the Closing Date, of each of the
following conditions (except to the extent that Buyer shall have hereafter
agreed in writing to waive one or more of such conditions):
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6.1.1 Compliance with Agreement. Seller shall have performed and
complied in all material respects with all covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing.
6.1.2 Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the Closing.
6.1.3 Certificate. Seller shall have delivered to Buyer (i) a
certificate, dated the Closing Date, executed on its behalf by its president or
a vice president, certifying true and correct copies of each contract,
agreement, commitment, instrument or other document described on Schedules
4.1.10(A), 4.1.10(B), and 4.1.10(C), and (ii) a certificate, dated the Closing
Date, executed on its behalf by its president or a vice president, to the effect
that the conditions in Sections 6.1.1 and 6.1.2 are satisfied, except for any
exceptions noted in such certificate. If any of Buyer's conditions to Closing
have not been satisfied, but Buyer nonetheless waives the satisfaction of such
condition, Buyer shall not be entitled to any decrease in the Purchase Price or
any recourse, including indemnification under Section 7.1, against Seller or its
Affiliates with respect to the matter so waived.
6.1.4 Filings. Any applicable waiting period under the HSR Act shall
have expired.
6.1.5 Litigation. (i) There shall not be pending any litigation or
proceeding (filed by a person or entity other than Buyer or its Affiliates) to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain material damages or other material relief in connection with the
consummation of such transactions.
6.1.6 Stock Certificates; Assignment Agreements. Seller shall have
delivered to Buyer (i) one or more stock certificates evidencing the Class A
Common Stock, with stock powers duly executed in blank, and (ii) the Assignment
Agreements, duly executed by Seller and its Affiliates (to the extent they are
parties thereto) and all necessary consents thereto shall have been obtained.
6.1.7 Opinion. Seller shall have delivered to Buyer one or more
opinions of internal counsel of Seller or its Affiliates (i) covering due
authorization, execution and delivery by Seller and its Affiliates, as
applicable, of this Agreement, any separate agreements executed
contemporaneously herewith between Seller or its Affiliates and Buyer or its
Affiliates (including the Guaranty by Enron Corp. of Seller's obligations
hereunder in favor of Buyer) and the Assignment Agreements and (ii) to the
effect that this Agreement and such other agreements are valid and binding on
Seller or its Affiliates, as applicable (but expressing no opinion as to
enforceability).
6.1.8 Secretary's Certificate. Seller shall have delivered to Buyer a
certificate dated the Closing Date executed by the secretary or an assistant
secretary of Seller, certifying that the resolutions of Seller authorizing
entering into this Agreement and in full force and effect.
6.1.9 Resignations. Seller shall have delivered to Buyer the duly
executed resignations of all Class A directors and the officers listed on
Schedule 6.1.9.
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6.1.10 Scheduled Payments. All scheduled payments on Long Term Debt due
on or before the Effective Date pursuant to the applicable amortization schedule
therefor shall have been paid.
6.2 Seller's Obligation to Close. The obligation of Seller to close under this
Agreement is subject to the fulfillment, on the Closing Date, of each of the
following conditions (except to the extent that Seller shall have hereafter
agreed in writing to waive one or more of such conditions):
6.2.1 Compliance with Agreement. Buyer shall have performed and
complied in all material respects with all covenants to be performed or complied
with by Buyer on or prior to the Closing.
6.2.2 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing
6.2.3 Certificate. Buyer shall have delivered to Seller a certificate,
dated the Closing Date, executed on its behalf by its president or a vice
president, to the effect that the conditions in Sections 6.2.1 and 6.2.2 have
been satisfied, except for any exceptions noted in such certificate. If any of
Seller's conditions to Closing have not been satisfied, but Seller nonetheless
waives the satisfaction of such condition, Seller shall not be entitled to any
increase in the Purchase Price or any recourse, including indemnification under
Section 7.2, against Buyer with respect to the matters so waived.
6.2.4 Opinion. Buyer shall have delivered to Seller an opinion of
internal counsel (i) covering due authorization, execution and delivery by Buyer
and its Affiliates, as applicable, of this Agreement, any separate agreements
executed contemporaneously herewith between Seller or its Affiliates and Buyer
or its Affiliates (including the Guaranty by Calpine Corporation of Buyer's
obligations hereunder in favor of Seller), and the Assignment Agreements and
(ii) to the effect that this Agreement and such other agreements are valid and
binding on Buyer or its Affiliates, as applicable (but expressing no opinion as
to enforceability).
6.2.5 Filings. Any applicable waiting period under the HSR Act shall
have expired.
6.2.6 Litigation. There shall not be pending any litigation or
proceeding (filed by a person or entity other than Seller or its Affiliates) to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain material damages or other material relief in connection with the
consummation of such transactions.
6.2.7 Assignment Agreements. Buyer shall have executed and delivered to
Seller the Assignment Agreements, duly executed by Buyer and its Affiliates (to
the extent they are parties thereto) and all necessary consents thereto shall
have been obtained.
6.2.8 Long Term Debt. Buyer shall have purchased the Long Term Debt,
including the outstanding principal and interest thereunder, pursuant to the
Assignment of Notes and shall have otherwise obtained the release of Seller and
its Affiliates from liability under the Credit Support Obligations (other than
the Surety Agreement) pursuant to documents and agreements in form and substance
reasonably acceptable to Seller or, with respect to Credit Support Obligations
other than
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the UCC Guaranty Agreement, Buyer shall indemnify Seller and its Affiliates with
respect thereto pursuant to Section 7.2(B).
6.2.9 Release. Seller and its Affiliates shall have obtained releases,
in form and substance satisfactory to Seller, of all of its and its Affiliates'
obligations under the Credit Support Obligations, other than the Surety
Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Buyer. (A) After the Closing, subject to Sections 7.1(B),
7.5 and 7.6, Seller shall indemnify Buyer against, and hold Buyer harmless from,
any loss, damage, cost, liability or expense (including reasonable costs of
defense and investigations, settlements, and reasonable attorneys' fees) or
penalties or fines (collectively "Losses") Buyer incurs or becomes subject to,
to the extent arising out of or resulting from any inaccuracy in or breach of
any of the (i) representations and warranties or (ii) covenants made by Seller
herein (any such Loss being referred to herein as "Buyer Indemnified Loss");
provided that Seller shall have no liability under Section 7.1(A) unless the
aggregate of all Buyer Indemnified Losses for which Seller would, but for this
proviso, be liable exceeds on a cumulative basis $1,000,000, and then only to
the extent of any such excess; and further provided that Seller shall not have
any liability under Section 7.1(A) for any individual item where the Loss
relating to such item is less than $25,000; and further provided that, in the
case of Section 4.1.16, in no event shall the aggregate liability of Seller
exceed $4,000,000; and further provided that the aggregate liability of Seller
under this Section 7.1(A) for Buyer Indemnified Losses (excluding Buyer
Indemnified Losses resulting from a breach of Sections 4.1.2 or 4.1.5(B) and
excluding purchase price adjustments and matters covered by separate agreement
executed concurrently herewith which state that they are not subject to such
limitations) shall in no event exceed $10,000,000; and further provided that
Seller's liability with respect to a breach of the representations in Section
4.1.2 and 4.1.5(B) shall not exceed the Purchase Price; and further provided
that the aggregate liability of Seller under this Agreement (including Buyer
Indemnified Losses resulting from breach of Section 4.1.2 or 4.1.5(B)) and under
any certificate to be delivered by Seller or its Affiliates at the Closing and
under any agreement delivered in connection herewith shall in no event exceed
the Purchase Price; and further provided that in no event shall Seller have any
obligation to indemnify Buyer with respect to any Losses arising out of default
by the Company or the Subsidiaries under the credit agreements or security
agreements with respect to the Long Term Debt (x) unless such default is a
default with respect to (i) the payment of principal, interest, fees or other
expenses required to be paid under such credit agreements or security
agreements, (ii) any requirements of such credit agreements or security
agreements to deposit, maintain, return or restore funds in or to project
accounts or reserve accounts, or (iii) the use, application or distribution of
funds, including payments to Seller, Dominion and their respective Affiliates,
or (y) unless Seller had knowledge of such default at or prior to the Closing.
(B) The representations and warranties in this Agreement and in any
other document or certificate to be delivered at the Closing pursuant hereto
shall survive the Closing solely for purposes of this Article VII and shall
terminate 540 days after the Closing Date, except for (i) Sections 4.1.2,
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4.1.5(B), and 4.2.2, which, solely for purposes of this Article VII, shall
survive indefinitely, (ii) Section 4.1.14, which shall terminate upon the
expiration of the statute of limitations applicable to tax matters, and (iii)
Section 4.1.16, which shall terminate 1,095 days after the Closing Date. No
action can be brought with respect to any breach of any representation and
warranty under this Agreement or any other document or certificate to be
delivered at the Closing pursuant hereto unless a Claim Notice or Indemnity
Notice specifying the breach of the representation or warranty forming the basis
of such claim has been delivered to the party alleged to have breached such
representation or warranty prior to the termination date of such representation
or warranty as described in this Section 7.1(B). Any claim for indemnity for
breach of covenant herein that pursuant to its terms is to be performed prior to
the Closing shall be effective only as to matters with respect to which a Claim
Notice has been delivered pursuant hereto within 180 days after the Closing
Date. The limited rights provided to Buyer and Seller pursuant to this Article
VII and Article VIII shall be the sole remedy for any inaccuracy in or breach of
any representations, warranties or covenants contained in this Agreement or in
any document or certificate to be delivered at the Closing. Except to the extent
expressly set forth in Section 4.1 or in any agreement or certificate delivered
by Seller or its Affiliates at the Closing, neither Seller, Company, any
Subsidiary nor any of their respective Affiliates makes any representations or
warranties whatsoever and Seller hereby disclaims all liability and
responsibility for any other representation, warranty, statement or information
made or communicated (orally or in writing) to Buyer (including, but not limited
to, any information contained in the data room maintained by or on behalf of
Seller or any opinions, information or advice which may have been provided to
Buyer by any officer, stockholder, director, employee, agent, consultant or
representative of Seller, Company, any Subsidiary or any of their respective
Affiliates). Without limiting the generality of the foregoing, except as
expressly set forth in Section 4.1 or any certificates delivered by Seller or
its Affiliates at the Closing, neither Seller, Company, any Subsidiary nor any
of their respective Affiliates makes any representation or warranty as to (i)
title to any of the properties or assets of Company or any Subsidiary, (ii) the
Facilities, or (iii) the prospects of the business of the Company and the
Subsidiaries. SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, OR FITNESS FOR PARTICULAR PURPOSE, AND OF
CONFORMITY TO SAMPLES AND MODELS. To the fullest extent permitted by Legal
Requirements, Buyer and Seller hereby waive any and all rights they may have at
law or in equity except as set forth in this Article VII with respect to any
inaccuracy in or breach of any representation or warranty and covenant in this
Agreement or in any certificates to be delivered by Seller or its Affiliates at
the Closing.
7.2 Indemnification and Release of Seller. (A) After the Closing, subject to
Section 7.5, Buyer shall indemnify Seller against, and hold Seller harmless
from, any Losses Seller incurs or becomes subject to, to the extent arising out
of or resulting from any inaccuracy in or breach of any of the (i)
representations and warranties or (ii) covenants made by Buyer herein (any such
Loss being referred to herein as a "Seller Indemnified Loss"); provided that
Buyer shall have no liability under Section 7.2(A) unless the aggregate of all
Seller Indemnified Losses (excluding Seller Indemnified Losses resulting from a
breach of Section 4.2.2, 4.2.8 or 5.2.6) for which Buyer would, but for this
proviso, be liable exceeds on a cumulative basis $1,000,000, and then only to
the extent of any such excess; and further provided that Buyer shall not have
any liability under Section 7.2(A) for any individual item where the Loss
relating to such item is less than $25,000; and further provided that
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the aggregate liability of Seller under this Section 7.2(A) for Seller
Indemnified Losses (excluding Seller Indemnified Losses resulting from a breach
of Section 4.2.2, 4.2.8 or 5.2.6) shall in no event exceed $10,000,000; and
further provided that the aggregate liability of Buyer under this Agreement
(including Seller Indemnified Losses resulting from breach of Section 4.2.2) or
in any certificate delivered by Buyer or its Affiliates at the Closing) shall in
no event exceed the sum of the Purchase Price and the total outstanding
principal and interest under the Long Term Debt.
(B) After the Closing, Buyer shall indemnify and hold harmless Seller
and its Affiliates from any Losses arising out of obligations to be paid or
performed from and after the Closing under the Credit Support Obligations,
except for Credit Support Obligations with respect to which Seller has advised
Buyer in writing at or before the Closing that any release received with respect
thereto is satisfactory in form and substance to Seller.
(C) Except as expressly set forth in Section 4.2 or in any certificate
to be delivered by Buyer or its Affiliates at the Closing, neither Buyer nor any
of its Affiliates makes any representations or warranties whatsoever, and Buyer
hereby disclaims all liability and responsibility for any other representation,
warranty, statement or information made or communicated (orally or in writing)
to Seller and its Affiliates. To the fullest extent permitted by Legal
Requirements, Seller and its Affiliates hereby waive any and all rights they may
have at law or in equity except as set forth in this Article VII with respect to
any inaccuracy in or breach of any representation, warranty or covenant in this
Agreement or in any certificate to be delivered by Buyer or its Affiliates at
the Closing.
7.3 Applicability. SUBJECT TO SECTIONS 7.5 AND 7.6, THE PROVISIONS OF THIS
ARTICLE VII SHALL APPLY NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH
THE INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY ARE ADJUDICATED NEGLIGENT OR
OTHERWISE AT FAULT OR STRICTLY LIABLE WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS
OF INDEMNIFICATION UNDER THIS ARTICLE VII SHALL, SUBJECT TO SECTION 7.5 AND 7.6,
CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY THE INDEMNIFIED PARTY ONLY
FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGE OR INJURIES ADJUDICATED TO
BE ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
7.4 Indemnification Procedures. All claims for indemnification under
this Agreement shall be asserted and resolved as follows:
(A) A party claiming indemnification under this Agreement (an
"Indemnified Party") with respect to any third-party claim or claims asserted
against the Indemnified Party ("Third Party Claim") that could give rise to a
right of indemnification under this Agreement shall promptly (i) notify the
party from whom indemnification is sought (the "Indemnifying Party") of the
Third Party Claim and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the Third Party
Claim, a copy of all papers served with respect to such claim (if any), the
Indemnified Party's best estimate of the amount of damages attributable to the
Third Party Claim and the basis of the Indemnified Party's request for
indemnification under this
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Agreement. Subject to Section 7.1(B), failure to provide such Claim Notice shall
not affect the right of the Indemnified Party's indemnification hereunder except
to the extent the Indemnifying Party is prejudiced thereby. Within 30 days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (x) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article VII with
respect to such Third Party Claim and (y) whether the Indemnifying Party desires
to defend the Indemnified Party against such Third Party Claim; provided that if
the Indemnifying Party fails to so notify the Indemnified Party during the
Election Period, the Indemnifying Party shall be deemed to have elected to
dispute such liability.
(B) If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party does not dispute its potential
liability to the Indemnified Party under this Article VII and that the
Indemnifying Party elects to assume the defense of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 7.4(B). The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided that counsel selected by the Indemnifying Party to defend such
proceedings shall be reasonably acceptable to the Indemnified Party; and further
provided that the Indemnifying Party shall not enter into any settlement
agreement providing for (i) a finding of responsibility or liability on the part
of the Indemnified Party, (ii) any material sanction or material restriction
upon the conduct of any business, (iii) an affirmative obligation on the part of
the Indemnified Party, other than an obligation to pay money which will be
discharged in full by the Indemnifying Party, or (iv) any amendment to any
contract, agreement, instrument or other document binding on Buyer, the Company,
either Subsidiary, EC5, or their respective Affiliates; in each case, without
the Indemnified Party's consent, which consent shall not be unreasonably
withheld. The Indemnified Party is hereby authorized, at the sole cost and
expense of the Indemnifying Party (but only if pursuant to Section 7.4(D) the
Indemnified Party is actually entitled to indemnification hereunder), to file,
during the Election Period, any motion, answer or other pleadings which the
Indemnified Party shall deem necessary or appropriate to protect its interests
or those of the Indemnifying Party and not prejudicial to the Indemnifying Party
(it being understood and agreed that if an Indemnified Party takes any such
action, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim to the extent that such action prejudiced
the Indemnifying Party). If requested by the Indemnifying Party, the Indemnified
Party agrees, at the sole cost and expense of the Indemnifying Party, to
cooperate with the Indemnifying Party and its counsel in contesting any Third
Party Claim which the Indemnifying Party elects to contest, including the making
of any related counterclaim against the person or entity asserting the Third
Party Claim or any cross-complaint against any person or entity. The Indemnified
Party may participate in, but not control, any defense or settlement or any
Third Party Claim controlled by the Indemnifying Party pursuant to this Section
7.4, and the Indemnified Party shall bear its own costs and expenses with
respect to such participation.
(C) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 7.4(B),
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or if the Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 7.4(B) but fails to diligently prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party (but only if pursuant to Section
7.4(D) the Indemnified Party is actually entitled to indemnification hereunder),
the Third Party Claim by all appropriate proceedings, which proceedings shall be
promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall have full control of such
defense and proceedings; provided, however, that the Indemnified Party may not
enter into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld, any compromise or settlement of such Third Party Claim.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section 7.4(C),
and the Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
(D) If the Indemnifying Party elects not to (or is deemed to have
elected not to) assume the defense of a Third Party Claim, or elects to assume
the defense of a Third Party Claim, but reserves the right to dispute whether
such claim is an indemnifiable loss under this Article VII, the determination of
whether the Indemnified Party is entitled to indemnification hereunder shall be
resolved by litigation in an appropriate court of competent jurisdiction.
(E) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall promptly transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, the Indemnified Party's best estimate of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within 30 days from its receipt of the Indemnity Notice
that the Indemnifying Party disputes such claim, the Indemnifying Party shall be
deemed to have disputed such claim. If the Indemnifying Party has disputed (or
is deemed to have disputed) such claim, such dispute shall be resolved by
litigation in an appropriate court of competent jurisdiction.
(F) Payments of all amounts owing by the Indemnifying Party with
respect to a Third Party Claim shall be made within 30 days after the latest of
(i) the settlement of the Third Party Claim, (ii) the expiration of the period
for appeal of a final adjudication of such Third Party Claim and (iii) the
expiration of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement. Payments of all
amounts owing by the Indemnifying Party as described in Section 7.3(E) shall be
made within 30 days after the earlier of the expiration of the period for appeal
of a final adjudication or agreement between the Indemnifying Party and the
Indemnified Party as to the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
7.5 Limitation on Liabilities. (A) IN NO EVENT SHALL THE INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT (INCLUDING UNDER ARTICLE VII AND ARTICLE VIII)
OR THE TERM "LOSSES" COVER OR INCLUDE CONSEQUENTIAL, INCIDENTAL, SPECIAL,
INDIRECT, OR PUNITIVE DAMAGES OR LOST PROFITS SUFFERED BY THE COMPANY, BUYER,
SELLER OR SELLER'S AFFILIATES, WHETHER
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BASED ON STATUTE, CONTRACT, TORT OR OTHERWISE, AND WHETHER OR NOT
ARISING FROM THE INDEMNIFYING PARTY'S SOLE, JOINT OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT.
(B) Notwithstanding anything to the contrary contained in this
Agreement, (i) no amounts of indemnity shall be payable as a result of any claim
in respect of a Loss under Articles VII or VIII to the extent that (1) the
Indemnified Party failed to promptly notify the Indemnifying Party of such claim
and the Indemnifying Party's liability with respect to such claim was adversely
affected by such failure, or (2) the Indemnified Party had a reasonable
opportunity, but failed, in good faith to mitigate the Loss, including the
failure to use Best Efforts to recover under a policy of insurance or under a
contractual right of set-off or indemnity, (ii) all indemnifiable Losses under
Articles VII or VIII shall be net of insurance proceeds recovered or recoverable
by the Indemnified Party and net of tax benefits to the Indemnified Party and
its Affiliates, (iii) in no event shall Seller be responsible for more than 50%
of the amount of Loss suffered or incurred in whole or in part by the Company or
the Subsidiaries (as opposed to a Loss suffered or incurred solely by Buyer; for
example, a breach of Section 4.1.5(B), and (iv) the amounts of indemnity and
Losses described in this Section 7.5 shall in all cases be subject to the
restrictions in Section 7.1, and the provisions of this Section 7.5 shall in no
event expand the liability of Seller under Section 7.1. The Indemnified Party
hereby waives (or will cause to be waived) any subrogation rights that its
insurers may have with respect to any indemnifiable Losses.
7.6 Notification by Seller of Certain Matters. Seller may, at the Closing,
notify Buyer in one or more of the certificates to be delivered pursuant to
Section 6.1.3, in reasonable detail of any representation or warranty of Seller
that was not true and correct as of the date of this Agreement or as of the
Closing or of any covenant of Seller that has not been performed and complied
with and, if Buyer shall nevertheless close under this Agreement, none of the
matters set forth in such certificate shall be deemed to be an inaccuracy in or
breach of any of the representations and warranties or covenants of Seller
herein for purposes of, and Buyer shall not be entitled to be indemnified as to
any of such matters pursuant to, this Article VII.
ARTICLE VIII
TERMINATION RIGHTS
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date as follows, and in no other manner:
(i) by mutual consent of Buyer and Seller;
(ii) by notice from Seller to Buyer, if the Closing Date shall not have
occurred on or before May 15, 1997;
(iii) by notice from Buyer to Seller, if the Closing Date shall not
have occurred on or before May 15, 1997;
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(iv) by either party by notice to the other, if (a) a final
non-appealable judgment has been entered against such party or any of its
Affiliates restraining, prohibiting or declaring illegal the transactions
contemplated hereby or (b) the Company or any of the Subsidiaries shall have
declared bankruptcy or been involuntarily put into bankruptcy or receivership;
or
(v) notwithstanding Section 5.1.10 or any other provision of this
Agreement, by notice from Seller to Buyer, if at any time prior to the Closing
Seller reasonably believes, in its sole discretion, that the approvals required
(in Seller's judgment) to enter into this Agreement or the Assignment of Notes
or to consummate the transactions contemplated hereby or thereby in a manner
that releases Seller and its Affiliates from liability under the Credit Support
Obligations (including any approvals from Dominion or its Affiliates, the
lenders under the Long Term Debt, and Union Carbide Corporation under the
Guaranty Agreement, but excluding any consent of Texas Utilities Electric
Company under the Surety Agreement) will not be obtained in a time period
satisfactory to Seller in its sole discretion.
8.2 Limitation on Right to Terminate; Effect of Termination. (A) A party shall
not be allowed to exercise any right of termination pursuant to Section 8.1 if
the event giving rise to the termination right shall be due to the willful
failure of such party to perform or observe in any material respect any of the
covenants set forth herein to be performed or observed by such party.
(B) If this Agreement is terminated as permitted under Section 8.1,
such termination shall be without liability of or to any party to this Agreement
or any Affiliate, shareholder, director, officer, employee, agent or
representative of such party; provided that Sections 4.1.19, 4.2.6, 5.1.6,
5.1.7, 5.1.8, 5.2.2, 5.2.3, 5.2.4, 8.2, 9.10 and 9.11 shall survive any such
termination; and further provided that if any such termination under Section 8.1
(excluding Section 8.1(v)) shall result from the willful failure of any party or
its Affiliate to perform a covenant of this Agreement or from a willful breach
of this Agreement by any party or its Affiliate, or a breach, whether or not
willful, of Section 4.2.8 or 5.2.6 by Buyer, then, subject to Article VII, such
party shall be liable for Losses sustained or incurred by the other parties as a
result of such failure or breach.
ARTICLE IX
GENERAL
9.1 Exclusive Agreement; Schedules. This Agreement and the attached schedules
and exhibits, the agreements and documents to be executed pursuant hereto or
which are executed concurrently herewith and the Confidentiality Agreement set
forth the entire agreement and understanding of the parties in respect of the
transactions contemplated hereby and supersede all prior agreements,
arrangements and undertakings (oral or written) relating to the subject matter
hereof. The disclosures in the schedules hereto are to be taken as relating to
the representations and warranties of Seller as a whole. The inclusion of
information in the schedules hereto shall not be construed as an admission that
such information is material. In addition, matters reflected in the schedules
are not necessarily limited to matters required by this Agreement to be
reflected on such schedules. Such additional matters are set forth for
information purposes only and do not necessarily include
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other matters of a similar nature. No representation, promise, inducement or
statement of intention has been made by any party which is not embodied in or
superseded by this Agreement or the Confidentiality Agreement or in the
agreements and documents to be executed pursuant hereto, and no party shall be
bound by or liable for any alleged representation, promise, inducement or
statement of intention not so set forth.
9.2 Successors and Assigns. All of the terms, covenants, representations,
warranties and conditions of this Agreement shall be binding upon, and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
permitted successors and assigns (and in the case of indemnities to the benefit
of all persons indemnified). This Agreement and the rights and obligations
hereunder shall not be assigned by any party hereto (by operation of law or
otherwise) without the prior written consent of the other party, except that any
party may assign an interest in all of its rights hereunder to any Affiliate;
provided that no assignment shall relieve the assigning party of any of its
representations, warranties, or obligations contained herein, and except that
after the Closing Buyer may collaterally assign its rights hereunder to the
lenders of the Company, the Subsidiaries, Buyer or its Affiliates, to secure the
Long Term Debt or any extensions or replacements thereof or any other financing
or refinancing of the Facilities.
9.3 Amendments. This Agreement may be amended, modified, superseded or canceled,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by the parties
hereto, or, in the case of a waiver, by or on behalf of the party waiving
compliance. The failure of any party at any time or times to require performance
of any provisions hereof shall in no manner affect the right at a later time to
enforce the same. No waiver by any party of any condition, or of any breach of
any term, covenant, representation or warranty contained in this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of any breach of any other term, covenant, representation or
warranty.
9.4 Records and Access. (A) After the Closing, Seller shall deliver to Buyer all
files and records in its possession that are normally maintained by Seller or
its Affiliates in respect of the Company (including all documents and
information contained in the data room maintained by or on behalf of Seller) as
soon as practicable; provided that Seller may make and keep copies of such files
and records.
(B) From and after the Closing, Buyer shall maintain copies of all
books, records and other information (including books, records and information
relating to financial information, taxes and litigation) relating to the
Facilities and the Company and shall not destroy any of same without first
allowing Seller, at Seller's expense, the opportunity to make copies of same for
a period of not less than five years (or if longer, the applicable statute of
limitations period). During such period, Buyer shall give Seller and their
representatives reasonable cooperation, access and staff assistance, during
normal business hours and upon reasonable notice, with respect to such books,
records and information as may be necessary for general business purposes,
including for the preparation of tax returns and financial statements and the
management and handling of tax audits and litigation; provided that such
requested cooperation, access and assistance shall not unreasonably interfere
with the normal operations of Buyer.
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9.5 Further Assurances. Each party agrees to execute such further instruments or
documents as the other party may from time to time reasonably request in order
to confirm or carry out the transactions contemplated in this Agreement;
provided that no such instrument or document shall expand a party's obligations
or liabilities beyond that contemplated in this Agreement.
9.6 Notices. All notices, requests, demands and other communications
(collectively, "Notices") required or permitted to be given hereunder shall be
in writing and delivered personally, or by facsimile transmission or mailed
first class, postage prepaid, registered or certified mail, as follows:
If to Buyer, to:
Calpine Finance Company
50 West San Fernando
San Jose, California 95113
Attention: Ron Walter and Joseph E. Ronan
Facsimile Number: (405) 995-0505
with a copy to:
Washburn, Briscoe & McCarthy
A Professional Corporation
55 Francisco Street, Suite 600
San Francisco, California 94133
Attention: David C. Spielberg
Facsimile Number: (415) 421-5044
If to Seller, to:
Enron Power Corp.
Enron Building
1400 Smith
Houston, Texas 77002
Attention: General Counsel
Facsimile Number: (713) 646-3491
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Marcia E. Backus
Facsimile Number: (713) 615-5606
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<PAGE>
All Notices shall be effective upon receipt. Any party may change its Notice
address by giving written Notice to the other in the manner specified above.
9.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
9.8 Severability. In the event any of the provisions hereof are held to be
invalid or unenforceable under any Legal Requirement, the remaining provisions
hereof shall not be affected thereby. In such event, the parties hereto agree
and consent that such provisions and this Agreement shall be modified and
reformed so as to effect the original intent of the parties as closely as
possible with respect to those provisions which were held to be invalid or
unenforceable.
9.9 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one agreement.
9.10 Expenses. Except as expressly provided in this Agreement, whether or not
the transactions contemplated hereby are consummated, each party shall pay its
own expenses incident to the preparation of this Agreement and for consummating
the transaction.
9.11 Attorneys' Fees. If any party institutes legal action against the other to
enforce this Agreement, the party prevailing pursuant to any final judgment
shall be entitled to recover its reasonable attorneys' fees and expenses from
the other party that are attributable solely to such enforcement (subject to the
caps and other limits set forth in Article VII).
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this instrument the day and
year first above written.
Seller:
ENRON POWER CORP.
By:
Name:
Title:
Buyer:
CALPINE FINANCE COMPANY
By:
Name:
Title:
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<PAGE>
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions................................................................1
- -----------
1.2 Terminology................................................................6
- -----------
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Class A Common Stock..................................7
- -----------------------------------------
2.2 Purchase Price.............................................................7
- --------------
2.3 Determination of Purchase Price............................................7
- -------------------------------
ARTICLE III
CLOSING DATE
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Seller...................................9
- ----------------------------------------
4.1.1 Organization and Good Standing...........................................9
- ------------------------------
4.1.2 Authority of Seller......................................................9
- -------------------
4.1.3 No Violations With Respect to Seller.....................................9
- ------------------------------------
4.1.4 Approvals and Consents for Seller.......................................10
---------------------------------
4.1.5 Ownership...............................................................10
- ---------
4.1.6 Company and Subsidiaries................................................11
- ------------------------
4.1.7 No Violation With Respect to Company and Subsidiaries...................11
- -----------------------------------------------------
4.1.8 No Default; Legal Requirements..........................................12
- ------------------------------
4.1.9 Financial Statements....................................................13
- --------------------
4.1.10 Leases; Contracts; Agreements and Commitments..........................13
- ---------------------------------------------
4.1.11 Litigation.............................................................15
- ----------
4.1.12 Government Permits.....................................................15
- ------------------
4.1.13 Employee Benefits......................................................15
- -----------------
4.1.14 Tax Matters............................................................15
- -----------
4.1.15 Real Property..........................................................16
- -------------
4.1.16 Environmental Matters..................................................16
- ---------------------
4.1.17 Regulatory Matters.....................................................16
- ------------------
4.1.18 Sole Purpose; Nature of Business.......................................17
- --------------------------------
4.1.19 Brokerage or Finders Fees..............................................17
- -------------------------
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4.1.20 Insurance..............................................................17
- ---------
4.1.21 Material Assets and Properties.........................................17
- ------------------------------
4.2 Representations and Warranties of Buyer...................................17
- ---------------------------------------
4.2.1 Organization and Good Standing..........................................17
- ------------------------------
4.2.2 Authority of Buyer......................................................17
- ------------------
4.2.3 No Violations...........................................................18
- -------------
4.2.4 Approvals and Consents..................................................18
- ----------------------
4.2.5 Acquisition as Investment...............................................18
- -------------------------
4.2.6 Brokerage or Finders Fees...............................................18
- -------------------------
4.2.7 No Electric Utility Ownership...........................................18
- -----------------------------
4.2.8 Available Funds.........................................................19
- ---------------
4.2.9 Knowledgeable Buyer.....................................................19
- -------------------
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Covenants of Seller.......................................................19
- -------------------
5.1.1 Certain Changes.........................................................19
- ---------------
5.1.2 Operation of Business...................................................21
- ---------------------
5.1.3 Insurance...............................................................21
- ---------
5.1.4 Access..................................................................21
- ------
5.1.5 Antitrust Notification and Other Governmental Filings...................21
- -----------------------------------------------------
5.1.6 Confidentiality.........................................................22
- ---------------
5.1.7 Public Announcements....................................................22
- --------------------
5.1.8 Transaction Costs.......................................................22
- -----------------
5.1.9 Noncompetition..........................................................22
- --------------
5.1.10 Satisfaction of Closing Conditions.....................................22
- ----------------------------------
5.2 Covenants of Buyer........................................................22
- ------------------
5.2.1 Antitrust Notification and Other Governmental Filings...................22
- -----------------------------------------------------
5.2.2 Public Announcements....................................................23
- --------------------
5.2.3 Confidential Information................................................23
- ------------------------
5.2.4 Transaction Costs.......................................................23
- -----------------
5.2.5 Satisfaction of Closing Conditions......................................23
- ----------------------------------
5.2.6 Bank Account and Line of Credit.........................................23
- -------------------------------
5.2.7 Certain FERC Matters....................................................23
- --------------------
5.3 Mutual Covenants..........................................................24
- ----------------
5.3.1 Release.................................................................24
- -------
5.3.2 Tax Returns.............................................................24
- -----------
5.3.4 Employment Matters......................................................24
- ------------------
ARTICLE VI
CONDITIONS TO CLOSING
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6.1 Buyer's Obligation to Close...............................................26
- ---------------------------
6.1.1 Compliance with Agreement...............................................26
- -------------------------
6.1.2 Representations and Warranties..........................................26
- ------------------------------
6.1.3 Certificate.............................................................26
- -----------
6.1.4 Filings.................................................................27
- -------
6.1.5 Litigation..............................................................27
- ----------
6.1.6 Stock Certificates; Assignment Agreements...............................27
- -----------------------------------------
6.1.7 Opinion.................................................................27
- -------
6.1.8 Secretary's Certificate.................................................27
- -----------------------
6.1.9 Resignations............................................................27
- ------------
6.1.10 Scheduled Payments.....................................................27
- ------------------
6.1.11 Affidavits.............................................................27
- ----------
6.1.12 Certain Other Agreements...............................................27
- ------------------------
6.2 Seller's Obligation to Close..............................................27
- ----------------------------
6.2.1 Compliance with Agreement...............................................28
- -------------------------
6.2.2 Representations and Warranties..........................................28
- ------------------------------
6.2.3 Certificate.............................................................28
- -----------
6.2.4 Opinion.................................................................28
- -------
6.2.5 Filings.................................................................28
- -------
6.2.6 Litigation..............................................................28
- ----------
6.2.7 Assignment Agreements...................................................28
- ---------------------
6.2.8 Long Term Debt..........................................................28
- --------------
6.2.9 Release.................................................................28
- -------
6.2.10 Certain Other Agreements...............................................28
- ------------------------
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Buyer..................................................29
- ------------------------
7.2 Indemnification and Release of Seller.....................................30
- -------------------------------------
7.3 Applicability.............................................................31
- -------------
7.4 Indemnification Procedures................................................31
- --------------------------
7.5 Limitation on Liabilities.................................................33
- -------------------------
7.6 Notification by Seller of Certain Matters.................................34
- -----------------------------------------
ARTICLE VIII
TERMINATION RIGHTS
8.1 Termination...............................................................34
- -----------
8.2 Limitation on Right to Terminate; Effect of Termination...................35
- -------------------------------------------------------
ARTICLE IX
GENERAL
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9.1 Exclusive Agreement; Schedules............................................35
- ------------------------------
9.2 Successors and Assigns....................................................35
- ----------------------
9.3 Amendments................................................................36
- ----------
9.4 Records and Access........................................................36
- ------------------
9.5 Further Assurances........................................................36
- ------------------
9.6 Notices...................................................................37
- -------
9.7 Governing Law.............................................................37
- -------------
9.8 Severability..............................................................38
- ------------
9.9 Counterparts..............................................................38
- ------------
9.10 Expenses.................................................................38
- --------
9.11 Attorneys' Fees..........................................................38
- ---------------
Exhibits to Purchase and Sale Agreement:
Exhibit A - Assignment and Assumption Agreements
Schedules to Purchase and Sale Agreement:
Schedule 1.1(A) - Knowledge
Schedule 4.1.3 - No Violations of Seller
Schedule 4.1.5(A) - Company's Capital Stock
Schedule 4.1.5(E) - Subsidiaries' Capital Stock Debt; Other
Securities
Schedule 4.1.7 - No Violations of Company and Subsidiaries
Schedule 4.1.8 - No Default; Legal Requirements
Schedule 4.1.9(B)-1 - December 31 Balance Sheet
Schedule 4.1.9(B)-2 - Financial Statements
Schedule 4.1.9(C) - Balance Sheet Liabilities
Schedule 4.1.10(A) - Contracts of Company and its Affiliates
Schedule 4.1.10(B) - Contracts of Seller and its Affiliates
Schedule 4.1.10(C) - Obligations of Seller and its Affiliates to
be Assumed by Buyer
Schedule 4.1.11 - Litigation
Schedule 4.1.14 - Tax Matters
Schedule 4.1.15 - Real Property
Schedule 4.1.16 - Environmental Matters
Schedule 4.1.20 - Insurance
Schedule 4.1.21 - Excluded Assets
Schedule 5.1.1 - Ordinary Course of Business
Schedule 5.3.4(A) - Employment Matters
Schedule 6.1.9 - Directors and Officers
C:\PUR15.WPD
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PURCHASE AND SALE AGREEMENT
by and between
ENRON POWER CORP.
(as Seller)
and
CALPINE FINANCE COMPANY
(as Buyer)
Dated as of March 27, 1997
