<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CALPINE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 4911 77-0212977
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
(408) 995-5115
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PETER CARTWRIGHT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
(408) 995-5115
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
SCOTT D. LESTER, ESQ.
BROBECK, PHLEGER & HARRISON LLP
ONE MARKET
SPEAR STREET TOWER
SAN FRANCISCO, CA 94105
(415) 442-0900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on the Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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7 7/8% Senior Notes Due
2008...................... $400,000,000 -- $400,000,000 $121,212
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(1) Pursuant to Rule 457(f)(2) of the Securities Act of 1933, as amended, the
registration fee has been estimated based on the book value of the
securities to be received by Registrant in exchange for the securities to be
issued hereunder in the Exchange Offer described herein.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED AUGUST 10, 1998
PROSPECTUS
OFFER TO EXCHANGE
all outstanding
7 7/8% SENIOR NOTES DUE 2008
($400,000,000 principal amount outstanding)
for
7 7/8% SENIOR NOTES DUE 2008
of
LOGO
CALPINE CORPORATION
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
------------------------
CALPINE CORPORATION, A DELAWARE CORPORATION ("CALPINE" OR THE "COMPANY"), HEREBY
OFFERS, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL (THE "LETTER OF
TRANSMITTAL"), TO EXCHANGE ITS 7 7/8% SENIOR NOTES DUE 2008 (THE "NEW NOTES"),
IN AN OFFERING WHICH HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), PURSUANT TO A REGISTRATION STATEMENT OF WHICH
THIS PROSPECTUS CONSTITUTES A PART, FOR AN EQUAL PRINCIPAL AMOUNT OF ITS
OUTSTANDING 7 7/8% SENIOR NOTES DUE 2008 (THE "OLD NOTES"), OF WHICH AN
AGGREGATE OF $400,000,000 IN PRINCIPAL AMOUNT IS OUTSTANDING AS OF THE DATE
HEREOF (THE "EXCHANGE OFFER"). THE NEW NOTES AND THE OLD NOTES ARE SOMETIMES
REFERRED TO HEREIN COLLECTIVELY AS THE "SENIOR NOTES." THE FORM AND TERMS OF THE
NEW NOTES WILL BE THE SAME AS THE FORM AND TERMS OF THE OLD NOTES EXCEPT THAT
THE NEW NOTES WILL NOT BEAR LEGENDS RESTRICTING THE TRANSFER THEREOF. THE NEW
NOTES WILL BE OBLIGATIONS OF THE COMPANY ENTITLED TO THE BENEFITS OF THE
INDENTURE, DATED AS OF MARCH 31, 1998 (THE "INDENTURE"), RELATING TO THE SENIOR
NOTES. SEE "DESCRIPTION OF THE NEW NOTES." FOLLOWING THE COMPLETION OF THE
EXCHANGE OFFER, NONE OF THE SENIOR NOTES WILL BE ENTITLED TO ANY RIGHTS UNDER
THE REGISTRATION RIGHTS AGREEMENT DATED MARCH 26, 1998 OR THE REGISTRATION
RIGHTS AGREEMENT DATED AS OF JULY 21, 1998 (COLLECTIVELY, THE "REGISTRATION
RIGHTS AGREEMENT"), INCLUDING, BUT NOT LIMITED TO, THE CONTINGENT INCREASE IN
THE INTEREST RATE PROVIDED FOR PURSUANT THERETO. SEE "THE EXCHANGE OFFER."
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE SENIOR NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE 15.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
<PAGE> 3
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1998 unless the Exchange Offer is
extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange. The Company has not entered into any arrangement or
understanding with any person to distribute the New Notes to be received in the
Exchange Offer.
The Old Notes initially sold to Qualified Institutional Buyers (as defined
in Rule 144A) in reliance on Rule 144A under the Securities Act ("Rule 144A")
were initially represented by two, permanent global Notes in definitive, fully
registered form, registered in the name of a nominee of The Depositary Trust
Company ("DTC"), which were deposited with The Bank of New York, the Trustee
under the Indenture (the "Trustee"), as custodian. The New Notes exchanged for
the Old Notes that are represented by the global Old Notes will continue to be
represented by permanent global Old Notes (collectively, the "Global Notes," and
individually, a "Global Note") in definitive, fully registered form, registered
in the name of a nominee of DTC and deposited with the Trustee as custodian,
unless the beneficial holders thereof request otherwise. See "Description of the
New Notes -- Book Entry; Delivery and Form." Old Notes may be tendered only in
denominations of $1,000 and any integral multiple thereof.
Interest on the New Notes will be payable semi-annually in arrears on April
1 and October 1 of each year (each an "Interest Payment Date"), commencing on
the first such date following their date of issuance. Interest on the New Notes
will accrue from the last Interest Payment Date on which interest was paid on
the Old Notes that are accepted for exchange or, if no interest has been paid,
from March 31, 1998. Accordingly, interest which has accrued since the last
Interest Payment Date or March 31, 1998 on the Old Notes accepted for exchange
will cease to be payable upon issuance of the New Notes. Untendered Old Notes
that are not exchanged for New Notes pursuant to the Exchange Offer will remain
outstanding and bear interest at a rate of 7 7/8% per annum after the Expiration
Date.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who acquires such New Notes directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an affiliate of the Company (within the meaning of Rule
405 under the Securities Act)) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the New Notes in the ordinary course of such holder's business and
is not participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders of Old Notes wishing
to accept the Exchange Offer must represent to the Company that such conditions
have been met. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale for a period of 180 days from the date of this Prospectus, or such
shorter period as will terminate when all Old Notes acquired by broker-dealers
for their own accounts as a result of market-making activities or other trading
activities have been exchanged for New Notes and resold by such broker-dealers.
See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Senior
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. To the extent that a market for the New Notes develops, the market
value of the New Notes will depend on market conditions (such as yields on
alternative investments) general economic conditions, the Company's financial
condition and other conditions. Such conditions might cause the New Notes, to
the extent that they
2
<PAGE> 4
are actively traded, to trade at a significant discount from the face value. See
"Risk Factors -- Absence of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
------------------------
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus, including, without limitation,
such statements under "Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" and located
elsewhere herein, regarding the Company or any of the transactions described
herein, including the timing, financing, strategies and effects of such
transactions, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectation will prove to have been correct.
Important factors that could cause actual results to differ materially from
expectations ("Cautionary Statements") are disclosed in this Prospectus,
including, without limitation, in conjunction with the forward-looking
statements in this Prospectus and/or under "Risk Factors." All subsequent
written or oral forward-looking statements attributable to the Company or
persons acting on behalf of the Company are expressly qualified in their
entirety by the Cautionary Statements.
------------------------
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
CALPINE CORPORATION, 50 WEST SAN FERNANDO STREET, SAN JOSE, CALIFORNIA 95113,
ATTENTION: INVESTOR RELATIONS (TELEPHONE NUMBER: 408-995-5115). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1998.
3
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS, NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR
BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF
TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 5
Risk Factors................................................ 15
Use of Proceeds............................................. 23
The Exchange Offer.......................................... 24
Selected Consolidated Financial Data........................ 33
Pro Forma Consolidated Financial Data....................... 35
Description of New Notes.................................... 41
Certain Federal Income Tax Considerations................... 67
Plan of Distribution........................................ 69
Legal Matters............................................... 70
Experts..................................................... 70
Available Information....................................... 70
Incorporation By Reference.................................. 71
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4
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus or incorporated by reference herein.
References in this Prospectus to the "Company" or "Calpine" shall, as the
context requires, include Calpine Corporation and its consolidated subsidiaries.
THE COMPANY
Calpine is engaged in the acquisition, development, ownership and operation
of power generation facilities and the sale of electricity and steam principally
in the United States. The Company currently has interests in 26 power plants and
steam fields having an aggregate capacity of 3,097 megawatts. The Company
currently sells electricity and steam to 16 utility and other customers,
principally under long-term power and steam sales agreements, generated by power
generation facilities located in six states and Mexico. In addition, Calpine has
a 169 megawatt gas-fired power plant currently under construction in Dighton,
Massachusetts. Since its inception in 1984, Calpine has developed substantial
expertise in all aspects of electric power generation. The Company's vertical
integration has resulted in significant growth in recent years as Calpine has
applied its extensive engineering, construction management, operations, fuel
management and financing capabilities to successfully implement its acquisition
and development program. Calpine's strategy is to capitalize on opportunities in
the power market through an ongoing program to acquire, develop, own and operate
power generation facilities, as well as marketing power and energy services to
utilities and other end users.
Calpine's net interest in power generation facilities has increased from
297 megawatts in 1992 to 2,434 megawatts, including the power plant currently
under construction. The Company's total assets have increased from $55.4 million
as of December 31, 1992 to $1.7 billion on a pro forma basis as of March 31,
1998. Calpine's revenue on a pro forma basis has increased to $606.8 million for
1997, representing a five-year compound annual growth rate of 73% since 1992.
The Company's EBITDA (as defined herein) on a pro forma basis increased to
$280.8 million in 1997 from $9.9 million in 1992, representing a five-year
compound annual growth rate of 95%. See "Pro Forma Consolidated Financial Data."
THE MARKET
The power generation industry represents the third largest industry in the
United States, with an estimated end-user market of over $200 billion of
electricity sales and 3,300 gigawatt hours of production in 1997. In response to
increasing customer demand for access to low-cost electricity and enhanced
services, new regulatory initiatives are currently being adopted or considered
at both state and federal levels to increase competition in the domestic power
generation industry. To date, such initiatives are under consideration at the
federal level and in approximately forty-five states. In April 1996, the Federal
Energy Regulatory Commission ("FERC") adopted Order No. 888, opening wholesale
power sales to competition and providing for open and fair electric transmission
services by public utilities. In addition, the California Public Utilities
Commission ("CPUC") commenced deregulation and implementation of customer choice
of electricity supplier on April 1, 1998. Calpine believes that industry trends
and such regulatory initiatives will lead to the transformation of the existing
market, which is largely characterized by electric utility monopolies, having
old, inefficient, high-cost generating facilities, selling to a captive customer
base, to a more competitive market where end users may purchase electricity from
a variety of suppliers, including non-utility generators, power marketers,
public utilities and others. The Company believes that these market trends will
create substantial opportunities for companies such as Calpine that are low-cost
power producers and have an integrated power services capability which enables
them to produce and sell energy to customers at competitive rates.
The Company also believes that these market trends will result in the
disposition of power generation facilities by utilities, independent power
producers and industrial companies. Numerous utilities have announced their
intentions to sell their power generation facilities. In addition, many
independent producers operating a limited number of power plants are seeking to
dispose of such plants in response to competitive pressures, and industrial
companies are selling their power plants to redeploy capital in their core
businesses.
5
<PAGE> 7
The Company believes that this consolidation will continue in the highly
fragmented independent power industry.
STRATEGY
Calpine's objective is to become a leading power company by capitalizing on
these emerging opportunities in the power market. The key elements of the
Company's strategy are as follows:
Expand and diversify domestic portfolio of power projects. In pursuing its
growth strategy, the Company intends to focus on opportunities where it is able
to capitalize on its extensive management and technical expertise to implement a
fully integrated approach to the acquisition, development and operation of power
generation facilities. This approach includes design, engineering, procurement,
finance, construction management, fuel and resource acquisition, operations and
power marketing, which Calpine believes provides it with a competitive
advantage.
Acquisition of power plants. The Company has significantly expanded
and diversified its project portfolio through the acquisition of power
generation facilities. Since 1993, the Company has completed transactions
involving thirteen gas-fired cogeneration facilities and two steam fields.
As a result of these transactions, the Company has more than quadrupled its
aggregate power generation capacity and substantially diversified its fuel
mix during this period. The Company intends to continue to pursue an active
acquisition program.
Development of merchant power plants. The Company is also pursuing the
development of highly efficient, low-cost power plants that seek to take
advantage of inefficiencies in the electricity market. The Company intends
to sell all or a portion of the power generated by such merchant plants
into the competitive market through a portfolio of short-, medium- and
long-term power sales agreements. As part of Calpine's initial effort to
develop merchant plants, the Company has developed a 240 megawatt gas-fired
cogeneration power plant in Pasadena, Texas, which commenced operations in
July 1998, and has a 169 megawatt gas-fired power generation facility
currently under construction in Dighton, Massachusetts. The Company
currently plans to develop additional low-cost, gas-fired facilities in
California, Texas, New England and other high-priced power markets.
Enhance the performance and efficiency of existing power projects. The
Company continually seeks to maximize the power generation potential of its
operating assets and minimize its operating and maintenance expenses and fuel
costs. As of June 30, 1998, the Company's power generation facilities have
operated at an average availability of approximately 98%. The Company believes
that achieving and maintaining a low-cost of production will be increasingly
important to compete effectively in the power generation market.
RECENT DEVELOPMENTS
Texas City/Clear Lake Acquisition of Remaining Interests
On March 31, 1998, the Company entered into a Stock Purchase and Redemption
Agreement (the "Dominion Agreement") with Dominion Cogen, Inc., a Virginia
corporation ("Dominion"), and Dominion Energy, Inc., a Virginia corporation
("DEI"). Under the terms of the Dominion Agreement, the Company acquired the
remaining 50 percent of the capital stock of Texas Cogeneration Company ("TCC").
TCC is the owner of the 450 megawatt Texas City and 377 megawatt Clear Lake
Power Plants located in Texas City and Pasadena, Texas, respectively. As
consideration for the purchase of the stock, the Company paid to Dominion $52.8
million in cash and has certain contingent purchase payments beginning in the
year 2000 that could approximate 2.9% of project revenue. As part of the
acquisition, the Company now also owns a 7.5% interest in the Bayonne Power
Plant, a 165 megawatt natural gas-fired cogeneration power plant located in
Bayonne, New Jersey. Calpine Fuels Texas Corporation, a wholly-owned subsidiary
of Calpine, now purchases natural gas for the Texas power plants from Enron
Capital & Trade Corp ("ECT"). In a related transaction, Calpine
6
<PAGE> 8
Fuels Texas paid approximately $105.3 million to ECT to restructure its existing
gas contracts. The Company funded the transactions with a portion of the net
proceeds of the March 31, 1998 offering of $300.0 million of 7 7/8% Senior Notes
Due 2008. On June 23, 1997, the Company had previously acquired a 50 percent
interest in TCC for a cash payment of $35.4 million. In addition, the Company
purchased from the existing lenders the $155.6 million of outstanding
non-recourse project financing of the two power plants, as previously reported
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997. The Company now owns a 100 percent interest in the Texas City and Clear
Lake Power Plants. The Company has operated the plants since June 1997. The
Texas City and Clear Lake Power Plants are natural gas-fired, combined-cycle
cogeneration facilities. The plants provide electricity to Texas Utilities
Electric Company, Texas New Mexico Power Company and Houston Lighting & Power
Company. As cogenerators, the plants also provide electricity and steam to Union
Carbide Corporation's chemical facility and to Celanese Chemical Group, Inc.'s
organic chemical plant.
Magic Valley Power Plant
On May 26, 1998, the Company announced it had signed a 20-year Power Sales
Agreement to provide electricity to the Magic Valley Electric Cooperative, Inc.
of Mercedes, Texas beginning in 2001. The power will be supplied by Calpine's
Magic Valley Generating Station, a 700 megawatt natural gas-fired power plant
under development in Edinburg, Texas. Magic Valley, a 51,000 member non-profit
electric cooperative, initially will purchase from 250 to 400 megawatts of
capacity, with an option to purchase additional capacity. The electric
cooperative will be the "anchor tenant" for Calpine's new Magic Valley plant.
Calpine is marketing additional capacity to other wholesale customers, initially
targeting south Texas. Permitting for the Magic Valley plant is underway, with
construction expected to begin in late 1999. In conjunction with the Magic
Valley plant, Calpine entered into an agreement with the City of Edinburg to
purchase water from the City's waste-water treatment plant for use at the power
plant. Calpine has also entered into agreements with Houston, Texas-based CCNG,
Inc., an oil and gas exploration, development and marketing company, to provide
fuel management services for the Magic Valley plant. In addition, both companies
will jointly pursue a variety of other natural gas opportunities in the Texas
market. As part of this new fuels venture, Calpine has granted CCNG Investments,
L.P. ("CCNG"), an option to purchase 1.1 million shares of Calpine Common Stock.
Corporate Line of Credit
On May 15, 1998, the Company entered into a $100 million, three-year
revolving line of credit with a consortium of banks to replace its prior $50
million line of credit. The new line of credit will be used for working capital
and other general corporate purposes, including acquisition bridge financing.
Pasadena 1 Power Plant
On July 7, 1998, Calpine announced the successful completion and commercial
operation of its 240 megawatt Pasadena 1 Power Plant located in Pasadena, Texas.
The $131 million merchant power plant sells power under contract and into the
open market. Calpine has entered into an Energy Sales Agreement with Phillips
Petroleum Houston Chemical Complex to provide 90 megawatts of electricity and
200,000 lbs/hr of steam beginning in September 1998. West Texas Utilities is
purchasing 50 megawatts of capacity through the end of 1998. Texas Utilities
Electric Company is also under contract to purchase up to 150 megawatts of
electricity under a two-year agreement beginning December 1, 1999. The remaining
available electricity output is sold into the competitive market through
Calpine's power sales activities.
Sonoma Power Plant
On July 17, 1998, Calpine completed the purchase of a 72 megawatt
geothermal power plant located in Sonoma County, California from the Sacramento
Municipal Utility District ("SMUD") for $13 million. The Company is the owner
and operator of the geothermal steam fields that provide steam to this facility,
formerly referred to as the SMUDGEO #1 Power Plant. Under the agreement, Calpine
paid SMUD $10.6 million at closing, and agreed to pay an additional $2.4 million
over the next two years. In connection with the
7
<PAGE> 9
acquisition, SMUD agreed to purchase 50 megawatts of electricity from the plant
at current market prices plus a renewable power premium through 2001. In
addition, SMUD has the option to purchase 10 megawatts of peak power production
through 2005. Calpine will market the excess electricity into the California
power market.
Pittsburg Power Plant
On July 21, 1998, the Company completed the acquisition of a 70 megawatt
natural gas-fired power plant from The Dow Chemical Company for approximately
$12.7 million. The power plant is located at Dow's Pittsburg, California
chemical facility. Calpine will sell up to 18 megawatts of electricity to Dow
under a ten-year power sales agreement, with the balance sold to Pacific Gas &
Electric Company under an existing power sales agreement. In addition, Calpine
sells approximately 200,000 lbs/hr of steam to Dow and to USS-POSCO Industries'
nearby steel mill.
Bechtel Joint Venture
On July 28, 1998, the Company announced a joint venture with Bechtel
Enterprises located in San Francisco, California to develop, own and operate
approximately 2,000 megawatts of new natural gas-fired power plants in Northern
California. These plants will be constructed by Bechtel and operated by Calpine
and will primarily serve the San Francisco Bay Area.
Sonat Energy Services Joint Venture
On July 30, 1998, the Company announced a joint venture with Sonat Energy
Services Company located in Birmingham, Alabama to develop a 680 megawatt
natural gas-fired peaking power plant near Columbus, Georgia (the "Cataula Power
Plant"). The Cataula Power Plant is scheduled to begin commercial operation in
June 2000 and will provide energy to the Georgia and Southeast power markets
during peak power demand periods. The Cataula Power Plant will connect to the
Georgia Integrated Transmission System, providing direct access to Georgia Power
Company, the Municipal Electric Authority of Georgia, Oglethorpe Power
Corporation and the City of Dalton, Georgia. The joint venture will sell
approximately 215 megawatts of electricity to Georgia Power Company under a five
year contract. The remaining plant's output capacity will be sold to other
wholesale customers.
BACKGROUND
The Company was incorporated under the laws of the State of California in
1984 and reincorporated in Delaware in 1996. The principal executive offices of
the Company are located at 50 West San Fernando Street, San Jose, California
95113, and its telephone number is (408) 995-5115.
RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Memorandum and, in particular, should evaluate the specific risk
factors set forth under "Risk Factors" for risks involved with an investment in
the Notes.
8
<PAGE> 10
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange $1,000 in
principal amount (and any integral multiple
thereof) of New Notes for each $1,000 in principal
amount (and any integral multiple thereof) of Old
Notes that are validly tendered pursuant to the
Exchange Offer. The Company will issue the New
Notes promptly after the Expiration Date. As of the
date of this Prospectus, $400,000,000 in aggregate
principal amount of Old Notes are outstanding. The
Company has not entered into any arrangement or
understanding with any person to distribute the New
Notes to be received in the Exchange Offer.
Resale..................... The Company believes that the New Notes issued
pursuant to the Exchange Offer generally will be
freely transferable by the holders thereof without
registration or any prospectus delivery requirement
under the Securities Act, except that a "dealer" or
any of the Company's "affiliates," as such terms
are defined under the Securities Act, that
exchanges Old Notes held for its own account may be
required to deliver copies of this Prospectus in
connection with any resale of the New Notes issued
in exchange for such Old Notes. See "The Exchange
Offer -- General" and "Plan of Distribution."
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless
extended, in which case the term Expiration Date
means the latest date and time to which the
Exchange Offer is extended. The Company will accept
for exchange any and all Old Notes that are validly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date.
Accrued Interest on the New
Notes and the Old
Notes.................... Each New Note will bear interest from the last
Interest Payment Date on which interest was paid on
the Old Notes, or, if interest has not yet been
paid on the Old Notes, from March 31, 1998, the
date of issuance. Such interest will be paid with
the first interest payment on the New Notes.
Accordingly, interest, which has accrued since the
last Interest Payment Date or March 31, 1998, on
the Old Notes accepted for exchange will cease to
be payable upon issuance of the New Notes.
Untendered Old Notes that are not exchanged for New
Notes pursuant to the Exchange Offer will bear
interest at a rate of 7 7/8% per annum after the
Expiration Date.
Termination................ The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, any new law,
statute, rule or regulation or any interpretation
by the staff of the Commission of any existing law,
statute, rule or regulation. Holders of Old Notes
will have certain rights against the Company under
the Registration Rights Agreement should the
Company fail to consummate the Exchange Offer. See
"The Exchange Offer -- Termination." No federal or
state regulatory requirements must be complied with
or approvals obtained in connection with the
Exchange Offer, other than applicable requirements
under federal and state securities laws.
Procedures for Tendering
Old Notes.................. Each beneficial owner owning interests in Old Notes
("Beneficial Owner") through a DTC Participant (as
defined) must instruct such
9
<PAGE> 11
DTC Participant to cause Old Notes to be tendered
in accordance with the procedures set forth in this
Prospectus and in the applicable Letter of
Transmittal. See "The Exchange Offer -- Procedures
for Tendering -- Old Notes held through DTC."
Each participant (a "DTC Participant") in the
Depository Trust Company ("DTC") holding Old Notes
through DTC must (i) electronically transmit its
acceptance to DTC through the DTC Automated Tender
Offer Program ("ATOP"), for which the transaction
will be eligible, and DTC will then verify the
acceptance, execute a book-entry delivery to the
Exchange Agent's (as defined herein) account at DTC
and send an Agent's Message (as defined herein) to
the Exchange Agent for its acceptance, or (ii)
comply with the guaranteed delivery procedures set
forth in this Prospectus and in the Letter of
Transmittal. By tendering though ATOP, DTC
Participants will expressly acknowledge receipt of
the accompanying Letter of Transmittal and agree to
be bound by its terms and the Company will be able
to enforce such agreement against such DTC
Participants. See "The Exchange Offer -- Procedures
for Tendering -- Old Notes held through DTC" and
"-- Guaranteed Delivery Procedures -- Old Notes
held through DTC."
Each holder of Old Notes must (i) complete and sign
a Letter of Transmittal, and mail or deliver such
Letter of Transmittal, and all other documents
required by the Letter of Transmittal, together
with certificate(s) representing all tendered Old
Notes, to the Exchange Agent at its address set
forth in this Prospectus and in the Letter of
Transmittal, or (ii) comply with the guaranteed
delivery procedures set forth in this Prospectus.
See "The Exchange Offer -- Procedures for
Tendering," "-- Exchange Agent" and "-- Guaranteed
Delivery Procedures -- Old Notes held by Holders."
By tendering, each holder of Old Notes will
represent to the Company that, among other things,
(i) it is not an affiliate of the Company, (ii) it
is not a broker-dealer tendering Old Notes acquired
directly from the Company for its own account,
(iii) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of such holder and (iv) it has
no arrangements or understandings with any person
to participate in the Exchange Offer for the
purpose of distributing the New Notes. See "The
Exchange Offer -- General."
Guaranteed Delivery
Procedures............... DTC Participants holding Old Notes through DTC who
wish to cause their Old Notes to be tendered, but
who cannot transmit their acceptances through ATOP
prior to the Expiration Date, may effect a tender
in accordance with the procedures set forth in this
Prospectus and in the Letter of Transmittal. See
"The Exchange Offer -- Guaranteed Delivery
Procedures." Holders who wish to tender their Old
Notes but (i) whose Old Notes are not immediately
available and will not be available for tendering
prior to the Expiration Date, or (ii) who cannot
deliver their Old Notes, the Letter of Transmittal
or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a
tender in accordance with the procedures set forth
in this Prospectus. See "The Exchange
Offer -- Guaranteed Delivery Procedures."
10
<PAGE> 12
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date, in accordance with the procedures
set forth in "The Exchange Offer -- Withdrawal of
Tenders."
Acceptance of Old Notes and
Delivery of New Notes.... Subject to certain conditions (as summarized above
in "Termination" and described more fully in "The
Exchange Offer -- Termination"), the Company will
accept for exchange any and all Old Notes that are
validly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The New Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange
Offer -- General."
Certain Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal income
tax purposes. For a discussion of certain federal
income tax considerations relating to the exchange
of the Old Notes for the New Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent............. The Trustee is also the Exchange Agent. The mailing
address of the Exchange Agent is: The Bank of New
York, 101 Barclay Street, Floor 7E, New York, New
York 10286, Attention: Reorganization Section. The
address for deliveries by hand and by overnight
courier is: The Bank of New York, 101 Barclay
Street, Corporate Trust Services Window, Grand
Level, New York, New York 10286. For information
with respect to the Exchange Offer, the telephone
number for the Exchange Agent is (212) 815-2742 and
the facsimile number for the Exchange Agent is
(212) 815-6339.
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the New Notes pursuant
to the Exchange Offer. Of the net proceeds received
by the Company from the sale of $300 million of the
Old Notes in March 1998, approximately $293.5
million was used to repay outstanding indebtedness,
to acquire interests in and develop power
generation facilities, and the remainder was used
for general corporate purposes. Of the net proceeds
received from the sale of $100 million of the Old
Notes in July 1998, the Company used approximately
$52.1 million to repay in full the outstanding
non-recourse project financing from ING Capital
Corp. on the Pasadena 1 Power Plant and expects to
use approximately $13.6 million to pay the
remaining construction costs on the Pasadena 1
Power Plant. The remainder of the net proceeds will
be used for the acquisition and development of
power generation facilities and for general
corporate purposes. See "Use of Proceeds."
11
<PAGE> 13
SUMMARY OF THE TERMS OF THE NEW NOTES
The Exchange Offer applies to an aggregate principal amount of $400,000,000
of the Old Notes. The form and terms of the New Notes will be the same as the
form and terms of the Old Notes except that the New Notes will not bear legends
restricting the transfer thereof. The New Notes will be obligations of the
Company entitled to the benefits of the Indenture. See "Description of the New
Notes."
<TABLE>
<S> <C>
Securities Offered........................ $400,000,000 aggregate principal amount of 7 7/8%
Senior Notes Due 2008.
Maturity Date............................. April 1, 2008.
Interest Payment Dates.................... April 1 and October 1 of each year, commencing October
1, 1998.
Redemption................................ The New Notes are not subject to redemption prior to
maturity.
Ranking................................... The New Notes will be senior unsecured obligations of
the Company and will rank pari passu in right of
payment with all other existing and future Senior
Indebtedness (as defined herein) of the Company and
senior in right of payment to all Subordinated
Indebtedness (as defined herein) of the Company. The
New Notes will be effectively subordinated to all
liabilities of the Company's subsidiaries, including
trade payables. As of March 31, 1998, after giving
effect to the sale of the Old Notes and the
application of the net proceeds therefrom, the amount
of secured indebtedness, to which the New Notes would
be effectively subordinated, would have been
approximately $193.8 million and the Company would
have had $859.6 million of outstanding indebtedness
ranking pari passu with the New Notes. See "Risk
Factors -- Substantial Leverage," "Risk Fac-
tors -- Risks Related to Holding Company Structure"
and "Description of New Notes -- Ranking."
Change of Control......................... Upon a Change of Control Triggering event (as defined
herein), the Company will be required to make an offer
to purchase the New Notes then outstanding at a
purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the date of repurchase. See "Description of New
Notes -- Covenants -- Change of Control."
Certain Covenants......................... The Indenture (as defined herein) under which the New
Notes will be issued will contain certain covenants
that, among other things, limit (i) the incurrence of
additional debt by the Company and its subsidiaries,
(ii) the payment of dividends on and redemptions of
capital stock by the Company and its subsidiaries,
(iii) the use of proceeds from the sale of assets and
subsidiary stock, (iv) transactions with affiliates,
(v) the creation of liens and (vi) sale leaseback
transactions. The Indenture will also restrict the
Company's ability to consolidate or merge with or
into, or to transfer all or substantially all of its
assets to, another person. However, these limitations
are subject to a number of important qualifications
and exceptions. See "Description of New
Notes -- Covenants."
</TABLE>
12
<PAGE> 14
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING
INFORMATION
The following table sets forth summary consolidated historical and pro
forma financial and operating information of the Company for the periods
indicated. The Company's summary consolidated historical financial information
were derived from the Company's Consolidated Financial Statements. The summary
pro forma consolidated financial and operating information was derived from the
Pro Forma Consolidated Financial Data of the Company and give effect to certain
transactions as described under "Pro Forma Consolidated Financial Information,"
as if such transactions had occurred at the beginning of the period. The
information presented below should be read in conjunction with "Selected
Consolidated Historical Financial and Operating Information," "Pro Forma
Consolidated Financial Data" and the Company's Consolidated Financial
Statements, included elsewhere and incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- -----------------------
PRO
ACTUAL FORMA(1)
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Total revenue...... $ 69,915 $ 94,762 $ 132,098 $ 214,554 $ 276,321 $ 606,836
Cost of revenue.... 42,501 52,845 77,388 129,200 153,308 414,224
Gross profit....... 27,414 41,917 54,710 85,354 123,013 192,612
Project development
expenses......... 1,280 1,784 3,087 3,867 7,537 7,537
General and
administrative
expenses......... 5,080 7,323 8,937 14,696 18,289 18,298
Income from
operations....... 21,054 31,772 42,686 66,791 97,187 166,777
Interest expense... 13,825 23,886 32,154 45,294 61,466 96,422
Other income,
net.............. (1,133) (1,988) (1,895) (6,259) (17,438) (19,135)
Net income......... $ 3,754 $ 6,021 $ 7,378 $ 18,692 $ 34,699 $ 57,834
OTHER FINANCIAL DATA
AND RATIOS:
Depreciation and
amortization..... $ 12,540 $ 21,580 $ 26,896 $ 40,551 $ 48,935 $ 81,199
EBITDA(2).......... $ 42,370 $ 53,707 $ 69,515 $ 117,379 $ 172,616 $ 280,806
EBITDA to
Consolidated
Interest
Expense(3)....... 2.98x 2.23x 2.11x 2.41x 2.60x 2.77x
Total debt to
EBITDA........... 6.24x 6.23x 5.87x 5.12x 4.96x 4.10x
Ratio of earnings
to fixed
charges(4)....... 2.09x 1.52x 1.46x 1.45x 1.64x 1.83x
SELECTED OPERATING
INFORMATION:
Power plants:
Electricity
revenue(5):
Energy......... $ 37,088 $ 45,912 $ 54,886 $ 93,851 $ 110,879 $ 315,721
Capacity....... $ 7,834 $ 7,967 $ 30,485 $ 65,064 $ 84,296 $ 207,722
Megawatt hours
produced....... 378,035 447,177 1,033,566 1,985,404 2,158,008 8,413,811
Average energy
price per
kilowatt
hour(6)........ 9.811c 10.267c 5.310c 4.727c 5.138c 3.752c
Steam fields:
Steam revenue:
Calpine........ $ 31,066 $ 32,631 $ 39,669 $ 40,549 $ 42,102 $ 42,102
Other
interest..... $ 2,143 $ 2,051 -- -- -- --
Megawatt hours
produced....... 2,014,758 2,156,492 2,415,059 2,528,874 2,641,422 2,641,422
Average price per
kilowatt
hour........... 1.648c 1.608c 1.643c 1.603c 1.594c 1.594c
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------------
1997 1998
-------- --------------------
PRO
ACTUAL FORMA(1)
------- ----------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Total revenue...... $ 39,231 $55,145 $ 123,410
Cost of revenue.... 30,589 39,369 94,747
Gross profit....... 8,642 15,776 28,663
Project development
expenses......... 2,161 1,681 1,681
General and
administrative
expenses......... 4,211 5,236 5,209
Income from
operations....... 2,270 8,859 21,773
Interest expense... 12,977 18,523 24,339
Other income,
net.............. (3,601) (2,764) (2,910)
Net income......... $ (4,040) $(3,057) $ 1,600
OTHER FINANCIAL DATA
AND RATIOS:
Depreciation and
amortization..... $ 11,333 $12,582 $ 20,473
EBITDA(2).......... $ 19,479 $25,681 $ 48,467
EBITDA to
Consolidated
Interest
Expense(3)....... 1.37x 1.30x 1.90x
Total debt to
EBITDA........... -- -- --
Ratio of earnings
to fixed
charges(4)....... 0.58x 0.58x 1.00x
SELECTED OPERATING
INFORMATION:
Power plants:
Electricity
revenue(5):
Energy......... $ 18,977 $23,314 $ 65,066
Capacity....... $ 5,181 $ 9,462 $ 41,873
Megawatt hours
produced....... 268,610 334,052 1,739,777
Average energy
price per
kilowatt
hour(6)........ 7.065c 6.979c 3.740c
Steam fields:
Steam revenue:
Calpine........ $ 9,529 $10,614 $ 10,614
Other
interest..... -- -- --
Megawatt hours
produced....... 606,838 641,833 641,833
Average price per
kilowatt
hour........... 1.57c 1.65c 1.65c
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1998
-------------------------------------------------------- -------------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(1)
-------- -------- -------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 6,166 $ 22,527 $ 21,810 $ 95,970 $ 48,513 $ 96,960 $ 155,444
Total assets......................... 302,256 421,372 554,531 1,031,397 1,380,956 1,678,097 1,736,671
Short-term debt...................... 17,200 27,300 85,885 37,492 112,966 9,670 9,670
Long-term line of credit............. 52,595 -- 19,851 -- -- -- --
Long-term non-recourse debt.......... 194,746 196,806 190,642 278,640 182,893 227,081 184,081
Notes payable........................ -- 5,296 6,348 -- -- -- --
Senior Notes......................... -- 105,000 105,000 285,000 560,041 859,629 958,709
Total debt........................... 264,541 334,402 407,726 601,132 855,900 1,096,380 1,152,460
Stockholders' equity................. 13,429 18,649 25,227 203,127 239,956 237,488 237,488
</TABLE>
- ---------------
(1) For a description of the transactions reflected in the pro forma information
set forth in the table, see "Pro Forma Consolidated Financial Data."
(2) 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. See "Description of the New Notes -- Certain Definitions."
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).
(3) For purposes of calculating the EBITDA to Consolidated Interest Expense
ratio, Consolidated Interest Expense is defined as total interest expense
plus one-third of all operating lease obligations, dividends paid in respect
of preferred stock and cash contributions to any employee stock ownership
plan used to pay interest on loans incurred to purchase capital stock of the
Company. See "Description of the New Notes -- Certain Definitions." The pro
forma EBITDA to Consolidated Interest Expense ratio presented gives effect
to the sale of the Old Notes and the application of the net proceeds
therefrom as if such transaction had occurred on January 1, 1997.
(4) Earnings are defined as income before provision for taxes, extraordinary
item and cumulative effect of changes in accounting principle plus cash
received from investments in power projects and fixed charges reduced by the
equity in income from investments in power projects and capitalized
interest. Fixed charges consist of interest expense, capitalized interest,
amortization of debt issuance costs and the portion of rental expenses
representative of the interest expense component.
(5) Electricity revenue is comprised of fixed capacity payments, which are not
related to production, and variable energy payments, which are related to
production.
(6) Represents energy revenue divided by the megawatt hours produced.
14
<PAGE> 16
RISK FACTORS
Prospective purchasers of the New Notes should carefully consider the
factors set forth below, as well as the other information contained in this
Prospectus, in evaluating an investment in the New Notes.
SUBSTANTIAL LEVERAGE
The Company is substantially leveraged as a result of outstanding
indebtedness of the Company and non-recourse debt financing of certain of the
Company's subsidiaries incurred to finance the acquisition and development of
power generation facilities. As of March 31, 1998, the Company's total
consolidated indebtedness was $1.1 billion, its total consolidated assets were
$1.7 billion and its stockholders' equity was $237.5 million. At such date, on a
pro forma basis after giving effect to the Bethpage and Texas City/Clear Lake
Transactions (as defined herein) and the sale of $400 million of Old Notes, the
Company's total consolidated indebtedness would have been approximately $1.2
billion and its total consolidated assets would have been approximately $1.7
billion. See "Capitalization," "Pro Forma Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The ability of the Company to meet its debt service obligations and
to repay outstanding indebtedness according to its terms will be dependent
primarily upon the performance of the power generation facilities in which the
Company has an interest.
The Indenture dated March 31, 1998, as supplemented by the Supplement
Indenture dated July 24, 1998 (together, the "Indenture"), relating to the
Senior Notes, and the Indentures relating to the Company's 8 3/4% Senior Notes
Due 2007 (the "8 3/4% Senior Notes"), 10 1/2% Senior Notes Due 2006 (the
"10 1/2% Senior Notes") and 9 1/4% Senior Notes Due 2004 (the "9 1/4% Senior
Notes") (collectively, the "Indentures") contain certain restrictive covenants.
Such restrictions affect, and in many respects limit or prohibit, among other
things, the ability of the Company or its subsidiaries or such other entities,
as the case may be, to incur indebtedness, make prepayments of certain
indebtedness, pay dividends, make investments, engage in transactions with
affiliates, create liens, sell assets and engage in mergers and consolidations.
The Indentures also contain provisions that require the Company, in the event of
a Change of Control Triggering Event (as such term is defined in the
Indentures), to make an offer to purchase the Senior Notes, the 8 3/4% Senior
Notes, the 10 1/2% Senior Notes and the 9 1/4% Senior Notes. There can be no
assurance that the Company will have the financial resources necessary to
purchase the Senior Notes, the 8 3/4% Senior Notes, the 10 1/2% Senior Notes and
the 9 1/4% Senior Notes upon a Change of Control Triggering Event. Such
provisions contained in the Indentures may not be waived by the Board of
Directors of the Company. See "Description of New Notes."
On May 15, 1998, the Company entered into a $100.0 million three-year
revolving credit facility with a consortium of banks to replace its prior $50.0
million line of credit (the "Revolving Credit Facility"). The Revolving Credit
Facility contains certain restrictions that limit or prohibit, among other
things, the ability of the Company or its subsidiaries to incur indebtedness,
make prepayments of certain indebtedness, pay dividends, make investments,
engage in transactions with affiliates, create liens, sell assets and engage in
mergers and consolidations.
The Company believes that, based on current levels of operations and
anticipated growth, cash flow from operations, together with other available
sources of funds, including borrowings under the Company's existing borrowing
arrangements, will be adequate to make required payments of principal and
interest on the Company's debt, including the Senior Notes, the 8 3/4% Senior
Notes, the 10 1/2% Senior Notes and the 9 1/4% Senior Notes, and to enable the
Company to comply with the terms of its Indentures and other debt agreements,
although there can be no assurance that this will be the case. If the Company is
unable to comply with the terms of its Indentures and other debt agreements and
fails to generate sufficient cash flow from operations in the future, the
Company may be required to refinance all or a portion of its existing debt or to
obtain additional financing. There can be no assurance that any such refinancing
would be possible or that any additional financing could be obtained,
particularly in view of the Company's high levels of debt and the debt
incurrence restrictions under existing Indentures and other debt agreements. If
cash flow is insufficient and no such refinancing or additional financing is
available, the Company may be forced to default on its debt obligations. In the
event of a default under the terms of any of the indebtedness of the Company,
subject to the terms of such indebtedness, the obligees thereunder would be
permitted to accelerate the maturity of such
15
<PAGE> 17
obligations, which could cause defaults under other obligations of the Company.
See "-- Risks Related to Holding Company Structure," "-- Possible Unavailability
of Financing."
RISKS RELATED TO HOLDING COMPANY STRUCTURE
The Senior Notes will be exclusively the obligations of Calpine and not of
any of its subsidiaries or other affiliates. Because the operations of the
Company are conducted primarily by its subsidiaries and other affiliates, the
Company's cash flow and its ability to service its indebtedness, including its
ability to pay the interest on and principal of the Senior Notes, are almost
entirely dependent upon the earnings of its subsidiaries and other affiliates
and the distribution of those earnings to the Company. The non-recourse project
financing agreements of certain of the Company's subsidiaries and other
affiliates generally restrict their ability to pay dividends, make distributions
or otherwise transfer funds to the Company. The restrictions in such agreements
generally require that, prior to the payment of dividends, distributions or
other transfers, the subsidiary or other affiliate proposing to make the
distribution must provide for the payment of other obligations, including
operating expenses, debt service and reserves. Calpine's subsidiaries and other
affiliates are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due on the Senior Notes or to make
any funds available therefor, whether by dividends, loans or other payments, and
do not guarantee the payment of interest on or principal of the Senior Notes.
Any right of Calpine to receive any assets of any of its subsidiaries or other
affiliates upon any liquidation or reorganization of Calpine (and the consequent
right of the holders of the Senior Notes to participate in the distribution of,
or to realize proceeds from, those assets) will be effectively subordinated to
the claims of any such subsidiaries' or other affiliates' creditors (including
trade creditors and holders of debt issued by such subsidiaries or affiliates).
After giving pro forma effect to the sale of $400 million Old Notes and the
Bethpage and Texas City/Clear Lake Transactions, as of March 31, 1998,
approximately $193.8 million of indebtedness of certain of the Company's
subsidiaries would be effectively senior to the Senior Notes, all of which
represents non-recourse project financing secured by the assets of such
subsidiaries.
While the Indentures impose limitations on the ability of the Company and
its subsidiaries to incur additional indebtedness, the Indentures do not limit
the amount of non-recourse project financing that the Company's subsidiaries may
incur to finance new power generation facilities. See "Description of the New
Notes -- Covenants -- Limitation on Incurrence of Indebtedness."
POSSIBLE UNAVAILABILITY OF FINANCING
Each power generation facility acquired or developed by the Company will
require substantial capital investment. The Company's ability to arrange
financing and the cost of such financing are dependent upon numerous factors,
including general economic and capital market conditions, conditions in energy
markets, regulatory developments, credit availability from banks or other
lenders, investor confidence in the industry and the Company, the continued
success of the Company's current power generation facilities, and provisions of
tax and securities laws that are conducive to raising capital. There can be no
assurance that financing for new facilities will be available to the Company on
acceptable terms in the future.
The Company's power generation facilities have been financed using a
variety of leveraged financing structures, primarily consisting of non-recourse
project financing and lease obligations. As of March 31, 1998, the Company had
approximately $1.1 billion of total consolidated indebtedness, of which
approximately 22% represented non-recourse project financing. After giving pro
forma effect to the sale of $400 million Old Notes and the Bethpage and Texas
City/Clear Lake Transactions, as of March 31, 1998, the Company would have had
approximately $1.2 billion of total consolidated indebtedness, of which
approximately 16% would represent non-recourse project financing. See "Pro Forma
Consolidated Financial Data." Each non-recourse project financing and lease
obligation is structured to be fully paid out of cash flow provided by the
facility or facilities, the assets of which (together with pledges of stock or
partnership interests in the entity owning the facility) collateralize such
obligations, without any claim against the Company's general corporate funds.
Such leveraged financing permits the development of larger facilities, but also
increases the risk to the Company that its interest in a particular facility
could be impaired or that fluctuations in revenues could adversely affect the
Company's ability to meet its lease or debt obligations. The debt collateralized
by the
16
<PAGE> 18
interests of the Company in each operating facility reduces the liquidity of
such assets since any sale or transfer of a facility would be subject both to
the lien securing the facility indebtedness and to transfer restrictions in the
financing agreements. While the Company intends to utilize non-recourse or lease
financing when appropriate, there can be no assurance that market conditions and
other factors will permit the same limited equity investment by the Company or
the same substantially non-recourse nature of financings for future facilities.
In the event of a default under a financing agreement, and assuming the Company
or the other equity investors in a facility are unable or choose not to cure
such default within applicable cure periods, if any, the lenders or lessors
would generally have rights to the facility, any related geothermal resource or
natural gas reserves, related contracts and cash flows and all licenses and
permits necessary to operate the facility. In the event of foreclosure after
such a default, the Company might not retain any interest in such facility. The
Company does not believe the existence of non-recourse or lease financing will
materially affect its ability to continue to borrow funds in the future in order
to finance new facilities. There can be no assurance, however, that the Company
will continue to be able to obtain the financing required to develop its power
generation facilities on terms satisfactory to the Company. See "-- Power
Project Development and Acquisition Risks."
The Company has from time to time guaranteed certain obligations of its
subsidiaries and other affiliates. There can be no assurance that, in respect of
any financings of facilities in the future, lenders or lessors will not require
the Company to guarantee the indebtedness of such future facilities, rendering
the Company's general corporate funds vulnerable in the event of a default by
such facility or related subsidiary. If the lenders or lessors were to require
such guarantees, and the Company were unable to incur indebtedness in respect of
such guarantees under the restrictions on indebtedness (including guarantees)
contained in the Indentures, the Company's ability to fund new facilities could
be adversely affected. The Indentures do not limit the ability of the Company's
subsidiaries to incur non-recourse or lease financing for investment in new
facilities.
IMPACT OF AVOIDED COST PRICING; ENERGY PRICE FLUCTUATIONS
PG&E pays a fixed price of $13.83 for each unit of electrical energy
according to schedules set forth in the long-term power sales agreements for the
Bear Canyon (20 megawatts) and West Ford Flat (27 megawatts) Power Plants. The
fixed price periods under these power sales agreements expire in September and
December 1998, respectively. 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 interim short-run
avoided cost ("SRAC"), which is calculated pursuant to the methodology approved
by the CPUC on December 9, 1996, and will continue at SRAC until the independent
power exchange, which commenced operations on April 1, 1998, is fully
implemented. Thereafter, SRAC will be replaced by the energy clearing price of
the independent power exchange. During 1997, SRAC averaged approximately 2.94c
per kilowatt hour and during the first three months of 1998 SRAC averaged
approximately 2.90c per kilowatt hour. As a result, while SRAC does not affect
capacity payments under the power sales agreements, the Company's energy revenue
under these power sales agreements is expected to 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 expects the
forecasted decline in energy revenues will be mitigated by decreased royalty
expenses and planned operating cost reductions at the facilities. In addition,
the Company will continue its strategy of offsetting such reductions through its
acquisition and development program. In addition, 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.
POWER PROJECT DEVELOPMENT AND ACQUISITION RISKS
The development of power generation facilities is subject to substantial
risks. In connection with the development of a power generation facility, the
Company must generally obtain governmental permits and approvals, fuel supply
and transportation agreements, sufficient equity capital and debt financing,
electrical transmission agreements, site agreements and construction contracts,
and there can be no assurance that the
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Company will be successful in doing so. In addition, project development is
subject to certain environmental, engineering and construction risks relating to
cost-overruns, delays and performance. Although the Company may attempt to
minimize the financial risks in the development of a project by securing a
favorable long-term power sales agreement, entering into power marketing
transactions, obtaining all required governmental permits and approvals and
arranging adequate financing prior to the commencement of construction, the
development of a power project may require the Company to expend significant
sums for preliminary engineering, permitting and legal and other expenses before
it can be determined whether a project is feasible, economically attractive or
financeable. If the Company were unable to complete the development of a
facility, it would generally not be able to recover its investment in such a
facility. The process for obtaining initial environmental, siting and other
governmental permits and approvals is complicated and lengthy, often taking more
than one year, and is subject to significant uncertainties. As a result of
competition, it may be difficult to obtain a power sales agreement for a
proposed project, and the prices offered in new power sales agreements for both
electric capacity and energy may be less than the prices in prior agreements.
There can be no assurance that the Company will be successful in the development
of power generation facilities in the future.
The Company has grown substantially in recent years as a result of
acquisitions of interests in power generation facilities and steam fields. The
Company believes that although the domestic power industry is undergoing
consolidation and that significant acquisition opportunities are available, the
Company is likely to confront significant competition for acquisition
opportunities. In addition, there can be no assurance that the Company will
continue to identify attractive acquisition opportunities at favorable prices
or, to the extent that any opportunities are identified, that the Company will
be able to consummate such acquisitions.
START-UP RISKS
The commencement of operation of a newly constructed power plant or steam
field involves many risks, including start-up problems, the breakdown or failure
of equipment or processes and performance below expected levels of output or
efficiency. New plants have no operating history and may employ recently
developed and technologically complex equipment. Insurance is maintained to
protect against certain of these risks, warranties are generally obtained for
limited periods relating to the construction of each project and its equipment
in varying degrees, and contractors and equipment suppliers are obligated to
meet certain performance levels. Such insurance, warranties or performance
guarantees may not be adequate to cover lost revenues or increased expenses and,
as a result, a project may be unable to fund principal and interest payments
under its financing obligations and may operate at a loss. A default under such
a financing obligation could result in the Company losing its interest in such
power generation facility or steam field. See "-- Possible Unavailability of
Financing."
In addition, power sales agreements, which have typically been entered into
with a utility early in the development phase of a project, often enable the
utility to terminate such agreement, or to retain security posted as liquidated
damages, in the event that a project fails to achieve commercial operation or
certain operating levels by specified dates or fails to make certain specified
payments. In the event such a termination right is exercised, a project may not
commence generating revenues, the default provisions in a financing agreement
may be triggered (rendering such debt immediately due and payable) and the
project may be rendered insolvent as a result.
GENERAL OPERATING RISKS
The Company currently operates 18 of the 26 power plants and steam fields
in which it has an interest. The continued operation of power plants and steam
fields involves many risks, including the breakdown or failure of power
generation equipment, transmission lines, pipelines or other equipment or
processes and performance below expected levels of output or efficiency. As of
June 30, 1998, the Company's power plants have operated at an average
availability of approximately 98%. Although from time to time the Company's
power generation facilities have experienced certain equipment breakdowns or
failures, such breakdowns or failures have not had a material adverse effect on
the operation of such facilities or on the Company's results of operations.
Although the Company's facilities contain certain redundancies and back-up
mechanisms, there can be no assurance that any such breakdown or failure would
not prevent the affected facility or steam field
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from performing under applicable power and/or steam sales agreements. In
addition, although insurance is maintained to protect against certain of these
operating risks, the proceeds of such insurance may not be adequate to cover
lost revenues or increased expenses, and, as a result, the entity owning such
power generation facility or steam field may be unable to service principal and
interest payments under its financing obligations and may operate at a loss. A
default under such a financing obligation could result in the Company losing its
interest in such power generation facility or steam field. See "-- Possible
Unavailability of Financing."
RISKS RELATED TO THE DEVELOPMENT AND OPERATION OF GEOTHERMAL ENERGY RESOURCES
The development and operation of geothermal energy resources are subject to
substantial risks and uncertainties similar to those experienced in the
development of oil and gas resources. The successful exploitation of a
geothermal energy resource ultimately depends upon the heat content of the
extractable fluids, the geology of the reservoir, the total amount of
recoverable reserves and operational factors relating to the extraction of
fluids, including operating expenses, energy price levels and capital
expenditure requirements relating primarily to the drilling of new wells. In
connection with the development of a project, the Company estimates the
productivity of the geothermal resource and the expected decline in such
productivity. The productivity of a geothermal resource may decline more than
anticipated, resulting in insufficient recoverable reserves being available for
sustained generation of the electrical power capacity desired. An incorrect
estimate by the Company or an unexpected decline in productivity could have a
material adverse effect on the Company's results of operations.
Geothermal reservoirs are highly complex, and, as a result, there exist
numerous uncertainties in determining the extent of the reservoirs and the
quantity and productivity of the steam reserves. Reservoir engineering is an
inexact process of estimating underground accumulations of steam or fluids that
cannot be measured in any precise way, and depends significantly on the quantity
and accuracy of available data. As a result, the estimates of other reservoir
specialists may differ materially from those of the Company. Estimates of
reserves are generally revised over time on the basis of the results of
drilling, testing and production that occur after the original estimate was
prepared. While the Company has extensive experience in the operation and
development of geothermal energy resources and in preparing such estimates,
there can be no assurance that the Company will be able to successfully manage
the development and operation of its geothermal reservoirs or that the Company
will accurately estimate the quantity or productivity of its steam reserves.
DEPENDENCE ON THIRD PARTIES
The nature of the Company's power generation facilities is such that, in
general, each facility currently relies on one power or steam sales agreement
with a single electric utility customer for substantially all, if not all, of
such facility's revenue over the life of the facility. During 1997,
approximately 80% and 5% of the Company's total revenue was attributable to
revenue received pursuant to power and steam sales agreements with PG&E and
SMUD, respectively. The power and steam sales agreements are generally long-term
agreements, covering the sale of electricity or steam for initial terms of 20 or
30 years. However, the loss of any one power or steam sales agreement with any
of these utility customers could have a material adverse effect on the Company's
results of operations. In addition, any material failure by any utility customer
to fulfill its obligations under a power or steam sales agreement could have a
material adverse effect on the cash flow available to the Company and, as a
result, on the Company's results of operations. PG&E has recently announced its
intention to sell all of its power generating facilities in The Geysers that
purchase steam from Thermal Power Company and the PG&E Unit 13 and PG&E Unit 16
Steam Fields. The Company cannot predict the impact that any such sale would
have.
Furthermore, each power generation facility may depend on a single or
limited number of entities to purchase thermal energy, or to supply or transport
natural gas to such facility. The failure of any one utility customer, steam
host, gas supplier or gas transporter to fulfill its contractual obligations
could have a material adverse effect on a power project and on the Company's
business and results of operations.
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INTERNATIONAL INVESTMENTS
The Company has made an investment in the Cerro Prieto geothermal steam
fields located in Mexico and may pursue additional international investments, in
selected countries. Such investments are subject to risks and uncertainties
relating to the political, social and economic structures of those countries.
Risks specifically related to investments in non-United States projects may
include risks of fluctuations in currency valuation, currency inconvertibility,
expropriation and confiscatory taxation, increased regulation and approval
requirements and governmental policies limiting returns to foreign investors.
GOVERNMENT REGULATION
The Company's activities are subject to complex and stringent energy,
environmental and other governmental laws and regulations. The construction and
operation of power generation facilities require numerous permits, approvals and
certificates from appropriate federal, state and local governmental agencies, as
well as compliance with environmental protection legislation and other
regulations. While the Company believes that it has obtained the requisite
approvals for its existing operations and that its business is operated in
accordance with applicable laws, the Company remains subject to a varied and
complex body of laws and regulations that both public officials and private
individuals may seek to enforce. There can be no assurance that existing laws
and regulations will not be revised or that new laws and regulations will not be
adopted or become applicable to the Company that may have a material adverse
effect on the Company's business or results of operations, nor can there be any
assurance that the Company will be able to obtain all necessary licenses,
permits, approvals and certificates for proposed projects or that completed
facilities will comply with all applicable permit conditions, statutes or
regulations. In addition, regulatory compliance for the construction of new
facilities is a costly and time-consuming process, and intricate and changing
environmental and other regulatory requirements may necessitate substantial
expenditures to obtain permits and may create a significant risk of expensive
delays or significant loss of value in a project if the project is unable to
function as planned due to changing requirements or local opposition.
The Company's operations are subject to the provisions of various energy
laws and regulations, including the Public Utility Regulatory Policies Act of
1978, as amended ("PURPA"), the Public Utility Holding Company Act of 1955, as
amended ("PUCHA"), and state and local regulations. PUHCA provides for the
extensive regulation of public utility holding companies and their subsidiaries.
PURPA provides to qualifying facilities ("QFs") (as defined under PURPA) and
owners of QFs certain exemptions from certain federal and state regulations,
including rate and financial regulations.
Under present federal law, the Company is not and will not be subject to
regulation as a holding company under PUHCA as long as the power plants in which
it has an interest are QFs under PURPA or are subject to another exemption. In
order to be a QF, a facility must be not more than 50% owned by an electric
utility or electric utility holding company. A QF that is a cogeneration
facility must produce not only electricity, but also useful thermal energy for
use in an industrial or commercial process or heating or cooling applications in
certain proportions to the facility's total energy output, and it must meet
certain energy efficiency standards. Therefore, loss of a thermal energy
customer could jeopardize a cogeneration facility's QF status. All geothermal
power plants up to 80 megawatts that meet PURPA's ownership requirements and
certain other standards are considered QFs. If one of the power plants in which
the Company has an interest were to lose its QF status and not otherwise receive
a PUHCA exemption, the project subsidiary or partnership in which the Company
has an interest owning or leasing that plant could become a public utility
company, which could subject the Company to significant federal, state and local
laws, including rate regulation and regulation as a public utility holding
company under PUHCA. This loss of QF status, which may be prospective or
retroactive, in turn, could cause all of the Company's other power plants to
lose QF status because, under FERC regulations, a QF cannot be owned by an
electric utility or electric utility holding company. In addition, a loss of QF
status could, depending on the power sales agreement, allow the power purchaser
to cease taking and paying for electricity or to seek refunds of past amounts
paid and thus could cause the loss of some or all contract revenues or otherwise
impair the value of a project and could trigger defaults under provisions of the
applicable project contracts and financing agreements (rendering such debt
immediately due and payable). If a power purchaser ceased taking and paying for
electricity or sought to obtain refunds of past amounts paid,
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there can be no assurance that the costs incurred in connection with the project
could be recovered through sales to other purchasers.
Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
QFs at avoided costs. The Company does not know whether such legislation will be
passed or what form it may take. The Company believes that if any such
legislation is passed, it would apply to new projects. As a result, although
such legislation may adversely affect the Company's ability to develop new
projects, the Company believes it would not affect the Company's existing QFs.
There can be no assurance, however, that any legislation passed would not
adversely impact the Company's existing projects.
Many states are implementing or considering regulatory initiatives designed
to increase competition in the domestic power generation industry. In a December
20, 1995 policy decision, the CPUC outlined a new market structure that would
provide for a competitive power generation industry and direct access to
generation for all consumers within five years. The CPUC issued decisions
providing for direct access for all customers effective April 1, 1998, and the
unbundling of all electric services. As part of its policy decision, the CPUC
indicated that power sales agreements of existing QFs would be honored. The
Company cannot predict the impact, if any, that such restructuring will have on
the Company's existing business or results of operations.
SEISMIC DISTURBANCES
Areas in which the Company operates and is developing many of its
geothermal and gas-fired projects are subject to frequent low-level seismic
disturbances, and more significant seismic disturbances are possible. While the
Company's existing power generation facilities are built to withstand relatively
significant levels of seismic disturbances, and the Company believes it
maintains adequate insurance protection, there can be no assurance that
earthquake, property damage or business interruption insurance will be adequate
to cover all potential losses sustained in the event of serious seismic
disturbances or that such insurance will continue to be available to the Company
on commercially reasonable terms.
AVAILABILITY OF NATURAL GAS
To date, the Company's fuel acquisition strategy has included various
combinations of Company-owned gas reserves, gas prepayment contracts and short-,
medium- and long-term supply contracts. In its gas supply arrangements, the
Company attempts to match the fuel cost with the fuel component included in the
facility's power sales agreements, in order to minimize a project's exposure to
fuel price risk. The Company believes that there will be adequate supplies of
natural gas available at reasonable prices for each of its facilities when
current gas supply agreements expire. There can be no assurance, however, that
gas supplies will be available for the full term of the facilities' power sales
agreements, or that gas prices will not increase significantly. If gas is not
available, or if gas prices increase above the fuel component of the facilities'
power sales agreements, there could be a material adverse impact on the
Company's results of operations.
COMPETITION
The power generation industry is characterized by intense competition, and
the Company encounters competition from utilities, industrial companies and
other power producers. In recent years, there has been increasing competition in
an effort to obtain power sales agreements, and this competition has contributed
to a reduction in electricity prices. In addition, many states are implementing
or considering regulatory initiatives designed to increase competition in the
domestic power industry. In California, direct access for all customers began on
April 1, 1998. Regulatory initiatives are also being considered in other states,
including Texas, New York and states in New England. This competition has put
pressure on electric utilities to lower their costs, including the cost of
purchased electricity, and increasing competition in the future will increase
this pressure.
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DEPENDENCE ON SENIOR MANAGEMENT
The Company's success is largely dependent on the skills, experience and
efforts of its senior management. The loss of the services of one or more
members of the Company's senior management could have a material adverse effect
on the Company's business and development.
QUARTERLY FLUCTUATIONS; SEASONALITY
The Company's quarterly operating results have fluctuated in the past and
may continue to do so in the future as a result of a number of factors,
including but not limited to the timing and size of acquisitions, the completion
of development projects, the timing and amount of curtailment, if any, and
variations in levels of production. Furthermore, the majority of capacity
payments under certain of the Company's power sales agreements are received
during the months of May through October.
ABSENCE OF PUBLIC MARKET
There has previously been no public market for the Senior Notes. The
Company does not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can be
no assurance that an active trading market will develop or be sustained in the
New Notes. To the extent that a market for the New Notes does develop, the
market value of the New Notes will depend on market conditions (such as yields
on alternative investments), general economic conditions, the Company's
financial condition and other conditions. Such conditions might cause the New
Notes, to the extent they are actively traded, to trade at a significant
discount from face value.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain subject to the existing restrictions on transfer of
such Old Notes. Additionally, holders of any Old Notes not tendered in the
Exchange Offer will not have any rights under the Registration Rights Agreement
to cause the Company to register the Old Notes, and the interest rate on the Old
Notes will remain at its initial rate of 7 7/8% per annum.
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as contemplated
in this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the terms of which are identical to the New Notes. The Old
Notes surrendered in exchange for the New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the indebtedness of the Company.
The net proceeds received by the Company from the sale of $300 million of
the Old Notes in March 1998 (after deducting the discounts and expenses in
connection with such sale) were used as follows: (i) $89.6 million to repay in
full the non-recourse project financing from a syndicate of banks with The Bank
of Nova Scotia, as agent, to Calpine Finance Company, a wholly owned subsidiary
of the Company; (ii) approximately $37.4 million to repay in full the
non-recourse project financing from Toronto Dominion Bank to TBG Cogen Partners,
a wholly owned subsidiary of the Company that owns the Bethpage Power Plant; and
(iii) the remainder for acquisitions and general corporate purposes. Of the net
proceeds received from the sale of $100 million of the Old Notes in July 1998,
the Company used approximately $52.1 million to repay in full the outstanding
non-recourse project financing from ING Capital Corp. on the Pasadena 1 Power
Plant and expects to use approximately $13.6 million to pay the remaining
construction costs on the Pasadena 1 Power Plant. The remainder of the net
proceeds will be used for the acquisition and development of power generation
facilities and for general corporate purposes.
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information."
GENERAL
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement, which requires the Company to file with the
Commission a registration statement (the "Exchange Offer Registration
Statement") under the Securities Act with respect to an issue of senior notes of
the Company with terms identical to the Old Notes (except with respect to
restrictions on transfer) and to use its best efforts to cause such registration
statement to become effective under the Securities Act and, upon the
effectiveness of such registration statement, to offer to the holders of the Old
Notes the opportunity, for a period of 30 days from the date the notice of the
Exchange Offer is mailed to holders of the Old Notes, to exchange their Old
Notes for a like principal amount of New Notes. The Exchange Offer is being made
pursuant to the Registration Rights Agreement to satisfy the Company's
obligations thereunder. The Company has not entered into any arrangement or
understanding with any person to distribute the New Notes to be received in the
Exchange Offer.
For each Old Note properly tendered and accepted pursuant to the Exchange
Offer, the holder of such Old Note will receive a New Note having a principal
amount equal to that of the Old Note tendered. Interest on each New Note will
accrue from the last respective interest date on which interest was paid on the
Old Note tendered in exchange therefor or, if no interest has been paid on such
Old Note, from the Issue Date.
Each holder of the Old Notes who wishes to exchange the Old Note for New
Notes in the Exchange Offer will be required to represent in the Letter of
Transmittal that (i) it is not an affiliate of the Company, (ii) the New Notes
to be received by it were acquired in the ordinary course of business and (iii)
at the time of commencement of the Exchange Offer, it has no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the New Notes.
In the event that applicable interpretations of the staff of the Commission
would not permit the Company to effect the Exchange Offer or, if for any other
reason the Exchange Offer is not consummated on or prior to September 27, 1998,
the Company has agreed to use its best efforts to cause to become effective a
shelf registration statement (the "Shelf Registration Statement") with respect
to the resale of the Old Notes and to keep the Shelf Registration Statement
effective until the earlier of two years after the date of the initial sale of
the Old Notes or until all the Old Notes covered by the Shelf Registration
Statement have been sold pursuant to such Shelf Registration Statement.
TERMS OF THE EXCHANGE OFFER
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to make certain representations, including
that (i) it is neither an affiliate of the Company nor a broker-dealer tendering
Old Notes acquired directly from the Company for its own account, (ii) any New
Notes to be received by it were acquired in the ordinary course of its business
and (iii) at the time of commencement of the Exchange Offer, it has no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes. In addition, in connection with
any resales of New Notes, any broker-dealer (a "Participating Broker-Dealer")
who acquired Old Notes for its own account as a result of market-making
activities or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the New
Notes. The Commission has taken the position that Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to the New Notes
(other than a resale of an unsold allotment from the original sales of Old
Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Company is required to
allow Participating Broker-Dealers (and other persons, if any, subject to
similar prospectus delivery requirements) to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the
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resale of such New Notes, provided, however, the Company shall not be required
to amend or supplement such prospectus for a period exceeding 180 days after the
consummation of the Exchange Offer. The Company has also agreed that in the
event that either the Exchange Offer is not consummated or a Shelf Registration
Statement is not declared effective on or prior to September 27, 1998, the
interest rate borne by the Old Notes will be increased by one-half of one
percent per annum until the Exchange Offer is consummated or a Shelf
Registration Statement is declared effective.
The Exchange Offer shall be deemed to have been consummated upon the
Company's having exchanged, pursuant to the Exchange Offer, New Notes for all
Old Notes that have been properly tendered and not withdrawn by the Expiration
Date. In such event, holders of Old Notes not participating in the Exchange
Offer who are seeking liquidity in their investment would have to rely on
exemptions to registration requirements under the securities laws, including the
Securities Act.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 in principal amount of New Notes (and any
integral multiple thereof) in exchange for an equal principal amount of
outstanding Old Notes tendered and accepted in the Exchange Offer. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offer in any
denomination of $1,000 or in integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Notes. Any holder of Old Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the New Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except that the New Notes will not bear legends restricting the
transfer thereof. The New Notes will evidence the same debt as the Old Notes.
The New Notes will be issued under and entitled to the benefits of the Note
Indenture.
As of the date of this Prospectus, $400,000,000 aggregate principal amount
of the Old Notes are outstanding and there are two registered holders thereof.
In connection with the issuance of the Old Notes, the Company arranged for the
Old Notes to be eligible for trading in the Private Offering, Resale and Trading
through Automated Linkages (PORTAL) Market, the National Association of
Securities Dealers' screen based, automated market trading of securities
eligible for resale under Rule 144A and to be issued and transferable in
book-entry form through the facilities of DTC. The New Notes will also be
issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1998 (the "Record
Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "Exchange Agent." The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
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If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"Fees and Expenses."
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law or the Note Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement and the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder. Old Notes that are not tendered for exchange in the
Exchange Offer will remain outstanding and continue to accrue interest, but will
not be entitled to any rights or benefits under the Registration Rights
Agreement.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
, 1998 unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "Termination" shall have occurred and shall not have been waived by
the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from the last Interest Payment Date on
which interest was paid on the Old Notes, or if interest has not yet been paid
on the Old Notes, from March 31, 1998. Such interest will be paid with the first
interest payment on the New Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
The New Notes will bear interest at a rate of 7 7/8% per annum. Interest on
the New Notes will be payable semi-annually, in arrears, on each Interest
Payment Date following the consummation of the Exchange Offer. Untendered Old
Notes that are not exchanged for New Notes pursuant to the Exchange Offer will
bear interest at a rate of 7 7/8% per annum after the Expiration Date.
26
<PAGE> 28
PROCEDURES FOR TENDERING
The tender of Old Notes pursuant to any of the procedures set forth in this
Prospectus and in the Letter of Transmittal will constitute a binding agreement
between the tendering holder and the Company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal. The
tender of Old Notes will constitute an agreement to deliver good and marketable
title to all tendered Old Notes prior to the Expiration Date free and clear of
all liens, charges, claims, encumbrances, interests and restrictions of any
kind. Holders must follow the procedures set forth in this Prospectus in order
to properly and effectively tender Old Notes.
EXCEPT AS PROVIDED IN "-- GUARANTEED DELIVERY PROCEDURES," UNLESS THE OLD
NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE EXCHANGE AGENT PRIOR
TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION, REJECT SUCH TENDER.
ISSUANCE OF EXCHANGE NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF TENDERED OLD
NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS. NOTWITHSTANDING THE
FOREGOING, DTC PARTICIPANTS TENDERING THROUGH ATOP WILL BE DEEMED TO HAVE MADE
VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN AGENT'S MESSAGE (DEFINED
BELOW) PRIOR TO THE EXPIRATION DATE.
Old Notes Held Through DTC
Each Beneficial Owner holding Old Notes through a DTC Participant must
instruct such DTC Participant to cause its Old Notes to be tendered in
accordance with the procedures set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Old Notes through DTC must (i) electronically transmit its
acceptance through ATOP, and DTC will then verify the acceptance, execute a
book-entry delivery to the Exchange Agent's account at DTC and send an Agent's
Message to the Exchange Agent for its acceptance, or (ii) comply with the
guaranteed delivery procedures set forth below and in the Note of Guaranteed
Delivery. See "-- Guaranteed Delivery Procedures."
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to Old
Notes held through DTC, and any financial institution that is a DTC Participant
may make book-entry delivery of interests in Old Notes in the Exchange Agent's
account through ATOP. However, although delivery of interests in the Old Notes
may be effected through book-entry transfer into the Exchange Agent's account
through ATOP, an Agent's Message in connection with such book-entry transfer,
and any other required documents, must be transmitted to and received by the
Exchange Agent at its address set forth under "-- Exchange Agent," or the
guaranteed delivery procedures set forth below must be complied with, in each
case, prior to the Expiration Date. Delivery of documents to DTC does not
constitute delivery to the Exchange Agent. The confirmation of a book-entry
transfer into the Exchange Agent's account at DTC as described above is referred
to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants have
received a Letter of Transmittal and agree to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such DTC Participants.
Cede & Co., as the holder of the global certificates representing the Old
Notes (a "Global Security"), will tender a portion of each Global Security equal
to the aggregate principal amount due at the stated maturity or number of shares
for which instructions to tender are given by DTC Participants.
27
<PAGE> 29
Old Notes Held by Holders
Each holder must (i) complete and sign and mail or deliver the accompanying
Letter of Transmittal, and any other documents required by the Letter of
Transmittal, together with certificate(s) representing all tendered Old Notes,
to the Exchange Agent at its address set under "-- Exchange Agent," or (ii)
comply with the guaranteed delivery procedures set forth below and in the Notice
of Guaranteed Delivery. See "-- Guaranteed Delivery Procedures."
All signatures on a Letter of Transmittal must be guaranteed by any member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor" institution
within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"); provided, however, that signatures on a Letter of Transmittal
need not be guaranteed if such Old Notes are tendered for the account of an
Eligible Institution including (as such terms are defined in Rule 17Ad-15): (i)
a bank; (ii) a broker, dealer, municipal securities dealer, municipal securities
broker, government securities dealer or government securities broker; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings institution that is a
participant in a Securities Transfer Association recognized program.
If a Letter of Transmittal or any Old Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
Holders should indicate in the applicable box in the Letter of Transmittal
the name and address to which substitute certificates evidencing Old Notes for
amounts not tendered are to be issued or sent, if different from the name and
address of the person signing the Letter of Transmittal. In the case of issuance
in a different name, the employer identification or social security number of
the person named must also be indicated. If no instructions are given, such Old
Notes not tendered, as the case may be, will be returned to the person signing
the Letter of Transmittal.
By tendering, each holder and each DTC Participant will make to the Company
the representations set forth in the third paragraph under the heading
"-- General."
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, as the case may be, each tendering holder waives any
right to receive any notice of the acceptance for purchase of its Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be resolved by the Company,
whose determination will be final and binding. The Company reserves the absolute
right to reject any or all tenders that are not in proper form or the acceptance
of which may, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the absolute right to waive any condition to the Exchange
Offer and any irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding. Unless waived, any irregularities in connection with tenders must be
cured within such time as the Company shall determine. The Company and the
Exchange Agent shall not be under any duty to give notification of defects in
such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering holder, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND OLD NOTES MUST BE SENT ONLY TO THE EXCHANGE
AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OLD NOTES TO THE COMPANY OR DTC.
28
<PAGE> 30
The method of delivery of Old Notes and Letters of Transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Old Notes Held Through DTC
DTC Participants holding Old Notes through DTC who wish to cause their Old
Notes to be tendered, but who cannot transmit their acceptances through ATOP
prior to the Expiration Date, may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Company herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent within
three New York Stock Exchange ("NYSE") trading days after the date of the
execution of the Notice of Guaranteed Delivery.
Old Notes Held by Holders
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three NYSE trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Old Notes (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation or book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon three NYSE
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
29
<PAGE> 31
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
Old Notes Held Through DTC
DTC Participants holding Old Notes who have transmitted their acceptances
through ATOP may, prior to 5:00 p.m., New York City time, on the Expiration
Date, withdraw the instruction given thereby by delivering to the Exchange
Agent, at its address set forth under "-- Exchange Agent," a written,
telegraphic or facsimile notice of withdrawal of such instruction. Such notice
of withdrawal must contain the name and number of the DTC Participant, the
principal amount due at the Stated Maturity date of the Old Notes to which such
withdrawal related and the signature of the DTC Participant. Withdrawal of such
an instruction will be effective upon receipt of such written notice of
withdrawal by the Exchange Agent.
Old Notes Held by Holders
Holders may withdraw a tender of Old Notes in the Exchange Offer, by a
telegram, telex, letter or facsimile transmission notice of withdrawal received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount due at the Stated Maturity of such
Old Notes, or in the case of Old Notes transferred by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any
Old Notes which have been tendered but which are not accepted for exchange will
be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at anytime prior
to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an Eligible
Institution; provided, however, that signatures on the notice of withdrawal need
not be guaranteed if the Old Notes being withdrawn are held for the account of
an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC Participant or a holder, as the case may be, in the same manner as the
person's name appears on its transmission through ATOP or Letter of Transmittal,
as the case may be, to which such withdrawal relates. If a notice of withdrawal
is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when signing
and must submit with the revocation appropriate evidence of authority to execute
the notice of withdrawal. A DTC Participant or a holder may withdraw an
instruction or a tender, as the case may be, only if such withdrawal complies
with the provisions of this Prospectus.
A withdrawal of a tender of Old Notes by a DTC Participant or a holder, as
the case may be, may be rescinded only by a new transmission of an acceptance
through ATOP or execution and delivery of a new Letter of Transmittal, as the
case may be, in accordance with the procedures described herein.
30
<PAGE> 32
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer, which, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission in a manner, which, in the Company's judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Courier:
The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attention: Denise Robertson Grand Level
New York, New York 10286
Attention: Denise Robertson
Telephone Number: (212) 815-2791
Facsimile Transmission: (212) 815-6339
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or by telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
31
<PAGE> 33
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes not tendered or accepted for exchange are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered, or if tendered Old
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of the exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company upon the consummation of the Exchange Offer. The
expenses of the Exchange Offer will be amortized by the Company over the term of
the New Notes under generally accepted accounting principles.
32
<PAGE> 34
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated financial data set forth below for the five years ended
and as of December 31, 1997 have been derived from the audited consolidated
financial statements of the Company. The consolidated financial data for the
three months ended and as of March 31, 1997 and March 31, 1998 are unaudited,
but have been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments necessary for the fair
presentation of the financial position and results of operations for these
periods. Consolidated operating results for the three months ended March 31,
1998 should not be considered indicative of the results that may be expected for
the entire year. The following selected consolidated financial data should be
read in conjunction with the consolidated financial statements and the related
notes thereto incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales.................. $53,000 $90,295 $127,799 $199,464 $237,277 $ 33,687 $ 43,390
Service contract revenue..................... 16,896 7,221 7,153 6,455 10,177 1,814 5,481
Income (loss) from unconsolidated investments
in power projects.......................... 19 (2,754) (2,854) 6,537 15,819 2,033 3,754
Interest income on loans to power projects... -- -- -- 2,098 13,048 1,697 2,520
------- ------- -------- -------- -------- -------- --------
Total revenue.......................... 69,915 94,762 132,098 214,554 276,321 39,231 55,145
Cost of revenue................................ 42,501 52,845 77,388 129,200 153,308 30,589 39,369
------- ------- -------- -------- -------- -------- --------
Gross profit................................... 27,414 41,917 54,710 85,354 123,013 8,642 15,776
Project development expenses................... 1,280 1,784 3,087 3,867 7,537 2,161 1,681
General and administrative expenses............ 5,080 7,323 8,937 14,696 18,289 4,211 5,236
Provision for write-off of project development
costs(1)..................................... -- 1,038 -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Income from operations......................... 21,054 31,772 42,686 66,791 97,187 2,270 8,859
Interest expense............................... 13,825 23,886 32,154 45,294 61,466 12,977 18,523
Other income, net.............................. (1,133) (1,988) (1,895) (6,259) (17,438) (3,601) (2,764)
------- ------- -------- -------- -------- -------- --------
Income before provision for income taxes and
cumulative effect of change in accounting
principle.................................. 8,362 9,874 12,427 27,756 53,159 (7,106) (6,900)
Provision for income taxes..................... 4,195 3,853 5,049 9,064 18,460 (3,066) (3,843)
------- ------- -------- -------- -------- -------- --------
Income before cumulative effect of change in
accounting principle....................... 4,167 6,021 7,378 18,692 34,699 (4,040) (3,057)
Cumulative effect of adoption of SFAS No.
109.......................................... (413) -- -- -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net income................................... $ 3,754 $ 6,021 $ 7,378 $ 18,692 $ 34,699 $ (4,040) $ (3,057)
======= ======= ======== ======== ======== ======== ========
OTHER FINANCIAL DATA AND RATIOS:
Depreciation and amortization.................. $12,540 $21,580 $ 26,896 $ 40,551 $ 48,935 $ 11,333 $ 12,582
EBITDA(2)...................................... $42,370 $53,707 $ 69,515 $117,379 $172,615 $ 19,479 $ 25,681
EBITDA to Consolidated Interest Expense(3)..... 2.98x 2.23x 2.11x 2.41x 2.60x 1.37x 1.30x
Total debt to EBITDA........................... 6.24x 6.23x 5.87x 5.12x 4.96x -- --
Ratio of earnings to fixed charges(4).......... 2.09x 1.52x 1.46x 1.45x 1.64x 0.58x 0.58x
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------ AS OF
1993 1994 1995 1996 1997 MARCH 31, 1998
-------- -------- -------- ---------- ---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 6,166 $ 22,527 $ 21,810 $ 95,970 $ 48,513 $ 96,960
Property, plant and equipment, net............... 251,070 335,453 447,751 648,208 719,721 1,140,783
Investments in power projects.................... 13,894 11,114 8,218 13,936 239,160 156,194
Notes receivable................................. 1,716 16,882 25,785 36,143 117,357 13,575
Total assets..................................... 302,256 421,372 554,531 1,031,397 1,380,956 1,678,097
Short-term debt.................................. 17,200 27,300 85,885 37,492 112,966 9,670
Long-term line of credit......................... 52,595 -- 19,851 -- -- --
Non-recourse debt................................ 194,746 196,806 190,642 278,640 182,893 227,081
Notes payable.................................... -- 5,296 6,348 -- -- --
Senior Notes..................................... -- 105,000 105,000 285,000 560,041 859,629
Total debt....................................... 264,541 334,402 407,726 601,132 855,900 1,096,380
Stockholders' equity............................. 13,429 18,649 25,227 203,127 239,956 237,488
</TABLE>
- ---------------
(1) Represents a write-off of certain capitalized project costs.
(2) 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. See "Description of the New Notes -- Certain Definitions."
EBITDA is presented here 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).
(3) For purposes of calculating the EBITDA to Consolidated Interest Expense
ratio, Consolidated Interest Expense is defined as total interest expense
plus one-third of all operating lease obligations, dividends paid in respect
of preferred stock and cash contributions to any employee stock ownership
plan used to pay interest on loans incurred to purchase capital stock of the
Company. See "Description of the New Notes -- Certain Definitions."
(4) Earnings are defined as income before provision for taxes, extraordinary
item and cumulative effect of change in accounting principle plus cash
received from investments in power projects and fixed charges reduced by the
equity in income from investments in power projects and capitalized
interest. Fixed charges consist of interest expense, capitalized interest,
amortization of debt issuance costs and the portion of rental expenses
representative of the interest expense component.
34
<PAGE> 36
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations for
the year ended December 31, 1997, gives effect to the following transactions as
if such transactions had occurred on January 1, 1997: (i) the acquisition of the
Montis Niger Gas Fields on January 30, 1997 (the "Montis Niger Transaction");
(ii) the acquisition by the Company of a 50% interest in the Texas City Power
Plant and the Clear Lake Power Plant on June 23, 1997 (the "Texas City/Clear
Lake Transaction"); (iii) the acquisition by the Company of 50% interests in the
Gordonsville Power Plant and the Auburndale Power Plant on October 9, 1997 (the
"Gordonsville/Auburndale Transaction"); (iv) the sale of the $200,000,000 of
8 3/4% Senior Notes Due 2007 on July 8, 1997, and the application of the net
proceeds therefrom; (v) the sale of $75,000,000 of 8 3/4% Senior Notes Due 2007
on September 10, 1997, and the application of the net proceeds therefrom; (vi)
the acquisition by the Company of an 11.36% interest in the Lockport Power
Plant, 50% interests in the Kennedy International Airport and Stony Brook Power
Plants, a 45% interest in the Bethpage Power Plant and a 100% interest in three
fuel management contracts on December 19, 1997 (the "GEI Transaction"); (vii)
subsequent to the GEI Transaction, the acquisition of the remaining 55% interest
in the Bethpage Power Plant on February 5, 1998 (the "Bethpage Transaction");
(viii) the acquisition by the Company of the remaining 50% interest in the Texas
City Power Plant and the Clear Lake Power Plant on March 31, 1998 (the
"remaining interest in the Texas City/Clear Lake Transaction") (the Montis Niger
Transaction, the Texas City/Clear Lake Transaction, the Gordonsville/Auburndale
Transaction, the sale of the $200,000,000 of 8 3/4% Senior Notes Due 2007, the
sale of $75,000,000 of 8 3/4% Senior Notes Due 2007, the GEI Transaction, the
Bethpage Transaction and the remaining interest in the Texas City/Clear Lake
Transaction being collectively referred to as the "Transactions"); (ix) the sale
of $300,000,000 of Old Notes on March 31, 1998, and the application of the net
proceeds therefrom; and (x) the sale of $100,000,000 of Old Notes on July 24,
1998 and the application of the net proceeds therefrom.
The following unaudited pro forma consolidated statement of operations for
the three months ended March 31, 1998 gives effect to the following transactions
as if such transactions had occurred on January 1, 1998: (i) the Bethpage
Transaction; (ii) the remaining interest in the Texas City/Clear Lake
Transaction; (iii) the sale of $300,000,000 of Old Notes on March 31, 1998 and
the application of the net proceeds therefrom; and (iv) the sale of $100,000,000
of Old Notes on July 24, 1998 and the application of the net proceeds therefrom.
The following unaudited pro forma consolidated balance sheet as of March
31, 1998 gives effect to the sale of the Old Notes on July 24, 1998 and the
application of the net proceeds therefrom as if such transactions had occurred
on March 31, 1998.
The pro forma consolidated financial data and accompanying notes should be
read in conjunction with the consolidated financial statements and related notes
thereto appearing elsewhere in this Prospectus. The pro forma adjustments are
based upon available information and certain assumptions that management
believes are reasonable and are described in the notes accompanying the pro
forma consolidated financial data. The pro forma consolidated financial data are
presented for informational purposes only and do not purport to represent what
the Company's results of operations or financial position would actually have
been had such transactions in fact occurred at such dates, or to project the
Company's results of operations or financial position at any future date or for
any future period. In the opinion of management, all adjustments necessary to
present fairly such pro forma consolidated financial data have been made.
35
<PAGE> 37
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------
ADJUSTMENTS FOR
THE SALE OF
ADJUSTMENTS FOR $300 MILLION
ACTUAL THE TRANSACTIONS(1) OF OLD NOTES
------ ------------------- ---------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales...... $237,277 $328,268 $ --
Service contract revenue from
related parties................ 10,177 6,468 --
Income from unconsolidated
investments in power
projects....................... 15,819 1,914 --
Interest income on loans to power
projects....................... 13,048 (6,135) --
-------- -------- --------
Total revenue.............. 276,321 330,515 --
-------- -------- --------
Cost of revenue:
Plant operating expenses......... 72,366 230,868 --
Depreciation..................... 47,501 32,263 --
Production royalties............. 10,803 -- --
Operating lease expenses......... 14,031 -- --
Service contract expenses........ 8,607 (2,215) --
-------- -------- --------
Total cost of revenue...... 153,308 260,916 --
-------- -------- --------
Gross profit....................... 123,013 69,599 --
Project development expenses....... 7,537 -- --
General and administrative
expenses......................... 18,289 9 --
-------- -------- --------
Income from operations........... 97,187 69,590 --
Interest expense................... 61,466 11,038 15,942(2)
Other income, net.................. (17,438) (1,697) --
-------- -------- --------
Income before provision for
income taxes................... 53,159 60,249 (15,942)
Provision for income taxes......... 18,460 22,942 (6,496)
-------- -------- --------
Net income..................... $ 34,699 $ 37,307 $ (9,446)
======== ======== ========
Basic earnings per common share:
Weighted average shares of common
stock outstanding.............. 19,946
Basic earnings per common
share.......................... $ 1.74
Diluted earnings per common share:
Weighted average shares of common
stock outstanding.............. 21,016
Diluted earnings per common
share.......................... $ 1.65
OTHER OPERATING DATA AND FINANCIAL
RATIOS:
Depreciation and amortization...... $ 48,935
EBITDA............................. $172,615
EBITDA to Consolidated Interest
Expense.......................... 2.60x
Total debt to EBITDA............... 4.96x
Ratio of earnings to fixed
charges.......................... 1.64x
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
PRO FORMA FOR PRO FORMA FOR THE
THE TRANSACTIONS ADJUSTMENTS FOR TRANSACTIONS AND
AND THE SALE OF THE SALE OF THE SALE OF $400
$300 MILLION $100 MILLION MILLION
OF OLD NOTES OF OLD NOTES OF OLD NOTES
---------------- --------------- -----------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales...... $565,545 $ -- $565,545
Service contract revenue from
related parties................ 16,645 -- 16,645
Income from unconsolidated
investments in power
projects....................... 17,733 -- 17,733
Interest income on loans to power
projects....................... 6,913 -- 6,913
-------- ------- --------
Total revenue.............. 606,836 -- 606,836
-------- ------- --------
Cost of revenue:
Plant operating expenses......... 303,234 -- 303,234
Depreciation..................... 79,764 -- 79,764
Production royalties............. 10,803 -- 10,803
Operating lease expenses......... 14,031 -- 14,031
Service contract expenses........ 6,392 -- 6,392
-------- ------- --------
Total cost of revenue...... 414,224 -- 414,224
-------- ------- --------
Gross profit....................... 192,612 -- 192,612
Project development expenses....... 7,537 -- 7,537
General and administrative
expenses......................... 18,298 -- 18,298
-------- ------- --------
Income from operations........... 166,777 -- 166,777
Interest expense................... 88,446 7,976(3) 96,422
Other income, net.................. (19,135) -- (19,135)
-------- ------- --------
Income before provision for
income taxes................... 97,466 (7,976) 89,490
Provision for income taxes......... 34,906 (3,250) 31,656
-------- ------- --------
Net income..................... $ 62,560 $(4,726) $ 57,834
======== ======= ========
Basic earnings per common share:
Weighted average shares of common
stock outstanding.............. 19,946 19,946
Basic earnings per common
share.......................... $ 3.14 $ 2.90
Diluted earnings per common share:
Weighted average shares of common
stock outstanding.............. 21,016 21,016
Diluted earnings per common
share.......................... $ 2.98 $ 2.75
OTHER OPERATING DATA AND FINANCIAL
RATIOS:
Depreciation and amortization...... $ 81,199 $ 81,199
EBITDA............................. $280,806 $280,806
EBITDA to Consolidated Interest
Expense.......................... 3.00x 2.77x
Total debt to EBITDA............... 3.75x 4.10x
Ratio of earnings to fixed
charges.......................... 1.98x 1.83x
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations.
36
<PAGE> 38
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
------------------------------------------------
ADJUSTMENTS
FOR THE
BETHPAGE AND
TEXAS ADJUSTMENTS FOR
CITY/CLEAR THE SALE OF
LAKE $300 MILLION
ACTUAL TRANSACTIONS(4) OF OLD NOTES
------- --------------- --------------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales..... $43,390 $74,163 $ --
Service contract revenue from
related parties............... 5,481 (1,613) --
Income (loss) from
unconsolidated investments in
power projects................ 3,754 (1,765) --
Interest income on loans to
power projects................ 2,520 (2,520) --
------- ------- -------
Total revenue............. 55,145 68,265 --
------- ------- -------
Cost of revenue:
Plant operating expenses........ 15,943 48,764 --
Depreciation.................... 12,350 7,891 --
Production royalties............ 2,872 -- --
Operating lease expenses........ 3,308 (1,277) --
Service contract expenses....... 4,896 -- --
------- ------- -------
Total cost of revenue..... 39,369 55,378 --
------- ------- -------
Gross profit...................... 15,776 12,887 --
Project development expenses...... 1,681 -- --
General and administrative
expenses........................ 5,236 (27) --
------- ------- -------
Income from operations.......... 8,859 12,914 --
Interest expense.................. 18,523 304 3,518(5)
Other income, net................. (2,764) (146) --
------- ------- -------
Income before provision for
income taxes.................. (6,900) 12,756 (3,518)
Provision for income taxes........ (3,843) 4,833 (1,434)
------- ------- -------
Net income.................... $(3,057) $ 7,923 $(2,084)
======= ======= =======
Basic earnings per common share:
Weighted average shares of
common stock outstanding........ 20,087
Basic earnings per common
share......................... $ (0.15)
Diluted earnings per common share:
Weighted average shares of
common stock outstanding........ 20,087
Diluted earnings per common
share......................... $ (0.15)
OTHER OPERATING DATA AND FINANCIAL
RATIOS:
Depreciation and amortization... $12,582
EBITDA.......................... $25,681
EBITDA to Consolidated Interest
Expense....................... 1.30x
Ratio of earnings to fixed
charges....................... 0.58x
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------
PRO FORMA FOR PRO FORMA FOR
THE BETHPAGE THE BETHPAGE
AND TEXAS AND TEXAS
CITY/CLEAR LAKE CITY/CLEAR LAKE
TRANSACTIONS ADJUSTMENTS FOR TRANSACTIONS
AND THE SALE OF THE SALE OF AND THE SALE OF
$300 MILLION $100 MILLION $400 MILLION
OF OLD NOTES OF OLD NOTES OF OLD NOTES
--------------- -------------------- ---------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Electricity and steam sales..... $117,553 $ -- $117,553
Service contract revenue from
related parties............... 3,868 -- 3,868
Income (loss) from
unconsolidated investments in
power projects................ 1,989 -- 1,989
Interest income on loans to
power projects................ -- -- --
-------- -------- --------
Total revenue............. 123,410 -- 123,410
-------- -------- --------
Cost of revenue:
Plant operating expenses........ 64,707 -- 64,707
Depreciation.................... 20,241 -- 20,241
Production royalties............ 2,872 -- 2,872
Operating lease expenses........ 2,031 -- 2,031
Service contract expenses....... 4,896 -- 4,896
-------- -------- --------
Total cost of revenue..... 94,747 -- 94,747
-------- -------- --------
Gross profit...................... 28,663 -- 28,663
Project development expenses...... 1,681 -- 1,681
General and administrative
expenses........................ 5,209 -- 5,209
-------- -------- --------
Income from operations.......... 21,773 -- 21,773
Interest expense.................. 22,345 1,994(6) 24,339
Other income, net................. (2,910) -- (2,910)
-------- -------- --------
Income before provision for
income taxes.................. 2,338 (1,994) 344
Provision for income taxes........ (444) (812) (1,256)
-------- -------- --------
Net income.................... $ 2,782 $ (1,182) $ 1,600
======== ======== ========
Basic earnings per common share:
Weighted average shares of
common stock outstanding........ 20,087 20,087
Basic earnings per common
share......................... $ 0.14 $ 0.08
Diluted earnings per common share:
Weighted average shares of
common stock outstanding........ 21,053 21,053
Diluted earnings per common
share......................... $ 0.13 $ 0.08
OTHER OPERATING DATA AND FINANCIAL
RATIOS:
Depreciation and amortization... $ 20,473 $ 20,473
EBITDA.......................... $ 48,467 $ 48,467
EBITDA to Consolidated Interest
Expense....................... 2.06x 1.90x
Ratio of earnings to fixed
charges....................... 1.07x 1.00x
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations.
37
<PAGE> 39
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the pro forma results of operations for the facilities involved
in the Transactions for the periods during which the facilities were not
owned by the Company during 1997, and for the 8 3/4% Senior Notes Due 2007,
as if the Transactions had been completed on January 1, 1997, including (i)
the Montis Niger Gas Fields through January 30, 1997; (ii) the 100% interest
in the Texas City and Clear Lake Power Plants through December 31, 1997;
(iii) the Gordonsville and Auburndale Power Plants through October 9, 1997;
(iv) the sale of the $200,000,000 of 8 3/4% Senior Notes Due 2007 through
July 9, 1997; (v) the sale of the $75,000,000 of 8 3/4% Senior Notes Due
2007 through September 10, 1997; (vi) the GEI Transaction through December
19, 1997; and (vii) the Bethpage Transaction through December 31, 1997.
(2) Reflects $23.6 million of interest expense related to the sale of the
$300,000,000 of Old Notes Due 2008, $650,000 of amortization expense for the
transaction costs and original issue discount, reduced by $3.0 million of
interest expense as a result of the expected repayment, with a portion of
the net proceeds of the sale of $300,000,000 of Old Notes, of the $37.4
million non-recourse project financing related to the Bethpage Power Plant
and $5.4 million of interest expense as a result of the expected repayment,
with a portion of the net proceeds of the sale of $300,000,000 of Old Notes,
of the $103.4 million of non-recourse project financing related to the Texas
City and Clear Lake Power Plants.
(3) Reflects $7.9 million of interest expense related to the sale of
$100,000,000 of Old Notes in July 1998 and $101,000 of amortization expense
for the transaction costs, original issue discount and the gain on interest
rate contracts.
(4) Represents the pro forma results of operations for the Bethpage Transaction
for the period of January 1, 1998 through February 5, 1998 and for the 100%
interest in the Texas City and Clear Lake Power Plants for the period of
January 1, 1998 through March 31, 1998.
(5) Reflects $5.9 million of interest expense related to the sale of the
$300,000,000 of Old Notes, $162,000 of amortization expense for the
transaction costs and original issue discount, reduced by $304,000 of
interest expense as a result of the repayment of the $37.4 million of
non-recourse project financing related to the Bethpage Power Plant and $2.2
million of interest expense as a result of the repayment of the $103.4
million of non-recourse project financing related to the Texas City and
Clear Lake Power Plants.
(6) Reflects $2.0 million of interest expense related to the sale of
$100,000,000 of Old Notes and $25,000 of amortization expense for the
transaction costs, original issue discount and the gain on interest rate
contracts.
38
<PAGE> 40
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------------------------
ADJUSTMENTS FOR PRO FORMA FOR
THE SALE OF THE SALE OF
$100 MILLION $100 MILLION
ACTUAL OF OLD NOTES OF OLD NOTES
---------- --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 96,960 $ 58,484(1) $ 155,444
Accounts receivable from related parties.................. 3,605 -- 3,605
Accounts receivable from others........................... 69,866 -- 69,866
Collateral securities, current portion.................... 3,387 -- 3,387
Prepaid operating lease................................... 13,652 -- 13,652
Other current assets...................................... 29,034 -- 29,034
---------- -------- ----------
Total current assets............................... 216,504 58,484 274,988
Property, plant & equipment, net............................ 1,140,783 -- 1,140,783
Investments in power projects............................... 156,194 -- 156,194
Project development costs................................... 7,490 -- 7,490
Collateral securities, net of current portion............... 86,155 -- 86,155
Notes and loans receivable from related parties............. 13,575 -- 13,575
Restricted cash............................................. 15,659 -- 15,659
Other assets................................................ 41,737 90(2) 41,827
---------- -------- ----------
Total assets....................................... $1,678,097 $ 58,574 $1,736,671
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of non-recourse project financing......... $ 9,670 $ -- $ 9,670
Accounts payable.......................................... 38,415 -- 38,415
Accrued payroll and related expenses...................... 3,151 -- 3,151
Accrued interest payable.................................. 14,286 2,494(3) 16,780
Other current liabilities................................. 34,241 -- 34,241
---------- -------- ----------
Total current liabilities.......................... 99,763 2,494 102,257
Non-recourse project financing, net of current portion...... 227,081 (43,000)(4) 184,081
Senior Notes................................................ 859,629 99,080(5) 958,709
Deferred income taxes, net.................................. 163,024 -- 163,024
Deferred lease incentive.................................... 70,491 -- 70,491
Other liabilities........................................... 20,621 -- 20,621
---------- -------- ----------
Total liabilities.................................. 1,440,609 58,574 1,499,183
---------- -------- ----------
Stockholders' equity:
Common stock.............................................. 20 -- 20
Additional paid-in capital................................ 168,132 -- 168,132
Retained earnings......................................... 69,336 -- 69,336
---------- -------- ----------
Total stockholders' equity......................... 237,488 -- 237,488
---------- -------- ----------
Total liabilities and stockholders' equity......... $1,678,097 $ 58,574 $1,736,671
========== ======== ==========
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet.
39
<PAGE> 41
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Reflects the cash balance after the application of the net proceeds from
the sale of $100,000,000 of the Old Notes. See "Use of Proceeds."
(2) Represents the estimated transaction costs less the gain on the interest
rate contracts associated with the sale of $100,000,000 of Old Notes that
are capitalized and will be amortized over the ten-year life of the Old
Notes.
(3) Represents accrued interest related to the sale of $100,000,000 of Old
Notes.
(4) Represents the long-term portion of the non-recourse project financing
associated with the Pasadena 1 Power Plant that the Company currently
expects to repay in full with a portion of the net proceeds from the sale
of $100,000,000 of Old Notes.
(5) Reflects the sale of $100,000,000 of Old Notes less original issue
discount.
40
<PAGE> 42
DESCRIPTION OF NEW NOTES
GENERAL
The New Notes will be issued under an Indenture (the "Indenture") dated as
of March 31, 1998, among the Company and The Bank of New York, as trustee (the
"Trustee"), in exchange for the Old Notes. No New Notes are currently
outstanding. The terms of the New Notes will include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The New Notes
will be subject to all such terms, and holders of Senior Notes are referred to
the Indenture and the Trust Indenture Act for a statement of such terms. A copy
of the proposed form of the Indenture is available upon request made to the
Company.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein.
The Company has no sinking fund or mandatory redemption obligations with
respect to the Senior Notes.
The Company is subject to the informational reporting requirements of
Sections 13 and 15(d) under the Exchange Act and, in accordance therewith, will
file certain reports and other information with the Commission. See "Additional
Information." In addition, if Sections 13 and 15(d) cease to apply to the
Company, the Company will covenant in the Indenture to file such reports and
information with the Trustee and the Commission, and mail such reports and
information to holders of the Senior Notes at their registered addresses, for so
long as any Senior Notes remain outstanding.
The Company conducts substantially all of its operations through its
subsidiaries. Creditors of its subsidiaries, including trade creditors, would
have a claim on the subsidiaries' assets that would be prior to the claims of
the holders of the Senior Notes. See "Risk Factors -- Risks Related to Holding
Company Structure."
TERMS OF THE SENIOR NOTES
The Old Notes were issued under the Indenture. The Senior Notes will mature
on April 1, 2008. The Senior Notes are limited to $400,000,000 in aggregate
principal amount and are issued in fully registered form in denominations of
$1,000 and any amount which is an integral amount multiple of $1,000 in excess
thereof.
Interest at the annual rate of 7 7/8% is payable semi-annually on April 1
and October 2 of each year while the Senior Notes are outstanding, commencing on
October 1, 1998 (each, an "Interest Payment Date"), to holders of record at the
close of business on the preceding March 15 and September 15, respectively, and
unless other arrangements are made, will be paid by check mailed to such holders
at their registered addresses, as shown on the Senior Note register. Interest
will be computed on the basis of a 360-day year of twelve months of 30 days
each. Interest began to accrue on March 31, 1998. The interest rate on the
Senior Notes will be increased by one-half of one percent per annum if the
Exchange Offer is not consummated, or a registration statement with respect to
the resale of the Senior Notes is not declared effective, by September 27, 1998.
Payments of principal of, and premium (if any) on the Senior Notes will be
made against presentation of the Senior Notes at or after the due date for such
payments, at an office maintained by the Trustee for such purpose at The Bank of
New York, 101 Barclay Street, New York, New York 10286, and the Senior Notes may
be presented for registration of transfer and exchange without service charge,
at such office during normal business hours on any day on which banks in the
Borough of Manhattan, in the City of New York, are open for business.
REDEMPTION
The Notes are not subject to redemption prior to maturity.
41
<PAGE> 43
RANKING
The Indebtedness evidenced by the Senior Notes constitutes Senior
Indebtedness of the Company and will rank pari passu in right of payment with
all existing and future Senior Indebtedness of the Company, including, without
limitation, all obligations under the Bank Credit Agreement (as defined herein),
the Working Capital Credit Agreement (as defined herein), the 8 3/4% Senior
Notes, the 9 1/4% Senior Notes, and the 10 1/2% Senior Notes. At March 31, 1998,
on a pro forma basis after giving effect to the Bethpage and Texas City/Clear
Lake Transactions and the sale of the Old Notes and the application of the net
proceeds therefrom, the Company would have had outstanding approximately $958.7
million of Senior Indebtedness. The Company conducts substantially all of its
operations through its subsidiaries. Creditors of its subsidiaries, including
trade creditors, would have a claim on the subsidiaries' assets that would be
prior to the claims of the holders of the Notes. At March 31, 1998, on a pro
forma basis, after giving effect to the Bethpage and Texas City/Clear Lake
Transactions and the sale of the Old Notes and the application of the net
proceeds therefrom, the Company's subsidiaries would have had $193.8 million of
outstanding indebtedness. See "Risk Factors -- Risks Related to Holding Company
Structure."
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indentures.
"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 Subsidiary;
(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 securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Covenants -- Transactions with
Affiliates" and "-- Sales of Assets" 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 Affiliate of any
such beneficial owner pursuant to the first sentence hereof. For purposes of the
provision described under "-- Covenants -- Limitation on Restricted Payments"
only, "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.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale leaseback transactions, but excluding
(except as provided for in the provisions described in the last paragraph under
"-- Covenants -- Sales of Assets") those permitted by the provisions described
under "-- Covenants -- Merger and Consolidation" and "-- Covenants -- Limitation
on Sale/Leaseback Transactions") in one or a series of transactions by the
Company or any Restricted 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 Restricted 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.
42
<PAGE> 44
"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 Senior Notes, compounded annually) of the total obligations 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 determination to
the dates of each successive scheduled principal payment of such Indebtedness or
scheduled redemption or similar payment with respect to such Indebtedness 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, between the Company and The Bank of Nova Scotia, as amended, refinanced,
replaced, renewed or extended from time to time.
"Board of Directors" means the Board of Directors of the Company 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 an underwriter engaged in a firm commitment
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 Persons 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 Senior Notes 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 Notes 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
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interest is capitalized during the construction of such Facility) for such four
fiscal quarters; provided, however, that if the Company or any Restricted
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 Restricted Subsidiary shall have made any acquisition of assets or Capital
Stock (occurring 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 Expense" 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 Company or any such Subsidiary under any guarantee of
Indebtedness or other obligation of any other Person and (vi) net costs
associated with Interest Rate Agreements (including amortization of discounts)
and Currency Agreements, plus (b) all but the principal component of rentals in
respect of Capitalized Lease Obligations 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 Subsidiary, plus (f) cash contributions to any employee stock
ownership plan to the extent such contributions
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<PAGE> 46
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 purchase 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
indirectly, by operation of the terms of its charter or bylaws 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 Restricted
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
redemption 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 Restricted
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 consolidation 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.
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"Controlled Non-Subsidiary Investment" means any Investment of the type
specified in clause (iv) of the first sentence under
"-- Covenants -- Limitations on Restricted Payments" 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 under
"-- Covenants -- Limitation on Changes in the Nature of Business" including
Unrelated Businesses to the extent permitted under "-- Covenants -- Limitations
on Changes in the Nature of the Business;" (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 Notes and, on the liquidation or dissolution of such
Person, receive repayment of the principal thereof prior to the payment of any
dividends or distributions 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 significant 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
"-- Covenants -- Limitations on Payment Restrictions Affecting Subsidiaries" 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 Senior Note which is
payable, but is not punctually paid or duly provided for on any Interest Payment
Date.
"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) Consolidated 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 Subsidiary 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 consolidated 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.
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<PAGE> 48
"Exchangeable Stock" means any Capital Stock which by its terms is
exchangeable or convertible at the option of any Person other than the Company
into another security (other than Capital Stock of the Company which is neither
Exchangeable Stock nor Redeemable Stock).
"Facility" means a power generation facility or energy producing facility,
including any related steam fields or gas 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 described
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 incorporated 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 agreement, 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 Senior Note
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,
contingently or otherwise, such obligation, and "Incurred," "Incurrence" and
"Incurring" shall each have a correlative meaning; provided, however, that any
Indebtedness 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 described under "-- Covenants -- Limitation on Payment
Restrictions Affecting Subsidiaries" and "-- Limitation on Liens" 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
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<PAGE> 49
(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 business 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 valued at, in the case of
Redeemable Stock, the greater of its voluntary or involuntary 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
respect 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 dividends 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 property 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 repurchase 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 the 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 obligations 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
obligation.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Senior Notes.
"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 under "-- Covenants -- Limitation on Restricted
Payments," (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
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<PAGE> 50
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, dividends, 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 Controlled 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 Senior Notes, 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 Senior Notes in light of
downgrading the rating thereof.
"Issue Date" means the date on which the Senior Notes are originally issued
under the 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 successors.
"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-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 Restricted
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 public offering and sale of the Senior Notes.
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<PAGE> 51
"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 Company 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 corporation,
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 Senior Note means the principal of the Senior Note plus,
if applicable, the premium on the Senior Note.
"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.
"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 Notes 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 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 Senior Notes is under publicly
announced consideration or possible downgrade by either of the Rating Agencies),
(i) a decrease of the rating of the Senior Notes 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
Senior Notes, stating that it is not downgrading, and is not considering
downgrading, the Senior Notes.
"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 Senior Notes, (b) is redeemable
at the option of the holder thereof at any time on or prior to the first
anniversary of the Stated Maturity of the Senior Notes (other than on a Change
of Control or Asset Sale, provided that such Change of Control or Asset Sale
shall not yet have
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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 Senior Notes.
"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 Restricted 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
refinances Indebtedness of another Restricted Subsidiary) including Indebtedness
that refinances Refinancing Indebtedness; provided, however, that (i) if the
Indebtedness being refinanced is contractually subordinated in right of payment
to the Senior Notes, the Refinancing Indebtedness shall be contractually
subordinated in right of payment to the Senior Notes 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
Notes, (iv) the Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness 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 Subsidiary.
"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 acquisition of
Related Assets by such Restricted Subsidiary; provided, however, that (i) such
Related Asset Indebtedness is Incurred contemporaneously with a Refinancing of
all of the Non-Recourse Debt of such Restricted Subsidiary then outstanding 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.
"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.
"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
Incurred, in respect of (A) Indebtedness of the Company for money borrowed and
(B) Indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which the Company is responsible or liable; (ii)
all Capitalized Lease Obligations of the Company; (iii) all obligations of the
Company (A) for the reimbursement of any obligor on any letter of
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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 Notes, 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 liabilities).
"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 Senior Notes 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
equivalent 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.
"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 the provisions under "Covenants -- Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness pursuant to the first paragraph of
"Covenants -- Limitation on Incurrence of Indebtedness" 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
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which is unconditionally guaranteed as a full faith and credit obligation 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 Subsidiary.
"Working Capital Credit Agreement" means the Line of Credit Note, dated as
of June 4, 1993, between the Company and The Bank of California, N.A. as
amended, refinanced, renewed or extended from time to time.
COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Restricted Payments. Under the terms of the Indenture, so
long as any of the Senior Notes 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 acquire or retire for value, prior to scheduled
maturity or scheduled repayment thereof or scheduled sinking fund payment
thereon, any Subordinated Indebtedness (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 under
"-- Covenants -- Transactions with Affiliates," 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 described 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
described in the first paragraph under "-- Limitation on Incurrence of
Indebtedness," 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 available (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 Senior Notes 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 Senior
Notes were Investment Grade for the entire period; (C) the
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aggregate Net Cash Proceeds received by the Company after January 1, 1994 from
the sale of Capital Stock (other than Redeemable 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 Exchangeable 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
Unrestricted 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) $15,000,000.
The failure to satisfy the conditions set forth in clauses (2) and (3) of
the first paragraph under "-- Limitation on Restricted Payments" shall not
prohibit any of the following as long as the condition set forth in clause (1)
of such paragraph is satisfied (except as set forth below): (i) dividends paid
within 60 days after the date of declaration thereof if at such date of
declaration such dividend would have complied with the provisions described in
the first paragraph under "-- Limitation on Restricted Payments;" provided,
however, that, notwithstanding clause (1) of the immediately preceding
paragraph, the occurrence or existence of a Default at the time of payment shall
not prohibit the payment of such dividends; (ii) any purchase, redemption,
defeasance, or other acquisition 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 the first paragraph under
"-- Limitation on Restricted Payments," the occurrence or existence of a Default
or Event of Default shall not prohibit, for purposes of this Section, the making
of such purchase, redemption, defeasance 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 purposes of clause (3) of the first paragraph under "-- Limitation on
Restricted Payments," and provided, further, that the Net Cash Proceeds from
such sale shall be excluded from sub-clause (C) of clause (3) of the first
paragraph under "-- Limitation on Restricted Payments;" (iii) any purchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Indebtedness of the Company made by exchange for, or out of the
proceeds of the substantially concurrent Incurrence of for cash (other than to a
Subsidiary), new Indebtedness 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 redeemed,
repurchased, defeased, acquired or retired, (B) if the Indebtedness being
purchased, redeemed, defeased or acquired or retired for value is Non-Recourse
Debt, such new Indebtedness shall be Non-Recourse Debt, (C) such new
Indebtedness has a Stated Maturity either (1) no earlier than the Stated
Maturity of the Indebtedness redeemed, repurchased, defeased, acquired or
retired or (2) after the Stated Maturity of the Senior Notes 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 the first paragraph under
"-- Limitation on Restricted Payments;" and (iv) any purchase, redemption,
defeasance or other acquisition 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 Senior Notes as described under
"-- Covenants -- Change of Control" 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 "-- Covenants -- Sales of Assets."
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Limitation on Incurrence of Indebtedness. Under the terms of the Indenture,
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.
The foregoing provision will not limit the ability of the Company or any
Restricted Subsidiary to Incur the following Indebtedness: (i) Refinancing
Indebtedness (except with respect to Indebtedness 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
outstanding 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 described in clause (i) or (ii) under
"-- Limitation on Restricted Payments;" (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 Subsidiary) 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 paragraph, 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 the immediately
preceding paragraph; (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 proceeds 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 Restricted
Subsidiaries which, but for such guarantees, would be permitted to be Incurred
pursuant to clause (vii) of this paragraph, 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 paragraph, is not in excess of
$50,000,000; and (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 Senior Notes
in effect prior to the Incurrence of such Related Asset Indebtedness.
Notwithstanding the provisions of this covenant described in the first two
paragraphs above, the Indenture provides that 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,
retirement, refunding or refinancing is not prohibited under "-- Limitation on
Restricted Payments" or unless such Indebtedness shall be contractually
subordinated to the Senior Notes at least to the same extent as such
Subordinated Indebtedness.
Limitation on Payment Restrictions Affecting Subsidiaries. Under the terms
of the Indenture, 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 the 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
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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 respect 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 refinanced, 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 clause
(l) of the covenant described under "Limitation on Liens" below that, in the
reasonable determination of the President or Chief Financial Officer of the
Company (x) is required in order to obtain such financing and (v) 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 Indebtedness incurred pursuant to clause (vii) of the proviso to the
covenant described under "-- Limitation on Incurrence of Indebtedness" above,
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.
Limitation on Sale/Leaseback Transactions. Under the terms of the
Indenture, 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 the
covenant entitled "Limitation on Liens" 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 Subsidiary 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 the covenant described under "-- Limitation on Liens" below,
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 Restricted 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.
Limitation on Liens. Under the terms of the Indenture, 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 Government 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 proceedings
promptly instituted and diligently conducted and for
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<PAGE> 58
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 prosecuting 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 Indebtedness
Incurred to finance the construction or purchase of, or repairs, improvements 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 Subsidiary (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 clause (vii) of the
second paragraph under "-- Limitation on Incurrence of Indebtedness" above,
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 Uniform Commercial Code financing statements for
informational purposes with respect to leases Incurred in the ordinary course of
business and not otherwise prohibited 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 constitute 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 Senior Notes are
secured equally and ratably with other Indebtedness of the Company pursuant to
the provisions described under "-- Covenants -- Limitations on Liens," without
effectively providing that the Senior Notes shall be secured equally and ratably
with (or prior to) the obligations so
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<PAGE> 59
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 proviso under "-- Limitation on Sale/Leaseback Transactions," 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.
Change of Control. Under the terms of the Indenture, in the event of a
Change of Control Triggering Event, the Company shall make an offer to purchase
(the "Change of Control Offer") the Senior Notes then outstanding at a purchase
price equal to 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 provision. The date on which the Company
shall purchase the Senior Notes pursuant to this provision (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 Senior Notes.
Notice of a Change of Control Offer shall be mailed by the Company to the
Holders of the Senior Notes 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 (in whole
or in part) the Senior Notes 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 pursuant to the
Indenture; (b) the purchase price and the Change of Control Purchase Date; (c)
that any Senior Note not surrendered or accepted for payment will continue to
accrue interest; (d) that any Senior Note 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 Senior Note
purchased (in whole or in part) pursuant to a Change of Control Offer will be
required to surrender the Senior Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Senior Note completed, to the Paying
Agent at the address specified in the notice (or otherwise make effective
delivery of the Senior Note 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 Senior Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his or her election to have the Senior
Note purchased.
On the Change of Control Purchase Date, the Company shall (i) accept for
payment the Senior Notes, 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 the
Senior Notes or portions thereof so accepted and (iii) deliver to the Trustee,
no later than 11:00 a.m. eastern standard time, the Senior Notes so accepted
together with an Officers' Certificate stating that such Senior Notes have been
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to Holders of Senior Notes so accepted payment in an amount equal to the
purchase price. Holders whose Securities are purchased only in part will be
issued new Senior Notes equal in principal amount to the unpurchased portion of
the Senior Notes surrendered.
Transactions with Affiliates. Under the terms of the Indenture, 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 transaction or
series of transactions are (A) no less favorable to the Company or such
Restricted
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<PAGE> 60
Subsidiary, as the case may be, than would be obtainable in a comparable
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 Payment which is expressly permitted to be paid
pursuant to the second paragraph under "-- Covenants -- Limitation on Restricted
Payments;" (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 employees and directors of the Company pursuant to plans
approved by the Board of Directors; (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 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 provision.
Sales of Assets. Under the terms of the Indenture, 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. Under the terms of the
Indenture, 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.
Under the terms of the Indenture, within 365 days (such period 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 Restricted
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
accordance with clause (i), and to the extent the Company or such Restricted
Subsidiary elects (or is required by the terms of any Senior Indebtedness or any
Indebtedness of such Restricted Subsidiary), to prepay, repay or purchase Senior
Indebtedness (other than Senior Notes) 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 Senior Notes; 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 the Senior Notes at not less than
their principal amount plus accrued interest (if any) pursuant to and subject to
the conditions set forth in the
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<PAGE> 61
Indenture; 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 application 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
affected 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 Company 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 provision 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.
Under the Indenture, the Company shall not be required to make an offer to
purchase the Senior Notes if the Net Available Cash available from an Asset Sale
(after application of the proceeds as provided in clauses (i) and (ii) of the
second paragraph above) 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 offer is required with respect to the Net Available Cash from any
subsequent Asset Sale).
Notwithstanding the foregoing, this provision 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 the covenant described under "-- Merger and Consolidation," the
Successor Corporation shall be deemed to have sold the properties and assets of
the Company not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale.
Limitation on the Issuance of Capital Stock and the Incurrence of
Indebtedness of Restricted Subsidiaries. Pursuant to the terms of the Indenture,
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 Indenture, (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 Non-Convertible
Stock that is not Preferred Stock if, after giving effect to such sale, the
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<PAGE> 62
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 the second paragraph under "-- Limitation on Incurrence
of Indebtedness."
Limitation on Changes in the Nature of the Business. The Indenture provides
that 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
constituting a violation of this covenant. 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
paragraph 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 paragraph, 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.
Limitation on Subsidiary Investments. The Indenture provides that 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 acquisition of Related
Assets by such Subsidiary, in an Unrelated Business.
Merger and Consolidation. Under the terms of each of the Indentures, the
Company shall not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other corporation 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
consolidation 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 to the Indenture, executed and
delivered to the Trustee, in form and substance reasonably satisfactory to the
Trustee, all the obligations of the Company under the Indenture and the Senior
Notes; (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 Corporation if the Company is not
the continuing obligor under the 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 the 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 obligation 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
Company (or the Successor Corporation if the Company is not the continuing
obligor under the Indenture) shall have a 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
obligation 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 Coverage Ratio of
the Company
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(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 immediately 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:
<TABLE>
<CAPTION>
(A) (B) (C)
--- ---- -----
<S> <C> <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
</TABLE>
Notwithstanding the foregoing clauses (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 provision will be deemed to have occurred
as a consequence thereof, as long as the requirements of clauses (i) and (iii)
are satisfied in connection therewith.
Upon any such assumption by the Successor Corporation, except in the case
of a lease, the Successor Corporation shall succeed to and be substituted for
the Company under the Indenture and the Senior Notes and the Company shall
thereupon be released from all obligations under the Indenture and under the
Senior Notes 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 Senior Notes issuable
under the Indenture 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 the Indenture, the Trustee shall authenticate and shall deliver
any Senior Notes which the Successor Corporation thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All the Senior Notes so
issued shall in all respects have the same legal rank and benefit under the
Indenture as the Senior Notes theretofore or thereafter issued in accordance
with the terms of the Indenture as though all such Senior Notes had been issued
at the date of the execution of the Indenture.
In the case of any such consolidation, merger or transfer, such changes in
form (but not in substance) may be made in the Senior Notes thereafter to be
issued as may be appropriate.
EVENTS OF DEFAULT
"Events of Default" are defined in the Indenture as (a) default for 30 days
in payment of any interest installment due and payable on the Senior Notes, (b)
default in payment of the principal when due on any Senior Note, or failure to
redeem or purchase Senior Notes when required pursuant to the Indenture or the
Senior Notes, (c) default in performance of any other covenants or agreements in
the Indenture or in the Notes Senior for 30 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the holders of at
least 25% in principal amount of the Senior Notes then outstanding, (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 Senior Notes) 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 instrument, and such unpaid portion exceeds $2,000,000 (or its foreign
currency equivalent) individually or $5,000,000 (or its foreign currency
equivalent)
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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 discharged
within 20 days of the Company or a Restricted Subsidiary becoming 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; and (f) certain events of
bankruptcy, insolvency and reorganization of the Company.
If any Event of Default (other than an Event of Default described in clause
(f) with respect to the Company) occurs and is continuing, the Indenture
provides that the Trustee by notice to the Company, or the Holders of at least
25% in principal amount of the Senior Notes by notice to the Company and the
Trustee, may declare the principal amount of the Senior Notes and any accrued
and unpaid interest to be due and payable immediately. If an Event of Default
described in clause (f) with respect to the Company occurs, the principal of and
interest on all the Senior Notes shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holders of Senior Notes. The Holders of a majority in principal amount of
the Senior Notes by notice to the Trustee may rescind any such declaration 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 other
than the non-payment of principal of or interest on the Senior Notes which shall
have become due by such declaration.
The Company must file annually with the Trustee a certificate describing
any Default by the Company in the performance of any conditions or covenants
that has occurred under the Indenture and its status. The Company must give the
Trustee written notice within 30 days of any Default under the Indenture that
could mature into an Event of Default described in clause (c), (d), (e) or (f)
of the second preceding paragraph.
The Trustee is entitled, subject to the duty of the Trustee during a
Default to act with the required standard of care, to be indemnified before
proceeding to exercise any right or power under the Indenture at the direction
of the Holders of the Senior Notes or which requires the Trustee to expend or
risk its own funds or otherwise incur any financial liability. The Indenture
also provides that the Holders of a majority in principal amount of the Senior
Notes issued under the Indenture 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 the Trustee; however, the Trustee may refuse to
follow any such direction that conflicts with law or the Indenture, is unduly
prejudicial to the rights of other Holders of the Senior Notes, or would involve
the Trustee in personal liability.
The Indenture provides that while the Trustee generally must mail notice of
a Default or Event of Default to the holders of the Senior Notes within 90 days
of occurrence, the Trustee may withhold notice to the Holders of the Senior
Notes of any Default or Event of Default (except in payment on the Senior Notes)
if the Trustee in good faith determines that the withholding of such notice is
in the interest of the Holders of the Senior Notes.
MODIFICATION OF THE INDENTURE
Under the terms of the Indenture, the Company and the Trustee may, with the
consent of the Holders of a majority in principal amount of the outstanding
Senior Notes, amend or supplement the Indenture or the Senior Notes except that
no amendment or supplement may, without the consent of each affected Holder, (i)
reduce the principal of or change the Stated Maturity of any Senior Note, (ii)
reduce the rate of or change the time of payment of interest on any Senior Note,
(iii) change the currency of payment of the Senior Notes, (iv) reduce the
premium payable upon the redemption of any Senior Note, or change the time at
which any
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such Senior Note may or shall be redeemed, (v) reduce the amount of Senior
Notes, the holders of which must consent to an amendment or supplement or (vi)
change the provisions of the Indenture relating to waiver of past defaults,
rights of Holders of the Senior Notes to receive payments or the provisions
relating to amendments of the Indenture that require the consent of Holders of
each affected Senior Note.
ACTIONS BY NOTEHOLDERS
Under the terms of the Indenture, a Holder of Senior Notes may not pursue
any remedy with respect to the Indenture or the Senior Notes (except actions for
payment of overdue principal or interest), unless (i) the Holder has given
notice to the Trustee of a continuing Event of Default, (ii) Holders of at least
25% in principal amount of the Senior Notes have made a written request to the
Trustee to pursue such remedy, (iii) such Holder or Holders have offered the
Trustee security or indemnity reasonably satisfactory to it against any loss,
liability or expense, (iv) the Trustee has not complied with such request within
60 days of such request and offer and (v) the Holders of a majority in principal
amount of the Senior Notes have not given the Trustee an inconsistent direction
during such 60-day period.
DEFEASANCE, DISCHARGE AND TERMINATION
Defeasance and Discharge. The Indenture provides that the Company will be
discharged from any and all obligations in respect of the Senior Notes, and the
provisions of the Indenture will no longer be in effect with respect to such
Senior Notes (except for, among other matters, certain obligations to register
the transfer or exchange of such Senior Notes, to replace stolen, lost or
mutilated Senior Notes, to maintain paying agencies and to hold monies for
payment in trust, and the rights of holders to receive payments of principal and
interest thereon), on the 123rd day after the date of the deposit with the
Trustee, in trust, of money or U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with their
terms, will provide money, or a combination thereof, in an amount sufficient to
pay the principal of and interest on such Senior Notes, when due in accordance
with the terms of the Indenture and such Senior Notes. Such a trust may only be
established if, among other things, (i) the Company has delivered to the Trustee
either (a) an Opinion of Counsel (who may not be employed by the Company) to the
effect that Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable federal
income tax law occurring after the date of the Indenture or (b) a ruling of the
Internal Revenue Service to such effect and (ii) no Default under the Indenture
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 and such deposit shall
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 the Company is bound.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to the provisions described in clauses (iv) and (v)
under "-- Merger and Consolidation" and all the covenants described herein under
"-- Covenants," clause (c) under "-- Events of Default" with respect to such
covenants and clauses (iv) and (v) under "-- Merger and Consolidation," and
clauses (d) and (e) under "-- Events of Default" shall be deemed not to be
Events of Default under the Indenture, and the provisions described herein under
"-- Ranking" shall not apply, upon the deposit with the Trustee, in trust, of
money or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of and interest on the Senior Notes
issued thereunder when due in accordance with the terms of the Indenture. Such a
trust may only be established if, among other things, the provisions described
in clause (ii) of the immediately preceding paragraph have been satisfied and
the Company has delivered to the Trustee an Opinion of Counsel (who may not be
an employee of the Company) to the effect that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of certain covenants and Events of
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Default 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.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Senior Notes, as described in the immediately
preceding paragraph and such Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
or U.S. Government Obligations on deposit with the Trustee will be sufficient to
pay principal of and interest on Senior Notes on the respective dates on which
such amounts are due but may not be sufficient to pay amounts due on such Senior
Notes, at the time of the acceleration resulting from such Event of Default.
However, the Company shall remain liable for such payments.
Termination of Company's Obligations in Certain Circumstances. The
Indenture further provides that the Company will be discharged from any and all
obligations in respect of the Senior Notes and the provisions of such Indenture
will no longer be in effect with respect to the Senior Notes (except to the
extent provided under "-- Defeasance and Discharge") if such Senior Notes 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, and the Company deposits with the Trustee, in trust, money or U.S.
Government Obligations that, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on
such Senior Notes when due in accordance with the terms of the Indenture and
such Senior Notes. Such a trust may only be established if, among other things,
(i) no Default under the Indenture shall have occurred and be continuing on the
date of such deposit, (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 and (iii) the Company has delivered to the Trustee an Opinion of
Counsel stating that such conditions have been complied with. Pursuant to this
provision, the Company is not required to deliver an Opinion of Counsel to the
effect that Holders will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such deposit and termination, and there is no
assurance that Holders would not recognize income, gain or loss for U.S. federal
income tax purposes as a result thereof or that Holders would be subject to U.S.
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 termination had not
occurred.
UNCLAIMED MONEY
Under the terms of the Indenture, subject to any applicable abandoned
property law, the Trustee will pay to the Company upon request any money held by
it for the payment of principal or interest that remains unclaimed for two
years. After payment to the Company, Holders of Senior Notes entitled to such
money must look to the Company for payment as general creditors.
CONCERNING THE TRUSTEE AND PAYING AGENT
The Bank of New York will act as Trustee under the Indenture and will
initially be Paying Agent and Registrar for the Senior Notes. The Company may
have in the future other relationships with such bank. Notices to the Trustee,
Paying Agent and Registrar under the Indenture should be directed to The Bank of
New York, 101 Barclay Street, 21st Floor, New York, New York 10286, Attention:
Corporate Trust Trustee Administration.
GOVERNING LAW
Under the terms of the Indenture, the laws of the State of New York govern
the Indenture and the Senior Notes.
BOOK ENTRY; DELIVERY AND FORM
The Old Notes were and the New Notes will be issued in fully registered
form without interest coupons. No Senior Notes will be issuable in bearer form.
Old Notes sold in reliance on Rule 144A are represented by
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two, permanent global Notes in definitive, fully registered form without
interest coupons (the "Restricted Global Notes") and have been deposited with
the Trustee as custodian for DTC and registered in the name of a nominee of DTC.
Old Notes sold in reliance on Regulation S are represented by a single,
permanent global Note in definitive, fully registered form without interest
coupons (the "Regulation S Global Note") and has been deposited with the Trustee
as custodian for DTC and registered in the name of a nominee of DTC for the
accounts of Euroclear and Cedel.
THE GLOBAL NOTES
Upon the issuance of the Regulation S Note and the Restricted Global Notes
(each a "Global Note" and together the "Global Notes"), DTC or its custodian
credited, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Notes to the accounts
of persons who have accounts with such depositary. Ownership of beneficial
interests in a Global Notes are limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Notes will be shown on, and the transfer
of that ownership will be effected only through, records maintained by DTC or
its nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Qualified Institutional Buyers may hold their interests in the Global Notes
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system.
Investors may hold their interests in the Regulation S Global Note directly
through Cedel or Euroclear, if they are participants in such system, or
indirectly through organizations that are participants in such systems.
Beginning 40 days after the sale of the Old Notes, investors may also hold such
interests through organizations other than Cedel or Euroclear that are
participants in the DTC system. Cedel and Euroclear will hold interests in the
Regulation S Global Note on behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Senior Notes represented by such Global Note for all
purposes under the Indenture and the Senior Notes. No beneficial owner of an
interest in a Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture and, if applicable, those of Euroclear and Cedel.
Payments of the principal of, and interest on, the Global Notes will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficiary ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Senior Notes (including the presentation of Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the Global Notes is credited and only in
respect of such portion of the aggregate principal amount of Senior Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC will exchange
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the Global Notes for Certificated Senior Notes which it will distribute to its
participants and which will be legended as set forth under the heading "Transfer
Restrictions."
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC was
created to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
in order to facilitate transfers of interest in the Global Notes among
participants of DTC, Euroclear and Cedel, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their respective operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Senior Notes in exchange for
the Global Notes which will bear the legend referred to under the heading
"Transfer Restrictions."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The discussion set forth in this summary is based on the provisions of the
Internal Revenue Code of 1986, as amended, final, temporary and proposed
Treasury regulations thereunder ("Treasury Regulations"), and administrative and
judicial interpretations thereof, all as in effect on the date hereof and all of
which are subject to change (possibly on a retroactive basis). Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could affect the tax consequences to holders of Senior Notes.
This summary is for general information only and does not purport to
address all of the federal income tax consequences that may be applicable to a
holder of Senior Notes. The tax treatment of a holder of Senior Notes may vary
depending on its particular situation. For example, certain holders, including
individual retirement and other tax-deferred accounts, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and individuals who are not citizens or residents of the United
States, may be subject to special rules not discussed below. In addition, this
discussion addresses the tax consequences to the initial holders of the Senior
Notes and not the tax consequences to subsequent transfers of the Senior Notes.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL
INCOME TAX CONSEQUENCES SET FORTH BELOW AND ANY OTHER FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR NEW NOTES AND OF HOLDING
AND DISPOSING OF THE NEW NOTES.
EXCHANGE OFFER
Under Section 1001 of the Code modifications in debt instruments may in
certain cases be deemed to constitute a taxable exchange of the existing debt
instrument for a new debt instrument. The Internal Revenue Service (the "IRS")
has issued Regulations providing rules for determining when a modification of a
debt
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instrument constitutes a taxable exchange. Because the terms of the New Notes do
not modify significantly the terms of the Old Notes, each New Note will be
viewed as a continuation of the corresponding Old Note, the issuance of the New
Note will be disregarded for federal income tax purposes, and a holder
exchanging an Old Note for a New Note (as well as a non-exchanging holder) will
not recognize any gain or loss as a result of the Exchange (or the Exchange
Offer).
STATED INTEREST
A holder of a New Note will be required to report as income for federal
income tax purposes interest earned on a New Note in accordance with the
holder's method of tax accounting. A holder of a New Note using the accrual
method of accounting for tax purposes is, as a general rule, required to include
interest in ordinary income as such interest accrues, while a cash basis holder
must include interest income when cash payments are received (or made available
for receipt) by such holder.
ORIGINAL ISSUE DISCOUNT
If the New Notes are issued with original issue discount ("OID") within the
meaning of Sections 1272 and 1273 of the Code and the pertinent Treasury
Regulations, holders of the New Notes generally will be required to include such
OID in gross income as it accrues in advance of the receipt of the cash
attributable to such income. The total amount of OID with respect to each New
Note will be any excess of its "stated redemption price at maturity" over its
"issue price"; provided that a New Note will not be deemed to have OID if such
excess is less than 1/4 of 1% of the New Note's stated redemption price at
maturity multiplied by the number of complete years to its maturity from its
issue date. The "issue price" of a New Note will be equal to its fair market
value when issued. The "stated redemption price at maturity" of a New Note is
the sum of all payments provided by the New Note other than "qualified stated
interest" payments. The term "qualified stated interest" generally means stated
interest that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate.
A holder of a New Note must include OID in income for federal income tax
purposes as it accrues under a "constant yield method" in advance of receipt of
cash payments attributable to such income, regardless of such holder's method of
accounting for tax purposes. The Company will furnish to the IRS and to record
holders of the New Notes information with respect to the OID, if any, accruing
during the calendar year (as well as interest paid during that year).
SALE, EXCHANGE, OR REDEMPTION OF A NOTE
Upon the sale, exchange (other than pursuant to the Exchange as discussed
above), or redemption of a Senior Note, a holder will recognize taxable gain or
loss equal to the difference between (i) the amount of cash and the fair market
value of property received (other than amounts received attributable to interest
not previously taken into account, which amount will be treated as interest
received), and (ii) the holder's adjusted tax basis in the Senior Note. A
holder's adjusted tax basis in a Senior Note generally will equal the cost of
the Senior Note to the holder, increased by the amount of any OID previously
included in income by the holder with respect to the Senior Note and reduced by
any payments previously received by the holder with respect to the Senior Note,
other than qualified stated interest payments, and by any premium amortization
deductions previously claimed by the holder. Provided the Senior Note is a
capital asset in the hands of the holder and has been held for more than one
year, any gain or loss recognized by the holder will generally be a long-term
capital gain or loss.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of a Senior Note may be
subject to a backup withholding at the rate of 31% on interest paid on the
Senior Note or on any other cash payment with respect to the sale or redemption
of the Senior Note, unless (i) such holder is a corporation or comes under
certain other exempt categories and when required demonstrates this fact or (ii)
such holder provides a correct taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies
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with applicable requirements of the backup withholding rules in the Treasury
Regulations. Prospective holders of the Senior Notes (who have not previously
furnished a Form W-9 with respect to the Old Notes) will be required to complete
a Form W-9 in order to provide the required information to the Company. A holder
of a Senior Note who does not provide the Company with the holder's correct
taxpayer identification number may be subject to penalties imposed by the IRS.
The Company will report to the holders of the Senior Notes and to the IRS
the amount of any "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to payments on the Senior Notes.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against the holder's federal income tax liability, provided
that the required information is furnished to the IRS.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER SHOULD
CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE
EXCHANGE, OWNERSHIP, AND DISPOSITION OF THE SENIOR NOTES (INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS).
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale for a period of 180 days from the date of this Prospectus,
or such shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for New Notes and resold by such
broker-dealers.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market or, in negotiated transactions or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Notes. Any broker-dealer that resells New Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"Underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days from the date of this Prospectus, or such shorter
period as will terminate when all Old Notes acquired by broker-dealers for their
own accounts as a result of market-making activities or other trading activities
have been exchanged for New Notes and resold by such broker-dealers, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by
Brobeck, Phleger & Harrison LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the years ended December 31, 1997, 1996 and 1995
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 11, 1998 and incorporated by reference in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports. In the reports for the Company, that firm states that with respect
to Sumas Cogeneration Company, L.P., its opinion is based on the reports of
other independent public accountants, namely Moss Adams LLP.
The consolidated financial statements of Sumas Cogeneration Company, L.P.
and Subsidiary as of December 31, 1997 and 1996 and for each of the years ended
December 31, 1997, 1996 and 1995 included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 11, 1998 and
incorporated by reference in this Prospectus have been audited by Moss Adams
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said reports.
AVAILABLE INFORMATION
Calpine is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained by mail from the Commission's Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants, such as
the Company, that file electronically with the Commission. The address of the
site is http://www.sec.gov. In addition, the Common Stock of the Company is
listed on the New York Stock Exchange and other information concerning the
Company may be inspected at the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION BY REFERENCE
The following reports have been filed by the Company with the Commission
and are specifically incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, (ii) the Company's
Proxy Statement dated April 15, 1997, (iii) the Company's Quarterly Report on
Form 10-Q for the three months ended March 31, 1998, and (iv) the Company's
Current Reports on Form 8-K filed on April 1, 1998, April 3, 1998, April 14,
1998 (as amended by the Form 8-K filed on May 15, 1998) and June 9, 1998.
All documents filed by Calpine with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Offering shall be deemed to be incorporated by reference in this Offering
Circular and to be a part of this Offering Circular from the date of the filing
of such document. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Offering Circular to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by
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<PAGE> 72
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Offering circular.
Calpine hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request of such person, a copy of any or all of the
information that has been incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference herein
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates). Requests for such information
should be directed to Calpine Corporation, 50 West San Fernando Street, San
Jose, California 95113, Attention: Investor Relations (telephone number:
408-995-5115).
71
<PAGE> 73
LOGO
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the state of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
In accordance with Delaware Law, the certificate of incorporation of the
Company contains a provision to limit the personal liability of the directors of
the Registrant for violations of their fiduciary duty. This provision eliminates
each director's liability to the Registrant or its stockholders for monetary
damages except (i) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
Article Ten of the Bylaws of the Registrant provides for indemnification of
the officers and directors of the Registrant to the fullest extent permitted by
applicable law.
The Company has entered into indemnification agreements with its directors
and officers. These agreements provide substantially broader indemnity rights
than those provided under the Delaware Law and the Company's Bylaws. The
indemnification agreements are not intended to deny or otherwise limit third-
party or derivative suits against the Company or its directors or officers, but
if a director or officer were entitled to indemnity or contribution under the
indemnification agreement, the financial burden of a third-party suit would be
borne by the Company, and the Company would not benefit from derivative
recoveries against the director or officer. Such recoveries would accrue to the
benefit of the Company but would be offset by the Company's obligations to the
director or officer under the indemnification agreement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
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.(b)
</TABLE>
II-1
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.3 Indenture dated as of July 8, 1997 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(c)
4.4 Indenture dated as of March 31, 1998 between the Company and
The Bank of New York, as Trustee, including form of Senior
Notes.
4.5 Registration Rights Agreement dated as of March 26, 1998
between the Company and Morgan Stanley & Co. Incorporated,
Credit Suisse First Boston Corporation, CIBC Oppenheimer,
Scotia Capital Markets (USA) Inc. and ING Baring (U.S.)
Securities, Inc.
4.6 Supplemental Indenture dated as of July 24, 1998 between the
Company and The Bank of New York, as Trustee, including form
of Senior Notes.
4.7 Registration Rights Agreement dated as of July 21, 1998
between the Company and Morgan Stanley & Co. Incorporated.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in the
opinion filed as Exhibit 5.1).
23.2 Independent Public Accountants' Consent of Arthur Andersen
LLP.
23.3 Independent Public Accountants' Consent of Moss Adams LLP.
24 Power of Attorney (contained on the signature page of this
Prospectus).
25 Form T-1 Statement of Eligibility of The Bank of New York.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
(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
August 29, 1996 and filed on September 13, 1996.
(c) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1997 and filed on August 14, 1997.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (i) and (ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i)
and (ii) is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15 of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE> 76
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement, relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment, all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(g) The undersigned registrant hereby undertakes to file an application for
the purpose of determining eligibility of the Trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-3
<PAGE> 77
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN JOSE,
CALIFORNIA, ON THE 7TH DAY OF AUGUST, 1998.
CALPINE CORPORATION
By: /s/ ANN B. CURTIS
------------------------------------
Ann B. Curtis
Senior Vice President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Peter Cartwright and Ann B. Curtis and
each of them his attorneys-in-fact, each with the power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming that such
attorneys-in-fact and agents or any of them, or his, her or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Peter Cartwright Chairman of the Board, August 7, 1998
- ------------------------------------------------ President,
Peter Cartwright Chief Executive Officer,
and Director (Principal
Executive Officer)
/s/ Ann B. Curtis Senior Vice President and August 7, 1998
- ------------------------------------------------ Director (Principal Financial
Ann B. Curtis Officer)
/s/ Jeffrey E. Garten Director August 7, 1998
- ------------------------------------------------
Jeffrey E. Garten
/s/ Susan C. Schwab Director August 7, 1998
- ------------------------------------------------
Susan C. Schwab
/s/ George J. Stathakis Director August 7, 1998
- ------------------------------------------------
George J. Stathakis
/s/ John O. Wilson Director August 7, 1998
- ------------------------------------------------
John O. Wilson
/s/ V. Orville Wright Director August 7, 1998
- ------------------------------------------------
V. Orville Wright
/s/ Gloria S. Gee Controller (Principal August 7, 1998
- ------------------------------------------------ Accounting Officer)
Gloria S. Gee
</TABLE>
II-4
<PAGE> 78
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
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.(b)
4.3 Indenture dated as of July 8, 1997 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(c)
4.4 Indenture dated as of March 31, 1998 between the Company and
The Bank of New York, as Trustee, including form of Senior
Notes
4.5 Registration Rights Agreement dated as of March 26, 1998
between the Company and Morgan Stanley & Co. Incorporated,
Credit Suisse First Boston Corporation, CIBC Oppenheimer
Corp., Scotia Capital Markets (USA) Inc. and ING Baring
(U.S.) Securities, Inc.
4.6 Supplemental Indenture dated as of July 24, 1998 between the
Company and The Bank of New York, as Trustee, including form
of Senior Notes.
4.7 Registration Rights Agreement dated as of July 21, 1998
between the Company and Morgan Stanley & Co. Incorporated.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in the
opinion filed as Exhibit 5.1).
23.2 Independent Public Accountants' Consent of Arthur Andersen
LLP.
23.3 Independent Public Accountants' Consent of Moss Adams LLP.
24 Power of Attorney (contained on the signature page of this
Prospectus).
25 Form T-1 Statement of Eligibility of The Bank of New York.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
(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
August 29, 1996 and filed on September 13, 1996.
(c) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1997 and filed on August 14, 1997.
<PAGE> 1
Exhibit 4.4
================================================================================
CALPINE CORPORATION
and
THE BANK OF NEW YORK, Trustee
- --------------------------------------------------------------------------------
Indenture
Dated as of March 31, 1998
- --------------------------------------------------------------------------------
$400,000,000
7-7/8% Senior Notes Due 2008
================================================================================
<PAGE> 2
<TABLE>
<S> <C> <C>
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...............24
SECTION 1.4 Rules of Construction...........................................25
ARTICLE II
THE SECURITIES...................................26
SECTION 2.1 Form and Dating.................................................26
SECTION 2.2 Execution and Authentication....................................30
SECTION 2.3 Registrar and Paying Agent......................................31
SECTION 2.4 Paying Agent To Hold Money in Trust.............................31
SECTION 2.5 Securityholder Lists............................................32
SECTION 2.6 Transfer and Exchange...........................................32
SECTION 2.7 Book-Entry Provisions for U.S. Global Note and Offshore
Global Note..................................................33
SECTION 2.8 Special Transfer Provisions.....................................35
SECTION 2.9 Replacement Securities..........................................40
SECTION 2.10 Outstanding Securities..........................................41
SECTION 2.11 Determination of Holders' Action................................41
SECTION 2.12 Temporary Securities............................................42
SECTION 2.13 Cancellation....................................................42
SECTION 2.14 Defaulted Interest..............................................42
ARTICLE III
COVENANTS.....................................43
SECTION 3.1 Payment of Securities...........................................43
SECTION 3.2 Maintenance of Office or Agency.................................43
SECTION 3.3 Limitation on Restricted Payments...............................43
SECTION 3.4 Limitation on Incurrence of Indebtedness........................47
SECTION 3.5 Limitation on Payment Restrictions Affecting Subsidiaries.......49
SECTION 3.6 Limitation on Sale/Leaseback Transactions.......................50
SECTION 3.7 Limitation on Liens.............................................51
SECTION 3.8 Change of Control...............................................54
SECTION 3.9 Compliance Certificate..........................................56
SECTION 3.10 SEC Reports.....................................................56
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.11 Transactions with Affiliates...................................57
SECTION 3.12 Sales of Assets................................................58
SECTION 3.13 Corporate Existence............................................62
SECTION 3.14 Payment of Taxes and Other Claims. ............................63
SECTION 3.15 Notice of Defaults and Other Events............................63
SECTION 3.16 Maintenance of Properties and Insurance........................63
SECTION 3.17 Limitation on Issuance of Capital Stock and Incurrence
of Indebtedness of Restricted Subsidiaries..................64
SECTION 3.18 Limitation on Changes in the Nature of the Business............64
SECTION 3.19 Limitation on Subsidiary Investments...........................65
ARTICLE IV
CONSOLIDATION, MERGER AND SALE...........................65
SECTION 4.1 Merger and Consolidation of Company.............................65
SECTION 4.2 Successor Substituted...........................................67
ARTICLE V
DEFAULTS AND REMEDIES...............................68
SECTION 5.1 Events of Default...............................................68
SECTION 5.2 Acceleration....................................................71
SECTION 5.3 Other Remedies..................................................71
SECTION 5.4 Waiver of Past Defaults.........................................71
SECTION 5.5 Control by Majority.............................................72
SECTION 5.6 Limitation on Suits.............................................72
SECTION 5.7 Rights of Holders To Receive Payment............................73
SECTION 5.8 Collection Suit by Trustee......................................73
SECTION 5.9 Trustee May File Proofs of Claim................................73
SECTION 5.10 Priorities.....................................................74
SECTION 5.11 Undertaking for Costs..........................................74
SECTION 5.12 Waiver of Stay or Extension Laws...............................75
ARTICLE VI
TRUSTEE......................................75
SECTION 6.1 Duties of Trustee...............................................75
SECTION 6.2 Rights of Trustee...............................................76
SECTION 6.3 Individual Rights of Trustee....................................77
SECTION 6.4 Trustee's Disclaimer............................................77
SECTION 6.5 Notice of Defaults..............................................78
SECTION 6.6 Reports by Trustee to Holders...................................78
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 6.7 Compensation and Indemnity......................................78
SECTION 6.8 Replacement of Trustee..........................................79
SECTION 6.9 Successor Trustee by Merger, etc................................80
SECTION 6.10 Eligibility; Disqualification .................................81
SECTION 6.11 Preferential Collection of Claims Against Company..............81
ARTICLE VII
SATISFACTION AND DISCHARGE OF INDENTURE......................81
SECTION 7.1 Discharge of Liability on Securities; Defeasance................81
SECTION 7.2 Termination of Company's Obligations............................81
SECTION 7.3 Defeasance and Discharge of Indenture...........................82
SECTION 7.4 Defeasance of Certain Obligations...............................85
SECTION 7.5 Application of Trust Money......................................87
SECTION 7.6 Repayment to Company............................................87
SECTION 7.7 Reinstatement...................................................88
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS.............................89
SECTION 8.1 Without Consent of Holders......................................89
SECTION 8.2 With Consent of Holders.........................................90
SECTION 8.3 Compliance with Trust Indenture Act.............................91
SECTION 8.4 Revocation and Effect of Consents...............................91
SECTION 8.5 Notation on or Exchange of Securities...........................91
SECTION 8.6 Trustee To Sign Amendments......................................91
SECTION 8.7 Fixing of Record Dates..........................................92
ARTICLE IX
REDEMPTION.....................................92
SECTION 9.1 Not Redeemable..................................................92
ARTICLE X
MISCELLANEOUS...................................93
SECTION 10.1 Trust Indenture Act Controls...................................93
SECTION 10.2 Notices........................................................93
SECTION 10.3 Communication by Holders with Other Holders....................94
SECTION 10.4 Certificate and Opinion as to Conditions Precedent.............94
SECTION 10.5 Statements Required in Certificate or Opinion..................95
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 10.6 Rules by Trustee and Agents....................................95
SECTION 10.7 Legal Holidays.................................................95
SECTION 10.8 Successors; No Recourse Against Others.........................96
SECTION 10.9 Duplicate Originals............................................96
SECTION 10.10 Other Provisions..............................................96
SECTION 10.11 Governing Law.................................................96
SIGNATURES...................................................................97
EXHIBIT A - Form of Initial Security......................................A-1
EXHIBIT B - Form of Exchange Security.....................................B-1
EXHIBIT C - Form of Certificate to Be Delivered in Connection with
Removal of Legend Following Offshore Notes Exchange Date......C-1
EXHIBIT D - Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors.....................D-1
EXHIBIT E - Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S............................E-1
</TABLE>
iv
<PAGE> 6
INDENTURE dated as of March 31, 1998, 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 7-7/8%
Senior Notes Due 2008:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 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
Subsidiary; (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 securities, 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 Affiliate of any
such beneficial owner pursuant to
<PAGE> 7
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
(including 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 Restricted 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 Restricted 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
obligations 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 determination to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption or similar payment with respect to
such Indebtedness 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
2
<PAGE> 8
named therein and The Bank of Nova Scotia, as agent for the lenders, as amended,
refinanced, renewed or extended from time to time.
"Board of Directors" means the Board of Directors of the Company
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
commitment 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 Persons acting in
3
<PAGE> 9
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 Restricted 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 Consoli dated 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
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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 Restricted Subsidiary shall have
made any acquisition of assets or Capital Stock (occurring 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
Expense" 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 Company
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or any such Subsidiary under any guarantee of Indebtedness or other obligation
of any other Person and (vi) net costs associated with Interest Rate Agreements
(including amortization of discounts) and Currency Agreements, plus (b) all but
the principal component of rentals in respect of Capitalized Lease Obligations
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 Subsidiary,
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 purchase 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 indirectly, 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
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<PAGE> 12
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
Restricted 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
redemption 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
Restricted 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
consolidation of accounts of such Person and each of its subsidiaries if and to
the extent the
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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 repayment of the
principal thereof prior to the payment of any dividends or distributions 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
significant 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
8
<PAGE> 14
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
"Depositary" 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) Consolidated 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 Subsidiary 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 consolidated 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
Company
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<PAGE> 15
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 7-7/8% Senior Notes Due 2008 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 7-7/8% per annum, without provision for adjustment as provided
in paragraph 1 on the reverse of the Initial Securities), that are issued and
exchanged 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 described 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
incorporated 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
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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
agreement, 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,
contingently or otherwise, such obligation, and "Incurred," "Incurrence" and
"Incurring" shall each have a correlative meaning; provided, however, that any
Indebtedness 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."
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"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 business 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 valued at, in the case of
Redeemable Stock, the greater of its voluntary or involuntary 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
respect 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 dividends 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 property 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 repurchase 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
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<PAGE> 18
Person at any date shall be, with respect to unconditional obligations, the
outstanding balance at such date of all such obligations 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 obligation.
"Indenture" means this Indenture as amended or supplemented from
time to time in accordance with the applicable provisions hereunder.
"Initial Securities" means the 7-7/8% Senior Notes Due 2008
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
installment 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
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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, dividends, 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 Controlled 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
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<PAGE> 20
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-
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<PAGE> 21
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 Placement Agreement dated March 26, 1998 among the Company,
Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation,
Scotia Capital Markets (USA) Inc., CIBC Oppenheimer Corp. and ING Baring
(U.S.) 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 Company
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
corporation, 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
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<PAGE> 22
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).
"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
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<PAGE> 23
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
redeemable 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
Restricted 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 refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances Refinancing Indebtedness; provided,
however, that (i) if the Indebtedness 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 Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
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
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<PAGE> 24
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
Subsidiary.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 26, 1998, by and among the Company, Morgan Stanley
& Co. Incorporated, Credit Suisse First Boston Corporation, Scotia Capital
Markets (USA) Inc., CIBC Oppenheimer Corp. and ING Baring (U.S.) 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
acquisition of Related Assets by such Restricted Subsidiary; provided, however,
that (i) such Related Asset Indebtedness is Incurred contemporaneously with a
Refinancing of all of the Non-Recourse Debt of such Restricted Subsidiary then
outstanding 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.
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<PAGE> 25
"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
Securities 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
Incurred, in respect of (A) Indebtedness of the Company for money borrowed and
(B) Indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which the Company is responsible or liable; (ii)
all Capitalized Lease Obligations of the Company; (iii) all obligations of the
Company (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
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<PAGE> 26
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 liabilities).
"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
equivalent 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
Sections 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
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<PAGE> 27
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 immediately 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 obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable before the maturity thereof.
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"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 Subsidiary.
"Working Capital Credit Agreement" means the Line of Credit Note,
dated as of June 4, 1993, between the Company and The Bank of California, N.A.,
as amended, refinanced, renewed or extended from time to time.
SECTION 1.2 Other Definitions.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
- ---- ------------------
<S> <C>
"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
"Offshore Global Note".................................................. 2.1(b)
"Offshore Notes Exchange Date".......................................... 2.1(b)
"Offshore Physical Notes"............................................... 2.1(b)
"Paying Agent".......................................................... 2.3
"Permanent Offshore Global Note"........................................ 2.1(b)
"Physical Notes"........................................................ 2.1(b)
"Registrar"............................................................. 2.3
</TABLE>
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<PAGE> 29
<TABLE>
<S> <C>
"Restricted Payment".................................................. 3.3(a)
"Successor Corporation"............................................... 4.1(i)
"Temporary Offshore Global Note"...................................... 2.1(b)
"U.S. Global Note".................................................... 2.1(b)
"U.S. Physical Notes"................................................. 2.1(b)
</TABLE>
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.
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<PAGE> 30
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 prepared 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.
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<PAGE> 31
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
shall be issued initially in the form of one or more permanent global Securities
in registered form, substantially in the form as above recited (the "U.S. 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 aggregate principal amount of the U.S. 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.
Securities offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of one or more temporary
global Securities in registered form substantially in the form as above recited
(the "Temporary Offshore Global Note") deposited with the Trustee, as custodian
for the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. At any time beginning 40 days after the later
of the commencement of the offering and the closing in connection with the
Initial Securities (the "Offshore Notes Exchange Date"), upon receipt by the
Trustee and the Company of a certificate substantially in the form of Exhibit C
hereto, one or more permanent global Notes in registered form substantially in
the form as above
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<PAGE> 32
recited (the "Permanent Offshore Global Note" and, together with the Temporary
Offshore Global Note, the "Offshore Global Note") duly executed by the Company
and authenticated by the Trustee as hereinafter provided shall be deposited with
the Trustee, as custodian for the Depositary, and the registrar shall reflect on
its books and records the date and a decrease in the principal amount of the
Temporary Offshore Global Note in an amount equal to the principal amount of the
beneficial interest in the Temporary Offshore Global Note transferred.
Securities offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Securities
in registered form in substantially the form as above recited (the "U.S.
Physical Notes"). Securities issued pursuant to Section 2.7 in exchange for
interests in the Offshore Global Note shall be in the form of permanent
certificated Securities in registered form substantially in the form as above
recited (the "Offshore Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are some
times collectively herein referred to as the "Physical Notes." The U.S. Global
Note and the Offshore Global Note are sometimes referred to as the "Global
Notes."
The definitive Securities shall be typed, printed, lithographed
or engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on which
the Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
(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 U.S. Global Note, Temporary
Offshore Global Note and each U.S. Physical 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
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<PAGE> 33
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3), OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT AS IN EFFECT
WITH RESPECT TO SUCH TRANSFER, 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) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF SECURITIES AT THE TIME OF TRANSFER OF LESS THAN $100,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) 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 LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE,
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH HEREIN RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO THE TRUSTEE. IF
THE PROPOSED
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<PAGE> 34
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND 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 IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTIONS," "UNITED STATES" AND "U.S. PERSONS" 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 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.
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<PAGE> 35
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,
imprinted 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 $300,000,000 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 Securities 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
$400,000,000 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
appointment, 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.
30
<PAGE> 36
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 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
payment 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
Securities) 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
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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 Section 312(a).
SECTION 2.6 Transfer and Exchange.
(a) The Securities shall be transferable only upon the
surrender 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 Registrar 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
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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
sufficient to cover any transfer tax or similar governmental charge payable in
connection 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).
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 U.S. Global Note and Offshore Global
Note.
(a) The U.S. Global Note and Offshore 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 U.S. Global Note
or Offshore Global Note, as the case may be, held on their behalf by the
Depositary, or the Trustee as its custodian, or under the U.S. Global Note or
Offshore Global Note, as the case may be, 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 U.S. Global Note or Offshore Global Note, as the case may
be, 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
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giving effect to any written certification, proxy or other authorization
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 U.S. Global Note and the Offshore
Global Note shall be limited to transfers of such U.S. Global Note or Offshore
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Beneficial interests in the U.S. Global Note and the
Offshore Global Note may be transferred in accordance with the applicable rules
and procedures of the Depositary and the provisions of Section 2.8 hereof. In
addition, U.S. Physical Notes and Offshore Physical Notes shall be transferred
to all beneficial owners in exchange for their beneficial interests in the U.S.
Global Note or the Offshore Global Note, as the case may be, if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the U.S. Global Note or the Offshore Global Note, as the case may
be, and a successor depositary is not appointed by the Company within 90 days of
such notice or (ii) an Event of Default has occurred and is continuing and the
registrar has received a request from the Depositary.
(c) Any beneficial interest in one of the Global Notes
that is transferred to a person who takes delivery in the form of an interest in
the other Global Note will, upon transfer, cease to be an interest in such
Global Note and become an interest in the other Global Note and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Note for as
long as it remains such an interest.
(d) In connection with any transfer of a beneficial
interest in the U.S. to a transferee receiving U.S. Physical Notes pursuant to
paragraph (b) of this Section 2.7, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S. Global Note
in an amount equal to the principal amount of the beneficial interest in the
U.S. Global Note to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(e) In connection with the transfer of the entire U.S.
Global Note or Offshore Global Note to beneficial owners pursuant to paragraph
(b) of this Section 2.7, the U.S. Global Note or Offshore Global Note, as the
case may
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be, shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b) or (d) of this
Section 2.7 shall, except as otherwise provided by paragraph (f) of Section 2.8,
bear the legend regarding transfer restrictions applicable to the U.S. Physical
Note set forth in Section 2.1(c).
(g) Any Offshore Physical Note delivered in exchange for
an interest in the Offshore Global Note pursuant to paragraph (b) of this
Section 2.7 shall, except as otherwise provided by paragraph (f) of Section 2.8,
bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.1(c).
(h) The registered holder of the U.S. Global Note and the
Offshore 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
following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of an Initial Security to any
Institutional Accredited Investor which is not a QIB (excluding
transfers to or by Non-U.S. Persons):
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(i) The Registrar shall register the transfer of
any Initial Security, whether or not such Initial Security bears
the Private Placement Legend, if (x) the requested transfer is
at least two years after the later of the original Issue Date of
the Initial Securities and the last date on which such Initial
Security was held by an affiliate of the Company or (y) the
proposed transferee has delivered to the Registrar (A) a
certificate substantially in the form of Exhibit D hereto and (B)
if the aggregate principal amount of the Initial Securities being
transferred is less than $100,000 at the time of such transfer,
an opinion of counsel acceptable to the Company and the Registrar
that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Registrar of (x) the documents, if any, required
by paragraph (i) and (y) instructions given in accordance with
the Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and decrease in
the principal amount of the U.S. Global Note in an amount equal
to the principal amount of the beneficial interest in the U.S.
Global Note to be transferred, and the Company shall execute, and
the Trustee shall authenticate and deliver, one or more U.S.
Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of an
Initial Security to a QIB (excluding transfers to or by Non-U.S.
Persons):
(i) If the Note to be transferred consists of U.S.
Physical Notes or an interest in the Temporary Offshore Global
Note, 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, that
the sale has been made in compliance with the provisions of Rule
144A to a transferee 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
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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
requested 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) If the proposed transferee is an Agent Member,
and the Initial Security to be transferred consists of U.S.
Physical Notes or an interest in the Temporary Offshore Global
Note, upon receipt by the registrar of the documents referred to
in clause (i) and instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the U.S. Global Note in an amount equal to
the principal amount of the U.S. Physical Note or the interest in
the Temporary Offshore Global Note, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Note or
decrease the amount of the Temporary Offshore Global Note so
transferred.
(c) Transfers of Interest in the Temporary Offshore Global
Note. The following provisions shall apply with respect to registration
of any proposed transfer of interests in the Temporary Offshore Global
Note:
(i) The Registrar shall register the transfer of
any Initial Security (x) 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 E hereto or
(y) if the proposed transferee is a QIB and the proposed
transferor has checked the box provided for on the form of
Initial Security stating, or has otherwise advised the Company
and Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee 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
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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 requested 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) If the proposed transferee is an Agent Member,
upon receipt by the registrar of the documents referred to in
clause (i)(y) above and instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the U.S. Global Note in an amount equal to
the principal amount of the Temporary Offshore Global Note to be
transferred, and the Trustee shall decrease the amount of the
Temporary Offshore Global Note so transferred.
(d) Transfers of Interests in the Permanent Offshore
Global Note or Offshore Physical Note. The Registrar shall register the
transfer of any interests in the Permanent Offshore Global Note or
Offshore Physical Notes without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at any Time. The
following provisions shall apply with respect to any transfer of an
Initial Security to a Non-U.S. Person:
(i) Prior to the 40th day after the later of the
commencement of the offering and the closing date in connection
with the Initial Securities, the Registrar shall register any
proposed transfer of an Initial Security to a Non-U.S. Person
upon receipt of a certificate substantially in the form of
Exhibit E hereto from the proposed transferor.
(ii) On and after the 40th day after the later of
the commencement of the offering and the closing date in
connection with the Initial Securities, the Registrar shall
register any proposed transfer to any Non-U.S. Person if the
Initial Securities to be transferred is a U.S. Physical Note or
an interest in the U.S. Global
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Note, upon receipt of a certificate substantially in the form of
Exhibit E from the proposed transferor.
(iii) (a) If the proposed transferor is an Agent
Member holding a beneficial interest in the U.S. Global Note,
upon receipt by the registrar of (x) documents, if any, required
by paragraph (ii) and (y) instructions in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Note in an amount equal to
the principal amount of the beneficial interest in the U.S.
Global Note to be transferred, and (b) if the proposed transferee
is an Agent Member, upon receipt by the Registrar of instructions
given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the Offshore
Global Note in an amount equal to the principal amount of the
U.S. Physical Notes or the U.S. Global Note, as the case may be,
to be transferred, and the Trustee shall cancel the Physical
Note, if any, so transferred or decrease the amount of the U.S.
Global Note.
(f) Private Placement Legend. Upon the transfer, exchange
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
either (i) the circumstances contemplated by the second paragraph of
Section 2.1(b) or paragraphs (a)(i)(x) or (e)(ii) of this Section 2.8
exist or (ii) 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.
(g) 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
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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
wrongfully 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, authenticate 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.
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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 Indenture 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 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 payment).
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.
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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; provided, however,
that if all Initial Securities are exchanged for Exchange Securities represented
by one or more Global Notes, the Global Notes may remain in temporary form until
such Global Notes are exchanged for Physical Notes pursuant to Section 2.7(b)..
Such exchange shall be made by the Company at its own expense and without any
charge therefor. Until so exchanged, 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.
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ARTICLE III
COVENANTS
SECTION 3.1 Payment of Securities.
The Company shall pay the principal of and interest on the
Securities 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 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
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the 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
agency.
SECTION 3.3 Limitation on Restricted Payments.
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(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 acquire or retire for value, prior to scheduled
maturity or scheduled repayment thereof or scheduled sinking fund payment
thereon, any Subordinated Indebtedness (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 described 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:
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(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
available (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 Redeemable
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 Exchangeable 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
Unrestricted 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
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(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
acquisition 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 occurrence or existence of a Default or Event of Default shall not
prohibit, for purposes of this Section, the making of such purchase,
redemption, defeasance 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 purposes 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
acquisition or retirement for value of Subordinated Indebtedness of the
Company made by exchange for, or out of the proceeds of the
substantially concurrent Incurrence of for cash (other than to a
Subsidiary), new Indebtedness 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 redeemed, repurchased, defeased, acquired or
retired, (B) if the Indebtedness being purchased, redeemed, defeased or
acquired or retired for value is Non-Recourse Debt, such new
Indebtedness shall be Non-Recourse Debt, (C) such new Indebt-
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edness has a Stated Maturity either (1) no earlier than the Stated
Maturity of the Indebtedness redeemed, repurchased, 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
acquisition 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
Indebtedness 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
outstanding 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);
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(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 Subsidiary)
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 proceeds 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
Restricted 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;
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(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
Indebtedness; 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, retirement, refunding or refinancing is not prohibited by Section
3.3 or unless such Indebtedness 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
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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
respect 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 refinanced, 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 Indebtedness
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
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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 Subsidiary 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
Restricted 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 Government 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 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; or other
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<PAGE> 57
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be diligently prosecuting 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 Indebtedness Incurred to finance the construction or purchase of,
or repairs, improvements 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
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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 Subsidiary (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 Uniform Commercial Code
financing statements for informational purposes with respect to leases Incurred
in the ordinary course of business and not otherwise prohibited 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 constitute 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.
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In the event of a Change of Control Triggering Event, the Company
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
pursuant to this Section;
(b) the purchase price and the Change of Control Purchase
Date;
(c) that any Security not surrendered or accepted for
payment 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
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<PAGE> 60
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 Securities 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
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
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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 Section 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 Section 314(a).
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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
transaction 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 comparable 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 Payment 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 employees and
directors of the Company pursuant to plans approved by the Board of Directors;
(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 transac-
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tion 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
Restricted 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 accordance with clause (i), and to the extent the Company or
such Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness or any Indebtedness 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 pur-
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chase 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 application 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
affected 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 Company 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
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<PAGE> 65
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 purchase 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 de scribed 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
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<PAGE> 66
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
Available 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
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<PAGE> 67
adjustments as may be deemed appropriate by the Company so that only Securities
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 surrendered.
(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 pursuant 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
applicable 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 appropriate 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 Subsidiary may consolidate with, merge
into, or sell, convey, transfer, lease or otherwise 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.
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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 Company 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
Significant 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
declared 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
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insurance and public liability insurance with reputable insurers or with the
government of the United States of America, or an agency or instrumentality
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 Indenture, (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
Non-Convertible 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
constituting 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
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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
acquisition 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
corporation 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
consolidation 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
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which becomes an obligation of the Company (or the Successor Corporation
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
obligation 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
obligation 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 Coverage 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 immediately 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
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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:
<TABLE>
<CAPTION>
(A) (B) (C)
--- --- ---
<S> <C> <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
</TABLE>
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 authenticate 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
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<PAGE> 73
this Indenture as the Securities theretofore or thereafter issued in accordance
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 purchase Securities when required pursuant to this
Indenture or the Securities;
(c) default in performance of any other covenants or
agreements 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 hereunder;
(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
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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 instrument, 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 discharged within 20 days of the Company or
a Restricted Subsidiary becoming 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
creditors, or
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(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 insolvency;
(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.
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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 rescission 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
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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
Indenture 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;
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(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
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the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 6.7. To the
extent that the payment 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, dividends, 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 discretion 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
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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
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company
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. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
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(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
judgment 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.
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(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
responsible 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,
instrument, 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
representation 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 authentication.
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The Trustee shall have no duty to ascertain or inquire as to the performance 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 Section 313(a) if required by that Section. The Trustee
also shall comply with TIA Section 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
compensation 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
disbursements 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
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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 expenses 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
administration 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:
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(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
resignation 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.
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This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 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
published annual report of condition. The Trustee shall comply with TIA Section
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 Section 310(b).
SECTION 6.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), except with
respect to any creditor relationship listed in TIA Section 311(b). A Trustee who
has resigned or been removed is subject to TIA Section 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 irrevocably 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 accompanied 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:
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(i) the Securities mature within one year, (ii) the Company
irrevocably deposits 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 Obligations 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 certification thereof delivered to the Trustee), without
consideration of any reinvestment of interest, to pay principal and interest on
the Securities to maturity, and to pay all other sums payable by it hereunder,
(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 instrument 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 Securities.
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
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reasonable request of and at the expense of the Company, shall execute proper
instruments acknowledging the same, except as to (a) rights of registration of
transfer and exchange, (b) substitution of apparently mutilated, defaced,
destroyed, 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
paragraph 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 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;
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(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 Company) 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 Company 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 Company (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
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(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 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
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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"
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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, reorganization 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
conditions 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 Obligations
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.
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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
reasonably 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 circulation 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,
restraining 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.
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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
Securities 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
connection 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 $100,000,000; provided,
however, the aggregate principal amount of Securities outstanding at
any time may not exceed $400,000,000.
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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) provide that the Securities will be redeemable prior
to maturity;
(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,
supplement 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
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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
determines, 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
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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 connection 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 Not Redeemable. The Securities are not redeemable prior to maturity.
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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 Sections 310 to 317, inclusive,
through operation of TIA Section 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),
addressed 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, 21st Floor
New York, New York 10286
Attention: Corporate Trust Trustee 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
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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 Section 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 Section 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
reasonably 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 reasonably
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.
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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.
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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
Indenture 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, 1998.
The reporting date for Section 6.6 is April 15 of each year. The
first reporting date is April 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.
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SIGNATURES
CALPINE CORPORATION
By /s/ ANN B. CURTIS
------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By /s/ REMO J. REALE
------------------------------------
Name: Remo J. Reale
Title: Assistant Vice President
Dated: March 31, 1998
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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 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 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
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3), OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
IN RULE 144(K) UNDER THE SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH
TRANSFER, 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)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE
- ----------
* This legend should only be added if the Security is issued as a Global Note.
<PAGE> 104
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES AT THE TIME OF
TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) 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 LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH HEREIN RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS SECURITY TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND 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 IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTIONS," "UNITED STATES" AND "U.S. PERSONS" 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.
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CALPINE CORPORATION
77/8% SENIOR NOTE DUE 2008
No. S-1 $300,000,000
CUSIP:
ISIN:
Calpine Corporation, a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Three Hundred Million Dollars
on April 1, 2008.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
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
================================================================================
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(Form of Reverse of Initial Security)
CALPINE CORPORATION
7-7/8% SENIOR NOTE DUE 2008
(1) Interest. Calpine Corporation, a Delaware corporation (such
corporation, 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 77/8% per annum (subject to adjustment as
provided below). The Company will pay interest semiannually on April 1 and
October 1 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 March 31, 1998. 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 March 26, 1998 by and among the Company,
Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation,
Scotia Capital Markets (USA) Inc., CIBC Oppenheimer Corp. and ING Baring (U.S.)
Securities, Inc., the annual interest rate due on the Securities shall be
increased by one-half of one percent, commencing as of September 27, 1998 (the
181st calendar day following the initial sale of the Securities), until the
exchange offer is consummated or the shelf registration statement is declared
effective. 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.
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(4) Indenture. The Company issued the Securities under an
Indenture dated as of March 31, 1998 (the "Indenture") between the Company and
the Trustee. The Securities are unsecured general obligations of the Company
limited to $400,000,000 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 Sections
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) Redemption. The Company may not redeem the Securities prior
to maturity.
(6) 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 15 days before an interest payment date.
(7) 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.
(8) 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
maturity.
(9) 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.
(10) 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
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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.
(11) 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 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.
(12) 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.
(13) 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.
(14) Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(15) 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. No representation is made as to the accuracy of
such numbers as printed
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on the Securities 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-7
<PAGE> 110
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 [ ]
Transfer to Qualified Institutional Buyer [ ]
Transfer to Institutional Accredited Investor [ ]
Transfer outside the United States in
compliance with Rule 904 under
the Securities Act of 1933 [ ]
================================================================================
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.
A-8
<PAGE> 111
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-9
<PAGE> 112
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> 113
CALPINE CORPORATION
7 7/8% SENIOR NOTE DUE 2008
No. $300,000,000
CUSIP:
ISIN:
Calpine Corporation, a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of Three Hundred Million Dollars
on April 1, 2008.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
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> 114
(Form of Back of Exchange Security)
CALPINE CORPORATION
7 7/8% SENIOR NOTE DUE 2008
(1) Interest. Calpine Corporation, a California corporation (such
corporation, 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 7 7/8% per annum. The Company will pay
interest semiannually on April 1 and October 1 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 March 31, 1998. 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 March 31, 1998 (the "Indenture") between the Company and
the Trustee. The Securities are unsecured general obligations of the Company
limited to $400,000,000 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
Sections 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) Redemption. The Company may not redeem the Securities prior
to maturity.
(6) 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.
B-3
<PAGE> 115
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 15 days before an interest
payment date.
(7) 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.
(8) 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
maturity.
(9) 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.
(10) 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.
(11) 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 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.
B-4
<PAGE> 116
(12) 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.
(13) 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.
(14) Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(15) 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. No representation is made as to the accuracy of
such numbers as printed on the Securities 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.
B-5
<PAGE> 117
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.
B-6
<PAGE> 118
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-7
<PAGE> 119
EXHIBIT C
Form of Certificate
The Bank of New York
101 Barclay Street, 21st Floor
New York, NY 10286
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Corporate Secretary
Re: Calpine Corporation (the "Company")
7 7/8% Senior Notes Due 2008 (the "Securities")
Dear Sirs:
This letter relates to U.S. $_________ principal amount of
Securities represented by a Security (the "Legended Security") which bears a
legend outlining restrictions upon transfer of such Legended Security. Pursuant
to Section 2.1(b) of the Indenture (the "Indenture") dated as of March 31, 1998
relating to the Securities, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the
Securities could be transferred in accordance with Rule 904 of Regulation S
promulgated under the Securities Act of 1933, as amended. Accordingly, you are
hereby requested to exchange the Legended Security for an unlegended Security
representing an identical principal amount of Securities, all in the manner
provided for in the Indenture.
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 Securityholder]
By:____________________________________
Authorized Signature
C-1
<PAGE> 120
EXHIBIT D
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
_______________, ______
The Bank of New York
101 Barclay Street, 21st Floor
New York, NY 10286
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Corporate Secretary
Re: Calpine Corporation (the "Company")
7 7/8% Senior Notes Due 2008 (the "Securities")
Dear Sirs:
In connection with our proposed purchase of $______ aggregate
principal amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the Securities
is subject to certain restrictions and conditions set forth in the
Indenture dated as of March 31, 1998 relating to the Securities (the
"Indenture") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Securities except in compliance
with, such restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act").
2. We understand that the offer and sale of the Securities have
not been registered under the Securities Act, and that the Securities
may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for
which we are acting as hereinafter stated, that if we should sell any
Securities, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially
in the form of this letter, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to
the exemption from registration provided by Rule 144 under the
Securities Act, or (F) pursuant to an effective registration statement
D-1
<PAGE> 121
under the Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated
herein.
3. We understand that, on any proposed resale of any Securities,
we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Securities purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion and the amount of Senior Notes so being acquired is at least
$100,000.
You 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.
Very truly yours,
[Name of Transferee]
By:____________________________________
Authorized Signature
D-2
<PAGE> 122
EXHIBIT E
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_______________, ______
The Bank of New York
101 Barclay Street, 21st Floor
New York, NY 10286
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Corporate Secretary
Re: Calpine Corporation (the "Company")
77/8% Senior Notes Due 2008 (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.
E-1
<PAGE> 123
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
E-2
<PAGE> 1
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
Dated as of March 26, 1998
by and between
CALPINE CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
CIBC OPPENHEIMER CORP.
ING BARING (U.S.) SECURITIES, INC.
-------------------------------
7-7/8% Senior Notes Due 2008
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of March 26, 1998, by and among Calpine Corporation, a Delaware
corporation (the "Company"), and Morgan Stanley & Co. Incorporated, Credit
Suisse First Boston Corporation, Scotia Capital Markets (USA) Inc., CIBC
Oppenheimer Corp. and ING Baring (U.S.) Securities, Inc. (the "Purchasers").
This Agreement is made pursuant to the Placement Agreement,
dated of even date herewith (the "Placement Agreement"), between the Company
and the Purchasers, which provides for the sale by the Company to the
Purchasers of an aggregate of $300,000,000 principal amount of the Company's
7-7/8% Senior Notes Due 2008 (the "Senior Notes"). In order to induce the
Purchasers to enter into the Placement Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution of
this Agreement is a condition to the Closing under the Placement Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without definition shall have
their respective meanings set forth in the Placement Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 4(o).
Closing Date: March 31, 1998, or such other date as may be agreed
upon for the sale and purchase of the Senior Notes pursuant to the Placement
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.
<PAGE> 3
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 registration
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 on an Exchange Offer and (ii) shall
have an interest rate of 7-7/8% per annum, 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 March 31, 1998, 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 registration
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 Prospectus, including post-effective amendments and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Registrable Securities: All Senior Notes which are Restricted
Securities.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration
2
<PAGE> 4
statement of the Company which covers any of the Exchange Notes or Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
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 Statement 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 exchanged 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.
Shelf Registration Statement: 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 benefits of this
Agreement are the Registrable Securities.
3
<PAGE> 5
(b) A Person is deemed to be a holder of Registrable
Securities whenever such Person beneficially owns Registrable Securities;
provided, that only Registrable 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 pursuant to this Agreement.
3. Shelf Registrations; Exchange Offers
(a) Shelf Registrations. As promptly as practicable and in
no event later than September 27, 1998, the Company shall prepare and file with
the SEC a Registration Statement under the Securities Act (the "Shelf
Registration Statement") 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 Registrable Securities (the "Shelf
Registration").
(b) The Shelf Registration Statement shall be on Form S-1
or another appropriate form permitting registration of such Registrable
Securities for resale by such holders in the manner or manners designated by
them.
(c) The Company shall use its best efforts to cause the
Shelf Registration Statement to become effective under the Securities Act in
accordance with Section 3(a) hereof and shall keep the Shelf Registration
continuously 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 Statement are no longer Restricted Securities. The
Company shall also supplement or make amendments to any Shelf Registration
Statement 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
Statement.
(d) Exchange Offer. Notwithstanding the provisions of
Section 3(a), at the option of the Company, to the extent any applicable law or
applicable interpretation of the staff of the SEC would permit holders
thereafter to resell Exchange Notes without
4
<PAGE> 6
restriction, the Company may, in lieu of complying with Section 3(a), cause to
be filed an Exchange Offer Registration Statement covering the offer by the
Company to the holders of Senior Notes to exchange all of the Registrable
Securities for Exchange Notes and to have such Exchange Offer consummated not
later than September 27, 1998. The Company shall commence the Exchange Offer
promptly after the Exchange Offer Registration Statement has been declared
effective by the SEC by mailing the related exchange offer Prospectus and
accompanying documents to each holder of Senior Notes stating, in addition to
such other disclosures 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 30 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 retain
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 institution 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 Exchange 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 principal amount of Registrable
Securities delivered for
5
<PAGE> 7
exchange and a statement that such holder is withdrawing its election
to have such Senior Notes exchanged.
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 delivered, to the
Trustee for cancellation all Registrable 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 complete the Exchange
Offer as provided above and shall comply with the applicable requirements of the
Securities 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 substantially 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.
6
<PAGE> 8
As provided in the Indenture, in the event that neither the Shelf
Registration Statement is declared effective nor the Exchange Offer is
consummated by September 27, 1998, the interest payable on the Senior Notes
shall be increased, beginning at such time, by one-half of one percent per annum
until the Exchange Offer is consummated or the Shelf Registration Statement is
declared effective.
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 Registration Statement or Registration Statements on
any appropriate form under the Securities Act, which form, in the case of a
Shelf Registration Statement, shall be available for the sale of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of distribution thereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; 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 amendments 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 thereto or
any Prospectus or any supplement thereto (including such documents which, upon
filing, would be incorporated or deemed to be incorporated by reference therein
and amendments to such documents, other than documents required to be filed
pursuant to
7
<PAGE> 9
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 Registration 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 Securities Act;
(c) notify the selling holders of Registrable 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 Prospectus supplement or post-effective amendment
related to such Registrable Securities has been filed, and, with respect to a
Registration Statement or any post-effective 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
information, (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 receipt 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
8
<PAGE> 10
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 circumstances under which they were made, not misleading, and (viii) of the
Company's determination that a posteffective amendment to a Registration
Statement would be appropriate;
(d) use every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness 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 Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information as such
holder reasonably requests to be included therein 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 Statements
and any post-effective amendment thereto, including 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
preliminary prospectus) and any amendment or supplement
9
<PAGE> 11
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 Registrable 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 exchange of
Registrable Securities, to use its best efforts 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 necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
applicable Registration Statement; provided, however, 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 Securities to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive 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 Registration Statement to be registered with or approved by
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<PAGE> 12
such other federal, state and local governmental regulatory 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 Securities
and cooperate with each seller of Registrable Securities in connection with any
filings required to be made with the National Association of Securities
Dealers, 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 Securities 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, Prospectus 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 reasonably satisfactory to Special Counsel) addressed
to each selling holder and underwriter of Registrable Securities, covering the
matters customarily covered in opinions requested in underwritten offerings,
(iii) obtain "cold comfort" letters from the independent certified public
accountants of the Company (and, if necessary,
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<PAGE> 13
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 Registration 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 connection with underwritten offerings,
and (iv) deliver such documents and certificates as may be reasonably requested
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 contained 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 holders,
in a manner designed to permit underwriters to satisfy their due diligence
investigation under the Securities 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, attorney or
accountant in connection with such registration; provided, however, that any
records, information or documents that are designated by the Company as
confidential at the time of delivery of such records, information or documents
shall be kept confidential by such persons, unless (i) such records, information
or documents 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 Securities Act) or (iv) disclosure of such records, information 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-
12
<PAGE> 14
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 accordance 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), commencing 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 Registrable Securities
under a Shelf Registration Statement to furnish to the Company such information
regarding the distribution 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 Registrable
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 applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are
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<PAGE> 15
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 (including reasonable fees and disbursements of counsel for any
underwriters or holders in connection with blue sky qualification of any of the
Exchange Notes or Registrable 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 Registrable 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 discounts 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 harmless the Purchasers
and each holder of Registrable Securities and each person, if any, who controls
the Purchasers 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 (including,
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 material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended and supplemented if the Company
14
<PAGE> 16
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 Purchasers 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 participating, 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 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 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 Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements thereto.
The Purchasers agree, severally and not jointly, to indemnify
and hold harmless the Company, the holders of Registrable Securities, the
directors of the
15
<PAGE> 17
Company, the officers of the Company who sign the Registration 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 Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities (including, 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 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
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified 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 indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation 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
16
<PAGE> 18
proceeding or related proceedings in the same jurisdiction, be liable for (a)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for the Purchasers and all persons, if any, who control the Purchasers
within the meaning of either Section 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 Registration 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 Morgan Stanley & Co. Incorporated.
In such case involving the holders of Registrable Securities and such
controlling persons of holders of Registrable 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 settlement 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 settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent, provided that (i) such
settlement 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 indemnifying 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-
17
<PAGE> 19
fied party, effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on 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 proportion 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 Securities 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 Section 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 immediately 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
18
<PAGE> 20
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
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The 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 indemnified party at law or in equity.
The indemnity and contribution provisions contained 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 granted by
law, including recovery of damages, will be entitled 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 Agreement, enter into any agreement with respect to
its securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof.
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<PAGE> 21
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, 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 majority 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
Securities 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 communications
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
initially is, with respect to the Purchasers, the address set forth on
the first page of the Placement Agreement; and
(ii) if to the Company, initially at its address
set forth on the first page of the Placement 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 receipt 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
Indenture at the address specified in such Indenture.
20
<PAGE> 22
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including 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, provision, 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, provisions,
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 substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated 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 exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained 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-
21
<PAGE> 23
rities sold pursuant to the Purchase Agreement. This Agreement supersedes all
prior agreements and under 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.
22
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CALPINE CORPORATION
By: /s/ ANN B. CURTIS
-----------------------------------
Name: Ann B. Curtis
Title:
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON
CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
CIBC OPPENHEIMER CORP.
ING BARING (U.S.) SECURITIES, INC.
BY: MORGAN STANLEY & CO.
INCORPORATED
By:
-----------------------------------
Name:
Title:
23
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CALPINE CORPORATION
By:
-----------------------------------
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON
CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
CIBC OPPENHEIMER CORP.
ING BARING (U.S.) SECURITIES, INC.
BY: MORGAN STANLEY & CO.
INCORPORATED
By: /s/ JEFFREY R. HOLZSCHUH
-----------------------------------
Name: Jeffrey R. Holzschuh
Title: Managing Directo
23
<PAGE> 1
EXHIBIT 4.6
FIRST SUPPLEMENTAL INDENTURE
Dated as of July 24, 1998
between
CALPINE CORPORATION,
AS ISSUER
and
THE BANK OF NEW YORK
AS TRUSTEE
Supplementing the Indenture
Dated as of March 31, 1998
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of July 24, 1998 (the
"First Supplemental Indenture"), between Calpine Corporation, a Delaware
corporation (the "Company"), and The Bank of New York, as trustee (the
"Trustee").
WHEREAS, the Company executed and delivered the Indenture dated
as of March 31, 1998 (the "Indenture"), to the Trustee to provide for the
issuance of $300,000,000 of the Company's 7-7/8 % Senior Notes due 2008 (the
"Initial Securities");
WHEREAS, pursuant to the terms of the Indenture, the Company
desires to supplement and amend the Indenture to issue $100,000,000 additional
securities (the "Additional Securities" and, together with the Initial
Securities, the "Securities") of the Company as contemplated by Section 8.1(h)
of the Indenture;
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Company and the Trustee in accordance with
its terms and a valid amendment and supplement to the Indenture, have been done.
NOW THEREFORE, for and in consideration of the premises and
mutual covenants herein contained, the Company and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definition of Terms.
Unless the context otherwise requires:
(a) capitalized terms used herein that are not otherwise
defined herein shall have the meaning assigned to such terms in the Indenture;
(b) the singular includes the plural and vice versa;
(c) headings are for convenience of reference only and do
not affect interpretation;
(d) "Offering" means the offering and sale of the Initial
Securities and the offering and sale of Additional Securities.
2
<PAGE> 3
(e) "Additional Securities Registration Rights Agreement"
means the Registration Rights Agreement dated as of July 21, 1998.
ARTICLE II
AMENDMENTS TO THE INDENTURE
Section 2.1 Issuance of Additional Securities.
The Indenture is amended to provide for the issuance of
additional 7-7/8% Senior Notes due 2008 of the Company in an aggregate principal
amount of $100,000,000.
Section 2.2 Effectiveness.
The amendment set forth in Section 2.1 shall not be effective as
to any Security outstanding prior to the date hereof.
ARTICLE III
MISCELLANEOUS
Section 3.1 Form and Dating.
The Additional Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A annexed hereto,
which is part of this First Supplemental Indenture.
The terms and provisions contained in the forms of Additional
Securities annexed hereto as Exhibit A and Exhibit B shall constitute, and are
expressly made, a part of this First Supplemental Indenture.
Section 3.2 Execution and Authentication.
The Trustee shall authenticate (i) Additional Securities for
original issue in an aggregate principal amount of $100,000,000 and (ii)
Exchange Securities for issue only in exchange pursuant to the Additional
Securities Registration Rights Agreement, for a like principal amount of
Additional Securities, in each case, upon a written order of the Company signed
by two Officers.
3
<PAGE> 4
Section 3.3 Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental
Indenture, is in all respects ratified and confirmed, and this First
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
Section 3.4 Governing Law.
This First Supplemental Indenture shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said State.
Section 3.5 Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this First Supplemental Indenture but
this First Supplemental Indenture shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
Section 3.6 Counterparts.
This First Supplemental Indenture may be executed in any number
of counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
Section 3.7 Effectiveness.
This First Supplemental Indenture shall be effective and binding
when executed by the Company and the Trustee.
Section 3.8 Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not by
the Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or sufficiency
of this First Supplemental Indenture.
4
<PAGE> 5
Section 3.9 Performance by Trustee.
The Trustee, for itself and its successors accepts the Trust of
the Indenture as amended by this First Supplemental Indenture and agrees to
perform the First Supplemental Indenture and agrees to perform the same, but
only upon the terms and conditions set forth in the Indenture, including the
terms and provisions defining and limiting the liability and responsibility of
the Trustee.
* * *
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
CALPINE CORPORATION
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
THE BANK OF NEW YORK
as Trustee
By:_____________________________
Name:
Title:
<PAGE> 7
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 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 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
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3), OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
- --------
* This legend should only be added if the Security is issued as a Global Note.
A-1
<PAGE> 8
AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT AS IN EFFECT
WITH RESPECT TO SUCH TRANSFER, 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) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
SECURITIES AT THE TIME OF TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) 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 LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH HEREIN RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS SECURITY TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND 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 IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS," "UNITED STATES" AND "U.S.
PERSONS" HAVE THE MEANINGS
A-2
<PAGE> 9
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.
A-3
<PAGE> 10
CALPINE CORPORATION
7-7/8% SENIOR NOTE DUE 2008
No. S-1 $______________
CUSIP:
ISIN:
Calpine Corporation, a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of ______________ Dollars on April
1, 2008.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
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
A-4
<PAGE> 11
(Form of Reverse of Initial Security)
CALPINE CORPORATION
7-7/8% SENIOR NOTE DUE 2008
(1) Interest. Calpine Corporation, a Delaware corporation (such
corporation, 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 7-7/8% per annum (subject to adjustment as
provided below). The Company will pay interest semiannually on April 1 and
October 1 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 March 31, 1998. 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 September 26, 1998, in
accordance with the terms of a Registration Rights Agreement dated July 21, 1998
by and between the Company and Morgan Stanley & Co. Incorporated (the
"Additional Securities Registration Rights Agreement"), the annual interest rate
due on the Securities shall be increased by one-half of one percent, commencing
as of September 27, 1998 (the 181st calendar day following the initial sale of
the Securities), until the exchange offer is consummated or the shelf
registration statement is declared effective. The holder of this Security is
entitled to the benefits of such Additional Securities 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.
A-5
<PAGE> 12
(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 March 31, 1998, as supplemented by the First Supplemental
Indenture dated as of July 24, 1998 (together, the "Indenture") between the
Company and the Trustee. The Securities are unsecured general obligations of the
Company limited to $400,000,000 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 Sections
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) Redemption. The Company may not redeem the Securities prior
to maturity.
(6) 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 15 days before an interest payment date.
(7) 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.
(8) 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
maturity.
A-6
<PAGE> 13
(9) 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.
(10) 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.
(11) 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 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.
(12) 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.
(13) 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
A-7
<PAGE> 14
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.
(14) Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(15) 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. No representation is made as to the accuracy of
such numbers as printed on the Securities 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-8
<PAGE> 15
================================================================================
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 [ ]
Transfer to Qualified Institutional Buyer [ ]
Transfer to Institutional Accredited Investor [ ]
Transfer outside the United States in
compliance with Rule 904 under
the Securities Act of 1933 [ ]
================================================================================
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: [ ]
A-9
<PAGE> 16
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-10
<PAGE> 17
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> 18
CALPINE CORPORATION
7-7/8% SENIOR NOTE DUE 2008
No._______________ $______________
CUSIP:
ISIN:
Calpine Corporation, a Delaware corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum of ______________ Dollars on April
1, 2008.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
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> 19
(Form of Back of Exchange Security)
CALPINE CORPORATION
7-7/8% SENIOR NOTE DUE 2008
(1) Interest. Calpine Corporation, a California corporation (such
corporation, 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 7-7/8% per annum. The Company will pay
interest semiannually on April 1 and October 1 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 March 31, 1998. 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 March 31, 1998, as supplemented by the First Supplemental
Indenture dated as of July 24, 1998 (together, the "Indenture") between the
Company and the Trustee. The Securities are unsecured general obligations of the
Company limited to $400,000,000 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 Sections
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.
B-3
<PAGE> 20
(5) Redemption. The Company may not redeem the Securities prior
to maturity.
(6) 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 15 days before an interest payment date.
(7) 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.
(8) 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
maturity.
(9) 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.
(10) 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.
B-4
<PAGE> 21
(11) 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 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.
(12) 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.
(13) 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.
(14) Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(15) 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. No representation is made as to the accuracy of
such numbers as printed on the Securities and reliance may be placed only on the
other identification numbers placed thereon.
B-5
<PAGE> 22
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.
B-6
<PAGE> 23
================================================================================
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: $
B-7
<PAGE> 24
*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.
<PAGE> 1
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
Dated as of July_21, 1998
by and between
CALPINE CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
-------------------------------
7-7/8% Senior Notes Due 2008
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of July 21, 1998, by and between Calpine Corporation, a Delaware
corporation (the "Company"), and Morgan Stanley & Co. Incorporated (the
"Purchaser").
This Agreement is made pursuant to the Placement Agreement, dated
of even date herewith (the "Placement Agreement"), between the Company and the
Purchaser, which provides for the sale by the Company to the Purchaser of an
additional aggregate of $100,000,000 principal amount of the Company's 7-7/8%
Senior Notes Due 2008 (the "Senior Notes") to be issued under an Indenture dated
March 31, 1998, to be supplemented by the First Supplemental Indenture to be
dated as of July 24, 1998. In order to induce the Purchaser to enter into the
Placement Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution of this Agreement is a condition to
the Closing under the Placement Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Placement Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Advice: See Section 4(o).
Closing Date: July 24, 1998, or such other date as may be agreed
upon for the sale and purchase of the Senior Notes pursuant to the Placement
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.
<PAGE> 3
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 registration
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 on an Exchange Offer and (ii) shall
have an interest rate of 7-7/8% per annum, 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 March 31, 1998, to be
supplemented by the First Supplemental Indenture to be dated as of July 24,
1998, 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 registration
statement in reliance upon Rule 430A), as amended 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 Prospectus, including post-effective amendments and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Registrable Securities: All Senior Notes which are Restricted
Securities.
Registration Expenses: See Section 5 hereof.
2
<PAGE> 4
Registration Statement: Any registration statement of the Company
which covers any of the Exchange Notes or Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
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 Statement 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 exchanged 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.
Shelf Registration Statement: See Section 3 hereof.
Special Counsel: Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel to the Purchaser 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 benefits of this
Agreement are the Registrable Securities.
3
<PAGE> 5
(b) A Person is deemed to be a holder of Registrable
Securities whenever such Person beneficially owns Registrable Securities;
provided, that only Registrable 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 pursuant to this Agreement.
3. Shelf Registrations; Exchange Offers
(a) Shelf Registrations. As promptly as practicable and in
no event later than September 27, 1998, the Company shall prepare and file with
the SEC a Registration Statement under the Securities Act (the "Shelf
Registration Statement") 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 Registrable Securities (the "Shelf
Registration").
(b) The Shelf Registration Statement shall be on Form S-1
or another appropriate form permitting registration of such Registrable
Securities for resale by such holders in the manner or manners designated by
them.
(c) The Company shall use its best efforts to cause the
Shelf Registration Statement to become effective under the Securities Act in
accordance with Section 3(a) hereof and shall keep the Shelf Registration
continuously 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 Statement are no longer Restricted Securities. The
Company shall also supplement or make amendments to any Shelf Registration
Statement 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
Statement.
(d) Exchange Offer. Notwithstanding the provisions of
Section 3(a), at the option of the Company, to the extent any applicable law or
applicable interpretation of the staff of the SEC would permit holders
thereafter to resell Exchange Notes without
4
<PAGE> 6
restriction, the Company may, in lieu of complying with Section 3(a), cause to
be filed an Exchange Offer Registration Statement covering the offer by the
Company to the holders of Senior Notes to exchange all of the Registrable
Securities for Exchange Notes and to have such Exchange Offer consummated not
later than September 27, 1998. The Company shall commence the Exchange Offer
promptly after the Exchange Offer Registration Statement has been declared
effective by the SEC by mailing the related exchange offer Prospectus and
accompanying documents to each holder of Senior Notes stating, in addition to
such other disclosures 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 30 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
retain 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
institution 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 Exchange 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 principal amount of Registrable Securities delivered for
5
<PAGE> 7
exchange and a statement that such holder is withdrawing its
election to have such Senior Notes exchanged.
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 delivered, to the Trustee for
cancellation all Registrable 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 complete the Exchange
Offer as provided above and shall comply with the applicable requirements of the
Securities 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
Purchaser of the names and addresses of the holders of Senior Notes to whom the
Exchange Offer is made, and the Purchaser 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 substantially 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.
6
<PAGE> 8
As provided in the Indenture, in the event that neither the Shelf
Registration Statement is declared effective nor the Exchange Offer is
consummated by September 27, 1998, the interest payable on the Senior Notes
shall be increased, beginning at such time, by one-half of one percent per annum
until the Exchange Offer is consummated or the Shelf Registration Statement is
declared effective.
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 Registration Statement or Registration Statements on
any appropriate form under the Securities Act, which form, in the case of a
Shelf Registration Statement, shall be available for the sale of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of distribution thereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; 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 amendments 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 thereto or
any Prospectus or any supplement thereto (including such documents which, upon
filing, would be incorporated or deemed to be incorporated by reference therein
and amendments to such documents, other than documents required to be filed
pursuant to
7
<PAGE> 9
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 Registration 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 Securities Act;
(c) notify the selling holders of Registrable 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 Prospectus supplement or post-effective amendment
related to such Registrable Securities has been filed, and, with respect to a
Registration Statement or any post-effective 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
information, (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 receipt 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
8
<PAGE> 10
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 circumstances 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 effectiveness 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 Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information as such
holder reasonably requests to be included therein 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 Statements
and any post-effective amendment thereto, including 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
9
<PAGE> 11
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 Registrable 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 exchange of
Registrable Securities, to use its best efforts 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 necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
applicable Registration Statement; provided, however, 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 Securities to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive 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 Registration Statement to be registered with or approved by
10
<PAGE> 12
such other federal, state and local governmental regulatory 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 Securities
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 Securities 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, Prospectus 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 reasonably satisfactory to Special Counsel) addressed
to each selling holder and underwriter of Registrable Securities, covering the
matters customarily covered in opinions requested in underwritten offerings,
(iii) obtain "cold comfort" letters from the independent certified public
accountants of the Company (and, if necessary,
11
<PAGE> 13
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 Registration 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 connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably requested 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 contained 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 holders,
in a manner designed to permit underwriters to satisfy their due diligence
investigation under the Securities 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, attorney or
accountant in connection with such registration; provided, however, that any
records, information or documents that are designated by the Company as
confidential at the time of delivery of such records, information or documents
shall be kept confidential by such persons, unless (i) such records, information
or documents 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 Securities Act) or (iv) disclosure of such records, information 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-
12
<PAGE> 14
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 accordance with the terms of the TIA and
execute, and use its best efforts to cause the trustee to execute, all documents
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), commencing 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 Registrable Securities
under a Shelf Registration Statement to furnish to the Company such information
regarding the distribution 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 Registrable
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 applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are
13
<PAGE> 15
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 (including reasonable fees and disbursements of counsel for any
underwriters or holders in connection with blue sky qualification of any of the
Exchange Notes or Registrable 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 Registrable 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 discounts 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 harmless the Purchaser
and each holder of Registrable Securities and each person, if any, who controls
the Purchaser 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 (including,
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 material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended and supplemented if the Company
14
<PAGE> 16
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 Purchaser or any holder of Registrable
Securities furnished to the Company in writing by such Purchaser or holder of
Registrable Securities expressly for use therein.
In connection with any Shelf Registration in which a holder of
Registrable Securities is participating, 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
Purchaser and each person, if any, who controls the Purchaser 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 reasonably incurred
in connection with defending 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 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 Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
The Purchaser agrees to indemnify and hold harmless the Company,
the holders of Registrable Securities, the directors of the Company, the
officers of the
15
<PAGE> 17
Company who sign the Registration 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 Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities (including,
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 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 Purchaser furnished to the Company in
writing expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
In case any proceeding (including any governmental 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
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified 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 indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation 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-
16
<PAGE> 18
tion, be liable for (a) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Purchaser and all persons, if any, who
control the Purchaser within the meaning of either Section 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 Registration 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 Purchaser and such control persons of the
Purchaser, such firm shall be designated in writing by the Purchaser. In such
case involving the holders of Registrable Securities and such controlling
persons of holders of Registrable 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 settlement 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 settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent, provided that (i) such settlement 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 indemnifying 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 indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemni-
17
<PAGE> 19
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 proportion 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 resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
holders of Registrable Securities on the one hand and the Purchaser 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 Purchaser 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 Section 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 immediately 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
18
<PAGE> 20
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 alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The 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 indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Purchaser or any person controlling
the Purchaser, 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 granted by law,
including recovery of damages, will be entitled 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 Agreement, enter into any agreement with respect to
its securities 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 provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supple-
19
<PAGE> 21
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
majority 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 Securities 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 communications
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 initially is, with respect to the Purchaser, the ad-
dress set forth on the first page of the Placement Agreement;
and
(ii) if to the Company, initially at its address set forth
on the first page of the Placement 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 receipt 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
Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon
20
<PAGE> 22
the successors and assigns of each of the parties, including 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 parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(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, provision, 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, provisions,
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 substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated 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 exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained 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 securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and under-
21
<PAGE> 23
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 defined in Rule 405 under the
Securities Act) (other than the Purchaser 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.
22
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CALPINE CORPORATION
By:______________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:_______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 5.1
BROBECK, PHLEGER & HARRISON LLP
ONE MARKET
SPEAR TOWER
SAN FRANCISCO, CALIFORNIA 94105
TELEPHONE: (415) 442-0900
FACSIMILE: (415) 442-1010
August 7, 1998
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Ladies and Gentlemen:
We have acted as counsel to Calpine Corporation, a California corporation
(the "Company"), in connection with its registration of $400,000,000 of 7-7/8%
Senior Notes Due 2008 (the "Exchange Notes") of the Company, in exchange for a
like amount of 7-7/8% Senior Notes due 2008 (the "Outstanding Notes") of the
Company, as contemplated by the Prospectus (the "Prospectus") included as part
of the Registration Statement on Form S-4 with respect to the Exchange Notes
originally filed with the Securities and Exchange Commission (the
"Commission"), on August 7, 1998 under the Securities Act of 1933 (the
"Securities Act") (such Registration Statement, as amended or supplemented, is
hereinafter referred to as the "Registration Statement").
In our capacity as counsel of the Company, we have examined, among other
things, the following:
(i) The Registration Statement and Prospectus contained therein;
(ii) The Indenture, dated March 31, 1998, as supplemented by the
Supplemental Indenture, dated July 24, 1998, by and between the Company and
The Bank of New York (the "Trustee") (together, the "Indenture");
(iii) The Registration Rights Agreement, dated March 26, 1998, by and
between the Company, Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, CIBC Oppenheimer Corp., Scotia Capital Markets (USA) Inc.
and ING Baring (U.S.) Securities, Inc.;
(iv) The Registration Rights Agreement, dated July 21, 1998, by and
between the Company, Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, CIBC Oppenheimer Corp., Scotia Capital Markets (USA) Inc.
and ING Baring (U.S.) Securities, Inc.;
(v) The Certificates of Incorporation of the Company, including all
amendments thereto, as in effect on the date hereof;
(vi) The Bylaws of the Company, including all amendments thereto, as
in effect on the date hereof; and
(vii) Resolutions of the Board of Directors of the Company, adopted at
a meeting held on March 6, 1998, authorizing the issuance of the Exchange Notes
and certain other actions with regard thereto.
In addition, we have obtained from public officials and from officers and
other representatives of the Company and the Trustee such certificates,
documents and assurances as we considered necessary or appropriate for purposes
of rendering this opinion letter. In our examination of the documents listed in
(i) through (vii) above and the other certificates, documents and assurances
referred to herein, we have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as copies and the authenticity of the originals of such
documents. Regarding documents executed by parties other than the Company we
have assumed (i) that each such other party had the power to enter into and
perform all its obligations thereunder, (ii) the due authorization, execution
and delivery of such documents by each such party, and (iii) that such
documents constitute the legal, valid, binding and enforceable obligations of
each such party.
This opinion letter relates solely to the laws of the State of California
and the General Corporation law of the State of Delaware and we express no
opinion as to the effect or applicability of the laws of any other
jurisdictions.
Based upon and subject to the foregoing and on our consideration of such
other matters of fact and questions of law as we considered relevant in the
circumstances, we are of the opinion that:
1. The Exchange Notes have been duly authorized by the Company; and
2. When (i) authenticated by the Trustee in accordance with the provisions
of the Indenture, (ii) duly executed by the Company and (iii) issued and
delivered in exchange for the Outstanding Notes in accordance with the terms of
the Exchange Offer (as defined in the Registration Statement), the Exchange
Notes will constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms.
The opinions set forth above are subject to the qualification that the
enforceability of the obligations of the Company may be subject to or limited by
(i) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
transfer and other similar laws affecting the rights of creditors generally;
and (ii) general equitable principles (whether relief is sought in a proceeding
at law or in equity), including, without limitation, concepts of materiality,
reasonableness, good faith, and fair dealing.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission thereunder.
This opinion letter is rendered solely to you in connection with the above
referenced matter and may not be relied upon by you for any other purpose or
delivered to, or quoted or relied upon by, any other person without our prior
written consent. This opinion letter is expressly limited to the matters set
forth above and we render no other opinion and express no other belief, whether
by implication or otherwise, as to any other matters. This opinion letter is
rendered as of the date hereof, and we assume no obligation to advise you of
any facts, circumstances, events or developments that may be brought to our
attention in the future, which facts, circumstances, events or developments may
alter, affect or modify the opinions or beliefs expressed herein.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
--------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 10,
1998 (except for Note 16 as to which the date is February 17, 1998) included in
Calpine Corporation's Form 10-K for the year ended December 31, 1997 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
August 7, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 22, 1998, on our audits of the consolidated
financial statements of Sumas Cogeneration Company, L.P. and Subsidiary in the
Calpine Corporation Registration Statement (Form S-4) for the Registration of
the 7 7/8% Senior Notes Due 2008 of Calpine Corporation.
Moss Adams LLP
Everett, Washington
August 7, 1998
<PAGE> 1
Exhibit 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
CALPINE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 77-0212977
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
50 West San Fernando Street
San Jose, CA 95113
(Address of principal executive offices) (Zip code)
----------------------
7-7/8% Senior Notes Due 2008
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
2
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 3rd day of August, 1998.
THE BANK OF NEW YORK
By: /s/ MARY JANE SCHMALZEL
------------------------------------
Name: MARY JANE SCHMALZEL
Title: VICE PRESIDENT
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 3rd day of August, 1998.
THE BANK OF NEW YORK
By: /s/ MARY JANE SCHMALZEL
------------------------------------
Name: MARY JANE SCHMALZEL
Title: VICE PRESIDENT
<PAGE> 6
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1998, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ..................... $ 6,397,993
Interest-bearing balances .............. 1,138,362
Securities:
Held-to-maturity securities ............ 1,062,074
Available-for-sale securities .......... 4,167,240
Federal funds sold and Securities pur-
chased under agreements to resell ...... 391,650
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ............................... 36,538,242
LESS: Allowance for loan and
lease losses ......................... 631,725
LESS: Allocated transfer risk
reserve............................... 0
Loans and leases, net of unearned
income, allowance, and reserve ....... 35,906,517
Assets held in trading accounts .......... 2,145,149
Premises and fixed assets (including
capitalized leases) .................... 663,928
Other real estate owned .................. 10,895
Investments in unconsolidated
subsidiaries and associated
companies .............................. 237,991
Customers' liability to this bank on
acceptances outstanding ................ 992,747
Intangible assets ........................ 1,072,517
Other assets ............................. 1,643,173
------------
Total assets ............................. $ 55,830,236
============
LIABILITIES
Deposits:
In domestic offices .................... $ 24,849,054
Noninterest-bearing .................... 10,011,422
Interest-bearing ....................... 14,837,632
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....... 15,319,002
Noninterest-bearing .................... 707,820
Interest-bearing ....................... 14,611,182
Federal funds purchased and Securities
sold under agreements to repurchase .... 1,906,066
Demand notes issued to the U.S.
Treasury ............................... 215,985
Trading liabilities ...................... 1,591,288
Other borrowed money:
With remaining maturity of one year
or less .............................. 1,991,119
With remaining maturity of more than
one year through three years ......... 0
With remaining maturity of more than
three years .......................... 25,574
Bank's liability on acceptances exe-
cuted and outstanding .................. 998,145
Subordinated notes and debentures ........ 1,314,000
Other liabilities ........................ 2,421,281
------------
Total liabilities ........................ 50,631,514
------------
EQUITY CAPITAL
Common stock ............................. 1,135,284
Surplus .................................. 731,319
Undivided profits and capital
reserves ............................... 3,328,050
Net unrealized holding gains
(losses) on available-for-sale
securities ............................. 40,198
Cumulative foreign currency transla-
tion adjustments ....................... (36,129)
------------
Total equity capital ..................... 5,198,722
------------
Total liabilities and equity
capital ................................ $ 55,830,236
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
<PAGE> 7
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1998, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ..................... $ 6,397,993
Interest-bearing balances .............. 1,138,362
Securities:
Held-to-maturity securities ............ 1,062,074
Available-for-sale securities .......... 4,167,240
Federal funds sold and Securities pur-
chased under agreements to resell ...... 391,650
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ............................... 36,538,242
LESS: Allowance for loan and
lease losses ......................... 631,725
LESS: Allocated transfer risk
reserve............................... 0
Loans and leases, net of unearned
income, allowance, and reserve ....... 35,906,517
Assets held in trading accounts .......... 2,145,149
Premises and fixed assets (including
capitalized leases) .................... 663,928
Other real estate owned .................. 10,895
Investments in unconsolidated
subsidiaries and associated
companies .............................. 237,991
Customers' liability to this bank on
acceptances outstanding ................ 992,747
Intangible assets ........................ 1,072,517
Other assets ............................. 1,643,173
------------
Total assets ............................. $ 55,830,236
============
LIABILITIES
Deposits:
In domestic offices .................... $ 24,849,054
Noninterest-bearing .................... 10,011,422
Interest-bearing ....................... 14,837,632
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....... 15,319,002
Noninterest-bearing .................... 707,820
Interest-bearing ....................... 14,611,182
Federal funds purchased and Securities
sold under agreements to repurchase .... 1,906,066
Demand notes issued to the U.S.
Treasury ............................... 215,985
Trading liabilities ...................... 1,591,288
Other borrowed money:
With remaining maturity of one year
or less .............................. 1,991,119
With remaining maturity of more than
one year through three years ......... 0
With remaining maturity of more than
three years .......................... 25,574
Bank's liability on acceptances exe-
cuted and outstanding .................. 998,145
Subordinated notes and debentures ........ 1,314,000
Other liabilities ........................ 2,421,281
------------
Total liabilities ........................ 50,631,514
------------
EQUITY CAPITAL
Common stock ............................. 1,135,284
Surplus .................................. 731,319
Undivided profits and capital
reserves ............................... 3,328,050
Net unrealized holding gains
(losses) on available-for-sale
securities ............................. 40,198
Cumulative foreign currency transla-
tion adjustments ....................... (36,129)
------------
Total equity capital ..................... 5,198,722
------------
Total liabilities and equity
capital ................................ $ 55,830,236
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
<PAGE> 1
LETTER OF TRANSMITTAL
FOR
7 7/8% SENIOR NOTES DUE 2007
OF
CALPINE CORPORATION
PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF
ALL OF ITS OUTSTANDING 7 7/8% SENIOR NOTES DUE 2008
FOR
7 7/8% SENIOR NOTES DUE 2008
------------------------
PURSUANT TO THE PROSPECTUS DATED AUGUST , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON
THE EXPIRATION DATE.
TO: THE BANK OF NEW YORK, EXCHANGE AGENT
<TABLE>
<CAPTION>
By Mail: By Facsimile: By Hand or Overnight Carrier:
<S> <C> <C>
The Bank of New York (212) 815-6339 The Bank of New York
101 Barclay Street, Floor 7E Confirm by Telephone: 101 Barclay Street
New York, New York 10286 (212) 815-2791 Corporate Trust Services Window
Attn: Denise Robertson Ground Level
New York, New York 10286
Attn: Denise Robertson
</TABLE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON OLD NOTES)
- ---------------------------------------------------------------------------------------------------------------------
AGGREGATE
CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL
NUMBER(S)* OF OLD NOTE(S) TENDERED**
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered the entire principal amount represented by the Old Note
indicated in column 2. See Instruction 2. Old Notes tendered hereby
must be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
- --------------------------------------------------------------------------------
BY EXECUTION HEREOF, THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS
DATED AUGUST , 1998 (THE "PROSPECTUS") OF CALPINE CORPORATION, A DELAWARE
<PAGE> 2
CORPORATION (THE "COMPANY"), WHICH, TOGETHER WITH THIS LETTER OF TRANSMITTAL AND
THE INSTRUCTIONS HERETO (THE "LETTER OF TRANSMITTAL"), CONSTITUTES THE COMPANY'S
OFFER (THE "EXCHANGE OFFER") TO EXCHANGE $1,000 PRINCIPAL AMOUNT OF ITS 7 7/8%
SENIOR NOTES DUE 2008 (THE "NEW NOTES"), WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), PURSUANT TO A
REGISTRATION STATEMENT OF WHICH THE PROSPECTUS CONSTITUTES A PART, FOR EACH
$1,000 PRINCIPAL AMOUNT OF ITS OUTSTANDING 7 7/8% SENIOR NOTES DUE 2008 (THE
"OLD NOTES"), UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE
PROSPECTUS.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal is to be used by Holders (as defined below) if
certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders. If tender of Old Notes is to be made by
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company ("DTC") through the DTC Automated Tender Offer Program ("ATOP"), such
tender may be made by transmission of an Agent's Message pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer -- Procedures
for Tendering" by any financial institution that is a participant in DTC and
whose name appears on a security position listing as the owner of Old Notes
(such participants, acting on behalf of Holders are referred to herein, together
with such Holders, as "Acting Holders"). Holders whose Old Notes are not
available or who cannot deliver their Old Notes and all other documents required
hereby to the Exchange Agent by 5:00 p.m. on the Expiration Date may tender
their Old Notes in accordance with the guaranteed delivery procedures set forth
in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures."
See Instruction 1. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder; or (ii) whose Old Notes are held of record by DTC and who desires to
deliver such Old Notes by book-entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
HOLDERS WHO WISH TO EXCHANGE THEIR OLD NOTES MUST COMPLETE ALL OF THE
COLUMNS IN THE BOX ENTITLED "DESCRIPTION OF OLD NOTES TENDERED" ON THE PRIOR
PAGE, COMPLETE THE BOX BELOW ENTITLED "METHOD OF DELIVERY" AND SIGN WHERE
INDICATED BELOW.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE OLD NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE
PROSPECTUS AND HEREIN.
All capitalized terms used herein and not defined shall have the meaning
ascribed to them in the Prospectus.
<PAGE> 3
METHOD OF DELIVERY
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-------------------------------------------------------------------------------
Account Number
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder(s)
------------------------------------------------------------------------------
Window Ticket Number (if any)
----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------------------------------------
Name of Institution which guaranteed delivery
--------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------------
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of the Company all right, title and interest
in and to such Old Notes, and hereby irrevocably constitutes and appoints the
Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned
(with full knowledge that said Exchange Agent also acts as the agent of the
Company and as Trustee under the indenture governing the Old Notes and the New
Notes) with respect to such Old Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver certificates representing such Old Notes, and to
deliver all accompanying evidences of transfer and authenticity to or upon the
order of the Company upon receipt by the Exchange Agent, as the undersigned's
agent, of the New Notes to which the undersigned is entitled upon the acceptance
by the Company of such Old Notes for exchange pursuant to the Exchange Offer,
(b) receive all benefits and otherwise to exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer, and (c) present such Old Notes for transfer on the register for such Old
Notes.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Old Notes or the New Notes. If a market for the
New Notes should develop, the New Notes could trade at a discount from their
principal amount. The undersigned is aware that the Company does not intend to
list the New Notes on a national securities exchange and that there can be no
assurance that an active market for the Exchange Note will develop.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes, it
represents that the Old Notes to be exchanged for New Notes were acquired as a
result of market-making activities or other trading activities and it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned represents that (a) it is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, (b) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (c) it is
acquiring the New Notes in the ordinary course of business.
The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers will differ from the terms of the Exchange
Offer.
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
a net long position within the meaning of Rule 14e-4 under the Exchange Act
("Rule 14e-4") equal to or greater than the principal amount of Old Notes
tendered hereby, (c) the tender of such Old Notes complies with Rule 14e-4 (to
the extent that Rule 14e-4 is applicable to such exchange), (d) the undersigned
has full power and authority to tender, exchange, assign and transfer the Old
Notes tendered hereby, and (e) when the same are accepted for exchange by the
Company, the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the sale, assignment and transfer of the
Old Notes tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the
<PAGE> 5
death or incapacity of the undersigned. The undersigned also agrees that, except
as stated in the Prospectus, the Old Notes tendered hereby cannot be withdrawn.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering" and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described in the Prospectus and the instructions thereto, the
tendering holder will be deemed to have waived the right to receive any payment
in respect of interest on the Old Notes accrued up to the date of issuance of
the New Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Old Notes tendered. Old Notes not accepted for exchange or withdrawn will be
returned to the undersigned at the address set forth below unless otherwise
indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, New Notes, and Old Notes not validly tendered or accepted
for exchange, will be issued in the name of the undersigned. Similarly, unless
otherwise indicated under the box entitled "Special Delivery Instructions"
below, New Notes, and Old Notes not validly tendered or accepted for exchange,
will be delivered to the undersigned at the address shown below the signature of
the undersigned. The undersigned recognizes that the Company has no obligation
pursuant to the "Special Issuance Instructions" to transfer any Old Notes from
the name of the registered holder thereof if the Company does not accept for
exchange any of the principal amount of such Old Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal) will
be final and binding. Unless waived, any defects or irregularities in connection
with tenders of Old Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Old Notes, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
<PAGE> 6
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Dated: __ , 1997
__x
__x
SIGNATURE(S) OF OWNER (DATE)
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the Note(s) for the Old Notes
or by any person(s) authorized to become registered holder(s) by endorsements
and documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
Name(s):
__
(PLEASE TYPE OR PRINT)
Capacity: __
Address: __
__
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
(AUTHORIZED SIGNATURE)
TITLE
NAME OF FIRM
Dated: , 1997__
<PAGE> 7
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Certificates for Old Notes not exchanged and/or New
Notes are to be issued in the name of and sent to someone other than the
person(s) whose signature(s) appear(s) on this Letter above, or if Old Notes
delivered by book-entry transfer which are not accepted for exchange are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility
other than the account indicated above.
Issue New Notes and/or Old Notes to:
Name(s):
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address:
(INCLUDING ZIP CODE)
(Complete accompanying Substitute Form W-9) Credit unexchanged Old Notes
delivered by book-entry transfer to the Book-Entry Transfer Facility account set
forth below.
- ---------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4 AND 6)
To be completed ONLY if Certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person(s) whose signature(s)
appear(s) on this Letter above or to such person(s) at an address other than
shown in the box entitled "Description of Old Notes" on this Letter above.
Mail New Notes and/or Old Notes to:
Name(s)
(PLEASE TYPE OR PRINT)
(PLEASE TYPE OR PRINT)
Address
- ---------------------------------------------------------
(INCLUDING ZIP CODE)
<PAGE> 8
INSTRUCTIONS FORMING PART OF THE
TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Old Notes, together with either an Agent's Message or a properly completed
Letter of Transmittal (or facsimile thereof), duly executed by the registered
holder thereof, and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at one of its addresses set forth on the
first page of this Letter of Transmittal. If the beneficial owner of any Old
Notes is not the registered holder, then such person may validly tender his or
her Old Notes only by obtaining and submitting to the Exchange Agent a properly
completed Letter of Transmittal from the registered holder. OLD NOTES SHOULD BE
DELIVERED ONLY TO THE EXCHANGE AGENT AND NOT TO THE COMPANY OR TO ANY OTHER
PERSON.
THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BY 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Old Notes and such holder's Old Notes are not
immediately available or time will not permit such holder's Letter of
Transmittal, Old Notes or other required documents to reach the Exchange Agent
on or before the Expiration Date, such holder's tender may be effected if:
(a) the tender is made through an Eligible Institution (as defined herein);
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail, Agent's Message
or hand delivery) setting forth the name and address of the holder of
the Old Notes, the certificate number or numbers of such Old Noes and
the principal amount of Old Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within three business days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes to
be tendered in proper form for transfer or a Book-Entry Confirmation as
the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such Agent's Message or properly completed and executed Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing all tendered Old Notes in proper form for transfer and all
other documents required by the Letter of Transmittal are received by
the Exchange Agent within three business days after the Expiration
Date.
2. WITHDRAWAL OF TENDERS. Tendered Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Old Notes, (c) contain the
description of the Old Notes to be withdrawn, the certificate numbers shown on
the particular certificates evidencing such Old Notes and the aggregate
principal amount represented by such Old Notes and (d) be signed by the holder
of such Old Notes in the same manner as the original signature appears on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the holder
withdrawing the tender. The signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Old Notes have been tendered
(a) by a registered holder of Old Notes who has not completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the Company, whose determination shall be final and binding on all parties. If
the Old Notes to be withdrawn have been delivered
<PAGE> 9
or otherwise identified to the Exchange Agent, a signed notice of withdrawal is
effective immediately upon receipt by the Exchange Agent of a written or
facsimile transmission notice of withdrawal even if physical release is not yet
effected. In addition, such notice must specify, in the case of Old Notes
tendered by delivery of certificates for such Old Notes, the name of the
registered holder (if different from that of the tendering holder) to be
credited with the withdrawn Old Notes. Withdrawals may not be rescinded, and any
Old Notes withdrawn will thereafter be deemed not validly tendered for purposes
of the Exchange Offer. However, properly withdrawn Old Notes may be retendered
by following one of the procedures described under "The Exchange
Offer -- Procedures for Tendering" in the Prospectus at any time on or prior to
the applicable Expiration Date.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered hereby, the signature must
correspond exactly with the name(s) as written on the face of the certificates
without any change whatsoever.
If any Old Notes tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any Old Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Exchange Notes are to be issued, or
certificates for any untendered principal amount of Old Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Old Notes tendered pursuant
hereto are tendered (a) by a registered holder of Old Notes who has not
completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
for the account of an Eligible Institution. In the event that signatures on this
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office of correspondent in the United States (each as "Eligible
Institutions").
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange Notes and/or substitute certificates evidencing Old Notes for the
principal amounts not exchanged are to be issued or sent, if different from the
name and address of the person signing this Letter of Transmittal. In the case
of issuance in a different name, the employer identification or social security
number of the person named must also be
<PAGE> 10
indicated. If no such instructions are given, any Old Notes not exchanged will
be returned to the name and address of the person signing this Letter of
Transmittal.
5. TAX IDENTIFICATION NUMBER WITHHOLDING Federal income tax law of the
United States requires that a holder of Old Notes whose Old Notes are accepted
for exchange provide the Company with the holder's correct taxpayer
identification number, which, in the case of a holder who is an individual, is
his or her social security number, or otherwise establish an exemption from
backup withholding. If the Company is not provided with the correct taxpayer
identification number, the exchange holder of Old Notes may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
interest on the New Notes acquired pursuant to the Exchange Offer may be subject
to backup withholding in an amount equal to 31% of any interest payment. If
withholding occurs and results in an overpayment of taxes, a refund may be
obtained.
To prevent backup withholding, an exchanging holder of Old Notes must
provide his correct taxpayer identification number by completing the Substitute
Form W-9 provided in this Letter of Transmittal, certifying that the taxpayer
identification number provided is correct (or that the exchanging holder of Old
Notes is awaiting a taxpayer identification number) and that either (a) the
exchanging holder has not yet been notified by the IRS that such holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (b) the IRS has notified the exchanging holder that such holder is
no longer subject to backup withholding.
Certain exchanging holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding requirements. A foreign individual and other exempt holders other
than foreign individuals (e.g., corporations) should certify to such exempt
status on the Substitute Form W-9 provided in this Letter of Transmittal.
Foreign individuals should complete and provide Form W-8 to indicate their
foreign status.
6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer will
not be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Exchange Notes are to be issued to any person other
than the holder of the Old Notes tendered for exchange. The Company will pay all
other charges or expenses in connection with the Exchange Offer. If holders
tender Old Notes for exchange and the Exchange Offer is not consummated,
certificates representing the Old Notes will be returned to the holders at the
Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Old Notes being tendered and the certificate
numbers (if available) should be listed on a separate schedule attached hereto
and separately signed by all parties required to sign this Letter of
Transmittal.
8. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If tenders are to be made with respect to less than the
entire principal amount of any Old Notes, fill in the total principal amount of
Outstanding Notes which are tendered in the appropriate box on the cover
entitled "Description of Old Notes Tendered." In the case of partial tenders,
new certificates representing the Outstanding Notes in fully registered form for
the remainder of the principal amount of the Old Notes will be sent to the
person(s) signing this Letter of Transmittal, unless otherwise indicated in the
appropriate place on this Letter of Transmittal, as promptly as practicable
after the expiration or termination of the Exchange Offer.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or
additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the first
page of this Letter of Transmittal.
<PAGE> 11
- --------------------------------------------------------------------------------
PAYER'S NAME:
- --------------------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL
REVENUE SERVICE PAYER'S
REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
SOCIAL SECURITY NUMBER OR
EMPLOYER IDENTIFICATION
NUMBER
----------------------------
PART III -- Awaiting TIN [ ]
CERTIFICATE INSTRUCTIONS -- You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding
you received another notification from the IRS
stating that you are no longer subject to backup
withholding, do no not cross out item (2).
- --------------------------------------------------------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within 60
days, 31 percent of all payments made to me thereafter will be withheld until
I provide a number.
<TABLE>
<S> <C>
Signature Date
</TABLE>
- --------------------------------------------------------------------------------
PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY
SIGNING AND DATING
BELOW
PART II -- Certification -- Under Penalties of
Perjury, I certify
that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
(2) I am not subject to backup withholding either
because I have not been notified by the
Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
7 7/8% SENIOR NOTES DUE 2008
OF
CALPINE CORPORATION
As set forth in the Prospectus dated , 1998 (the
"Prospectus") of Calpine Corporation (the "Company") and in the accompanying
Letter of Transmittal and instructions thereto (the "Letter or Transmittal"),
this form or one substantially equivalent hereto must be used to accept the
Company's exchange offer (the "Exchange Offer") to purchase all of its
outstanding 7 7/8% Senior Notes Due 2008 (the "Old Notes") if (i) certificates
representing the Old Notes to be tendered for purchase and payment are not lost
but are not immediately available or (ii) time will not permit the Letter of
Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date. This form
may be delivered by an Eligible Institution by mail or hand delivery or
transmitted, via facsimile (receipt confirmed by telephone) to the Exchange
Agent as set forth below. All capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF OLD NOTES IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M.
ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
By Mail: The Exchange Agent By Hand or Overnight Carrier:
The Bank of New York The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E By Facsimile: 101 Barclay Street
New York, New York 10286 (212) 815-6339 Corporate Trust Services Window
Attn: Denise Robertson Confirm by Telephone: Ground Floor
(212) 815-2791 New York, New York 10286
Attn: Denise Robertson
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures".
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time, on the Expiration
Date. Tenders of Old Notes may also be withdrawn if the Exchange Offer is
terminated without any such Old Notes being purchased thereunder or as otherwise
provided in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders".
<PAGE> 2
Subject to and effective upon acceptance for exchange of the Old Notes
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of the Company all right, title and interest in and to, and any
and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Old Notes tendered hereby. In the event
of a termination of the Exchange Offer, the Old Notes tendered pursuant thereto
will be returned promptly to the tendering Old Note holder.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the sale, assignment and transfer of
the Old Notes tendered.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned,
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE COMPLETE AND SIGN
SIGNATURE(S) OF REGISTERED OTHER(S)
OR AUTHORIZED SIGNATORY:
- --------------------------------------
- --------------------------------------
- --------------------------------------
- --------------------------------------
PRINCIPAL AMOUNT OF OLD NOTES
TENDERED:
- --------------------------------------
- --------------------------------------
CERTIFICATE NO(S). OF OLD NOTES (IF
AVAILABLE):
- --------------------------------------
- --------------------------------------
DATE:
- --------------------------------------
NAME(S) OF REGISTERED HOLDER(S):
--------------------------------------
--------------------------------------
ADDRESS:
--------------------------------------
--------------------------------------
AREA CODE AND TELEPHONE NO.:
-------------------------------------------------------------------
IF OLD NOTES WILL BE DELIVERED BY
BOOK-ENTRY TRANSFER AT THE DEPOSITORY
TRUST COMPANY, INSERT DEPOSITORY
ACCOUNT NO.:
--------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information:
Please print name(s) and address(es)
Name(s):
Capacity:
Address(es):
<PAGE> 3
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby (a) represents that each holder of Old Notes on whose behalf this tender
is being made "own(s)" the Old Notes covered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that
such tender of Old Notes complies with such Rule 14e-4, and (c) guarantees that,
within three New York Stock Exchange trading days from the date of this Notice
of Guaranteed Delivery, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), together with certificates representing
the Old Notes covered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company, pursuant to the procedure for book-entry transfer set
forth in the Prospectus) and required documents will be deposited by the
undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Old Notes tendered hereby to the Exchange Agent within the time period set
forth above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm:
Address:
- --------------------------------------
Area Code and Telephone No.:
--------------------------------------
Authorized Signature
Name:
Title:
Date:
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
