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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 033-73160
CALPINE CORPORATION
(A DELAWARE CORPORATION)
I.R.S. EMPLOYER IDENTIFICATION NO. 77-0212977
50 WEST SAN FERNANDO STREET
SAN JOSE, CALIFORNIA 95113
TELEPHONE: (408) 995-5115
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
CALPINE CORPORATION COMMON STOCK, $0.001 PAR VALUE REGISTERED ON THE NEW YORK
STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 23, 2000: $5.7 billion. Common stock outstanding as of
February 23, 2000: 63,215,367
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the documents listed below have been incorporated by reference
into the indicated parts of this report, as specified in the responses to the
item numbers involved.
<TABLE>
<S> <C>
(1) Designated portions of the Proxy Statement relating to
the 2000 Annual Meeting of Shareholders................. Part III (Items 10, 11 and 12)
</TABLE>
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FORM 10-K
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 24
Item 3. Legal Proceedings........................................... 26
Item 4. Submission of Matters To A Vote of Security Holders......... 26
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 26
Item 6. Selected Financial Data..................................... 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 27
Item 7a. Quantitative and Qualitative Disclosure about Market Risk... 27
Item 8. Financial Statements and Supplementary Data................. 27
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 27
PART III
Item 10. Executive Officers, Directors and Key Employees............. 27
Item 11. Executive Compensation...................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 27
Item 13. Certain Relationships and Related Transactions.............. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 28
Signatures............................................................ 32
Index to Consolidated Financial Statements and Other Information...... F-1
</TABLE>
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ITEM 1. BUSINESS
Except for historical financial information contained herein, the matters
discussed in this annual report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding the intent, belief or current
expectations of the Company and its management. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties; actual results
could differ materially from those indicated by such forward-looking statements.
Among the important factors that could cause actual results to differ materially
from those indicated by such forward-looking statements are: (i) that the
information is of a preliminary nature and may be subject to further adjustment,
(ii) those risks and uncertainties identified under "Risk Factors" included in
Item 1. Business in this Annual Report on Form 10-K, (iii) the possible
unavailability of financing, (iv) risks related to the development, acquisition
and operation of power plants, (v) the impact of avoided cost pricing, energy
price fluctuations and gas price increases, (vi) the impact of curtailment,
(vii) the seasonal nature of the Company's business, (viii) start-up risks, (ix)
general operating risks, (x) the dependence on third parties, (xi) risks
associated with international investments, (xii) risks associated with the power
marketing business, (xiii) changes in government regulation, (xiv) the
availability of natural gas, (xv) the effects of competition, (xvi) the
dependence on senior management, (xvii) volatility in the Company's stock price,
(xviii) fluctuations in quarterly results and seasonality, and (xix) other risks
identified from time to time in the Company's reports and registration
statements filed with the Securities and Exchange Commission.
OVERVIEW
Calpine is a leading independent power company engaged in the development,
acquisition, ownership and operation of power generation facilities and the sale
of electricity predominantly in the United States. We have experienced
significant growth in all aspects of our business over the last five years.
Currently, we own interests in 44 power plants having an aggregate capacity of
4,273 megawatts. We also have ten gas-fired projects and two project expansions
under construction having an aggregate capacity of 5,935 megawatts and have
announced plans to develop twelve gas-fired power plants with a total capacity
of 7,990 megawatts. Upon completion of our projects under construction, we will
have interests in 54 power plants located in 17 states having an aggregate
capacity of 10,208 megawatts, of which we will have a net interest in 8,531
megawatts. Of this total generating capacity, 90% will be attributable to
gas-fired facilities and 10% will be attributable to geothermal facilities.
As a result of our expansion program, our revenues, cash flow, earnings and
assets have grown significantly over the last five years, as shown in the table
below.
<TABLE>
<CAPTION>
COMPOUND ANNUAL
1994 1999 GROWTH RATE
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(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Total Revenue......................... $ 94.8 $ 847.7 55%
EBITDA................................ 53.7 392.2 49%
Net Income............................ 6.0 95.1 74%
Total Assets.......................... 421.4 3,991.6 57%
</TABLE>
Since our inception in 1984, we have developed substantial expertise in all
aspects of the development, acquisition and operation of power generation
facilities. We believe that the vertical integration of our extensive
engineering, construction management, operations, fuel management and financing
capabilities provides us with a competitive advantage to successfully implement
our acquisition and development program and has contributed to our significant
growth over the past five years.
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THE MARKET
The power industry represents the third largest industry in the United
States, with an estimated end-user market of over $225 billion of electricity
sales in 1999 produced by an aggregate base of power generation facilities with
a capacity of approximately 785,000 megawatts. In response to increasing
customer demand for access to low-cost electricity and enhanced services, new
regulatory initiatives have been and are continuing to be adopted at both the
state and federal level to increase competition in the domestic power generation
industry. The power generation industry historically has been largely
characterized by electric utility monopolies producing electricity from old,
inefficient, high-cost generating facilities selling to a captive customer base.
Industry trends and regulatory initiatives have transformed the existing market
into a more competitive market where end-users purchase electricity from a
variety of suppliers, including non-utility generators, power marketers, public
utilities and others.
There is a significant need for additional power generating capacity
throughout the United States, both to satisfy increasing demand, as well as to
replace old and inefficient generating facilities. Due to environmental and
economic considerations, we believe this new capacity will be provided
predominantly by gas-fired facilities. We believe that these market trends will
create substantial opportunities for efficient, low-cost power producers that
can produce and sell energy to customers at competitive rates.
In addition, as a result of a variety of factors, including deregulation of
the power generation market, utilities, independent power producers and
industrial companies are disposing of power generation facilities. To date,
numerous utilities have sold or announced their intentions to sell their power
generation facilities and have focused their resources on the transmission and
distribution business segments. Many independent producers operating a limited
number of power plants are also seeking to dispose of their plants in response
to competitive pressures, and industrial companies are selling their power
plants to redeploy capital in their core businesses.
STRATEGY
Our strategy is to continue our rapid growth by capitalizing on the
significant opportunities in the power market, primarily through our active
development and acquisition programs. In pursuing our growth strategy, we
utilize our management and technical knowledge to implement a fully integrated
approach to the acquisition, development and operation of power generation
facilities. This approach uses our expertise in design, engineering,
procurement, finance, construction management, fuel and resource production and
acquisition, operations and power marketing, which we believe provides us with a
competitive advantage. The key elements of our strategy are as follows:
- Development of new and expansion of existing power plants. We are
actively pursuing the development of new and expansion of our existing
highly efficient, low-cost, gas-fired power plants to replace old and
inefficient generating facilities and meet the demand for new generation.
- Acquisition of power plants. Our strategy is to acquire power generating
facilities that meet our stringent criteria, provide significant
potential for revenue, cash flow and earnings growth and provide the
opportunity to enhance the operating efficiencies of the plants.
- Enhancement of existing power plants. We continually seek to maximize the
power generation and revenue potential of our operating assets and
minimize our operating and maintenance expenses and fuel costs.
RECENT DEVELOPMENTS
Project Development and Construction. In May 1999, we completed a 35
megawatt expansion of our Clear Lake Power Plant to 412 megawatts, and the 169
megawatt Dighton Power Plant commenced commercial operations in August 1999.
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We currently have twelve projects under construction representing 5,935
additional megawatts. Of these new projects, we are currently expanding our
Pasadena facility by 545 megawatts to 785 megawatts and the Morris facility by
50 megawatts to 167 megawatts. We have ten new power plants under construction,
including the Baytown Power Plant in Texas; Tiverton Power Plant in Rhode
Island; the Rumford Power Plant in Maine; the Westbrook Energy Center in Maine;
the Sutter Power Plant in California; the South Point Power Plant in Arizona;
the Lost Pines 1 Power Plant in Texas; the Los Medanos Energy Center in
California; the Magic Valley Generation Station in Texas; and the Aries Power
Plant in Missouri. We have also announced plans to develop twelve additional
power generation facilities, totaling 7,990 megawatts, in California,
Mississippi, Texas, Arizona, Pennsylvania, Oregon, Alabama, Connecticut and
Florida.
In August 1999, we announced the purchase of 18 F-class combustion turbines
from Siemens Westinghouse Power Corporation that will be capable of producing
4,900 megawatts of electricity in a combined-cycle configuration. Beginning in
2002, Siemens will deliver six turbines per year through 2004. Combined with our
existing turbine orders we have 69 turbines under contract, option, letter of
intent or other commitment capable of producing approximately 18,800 megawatts
in a combined cycle configuration.
In November 1999, we executed an agreement with Credit Suisse First Boston,
New York branch and The Bank of Nova Scotia, as lead arrangers, for a $1.0
billion non-recourse revolving construction loan facility. We will use the
credit facility to finance the construction of our diversified portfolio of
gas-fired power plants currently under development in a combined cycle
configuration.
Acquisitions. In March 1999, we completed the acquisition of Unocal
Corporation's Geysers geothermal steam fields in northern California for
approximately $102.2 million. The steam fields fuel our 12 Sonoma County power
plants, totaling 544 megawatts, purchased from Pacific Gas and Electric Company
("PG&E") in May 1999.
In May 1999, we completed the acquisitions from PG&E of 14 geothermal power
plants at The Geysers in northern California, with a combined capacity of
approximately 700 megawatts, for $212.8 million. With these acquisitions plus
the acquisition of the Calistoga Power Plant in October 1999 and our increased
stake in the Aidlin Power Plant in August 1999, we now own interests in and
operate 19 geothermal power plants that generate more than 888 megawatts of
electricity, and we are the nation's largest geothermal and green power
producer. The combination of our existing geothermal steam and power plant
assets, the acquisition of the Sonoma steam fields from Unocal, and the 14 power
plants from PG&E together with the Calistoga Power Plant and our increased stake
in the Aidlin Power Plant allows us to fully integrate the steam and power plant
operations at The Geysers into one efficient, unified system to maximize the
renewable natural resource, lower overall production costs and extend the life
of The Geysers.
In August 1999, we completed the acquisition of an additional 50% of the
Aidlin Power Plant from Edison Mission Energy (5%) and General Electric Capital
Corporation (45%) for a total purchase price of $7.2 million. We now own 55% of
the 20 megawatt Aidlin Power Plant.
In October 1999, we completed the acquisition of Sheridan Energy, Inc., a
natural gas exploration and production company, through a $38.8 million cash
tender offer. We purchased all of the outstanding shares of Sheridan Energy's
common stock for $5.50 per share. In addition, we redeemed $11.9 million of
outstanding preferred stock of Sheridan Energy. Sheridan Energy's oil and gas
properties, including approximately 148 billion cubic feet equivalent of proven
reserves as of July 1, 1999 and certain leasehold acreage, are located in
northern California and the Gulf Coast region, where we are developing low-cost
natural gas supplies and proprietary pipeline systems to support our
strategically-located natural gas-fired power plants. We subsequently renamed
Sheridan Energy as Calpine Natural Gas Company.
In October 1999, we completed the acquisition of the Calistoga Power Plant
from FPL Energy and Caithness Corporation for approximately $77.9 million.
Located in The Geysers region of northern California, Calistoga is a 67 megawatt
facility which provides electricity to PG&E under a long-term contract.
In December 1999, we acquired 80% of the common stock of Cogeneration
Corporation of America, Inc. ("CGCA") for $25.00 per share or approximately
$137.3 million. NRG Energy, Inc., a wholly owned subsidiary of Northern States
Power, owns the remaining 20%. CGCA owns interests in six natural gas-fired
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power plants, totaling 579 megawatts. The plants are located in Pennsylvania,
New Jersey, Illinois and Oklahoma.
In December 1999, but effective as of November 1, 1999, we completed the
acquisition of Vintage Petroleum, Inc.'s interest in the Rio Vista Gas Unit and
related areas for approximately $71.5 million. As of the effective date of the
acquisition, Vintage owned approximately 90 billion cubic feet of proven natural
gas reserves and certain leasehold acreage located in the Sacramento Basin in
northern California. As a result of this acquisition and the Sheridan Energy
acquisition, we own a 99.5% working interest in the Rio Vista Gas Unit and
certain development acreage in northern California.
In January 2000, we acquired a 50% interest in the Aries Power Plant, a 600
megawatt natural gas-fired plant currently under construction near Pleasant
Hill, Missouri from a subsidiary of Aquila Energy Corporation. Construction
started in October 1999. Commercial operation of the first 330 megawatts is
scheduled to begin June 2001 with the balance of the plant starting in January
2002. The majority of the facility's output will be sold to Missouri Public
Service through May 2005. Thereafter, power will be sold into the Southwest
Power Pool.
In February 2000, we acquired 100% of the stock of Western Gas Resources
California ("Western") from Western Gas Resources, Inc. for $14.9 million.
Western's assets include the 130-mile Steelhead natural gas pipeline and the
remaining interest in the Sacramento River Gas System ("SRGS") natural gas
pipeline, now 100% owned by us.
Enhancement of Existing Power Plants. In July 1999, we announced a
renegotiation of our Gilroy power sales agreement with PG&E. The amendment
provides for the termination of the remaining 18 years of the long-term contract
in exchange for a fixed long-term payment schedule. The amended agreement was
approved by the California Public Utilities Commission in December 1999. We will
continue to sell the output from the Gilroy Power Plant through October 2002 to
PG&E and thereafter we will market the output in the California wholesale power
market.
Issuance of Securities. In October 1999, we completed a public offering of
8,280,000 shares of our common stock at $46.31 per share and 5,520,000 5 3/4%
HIGH TIDES issued by a subsidiary trust at $50.00 each, raising $636.7 million
of aggregate net proceeds.
In January 2000, we completed an offering under Rule 144A of the Securities
Act of 6,000,000 5 1/2% HIGH TIDES issued by a subsidiary trust at $50.00 each,
raising $292.4 million of aggregate net proceeds. In February 2000, we sold an
additional 1,200,000 5 1/2% HIGH TIDES pursuant to the exercise of the
underwriters' over-allotment option for net proceeds of approximately $58.6
million.
DESCRIPTION OF FACILITIES
We currently have interests in 44 power generation facilities with a
current aggregate capacity of approximately 4,273 megawatts, consisting of 25
gas-fired cogeneration plants with a total capacity of 3,385 megawatts and 19
geothermal power generation facilities with a total capacity of 888 megawatts.
We also have ten gas-fired projects and two project expansions currently under
construction with an aggregate capacity of 5,935 megawatts, and have announced
the development of twelve additional power plants with an aggregate capacity of
7,990 megawatts. Each of the power generation facilities currently in operation
produces electricity for sale to a utility or other third-party end user.
Thermal energy produced by the gas-fired cogeneration facilities is sold to
governmental and industrial users.
The gas-fired and geothermal power generation projects in which we have an
interest produce electricity and thermal energy that are typically sold pursuant
to long-term power sales agreements. Revenue from a power sales agreement
usually consists of two components: energy payments and capacity payments.
Energy payments are based on a power plant's net electrical output where payment
rates may be determined by a schedule of prices covering a fixed number of years
under the power sales agreement, after which payment rates are usually indexed
to the fuel costs of the contracting utility or to general inflation indices.
Capacity payments are based on a power plant's net electrical output and/or its
available capacity. Energy payments are
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made for each kilowatt hour of energy delivered, while capacity payments, under
certain circumstances, are made whether or not any electricity is delivered.
Upon completion of our projects under construction, we will provide
operating and maintenance services for 44 of the 54 power plants in which we
have an interest. Such services include the operation of power plants,
geothermal steam fields, wells and well pumps, gas fields, gathering systems and
gas pipelines. We also supervise maintenance, materials purchasing and inventory
control, manage cash flow, train staff and prepare operating and maintenance
manuals for each power generation facility that we operate. As a facility
develops an operating history, we analyze its operation and may modify or
upgrade equipment or adjust operating procedures or maintenance measures to
enhance the facility's reliability or profitability. These services are
performed under the terms of an operating and maintenance agreement pursuant to
which we are generally reimbursed for certain costs, paid an annual operating
fee and may also be paid an incentive fee based on the performance of the
facility. The fees payable to us are generally subordinated to any lease
payments or debt service obligations of non-recourse financing for the project.
In order to provide fuel for the gas-fired power generation facilities in
which we have an interest, natural gas reserves are acquired or natural gas is
purchased from third parties under supply agreements. We attempt to structure a
gas-fired power facility's fuel supply agreement so that gas costs have a direct
relationship to the fuel component of revenue energy payments. We currently hold
interests in geothermal leaseholds in The Geysers that produce steam that is
supplied to the power generation facilities owned by us for use in producing
electricity.
Certain power generation facilities in which we have an interest have been
financed primarily with non-recourse project financing that is structured to be
serviced out of the cash flows derived from the sale of electricity and thermal
energy produced by such facilities and provides that the obligations to pay
interest and principal on the loans are secured almost solely by the capital
stock or partnership interests, physical assets, contracts and/or cash flow
attributable to the entities that own the facilities. The lenders under
non-recourse project financing generally have no recourse for repayment against
us or any of our assets or the assets of any other entity other than foreclosure
on pledges of stock or partnership interests and the assets attributable to the
entities that own the facilities.
Substantially all of the power generation facilities in which we have an
interest are located on sites which are leased on a long-term basis. See
"Properties."
<TABLE>
<CAPTION>
MEGAWATTS
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# OF PLANT CALPINE NET
PLANTS CAPACITY INTEREST
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<S> <C> <C> <C>
In operation
Geothermal power plants.................. 19 888 879
Gas-fired power plants................... 25 3,385 2,476
Under construction
-- New facilities........................... 10 5,340 4,581
-- Expansion projects (two)................. -- 595 595
Announced development......................... 12 7,990 6,978
-- ------ ------
66 18,198 15,509
== ====== ======
</TABLE>
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Set forth below is certain information regarding our operating power
plants, plants under construction, and development projects.
<TABLE>
<CAPTION>
POWER NAMEPLATE CALPINE CALPINE NET
GENERATION CAPACITY INTEREST INTEREST
POWER PLANT TECHNOLOGY LOCATION (MEGAWATTS)(1) PERCENTAGE (MEGAWATTS)
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<S> <C> <C> <C> <C> <C>
OPERATING POWER PLANTS
GEOTHERMAL POWER PLANTS
Sonoma County (12 power Geothermal California 544.0 100.0% 544.0
plants)(2).....................
Lake County (2 power Geothermal California 150.0 100.0% 150.0
plants)(2).....................
Calistoga........................ Geothermal California 67.0 100.0% 67.0
Sonoma(2)........................ Geothermal California 60.0 100.0% 60.0
West Ford Flat................... Geothermal California 27.0 100.0% 27.0
Bear Canyon...................... Geothermal California 20.0 100.0% 20.0
Aidlin........................... Geothermal California 20.0 55.0% 11.0
------- -------
Subtotal....................... 888.0 879.0
======= =======
GAS-FIRED POWER PLANTS
Texas City....................... Gas-Fired Texas 450.0 100.0% 450.0
Clear Lake....................... Gas-Fired Texas 412.0 100.0% 412.0
Pasadena......................... Gas-Fired Texas 240.0 100.0% 240.0
Gordonsville..................... Gas-Fired Virginia 240.0 50.0% 120.0
Lockport......................... Gas-Fired New York 184.0 11.4% 20.9
Dighton(3)....................... Gas-Fired Massachusetts 169.0 50.0% 84.5
Bayonne.......................... Gas-Fired New Jersey 165.0 7.5% 12.4
Auburndale....................... Gas-Fired Florida 150.0 50.0% 75.0
Grays Ferry...................... Gas-Fired Pennsylvania 150.0 40.0% 60.0
Sumas(4)......................... Gas-Fired Washington 125.0 70.0% 87.5
Parlin........................... Gas-Fired New Jersey 122.0 80.0% 97.6
King City........................ Gas-Fired California 120.0 100.0% 120.0
Gilroy........................... Gas-Fired California 120.0 100.0% 120.0
Morris........................... Gas-Fired Illinois 117.0 80.0% 93.6
Pryor............................ Gas-Fired Oklahoma 110.0 80.0% 88.0
Kennedy International Airport.... Gas-Fired New York 107.0 50.0% 53.5
Pittsburg........................ Gas-Fired California 70.0 100.0% 70.0
Newark........................... Gas-Fired New Jersey 58.0 80.0% 46.4
Bethpage......................... Gas-Fired New York 57.0 100.0% 57.0
Greenleaf 1...................... Gas-Fired California 49.5 100.0% 49.5
Greenleaf 2...................... Gas-Fired California 49.5 100.0% 49.5
Stony Brook...................... Gas-Fired New York 40.0 50.0% 20.0
Agnews........................... Gas-Fired California 29.0 20.0% 5.8
Watsonville...................... Gas-Fired California 28.5 100.0% 28.5
Philadelphia..................... Gas-Fired Pennsylvania 22.0 66.4% 14.6
------- -------
Subtotal....................... 3,384.5 2,476.3
======= =======
PROJECTS UNDER CONSTRUCTION
Baytown.......................... Gas-Fired Texas 800.0 100.0% 800.0
Magic Valley..................... Gas-Fired Texas 730.0 100.0% 730.0
Aries............................ Gas-Fired Missouri 600.0 50.0% 300.0
Westbrook........................ Gas-Fired Maine 545.0 100.0% 545.0
Pasadena Expansion............... Gas-Fired Texas 545.0 100.0% 545.0
</TABLE>
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<TABLE>
<CAPTION>
POWER NAMEPLATE CALPINE CALPINE NET
GENERATION CAPACITY INTEREST INTEREST
POWER PLANT TECHNOLOGY LOCATION (MEGAWATTS)(1) PERCENTAGE (MEGAWATTS)
----------- ---------- -------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
South Point...................... Gas-Fired Arizona 545.0 100.0% 545.0
Sutter........................... Gas-Fired California 545.0 100.0% 545.0
Lost Pines 1..................... Gas-Fired Texas 545.0 50.0% 272.5
Los Medanos...................... Gas-Fired California 500.0 100.0% 500.0
Tiverton(5)...................... Gas-Fired Rhode Island 265.0 62.8% 166.4
Rumford(6)....................... Gas-Fired Maine 265.0 66.7% 176.8
Morris Expansion................. Gas-Fired Illinois 50.0 100.0% 50.0
------- -------
Subtotal....................... 5,935.0 5,175.7
======= =======
ANNOUNCED DEVELOPMENT
Blue Heron....................... Gas-Fired Florida 1,080.0 100.0% 1,080.0
Delta............................ Gas-Fired California 880.0 50.0% 440.0
Lone Oak......................... Gas-Fired Mississippi 800.0 100.0% 800.0
Decatur.......................... Gas-Fired Alabama 700.0 100.0% 700.0
Hillabee......................... Gas-Fired Alabama 700.0 100.0% 700.0
Metcalf.......................... Gas-Fired California 600.0 50.0% 300.0
Channel.......................... Gas-Fired Texas 560.0 100.0% 560.0
Ontelaunee....................... Gas-Fired Pennsylvania 545.0 100.0% 545.0
West Phoenix..................... Gas-Fired Arizona 545.0 50.0% 272.5
Osprey........................... Gas-Fired Florida 540.0 100.0% 540.0
Hermiston........................ Gas-Fired Oregon 540.0 100.0% 540.0
Towantic......................... Gas-Fired Connecticut 500.0 100.0% 500.0
------- -------
Subtotal....................... 7,990.0 6,977.5
======= =======
</TABLE>
- ---------------
(1) Nameplate capacity may not represent the actual output for a facility at any
particular time.
(2) For these geothermal power plants, nameplate capacity refers to the
approximate capacity of the power plants. The capacity of these plants is
expected to gradually diminish as the production of the related steam fields
declines.
(3) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Dighton Power Plant" for a description of our interest
in the Dighton Power Plant. Based on our current estimates, our interest
represents our right to receive approximately 50% of project cash flow
beginning at the commencement of commercial operation.
(4) See "Operating Power Plants -- Sumas Power Plant" for a description of our
interest in the Sumas Power Plant. Based on our current estimates, the
payments to be received by us represent approximately 70% of distributable
cash.
(5) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Tiverton Power Plant" for a description of our
interest in the Tiverton Power Plant.
(6) See "Project Development and Acquisitions -- Project Development -- Projects
Under Construction -- Rumford Power Plant" for a description of our interest
in the Rumford Power Plant.
OPERATING POWER PLANTS
Geothermal Power Plants
Sonoma County Power Plants. The Sonoma County power plants consist of 12
geothermal power plants and associated steam fields having combined capacity of
544 megawatts located at The Geysers in northern California. The power plants
were acquired from PG&E on May 7, 1999 and we market the output from these
plants into the California power market. Subsequent to their acquisition, the
Sonoma County power plants
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generated approximately 2,466,480 megawatt hours of electrical energy and
approximately $134.7 million of total revenues.
Lake County Power Plants. The Lake County power plants consist of two
geothermal power plants and associated steam fields having a combined capacity
of 150 megawatts located at The Geysers in northern California. We acquired
these power plants from PG&E on May 7, 1999, and we market the output from these
plants into the California power market. Subsequent to their acquisition, the
Lake County Power Plants generated approximately 703,327 megawatt hours of
electrical energy and approximately $30.1 million of total revenues.
Calistoga Power Plant. The Calistoga Power Plant consists of a 67 megawatt
geothermal power plant and associated steam fields located in northern
California. Electricity generated by the Calistoga Power Plant is sold to PG&E
under a power sales agreement terminating in 2014 which contains payment
provisions for capacity and energy. Subsequent to its acquisition in October
1999, the Calistoga Power Plant generated approximately 106,433 megawatt hours
of electrical energy and approximately $5.6 million of total revenue.
Sonoma Power Plant. The Sonoma Power Plant consists of a 60 megawatt
geothermal power plant and associated steam fields located in Sonoma County,
California. Electricity generated by the Sonoma Power Plant is sold to the
Sacramento Municipal Utility District ("SMUD") under a power sales agreement for
up to 50 megawatts of peak power production, terminating in 2001. In addition,
beginning on December 31, 1999, SMUD has the option to purchase up to an
additional 10 megawatts of peak power production through 2005. We market the
excess electricity into the California power market. During 1999, the Sonoma
Power Plant generated approximately 345,078 megawatt hours of electrical energy
and approximately $10.6 million in revenue.
West Ford Flat Power Plant. The West Ford Flat Power Plant consists of a 27
megawatt geothermal power plant and associated steam fields located in northern
California. Electricity generated by the West Ford Flat Power Plant is sold to
PG&E under a power sales agreement terminating in 2008 which contains payment
provisions for capacity and energy. During 1999, the West Ford Flat Power Plant
generated approximately 195,773 megawatt hours of electrical energy for sale to
PG&E and approximately $10.8 million of revenue.
Bear Canyon Power Plant. The Bear Canyon Power Plant consists of a 20
megawatt geothermal power plant and associated steam fields located in northern
California, two miles south of the West Ford Flat Power Plant. Electricity
generated by the Bear Canyon Power Plant is sold to PG&E under two 10 megawatt
power sales agreements terminating in 2008 which contain payment provisions for
capacity and energy. During 1999, the Bear Canyon Power Plant generated
approximately 143,080 megawatt hours of electrical energy and approximately $7.9
million of revenue.
Aidlin Power Plant. The Aidlin Power Plant consists of a 20 megawatt
geothermal power plant and associated steam fields located in northern
California. We hold an indirect 55% ownership interest in the Aidlin Power
Plant. Electricity generated by the Aidlin Power Plant is sold to PG&E under two
10 megawatt power sales agreements terminating in 2009 which contain payment
provisions for capacity and energy. During 1999, the Aidlin Power Plant
generated approximately 156,251 megawatt hours of electrical energy and revenue
of $13.3 million.
Gas-Fired Power Plants
Texas City Power Plant. The Texas City Power Plant is a 450 megawatt
gas-fired cogeneration facility located in Texas City, Texas. Electricity
generated by the Texas City Power Plant is sold under a long-term agreements to
Texas Utilities Electric Company ("TUEC") under a power sales agreement
terminating on September 30, 2002, and Union Carbide Corporation ("UCC") under a
steam and electricity services agreement which terminates on October 19, 2003.
Each agreement contains payment provisions for capacity and electric energy
payments. During 1999, the Texas City Power Plant generated approximately
2,843,494 megawatt hours of electric energy for sale to TUEC and UCC and
approximately $157.7 million of revenue.
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Clear Lake Power Plant. The Clear Lake Power Plant is a 412 megawatt
gas/hydrogen-fired cogeneration facility located in Pasadena, Texas. Electricity
generated by the Clear Lake Power Plant is sold under three separate long-term
agreements to (1) Texas-New Mexico Power Company ("TNP") under a power sales
agreement terminating in 2004, (2) Houston Lighting and Power Company ("HL&P")
under a power sales agreement terminating in 2005, and (3) Hoechst Celanese
Chemical Group, Inc. ("HCCG") under a power sales agreement terminating in 2004.
Each power sales agreement contains payment provisions for capacity and energy
payments. Under a steam purchase and sale agreement expiring August 31, 2004,
the Clear Lake Power Plant will supply up to 900,000 lbs/hr of steam to HCCG.
During 1999, the Clear Lake Power Plant generated approximately 2,780,074
megawatt hours of electric energy for sale to TNP, HL&P and HCCG and
approximately $87.5 million of revenue.
Pasadena Power Plant. The Pasadena Power Plant is a 240 megawatt gas-fired
cogeneration facility located in Pasadena, Texas. Electricity generated by the
Pasadena Power Plant is sold under contract and into the open market. We entered
into an energy sales agreement with Phillips Petroleum Company ("Phillips")
terminating in 2018. Under this agreement, we provide 90 megawatts of
electricity and 200,000 lbs/hr of steam to Phillips' Houston Chemical Complex.
West Texas Utilities purchased 50 megawatts of capacity through the end of 1998.
In 1999, LG&E Energy Marketing purchased up to 150 megawatts of electricity
under a one-year agreement. TUEC 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 our power marketing organization. During 1999, the Pasadena Power Plant
generated approximately 1,734,241 megawatt hours of electric energy with
approximately $65.9 million of revenue.
Gordonsville Power Plant. The Gordonsville Power Plant, of which we own
50%, is a 240 megawatt gas-fired cogeneration facility located near
Gordonsville, Virginia. Electricity generated by the Gordonsville Power Plant is
sold to the Virginia Electric and Power Company under two power sales agreements
terminating on June 1, 2024, each of which include payment provisions for
capacity and energy. The Gordonsville Power Plant sells steam to Rapidan Service
Authority under the terms of a steam purchase and sales agreement, which expires
June 1, 2004. During 1999, the Gordonsville Power Plant generated approximately
182,970 megawatt hours of electrical energy and approximately $39.3 million of
revenue.
Lockport Power Plant. The Lockport Power Plant is a 184 megawatt gas-fired,
combined-cycle cogeneration facility located in Lockport, New York. The facility
is owned and operated by Lockport Energy Associates, L.P. ("LEA"). We own an
indirect 11.36% limited partnership interest in LEA. Electricity and steam is
sold to General Motors Corporation ("GM") under an energy sales agreement
expiring in December 2007 for use at the GM Harrison plant, which is located on
a site adjacent to the Lockport Power Plant. Electricity is also sold to New
York State Electricity and Gas Company ("NYSEG") under a power purchase
agreement expiring October 2007. NYSEG is required to purchase all of the
electric power produced by the Lockport Power Plant not required by GM. For
1999, the Lockport Power Plant generated approximately 1,614,513 megawatt hours
of electricity and had $92.0 million in revenue.
Dighton Power Plant. In October 1997, we invested $16.0 million in the
development of a 169 megawatt gas-fired combined-cycle power plant to be located
in Dighton, Massachusetts. This investment, which is structured as subordinated
debt, will provide us with a preferred payment stream at a rate of 12.07% per
year for a period of twenty years from the commercial operation date. Commercial
operation commenced in August 1999. The Dighton Power Plant is operated by
Energy Management Inc.("EMI") and sells its output into the New England power
market and to wholesale and retail customers in the northeastern United States.
Since its start-up in 1999, the Dighton Power Plant generated approximately
367,671 megawatt hours of electrical energy and approximately $20.6 million of
total revenues.
Bayonne Power Plant. The Bayonne Power Plant is a 165 megawatt gas-fired
cogeneration facility located in Bayonne, New Jersey. The facility is primarily
owned by an affiliate of Cogen Technologies, Inc. We own an indirect 7.5%
partnership interest in the facility. Electricity generated by the Bayonne Power
Plant is sold under various power sales agreements to Jersey Central Power &
Light Company ("JCP&L") and Public Service Electric and Gas Company of New
Jersey. The Bayonne Power Plant also sells steam to two
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industrial entities. During 1999, the Bayonne Power Plant generated
approximately 1,430,000 megawatt hours of electrical energy and approximately
$109.8 million in revenue.
Auburndale Power Plant. The Auburndale Power Plant, of which we own 50%, is
a 150 megawatt gas-fired cogeneration facility located near the city of
Auburndale, Florida. Electricity generated by the Auburndale Power Plant is sold
under various power sales agreements to Florida Power Corporation ("FPC"), Enron
Power Marketing and Sonat Power Marketing. Auburndale sells 131 megawatts of
capacity and energy to FPC under three power sales agreements, each terminating
at the end of 2013. The Auburndale Power Plant sells steam under two steam
purchase and sale agreements. One agreement is with Cutrale Citrus Juices, USA,
an affiliate of Sucocitro Cutrale LTDA, expiring on July 1, 2014. The second
agreement is with Todhunter International, Inc., doing business as Florida
Distillers Company, expiring on July 1, 2009. During 1999, the Auburndale Power
Plant generated approximately 1,027,466 megawatt hours of electrical energy and
approximately $52.3 million in revenue.
Grays Ferry Power Plant. The Grays Ferry Power Plant is a 150 megawatt,
natural gas-fired cogeneration project located in Philadelphia, Pennsylvania. We
indirectly own 40% of this project. Electricity generated by the Grays Ferry
Power Plant is sold under two long-term power sales agreements to PECO Energy
Company, expiring in 2017. An affiliate of Trigen Energy Corporation purchases
the steam produced by the project pursuant to a 25-year contract expiring in
2022. Subsequent to our acquisition of CGCA in December 1999, the Grays Ferry
Power Plant generated approximately 46,125 megawatt hours of electrical energy
and approximately $3.7 million in revenue in 1999.
Sumas Power Plant. The Sumas Power Plant is a 125 megawatt gas-fired,
combined cycle cogeneration facility located in Sumas, Washington. We currently
hold an ownership interest in the Sumas Power Plant, which entitles us to
receive certain scheduled distributions during the next two years. Upon receipt
of the scheduled distributions, we will no longer have any ownership interest in
the Sumas Power Plant. Electrical energy generated by the Sumas Power Plant is
sold to Puget Sound Power & Light Company ("Puget") under the terms of a power
sales agreement terminating in 2013. Under the power sales agreement, Puget has
agreed to purchase an annual average of 123 megawatts of electrical energy. In
addition to the sale of electricity to Puget, pursuant to a long-term steam
supply and dry kiln lease agreement, the Sumas Power Plant produces and sells
approximately 23,000 lbs/hr of low pressure steam to an adjacent lumber-drying
facility owned by Sumas, which has been leased to and is operated by Socco, Inc.
During 1999, the Sumas Power Plant generated approximately 666,598 megawatt
hours of electrical energy and approximately $52.8 million of total revenue.
Parlin Power Plant. The Parlin Power Plant consists of a 122 megawatt
natural gas-fired cogeneration power plant located in Parlin, New Jersey.
Electricity generated by the Parlin Power Plant is sold pursuant to a long-term
contract expiring in 2011 to JCP&L, and steam produced is sold to E.I. Dupont de
Nemours and Company under a long-term agreement expiring in 2021. Subsequent to
our acquisition of this project in December 1999, the Parlin Power Plant
generated approximately 13,938 megawatt hours of electrical energy and
approximately $908,000 of total revenue in 1999.
King City Power Plant. The King City Power Plant is a 120 megawatt
gas-fired, combined-cycle cogeneration facility located in King City,
California. We operate the King City Power Plant under a long-term operating
lease for this facility with BAF Energy ("BAF"), terminating in 2018.
Electricity generated by the King City Power Plant is sold to PG&E under a power
sales agreement terminating in 2019. The power sales agreement contains payment
provisions for capacity and energy. In addition to the sale of electricity to
PG&E, the King City Power Plant produces and sells thermal energy to a thermal
host, Basic Vegetable Products, Inc., an affiliate of BAF, under a long-term
contract coterminous with the power sales agreement. During 1999, the King City
Power Plant generated approximately 645,836 megawatt hours of electrical energy
and approximately $44.2 million of total revenue.
Gilroy Power Plant. The Gilroy Power Plant is a 120 megawatt gas-fired
cogeneration facility located in Gilroy, California. Electricity generated by
the Gilroy Power Plant is sold to PG&E under a power sales agreement terminating
in 2018. In July 1999 we announced a renegotiation of our Gilroy power sales
agreement with PG&E. The amendment provides for the termination of the remaining
18 years of the long-
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term contract in exchange for a fixed long-term payment schedule. The amended
agreement was approved by the California Public Utilities Commission ("CPUC") in
December 1999. We will continue to sell the output from the Gilroy Power Plant
through October 2002 to PG&E and thereafter we will market the output in the
California wholesale power market. In addition, the Gilroy Power Plant produces
and sells thermal energy to a thermal host, Gilroy Foods, Inc., under a
long-term contract. During 1999, the Gilroy Power Plant generated approximately
950,848 megawatt hours of electrical energy for sale to PG&E and approximately
$67.2 million in revenue.
Morris Power Plant. The Morris Power Plant consists of a 117 megawatt
natural gas-fired cogeneration facility located in Morris, Illinois. We
indirectly own 80% of this project. Electricity and steam produced by the
facility is sold to Equistar Chemicals, L.P. pursuant to a long-term contract
expiring in 2023. Any surplus electricity is marketed to the Illinois power
market. Subsequent to our acquisition of this project in December 1999, the
Morris Power Plant generated approximately 13,809 megawatt hours of electrical
energy and approximately $1.3 million of total revenue in 1999. We are currently
expanding this facility by 50 megawatts.
Pryor Power Plant. The Pryor Power Plant is a 110 megawatt natural
gas-fired cogeneration power plant located in Pryor, Oklahoma. We indirectly own
80% of this project. The Pryor Power Plant sells 100-megawatts of capacity and
varying amounts of electrical energy to Oklahoma Gas and Electric Company under
a contract expiring at the end of 2007. Steam produced from the Pryor facility
is sold to a number of industrial users under contracts with various termination
dates ranging from 2000 to 2007. Surplus electricity is also sold to the Public
Service Company of Oklahoma at its avoided cost. Subsequent to our acquisition
of this project in December 1999, the Pryor Power Plant generated approximately
15,541 megawatt hours of electrical energy and approximately $791,000 of total
revenue in 1999.
Kennedy International Airport Power Plant. The Kennedy International
Airport Power Plant is a 107 megawatt gas-fired cogeneration facility located at
John F. Kennedy International Airport in Queens, New York. The facility is owned
and operated by KIAC Partners and leased from The Port Authority of New York and
New Jersey. We own an indirect 50% ownership interest in KIAC. Electricity and
thermal energy generated by the Kennedy International Airport Power Plant is
sold to the Port Authority, and incremental electric power is sold to
Consolidated Edison Company of New York, the New York Power Authority and other
utility customers. Electric power and thermal energy in the form of chilled and
hot water generated by the Kennedy International Airport Power Plant is sold to
the Port Authority under an energy purchase agreement that expires November
2015. For 1999, the Kennedy International Airport Power Plant generated
approximately 570,024 megawatt hours of electrical energy, 253,591 mmbtu of
chilled water and 204,009 mmbtu of hot water for sale to the Port Authority, and
generated approximately $59.3 million in revenue.
Pittsburg Power Plant. The Pittsburg Power Plant is a 70 megawatt gas-fired
cogeneration facility, located at The Dow Chemical Company's ("Dow") Pittsburg,
California chemical facility. We sell up to 18 megawatts of electricity to Dow
under a power sales agreement expiring in 2008. Surplus energy is sold to PG&E
under an existing power sales agreement. In addition, we sell approximately
200,000 lbs/hr of steam to Dow under an energy sales agreement expiring in 2003
and to USS-POSCO Industries' nearby steel mill under a process steam contract
expiring in 2001. During 1999, the Pittsburg Power Plant generated approximately
412,148 megawatt hours of electrical energy to Dow and PG&E and approximately
$22.1 million in revenue.
Newark Power Plant. The Newark Power Plant consists of a 58 megawatt
natural gas-fired cogeneration power plant located in Newark, New Jersey. We
indirectly own 80% of this project. Electricity produced by the facility is sold
pursuant to a long-term contract expiring in 2015 to JCP&L. Steam produced is
sold to Newark Boxboard, Inc. under a long-term contract expiring in 2015.
Subsequent to our acquisition of this project in December 1999, the Newark Power
Plant generated approximately 17,156 megawatt hours of electrical energy and
approximately $778,000 in revenue in 1999.
Bethpage Power Plant. The Bethpage Power Plant is a 57 megawatt gas-fired,
combined cycle cogeneration facility located adjacent to a Northrup Grumman
Corporation ("Grumman") facility in Bethpage, New York. Electricity and steam
generated by the Bethpage Power Plant are sold to Grumman
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under an energy purchase agreement expiring August 2004. Electric power not sold
to Grumman is sold to Long Island Power Authority ("LIPA") under a generation
agreement also expiring August 2004. Grumman is also obligated to purchase a
minimum of 158,000 klbs of steam per year from the Bethpage Power Plant. For
1999, the Bethpage Power Plant generated approximately 468,268 megawatt hours of
electrical energy for sale to Grumman and LIPA and approximately $32.6 million
in revenue.
Greenleaf 1 Power Plant. The Greenleaf 1 Power Plant is a 49.5 megawatt
gas-fired cogeneration facility located near Yuba City, California. We operate
this facility under an operating lease with Union Bank of California,
terminating in 2014 (the "Greenleaf Lease"). Electricity generated by the
Greenleaf 1 Power Plant is sold to PG&E under a power sales agreement
terminating in 2019 which contains payment provisions for capacity and energy.
In addition, the Greenleaf 1 Power Plant sells thermal energy, in the form of
hot exhaust to dry wood waste, to a thermal host which is owned and operated by
us. For 1999, the Greenleaf 1 Power Plant generated approximately 389,628
megawatt hours of electrical energy for sale to PG&E and approximately $20.7
million in revenue.
Greenleaf 2 Power Plant. The Greenleaf 2 Power Plant is a 49.5 megawatt
gas-fired cogeneration facility located near Yuba City, California. This
facility is also operated by us under the Greenleaf Lease. Electricity generated
by the Greenleaf 2 Power Plant is sold to PG&E under a power sales agreement
terminating in 2019 which includes payment provisions for capacity and energy.
In addition to the sale of electricity to PG&E, the Greenleaf 2 Power Plant
sells thermal energy to Sunsweet Growers, Inc. pursuant to a 30-year contract.
For 1999, the Greenleaf 2 Power Plant generated approximately 345,902 megawatt
hours of electrical energy for sale to PG&E and approximately $20.0 million in
revenue.
Stony Brook Power Plant. The Stony Brook Power Plant is a 40 megawatt
gas-fired cogeneration facility located on the campus of the State University of
New York at Stony Brook, New York ("SUNY"). The facility is owned by Nissequogue
Cogen Partners ("NCP"). We own an indirect 50% ownership interest in NCP. Steam
and electric power is sold to SUNY under an energy supply agreement expiring in
2023. Under the energy supply agreement, SUNY is required to purchase, and the
Stony Brook Power Plant is required to provide, all of SUNY's electric power and
steam requirements up to 36.125 megawatts of electricity and 280,000 lbs/hr of
process steam. The remaining electricity is sold to LIPA under a long-term
agreement. LIPA is obligated to purchase electric power generated by the
facility not required by SUNY. SUNY is required to purchase a minimum of 402,000
klbs per year of steam. For 1999, the Stony Brook Power Plant generated
approximately 323,366 megawatt hours of electrical energy and 1,226,000 klbs of
steam for sale to SUNY and LIPA and approximately $30.8 million in revenue.
Agnews Power Plant. The Agnews Power Plant is a 29 megawatt gas-fired,
combined-cycle cogeneration facility located on the East Campus of the
state-owned Agnews Developmental Center in San Jose, California. We hold a 20%
ownership interest in GATX Calpine-Agnews, Inc., which is the sole stockholder
of O.L.S. Energy-Agnews, Inc. ("O.L.S. Energy-Agnews"). O.L.S. Energy-Agnews
leases the Agnews Power Plant under a sale leaseback arrangement. Electricity
generated by the Agnews Power Plant is sold to PG&E under a power sales
agreement terminating in 2021 which contains payment provisions for capacity and
energy. In addition, the Agnews Power Plant produces and sells electricity and
approximately 7,000 lbs/hr of steam to the Agnews Developmental Center pursuant
to a 30-year energy service agreement. During 1999, the Agnews Power Plant
generated approximately 228,781 megawatt hours of electrical energy and total
revenue of $23.0 million.
Watsonville Power Plant. The Watsonville Power Plant is a 28.5 megawatt
gas-fired, combined cycle cogeneration facility located in Watsonville,
California. We operate the Watsonville Power Plant under an operating lease with
the Ford Motor Credit Company, terminating in 2009. Electricity generated by the
Watsonville Power Plant is sold to PG&E under a power sales agreement
terminating in 2009 which contains payment provisions for capacity and energy.
During 1999, the Watsonville Power Plant produced and sold steam to Farmers
Processing, a food processor. In addition, the Watsonville Power Plant sold
process water produced from its water distillation facility to Farmer's Cold
Storage, Farmer's Processing and Cascade Properties. For 1999, the Watsonville
Power Plant generated approximately 193,584 megawatt hours of electrical energy
for sale to PG&E and approximately $11.5 million in revenue.
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Philadelphia Water Project. The Philadelphia Water Project is a 22 megawatt
gas-fired facility consisting of two standby peak shaving facilities located at
the Philadelphia Water Department's Northeast and Southwest wastewater treatment
plants. We indirectly own 66.4% of this project. The project sells capacity and
energy on demand to the Philadelphia Municipal Authority pursuant to two
long-term contracts expiring in 2013. Subsequent to our acquisition of this
project in December 1999, the Philadelphia Water Project generated approximately
$134,000 in revenue in 1999.
PROJECT DEVELOPMENT AND ACQUISITIONS
We are actively engaged in the development and acquisition of power
generation projects. We have historically focused principally on the development
and acquisition of interests in gas-fired and geothermal power projects,
although we also consider projects that utilize other power generation
technologies. We have significant expertise in a variety of power generation
technologies and have substantial capabilities in each aspect of the development
and acquisition process, including design, engineering, procurement,
construction management, fuel and resource acquisition and management, financing
and operations.
ACQUISITIONS
We will consider the acquisition of an interest in operating projects as
well as projects under development where we would assume responsibility for
completing the development of the project. In the acquisition of power
generation facilities, we generally seek to acquire an ownership interest in
facilities that offer us attractive opportunities for revenue and earnings
growth, and that permit us to assume sole responsibility for the operation and
maintenance of the facility. In evaluating and selecting a project for
acquisition, we consider a variety of factors, including the type of power
generation technology utilized, the location of the project, the terms of any
existing power or thermal energy sales agreements, gas supply and transportation
agreements and wheeling agreements, the quantity and quality of any geothermal
or other natural resource involved, and the actual condition of the physical
plant. In addition, we assess the past performance of an operating project and
prepare financial projections to determine the profitability of the project. We
generally seek to obtain a significant equity interest in a project and to
obtain the operation and maintenance contract for that project.
PROJECT DEVELOPMENT
The development of power generation projects involves numerous elements,
including evaluating and selecting development opportunities, designing and
engineering the project, obtaining power sales agreements, acquiring necessary
land rights, permits and fuel resources, obtaining financing and managing
construction. We intend to focus primarily on development opportunities where we
are able to capitalize on our expertise in implementing an innovative and fully
integrated approach to project development in which we control the entire
development process. Utilizing this approach, we believe that we are able to
enhance the value of our projects throughout each stage of development in an
effort to maximize our return on investment.
We are pursuing the development of highly efficient, low-cost power plants
that seek to take advantage of inefficiencies in the electricity market. We
intend to sell all or a portion of the power generated by such plants into the
competitive market through a portfolio of short-, medium-and long-term power
sales agreements. We expect that these projects will represent a prototype for
our future plant developments.
Projects Under Construction
Baytown Power Plant. In October 1999, we announced plans to build, own and
operate a 800 megawatt gas-fired cogeneration power plant at Bayer Corporation's
chemical facility in Baytown, Texas. The Baytown Power Plant will supply Bayer
with all of its electric and steam requirements for 20 years and market excess
electricity into the Texas wholesale power market. Construction commenced in
early 2000 and commercial operation is expected to begin in late 2001.
Magic Valley Generating Station. In May 1998, we announced that we had
signed a 20-year power sales agreement to provide electricity to the Magic
Valley Electric Cooperative, Inc. of Mercedes, Texas beginning
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in 2001. The power will be supplied by our Magic Valley Generating Station, a
730 megawatt natural gas-fired power plant under development in Edinburg, Texas.
Magic Valley Electric Cooperative Inc., 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. We are marketing additional capacity
to other wholesale customers, initially targeting south Texas. Construction
commenced in April 1999 with commercial operation scheduled to begin in early
2001.
Aries Power Plant. In January 2000, we acquired a 50% interest in the Aries
Power Plant, a 600 megawatt natural gas-fired plant currently under construction
near Pleasant Hill, Missouri, from a subsidiary of Aquila Energy Corporation.
Construction started in October 1999. Commercial operation of the first 330
megawatts is scheduled to begin June 2001 with the balance of the plant starting
in January 2002. The majority of the facility's output will be sold to Missouri
Public Service through May 2005. Thereafter, power will be sold into the
Southwest Power Pool.
Westbrook Energy Center. In February 1999, we acquired from Genesis Power
Corporation, a New England based power developer, the development rights to a
545 megawatt gas-fired combined-cycle power plant to be located in Westbrook,
Maine. Construction commenced in February 1999 and commercial operation is
scheduled for early 2001. It is anticipated that the output generated by the
Westbrook Energy Center will be sold into the New England power market and to
wholesale and retail customers in the northeastern United States.
Pasadena Expansion. We are currently expanding the Pasadena Power Plant by
an additional 545 megawatts. Construction began in November 1998 and commercial
operation is expected to begin in June 2000. The electricity output from this
expansion will be sold into the competitive market through our power sales
activities.
South Point Power Plant. In May 1998, we announced that we had entered into
a long-term lease agreement with the Fort Mojave Indian Tribe to develop a 545
megawatt gas-fired power plant on the tribe's reservation in Mojave County,
Arizona. The electricity generated will be sold to the Arizona, Nevada and
California power markets. Construction commenced in August 1999 and we
anticipate that the South Point Power Plant will begin operation in mid 2001.
Sutter Power Plant. In February 1997, we announced plans to develop a 545
megawatt gas-fired combined cycle project in Sutter County, in northern
California. The Sutter Power Plant would be northern California's first newly
constructed power plant since deregulation of the California power market in
1998. Construction commenced in August 1999 and the Sutter Power Plant is
expected to provide electricity to the deregulated California power market
commencing mid 2001
Lost Pines 1 Power Plant. In September 1999, we entered into definitive
agreements with Austin, Texas-based GenTex Power Corporation, the power
generation affiliate of the Lower Colorado River Authority, to build a 545
megawatt gas-fired facility in Bastrop County, Texas. Construction of this
facility began in October 1999 and commercial operation is expected to begin in
mid 2001. Upon commercial operation, GenTex will take half of the electrical
output for sale to its customers and we will market the remaining energy to the
Texas power market.
Los Medanos Energy Center. In September 1999, we finalized an agreement
with Enron North America for the development rights of a 500 megawatt gas-fired
plant in Pittsburg, California. Construction commenced in September 1999 and
commercial operation is expected to begin in mid 2001. The facility will provide
electricity and industrial steam totaling approximately 65 megawatts to
USS-POSCO Industries under a long-term agreement. The balance of the plant's
output will be sold into the California power market.
Tiverton Power Plant. In September 1998, we invested $40.0 million of
equity in the development of a 265 megawatt gas-fired power plant to be located
in Tiverton, Rhode Island. The Tiverton Power Plant is being developed by EMI.
For our investment in the Tiverton Power Plant, we will earn 62.8% of the
Tiverton Power Plant project cash flow until a specified pre-tax return is
reached, whereupon our company and EMI will equally share projected cash flows
through the remaining life of the project. Construction commenced in late 1998
and commercial operation is currently scheduled for May 2000. Upon completion,
the Tiverton
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Power Plant will be operated by EMI and will sell its output in the New England
power market and to wholesale and retail customers in the northeastern United
States.
Rumford Power Plant. In November 1998, we invested $40.0 million of equity
in the development of a 265 megawatt gas-fired power plant to be located in
Rumford, Maine. The Rumford Power Plant is being developed by EMI. For our
investment in the Rumford Power Plant, we will earn 66 2/3% of the Rumford Power
Plant project cash flow until a 10.5% pre-tax return is reached, whereupon we
will receive 50% of projected cash flows through the remaining life of the
project. Construction commenced in late 1998 and commercial operation is
currently scheduled for July 2000. Upon completion, the Rumford Power Plant will
be operated by EMI and will sell its output in the New England power market and
to wholesale and retail customers in the northeastern United States.
Morris Expansion. We are currently expanding the Morris Power Plant by
approximately 50 megawatts with the addition of a steam turbine. Construction
began in January 2000 with commercial operation scheduled for mid 2000.
Announced Development Projects
Blue Heron Energy Center. In January 2000 we announced plants to build, own
and operate a 1,080 megawatt gas-fired cogeneration power plant in Indian River
County, Florida. We anticipate that construction will commence in 2001 and that
commercial operation of the facility will commence in mid 2003.
Delta Energy Center. In February 1999, we, together with Bechtel
Enterprises, announced plans to develop a 880 megawatt gas-fired cogeneration
project in Pittsburg, California. The Delta Energy Center will provide steam and
electricity to the nearby Dow Chemical Company facility and market the excess
electricity into the California power market. We anticipate that construction
will commence in early 2000 and that operation of the facility will commence in
2002. We are currently pursuing regulatory agency permits for this project. In
February 2000, we announced that the California Energy Commission ("CEC") has
approved Delta Energy Center's Application for Certification.
Lone Oak Energy Center. In February 2000, we announced plans to build, own
and operate the Lone Oak Energy Center, a 800 megawatt gas-fired cogeneration
power plant in Lowndes County, Mississippi. We anticipate that construction will
commence in early 2001 and that commercial operation of the facility will
commence in early 2003.
Decatur Energy Center. In February 2000, we announced plans to build, own
and operate a 700 megawatt gas-fired cogeneration power plant at Solutia Inc.'s
Decatur, Alabama chemical facility. Under a 20 year agreement, Solutia will
lease a portion of the facility to meet its electricity needs and purchase its
steam requirements from us. Excess power from the facility will be sold into the
southeastern wholesale power market under a variety of short, mid and long term
contracts. We will also build a new intrastate natural gas pipeline to fuel the
new plant. Construction is estimated to commence in mid 2000 and commercial
operation in mid 2002.
Hillabee Energy Center. In February 2000, we announced plans to build, own
and operate the Hillabee Energy Center, a 700 megawatt gas-fired cogeneration
power plant in Tallapoosa County, Alabama. We anticipate that construction will
commence in early 2001 and that commercial operation of the facility will
commence in early 2003.
Metcalf Energy Center. In February 1999, we, together with Bechtel
Enterprises, announced plans to develop, own and operate a 600 megawatt
gas-fired cogeneration project in San Jose, California. We expect the CEC
review, licensing and public hearing process will be completed in late 2000 or
early 2001. We anticipate that construction will commence following this
approval and that commercial operation of the facility will commence in late
2002 or early 2003. Electricity generated by the Metcalf Energy Center will be
sold into the California power market.
Channel Energy Center. In October 1999, we announced that we had executed a
letter of intent which gives us the exclusive right to negotiate with
LYONDELL-CITGO Refining LP to build, own and operate a
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<PAGE> 18
560 megawatt gas-fired cogeneration power plant at the LYONDELL-CITGO refinery
in Houston, Texas. The Channel Energy Center will supply all of the electricity
and steam requirements for 20 years to the refinery. Permitting for the facility
is currently underway, with construction projected to commence in early 2000 and
commercial operation in 2001.
Ontelaunee Energy Center. In June 1999, we announced that we had acquired
the rights to develop a 545 megawatt gas-fired power plant in Ontelaunee
Township in eastern Pennsylvania. Permitting for the proposed facility is
underway and construction is scheduled to begin in early 2000. Commercial
operation is estimated for late 2002. Output from the plant will be sold into
the Pennsylvania/New Jersey/Maryland (PJM) power pool and pursuant to bilateral
contracts.
West Phoenix Power Plant. In April 1999, we announced an agreement with
Pinnacle West Capital Corporation to develop, own and operate a 545 megawatt
gas-fired facility at Arizona Public Services' West Phoenix Power Station in
Phoenix, Arizona. Timing of development activities is still under discussion
with our partner. Electricity from the facility will be sold into the Arizona
power market.
Osprey Energy Center. In January 2000, we announced plans to build, own and
operate the Osprey Energy Center, a 540 megawatt gas-fired cogeneration power
plant near the city of Auburndale, Florida. The facility will be built adjacent
to our existing power facility, the Auburndale Power Plant. We anticipate that
construction will commence in 2001 and that commercial operation of the facility
will commence in early 2003.
Hermiston Power Plant. In January 2000, we acquired the development rights
for the Hermiston Power Project, a 540 megawatt gas-fired cogeneration power
facility located near Hermiston, Oregon. We anticipate that construction will
commence in the summer of 2000 and that commercial operation of the facility
will commence in 2002.
Towantic Energy Center. In November 1999, we completed the acquisition of
development rights to build, own and operate the Towantic Energy Center. The
Towantic Energy Center is a 500 megawatt gas-fired cogeneration plant located in
Oxford, Connecticut. This power plant will market its electricity via bilateral
contracts into the New England region. Construction is estimated to commence in
late 2000 and commercial operation in 2002. In February 2000, a townwide
referendum in the Town of Oxford, Connecticut approved the sale of the
town-owned land for the Towantic Energy Center.
OIL AND GAS PROPERTIES
Montis Niger. In January 1997, we purchased Montis Niger, Inc., a gas
production and pipeline company operating primarily in the Sacramento Basin in
northern California, which we subsequently renamed Calpine Gas Company. As of
December 31, 1999, Calpine Gas Company owned proven natural gas reserves,
leasehold acreage and operated an 80-mile pipeline delivering gas to the
Greenleaf 1 and 2 Power Plants. We currently supply approximately 79% of the
fuel requirements for the Greenleaf 1 and 2 Power Plants.
Calpine Natural Gas Company. In October 1999, we purchased Sheridan Energy,
Inc., a natural gas exploration and production company operating in northern
California and the Gulf Coast region, which we subsequently renamed Calpine
Natural Gas Company ("CNGC"). CNGC's oil and gas properties are primarily
natural gas and are located in strategic markets where we are developing
low-cost natural gas supplies and proprietary pipeline systems in support of its
natural gas-fired power plants.
Vintage. In December 1999, we completed the acquisition of Vintage
Petroleum, Inc.'s interest in the Rio Vista Gas Unit and related areas,
representing primarily natural gas reserves located in the Sacramento Basin in
northern California. As a result of this acquisition and the Sheridan Energy
acquisition, we own a 99.5% working interest in the Rio Vista Gas Unit and
certain development acreage in northern California.
Western. In February 2000, we acquired 100% of the stock of Western from
Western Gas Resources, Inc. Western's assets include the 130-mile Steelhead
natural gas pipeline and the remaining interest in the SRGS natural gas
pipeline, now 100% owned by us.
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GOVERNMENT REGULATION
We are subject to complex and stringent energy, environmental and other
governmental laws and regulations at the federal, state and local levels in
connection with the development, ownership and operation of its energy
generation facilities. Federal laws and regulations govern transactions by
electrical and gas utility companies, the types of fuel which may be utilized by
an electric generating plant, the type of energy which may be produced by such a
plant and the ownership of a plant. State utility regulatory commissions must
approve the rates and, in some instances, other terms and conditions under which
public utilities purchase electric power from independent producers and sell
retail electric power. Under certain circumstances where specific exemptions are
otherwise unavailable, state utility regulatory commissions may have broad
jurisdiction over non-utility electric power plants. Energy producing projects
also are subject to federal, state and local laws and administrative regulations
which govern the emissions and other substances produced, discharged or disposed
of by a plant and the geographical location, zoning, land use and operation of a
plant. Applicable federal environmental laws typically have both state and local
enforcement and implementation provisions. These environmental laws and
regulations generally require that a wide variety of permits and other approvals
be obtained before the commencement of construction or operation of an
energy-producing facility and that the facility then operate in compliance with
such permits and approvals.
FEDERAL ENERGY REGULATION
PURPA
The enactment of the Public Utility Regulatory Policies Act of 1978, as
amended ("PURPA") and the adoption of regulations thereunder by the Federal
Energy Regulatory Commission ("FERC") provided incentives for the development of
cogeneration facilities and small power production facilities (those utilizing
renewable fuels and having a capacity of less than 80 megawatts).
A domestic electricity generating project must be a qualifying facility
("QF") under FERC regulations in order to take advantage of certain rate and
regulatory incentives provided by PURPA. PURPA exempts owners of QFs from the
Public Utility Holding Company Act of 1935, as amended ("PUHCA"), and exempts
QFs from most provisions of the Federal Power Act (the "FPA") and, except under
certain limited circumstances, state laws concerning rate or financial
regulation. These exemptions are important to us and our competitors. We believe
that each of the electricity generating projects in which we own an interest and
which operates as a QF power producer currently meets the requirements under
PURPA necessary for QF status.
PURPA provides two primary benefits to QFs. First, QFs generally are
relieved of compliance with extensive federal and state regulations that control
the financial structure of an electric generating plant and the prices and terms
on which electricity may be sold by the plant. Second, the FERC's regulations
promulgated under PURPA require that electric utilities purchase electricity
generated by QFs at a price based on the purchasing utility's "avoided cost,"
and that the utility sell back-up power to the QF on a non-discriminatory basis.
The term "avoided cost" is defined as the incremental cost to an electric
utility of electric energy or capacity, or both, which, but for the purchase
from QFs, such utility would generate for itself or purchase from another
source. The FERC regulations also permit QFs and utilities to negotiate
agreements for utility purchases of power at rates lower than the utility's
avoided costs. While public utilities are not explicitly required by PURPA to
enter into long-term power sales agreements, PURPA helped to create a regulatory
environment in which it has been common for long-term agreements to be
negotiated.
In order to be a QF, a cogeneration facility must produce not only
electricity, but also useful thermal energy for use in an industrial or
commercial process for heating or cooling applications in certain proportions to
the facility's total energy output and must meet certain energy efficiency
standards. A geothermal facility may qualify as a QF if it produces less than 80
megawatts of electricity. Finally, a QF (including a geothermal QF or other
qualifying small power producer) must not be controlled or more than 50% owned
by an electric utility or by most electric utility holding companies, or a
subsidiary of such a utility or holding company or any combination thereof.
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We endeavor to develop our projects, monitor compliance by the projects
with applicable regulations and choose our customers in a manner which minimizes
the risks of any project losing its QF status. Certain factors necessary to
maintain QF status are, however, subject to the risk of events outside our
control. For example, loss of a thermal energy customer or failure of a thermal
energy customer to take required amounts of thermal energy from a cogeneration
facility that is a QF could cause the facility to fail requirements regarding
the level of useful thermal energy output. Upon the occurrence of such an event,
we would seek to replace the thermal energy customer or find another use for the
thermal energy which meets PURPA's requirements, but no assurance can be given
that this would be possible.
If one of the facilities in which we have an interest should lose its
status as a QF, the project would no longer be entitled to the exemptions from
PUHCA and the FPA. This could also trigger certain rights of termination under
the facility's power sales agreement, could subject the facility to rate
regulation as a public utility under the FPA and state law and could result in
us inadvertently becoming an electric utility holding company by owning more
than 10% of the voting securities of, or controlling, a facility that would no
longer be exempt from PUHCA. This could cause all of our remaining projects to
lose their qualifying status, because QFs may not be controlled or more than 50%
owned by such electric utility holding companies. Loss of QF status may also
trigger defaults under covenants to maintain QF status in the projects' power
sales agreements, steam sales agreements and financing agreements and result in
termination, penalties or acceleration of indebtedness under such agreements
such that loss of status may be on a retroactive or a prospective basis.
Under the Energy Policy Act of 1992, if a facility can be qualified as an
exempt wholesale generator ("EWG"), it will be exempt from PUHCA even if it does
not qualify as a QF. Therefore, another response to the loss or potential loss
of QF status would be to apply to have the project qualified as an EWG. However,
assuming this changed status would be permissible under the terms of the
applicable power sales agreement, rate approval from FERC would be required. In
addition, the facility would be required to cease selling electricity to any
retail customers (such as the thermal energy customer) to retain its EWG status
and could become subject to state regulation of sales of thermal energy. See
"Public Utility Holding Company Regulation."
Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
QFs at avoided costs. We do not know whether such legislation will be passed or
what form it may take. We believe that if any such legislation is passed, it
would apply only to new projects. As a result, although such legislation may
adversely affect our ability to develop new projects, we believe it would not
affect our existing QFs. There can be no assurance, however, that any
legislation passed would not adversely impact our existing projects.
Public Utility Holding Company Regulation
Under PUHCA, any corporation, partnership or other legal entity which owns
or controls 10% or more of the outstanding voting securities of a "public
utility company" or a company which is a "holding company" for a public utility
company is subject to registration with the Securities and Exchange Commission
and regulation under PUHCA, unless eligible for an exemption. A holding company
of a public utility company that is subject to registration is required by PUHCA
to limit its utility operations to a single integrated utility system and to
divest any other operations not functionally related to the operation of that
utility system. Approval by the SEC is required for nearly all important
financial and business dealings of a registered holding company. Under PURPA,
most QFs are not public utility companies under PUHCA.
The Energy Policy Act of 1992, among other things, amends PUHCA to allow
EWGs, under certain circumstances, to own and operate non-QF electric generating
facilities without subjecting those producers to registration or regulation
under PUHCA. The effect of such amendments has been to enhance the development
of non-QFs which do not have to meet the fuel, production and ownership
requirements of PURPA. We believe that these amendments benefit us by expanding
our ability to own and operate facilities that do not qualify for QF status.
However, they have also resulted in increased competition by allowing utilities
to develop such facilities which are not subject to the constraints of PUHCA.
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Federal Natural Gas Transportation Regulation
We have an ownership interest in 25 gas-fired cogeneration projects. The
cost of natural gas is ordinarily the largest expense of a gas-fired project and
is critical to the project's economics. The risks associated with using natural
gas can include the need to arrange transportation of the gas from great
distances, including obtaining removal, export and import authority if the gas
is transported from Canada; the possibility of interruption of the gas supply or
transportation (depending on the quality of the gas reserves purchased or
dedicated to the project, the financial and operating strength of the gas
supplier, whether firm or non-firm transportation is purchased and the operating
of the gas pipeline); and obligations to take a minimum quantity of gas and pay
for it (i.e., take-and-pay obligations).
Pursuant to the Natural Gas Act, FERC has jurisdiction over the
transportation and storage of natural gas in interstate commerce. With respect
to most transactions that do not involve the construction of pipeline
facilities, regulatory authorization can be obtained on a self-implementing
basis. However, pipeline rates and terms and conditions for such services are
subject to continuing FERC oversight.
Federal Power Act Regulation
Under the FPA FERC is authorized to regulate the transmission of electric
energy and the sale of electric energy at wholesale in interstate commerce.
Unless otherwise exempt, any person that owns or operates facilities used for
such purposes is considered a "public utility" subject to FERC jurisdiction.
FERC regulation under the FPA includes approval of the disposition of utility
property, authorization of the issuance of securities by public utilities,
regulation of the rates, terms and conditions for the transmission or sale of
electric energy at wholesale in interstate commerce, the regulation of
interlocking directorates, a uniform system of accounts and reporting
requirements for public utilities.
FERC regulations implementing PURPA provide that a QF is exempt from
regulation under the foregoing provisions of the FPA. An EWG is not exempt from
the FPA and therefore an EWG that makes sales of electric energy at wholesale in
interstate commerce is subject to FERC regulation as a "public utility."
However, many of the regulations which customarily apply to traditional public
utilities have been waived or relaxed for power marketers, EWGs and other
non-traditional public utilities that lack market power. EWGs are regularly
granted authorization to charge market based rates, blanket authority to issue
securities, and waivers of FERC's requirements pertaining to accounts, reports
and interlocking directorates. Such action is intended to implement FERC's
policy to foster a more competitive wholesale power market.
Many of the generating projects in which Calpine owns an interest are
operated as QFs and are therefore exempt from FERC regulation under the FPA.
However, several of Calpine's generating projects are or will be EWGs subject to
FERC jurisdiction under the FPA. Several Calpine affiliates have been granted
authority to engage in sales at market based rates and to issue securities and
have also been granted the customary waivers of FERC regulations available to
non-traditional public utilities; however we cannot assure that such authorities
or waivers will be granted in the future to other affiliates.
STATE REGULATION
State public utility commissions ("PUCs") have historically had broad
authority to regulate both the rates charged by, and the financial activities
of, electric utilities operating in their states and to promulgate regulation
for implementation of PURPA. Since a power sales agreement becomes a part of a
utility's cost structure (generally reflected in its retail rates), power sales
agreements with independent electricity producers, such as EWGs, are potentially
under the regulatory purview of PUCs and in particular the process by which the
utility has entered into the power sales agreements. If a PUC has approved the
process by which a utility secures its power supply, a PUC is generally inclined
to "pass through" the expense associated with power purchase agreement with an
independent power producer to the utility's retail customer. However, a
regulatory commission under certain circumstances may disallow the full
reimbursement to a utility for the cost to purchase power from a QF or an EWG.
In addition, retail sales of electricity or thermal energy by an independent
power producer may be subject to PUC regulation depending on state law.
Independent power producers which are not QFs under PURPA, or EWGs pursuant to
the Energy Policy Act of 1992, are
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considered to be public utilities in many states and are subject to broad
regulation by a PUC, ranging from requirement of certificate of public
convenience and necessity to regulation of organizational, accounting, financial
and other corporate matters. States may assert jurisdiction over the siting and
construction of electric generating facilities including QFs and EWGs and, with
the exception of QFs, over the issuance of securities and the sale or other
transfer of assets by these facilities.
In the State of California, restructuring legislation was enacted in
September 1996 and was implemented in 1998. This legislation established an
Independent Systems Operator ("ISO") responsible for centralized control and
efficient and reliable operation of the state-wide electric transmission grid,
and a power exchange responsible for an efficient competitive electric energy
auction open on a non-discriminatory basis to all electric services providers.
Other provisions include the quantification and qualification of utility
stranded costs to be eligible for recovery through competitive transition
charges ("CTC"), market power mitigation through utility divestiture of fossil
generation plants, the unbundling and establishment of rate structure for
historical utility functions, the continuation of public purpose programs and
issues related to issuance of rate reduction bonds.
The CEC and the California Legislature have responsibility for development
of a competitive market mechanism for allocation and distribution of funds made
available by the legislation for enhancement of in-state renewable resource
technologies and public interest research and development programs. Funds are to
be available through the four-year transition period to a fully competitive
electric services industry.
In addition to the significant opportunity provided for power producers
such as us through implementation of customer choice (direct access), the
California restructuring legislation both recognizes the sanctity of existing
contracts (including QF power sales contracts), provides for mitigation of
utility horizontal market power through divestiture of fossil generation by
California public utilities and provides funds for continuation of public
services programs including fuel diversity through enhancement for in-state
renewable technologies (includes geothermal) for the four-year transition period
to a fully competitive electric services industry.
Other states in which we conduct operations either have implemented or are
actively considering similar restructuring legislation.
State PUCs also have jurisdiction over the transportation of natural gas by
local distribution companies ("LDCs"). Each state's regulatory laws are somewhat
different; however, all generally require the LDC to obtain approval from the
PUC for the construction of facilities and transportation services if the LDC's
generally applicable tariffs do not cover the proposed transaction. LDC rates
are usually subject to continuing PUC oversight.
REGULATION OF CANADIAN GAS
The Canadian natural gas industry is subject to extensive regulation by
governmental authorities. At the federal level, a party exporting gas from
Canada must obtain an export license from the Canadian National Energy Board
("NEB"). The NEB also regulates Canadian pipeline transportation rates and the
construction of pipeline facilities. Gas producers also must obtain a removal
permit or license from provincial authorities before natural gas may be removed
from the province, and provincial authorities may regulate intra-provincial
pipeline and gathering systems. In addition, a party importing natural gas into
the United States first must obtain an import authorization from the U.S.
Department of Energy.
ENVIRONMENTAL REGULATIONS
The exploration for and development of geothermal resources and natural gas
and the construction and operation of wellfields, pipelines and power projects
are subject to extensive federal, state and local laws and regulations adopted
for the protection of the environment and to regulate land use. The laws and
regulations applicable to us primarily involve the discharge of emissions into
the water and air and the use of water, but can also include wetlands
preservation, endangered species, waste disposal and noise regulations. These
laws and regulations in many cases require a lengthy and complex process of
obtaining licenses, permits and approvals from federal, state and local
agencies.
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Noncompliance with environmental laws and regulations can result in the
imposition of civil or criminal fines or penalties. In some instances,
environmental laws also may impose clean-up or other remedial obligations in the
event of a release of pollutants or contaminants into the environment. The
following federal laws are among the more significant environmental laws as they
apply to us. In most cases, analogous state laws also exist that may impose
similar, and in some cases more stringent, requirements on us as those discussed
below.
Clean Air Act
The Federal Clean Air Act of 1970 (the "Clean Air Act") provides for the
regulation, largely through state implementation of federal requirements, of
emissions of air pollutants from certain facilities and operations. As
originally enacted, the Clean Air Act sets guidelines for emissions standards
for major pollutants (i.e., sulfur dioxide and nitrogen oxide) from newly built
sources. In late 1990, Congress passed the Clean Air Act Amendments (the "1990
Amendments"). The 1990 Amendments attempt to reduce emissions from existing
sources, particularly previously exempted older power plants. We believe that
all of our operating plants are in compliance with federal performance standards
mandated for such plants under the Clean Air Act and the 1990 Amendments. With
respect to our Aidlin geothermal plant and one of our steam field pipelines, our
operations have, in certain instances, necessitated variances under applicable
California air pollution control laws. However, we believe that we are in
material compliance with such laws with respect to such facilities.
Clean Water Act
The Federal Clean Water Act (the "Clean Water Act") establishes rules
regulating the discharge of pollutants into waters of the United States. We are
required to obtain a wastewater and storm water discharge permit for wastewater
and runoff, respectively, from certain of our facilities. We believe that, with
respect to our geothermal operations, we are exempt from newly promulgated
federal storm water requirements. We believe that we are in material compliance
with applicable discharge requirements of the Clean Water Act.
Resource Conservation and Recovery Act
The Resource Conservation and Recovery Act ("RCRA") regulates the
generation, treatment, storage, handling, transportation and disposal of solid
and hazardous waste. We believe that we are exempt from solid waste requirements
under RCRA. However, particularly with respect to its solid waste disposal
practices at the power generation facilities and steam fields located at The
Geysers, we are subject to certain solid waste requirements under applicable
California laws. We believe that our operations are in material compliance with
such laws.
Comprehensive Environmental Response, Compensation, and Liability Act
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA" or "Superfund"), requires cleanup of sites from which
there has been a release or threatened release of hazardous substances and
authorizes the United States Environmental Protection Agency to take any
necessary response action at Superfund sites, including ordering potentially
responsible parties ("PRPs") liable for the release to take or pay for such
actions. PRPs are broadly defined under CERCLA to include past and present
owners and operators of, as well as generators of wastes sent to, a site. As of
the present time, we are not subject to liability for any Superfund matters.
However, we generate certain wastes, including hazardous wastes, and sends
certain of our wastes to third party waste disposal sites. As a result, there
can be no assurance that we will not incur liability under CERCLA in the future.
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RISK FACTORS
SEE RISK FACTOR SECTION STARTING ON PAGE F-16 UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" INCLUDED IN APPENDIX
F TO THIS REPORT.
COMPETITION
The power generation industry is characterized by intense competition, and
we encounter competition from utilities, industrial companies and other
independent 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, the CPUC issued
decisions which provide for direct access for all customers as of April 1, 1998.
In Texas, recently enacted legislation will phase-in a deregulated power market
commencing January 1, 2001. Regulatory initiatives are also being considered in
other states, including 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 supply of electricity
in the future will increase this pressure.
CUSTOMERS
A majority of our power generation facilities currently rely on one or more
power sales agreements with one or more utilities or other customers for all or
substantially all of such facility's revenue. In addition, during 1999, sales of
electricity to two utility customers, PG&E and TUEC, comprised approximately 47%
of our total revenue that year. The loss of any one power sales agreement with
any of these customers could have a negative effect on our results of
operations. In addition, any material failure by any customer to fulfill its
obligations under a power sales agreement could have a negative effect on the
cash flow available to us and on our results of operations.
SEASONALITY
Our results are subject to quarterly and seasonal fluctuations. Our
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 the timing and
size of acquisitions, the completion of development projects, and variations in
levels of production.
Additionally, because we receive the majority of capacity payments under
some of our power sales agreements during the months of May through October, our
revenues and results of operations are, to some extent, seasonal. Our industry
generally experiences summer peaks and winter peaks, and depending on the
service territory, there may be seasonal variations experienced by electric
power generators in the industry.
EMPLOYEES
As of December 31, 1999, we employed 865 people. None of our employees are
covered by collective bargaining agreements, and we have never experienced a
work stoppage, strike or labor dispute. We consider relations with our employees
to be good.
ITEM 2. PROPERTIES
Our principal executive office is located in San Jose, California, under a
lease that expires in June 2006. We have regional offices in Pleasanton,
California; Houston, Texas; Boston, Massachusetts and Folsom, California.
We have leasehold interests in 105 leases comprising 21,217 acres of
federal, state and private geothermal resource lands in The Geysers area in
northern California. In the Glass Mountain and Medicine Lake areas in northern
California, we hold leasehold interests in 18 leases comprising approximately
25,028 acres of federal geothermal resource lands.
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In general, under the leases, we have the exclusive right to drill for,
produce and sell geothermal resources from these properties and the right to use
the surface for all related purposes. Each lease requires the payment of annual
rent until commercial quantities of geothermal resources are established. After
such time, the leases require the payment of minimum advance royalties or other
payments until production commences, at which time production royalties are
payable. Such royalties and other payments are payable to landowners, state and
federal agencies and others, and vary widely as to the particular lease. The
leases are generally for initial terms varying from 10 to 20 years or for so
long as geothermal resources are produced and sold. Certain of the leases
contain drilling or other exploratory work requirements. In certain cases, if a
requirement is not fulfilled, the lease may be terminated and in other cases
additional payments may be required. We believe that our leases are valid and
that we have complied with all the requirements and conditions material to the
continued effectiveness of the leases. A number of our leases for undeveloped
properties may expire in any given year. Before leases expire, we perform
geological evaluations in an effort to determine the resource potential of the
underlying properties. We cannot assure that we will decide to renew any
expiring leases.
We own Calpine Gas Company and CNGC, which have interests in property as
listed below. Based on an independent petroleum engineering report, as of
December 31, 1999, utilizing year end product prices and costs held constant,
our proved oil and natural gas reserve volumes, in thousands of barrels
("MBbls") and billion cubic feet ("Bcf") and associated future net reserves,
undiscounted and discounted at 10% ("PV 10") before future income taxes, are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------------------
OIL (MBBLS) GAS (BCF) UNDISCOUNTED PV 10
----------- --------- ------------ --------
<S> <C> <C> <C> <C>
Proved developed................... 1,304 190 $315,235 $165,318
Proved undeveloped................. 556 19 28,532 15,069
----- --- -------- --------
Total.................... 1,860 209 $343,767 $180,387
===== === ======== ========
</TABLE>
Proved oil and natural gas reserves are the estimated quantities of crude
oil, natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Estimated
future development costs associated with proved developed non-producing and
proved undeveloped reserves for 1999 total $16.2 million.
The following table sets forth the undeveloped acreage, developed acreage
and productive wells in which we own a working interest as of December 31, 1999.
Productive wells are wells in which we have a working interest and are capable
of producing oil or natural gas. Gross represents the total number of acres or
wells in which we own a working interest. Net represents our proportionate
working interest resulting from our ownership in the gross acres or wells.
<TABLE>
<CAPTION>
UNDEVELOPED ACRES DEVELOPED ACRES PRODUCTIVE WELLS
----------------- ----------------- -----------------
GROSS NET GROSS NET GROSS NET
------- ------ ------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Arkansas.............................. -- -- 5,623 1,669 46 21
California............................ 48,619 36,731 40,588 38,101 141 124
Colorado.............................. -- -- 2,794 511 -- --
Louisiana............................. 42,558 41,542 8,323 5,860 20 9
Mississippi........................... 350 277 9,625 2,874 17 5
Oklahoma.............................. 4,765 953 16,678 7,629 63 18
Texas................................. 17,481 7,123 17,347 9,957 102 59
------- ------ ------- ------ --- ---
Total....................... 113,773 86,626 100,978 66,601 389 236
======= ====== ======= ====== === ===
</TABLE>
We own the Texas City, Clear Lake and Pasadena Power Plants, which lease an
aggregate of 48 acres.
We own 40 gross acres and 38 net acres in Edinburg, Texas where we are
constructing the Magic Valley Power Plant.
We own 77 acres in Sutter County, California, on which the Greenleaf 1
Power Plant is located.
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<PAGE> 26
See "Description of Facilities" for a description of the other material
leased or owned properties in which we have an interest. We believe that our
properties are adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
On September 30, 1997, a lawsuit was filed by Indeck North American Power
Fund ("Indeck") in the Circuit Court of Cook County, Illinois against Norweb
plc. and certain other parties, including us. Some of Indeck's claims relate to
Calpine Gordonsville, Inc.'s acquisition of a 50% interest in Gordonsville
Energy from Northern Hydro Limited and Calpine Auburndale, Inc.'s acquisition of
a 50% interest in Auburndale Power Plant Partners Limited Partnership from
Norweb Power Services (No. 1) Limited. Indeck is claiming that Calpine
Gordonsville, Inc., Calpine Auburndale, Inc. and Calpine Corporation tortiously
interfered with Indeck's contractual rights to purchase such interests and
conspired with other parties to do so. Indeck is seeking $25.0 million in
compensatory damages, $25.0 million in punitive damages, and the recovery of
attorneys' fees and costs. In July 1998, the court granted motions to dismiss,
without prejudice, the claims against Calpine Gordonsville, Inc. and Calpine
Auburndale, Inc. In August 1998, Indeck filed an amended complaint and the
defendants filed motions to dismiss. In April 1999, the court dismissed the
claims against Calpine Auburndale and Calpine Gordonsville with prejudice.
Indeck appealed the court's decision. The outcome of the appeal is not expected
until late 2000. We are unable to predict the outcome of these proceedings but
we do not expect that the outcome of these proceedings will have a material
adverse effect on our financial position or results of operation.
An action was filed against Lockport Energy Associates ("LERA") and the New
York Public Service Commission ("NYPSC") in August 1997 by NYSEG in the Federal
District Court for the Northern District of New York. NYSEG has requested the
Court to direct NYPSC and FERC to modify contract rates to be paid to the
Lockport Power Plant. In October 1997, NYPSC filed a cross-claim alleging that
the FERC violated PURPA and the Federal Power Act by failing to reform the NYSEG
contract that was previously approved by the NYPSC. We are unable to predict the
outcome of these proceedings but we do not expect that the outcome of these
proceedings will have a material adverse effect on our financial position or
results of operation. In any event, we retain the right to require The Brooklyn
Union Gas Company to purchase our interest in the Lockport Power Plant for $18.9
million, less equity distributions received by us, at any time before December
19, 2001.
We and our affiliates are involved in various other claims and legal
actions arising out of the normal course of business. We are unable to predict
the outcome of these proceedings but we do not expect that the outcome of these
proceedings will have a material adverse effect on our financial position or
results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required hereunder is set forth under "Quarterly
Consolidated Financial Data" included in Appendix F, Note 17 of the Notes to
Consolidated Financial Statements to this report. The Company made no sales of
unregistered securities in the last three years except as follows:
Effective September 1999, Calpine Corporation amended its Retirement
Savings Plan to add a Calpine Common Stock Fund as one of the investment options
for employee contributions to the Plan. As the result of this amendment, the
exemption from registration under the Securities Act of 1933 for both the plan
participation interests and the shares of Common Stock previously afforded by
Section 3(a)(2) of the Securities Act ceased to be available.
Since the Plan amendment, through February 2000, Calpine estimates that (i)
the Plan has sold to participants $14.0 million in plan participation interests
and (ii) Calpine has sold to participants 155,566 shares of Common Stock, in
each case without the registration of the securities under the Securities Act.
26
<PAGE> 27
Because employee contributions that are directed to the Calpine Common Stock
Fund are used by the Plan's trustee to purchase shares of Common Stock in the
open market, Calpine does not receive any proceeds from the sale of the shares.
While Calpine believes that many of the sales would qualify as an exempt
transaction under Section 4(2) of the Securities Act, it has not undertaken an
evaluation of the eligibility of each Plan participant to purchase securities in
a private placement, and expects that such an evaluation would show that not all
of the Plan participants who purchased unregistered securities would qualify.
Accordingly, Calpine in March 2000, intends to file with the Securities and
Exchange Commission a registration statement on Form S-8 registering both the
plan participation interest and shares of Common Stock for future issuance under
the Plan. Calpine is prepared to rescind any sale of plan participation
interests or common stock if requested by a participant who did not qualify for
a private placement.
ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth under "Selected
Consolidated Financial Data" included in Appendix F to this report.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required hereunder is set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Appendix F to this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information required hereunder is set forth under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Market Risks" included in Appendix F to this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required hereunder is set forth under "Report of
Independent Public Accountants," "Consolidated Balance Sheets," "Consolidated
Statements of Operations," "Consolidated Statements of Shareholder's Equity,"
"Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial
Statements" included in Appendix F of this report. Other financial information
and schedules are included in Appendix F of this report.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 10. EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Incorporated by reference from Proxy Statement relating to the 2000 Annual
Meeting of Shareholders to be filed.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from Proxy Statement relating to the 2000 Annual
Meeting of Shareholders to be filed.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from Proxy Statement relating to the 2000 Annual
Meeting of Shareholders to be filed.
27
<PAGE> 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)-1. FINANCIAL STATEMENTS AND OTHER INFORMATION
The following items appear in Appendix F of this report:
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Report of Independent Public Accountants
Consolidated Balance Sheets, December 31, 1999 and 1998
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements for the Years Ended December
31, 1999, 1998 and 1997
(a)-2. FINANCIAL STATEMENT SCHEDULES
None
(a)-3. REPORTS ON FORM 8-K
1. Current report dated October 11, 1999 and filed on October 12, 1999
ITEM 5. OTHER EVENTS -- Press Release announcing Calpine Corporation's
expectation of higher Financial Results for the
Three and Nine Months Ended September 30, 1999.
2. Current report dated October 22, 1999 and filed on October 25, 1999
ITEM 5. OTHER EVENTS -- Press Release announcing Calpine Corporation's
Financial Results for the Three and Nine Months
Ended September 30, 1999
3. Current report dated January 26, 2000 and filed on February 8, 2000
ITEM 5. OTHER EVENTS -- Announcement of Pricing of Up to $360 Million of
Convertible Preferred Securities
4. Current report dated February 3, 2000 and filed on February 8, 2000
ITEM 5. OTHER EVENTS -- Press Release announcing Calpine Corporation's
Financial Results for the Three and Twelve
Months Ended December 31, 1999
28
<PAGE> 29
(a)-4. EXHIBITS
The following exhibits are filed herewith unless otherwise indicated:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of Calpine
Corporation, a Delaware corporation.(b)
3.2 -- Amended and Restated Bylaws of Calpine Corporation, a
Delaware corporation.(b)
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.(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.(e)
4.4 -- Indenture dated as of March 31, 1998 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(g)
4.5 -- Indenture dated as of March 26, 1999 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(h)
4.6 -- Indenture dated as of April 21, 1999 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(h)
4.7 -- 1999 HIGH TIDES.
4.7.1 -- Certificate of Trust of Calpine Capital Trust, a Delaware
statutory trust, filed October 4, 1999.(i)
4.7.2 -- Corrected Certificate of Certificate of Trust of Calpine
Capital Trust, a Delaware statutory trust, dated September
29, 1999.(i)
4.7.3 -- Declaration of Trust of Calpine Capital Trust, dated as of
October 4, 1999, among Calpine Corporation, as Depositor,
The Bank of New York (Delaware), as Delaware Trustee, The
Bank of New York, as Property Trustee, and the
Administrative Trustees named therein.(i)
4.7.4 -- Indenture, dated as of November 2, 1999, between Calpine
Corporation and The Bank of New York, as Trustee, including
form of Debenture.(i)
4.7.5 -- Remarketing Agreement, dated November 2, 1999, among Calpine
Corporation, Calpine Capital Trust, The Bank of New York, as
Tender Agent, and Credit Suisse First Boston Corporation, as
Remarketing Agent.(i)
4.7.6 -- Amended and Restated Declaration of Trust of Calpine Capital
Trust, dated as of November 2, 1999, among Calpine
Corporation, as Depositor and Debenture Issuer, The Bank of
New York (Delaware), as Delaware Trustee, and The Bank of
New York, as Property Trustee, and the Administrative
Trustees named therein, including form of Preferred Security
and form of Common Security.(i)
4.7.7 -- Preferred Securities Guarantee Agreement, dated as of
November 2, 1999, between Calpine Corporation and The Bank
of New York, as Guarantee Trustee.(i)
4.8 -- 2000 HIGH TIDES.
4.8.1 Certificate of Trust of Calpine Capital Trust II, a Delaware
statutory trust, filed January 25, 2000.(*)
4.8.2 Declaration of Trust of Calpine Capital Trust II, dated as
of January 24, 2000, among Calpine Corporation, as Depositor
and Debenture Issuer, The Bank of New York (Delaware), as
Delaware Trustee, The Bank of New York, as Property Trustee,
and the Administrative Trustees named therein.(*)
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
4.8.3 Indenture, dated as of January 31, 2000, between Calpine
Corporation and The Bank of New York, as Trustee, including
form of Debenture.(*)
4.8.4 Remarketing Agreement, dated as of January 31, 2000, among
Calpine Corporation, Calpine Capital Trust II, The Bank of
New York, as Tender Agent, and Credit Suisse First Boston
Corporation, as Remarketing Agent.(*)
4.8.5 Registration Rights Agreement, dated January 31, 2000, among
Calpine Corporation, Calpine Capital Trust II, Credit Suisse
First Boston Corporation and ING Barings LLC.(*)
4.8.6 Amended and Restated Declaration of Trust of Calpine Capital
Trust II, dated as of January 31, 2000, among Calpine
Corporation, as Depositor and Debenture Issuer, The Bank of
New York (Delaware), as Delaware Trustee, The Bank of New
York, as Property Trustee, and the Administrative Trustees
named therein, including form of Preferred Security and form
of Common Security.(*)
4.8.7 -- Preferred Securities Guarantee Agreement, dated as of
January 31, 2000, between Calpine Corporation and The Bank
of New York, as Guarantee Trustee.(*)
10.1 -- Purchase Agreements.
10.1.1 -- Purchase and Sale Agreement dated March 27, 1997 for the
purchase and sale of shares of Enron/Dominion Cogen Corp.
Common Stock among Enron Power Corporation and Calpine
Corporation.(f)
10.1.2 -- Stock Purchase and Redemption Agreement dated March 31,
1998, among Dominion Cogen, Inc. Dominion Energy, Inc. and
Calpine Finance.(f)
10.2 Financing Agreements.
10.2.1 Calpine Construction Finance Company Financing
Agreement.(j)(*)
10.3 -- Other Agreements.
10.3.1 -- Calpine Corporation Stock Option Program and forms of
agreements thereunder.(a)
10.3.2 -- Calpine Corporation 1996 Stock Incentive Plan and forms of
agreements thereunder.(b)
10.3.3 -- Calpine Corporation Employee Stock Purchase Plan and forms
of agreements thereunder.(b)
10.3.4 -- Amended and Restated Employment Agreement between Calpine
Corporation and Mr. Peter Cartwright.(*)
10.3.5 -- Executive Vice President Employment Agreement between
Calpine Corporation and Ms. Ann B. Curtis.(k)
10.3.6 -- Senior Vice President Employment Agreement between Calpine
Corporation and Mr. Ron A. Walter.(k)
10.3.7 -- Senior Vice President Employment Agreement between Calpine
Corporation and Mr. Robert D. Kelly.(k)
10.3.8 -- Executive Vice President Employment Agreement between
Calpine Corporation and Mr. Thomas R. Mason.(k)
10.4 -- Form of Indemnification Agreement for directors and
officers.(b)
21 -- Subsidiaries of the Company.(*)
23 -- Consent of Arthur Andersen, LLP, Independent Public
Accountants.(*)
27 -- Financial Data Schedule.(*)
</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 Registration Statement on Form S-1
(Registration Statement No. 333-07497).
30
<PAGE> 31
(c) Incorporated by reference to Registrant's Current Report on Form 8-K dated
August 29, 1996 and filed on September 13, 1996.
(d) Incorporated by reference to Registrant's Annual Report on Form 10-K dated
December 31, 1996, and filed on March 27, 1996.
(e) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1997 and filed on August 14, 1997.
(f) Incorporated by reference to Registrant's Current Report on Form 8-K dated
March 31, 1998 and filed on April 14, 1998.
(g) Incorporated by reference to Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-61047).
(h) Incorporated by reference to Registrant's Registration Statement on Form
S-3/A (Registration Statement No. 333-72583).
(i) Incorporated by reference to Registrant's Registration Statement on Form
S-3/A (Registration Statement No. 333-87427).
(j) Approximately 200 pages of this exhibit have been omitted pursuant to a
request for confidential treatment. The omitted language has been filed
separately with the Securities and Exchange Commission.
(k) Incorporated by reference to Registrant's Form 10-Q/A dated September 30,
1999, and filed on November 17, 1999.
(*) Filed herewith.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: February 28, 2000 CALPINE CORPORATION
By /s/ ANN B. CURTIS
------------------------------------
Ann B. Curtis
Executive Vice President and
Director
(Principal Financial Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Calpine Corporation do
hereby constitute and appoint Peter Cartwright and Ann B. Curtis, and each of
them, the lawful attorney and agent or attorneys and agents with power and
authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, determine may be
necessary or advisable or required to enable Calpine Corporation to comply with
the Securities and Exchange Act of 1934, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Form 10-K Annual Report. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Form 10-K Annual Report or amendments or
supplements thereto, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite the name.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ PETER CARTWRIGHT Chairman, President, Chief February 28, 2000
- ----------------------------------------------------- Executive and Director
Peter Cartwright (Principal Executive Officer)
/s/ ANN B. CURTIS Executive Vice President and February 28, 2000
- ----------------------------------------------------- Director (Principal Financial
Ann B. Curtis Officer)
/s/ CHARLES B. CLARK, JR. Vice President and Corporate February 28, 2000
- ----------------------------------------------------- Controller (Principal
Charles B. Clark, Jr. Accounting Officer)
/s/ JEFFREY E. GARTEN Director February 28, 2000
- -----------------------------------------------------
Jeffrey E. Garten
/s/ SUSAN C. SCHWAB Director February 28, 2000
- -----------------------------------------------------
Susan C. Schwab
/s/ GEORGE J. STATHAKIS Director February 28, 2000
- -----------------------------------------------------
George J. Stathakis
/s/ JOHN O. WILSON Director February 28, 2000
- -----------------------------------------------------
John O. Wilson
/s/ V. ORVILLE WRIGHT Director February 28, 2000
- -----------------------------------------------------
V. Orville Wright
</TABLE>
32
<PAGE> 33
CALPINE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Selected Consolidated Financial Data........................ F-2
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. F-4
Report of Independent Public Accountants.................... F-26
Consolidated Balance Sheets December 31, 1999 and 1998...... F-27
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-28
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997.............. F-29
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.......................... F-30
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1999, 1998 and 1997.................... F-31
</TABLE>
F-1
<PAGE> 34
CALPINE CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND RATIO DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
Electricity and steam sales................. $127,799 $199,464 $237,277 $507,897 $760,325
Service contract revenue.................... 7,153 6,455 10,177 20,249 43,773
(Loss) income from unconsolidated
investments in power projects............. (2,854) 6,537 15,819 25,240 36,593
Interest income on loans to power
projects.................................. -- 2,098 13,048 2,562 1,226
Other revenue............................... -- -- -- -- 5,818
-------- -------- -------- -------- --------
Total revenue........................ 132,098 214,554 276,321 555,948 847,735
Cost of revenue............................. 77,388 129,200 153,308 375,327 557,477
-------- -------- -------- -------- --------
Gross profit.............................. 54,710 85,354 123,013 180,621 290,258
Project development expenses................ 3,087 3,867 7,537 7,165 10,712
General and administrative expenses......... 8,937 14,696 18,289 26,780 53,044
-------- -------- -------- -------- --------
Income from operations.................... 42,686 66,791 97,187 146,676 226,502
Interest expense............................ 32,154 45,294 61,466 86,726 91,162
Distributions on trust preferred
securities................................ -- -- -- -- 2,565
Other income................................ (1,895) (6,259) (17,438) (13,423) (25,441)
-------- -------- -------- -------- --------
Income before provision for income
taxes................................... 12,427 27,756 53,159 73,373 158,216
Provision for income taxes.................. 5,049 9,064 18,460 27,054 61,973
-------- -------- -------- -------- --------
Income before extraordinary charge........ 7,378 18,692 34,699 46,319 96,243
Extraordinary charge, net of tax benefit of
$ -- , $ -- , $ -- , $441 and $793........ -- -- -- 641 1,150
-------- -------- -------- -------- --------
Net income................................ $ 7,378 $ 18,692 $ 34,699 $ 45,678 $ 95,093
======== ======== ======== ======== ========
Basic earnings per common share:
Weighted average shares of common stock
Outstanding............................. 20,776 25,805 39,892 40,242 52,328
Income before extraordinary charge........ $ 0.36 $ 0.72 $ 0.87 $ 1.15 $ 1.84
Extraordinary charge...................... $ -- $ -- $ -- $ (0.01) $ (0.02)
Net income................................ $ 0.36 $ 0.72 $ 0.87 $ 1.14 $ 1.82
Diluted earnings per common share:
Weighted average shares of common stock
Outstanding............................. 21,913 29,758 42,032 42,328 55,661
Income before extraordinary charge........ $ 0.34 $ 0.63 $ 0.83 $ 1.09 $ 1.73
Extraordinary charge...................... -- -- -- $ (0.01) $ (0.02)
Net income................................ $ 0.34 $ 0.63 $ 0.83 $ 1.08 $ 1.71
OTHER FINANCIAL DATA AND RATIOS:
Depreciation and amortization............... $ 26,896 $ 40,551 $ 48,935 $ 82,913 $ 83,040
EBITDA(1)................................... $ 69,515 $117,379 $172,616 $255,306 $392,160
EBITDA to Consolidated Interest
Expense(2)................................ 2.11x 2.41x 2.60x 2.74x 3.79x
Total debt to EBITDA........................ 5.87x 5.12x 4.96x 4.20x 5.24x
Ratio of earnings to fixed charges(3)....... 1.46x 1.45x 1.64x 1.68x 1.78x
</TABLE>
F-2
<PAGE> 35
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------
1995 1996 1997 1998 1999
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 21,810 $ 95,970 $ 48,513 $ 96,532 $ 349,371
Property, plant and equipment, net............ 447,751 648,208 736,339 1,094,303 2,866,447
Investment in power projects.................. 8,218 13,936 222,542 221,509 284,834
Total assets........................... 554,531 1,031,397 1,380,915 1,728,946 3,991,606
Short-term debt............................... 85,885 37,492 112,966 5,450 11,638
Borrowings under line of credit, current
portion..................................... 19,851 -- -- -- 35,832
Borrowings under line of credit, net of
current portion............................. -- -- -- -- 86,918
Non-recourse project financing (long-term).... 190,642 278,640 182,893 114,190 357,137
Notes payable, net of current................. 6,348 -- -- -- 10,385
Senior notes.................................. 105,000 285,000 560,000 951,750 1,551,750
Total debt............................. 407,726 601,132 855,859 1,071,390 2,053,660
Company-obligated mandatorily redeemable
convertible preferred securities of a
subsidiary trust............................ -- -- -- -- 270,713
Minority interests............................ -- -- -- -- 61,705
Stockholders' equity.......................... 25,227 203,127 239,956 286,966 964,632
</TABLE>
(The information contained in the Selected Consolidated Financial Data is
derived from the audited Consolidated Financial Statements of Calpine
Corporation and Subsidiaries.)
- ---------------
(1) EBITDA is defined as income from operations plus depreciation, capitalized
interest, other income, non-cash charges and cash received from investments
in power projects, reduced by the income from unconsolidated investments in
power projects. EBITDA is presented not as a measure of operating results,
but rather as a measure of our ability to service debt. EBITDA should not be
construed as an alternative to either (i) income from operations (determined
in accordance with generally accepted accounting principles) or (ii) cash
flows from operating activities (determined in accordance with generally
accepted accounting principles).
(2) 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 our capital stock.
(3) Earnings are defined as income before provision for taxes, extraordinary
charge 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.
F-3
<PAGE> 36
CALPINE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical financial information contained herein, the matters
discussed in this annual report may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended and subject to
the safe harbor created by the Securities Litigation Reform Act of 1995. Such
statements include declarations regarding our intent, belief or current
expectations. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve a number of
risks and uncertainties; actual results could differ materially from those
indicated by such forward-looking statements. Among the important factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements are: (i) that the information is of a preliminary
nature and may be subject to further adjustment, (ii) the possible
unavailability of financing, (iii) risks related to the development, acquisition
and operation of power plants, (iv) the impact of avoided cost pricing, energy
price fluctuations and gas price increases, (v) the impact of curtailment, (vi)
the seasonal nature of our business, (vii) start-up risks, (viii) general
operating risks, (ix) the dependence on third parties, (x) risks associated with
international investments, (xi) risks associated with the power marketing
business, (xii) changes in government regulation, (xiii) the availability of
natural gas, (xiv) the effects of competition, (xv) the dependence on senior
management, (xvi) volatility in the our stock price, (xvii) fluctuations in
quarterly results and seasonality, and (xviii) other risks identified from time
to time in our reports and registration statements filed with the Securities and
Exchange Commission.
OVERVIEW
Calpine is engaged in the development, acquisition, ownership, and
operation of power generation facilities and the sale of electricity and steam
principally in the United States. At February 23, 2000, we had interests in 44
power plants and steam fields predominantly in the United States, having an
aggregate capacity of 4,273 megawatts.
On January 4, 1999, we completed the acquisition of a 20% interest in
approximately 82 billion cubic feet of proven natural gas reserves located in
the Sacramento basin of Northern California. We paid approximately $14.9 million
for $13.0 million in redeemable non-voting preferred stock and 20% of the
outstanding common stock of Sheridan California Energy, Inc. ("SCEI").
Additionally, we signed a ten year gas contract enabling us to purchase 100% of
SCEI's production.
On February 17, 1999, we announced that the Delta Energy Center met the
California Energy Commission's ("CEC") Data Adequacy requirements. This ruling
stated that our Application for Certification contained adequate information for
the CEC to begin its analysis of the power plant's environmental impacts and
proposed mitigation. The Delta Energy Center, an 880 megawatt gas-fired power
plant located at the Dow Chemical Company facility in Pittsburg, California, is
the first power plant that will be developed, owned and operated under a joint
venture with Bechtel Enterprises, and will provide power to the Pittsburg,
California and the greater San Francisco Bay Area. The gas-fired power plant is
to be constructed by Bechtel and operated by us.
On February 17, 1999, we announced plans to develop, own and operate a 545
megawatt gas-fired power plant in Westbrook, Maine. We acquired the development
rights for the Westbrook Energy Center from Genesis Power Corporation. This
power plant is scheduled to begin power deliveries in early 2001, and will serve
the New England market.
On February 24, 1999, we announced plans to develop, own and operate a 600
megawatt gas-fired power plant located in San Jose, California. This power
plant, called the Metcalf Energy Center, is the second power plant to be
developed under the joint venture with Bechtel Enterprises, and will provide
electricity to the San Francisco Bay area. We expect the plant to commence
operation in mid 2002.
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On March 19, 1999, we completed the acquisition of Unocal Corporation's
Geysers geothermal steam fields in northern California for approximately $102.2
million. The steam fields fuel our 12 Sonoma County power plants, totaling 544
megawatts of capacity. We purchased these plants from Pacific Gas and Electric
Company ("PG&E") on May 7, 1999.
On April 14, 1999, we received approval from the CEC to construct a 545
megawatt gas-fired power plant near Yuba City, California. This power plant,
called the Sutter Power Plant, was the first new power plant approved in
California's deregulated power industry. Electricity produced by the Sutter
Power Plant will be sold into California's energy market. We expect the plant to
commence operation in mid 2001.
On April 22, 1999, we entered into a joint venture with GenTex Power
Corporation to develop, own and operate a 545 megawatt gas-fired power plant in
Bastrop County, Texas, called Lost Pines I. Construction of this power plant
began in October 1999. Under the definitive agreements we entered in September
1999, we will manage all phases of the plant's development process, with GenTex
and ourselves jointly operating the plant. The output from Lost Pines I will be
divided equally, with GenTex selling its portion to its customer base, while we
will sell our portion to the wholesale power market in Texas. We expect the
plant to commence operation in mid-2001.
On April 23, 1999, we entered into a joint agreement with Pinnacle West
Capital Corporation to develop, own and operate a 545 megawatt gas-fired power
plant located in Phoenix, Arizona. This plant, called the West Phoenix Power
Plant, will provide power to the Phoenix metropolitan area. The timing of
development activities is still under discussion with our partner.
On May 7, 1999, we completed the acquisitions from PG&E of 12 Sonoma County
and 2 Lake County power plants for approximately $212.8 million. The
acquisitions were financed with a 24-year operating lease. Our geothermal steam
fields fuel the facilities, which have a combined capacity of approximately 694
megawatts of electricity. All of the generation from the facilities is sold to
the California power exchange, with the exception of an agreement entered into
on April 29, 1999, to sell to Commonwealth Energy Corporation 75 megawatts of
geothermal electricity in 1999, 100 megawatts in 2000, and 125 megawatts in 2001
and through June 2002. Historically, we have served as a steam supplier for
these facilities, which had been owned and operated by PG&E. These acquisitions
have enabled us to consolidate our operations in The Geysers into a single
ownership structure and to integrate the power plant and steam field operations,
allowing us to optimize the efficiency and performance of the facilities. We
believe that these acquisitions provide us with significant synergies that
leverage our expertise in geothermal power generation and position us to benefit
from the demand for "green" energy in the competitive market.
On June 21, 1999, we acquired the rights to build, own and operate a 545
megawatt gas-fired power plant located in Ontelaunee Township, Pennsylvania. The
plant, called the Ontelaunee Energy Center, will provide power to residences and
businesses throughout the Pennsylvania-New Jersey-Maryland power pool.
Construction will commence in 2000 and the plant is scheduled to begin
production in 2002.
On July 8, 1999, we announced a renegotiation of our Gilroy power sales
agreement with PG&E. The amendment provides for the termination of the remaining
18 years of the long-term contract in exchange for fixed long-term payments by
PG&E to us. The amended agreement was approved by the California Public
Utilities Commission on December 2, 1999. We will continue to sell the output
from the Gilroy Power Plant through October 2002 to PG&E and thereafter we will
market the output in the California wholesale power market.
On August 20, 1999, we announced the purchase of 18 F-class combustion
turbines from Siemens Westinghouse Power Corporation that will be capable of
producing 4,900 megawatts of electricity in a combined-cycle configuration.
Beginning in 2002, Siemens will deliver six turbines per year through 2004.
Combined with our existing turbine orders we have 69 turbines under contract,
option, letter of intent or other commitment capable of producing approximately
18,800 megawatts in a combined-cycle mode.
On August 31, 1999, we completed the acquisition of an additional 50% of
the Aidlin Power Plant from Edison Mission Energy (5%) and General Electric
Capital Corporation (45%) for a total purchase price of $7.2 million. We now own
55% of the 20-megawatt Aidlin Power Plant.
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On September 20, 1999, the Board of Directors authorized a two-for-one
stock split of our common stock, in the form of a stock dividend, effective
October 7, 1999, payable to stockholders of record on September 28, 1999. In the
Management's Discussion and Analysis, all references to the number of common
shares and per share amounts have been adjusted for this split.
On September 29, 1999 we completed the acquisition of development rights to
build, own and operate the Los Medanos Power Plant from Enron North America. The
Los Medanos Power Plant is a 500 megawatt gas-fired cogeneration plant located
adjacent to USS-POSCO Industries steel mill in Pittsburg, California. Los
Medanos will supply USS-POSCO with 60 megawatts of electricity and 75,000 pounds
per hour of steam, and market the excess electricity into the California power
exchange and under bilateral contracts. Construction commenced in September 1999
and commercial operation is scheduled to occur in 2001.
On September 30, 1999 we announced plans to build, own and operate an 800
megawatt gas-fired cogeneration power plant at Bayer Corporation's chemical
facility in Baytown, Texas. The Baytown Power Plant will supply Bayer with all
of its electric and steam requirements for 20 years and market excess
electricity into the Texas wholesale power market. Construction is estimated to
commence in 2000 and commercial operation in late 2001.
On October 1, 1999, we completed the acquisition of Sheridan Energy, Inc.,
a natural gas exploration and production company, through a $38.8 million cash
tender offer. We purchased all of the outstanding shares of Sheridan Energy's
common stock for $5.50 per share. In addition, we redeemed $11.9 million of
outstanding preferred stock of Sheridan Energy. Sheridan Energy's oil and gas
properties, including approximately 148 billion cubic feet equivalent of proven
reserves as of July 1, 1999 and certain leasehold acreage, are located in
northern California and the Gulf Coast region, where we are developing low-cost
natural gas supplies and proprietary pipeline systems to support our
strategically-located natural gas-fired power plants. We subsequently renamed
Sheridan Energy as Calpine Natural Gas Company ("CNGC").
On October 19, 1999, we completed the acquisition of the Calistoga Power
Plant from FPL Energy and Caithness Corporation for approximately $77.9 million.
Located in The Geysers region of northern California, Calistoga is a 67 megawatt
facility which provides electricity to PG&E under a long-term contract.
On October 25, 1999, we announced that we had executed a letter of intent
which gives us the exclusive right to negotiate with LYONDELL-CITGO Refining LP
to build, own and operate a 560 megawatt gas-fired cogeneration power plant at
the LYONDELL-CITGO refinery in Houston, Texas. The Channel Energy Center will
supply all of the electricity and steam requirements for 20 years to the
refinery. Permitting for the facility is currently underway, with construction
projected to commence in early 2000 and commercial operation in 2001.
On October 27, 1999, we completed a public offering of 8,280,000 shares of
our common stock at $46.31 per share and 5,520,000 5 3/4% HIGH TIDES issued by a
subsidiary trust at $50.00 each, raising $636.7 million of aggregate net
proceeds.
On November 3, 1999, we completed the acquisition of development rights to
build, own and operate the Towantic Energy Center. The Towantic Energy Center is
a 500 megawatt gas-fired cogeneration plant located in Oxford, Connecticut. The
Towantic Energy Center will market its electricity via bilateral contracts into
the New England region. Construction is estimated to commence in 2000 and
commercial operation in 2002.
On November 3, 1999, we executed an agreement with Credit Suisse First
Boston, New York branch, and The Bank of Nova Scotia, as lead arrangers, for a
$1.0 billion non-recourse revolving construction credit facility. We will use
this non-recourse credit facility to finance the construction of our diversified
portfolio of gas-fired power plants currently under development.
On December 17, 1999, we acquired 80% of the common stock of Cogeneration
Corporation of America, Inc. ("CGCA") for $25.00 per share or approximately
$137.3 million. NRG Energy, Inc., a wholly owned subsidiary of Northern States
Power, owns the remaining 20%. CGCA owns interests in six natural gas-fired
power plants, totaling 579 megawatts. The plants are located in Pennsylvania,
New Jersey, Illinois and Oklahoma.
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<PAGE> 39
On December 31, 1999, but effective as of November 1, 1999, we completed
the acquisition of Vintage Petroleum, Inc.'s interest in the Rio Vista Gas Unit
and related areas for approximately $71.5 million. As of the effective date of
the acquisition, Vintage owned approximately 90 billion cubic feet of proven
natural gas reserves and certain leasehold acreage located in the Sacramento
Basin in northern California. As a result of this acquisition and the Sheridan
Energy acquisition, we own a 99.5% working interest in the Rio Vista Gas Unit
and certain development acreage in northern California.
TRANSACTIONS ANNOUNCED OR CONSUMMATED SUBSEQUENT TO DECEMBER 31, 1999
On January 11, 2000, we announced our plans to expand our presence into the
Florida wholesale power market. Our plans are to invest approximately $750
million in power generation facilities and manage these development activities
in the Southeast from a new office in Tampa, Florida. We will develop two
natural gas-fired energy centers, the 1,080 megawatt Blue Heron Energy Center,
to be located outside of Vero Beach, and the 540 megawatt Osprey Energy Center,
to be located in the City of Auburndale adjacent to an existing power facility
in which we have an interest.
Construction for the proposed facilities is planned for 2001, with the
Osprey project to commence operation in early 2003, followed by the Blue Heron
Energy Center in mid-2003.
On January 14, 2000, we acquired a 50% interest in the Aries Power Plant, a
600 megawatt natural gas-fired plant currently under construction near Pleasant
Hill, Missouri, from a subsidiary of Aquila Energy Corporation. Construction
started in October 1999. Commercial operation of the first 330 megawatts is
scheduled to begin June 2001 with the balance of the plant starting in January
2002. The majority of the facility's output will be sold to Missouri Public
Service through May 2005. Thereafter, power will be sold into the Southwest
Power Pool.
On January 18, 2000, we entered into an agreement to provide the Sacramento
Municipal Utility District ("SMUD") with a five year supply of electricity from
our 545-megawatt Sutter Power Plant. The plant is currently under construction
near Yuba City, California. We will provide 150 megawatts of electricity to
SMUD's customer base beginning with the plant's startup in mid-2001.
On January 26, 2000, we completed an offering under Rule 144A of the
Securities Act of 6,000,000 5 1/2% HIGH TIDES issued by a subsidiary trust at
$50.00 each, raising $292.4 million of aggregate net proceeds. In February 2000,
we sold an additional 1,200,000 5 1/2% HIGH TIDES pursuant to the exercise of
the underwriters' over-allotment option for net proceeds of approximately $58.6
million.
On January 28, 2000, we acquired the development rights for the Hermiston
Power Plant, a 540 megawatt gas-fired cogeneration power facility located near
Hermiston, Oregon, from Ida-West Energy Company and TransCanada Pipelines.
Construction of the facility is expected to commence in the summer of 2000 with
commercial operation commencing in 2002.
On February 2, 2000, we announced plans to build, own and operate the
Decatur Energy Center, a 700 megawatt gas-fired cogeneration power plant at
Solutia Inc.'s Decatur, Alabama chemical facility. Under terms of a 20 year
contract, Solutia will lease a portion of the facility to meet its electricity
needs and purchase its steam requirements from us. Excess power from the
facility will be sold into the Southeastern wholesale power market under a
variety of short, mid, and long term contracts. We will also build a new
intrastate natural gas pipeline to fuel the plant. Construction is scheduled to
commence in 2000 with commercial operations commencing in 2002.
On February 4, 2000, we acquired 100% of the stock of Western Gas Resources
California ("Western") from Western Gas Resources, Inc. for $14.9 million.
Western's assets include the 130-mile Steelhead natural gas pipeline and the
remaining interest in the Sacramento River Gas System ("SRGS") natural gas
pipeline, now 100% owned by us.
On February 8, 2000, we announced that the Towantic Energy Center received
approval through a townwide referendum to purchase the town-owned land on which
the facility will be built. The referendum
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<PAGE> 40
also approved a Tax Stabilization Agreement that will even out the property
taxes paid to Oxford over a 22-year period.
On February 9, 2000, we announced that the CEC approved plans to construct
the Delta Energy Center in Pittsburg, California. The Delta Energy Center, an
880 megawatt gas-fired power plant located at the Dow Chemical facility, is the
first power plant that will be developed, owned and operated under a joint
venture with Bechtel Enterprises, and will provide power to Pittsburg,
California and the greater San Francisco Bay area.
On February 22, 2000, we announced plans to build, own and operate the Lone
Oak Energy Center, a 800 megawatt gas-fired cogeneration facility located in
Lowndes County, Mississippi. We anticipate that construction will commence in
early 2001 and that commercial operation of the facility will commence in early
2003.
On February 24, 2000, we announced plans to build, own and operate the
Hillabee Energy Center, a 700 megawatt gas-fired cogeneration facility located
in Tallapoosa County, Alabama. We anticipate that construction will commence in
early 2001 and that commercial operation of the facility will commence in early
2003.
SELECTED OPERATING INFORMATION
Set forth below is certain selected operating information for the power
plants and steam fields, for which results are consolidated in our statements of
operations. The information set forth under Power Plants consists of the results
for the West Ford Flat Power Plant, Bear Canyon Power Plant, Greenleaf 1 & 2
Power Plants, Watsonville Power Plant, King City Power Plant, Gilroy Power
Plant, the Bethpage Power Plant since its acquisition on February 5, 1998, the
Texas City and Clear Lake Power Plants since their acquisition on March 31,
1998, the Pasadena Power Plant since it began commercial operation on July 7,
1998, the Sonoma Power Plant since its acquisition on July 17, 1998, the
Pittsburg Power Plant since its acquisition on July 21, 1998, the 12 Sonoma
County and 2 Lake County power plants purchased from PG&E on May 7, 1999, the
acquisition of an additional 50% interest in the Aidlin Power Plant on August
31, 1999, the Calistoga Power Plant since its acquisition on October 21, 1999
and five facilities (Newark, Pryor, Parlin, and Morris Power Plants and
Philadelphia Water Project) that we acquired with our purchase of 80% of CGCA on
December 17, 1999. The information set forth under Steam Fields consists of the
results for the Thermal Power Company Steam Fields prior to the acquisition of
Unocal Corporation's interest in the Thermal Power Company steam fields on March
19, 1999 and of the PG&E power plants on May 7, 1999.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
POWER PLANTS:
Electricity revenue(1):
Energy............................ $ 54,886 $ 93,851 $ 110,879 $ 252,178 $ 555,779
Capacity.......................... $ 30,485 $ 65,064 $ 84,296 $ 193,535 $ 183,696
Megawatt hours produced........... 1,033,566 1,985,404 2,158,008 9,864,080 14,802,709
Average energy price per megawatt
hour(2)........................ $ 53.10 $ 47.27 $ 51.38 $ 25.57 $ 37.55
STEAM FIELDS:
Steam revenue(3):................. $ 39,669 $ 40,549 $ 42,102 $ 36,130 $ 20,850
Megawatt hours produced........... 2,415,059 2,528,874 2,641,422 2,323,623 1,192,722
Average price per megawatt hour... $ 16.43 $ 16.03 $ 15.94 $ 15.55 $ 17.48
</TABLE>
- ---------------
(1) Electricity revenue is composed of fixed capacity payments, which are not
related to production, and variable energy payments, which are related to
production. For the year ended December 31, 1999, Capacity revenues include,
besides traditional capacity payments, other revenues such as Reliability
Must Run and Ancillary Service revenues.
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<PAGE> 41
(2) Represents variable energy revenue divided by the megawatt-hours produced.
The significant increase in capacity revenue and the accompanying decline in
average energy price per megawatt-hour since 1994 primarily reflects the
increase in our megawatt hour production as a result of additional gas-fired
power plants.
(3) The decline in steam revenue between 1999 and 1997 reflects the acquisition
and consolidation of the Sonoma Power Plant and the related steam fields.
Due to the consolidation of our ownership of the steamfields and the power
plants purchased from PG&E on May 7, 1999, we have ceased recognizing
revenue for the Steam Fields after May 7, 1999.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenue -- Total revenue increased 52% to $847.7 million in 1999 compared
to $555.9 million in 1998, primarily due to the impact of recognizing a full
year's income from various assets that were acquired in 1998 and of recognizing
a partial year's income from various assets that were acquired in 1999, as
described below.
Electricity and steam sales revenue increased 50% to $760.3 million in
1999 compared to $507.9 million in 1998. Geothermal revenues at the Geysers
accounted for $125.8 million, or roughly half, of the total increase of
$252.4 million. This was primarily due to the purchase of 14 geothermal
power plants from PG&E on May 7, 1999 and, to a much lesser extent, due to
the purchases of: (1) an additional 50% stake in the Aidlin Power Plant in
August, 1999 after which we consolidated the plant into our financial
results; and (2) the Calistoga Power Plant on October 19, 1999. In 1999 our
geothermal steamfield sales of steam declined by $3.0 million compared to
1998, due to consolidation of steamfield and power plant operations at the
Geysers under Calpine ownership in May 1999, after which we stopped
recording revenues from geothermal steamfield sales to third parties.
The remainder of the increase in electricity and steam sales revenue
is attributable to our gas fired power plants. In California, the Gilroy
Power Plant increased its revenue in 1999 by $27.9 million over 1998 by
both (1) doubling its production, mostly as a result of the expiration of
PG&E's curtailment rights on December 31, 1998 and (2) restructuring its
power purchase agreement with PG&E, effective as of September 1, 1999.
Also, the Pittsburg Power Plant in California increased its revenue by
$12.6 million in 1999 versus 1998. We acquired the project on July 21, 1998
and did not have a full year of operations in 1998. In Texas, the Texas
City and Clear Lake Power Plants, which were consolidated into our
financial statements following the acquisition of the remaining 50%
interest of Texas Cogeneration Company ("TCC") on March 31, 1998, benefited
by a full year of operations in 1999 versus only nine months on a
consolidated basis in 1998, and together they recorded an additional $39.0
million of revenue in 1999 versus in 1998. And finally the Pasadena Power
Plant, which commenced operation in July 1998, had $43.6 million of
additional revenue in 1999 compared to 1998 due to a full year of
operations in 1999.
Service contract revenue increased 117% to $43.8 million in 1999
compared to $20.2 million in 1998. The $23.5 million increase was primarily
due to an increase in recorded sales of purchased power to third parties
and to an increase in sales of purchased gas to third parties.
Income from unconsolidated investments in power projects increased 45%
to $36.6 million in 1999 compared to $25.2 million in 1998. The increase of
$11.4 million is primarily attributable to an increase of equity income
from the Sumas Power Plant. In 1999 we recorded $21.8 million versus $11.7
million in 1998, an increase of $10.1 million. Additionally, as a group,
our equity income projects on the East Coast, Lockport Power Plant, Stony
Brook Power Plant, Kennedy International Airport Power Plant, Gordonsville
Power Plant, Auburndale Power Plant, and Bayonne Power Plant, increased by
$4.1 million. This was offset by a $2.9 million reduction in equity income
attributable to our Clear Lake and Texas City Power Plants, which were
unconsolidated investments for part of 1998 until our purchase of the
remaining 50% interest in TCC on March 31, 1998.
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<PAGE> 42
Interest income on loans to power projects decreased 54% to $1.2
million in 1999 compared to $2.6 million in 1998. In 1999 we no longer
received interest income associated with the TCC investment following our
purchase of the remaining 50% interest in TCC on March 31, 1998. In 1999,
we recorded $1.2 million of income from our 20% investment in Sheridan
California Energy, Inc. We no longer recognize this revenue following our
purchase of the remaining 80% interest through the acquisition of Sheridan
Energy, the parent of Sheridan California Energy, Inc., on October 1, 1999.
Other revenue was $5.8 million in 1999 compared to $0 in 1998. In 1999
we recorded $5.3 million of oil and gas revenue following our acquisition
of Sheridan Energy on October 1, 1999. Additionally, we recorded $0.5
million of equipment sales and service revenue from a group of English
subsidiaries of CGCA, which we acquired 80% on December 17, 1999.
Cost of revenue -- Cost of revenue increased to $557.5 million in 1999
compared to $375.3 million in 1998, an increase of $182.2 million, or 49%.
Fuel expense increased by $87.1 million to $268.7 million in 1999
compared to $181.6 million in 1998 due primarily to: (1) a full year of
consolidated operations in 1999 for the Clear Lake and Texas City Power
Plants versus only nine months in 1998; (2) a full year of operations in
1999 versus a partial year in 1998 for the Pasadena Power Plant, which
commenced commercial operations in July, 1998; (3) a full year of
operations in 1999 versus a partial year in 1998 for the Pittsburg Power
Plant, which we acquired on July 21, 1998; and (4) higher production in
1999 compared to 1998, and therefore higher fuel expense, at our Gilroy and
King City Power Plants due to the expiration of PG&E's curtailment rights
on December 31, 1998 and April 28, 1999 respectively.
Plant operating expense increased by $43.8 million to $118.3 million
in 1999 compared to $74.5 million in 1998 due primarily to higher
geothermal plant operating expense in 1999 following our purchase of 14
geothermal power plants from PG&E on May 7, 1999 and our purchase of
geothermal steam field assets from Unocal Corporation on March 19, 1999.
Depreciation expense increased by $8.8 million to $82.8 million in
1999 compared to $74.0 million in 1998 primarily due to a full year of
operations in 1999 versus partial years in 1998 for the Texas City, Clear
Lake and Pasadena Power Plants, as noted above, and also due to our
purchase of Sheridan Energy on October 1, 1999.
Operating lease expense increased by $16.5 million to $33.6 million in
1999 compared to $17.1 million in 1998. $10.8 million of the increase is
due to the sale-leaseback in May 1999 of the 14 geothermal power plants
acquired from PG&E in May 1999 and the Sonoma Power Plant, which we
acquired in July 1998. We later added the Calistoga Power Plant, which we
acquired in October 1999, to that lease. The remainder of the increase is
primarily due to recording a full year of expense in 1999 versus a partial
year in 1998 for the Greenleaf 1 and 2 Power Plants, which were leased
commencing in August 1998.
Production royalty expense increased by $ 3.1 million to $13.8 million
in 1999 compared to $10.7 million in 1998 due to our purchase of geothermal
steam field assets from Unocal Corporation on March 19, 1999.
Service contract expense increased by $ 22.8 million to $40.2 million
in 1999 compared to $17.4 million in 1998 due to higher recorded purchases
of electricity and gas that were sold to third parties.
Gross profit -- Gross profit increased by $109.7 million, or 61%, to $290.3
million in 1999 compared to $180.6 million in 1998 due primarily to the purchase
of geothermal steam field assets from Unocal Corporation on March 19, 1999 and
14 geothermal power plants from PG&E on May 7, 1999. Overall, the consolidated
geothermal operations at the Geysers increased gross profit in 1999 by $64.6
million compared to 1998. Also, contributing $12.4 million to the increase is
the Gilroy Power Plant, which benefited from the contract restructuring with
PG&E. The Pasadena Power Plant, which benefited from a full year of operations
in 1999, contributed an increase of $17.0 million, and we also realized $11.4
million in additional equity
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<PAGE> 43
income from unconsolidated projects in 1999 compared to 1998 owing mostly to
increased distributions from the Sumas Power Plant.
Project development expenses -- Project development expenses increased by
$3.5 million, or 49%, in 1999 to $10.7 million compared to $7.2 million in 1998
due to the overall heavier pace in development activities as described in
Business -- Project Development and Acquisitions.
General and administrative expenses -- In 1999 general and administrative
expenses were $53.0 million compared to $26.8 million in 1998. The increase of
98% or $26.2 million is largely attributable to the establishment of regional
offices in Pleasanton, CA, and Boston, MA, the build-up of our Houston, TX
regional office and the establishment of our construction management office in
Sacramento, CA. In addition to higher headcount and salaries associated with our
substantial growth, we incurred larger employee bonus expense owing to the
record year we experienced in 1999. The increased general and administrative
investment in 1999 reflects, in part, increased expenses designed to support our
growth in 2000 and beyond.
Interest expense -- Interest expense before capitalization of interest was
$138.5 million in 1999 compared to $93.7 million in 1998, an increase of
$44.8 -- million due to higher debt balances in 1999 (total debt increased by
$982.3 million due primarily to our public offering of $600.0 million of senior
notes on March 29, 1999). However, actual reported interest expense increased by
a much smaller $4.4 million, or 5%, in 1999 compared to 1998 because we
capitalized substantially more interest in 1999 compared to 1998 due to our
heavy power plant construction program. By the fourth quarter of 1999, we had 9
construction projects underway. We capitalized $47.3 million of interest expense
in 1999 compared to $7.0 million in 1998, which is an increase of $40.3 million
in capitalized interest expense.
Total interest expense on senior notes increased by $ 46.1 million to
$121.8 million in 1999 compared to $75.7 million in 1998. Although the average
interest rate on the Senior Notes decreased by 0.4% in 1999 compared to 1998,
interest expense increased because of the additional $600.0 million of Senior
Notes issued in March 1999. The proceeds of the senior notes issued in March of
1999 were used partially to retire $120.6 million of debt related to the Gilroy
Power Plant, and interest expense on the Gilroy debt decreased by $6.7 million
in 1999 compared to 1998. Additionally, we increased debt by $97.8 million with
the acquisition of Sheridan Energy on October 1, 1999 and due to Sheridan's
purchase of certain gas reserves from Vintage Petroleum, Inc. on December 31,
1999. Interest on Sheridan debt was $1.3 million in 1999. We also increased debt
by $241.0 million by acquiring CGCA on December 17, 1999. Interest expense from
CGCA debt in 1999 following the acquisition was $491,000.
Interest income -- In 1999, interest income was $24.1 million compared to
$12.3 million in 1998. The increase of 96% or $11.8 million is attributable to
higher average cash balances in 1999 owing to the public offerings of senior
notes and common stock in March, 1999, and due to the public offerings of common
stock and HIGH TIDES in October 1999.
Other income, net -- In 1999, other income was $1.3 million compared to
$1.1 million in 1998. In 1999 we recorded $655,000 of income associated with an
investment in Cheng Power Systems, Inc. and $324,000 from the sale of excess
nitrous oxide "NOX" credits by the Bethpage Power Plant.
Distributions on Trust Preferred Securities -- In October 1999 we completed
a public offering by a subsidiary trust of 5,520,000 HIGH TIDES. The accrued
distributions through December 31, 1999 were $2.6 million.
Provision for income taxes -- The effective income tax rate was
approximately 39% in 1999 compared to 37% in 1998. The rate increase in 1999 is
primarily attributable to a higher average state tax rate based on the mix of
states in which we worked. In 1999 our provision for federal and state income
taxes totaled $62.0 million versus $27.1 million in 1998, an increase of $34.9
million, which is due primarily to higher taxable income in 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue -- Total revenue increased 101% to $555.9 million in 1998 compared
to $276.3 million in 1997.
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<PAGE> 44
Electricity and steam sales revenue increased 114% to $507.9 million
in 1998 compared to $237.3 million in 1997. The increase is primarily
attributable to the acquisition of the remaining interest in the Texas
City, Clear Lake and Bethpage Power Plants and the acquisition of the
Pittsburg Power Plant. These power plants accounted for $245.2 million in
additional electricity revenues in 1998. We benefited from the startup of
our power plant in Pasadena, Texas, which became operational in July 1998.
This power plant contributed $30.5 million in revenue during 1998. During
1998, we produced 9,864,080 megawatt hours, which was 7,706,072 megawatt
hours higher than the same period in 1997, as a result of the factors
described above. We recently announced three acquisitions, which we expect
to complete during 1999, upon government approval. These acquisitions when
completed will eliminate steam revenue for The Geysers, reflecting the
consolidation of the acquired power plants and related steam fields.
Service contract revenue increased 98% to $20.2 million in 1998
compared to $10.2 million in 1997. The $10.0 million increase was primarily
due to $3.3 million for fuel management fees, and $7.5 million for third
party excess gas sales.
Income from unconsolidated investments in power projects increased 59%
to $25.2 million in 1998 compared to $15.8 million in 1997. The increase of
$9.4 million is primarily attributable to our investments in the Lockport,
Stony Brook and Kennedy International Airport Power Plants, which
contributed $5.2 million of equity income during 1998, as well as $2.5
million of equity income from the Bayonne Power Plant. For the year ended
December 31, 1998, we also recorded $11.7 million of equity income from the
Sumas Power Plant compared to $8.5 million for the same period in 1997.
These increases in equity income were partially offset by a $1.1 million
decrease from the Auburndale Power Plant.
Interest income on loans to power projects decreased 80% to $2.6
million in 1998 compared to $13.0 million in 1997. This decrease was
attributable to the acquisition of the remaining 50% interest in TCC on
March 31, 1998 and the sale of a note receivable in December 1997.
Cost of revenue -- Cost of revenue increased to $375.3 million in 1998
compared to $153.3 million in 1997. The increase of $222.0 million in 1998 was
primarily attributable to increased plant operating, fuel and depreciation
expenses as a result of the acquisition of the remaining interest in the Texas
City, Clear Lake and Bethpage Power Plants, the acquisition of the Pittsburg
Power Plant and the startup of the Pasadena Power Plant. Additionally, service
contract expenses increased $8.8 million for the year ended December 31, 1998,
of which $6.6 million was related to costs associated with the sale of third
party excess gas and a $1.8 million increase for fuel management contracts.
General and administrative expenses -- General and administrative expenses
increased 46% to $26.8 million in 1998 compared to $18.3 million in 1997. The
increase was attributable to the continued growth in personnel and overhead
costs necessary to support the overall growth in our operations.
Interest expense -- Interest expense increased 41% to $86.7 million in 1998
compared to $61.5 million in 1997. The increase was primarily attributable to
interest expense of $35.0 million related to the senior notes issued in 1998 and
1997. This increase was partially offset by $3.5 million for the repayment of
non-recourse project financing for our Geysers facilities, $2.9 million for
reduction of the TCC debt, $2.0 million for reduction of the indebtedness of the
Greenleaf 1 & 2 Power Plants and $1.7 million of interest capitalized on the
development and construction of power projects.
Interest income -- Interest income decreased 14% to $12.3 million in 1998
compared to $14.3 million in 1997. The decrease was primarily attributable to
less interest earned on restricted cash in 1998.
Other income, net -- Other income decreased 66% to $1.1 million in 1998
compared to $3.2 million in 1997. The decrease was primarily attributable to gas
refunds received in 1997.
Provision for income taxes -- The effective income tax rate was
approximately 37% in 1998 compared to 35% in 1997. The effective rates were
lower than the statutory rate (federal and state) primarily due to depletion in
excess of tax basis benefits at our geothermal facilities, and a decrease in the
California tax liability due to our expansion into states other than California.
F-12
<PAGE> 45
LIQUIDITY AND CAPITAL RESOURCES
To date, we have obtained cash from our operations, borrowings under our
credit facilities and other working capital lines, sale of debt and equity, and
proceeds from non-recourse project financing. We utilized this cash to fund our
operations, service debt obligations, fund the acquisition, development and
construction of power generation facilities, finance capital expenditures and
meet our other cash and liquidity needs. The following table summarizes our cash
flow activities for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from:
Operating activities................. $ 264,083 $ 164,579 $ 106,553
Investing activities................. (1,490,417) (400,003) (400,250)
Financing activities................. 1,479,173 283,443 246,240
----------- --------- ---------
Total........................ $ 252,839 $ 48,019 $ (47,457)
=========== ========= =========
</TABLE>
Operating activities for 1999 provided $264.1 million, a 60% increase from
1998, consisting of approximately $87.2 million of depreciation and
amortization, $95.1 million of net income, $43.3 million of distributions from
unconsolidated investments in power projects, $47.9 million of deferred income
taxes, an $74.9 million net increase in operating liabilities and a loss on sale
of assets of $1.1 million. This was partially offset by $48.9 million net
increase in operating assets and $36.6 million of income from unconsolidated
investments. The increase in cash provided from operating activities in 1999 is
primarily due to higher net income derived from our acquisition activity in 1998
and 1999.
Investing activities for 1999 used $1.5 billion, primarily due to $929.7
million for construction costs and capital expenditures including gas
turbine-generator costs, $102.2 million for the acquisition of steam fields from
Unocal, $67.9 million for the acquisition of CNGC, $71.5 million for the
purchase of gas reserves from Vintage Petroleum Inc., $7.2 million for the
acquisition of an additional 50% interest in the Aidlin Power Plant, $77.9
million for the acquisition of the Calistoga Power Plant, $212.7 million for the
acquisition of CGCA, advances to the Lost Pines I Joint Venture of $18.1
million, $30.2 million of capitalized project development costs, $47.3 million
of interest capitalized on construction projects, $8.2 million of additional
loans to principal owners of power plants, offset by $1.9 million of maturities
of collateral securities in connection with the King City Power Plant, the
repayment of $9.5 million of outstanding loans, a $1.2 million decrease in
restricted cash, and $71.2 million from the sale and leaseback transactions of
the Geysers Power Company plants and the Calistoga Power Plant. The increase in
cash used in investing activities in 1999 is primarily due to increased
acquisition activity compared to 1998.
Financing activities for 1999 provided $1.5 billion of cash consisting of
$155.8 million of borrowings primarily for the expansion of the Pasadena Power
Plant, $163.7 million of borrowings of notes payable, $600.0 million of gross
proceeds from an additional senior debt financing received in March 1999, $597.4
million of gross proceeds from public common stock offerings in March and
October of 1999, $276.0 million in gross proceeds from a public offering of a
subsidiary trust of 5,520,000 HIGH TIDES in October 1999, $2.1 million for the
issuance of common stock for our Employee Stock Purchase Plan, $812,000 proceeds
from the exercise of stock options and $1.9 million for the write off of
deferred financing costs in April 1999, partially offset by $129.7 million in
repayment of notes payable, $120.6 million in repayment of non-recourse project
financing for the Gilroy Power Plant in April 1999, $2.8 million of repayments
of other non-recourse project financing, and $65.4 million of financing costs.
The increase in cash provided from financing activities in 1999 is primarily due
to the debt and equity offerings issued during 1999, as well as the HIGH TIDES
issued by a subsidiary trust in 1999.
At December 31, 1999, cash and cash equivalents were $349.4 million and
working capital was $251.1 million. For 1999, cash and cash equivalents
increased by $252.8 million and working capital increased by $164.2 million as
compared to December 31, 1998. The increases in cash and cash equivalents and
working
F-13
<PAGE> 46
capital in 1999 is primarily attributable to the equity offering issued in
October 1999, as well as the HIGH TIDES issued by a subsidiary trust in October
1999.
As a developer, owner and operator of power generation facilities, we are
required to make long-term commitments and investments of substantial capital
for our projects. We historically have financed these capital requirements with
cash from operations, borrowings under our credit facilities, other lines of
credit, construction financing, non-recourse project financing or long-term
debt, and the sale of equity.
We continue to evaluate current and forecasted cash flow as a basis for
financing operating requirements and capital expenditures. We believe that we
will have sufficient liquidity from cash flow from operations, borrowings
available under the lines of credit, access to the capital markets and working
capital to satisfy all obligations under outstanding indebtedness, to finance
anticipated capital expenditures and to fund working capital requirements for
the next twelve months.
Credit Facilities (see Note 5 to the Notes to Consolidated Financial
Statements)
At December 31, 1999, we had a $100.0 million revolving credit facility
available with a consortium of commercial lending institutions. We had no
borrowings and $28.8 million of letters of credit outstanding under this credit
facility. Borrowings bear interest at The Bank of Nova Scotia's base rate plus
an applicable margin or at LIBOR plus an applicable margin.
At December 17, 1999, we, through our acquisition of CGCA, assumed a $25.0
million revolving credit facility with MeesPierson Capital Corporation. As of
December 31, 1999, all of the available credit under this facility was
outstanding. Interest is variable based upon, at our option, LIBOR plus a margin
ranging from 1.50% to 1.875% or the prime rate plus a margin ranging from 0.75%
to 1.125%.
At December 31, 1999, we had a credit agreement for $1.0 billion with a
consortium of banks with the lead arranger being The Bank of Nova Scotia and the
lead arranger syndication agent being Credit Suisse First Boston. We had no
borrowings outstanding under this facility. Borrowings under this facility bear
interest, at our option, at the prime commercial lending rate, the Federal Funds
Rate plus 0.50% or LIBOR.
On October 1, 1999, we completed the acquisition of Sheridan Energy, a
natural gas exploration and production company, through a $38.8 million cash
tender offer. Sheridan Energy, at December 31, 1999, maintains a borrowing base
facility of $24.5 million with Bank One, Texas, N.A. As of December 31, 1999,
Sheridan had total borrowings outstanding of $24.3 million with a final maturity
of December 31, 2001. Sheridan may elect to borrow at Bank One's stated rate, or
LIBOR plus 2.5%, or a combination thereof.
In conjunction with the acquisition of certain properties located in
California, Bank One extended a separate borrowing base facility of $74.6
million as of December 31, 1999 to Sheridan California Energy, Inc, a wholly
owned subsidiary of Sheridan Energy. As of December 31, 1999, there was $73.5
million outstanding under the SCEI facility with a final maturity of December
31, 2001.
Project Financing (see Note 6 to the Notes to Consolidated Financial
Statements)
On January 4, 1999, the Company entered into a Credit Agreement with ING
(U.S.) Capital LLC to provide up to $265.0 million of non-recourse project
financing for the construction of the Pasadena Power Plant expansion. As of
December 31, 1999, $154.8 million was outstanding as a construction loan under
the agreement. The outstanding loan bears interest at ING's base rate plus an
applicable margin or at LIBOR plus an applicable margin, and is payable
quarterly.
On December 17, 1999, we acquired CGCA, which owns 100% of the debt of
Morris LLC. On September 15, 1997, Morris entered into a construction and term
loan agreement to provide non-recourse project financing for a major portion of
the Morris Project. The agreement provides $85.6 million of 20-month
construction loan commitments and $5.4 million in letter of credit commitments.
As of December 31, 1999, $85.6 million was outstanding as a construction loan
under the agreement and no amounts were pledged under the letter of credit.
Interest on the construction loan is variable based on, at our option, either
the base rate, as defined in the construction and term loan agreement, or LIBOR
plus 0.75%.
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<PAGE> 47
On December 17, 1999, we acquired CGCA, which owns 100% of the Newark and
Parlin Power Plants. We have $125.3 million outstanding on a 15 year
non-recourse term loan which is a joint and severable liability of Newark and
Parlin. The interest rate on the outstanding principal is variable based on, at
our option, LIBOR plus 1.125% margin or a defined base rate plus 0.375% margin.
Debt and Equity Offerings (see Notes 7, 8 and 9 to the Notes to Consolidated
Financial Statements)
On March 26, 1999, we completed a public offering of 12,000,000 shares of
our common stock at $15.50 per share. The net proceeds from this public offering
were approximately $177.1 million. In April 1999, we sold an additional
1,800,000 shares of common stock at $15.50 per share pursuant to the exercise of
the underwriters' over-allotment option for net proceeds of approximately $26.7
million.
On March 29, 1999, we completed a public offering of $250.0 million of our
7 5/8% Senior Notes Due 2006 and of our $350.0 million 7 3/4% Senior Notes Due
2009. After deducting underwriting discounts and expenses of the offering, the
aggregate net proceeds from the sale of the Senior Notes were approximately
$589.6 million. The Senior Notes Due 2006 bear interest at 7 5/8% per year,
payable semi-annually on April 15 and October 15 each year and mature on April
15, 2006. The Senior Notes Due 2006 are not redeemable prior to maturity. The
Senior Notes Due 2009 bear interest at 7 3/4% per year, payable semi-annually on
April 15 and October 15 each year and mature on April 15, 2009. The Senior Notes
Due 2009 are not redeemable prior to maturity.
The net proceeds from the sale in March 1999 of the common stock, the
Senior Notes Due 2006, and the Senior Notes Due 2009 were used as follows: (i)
$120.6 million to refinance indebtedness relating to the Gilroy Power Plant,
(ii) $77.6 million to repay indebtedness under a bridge facility provided by
Credit Suisse First Boston to finance a portion of the purchase price to acquire
the steam fields that service the Sonoma County power plants, (iii) $50.0
million to repay outstanding borrowings under our revolving credit facility,
(iv) $25.0 million to complete the expansion of the Clear Lake Power Plant, (v)
approximately $400.0 million to finance a portion of power generation facilities
currently under construction and the projects currently under development, and
(vi) the remaining $120.2 million were used for general corporate purposes.
Transaction costs incurred in connection with the Senior Notes offering were
recorded as a deferred charge and are amortized over the respective lives of the
Senior Notes Due 2006 and the Senior Notes Due 2009 using the effective interest
rate method.
In October 1999, we completed a public offering of 8,280,000 shares of our
common stock at $46.31 per share and 5,520,000 1999 5 3/4% HIGH TIDES issued by
a subsidiary trust at $50.00 each, raising $636.7 million of aggregate net
proceeds to Calpine.
The net proceeds from the sale in October 1999 of the common stock and HIGH
TIDES were used to finance power projects under development and construction. In
addition, we used $137.3 million of the net proceeds to complete the acquisition
of 80% of CGCA. The remaining net proceeds will be used for working capital and
general corporate purposes.
Senior Notes
At December 31, 1999, we also had $105.0 million of outstanding 9 1/4%
Senior Notes Due 2004, which mature on February 1, 2004, with interest payable
semi-annually on February 1 and August 1 of each year. In addition, we had
$171.8 million of outstanding 10 1/2% Senior Notes Due 2006, which mature on May
15, 2006, with interest payable semi-annually on May 15 and November 15 of each
year. During 1997, we issued $275.0 million of 8 3/4% Senior Notes Due 2007,
which mature on July 15, 2007, with interest payable semi-annually on January 15
and July 15 of each year. During 1998, we issued $400.0 million of 7 7/8% Senior
Notes Due 2008, which mature on April 1, 2008, with interest payable
semi-annually on April 1 and October 1 of each year.
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<PAGE> 48
OUTLOOK
Our strategy is to continue our rapid growth by capitalizing on the
significant opportunities in the power industry, primarily through our active
development and acquisition programs. In pursuing our proven growth strategy, we
utilize our extensive management and technical expertise to implement a fully
integrated approach to the acquisition, development and operation of power
generation facilities. This approach uses our expertise in design, engineering,
procurement, finance, construction management, fuel and resource acquisition,
operations and power marketing, which we believe provide us with a competitive
advantage. The key elements of our strategy are as follows:
- Development of new and expansion of existing power plants. We are
actively pursuing the development of new and expansion of existing highly
efficient, low-cost, gas-fired power plants that replace old and
inefficient generating facilities and meet the demand for new generation.
Our strategy is to develop power plants in strategic geographic locations
that enable us to leverage existing power generation assets and operate
the power plants as integrated electric generation systems. This allows
us to achieve significant operating synergies and efficiencies in fuel
procurement, power marketing and operations and maintenance.
We currently have twelve new projects under construction, representing an
additional 5,935 megawatts of capacity. Of these new projects, we are
expanding our Pasadena facility by 545 megawatts to 785 megawatts and the
Morris facility by 50 megawatts to 167 megawatts. We have ten new power
plants under construction, including the Baytown Power Plant in Texas;
Tiverton Power Plant in Rhode Island; the Rumford Power Plant in Maine;
the Westbrook Power Plant in Maine; the Sutter Power Plant in California;
the Los Medanos Power Plant in California; the South Point Power Plant in
Arizona; the Magic Valley Power Plant in Texas; the Lost Pines I Power
Plant in Texas; and the Aries Power Plant in Missouri. We have also
announced plans to develop twelve additional power generation facilities,
totaling 7,990 megawatts, in California, Mississippi, Connecticut,
Florida, Texas, Alabama, Oregon, Arizona and Pennsylvania.
- Acquisition of power plants. Our strategy is to acquire power generating
facilities that meet our stringent acquisition criteria and provide
significant potential for revenue, cash flow and earnings growth, and
that provide the opportunity to enhance the operating efficiencies of the
plants. We have significantly expanded and diversified our project
portfolio through the acquisition of power generation facilities through
the completion of 41 acquisitions to date.
- Enhance the performance and efficiency of existing power projects. We
continually seek to maximize the power generation potential of our
operating assets and minimize our operating and maintenance expenses and
fuel costs. This will become even more significant as our portfolio of
power generation facilities expands to an aggregate of 54 power plants
with an aggregate capacity of approximately 10,208 megawatts, after
completion of our projects currently under construction. We focus on
operating our plants as an integrated system of power generation, which
enables us to minimize costs and maximize operating efficiencies. We
believe that achieving and maintaining a low-cost of production will be
increasingly important to compete effectively in the power generation
industry.
RISK FACTORS
We have substantial indebtedness that we may be unable to service and that
restricts our activities. We have substantial debt that we incurred to finance
the acquisition and development of power generation facilities. As of December
31, 1999, our total consolidated indebtedness was $2.1 billion, our total
consolidated assets were $4.0 billion and our stockholders' equity was $964.6
million. Whether we will be able to meet our debt service obligations and to
repay our outstanding indebtedness will be dependent primarily upon the
performance of our power generation facilities.
This high level of indebtedness has important consequences, including:
- limiting our ability to borrow additional amounts for working capital,
capital expenditures, debt service requirements, execution of our growth
strategy, or other purposes,
F-16
<PAGE> 49
- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
service the debt,
- increasing our vulnerability to general adverse economic and industry
conditions, and
- limiting our ability to capitalize on business opportunities and to react
to competitive pressures and adverse changes in government regulation.
The operating and financial restrictions and covenants in our existing debt
agreements, including the indentures relating to our $1.6 billion aggregate
principle amount of senior notes, our $1.0 billion revolving credit facility,
and our $100.0 million revolving credit facility, contain restrictive covenants.
Among other things, these restrictions limit or prohibit our ability to:
- incur indebtedness,
- make prepayments of indebtedness in whole or in part,
- pay dividends,
- make investments,
- engage in transactions with affiliates,
- create liens,
- sell assets, and
- acquire facilities or other businesses.
Also, if our management or ownership changes, the indentures governing our
senior notes may require us to make an offer to purchase our senior notes. We
cannot assure you that we will have the financial resources necessary to
purchase our senior notes in this event.
We believe that our cash flow from operations, together with other
available sources of funds, including borrowings under our existing borrowing
arrangements, will be adequate to pay principal and interest on our senior notes
and other debt and to enable us to comply with the terms of our indentures and
other debt agreements. If we are unable to comply with the terms of our
indentures and other debt agreements and fail to generate sufficient cash flow
from operations in the future, we may be required to refinance all or a portion
of our senior notes and other debt or to obtain additional financing. However,
we may be unable to refinance or obtain additional financing because of our high
levels of debt and the debt incurrence restrictions under our indentures and
other debt agreements. If cash flow is insufficient and refinancing or
additional financing is unavailable, we may be forced to default on our senior
notes and other debt obligations. In the event of a default under the terms of
any of our indebtedness, the debt holders may accelerate the maturity of our
obligations, which could cause defaults under our other obligations.
Our ability to repay our debt depends upon the performance of our
subsidiaries. Almost all of our operations are conducted through our
subsidiaries and other affiliates. As a result, we depend almost entirely upon
their earnings and cash flow to service our indebtedness, including our ability
to pay the interest on and principal of our senior notes. The non-recourse
project financing agreements of certain of our subsidiaries and other affiliates
generally restrict their ability to pay dividends, make distributions or
otherwise transfer funds to us prior to the payment of other obligations,
including operating expenses, debt service and reserves.
Our subsidiaries and other affiliates are separate and distinct legal
entities and have no obligation to pay any amounts due on our senior notes, and
do not guarantee the payment of interest on or principal of these notes. The
right of our senior note holders to receive any assets of any of our
subsidiaries or other affiliates upon our liquidation or reorganization will be
subordinated to the claims of any subsidiaries' or other affiliates' creditors
(including trade creditors and holders of debt issued by our subsidiaries or
affiliates). As of December 31, 1999, our subsidiaries had $365.7 million of
non-recourse project financing. We intend to utilize non-recourse project
financing, when appropriate in the future, and this financing will be
effectively senior to our senior notes.
F-17
<PAGE> 50
While the indentures impose limitations on our ability and the ability of
our subsidiaries to incur additional indebtedness, the indentures do not limit
the amount of non-recourse project financing that our subsidiaries may incur to
finance the acquisition and development of new power generation facilities.
We may be unable to secure additional financing in the future. Each power
generation facility that we acquire or develop will require substantial capital
investment. Our ability to arrange financing and the cost of the financing are
dependent upon numerous factors. These factors include:
- 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 in us,
- the continued success of our current power generation facilities, and
- provisions of tax and securities laws that are conducive to raising
capital.
Financing for new facilities may not be available to us on acceptable terms
in the future. We have financed our existing power generation facilities using a
variety of leveraged financing structures, primarily consisting of senior
unsecured indebtedness, non-recourse project financing and lease obligations. As
of December 31, 1999, we had approximately $2.1 billion of total consolidated
indebtedness, $365.7 million of non-recourse project financing, and $110.8
million of notes payable. Each non-recourse project financing and lease
obligation is structured to be fully paid out of cash flow provided by the
facility or facilities. In the event of a default under a financing agreement
which we do not cure, the lenders or lessors would generally have rights to the
facility and any related assets. In the event of foreclosure after a default, we
might not retain any interest in the facility. While we intend to utilize
non-recourse or lease financing when appropriate, market conditions and other
factors may prevent similar financing for future facilities. We do not believe
the existence of non-recourse or lease financing will significantly affect our
ability to continue to borrow funds in the future in order to finance new
facilities. However, it is possible that we may be unable to obtain the
financing required to develop our power generation facilities on terms
satisfactory to us.
We have from time to time guaranteed certain obligations of our
subsidiaries and other affiliates. Our lenders or lessors may also require us to
guarantee the indebtedness for future facilities. This would render our general
corporate funds vulnerable in the event of a default by the facility or related
subsidiary. Additionally, our indentures may restrict our ability to guarantee
future debt, which could adversely affect our ability to fund new facilities.
Our indentures do not limit the ability of our subsidiaries to incur
non-recourse or lease financing for investment in new facilities.
Revenue under some of our power sales agreements may be reduced
significantly upon their expiration or termination. Most of the electricity we
generate from our existing portfolio is sold under long-term power sales
agreements that expire at various times. When the terms of each of these power
sales agreements expire, it is possible that the price paid to us for the
generation of electricity may be reduced significantly, which would
substantially reduce our revenue under such agreements.
Our power project development and acquisition activities may not be
successful. The development of power generation facilities is subject to
substantial risks. In connection with the development of a power generation
facility, we must generally obtain:
- necessary power generation equipment,
- governmental permits and approvals,
- fuel supply and transportation agreements,
- sufficient equity capital and debt financing,
F-18
<PAGE> 51
- electrical transmission agreements, and
- site agreements and construction contracts.
We may be unsuccessful in accomplishing any of these matters or in doing so
on a timely basis. In addition, project development is subject to various
environmental, engineering and construction risks relating to cost-overruns,
delays and performance. Although we may attempt to minimize the financial risks
in the development of a project by securing a favorable power sales agreement,
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 us to expend significant sums for preliminary engineering,
permitting and legal and other expenses before we can determine whether a
project is feasible, economically attractive or financeable. If we were unable
to complete the development of a facility, we would generally not be able to
recover our investment in the project. 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. We cannot assure you that we will be successful in
the development of power generation facilities in the future.
We have grown substantially in recent years as a result of acquisitions of
interests in power generation facilities and steam fields. We believe that
although the domestic power industry is undergoing consolidation and that
significant acquisition opportunities are available, we are likely to confront
significant competition for acquisition opportunities. In addition, we may be
unable to continue to identify attractive acquisition opportunities at favorable
prices or, to the extent that any opportunities are identified, we may be unable
to complete the acquisitions.
Our projects under construction may not commence operation as
scheduled. The commencement of operation of a newly constructed power generation
facility 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 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. The insurance, warranties or performance guarantees, however, may not be
adequate to cover lost revenues or increased expenses. 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 losing our interest in a power generation facility.
In addition, power sales agreements entered into with a utility early in
the development phase of a project may enable the utility to terminate the
agreement, or to retain security posted as liquidated damages, if a project
fails to achieve commercial operation or certain operating levels by specified
dates or fails to make specified payments. In the event a termination right is
exercised, the default provisions in a financing agreement may be triggered
(rendering such debt immediately due and payable). As a result, the project may
be rendered insolvent and we may lose our interest in the project.
Our power generation facilities may not operate as planned. Upon completion
of our projects currently under construction, we will operate 44 of the 54 power
plants in which we will have an interest. The continued operation of power
generation facilities 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.
Although from time to time our power generation facilities have experienced
equipment breakdowns or failures, these breakdowns or failures have not had a
significant effect on the operation of the facilities or on our results of
operations. As of December 31, 1999, our gas-fired and geothermal power
generation facilities have operated at an average availability of approximately
95% and 95%, respectively. Although our facilities contain various redundancies
and back-up mechanisms, a breakdown or
F-19
<PAGE> 52
failure may prevent the affected facility from performing under applicable power
sales agreements. In addition, although insurance is maintained to protect
against operating risks, the proceeds of insurance may not be adequate to cover
lost revenues or increased expenses. As a result, we could be unable to service
principal and interest payments under our financing obligations which could
result in losing our interest in the power generation facility.
Our geothermal energy reserves may be inadequate for our operations. 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,
- operating expenses relating to the extraction of fluids,
- price levels relating to the extraction of fluids, and
- capital expenditure requirements relating primarily to the drilling of
new wells.
In connection with each geothermal power plant, we estimate the
productivity of the geothermal resource and the expected decline in
productivity. The productivity of a geothermal resource may decline more than
anticipated, resulting in insufficient reserves being available for sustained
generation of the electrical power capacity desired. An incorrect estimate by us
or an unexpected decline in productivity could lower our results of operations.
Geothermal reservoirs are highly complex. 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 ours. 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 we have
extensive experience in the operation and development of geothermal energy
resources and in preparing such estimates, we cannot assure you that we will be
able to successfully manage the development and operation of our geothermal
reservoirs or that we will accurately estimate the quantity or productivity of
our steam reserves.
We depend on our electricity and thermal energy customers. A majority of
our power generation facilities currently rely on one or more power sales
agreements with one or more utilities or other customers for all or
substantially all of such facility's revenue. In addition, sales of electricity
to two utility customers during 1999, PG&E and Texas Utilities Electric Company,
comprised approximately 47% of our total revenue that year. The loss of any one
power sales agreement with any of these customers could have a negative effect
on our results of operations. In addition, any material failure by any customer
to fulfill its obligations under a power sales agreement could have a negative
effect on the cash flow available to us and on our results of operations.
We are subject to complex government regulation which could adversely
affect our operations. Our 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 we believe that we have obtained the
requisite approvals for our existing operations and that our business is
operated in accordance with applicable laws, we remain subject to a varied and
complex body of laws and regulations that both public officials and private
individuals may seek to enforce. Existing laws and regulations may be revised or
new laws and regulations may become applicable to us that may have a negative
effect on our business and results of
F-20
<PAGE> 53
operations. We may be unable to obtain all necessary licenses, permits,
approvals and certificates for proposed projects, and completed facilities may
not 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. Intricate and changing environmental and
other regulatory requirements may necessitate substantial expenditures to obtain
permits. If a project is unable to function as planned due to changing
requirements or local opposition, it may create expensive delays or significant
loss of value in a project.
Our operations are potentially 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 1935, as
amended ("PUHCA"), 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, we are not subject to regulation as a holding
company under PUHCA, and will not be subject to such regulation as long as the
plants in which we have an interest (1) qualify as QFs, (2) are subject to
another exemption or waiver or (3) qualify as exempt wholesale generators
("EWG") under the Energy Policy Act of 1992. In order to be a QF, a facility
must be not more than 50% owned by an electric utility company or electric
utility holding company. In addition, a QF that is a cogeneration facility, such
as the plants in which we currently have interests, must produce electricity as
well as thermal energy for use in an industrial or commercial process in
specified minimum proportions. The QF also must meet certain minimum energy
efficiency standards. Generally, any geothermal power facility which produces up
to 80 megawatts of electricity and meets PURPA ownership requirements is
considered a QF.
If any of the plants in which we have an interest lose their QF status or
if amendments to PURPA are enacted that substantially reduce the benefits
currently afforded QFs, we could become a public utility holding company, which
could subject us to significant federal, state and local regulation, including
rate regulation. If we become a holding company, which could be deemed to occur
prospectively or retroactively to the date that any of our plants loses its QF
status, all our other power plants could 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
particular power purchase 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. If a power purchaser were to cease taking and paying for
electricity or seek to obtain refunds of past amounts paid, there can be no
assurance that the costs incurred in connection with the project could be
recovered through sales to other purchasers. Such events could adversely affect
our ability to service our indebtedness, including our senior notes. See
"Business -- Government Regulation -- Federal Energy Regulation -- Federal Power
Act Regulation."
Currently, Congress is considering proposed legislation that would amend
PURPA by eliminating the requirement that utilities purchase electricity from
QFs at prices based on avoided costs of energy. We do not know whether this
legislation will be passed or, if passed, what form it may take. We cannot
provide assurance that any legislation passed would not adversely affect our
existing domestic projects.
In addition, many states are implementing or considering regulatory
initiatives designed to increase competition in the domestic power generation
industry and increase access to electric utilities' transmission and
distribution systems for independent power producers and electricity consumers.
In particular, the state of California has restructured its electric industry by
providing for a phased-in competitive power generation industry, with a power
pool and an independent system operator, and for direct access to generation for
all power purchasers outside the power exchange under certain circumstances.
Although existing QF power sales contracts are to be honored under such
restructuring, and all of our California operating projects are QFs, until the
new system is fully implemented, it is impossible to predict what impact, if
any, it may have on the operations of those projects.
We may be unable to obtain an adequate supply of natural gas in the
future. To date, our fuel acquisition strategy has included various combinations
of our own gas reserves, gas prepayment contracts and short-, medium- and
long-term supply contracts. In our gas supply arrangements, we attempt to match
the
F-21
<PAGE> 54
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. We
believe that there will be adequate supplies of natural gas available at
reasonable prices for each of our facilities when current gas supply agreements
expire. However, gas supplies may not be available for the full term of the
facilities' power sales agreements, and gas prices may 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 negative impact on our
results of operations.
Competition could adversely affect our performance. The power generation
industry is characterized by intense competition. We encounter 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. This competition has contributed to a reduction in electricity
prices. In addition, many states have implemented or are considering regulatory
initiatives designed to increase competition in the domestic power industry.
This competition has put pressure on electric utilities to lower their costs,
including the cost of purchased electricity.
Our international investments may face uncertainties. We have one
investment in geothermal steam fields located in Mexico and may pursue
additional international investments. International investments are subject to
unique risks and uncertainties relating to the political, social and economic
structures of the countries in which we invest. 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.
We depend on our senior management. Our success is largely dependent on the
skills, experience and efforts of our senior management. The loss of the
services of one or more members of our senior management could have a negative
effect on our business, financial results and future growth.
Seismic disturbances could damage our projects. Areas where we operate and
are developing many of our geothermal and gas-fired projects are subject to
frequent low-level seismic disturbances. More significant seismic disturbances
are possible. Our existing power generation facilities are built to withstand
relatively significant levels of seismic disturbances, and we believe we
maintain adequate insurance protection. However, earthquake, property damage or
business interruption insurance may be inadequate to cover all potential losses
sustained in the event of serious seismic disturbances. Additionally, insurance
may not continue to be available to us on commercially reasonable terms.
Our results are subject to quarterly and seasonal fluctuations. Our
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:
- the timing and size of acquisitions,
- the completion of development projects, and
- variations in levels of production.
Additionally, because we receive the majority of capacity payments under
some of our power sales agreements during the months of May through October, our
revenues and results of operations are, to some extent, seasonal.
F-22
<PAGE> 55
The price of our common stock is volatile. The market price for our common
stock has been volatile in the past, and several factors could cause the price
to fluctuate substantially in the future. These factors include:
- announcements of developments related to our business,
- fluctuations in our results of operations,
- sales of substantial amounts of our securities into the marketplace,
- general conditions in our industry or the worldwide economy,
- an outbreak of war or hostilities,
- a shortfall in revenues or earnings compared to securities analysts'
expectations,
- changes in analysts' recommendations or projections, and
- announcements of new acquisitions or development projects by us.
The market price of our common stock may fluctuate significantly in the
future, and these fluctuations may be unrelated to our performance. General
market price declines or market volatility in the future could adversely affect
the price of our common stock, and the current market price may not be
indicative of future market prices.
YEAR 2000 COMPLIANCE
The "Year 2000 problem" refers to the fact that some computer hardware,
software and embedded systems were designed to read and store dates using only
the last two digits of the year. The problem is further complicated by the fact
that year 2000 is a leap year and computer systems may fail to recognize it as
such.
We have coordinated our efforts to address the Year 2000 problem through a
Year 2000 Project Team comprised of representatives from each business unit and
our Year 2000 Project Office. The Year 2000 Project Office has been charged with
addressing additional Year 2000 related issues including, but not limited to,
business continuation and other contingency planning.
In addition, we have been working with the Electric Power Research
Institute, a consortium of power companies, including investor-owned utilities,
to coordinate vendor contacts and product evaluation. Because many embedded
systems are similar across utilities, we believe that this concerted effort
helped to reduce total time expended in this area and helped to ensure that our
efforts were consistent with the efforts and practices of other power companies
and utilities.
As of February 4, 2000, we are not aware of any Year 2000 problem in any of
our critical corporate applications, non-information technology/embedded
systems, end-user computing systems or business partners' and vendors' systems.
In addition, we have not received any notification from any of our critical
business partners or vendors of any Year 2000-related disruption in their
business. However, the success to date of our Year 2000 efforts and the efforts
of our critical third party vendors or business partners cannot guarantee that
there will not be a material adverse effect on our business should a Year 2000
problem manifest or become apparent in the future.
Costs. The costs of expected modifications were estimated at approximately
$1.7 million, which were charged to expense as incurred. For the year ended
December 31, 1999, approximately $529,000 was charged to expense. Any remaining
costs to be incurred in 2000 will not be material, and will be funded through
operating cash flow.
Risks. Although we have not experienced and do not foresee having a Year
2000 problem, if our systems encounter unforeseen Year 2000 problems, or if one
or more of our significant third party business partners or vendors is unable to
provide services due to a Year 2000 problem, we could experience a disruption of
operations resulting in increased operating costs, loss of revenues and other
adverse effects, but we do not
F-23
<PAGE> 56
expect any of these circumstances will have a material adverse effect on our
financial position or results of operations.
FINANCIAL MARKET RISKS
From time to time, we use interest rate swap agreements to mitigate our
exposure to interest rate fluctuations. We do not use derivative financial
instruments for speculative or trading purposes. The following table summarizes
the fair market value of our existing interest rate swap agreements as of
December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
NOTIONAL WEIGHTED
PRINCIPAL AVERAGE FAIR
MATURITY DATE AMOUNT INTEREST RATE MARKET VALUE
------------- --------- ------------- ------------
<S> <C> <C> <C>
2000..................................... $ 22,900 8.2% $ (195)
2001..................................... 20,000 5.5% 225
2009..................................... 65,000 6.1% 3,725
2011..................................... 63,860 6.9% 202
2013..................................... 73,095 7.2% (461)
2014..................................... 76,738 6.7% 1,235
-------- --- ------
Total............................. $321,593 6.8% $4,731
======== === ======
</TABLE>
Short-term investments. As of December 31, 1999, we have short-term
investments of $230.7 million. These short-term investments consist of highly
liquid investments with maturities less than three months. These investments are
subject to interest rate risk and will increase in value if market interest
rates increase. We have the ability to hold these investments to maturity, and
as a result, we would not expect the value of these investments to be affected
to any significant degree by the effect of a sudden change in market interest
rates. Declines in interest rates over time will reduce our interest income.
Outstanding debt. As of December 31, 1999, we have outstanding debt of
approximately $2.1 billion primarily made up of $1.6 billion of senior notes,
$365.7 million of non-recourse project financing, $122.8 million in borrowings
under lines of credit, and $13.4 million of notes payable. As of December 31,
1999, our non-recourse project financing had a floating interest rate of 6.11%.
Our outstanding long-term Senior Notes as of December 31, 1999 are as follows
(in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
MATURITY DATE AMOUNT INTEREST RATE MARKET VALUE
------------- ---------- ------------- ------------
<S> <C> <C> <C>
2004................................... $ 105,000 9 1/4% $ 106,050
2006................................... 171,750 10 1/2% 180,939
2006................................... 250,000 7 5/8% 238,050
2007................................... 275,000 8 3/4% 275,963
2008................................... 400,000 7 7/8% 384,600
2009................................... 350,000 7 3/4% 320,950
---------- ----------
Total........................... $1,551,750 $1,506,552
========== ==========
</TABLE>
Gas price fluctuations. We enter into derivative commodity instruments to
hedge our exposure to the impact of price fluctuations on gas purchases. Such
instruments include regulated natural gas contracts and over-the-counter swaps
and basis hedges with major energy derivative product specialists. All hedge
transactions are subject to our risk management policy which does not permit
speculative positions. These transactions are accounted for under the hedge
method of accounting. Cash flows from derivative instruments are recognized as
incurred through changes in working capital.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of
F-24
<PAGE> 57
the Effective Date of FASB Statement No. 133 -- an Amendment of FASB Statement
No. 133". The Statement amends SFAS No. 133 to defer its effective date to all
fiscal quarters of all fiscal years beginning after June 15, 2000. We have not
yet completed our analysis of the impact of adopting SFAS No. 133 on the
financial statements and have not determined the timing of or method of the
adoption of SFAS No. 133. However, the Statement could increase the volatility
of our earnings.
F-25
<PAGE> 58
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors
and Stockholders of Calpine Corporation:
We have audited the accompanying consolidated balance sheets of Calpine
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Calpine Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Jose, California
January 31, 2000
F-26
<PAGE> 59
CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 349,371 $ 96,532
Accounts receivable, net of allowance of $3,343 and
$238................................................... 127,485 79,743
Inventories............................................... 16,417 14,194
Other current assets...................................... 33,135 19,034
---------- ----------
Total current assets.............................. 526,408 209,503
---------- ----------
Property, plant and equipment, net.......................... 2,866,447 1,094,303
Investments in power projects............................... 284,834 221,509
Project development costs................................... 24,018 17,001
Notes receivable............................................ 23,548 10,899
Restricted cash............................................. 43,615 14,454
Deferred financing costs.................................... 54,215 22,789
Other assets................................................ 168,521 138,488
---------- ----------
Total assets...................................... $3,991,606 $1,728,946
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit, current portion.......... $ 35,832 $ --
Non-recourse project financing, current portion........... 8,603 5,450
Notes payable, current portion............................ 3,035 --
Accounts payable.......................................... 84,353 53,190
Income taxes payable...................................... 8,835 --
Accrued payroll and related expenses...................... 24,345 9,588
Accrued interest payable.................................. 37,058 25,600
Other current liabilities................................. 73,250 28,751
---------- ----------
Total current liabilities......................... 275,311 122,579
---------- ----------
Borrowings under line of credit, net of current portion..... 86,918 --
Non-recourse project financing, net of current portion...... 357,137 114,190
Senior notes................................................ 1,551,750 951,750
Notes payable, net of current............................... 10,385 --
Deferred income taxes, net.................................. 291,458 159,788
Deferred lease incentive.................................... 64,245 67,814
Other liabilities........................................... 57,352 25,859
---------- ----------
Total liabilities................................. 2,694,556 1,441,980
---------- ----------
Commitments and contingencies (see Note 15).................
Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust................ 270,713 --
Minority interests.......................................... 61,705 --
---------- ----------
Stockholders' equity:
Preferred stock $0.001 par value per share; authorized
10,000,000 shares; none issued and outstanding in 1999
and 1998............................................... -- --
Common stock, $0.001 par value per share; authorized
100,000,000 shares; issued and outstanding 63,053,920
shares in 1999 and 40,323,162 shares in 1998........... 63 40
Additional paid-in capital................................ 751,404 168,854
Retained earnings......................................... 213,165 118,072
---------- ----------
Total stockholders' equity........................ 964,632 286,966
---------- ----------
Total liabilities and stockholders' equity........ $3,991,606 $1,728,946
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-27
<PAGE> 60
CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Electricity and steam sales.............................. $760,325 $507,897 $237,277
Service contract revenue................................. 43,773 20,249 10,177
Income from unconsolidated investments in power
projects.............................................. 36,593 25,240 15,819
Interest income on loans to power projects............... 1,226 2,562 13,048
Other revenue............................................ 5,818 -- --
-------- -------- --------
Total revenue.................................... 847,735 555,948 276,321
-------- -------- --------
Cost of revenue:
Fuel expenses............................................ 268,734 181,593 44,558
Plant operating expenses................................. 118,334 74,486 27,808
Depreciation expense..................................... 82,812 73,988 47,501
Production royalties..................................... 13,767 10,714 10,803
Operating lease expenses................................. 33,594 17,129 14,031
Service contract expenses................................ 40,236 17,417 8,607
-------- -------- --------
Total cost of revenue............................ 557,477 375,327 153,308
-------- -------- --------
Gross profit.......................................... 290,258 180,621 123,013
Project development expenses............................... 10,712 7,165 7,537
General and administrative expenses........................ 53,044 26,780 18,289
-------- -------- --------
Income from operations................................ 226,502 146,676 97,187
Interest expense........................................... 91,162 86,726 61,466
Distributions on trust preferred securities................ 2,565 -- --
Interest income............................................ (24,106) (12,348) (14,285)
Other income............................................... (1,335) (1,075) (3,153)
-------- -------- --------
Income before provision for income taxes.............. 158,216 73,373 53,159
Provision for income taxes................................. 61,973 27,054 18,460
-------- -------- --------
Income before extraordinary charge.................... 96,243 46,319 34,699
Extraordinary charge net of tax benefit of $793, $441 and
$--...................................................... 1,150 641 --
-------- -------- --------
Net income............................................ $ 95,093 $ 45,678 $ 34,699
======== ======== ========
Basic earnings per common share:
Weighted average shares of common stock outstanding...... 52,328 40,242 39,892
Income before extraordinary charge....................... $ 1.84 $ 1.15 $ 0.87
Extraordinary charge..................................... $ (0.02) $ (0.01) $ --
Net income............................................... $ 1.82 $ 1.14 $ 0.87
Diluted earnings per common share:
Weighted average shares of common stock outstanding...... 55,661 42,328 42,032
Income before extraordinary charge....................... $ 1.73 $ 1.09 $ 0.83
Extraordinary charge..................................... $ (0.02) $ (0.01) $ --
Net income............................................... $ 1.71 $ 1.08 $ 0.83
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-28
<PAGE> 61
CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1996....................... $40 $165,392 $ 37,695 $203,127
Issuance of 434,610 shares of common stock,
net......................................... -- 1,022 -- 1,022
Tax benefit from stock options exercised and
other....................................... -- 1,108 -- 1,108
Net income..................................... -- -- 34,699 34,699
--- -------- -------- --------
Balance, December 31, 1997....................... 40 167,522 72,394 239,956
--- -------- -------- --------
Issuance of 201,752 shares of common stock,
net......................................... -- 1,110 -- 1,110
Tax benefit from stock options exercised and
other....................................... -- 222 -- 222
Net income..................................... -- -- 45,678 45,678
--- -------- -------- --------
Balance, December 31, 1998....................... 40 168,854 118,072 286,966
--- -------- -------- --------
Issuance of 22,730,758 shares of common stock,
net......................................... 23 576,573 -- 576,596
Tax benefit from stock options exercised and
other....................................... -- 5,977 -- 5,977
Net income..................................... -- -- 95,093 95,093
--- -------- -------- --------
Balance, December 31, 1999....................... $63 $751,404 $213,165 $964,632
=== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE> 62
CALPINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 95,093 $ 45,678 $ 34,699
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 87,210 74,285 46,819
Deferred income taxes, net.............................. 47,944 13,554 15,082
Income from unconsolidated investments in power
projects.............................................. (36,593) (25,240) (15,819)
Distributions from unconsolidated power projects........ 43,318 27,717 21,042
Loss on sale of assets.................................. 1,058 -- --
Change in operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable................................... (17,258) 10,172 7,249
Notes receivable...................................... (13,919) -- --
Other current assets.................................. (8,555) 24,012 (9,936)
Other assets.......................................... (9,153) (28,968) (13,203)
Accounts payable...................................... 15,867 (4,913) 6,787
Accrued expenses...................................... 59,000 22,397 10,677
Other liabilities..................................... 71 5,885 3,156
----------- --------- ---------
Net cash provided by operating activities.......... 264,083 164,579 106,553
----------- --------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment.............. (929,723) (98,220) (107,094)
Proceeds from sale and leaseback of plant................. 71,236 559 --
Acquisitions, net of cash acquired........................ (540,587) (305,263) (209,639)
Advances to joint ventures................................ (18,111) -- --
Decrease (increase) in notes receivable................... 1,270 18,967 (120,604)
Maturities of collateral securities....................... 1,850 6,030 5,350
Project development costs................................. (77,568) (23,206) (11,938)
Decrease in restricted cash............................... 1,216 1,130 43,675
----------- --------- ---------
Net cash used in investing activities.............. (1,490,417) (400,003) (400,250)
----------- --------- ---------
Cash flows from financing activities:
Borrowings from line of credit............................ -- -- 14,300
Repayment of borrowings from line of credit............... -- -- (14,300)
Borrowings from non-recourse project financing............ 155,760 57,874 131,600
Repayments of non-recourse project financing.............. (123,386) (162,145) (144,529)
Proceeds from notes payable and short-term borrowings..... 163,675 -- --
Repayments of notes payable and short-term borrowings..... (129,721) -- (7,131)
Proceeds from issuance of Senior Notes.................... 600,000 400,000 275,000
Repurchase of Senior Notes................................ -- (8,250) --
Proceeds from Company-obligated mandatorily redeemable
convertible preferred securities of a subsidiary
trust................................................... 276,000 -- --
Proceeds from equity offerings............................ 597,368 -- --
Proceeds from issuance of common stock.................... 2,939 1,110 1,022
Write-off of deferred financing costs..................... 1,943 -- --
Financing costs........................................... (65,405) (5,146) (9,722)
----------- --------- ---------
Net cash provided by financing activities.......... 1,479,173 283,443 246,240
----------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 252,839 48,019 (47,457)
Cash and cash equivalents, beginning of period.............. 96,532 48,513 95,970
----------- --------- ---------
Cash and cash equivalents, end of period.................... $ 349,371 $ 96,532 $ 48,513
=========== ========= =========
Cash paid during the year for:
Interest.................................................. $ 117,376 $ 71,971 $ 42,746
Income taxes.............................................. $ 16,116 $ 2,167 $ 9,795
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE> 63
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. ORGANIZATION AND OPERATIONS OF THE COMPANY
Calpine Corporation ("Calpine"), a Delaware corporation, and subsidiaries
(collectively, the "Company") is engaged in the generation of electricity in the
United States. In pursuing this single business strategy, the Company is
involved in the development, acquisition, ownership and operation of power
generation facilities and the sale of electricity and its by-product, thermal
energy, primarily in the form of steam. The Company has ownership interests in
and operates gas-fired cogeneration facilities, gas fields, gathering systems
and gas pipelines, geothermal steam fields and geothermal power generation
facilities in northern California, Washington, Texas, Illinois, Oklahoma and
various locations on the East Coast. Each of the generation facilities produces
and markets electricity for sale to utilities and other third party purchasers.
Thermal energy produced by the gas-fired cogeneration facilities is primarily
sold to governmental and industrial users.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The accompanying consolidated financial
statements include accounts of the Company. Wholly-owned and majority-owned
subsidiaries are consolidated. Less-than-majority-owned subsidiaries and
subsidiaries for which control is deemed to be temporary, are accounted for
using the equity method. For equity method investments, the Company's share of
income is calculated according to the Company's equity ownership or according to
the terms of the appropriate partnership agreement (see Note 4). All significant
intercompany accounts and transactions are eliminated in consolidation. Prior to
the Company's acquisition of Unocal's interest in its Geysers geothermal
properties on March 19, 1999, the Company used the proportionate consolidation
method to account for Thermal Power Company's ("TPC's") 25% ownership in jointly
owned geothermal properties.
Use of Estimates in Preparation of Financial Statements -- The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The most significant estimates with regard to these
financial statements relate to future development costs and useful lives of the
generation facilities (see Property, Plant and Equipment, net).
Cash and Cash Equivalents -- The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The carrying amount of these instruments approximates fair value
because of their short maturity.
Inventories -- Operating supplies are valued at the lower of cost or
market. Cost for large replacement parts estimated to be used within one year is
determined using the specific identification method. For the remaining supplies
and spare parts, cost is determined using the weighted average cost method.
Property, Plant and Equipment, net -- Property, plant and equipment, net
are stated at cost less accumulated depreciation and amortization.
The Company capitalizes costs incurred in connection with the development
of geothermal properties, including costs of drilling wells and overhead
directly related to development activities, together with the costs of
production equipment, the related facilities and the operating power plants.
Proceeds from the sale of geothermal properties are applied against capitalized
costs, with no gain or loss recognized.
Geothermal costs, including an estimate of future development costs to be
incurred and the estimated costs to dismantle, are amortized by the units of
production method based on the estimated total productive output over the
estimated useful lives of the related steam fields. Depreciation of the
buildings and roads is
F-31
<PAGE> 64
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
computed using the straight-line method over their estimated useful lives. It is
reasonably possible that the estimate of useful lives, total units of production
or total capital costs to be amortized using the units of production method
could differ materially in the near term from the amounts assumed in arriving at
current depreciation expense. These estimates are affected by such factors as
the ability of the Company to continue selling electricity to customers at
estimated prices, changes in prices of alternative sources of energy such as
hydro-generation and gas, and changes in the regulatory environment.
Gas-fired power production facilities include cogeneration plants and
related equipment and are stated at cost. Depreciation is recorded utilizing the
straight-line method over the estimated original useful life of up to 38 years.
The value of the above-market pricing provided in power sales agreements
acquired is recorded in property, plant and equipment, net and is amortized over
the above-market pricing period in the power sales agreement with lives of 3 to
23 years. When assets are disposed of, the cost and related accumulated
depreciation are removed from the accounts, and the resulting gains or losses
are included in results of operations.
As of December 31, 1999 and 1998, the components of property, plant and
equipment, net are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Geothermal properties............................... $ 366,059 $ 312,139
Oil and gas properties.............................. 214,794 --
Buildings, machinery and equipment.................. 1,215,063 653,865
Power sales agreements.............................. 145,957 145,957
Gas contracts....................................... 122,593 122,561
Other assets........................................ 78,735 18,955
---------- ----------
2,143,201 1,253,477
Less: accumulated depreciation and amortization..... (227,059) (203,984)
---------- ----------
1,916,142 1,049,493
Land................................................ 3,419 1,590
Construction in progress............................ 946,886 43,220
---------- ----------
Property, plant and equipment, net.................. $2,866,447 $1,094,303
========== ==========
</TABLE>
Construction in progress is primarily attributable to the projects under
development during 1999 and 1998.
Capitalized Interest -- The Company capitalizes interest on projects during
the development and construction period. For the years ended December 31, 1999,
1998 and 1997 the Company capitalized $47.3 million, $7.0 million and $6.2
million, respectively, of interest in connection with the development and
construction of power plants.
Project Development Costs -- The Company capitalizes project development
costs once it is determined that it is probable that such costs will be realized
through the ultimate construction of a power plant. These costs include
professional services, salaries, permits and other costs directly related to the
development of a new project. Outside services and other third party costs are
capitalized for acquisition projects. Upon the start-up of plant operations or
the completion of an acquisition, these costs are generally transferred to
property, plant and equipment and amortized over the estimated useful life of
the project. Capitalized project costs are charged to expense if the Company
determines that the project is impaired.
Restricted Cash -- The Company is required to maintain cash balances that
are restricted by provisions of its debt agreements, lease agreements and by
regulatory agencies. The Company's debt agreements specify
F-32
<PAGE> 65
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
restrictions based on debt service payments and drilling costs. Regulatory
agencies require cash to be restricted to ensure that funds will be available to
restore property to its original condition. Restricted cash is invested in
accounts earning market rates; therefore, the carrying value approximates fair
value. Such cash is excluded from cash and cash equivalents for the purposes of
the consolidated statements of cash flows.
Deferred Financing Costs -- Costs incurred in connection with obtaining
financing are deferred and amortized using the effective interest rate method.
The amortization periods range from 4 to 24 years.
Stock Split -- On September 20, 1999, the Board of Directors authorized a
two-for-one stock split of the Company's common stock, in the form of a stock
dividend, effective October 7, 1999, payable to stockholders of record on
September 28, 1999. Par value remains at $0.001 per share as a result of
transferring $27,000 to common stock from additional paid-in capital,
representing the aggregate par value of the shares issued under the stock split.
All references to the number of common shares and the per common share amounts
have been restated to give retroactive effect to the stock split for all periods
presented.
Revenue Recognition -- Revenue from electricity and steam sales is
recognized upon transmission to the customer. Revenues from contracts entered
into or acquired since May 1992 are recognized at the lesser of amounts billable
under the contract or amounts recognizable at an average rate over the term of
the contract. The Company's power sales agreements related to Calpine Geysers
Company ("CGC") were entered into prior to May 1992. Had the Company applied the
methodology described above to the CGC power sales agreements, the revenues
recorded for the years ended December 31, 1999 would have been approximately
$24.2 million higher and the revenues for the years ended December 31, 1998 and
1997 would have been approximately $4.7 million and $20.1 million lower,
respectively.
Calpine Gilroy Cogen, LP ("Gilroy") has a long-term power purchase
agreement ("PPA") with Pacific, Gas and Electric Company ("PG&E") for the sale
of energy through 2018. The terms of the PPA provided for 120 megawatts of firm
capacity and a bonus payment. On December 2, 1999, the California Public
Utilities Commission approved the termination of the PPA between Gilroy and
PG&E. Under terms of the termination, PG&E and Gilroy are each released from any
further performance under the PPA effective November 1, 2002. PG&E is obligated
to pay Gilroy a maximum nominal total of $303.6 million for firm, bonus and as
delivered capacity, which consists of 140 monthly termination payments not to
exceed $20.7 million per year, from February 2002 to September 2014. Gilroy will
record a portion of the present value of the monthly termination payments in
each month following September 1999 through August 2002 as revenue.
The Company performs operations and maintenance services for some of the
projects in which it has an interest. Revenue from investees is recognized as
service contract revenue on these contracts when the services are performed.
The Company also recognizes revenue from power marketing activities through
its wholly owned subsidiary, Calpine Power Services Company ("CPSC"). Revenue
generated from CPSC through sales of purchased power to third parties is also
recorded as service contract revenue.
Revenue from the sale of crude oil is recognized upon the passage of title,
net of royalties. Revenue from natural gas production is recognized using the
sales method, net of royalties.
Oil and Gas Properties -- The Company follows the successful efforts method
of accounting for oil and natural gas operations. Under the successful efforts
method, capitalized costs relating to proved properties are amortized using the
units-of-production method based on estimated proven reserves. The cost of
unsuccessful exploration wells is charged to operations.
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash,
accounts receivable and notes receivable. The
F-33
<PAGE> 66
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Company's cash accounts are generally held in FDIC insured banks. The Company's
accounts and notes receivable are concentrated within entities engaged in the
energy industry, mainly within the United States (see Note 13). The Company
generally does not require collateral for accounts receivable.
Derivative Financial Instruments -- The Company engages in activities to
manage risks associated with changes in interest rates. The Company has entered
into swap agreements to reduce exposure to interest rate fluctuations. The
instruments' cash flows mirror those of the underlying exposure. Unrealized
gains and losses relating to the instruments are being deferred over the lives
of the contracts. The premiums paid on the instruments, as measured at
inception, are being amortized over their respective lives as components of
interest expense. Any gains or losses realized upon the early termination of
these instruments are being amortized over the respective lives of the
underlying transaction or recognized immediately if the transaction is
terminated earlier than initially anticipated. Gains and losses on any
instruments not meeting the above criteria would be recognized in income in the
current period. Subsequent gains or losses on the related financial instrument
are recognized in income in each period until the instrument matures, is
terminated or is sold. Cash flows from swap contracts accounted for as hedges
are classified in the same category as the item being hedged.
Power Marketing and Oil and Gas Operations -- The Company, through its
wholly owned subsidiary CPSC, markets power and energy services to utilities,
wholesalers, and end users. CPSC provides these services by entering into
contracts to purchase or supply electricity at specified delivery points and
specified future dates. In some cases, CPSC utilizes financial instruments to
manage its exposure to electricity price fluctuations. On December 31, 1999,
CPSC held swap contracts with several entities in order to hedge electricity
prices. Additionally, the Company or its subsidiaries in some cases uses
financial instruments to manage its exposure to oil and gas price fluctuations.
At December 31, 1999, the Company had positions with a net fair value of
$440,000 to protect the Company against the risks of fluctuating market prices.
The Company actively manages its positions, and it is the Company's policy to
not have any speculative positions. Net gains and losses related to commodity
swap contracts are recognized when realized. The Company's credit risk
associated with power and fuel contracts results from the risk-of-loss on
non-performance by counter parties. The Company reviews and assesses counter
party risk to limit any material impact to its financial position and results of
operations. The Company does not anticipate non-performance by the counter
parties.
New Accounting Pronouncements -- In June 1999, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133 -- an
Amendment of FASB Statement No. 133". The Statement amends SFAS No. 133 to defer
its effective date to all fiscal quarters of all fiscal years beginning after
June 15, 2000. The Company has not yet completed its analysis on the impact of
adopting SFAS No. 133 on the financial statements and has not determined the
timing of or method of the adoption of SFAS No. 133. However, the Statement
could increase the volatility of the Company's earnings.
Reclassifications -- Certain prior years' amounts in the Consolidated
Financial Statements have been reclassified to conform to the 1999 presentation.
F-34
<PAGE> 67
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3. ACQUISITIONS AND SALE AND LEASEBACK TRANSACTIONS
The following acquisitions, accounted for as purchases, and the additional
investment in Aidlin were consummated during the year ended December 31, 1999:
Unocal Transaction
On March 19, 1999, the Company acquired Unocal Corporation's Geysers
geothermal steam fields in northern California for approximately $102.2 million.
The steam fields fuel the Company's power plants located at the Geysers,
California. See below.
PG&E Transactions
On May 7, 1999, the Company completed the acquisition of 12 Sonoma County
and 2 Lake County power plants, located at the Geysers, California from Pacific
Gas & Electric Company ("PG&E") for approximately $212.8 million. These plants
have a combined capacity of approximately 694 megawatts of electricity. All of
the electricity generated from these facilities is sold into the California
energy market, with the exception of megawatts sold under an agreement entered
into on April 29, 1999 with Commonwealth Energy Corporation as follows: 75
megawatts in 1999, 100 megawatts in 2000 and 125 megawatts in 2001 through June
2002.
Concurrently with the acquisition, the Company entered into a sale and
leaseback financing transaction for these facilities, as well as the Sonoma
power plant acquired from the Sacramento Municipal Utility District in 1998.
Under the terms of the lease, the Company received $18.5 million in net proceeds
and recorded a deferred gain of $15.2 million, which is being amortized as a
reduction of operating lease expense over the term of the lease through 2022
(See Note 15).
Aidlin Transaction
On August 31, 1999, the Company completed the acquisition of an additional
50% interest in the Aidlin Power Plant ("Aidlin") from Edison Mission Energy and
General Electric Capital Corporation for a total purchase price of $7.2 million.
The Company previously owned a 5% interest in Aidlin.
Calistoga and Silverado Transactions
On October 19, 1999, the Company purchased the Calistoga Power Plant, the
Silverado steam fields and related assets from FPL Energy and Caithness
Corporation for $77.9 million. Additionally, on November 5, 1999, the Company
entered into a sale and leaseback financing transaction for the Calistoga plant.
Under the terms of the agreement, the Company received $52.8 million in net
proceeds and did not record a deferred gain or loss. (See Note 15).
Calpine Natural Gas Company Transaction
On October 1, 1999, the Company completed the acquisition of Sheridan
Energy Inc. ("Sheridan"), a natural gas exploration and production company,
through a $38.8 million cash tender offer. The Company purchased the outstanding
shares of Sheridan's common stock for $5.50 per share. In addition, the Company
redeemed $11.9 million of outstanding preferred stock of Sheridan. Sheridan's
oil and gas properties are primarily located in Northern California and the Gulf
Coast region. Previously, the Company had acquired a 20% interest in Sheridan
California Energy, Inc. from Sheridan for $14.9 million. As a result of the two
aforementioned acquisitions, the Company now owns all of the assets of Sheridan
and included the results in its Consolidated Financial Statements at December
31, 1999. The Company subsequently renamed Sheridan as Calpine Natural Gas
Company ("CNGC"). The Company accounted for its investment in Sheridan under
F-35
<PAGE> 68
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
the equity method until October 1, 1999. From October 1, 1999 through December
31, 1999, the results of CNGC's operations are consolidated.
Cogeneration Corporation of America Transaction
On December 17, 1999, the Company completed the acquisition of 80% of the
common stock of Cogeneration Corporation of America, Inc. ("CGCA") for
approximately $137.3 million with the remaining 20% being owned by NRG Energy
Inc., a wholly owned subsidiary of Northern States Power. As a result of this
acquisition the Company received an ownership interest in six natural gas-fired
facilities totaling approximately 579 megawatts of capacity and has assumed
operations of five of the plants.
Vintage Transaction
On December 31, 1999, but effective as of November 1, 1999, the Company
acquired proven natural gas reserves and certain leasehold acreage from Vintage
Petroleum, Inc. ("Vintage") of Tulsa, Oklahoma for approximately $71.5 million.
The Company added the remaining 58.8% working interest in the Rio Vista Gas Unit
and certain development acreage to its northern California gas portfolio. This
new production utilizes the Company's Sacramento Basin gas pipeline system. The
Company initially acquired a 40.7% working interest in the Rio Vista Gas Unit in
October 1999 through its Sheridan acquisition.
Pro Forma Effects of Acquisitions
The table below reflects unaudited pro forma combined results of the
Company, Unocal, the power plants acquired from PG&E, Sheridan, Calistoga, CGCA
and Vintage as if the acquisitions had taken place at the beginning of fiscal
year 1999 and 1998 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Total revenue........................................ $1,057,270 $833,422
Income before extraordinary charge................... 119,817 66,802
Net income........................................... 118,667 66,161
Net income per basic share........................... 2.27 1.64
Net income per diluted share......................... $ 2.13 $ 1.56
</TABLE>
In management's opinion, these unaudited pro forma amounts are not
necessarily indicative of what the actual combined results of operations might
have been if the acquisitions had been effective at the beginning of fiscal year
1999 and 1998.
4. UNCONSOLIDATED INVESTMENTS
Investments, which are accounted for under the equity method, are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
OWNERSHIP --------------------
INTEREST 1999 1998
--------- -------- --------
<S> <C> <C> <C>
Tiverton Power Plant....................... 62.8% $ 44,853 $ 40,945
Rumford Power Plant........................ 66.7% 44,316 40,416
Aidlin Power Plant......................... 55% -- 2,635
Lost Pines Power Plant..................... 50% 41,609 --
Kennedy International Airport Power
Plant.................................... 50% 37,880 39,156
Dighton Power Plant........................ 50% 14,875 17,970
Grays Ferry................................ 40% 21,875 --
Stony Brook Power Plant.................... 50% 21,477 20,933
</TABLE>
F-36
<PAGE> 69
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
DECEMBER 31,
OWNERSHIP --------------------
INTEREST 1999 1998
--------- -------- --------
<S> <C> <C> <C>
Auburndale Power Plant..................... 50% 19,565 23,527
Gordonsville Power Plant................... 50% 16,496 16,197
Lockport Power Plant....................... 11.4% 12,406 11,858
Bayonne Power Plant........................ 7.5% 8,490 7,872
PowerRent.................................. 40% 741 --
Agnews Power Plant......................... 20% -- --
Sumas Power Plant.......................... (1) -- --
Other...................................... 251 --
-------- --------
Total Unconsolidated
Investments.................... $284,834 $221,509
======== ========
</TABLE>
- ---------------
(1) Refer to Footnote (1) of the table in Note 4 detailing the Company's income
and distributions from investments in unconsolidated power projects.
The combined results of operations and financial position of the Company's
equity method affiliates are summarized below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Condensed Statement of Operations:
Revenue.............................. $ 562,401 $ 495,123 $ 271,494
Gross profit......................... 245,314 214,382 73,438
Income from continuing operations.... 214,520 199,601 57,799
Net income........................... 113,837 108,563 30,264
Company's share of net income........ 36,593 25,240 15,819
Condensed Balance Sheet:
Current assets....................... 167,805 134,794 193,953
Non-current assets................... 1,387,130 1,240,172 1,499,501
Total assets......................... 1,554,935 1,374,966 1,693,454
Current liabilities.................. 122,742 110,957 200,613
Non-current liabilities.............. 1,087,329 994,570 1,076,309
Total liabilities.................... 1,210,071 1,105,527 1,276,922
</TABLE>
F-37
<PAGE> 70
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
The following details the Company's income and distributions from
investments in unconsolidated power projects (in thousands):
<TABLE>
<CAPTION>
INCOME FROM UNCONSOLIDATED
INVESTMENTS IN POWER PROJECTS DISTRIBUTIONS
------------------------------ ---------------------------
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Sumas Power Plant(1)..................... $21,779 $11,699 $ 8,565 $21,779 $11,699 $20,275
Gordonsville Power Plant................. 4,299 3,807 404 4,000 3,125 --
Lockport Power Plant..................... 4,255 3,628 200 3,741 3,297 767
Texas Cogeneration Company(4)............ -- 2,922 6,331 -- -- --
Bayonne Power Plant...................... 3,426 2,446 -- 2,808 2,701 --
Kennedy International Airport Power
Plant.................................. 1,968 1,159 (190) 3,350 4,100 --
Stony Brook Power Plant.................. 857 252 60 370 -- --
Aidlin Power Plant(3).................... 181 625 454 -- -- --
Sheridan................................. 163 -- -- -- -- --
Grays Ferry(2)........................... (3) -- -- -- -- --
Auburndale Power Plant................... (712) (1,377) (245) 3,250 2,475 --
Dighton Power Plant...................... 323 -- -- 3,810 -- --
Other.................................... 57 79 240 210 320 --
------- ------- ------- ------- ------- -------
Total.......................... $36,593 $25,240 $15,819 $43,318 $27,717 $21,042
======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) On December 31, 1998, the Partnership agreement governing Sumas Cogeneration
Company, L.P. ("Sumas") was amended changing the distributions schedule for
the Company from the previously amended agreement dated September 30, 1997.
The newly amended agreement adjusts the earnings the Company is entitled to
under that agreement from a variable payment schedule to a fixed payment
schedule. In 1997, the partnership agreement was amended changing the
distribution percentages to the partners. The Company's percentage share of
the project's cash flow was increased from 50% to approximately 70% through
June 30, 2001. Thereafter, the Company will receive 50% of the project's
cash flow until a 24.5% pre-tax rate of return on its original investment is
achieved, at which time the Company's equity interest in the partnership
will be reduced to 0.1%. As a result of the amendment of the partnership
agreement and the receipt of certain distributions during 1997, the
Company's investment in Sumas was reduced to zero. Because the investment
has been reduced to zero and there are no continuing obligations of the
Company related to Sumas, the Company expects that income recorded in future
periods will approximate the amount of cash received from partnership
distributions.
(2) On December 17, 1999, the Company acquired 80% of the common stock CGCA
which has a 50% partnership interest in the Grays Ferry Cogeneration
Partnership ("Grays Ferry") (see Note 3), with the remaining 50% partnership
interest being owned by Trigen Energy Corporation. Grays Ferry has
constructed a 150 MW cogeneration facility located in Philadelphia, which
began commercial operations in January 1998. Grays Ferry has a 25-year
contract to supply all the steam produced by the project to an affiliate of
Trigen through 2022 and two 20-year contracts to supply all of the
electricity produced by the project to PECO Energy Company through 2017.
(3) The Company completed the acquisition of an additional 50% interest in the
Aidlin Power Plant in August, 1999. As such, the Company has consolidated
the operations of the Aidlin Power Plant.
(4) The Company acquired the remaining 50% interest in Texas Cogeneration
Company ("TCC") in 1998 and thereafter has consolidated TCC's financial
results.
The Company provides deferred taxes to the extent that distributions exceed
earnings.
F-38
<PAGE> 71
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
5. REVOLVING CREDIT FACILITY AND LINES OF CREDIT
The Company maintains a credit facility of $100.0 million, which is
available through a consortium of commercial lending institutions led by The
Bank of Nova Scotia as agent. A maximum of $50.0 million of the credit facility
may be allocated to letters of credit. At December 31, 1999, the Company had no
borrowings and $28.8 million of letters of credit outstanding under the credit
facility. Borrowings bear interest at The Bank of Nova Scotia's base rate plus
an applicable margin or at LIBOR plus an applicable margin. Interest is paid on
the last day of each interest period for such loans. The credit facility
specifies that the Company maintain certain covenants, with which the Company
was in compliance as of December 31, 1999. Commitment fees related to this
credit facility are charged based on 0.375% of committed unused funds.
CGCA maintains a credit facility of $25.0 million with MeesPierson Capital
Corporation ("MeesPierson"). As of December 31, 1999, all of the available
credit under the facility was outstanding. Interest is variable based on, at the
Company's option, LIBOR plus a margin ranging from 1.50% to 1.875% or the prime
rate plus a margin ranging from 0.75% to 1.125%. At December 31, 1999, the
interest rate was 8.25%. The interest rate margin is dependent upon CGCA's debt
service ratio. Commitment fees of 0.375% accrue on any unused portion of the
facility. Borrowings are secured by the assets, capital stock and cash flows of
the Philadelphia Water Project, which was acquired as part of the acquisition of
CGCA (see Note 3), as well as the distributable cash flows of the Newark, Parlin
and the Grays Ferry Projects, as permitted by primary lenders of each project.
On November 3, 1999, the Company entered into a credit agreement for $1.0
billion through its wholly owned subsidiary Calpine Construction Finance Company
L.P. with a consortium of banks with the lead arranger being The Bank of Nova
Scotia and the lead arranger syndication agent being Credit Suisse First Boston.
The non-recourse credit facility will be utilized to finance the construction of
the Company's diversified portfolio of gas-fired power plants currently under
development. The Company currently intends to refinance this construction
facility in the long-term capital markets prior to its four-year maturity. As of
December 31, 1999, the Company had no borrowings outstanding under the facility.
Borrowings under this facility bear interest, at the Company's option, at the
prime commercial lending rate, the Federal Funds Rate plus 0.50% or LIBOR. The
credit facility specifies that the Company maintain certain covenants, with
which the Company was in compliance as of December 31, 1999. Costs associated
with the credit agreement have been deferred and will be amortized over the life
of the assets financed.
CNGC maintains a borrowing base facility of $24.5 million with Bank One,
Texas, N.A. ("Bank One"). As of December 31, 1999, CNGC had total borrowings
outstanding of $24.3 million with final maturity of December 31, 2001. CNGC may
elect to borrow at Bank One's stated rate, or LIBOR plus 2.5%, or a combination
thereof. At December 31, 1999, the interest rate was 8.6%. The facility is
secured by substantially all of CNGC's oil and gas properties and is repayable
through monthly payments of $350,000. The monthly payments are redetermined
every six months or at Bank One's discretion. The facility requires the
maintenance of certain covenants such as ratios relating to working capital, and
tangible net worth. CNGC was in compliance with all of the facility's covenants
as of December 31, 1999.
In conjunction with the acquisition of certain properties located in
California, Bank One extended a separate borrowing base facility of $74.6
million as of December 31, 1999, to Sheridan California Energy, Inc. ("SCEI"), a
wholly owned subsidiary of CNGC. As of December 31, 1999, there was $73.5
million outstanding under the SCEI facility with a final maturity of December
31, 2001. At December 31, 1999, the interest rate was 8.4%. The SCEI facility is
secured by substantially all of SCEI's oil and gas properties and is repayable
through monthly payments of $775,000. The monthly payments are redetermined
every six months or at Bank One's discretion. The SCEI facility is repayable
only by SCEI and is not an obligation of CNGC. The SCEI facility requires the
maintenance of certain covenants such as ratios relating to working capital, and
tangible net worth. SCEI was in compliance with all of the facility's covenants
as of December 31, 1999.
F-39
<PAGE> 72
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Costs incurred regarding the establishment of the CNGC and SCEI facilities
are deferred and amortized over the term of the facilities.
6. PROJECT FINANCING AND INTEREST RATE SWAP AGREEMENTS
The components of project financing as of December 31, 1999 and 1998 are
(in thousands):
<TABLE>
<CAPTION>
INTEREST
RATE(1) DECEMBER 31,
------------ -------------------
PROJECTS 1999 1998 FINAL MATURITY 1999 1998
-------- ---- ---- -------------- -------- --------
<S> <C> <C> <C> <C> <C>
Gilroy Power Plant(4)........................... -- 6.8% $ -- $119,640
Morris Power Plant(2)(4)........................ 7.50% -- 2004 85,622 --
Newark & Parlin Power Plants(2)(3)(4)........... 6.51% -- 2011 125,318 --
Pasadena Power Plant(4)......................... 5.58% 5.8% 2005 154,800 --
-------- --------
Total project financing............... 365,740 119,640
Less: current portion........................... 8,603 5,450
-------- --------
Long-term project financing..................... $357,137 $114,190
======== ========
</TABLE>
- ---------------
(1) Weighted average rate before giving effect to amortization of financing cost
or interest rate swaps.
(2) Debt assumed as part of the CGCA acquisition on December 17, 1999.
(3) $20.2 million of the Newark & Parlin Plant Debt is guaranteed by CGCA.
(4) The fair value of the project financing approximates its carrying value.
Gilroy Power Plant Debt
In August 1996, the Company entered into an agreement with Banque Nationale
de Paris ("BNP") to finance the acquisition of the Gilroy Power Plant. In April
1999, the Company repaid the entire loan of $120.6 million to ("BNP") with a
portion of the net proceeds from the offering of Senior Notes due 2006. The
Company recorded an extraordinary loss of $1.2 million after taxes as a result
of the repayment for the write-off of unamortized deferred financing cost
associated with the BNP financing.
Morris Power Plant Debt
On December 17, 1999, the Company acquired 80% of the common stock of CGCA
which owns 100% of Morris LLC ("Morris") (see Note 3). In 1997, Morris entered
into a construction and term loan agreement to provide non-recourse project
financing for a major portion of the Morris Project. The agreement provides
$85.6 million of 5 year term loan commitments and $5.4 million in letter of
credit commitments. As of December 31, 1999, $85.6 million was outstanding as a
term loan under the agreement and no amounts were pledged under the letter of
credit. Interest on the term loan is variable based on, at CGCA's option, either
the base rate, as defined in the term loan agreement, or LIBOR plus 0.75%. The
interest rate resets based on CGCA's selection of the borrowing period ranging
from one to six months. The interest rate was 7.5% at December 31, 1999.
Borrowings are secured by CGCA's ownership interest in Morris, its cash flows,
dividends and any other property of Morris.
Newark & Parlin Power Plant Debt
On December 17, 1999, the Company acquired 80% of the common stock of CGCA
which owns 100% of the Newark and Parlin Power Plants ("Newark & Parlin") (see
Note 3). At December 31, 1999 there was $125.3 million outstanding on a fifteen
year non-recourse term loan which is a joint and severable liability of Newark &
Parlin. The term loan is amortized by quarterly principal payments ranging from
1.275% to 1.825%
F-40
<PAGE> 73
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
through the fourteenth year and 3.075% in the fifteenth year. The term loan is
secured by all Newark & Parlin assets and a pledge of their capital stock. CGCA
has guaranteed repayment of up to $25.0 million of the term loan based on the
principal balance of the loan, and also guaranteed payment by Newark & Parlin of
all income and franchise taxes when due. CGCA's guarantee is reduced
proportionately to the outstanding principal as payments are made on the debt.
The balance of the guarantee was $20.2 million as of December 31, 1999.
The interest rate on the outstanding principal is variable based on, at
CGCA's option, LIBOR plus 1.125% margin or a defined base rate plus 0.375%
margin. For any quarterly period where the debt service coverage is in excess of
1.4:1, both margins are reduced by 0.125%. The interest rate resets based on the
borrowing period selected, generally one to three months. The interest rate was
6.5% at December 31, 1999. Nominal margin increases for both the LIBOR and the
defined base rate will occur in year six and eleven of the Newark & Parlin
Credit Agreement.
The effective interest rate for 1999, after giving effect to the interest
rate swap, was 7.2%. Interest on the loan is payable at least quarterly. At
December 31, 1999, the fair market value of the interest rate swap was
approximately $202,000.
Pasadena Power Plant Debt
On January 4, 1999, the Company entered into a credit agreement with ING
(U.S.) Capital LLC ("ING") to provide up to $265.0 million of non-recourse
project financing for the construction of the Pasadena facility expansion. As of
December 31, 1999, $154.8 million was outstanding as a construction loan under
the agreement. The outstanding loan bears interest at ING's base rate plus an
applicable margin or at LIBOR plus an applicable margin and is payable
quarterly. The construction loan will convert to a term loan once the project
has completed construction. The construction loan will mature on or before July
1, 2000, but is subject to an extension to October 1, 2000 if there are
sufficient construction funds available. The term loan will be available for a
period not to exceed five years from the construction loan maturity date. In
connection with the credit agreement, the Company entered into a $10.0 million
letter of credit facility. At December 31, 1999, there were no letters of credit
outstanding under the facility.
The effective interest rate for 1999, after giving effect to two interest
rate swaps, was 8.2%. Interest on the loan is payable at least quarterly. At
December 31, 1999, the fair market value of these interest rate swaps was
approximately $3.3 million.
Additional Interest Rate Swap Agreements
The Company has entered into two interest rate swap agreements to fix the
interest rates on the Newark & Parlin and CNGC floating rate debt. These hedges
fix an interest rate on $94.3 million at 6.5%. At December 31, 1999, the fair
market value of these hedges was approximately $432,000 and is being deferred
and will be amortized over the lives of the respective project financings.
F-41
<PAGE> 74
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
7. SENIOR NOTES
Senior Notes payable consist of the following as of December 31, 1999 and
1998 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
INTEREST RATES FIRST CALL DATE 1999 1998
-------------- --------------- ---------- --------
<S> <C> <C> <C> <C>
Senior Notes due 2004................ 9 1/4% 1999 $ 105,000 $105,000
Senior Notes due 2006................ 10 1/2% 2001 171,750 171,750
Senior Notes due 2006(1)............. 7 5/8% -- 250,000 --
Senior Notes due 2007................ 8 3/4% 2002 275,000 275,000
Senior Notes due 2008(1)............. 7 7/8% -- 400,000 400,000
Senior Notes due 2009(1)............. 7 3/4% -- 350,000 --
---------- --------
Total...................... $1,551,750 $951,750
========== ========
</TABLE>
- ---------------
(1) The Senior Notes are not redeemable prior to maturity.
The Company has completed a series of public debt offerings since 1994.
Transaction costs in connection with the debt offerings are capitalized as
deferred financing costs and are being amortized over the ten-year life of the
related offerings. Interest is payable semiannually at specified rates. There
are no sinking fund or mandatory redemptions of principal before the maturity
dates of each offering. The Senior Note indentures limit the Company's ability
to incur additional debt, pay dividends, sell assets and enter into certain
transactions. As of December 31, 1999 the Company is in compliance with all debt
covenants relating to the Senior Notes.
Senior Notes Due 2004
The Senior Notes due 2004 bear interest at 9 1/4% per year, payable
semi-annually on February 1 and August 1 each year and mature on February 1,
2004. The Senior Notes are redeemable, at the option of the Company, at any time
on or after February 1, 1999 at various redemption prices. In addition, the
Company may redeem up to $36.8 million of the Senior Notes from the proceeds of
any public equity offering. The effective interest rate on the $105.0 million,
after amortization of deferred financing costs, was 9.7%. Based on the traded
yield to maturity, the approximate fair market value of the Senior Notes due
2004 was $106.1 million and $108.2 million as of December 31, 1999 and 1998,
respectively.
Senior Notes Due 2006
The Senior Notes due 2006 bear interest at 10 1/2% per year, payable
semi-annually on May 15 and November 15 each year and mature on May 15, 2006.
The Senior Notes are redeemable, at the option of the Company, at any time on or
after May 15, 2001 at various redemption prices. In addition, the Company may
redeem up to $63.0 million of the Senior Notes from the proceeds of any public
equity offering. The effective interest rate on the $171.8 million, after
amortization of deferred financing costs, was 10.8%. Based on the traded yield
to maturity, the approximate fair market value of the Senior Notes due 2006 was
$180.9 million and $188.9 million as of December 31, 1999 and 1998,
respectively.
On March 29, 1999, the Company completed a public offering of $250.0
million of its 7 5/8% Senior Notes Due 2006. The Senior Notes bear interest at
7 5/8% per year, payable semi-annually on April 15 and October 15 and mature on
April 15, 2006. The Senior Notes are not redeemable prior to maturity. The
effective interest rate on the $250.0 million, after amortization of deferred
financing costs, was 8.0%. Based on the traded yield to maturity, the
approximate fair market value of the Senior Notes due 2006 was $238.1 million as
of December 31, 1999. Transaction costs incurred in connection with the Senior
Notes offering were recorded as
F-42
<PAGE> 75
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
a deferred charge and are amortized over the life of the Senior Notes Due 2006
using the effective interest rate method.
Senior Notes Due 2007
The Senior Notes due 2007 bear interest at 8 3/4% per year, payable
semi-annually on January 15 and July 15 each year and mature on July 15, 2007.
The Senior Notes are redeemable, at the option of the Company, at any time on or
after July 15, 2002 at various redemption prices. In addition, the Company may
redeem up to $96.3 million of the Senior Notes from the proceeds of any public
equity offering. The effective interest rate on the $275.0 million, after
amortization of deferred financing costs, was 9.1%. Based on the traded yield to
maturity, the approximate fair market value of the Senior Notes due 2007 was
$276.0 million and $288.8 million as of December 31, 1999 and 1998,
respectively.
Senior Notes Due 2008
The Senior Notes Due 2008 bear interest at 7 7/8% per year, payable
semi-annually on April 1 and October 1 each year and mature on April 1, 2008.
The Senior Notes are not redeemable prior to maturity. The effective interest
rate on the $400.0 million, after amortization of deferred financing costs, was
8.0%. Based on the traded yield to maturity, the approximate fair market value
of the Senior Notes due 2008 was $384.6 million and $403.0 million as of
December 31, 1999 and 1998, respectively.
Senior Notes Due 2009
On March 29, 1999, the Company completed a public offering of $350.0
million of its 7 3/4% Senior Notes Due 2009 ("Senior Notes Due 2009"). The
Senior Notes Due 2009 bear interest at 7 3/4% per year, payable semi-annually on
April 15 and October 15 and mature on April 15, 2009. The Senior Notes Due 2009
are not redeemable prior to maturity. The effective interest rate on the $350.0
million, after amortization of deferred financing costs, was 8.1%. Based on the
traded yield to maturity, the approximate fair market value of the Senior Notes
due 2009 was $321.0 million as of December 31, 1999. Transaction costs incurred
in connection with the Senior Notes offering were recorded as a deferred charge
and are amortized over the life of the Senior Notes Due 2009 using the effective
interest rate method.
The annual principal maturities of the borrowings under line of credit,
recourse project financings, non-recourse project financings, notes payable and
Senior Notes as of December 31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000............................................. $ 47,470
2001............................................. 29,423
2002............................................. 30,847
2003............................................. 29,959
2004............................................. 209,875
Thereafter....................................... 1,706,086
----------
Total.................................. $2,053,660
==========
</TABLE>
8. TRUST PREFERRED SECURITIES
Concurrently with its public offering in October 1999, the Company, through
its wholly-owned subsidiary, Calpine Capital Trust, a statutory business trust
created under Delaware law, completed an offering of 4,800,000 Remarketable Term
Income Deferrable Equity Securities ("trust preferred securities") ("HIGH
TIDES") at a value of $50.00 per share. The net proceeds from the offering were
approximately
F-43
<PAGE> 76
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
$233.2 million. The Company sold an additional 720,000 trust preferred
securities at a value of $50.00 per share pursuant to the exercise of the
underwriters' over-allotment option for net proceeds of approximately $35.0
million. The net proceeds from the offering were used by the Company's
subsidiary to invest in convertible subordinated debentures of the Company,
which represent substantially all of the subsidiary's assets. The Company has
guaranteed all of the subsidiary's obligations under the trust preferred
securities. The trust preferred securities are reflected on the balance sheet as
"Company-obligated mandatorily redeemable convertible preferred securities of a
subsidiary trust", while distributions are reflected in the statements of
operations as "Distributions on trust preferred securities". Financing costs
related to the issuance of the trust preferred securities are amortized over 30
years. The trust preferred securities accrue distributions at a rate of 5 3/4%
per annum, have a liquidation value of $50.00 per share, are convertible into
shares of the Company's common stock at the holders option on or prior to the
tender notification date, at a rate of 0.8565 shares of common stock for each
trust preferred security, and may be redeemed at any time on or after November
5, 2002 at a redemption price equal to 101.44% of the principal amount plus any
accrued and unpaid interest declining to 100% of the principal amount on or
after November 5, 2003. Additionally, the Company has the right to defer the
interest payments on the debentures for up to twenty consecutive quarters, which
would also cause a deferral of distributions on the trust preferred securities.
Currently, the Company has no intention of deferring interest payments on the
debentures.
9. COMMON STOCK
On March 26, 1999, the Company completed a public offering of 12,000,000
shares of its common stock at $15.50 per share for net proceeds of approximately
$177.1 million. Additionally, in April 1999, the Company sold an additional
1,800,000 shares of common stock at $15.50 per share pursuant to the exercise of
the underwriters' over-allotment option for net proceeds of approximately $26.7
million.
On October 27, 1999, the Company completed a public offering of 7,200,000
shares of its common stock at $46.31 per share for net proceeds of approximately
$320.3 million. The Company sold an additional 1,080,000 shares of common stock
at $46.31 per share pursuant to the exercise of the underwriters' over-
allotment option for net proceeds of approximately $48.2 million.
10. PROVISION FOR INCOME TAXES
The components of the deferred income taxes, net as of December 31, 1999
and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Expenses deductible in a future period................. $ 7,949 $ 3,721
Net operating loss and credit carryforwards............ 50,358 19,550
Other differences...................................... 1,545 4,340
--------- ---------
Deferred tax assets.................................. 59,852 27,611
--------- ---------
Property differences................................... (340,164) (178,171)
Difference in taxable income and income from
investments recorded on the equity method............ (2,305) (3,796)
Other differences...................................... (8,841) (5,432)
--------- ---------
Deferred tax liabilities............................. (351,310) (187,399)
--------- ---------
Net deferred income taxes......................... $(291,458) $(159,788)
========= =========
</TABLE>
The net operating loss and credit carryforwards consist of federal and
state net operating loss carryforwards which expire 2005 through 2014, federal
and state alternative minimum tax credits and federal depletion deduction
carryforwards which can be carried forward indefinitely. The federal and state
net
F-44
<PAGE> 77
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
operating loss carryforwards available are subject to limitations on annual
usage. It is expected that they will be fully utilized before expiring. At
December 31, 1999, federal and state alternative minimum tax credit
carryforwards were fully utilized. Realization of the deferred tax assets and
federal net operating loss carryforwards is dependent, in part, on generating
sufficient taxable income prior to expiration of the loss carryforwards. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
The provision for income taxes for the years ended December 31, 1999, 1998
and 1997 consists of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal.......................................... $26,564 $ 1,582 $ 1,892
State............................................ 6,728 277 917
Deferred:
Federal.......................................... 23,142 26,830 14,989
State............................................ 4,305 1,772 2,897
Adjustment in state tax rate (net of federal
benefit).................................... -- (4,826) (2,113)
Revision in prior years' tax estimates........ 1,234 1,419 (122)
------- ------- -------
Total provision.......................... $61,973 $27,054 $18,460
======= ======= =======
</TABLE>
The Company's effective rate for income taxes for the years ended December
31, 1999, 1998 and 1997 differs from the United States statutory rate, as
reflected in the following reconciliation:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
United States statutory tax rate..................... 35.0% 35.0% 35.0%
State income tax, net of federal benefit............. 3.6 3.8 5.0
Depletion allowance.................................. -- (1.5) (2.1)
Decrease in California deferred tax due to Company's
expansion into other states, net of federal
benefit............................................ -- -- (4.1)
Other, net........................................... 0.6 (0.4) 0.9
---- ---- ----
Effective income tax rate.......................... 39.2% 36.9% 34.7%
==== ==== ====
</TABLE>
11. EMPLOYEE BENEFIT PLANS
Retirement Savings Plan
The Company has a defined contribution savings plan under Section 401(a)
and 501(a) of the Internal Revenue Code. The plan provides for tax deferred
salary deductions and after-tax employee contributions. Employees automatically
become participants on the first quarterly entry date after completion of three
months of service. Contributions include employee salary deferral contributions
and a 3% employer profit-sharing contribution. Employer profit-sharing
contributions in 1999, 1998 and 1997 totaled $1.3 million, $829,000 and
$588,000, respectively.
1996 Employee Stock Purchase Plan
The Company adopted the 1996 Employee Stock Purchase Plan ("ESPP") in July
1996. Eligible employees may purchase up to 550,000 shares of common stock at
semi-annual intervals through periodic payroll deductions. Purchases are limited
to 15 percent of an employee's eligible compensation, up to a maximum of $25,000
per year. Shares are purchased on January 31 and July 31 of each year until
termination
F-45
<PAGE> 78
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
of the plan on February 1, 2000. Under the ESPP, 205,522 shares were issued at a
weighted average fair value of $7.69 per share in 1999. In January 2000,
employees participating in the ESPP purchased an additional 101,712 shares at a
weighted average fair value of $10.65 per share. The purchase price is 85% of
the lower of (i) the fair market value of the common stock on the participant's
entry date into the offering period, or (ii) the fair market value on the
semi-annual purchase date.
1996 Stock Incentive Plan
The Company adopted the 1996 Stock Incentive Plan ("SIP") in September
1996. The SIP succeeded the Company's previously adopted stock option program.
The Company accounts for the SIP under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" under which no compensation cost
has been recognized. Had compensation cost for the SIP been determined
consistent with the methodology of SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would have been
reduced to the following pro forma amounts (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C> <C>
Net income.............................. As reported $95,093 $45,678 $34,699
Pro Forma 87,417 43,965 33,272
Earnings per share data:
Basic earnings per share................ As reported $ 1.82 $ 1.14 $ 0.87
Pro Forma 1.67 1.09 0.83
Diluted earnings per share.............. As reported 1.71 1.08 0.83
Pro Forma 1.57 1.04 0.79
</TABLE>
The fair value of options granted in 1999, 1998 and 1997 was $17.88, $3.61
and $5.14 on the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions: expected dividend yields of 0%,
expected volatility of 69% for 1999, 35% for 1998 and 44% for 1997, risk-free
interest rates of 5.74% for 1999, 5.25% for 1998, 5.8%, for 1997, respectively,
and expected lives of 7 years for 1999, 1998 and 1997.
The Company may grant options for up to 9,285,028 shares under the SIP. As
of December 31, 1999, the Company had granted options to purchase 8,252,780
shares of common stock, net of cancellations. Over the life of the SIP, options
exercised have equaled 749,128, leaving 7,503,652 granted and not yet exercised.
Under the SIP, the option exercise price equals the stock's fair market value on
date of grant. The SIP options generally vest after four years and expire after
10 years. Changes in options outstanding, granted, exercisable
F-46
<PAGE> 79
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
and cancelled by the Company during the years 1999, 1998 and 1997, whether under
the option or purchase plan were as follows:
<TABLE>
<CAPTION>
AVAILABLE FOR WEIGHTED
OPTION OR NUMBER OF AVERAGE
AWARD SHARES EXERCISE PRICE
------------- --------- --------------
<S> <C> <C> <C>
Beginning as of January 1, 1997................ 3,393,128 4,680,588 $ 1.85
Granted................................... (788,434) 788,434 9.15
Exercised................................. -- (326,312) 0.66
Cancelled................................. 103,104 (103,104) 4.28
---------- ---------
Outstanding December 31, 1997.................. 2,707,798 5,039,606 3.01
Additional shares reserved................... 798,082 -- --
Granted................................... (841,450) 841,450 8.52
Exercised................................. -- (67,580) 1.48
Cancelled................................. 44,596 (44,596) 7.82
---------- ---------
Outstanding December 31, 1998.................. 2,709,026 5,768,880 3.80
Additional shares reserved................... 403,230 -- --
Granted................................... (2,086,608) 2,086,608 24.52
Exercised................................. -- (345,236) 2.89
Cancelled................................. 6,600 (6,600) 15.20
---------- ---------
Outstanding December 31, 1999.................. 1,032,248 7,503,652 $ 9.59
========== =========
Options exercisable:
December 31, 1997............................ 3,270,938 $ 1.61
December 31, 1998............................ 3,853,610 2.19
December 31, 1999............................ 4,352,513 $ 2.95
</TABLE>
The following tables summarizes information concerning outstanding and
exercisable options at December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------ OPTIONS EXERCISABLE
WEIGHTED --------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
RANGE OF EXERCISE PRICES SHARES LIFE IN YEARS PRICE SHARES PRICE
------------------------ --------- ------------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 0.25 - $ 0.25..................... 1,604,940 3.00 $ 0.25 1,604,940 $ 0.25
$ 0.93 - $ 2.29..................... 629,846 4.48 2.04 629,846 2.04
$ 2.45 - $ 2.45..................... 754,710 5.33 2.45 754,710 2.45
$ 2.58 - $ 4.29..................... 919,034 6.31 4.25 684,005 4.24
$ 4.43 - $ 8.60..................... 762,798 8.18 8.43 219,048 8.02
$ 8.78 - $13.28..................... 865,364 7.49 9.60 444,964 9.47
$15.01 - $15.44..................... 1,059,200 9.12 15.44 -- --
$16.97 - $39.81..................... 883,400 9.56 36.48 15,000 27.72
$40.00 - $54.63..................... 24,120 9.86 49.19 -- --
$57.00 - $57.00..................... 240 9.97 57.00 -- --
--------- ---------
Total..................... 7,503,652 6.47 $ 9.59 4,352,513 $ 2.95
========= =========
</TABLE>
F-47
<PAGE> 80
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
12. STOCKHOLDERS' EQUITY
Preferred Stock and Preferred Share Purchase Rights
On June 5, 1997, the Board of Directors adopted a Stockholders Rights Plan
("Rights Plan") to strengthen the Board of Directors ability to protect the
Company's stockholders. The Rights Plan is designed to protect against abusive
or coercive takeover tactics that are not in the best interests of the Company
and its stockholders. To implement the Rights Plan, the Board of Directors
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, par value $0.001 per share, held on record as
of June 18, 1997, and directed the issuance of one Right with respect to each
share of Common Stock that shall become outstanding between the Record Date and
the Distribution Date. On December 31, 1999, there were 63,053,920 Rights
outstanding. Each Right initially represents a contingent right to purchase,
under certain circumstances, one one-thousandth of a share (a "Unit") of Series
A Junior Participating Preferred Stock, par value $0.001 per share (the
"Preferred Stock"), of the Company at a price of $80.00 per Unit, subject to
adjustment. The Rights become exercisable and trade independently from the
Company's common stock upon the public announcement of the acquisition by a
person or group of 15% or more of the Company's common stock, or ten days after
commencement of a tender or exchange offer that would result in the acquisition
of 15% or more of the Company's common stock. Each Unit of Preferred Stock
purchased upon exercise of the Rights will be entitled to a dividend equal to
any dividend declared per share of common stock and will have one vote, voting
together with the common stock. In the event of liquidation, each share of
Preferred Stock will be entitled to any payment made per share of common stock.
If the Company is acquired in a merger or other business combination
transaction after a person or group has acquired 15% or more of the Company's
common stock, each Right will entitle its holder to purchase at the Right's
exercise price a number of the acquiring company's common shares having a market
value of twice such exercise price. In addition, if a person or group acquires
15% or more of the Company's common stock, each Right will entitle its holder
(other than the acquiring person or group) to purchase, at the Right's exercise
price, a number of fractional shares of the Company's Preferred Stock or shares
of common stock having a market value of twice such exercise price.
The Rights expire June 18, 2007, unless redeemed earlier by the Company's
Board of Directors. The Board of Directors can redeem the Rights at a price of
$0.01 per Right at any time before the Rights become exercisable, and thereafter
only in limited circumstances.
13. SIGNIFICANT CUSTOMERS
The Company's electricity and steam sales revenue is primarily from two
sources -- Pacific Gas & Electric Company ("PG&E") and Texas Utilities Electric
Company ("TUEC").
Revenues earned from these sources for the years ended December 31, 1999,
1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
PG&E....................................... $215,264 $222,593 $221,457
TUEC....................................... 144,016 128,724 --
</TABLE>
F-48
<PAGE> 81
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Accounts receivable at December 31, 1999, and 1998 were as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
ACCOUNTS RECEIVABLE:
PG&E..................................................... $33,251 $25,186
TUEC..................................................... 9,918 15,052
</TABLE>
14. EARNINGS PER SHARE
Basic earnings per common share were computed by dividing net income by the
weighted average number of common shares outstanding for the period. The
dilutive effect of the potential exercise of outstanding options to purchase
shares of common stock is calculated using the treasury stock method. The
reconciliation of basic earnings per common share to diluted earnings per share
is shown in the following table (dollars in thousands except share data). All
share data has been adjusted to reflect the two-for-one stock split effective
October 7, 1999.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- ------------------------
NET NET NET
INCOME SHARES EPS INCOME SHARES EPS INCOME SHARES EPS
------- ------ ------ ------- ------ ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary
Charge...................... $96,243 52,328 $ 1.84 $46,319 40,242 $ 1.15 $34,699 39,892 $0.87
Extraordinary charge net of
tax benefit of $793 and $441
for 1999 and 1998,
respectively................ 1,150 (0.02) 641 (0.01) -- --
------- ------ ------ ------- ------ ------ ------- ------ -----
Net income.................... $95,093 52,328 $ 1.82 $45,678 40,242 $ 1.14 $34,699 39,892 $0.87
======= ====== ====== ======= ====== ====== ======= ====== =====
Common shares issuable upon
Exercise of stock options
using treasury stock
method...................... 3,333 2,086 2,140
------ ------ ------
DILUTED EARNINGS PER
COMMONSHARE:
Income before extraordinary
Charge...................... $96,243 55,661 $ 1.73 $46,319 42,328 $ 1.09 $34,699 42,032 $0.83
Extraordinary charge net of
tax benefit of $793 and $441
for 1999 and 1998,
respectively................ 1,150 (0.02) 641 (0.01) -- --
------- ------ ------ ------- ------ ------ ------- ------ -----
Net income.................... $95,093 55,661 $ 1.71 $45,678 42,328 $ 1.08 $34,699 42,032 $0.83
======= ====== ====== ======= ====== ====== ======= ====== =====
</TABLE>
The Company recognized an extraordinary charge of $1.2 million or $0.02 per
share (net of tax benefit of $793,000) in April of 1999, representing the
write-off of deferred financing costs related to non-recourse project financing
for the Gilroy Power Plant. The financing agreement was terminated and the
outstanding balance as of April 1999 of $120.6 million was repaid.
In 1998, the Company recognized a $641,000 extraordinary charge (net of tax
benefit of $441,000), for the repurchase of $8.3 million of the 10 1/2% Senior
Notes Due 2006. The notes were redeemed at a premium plus accrued interest to
the date of repurchase.
Unexercised employee stock options to purchase 240 shares of the Company's
common stock during the year ended December 31, 1999 were not included in the
computation of diluted shares outstanding because such inclusion would be
anti-dilutive. There were no ant-dilutive unexercised employee stock options
during the year ended December 31, 1998. Unexercised employee stock options to
purchase 385,000 shares of the Company's common stock during the year ended
December 31, 1997 were not included in the computation of diluted shares
outstanding because such inclusion would be anti-dilutive.
F-49
<PAGE> 82
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
15. COMMITMENTS AND CONTINGENCIES
Production Royalties and Leases -- The Company is committed under numerous
geothermal leases and right-of-way, easement and surface agreements. The
geothermal leases generally provide for royalties based on production revenue
with reductions for property taxes paid. The right-of-way, easement and surface
agreements are based on flat rates and are not material. Under the terms of
certain geothermal leases prior to May, 1999 when we consolidated the steam
field and power plant operations at The Geysers, royalties accrued at rates
ranging from 3% to 14% of steam and effluent revenue. Following the
consolidation of operations, the royalties began to accrue as a percentage of
electrical revenues. Certain properties also have net profits and overriding
royalty interests ranging from approximately 1% to 28%, which are in addition to
the land royalties. Most lease agreements contain clauses providing for minimum
lease payments to lessors if production temporarily ceases or if production
falls below a specified level.
Expenses under these agreements for the years ended December 31, 1999, 1998
and 1997 are (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Production royalties.......................... $13,767 $10,714 $10,803
</TABLE>
Natural Gas Purchases -- The Company enters into short-term gas purchase
contracts with third parties to supply gas to its gas-fired cogeneration
projects.
Office and Equipment Leases -- The Company leases its corporate office and
regional offices in Boston, Massachusetts, Houston, Texas, Pleasanton,
California, San Jose, California, Sacramento, California, and Minneapolis,
Minnesota under noncancellable operating leases expiring through 2006. Future
minimum lease payments under these leases are as follows (in thousands):
<TABLE>
<S> <C>
2000............................................... $ 4,781
2001............................................... 5,121
2002............................................... 4,936
2003............................................... 4,712
2004............................................... 3,573
Thereafter......................................... 2,429
-------
Total.................................... $25,552
=======
</TABLE>
Lease payments are subject to adjustments for the Company's pro rata
portion of annual increases or decreases in building operating costs. In 1999,
1998 and 1997 rent expense for noncancellable operating leases amounted to $3.1
million, $1.2 million and $1.2 million, respectively.
Cogeneration Facilities Operating Leases -- The Company entered into
long-term operating leases in June 1995, April 1996, August 1998 and May 1999
for its Watsonville, King City, and Greenleaf cogeneration facilities and for
The Geysers Power Plants. Future minimum lease payments under these leases are
as follows (in thousands):
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER TOTAL
------- ------- ------- ------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Watsonville................... $ 2,905 $ 2,905 $ 2,905 $ 2,905 $ 2,905 $ 15,682 $ 30,207
King City..................... 20,254 21,015 21,848 22,781 13,975 130,011 229,884
Greenleaf..................... 8,991 9,070 8,990 8,994 8,858 71,651 116,554
Geysers (see Note 3).......... 45,009 43,676 47,992 37,152 37,541 246,378 457,748
------- ------- ------- ------- ------- -------- --------
Total.................... $77,159 $76,666 $81,735 $71,832 $63,279 $463,722 $834,393
======= ======= ======= ======= ======= ======== ========
</TABLE>
F-50
<PAGE> 83
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
In 1999, 1998 and 1997, rent expense for cogeneration facilities operating
leases amounted to $33.6 million, $15.7 million and $16.6 million, respectively.
The Watsonville operating lease provides for additional contingent rents payable
during the period from July through December. Contingent rent expense for 1999,
1998 and 1997 amounted to $393,000, $1.5 million and $864,000, respectively.
The King City operating lease commitment is supported by $90.7 million of
collateral securities consisting of investment grade and U.S. Treasury
securities that mature serially in amounts equal to a portion of the semi-annual
lease payment.
Capital expenditures -- At December 31, 1999, the Company is under contract
or letter of intent with Siemens Westinghouse Power Corporation for 63 turbines
for a total purchase price of $2.3 billion related to the Company's power
development projects. Approximate payments related to these turbines are $496.4
million, $655.4 million, $398.9 million, $227.0 million, $84.5 million and $10.6
million in 2000, 2001, 2002, 2003, 2004 and thereafter, respectively.
At December 31, 1999, the Company is also under contract with General
Electric Company for 6 turbines for a total purchase price of $374.5 million
related to the Company's power development projects. Approximate payments
related to these turbines are $118.8 million, $53.9 million, $18.0 million and
$4.5 million in 2000, 2001, 2002 and 2003, respectively.
Litigation
Legal Matters -- On September 30, 1997, a lawsuit was filed by Indeck North
American Power Fund ("Indeck") in the Circuit Court of Cook County, Illinois
against Norweb plc. and certain other parties, including the Company. Some of
Indeck's claims relate to Calpine Gordonsville, Inc.'s acquisition of a 50%
interest in Gordonsville Energy L.P. from Northern Hydro Limited and Calpine
Auburndale, Inc.'s acquisition of a 50% interest in Auburndale Power Plant
Partners Limited Partnership from Norweb Power Services (No. 1) Limited. Indeck
claimed that Calpine Gordonsville, Inc., Calpine Auburndale, Inc. and the
Company tortuously interfered with Indeck's contractual rights to purchase such
interests and conspired with other parties to do so. Indeck is seeking $25.0
million in compensatory damages, $25.0 million in punitive damages, and the
recovery of attorneys' fees and costs. In April 1999, the court dismissed the
claims against Calpine Auburndale and Calpine Gordonsville with prejudice.
Indeck appealed the court's decision. The outcome of the appeal is not expected
until late 2000. The Company is unable to predict the outcome of these
proceedings but it does not expect that the outcome of these proceedings will
have a material adverse effect on its financial position or results of
operations.
An action was filed against Lockport Energy Associates, L.P. and the New
York Public Service Commission ("NYPSC") in August 1997 by NYSEG in the Federal
District Court for the Northern District of New York. NYSEG has requested the
Court to direct NYPSC and the FERC to modify contract rates to be paid to the
Lockport Power Plant. In October 1997, NYPSC filed a cross-claim alleging that
the FERC PURPA and the Federal Power Act by failing to reform the NYSEG contract
that was previously approved by the NYPSC. The Company is unable to predict the
outcome of these proceedings but it does not expect that the outcome of these
proceedings will have a material adverse effect on the Company's financial
position or results of operation. In any event, the Company retains the right to
require The Brooklyn Union Gas Company to purchase its interest in the Lockport
Power Plant for $18.9 million, less equity distributions received by us, at any
time before December 19, 2001.
The Company is involved in various other claims and legal actions arising
out of the normal course of business. The Company does not expect that the
outcome of these proceedings will have a material adverse effect on the
Company's financial position or results of operations.
F-51
<PAGE> 84
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
16. SUBSEQUENT EVENTS
In January 2000, the Company completed an offering under Rule 144A of the
Securities Act of 6,000,000 5 1/2% HIGH TIDES issued by a subsidiary trust at
$50.00 each, raising $292.4 million of aggregate net proceeds. In February 2000,
the Company sold an additional 1,200,000 5 1/2% HIGH TIDES pursuant to the
exercise of the underwriters' over-allotment option for net proceeds of
approximately $58.6 million.
In January and February 2000, the Company acquired various assets for
approximately $60.5 million, including a 50% interest in the Aries Power Plant
and 100% of the stock of Western Gas Resources California.
17. QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
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 of
operations under the terms of certain power sales agreements, 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.
The Company's common stock has been traded on the New York stock exchange
since September 19, 1996. There were 110 common stockholders of record at
December 31, 1999. No dividends were paid for the
F-52
<PAGE> 85
CALPINE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
years ended December 31, 1999 and 1998. All share data has been adjusted to
reflect the two-for-one stock split effective October 7, 1999.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
------------ ------------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1999
Total revenue..................................... $247,497 $263,648 $190,677 $145,913
Gross profit...................................... 88,023 103,815 62,014 36,406
Income from operations............................ 66,189 87,105 48,789 24,419
Income before extraordinary charge................ 30,766 42,917 18,710 3,850
Extraordinary charge.............................. -- -- 1,150 --
Net income........................................ 30,766 42,917 17,560 3,850
Basic earnings per common share:
Income before extraordinary charge.............. $ 0.51 $ 0.79 $ 0.35 $ 0.09
Extraordinary charge............................ -- -- (0.02) --
Net income...................................... 0.51 0.79 0.33 0.09
Diluted earnings per common share:
Income before extraordinary charge.............. $ 0.48 $ 0.74 $ 0.33 $ 0.09
Extraordinary charge............................ -- -- (0.02) --
Net income...................................... 0.48 0.74 0.31 0.09
Common stock price per share:
High............................................ $ 64.94 $ 47.88 $ 29.50 $ 18.69
Low............................................. 42.69 27.41 17.56 12.63
1998
Total revenue..................................... $173,033 $186,173 $141,597 $ 55,145
Gross profit...................................... 50,935 69,069 44,841 15,776
Income from operations............................ 40,262 59,959 37,596 8,859
Income before extraordinary charge................ 14,033 23,415 11,928 (3,057)
Extraordinary charge.............................. -- 339 302 --
Net income (loss)................................. 14,033 23,076 11,626 (3,057)
Basic earnings per common share:
Income before extraordinary charge.............. $ 0.35 $ .58 $ 0.30 $ (0.08)
Extraordinary charge............................ -- (0.01) (0.01) --
Net income...................................... 0.35 .57 0.29 (0.08)
Diluted earnings per common share:
Income before extraordinary charge.............. $ 0.33 $ .55 $ 0.29 $ (0.07)
Extraordinary charge............................ -- (0.01) (0.01) --
Net income (loss)............................... 0.33 .54 0.28 (0.07)
Common stock price per share:
High............................................ $ 13.81 $ 10.75 $ 10.63 $ 9.25
Low............................................. 8.59 8.56 8.63 6.38
</TABLE>
F-53
<PAGE> 86
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of Calpine
Corporation, a Delaware corporation.(b)
3.2 -- Amended and Restated Bylaws of Calpine Corporation, a
Delaware corporation.(b)
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.(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.(e)
4.4 -- Indenture dated as of March 31, 1998 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(g)
4.5 -- Indenture dated as of March 26, 1999 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(h)
4.6 -- Indenture dated as of April 21, 1999 between the Company and
The Bank of New York, as Trustee, including form of
Notes.(h)
4.7 -- 1999 HIGH TIDES.
4.7.1 -- Certificate of Trust of Calpine Capital Trust, a Delaware
statutory trust, filed October 4, 1999.(i)
4.7.2 -- Corrected Certificate of Certificate of Trust of Calpine
Capital Trust, a Delaware statutory trust, dated September
29, 1999.(i)
4.7.3 -- Declaration of Trust of Calpine Capital Trust, dated as of
October 4, 1999, among Calpine Corporation, as Depositor,
The Bank of New York (Delaware), as Delaware Trustee, The
Bank of New York, as Property Trustee, and the
Administrative Trustees named therein.(i)
4.7.4 -- Indenture, dated as of November 2, 1999, between Calpine
Corporation and The Bank of New York, as Trustee, including
form of Debenture.(i)
4.7.5 -- Remarketing Agreement, dated November 2, 1999, among Calpine
Corporation, Calpine Capital Trust, The Bank of New York, as
Tender Agent, and Credit Suisse First Boston Corporation, as
Remarketing Agent.(i)
4.7.6 -- Amended and Restated Declaration of Trust of Calpine Capital
Trust, dated as of November 2, 1999, among Calpine
Corporation, as Depositor and Debenture Issuer, The Bank of
New York (Delaware), as Delaware Trustee, and The Bank of
New York, as Property Trustee, and the Administrative
Trustees named therein, including form of Preferred Security
and form of Common Security.(i)
4.7.7 -- Preferred Securities Guarantee Agreement, dated as of
November 2, 1999, between Calpine Corporation and The Bank
of New York, as Guarantee Trustee.(i)
4.8 -- 2000 HIGH TIDES.
4.8.1 Certificate of Trust of Calpine Capital Trust II, a Delaware
statutory trust, filed January 25, 2000.(*)
4.8.2 Declaration of Trust of Calpine Capital Trust II, dated as
of January 24, 2000, among Calpine Corporation, as Depositor
and Debenture Issuer, The Bank of New York (Delaware), as
Delaware Trustee, The Bank of New York, as Property Trustee,
and the Administrative Trustees named therein.(*)
4.8.3 Indenture, dated as of January 31, 2000, between Calpine
Corporation and The Bank of New York, as Trustee, including
form of Debenture.(*)
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
4.8.4 Remarketing Agreement, dated as of January 31, 2000, among
Calpine Corporation, Calpine Capital Trust II, The Bank of
New York, as Tender Agent, and Credit Suisse First Boston
Corporation, as Remarketing Agent.(*)
4.8.5 Registration Rights Agreement, dated January 31, 2000, among
Calpine Corporation, Calpine Capital Trust II, Credit Suisse
First Boston Corporation and ING Barings LLC.(*)
4.8.6 Amended and Restated Declaration of Trust of Calpine Capital
Trust II, dated as of January 31, 2000, among Calpine
Corporation, as Depositor and Debenture Issuer, The Bank of
New York (Delaware), as Delaware Trustee, The Bank of New
York, as Property Trustee, and the Administrative Trustees
named therein, including form of Preferred Security and form
of Common Security.(*)
4.8.7 -- Preferred Securities Guarantee Agreement, dated as of
January 31, 2000, between Calpine Corporation and The Bank
of New York, as Guarantee Trustee.(*)
10.1 -- Purchase Agreements.
10.1.1 -- Purchase and Sale Agreement dated March 27, 1997 for the
purchase and sale of shares of Enron/Dominion Cogen Corp.
Common Stock among Enron Power Corporation and Calpine
Corporation.(f)
10.1.2 -- Stock Purchase and Redemption Agreement dated March 31,
1998, among Dominion Cogen, Inc. Dominion Energy, Inc. and
Calpine Finance.(f)
10.2 Financing Agreements.
10.2.1 Calpine Construction Finance Company Financing
Agreement.(j)(*)
10.3 -- Other Agreements.
10.3.1 -- Calpine Corporation Stock Option Program and forms of
agreements thereunder.(a)
10.3.2 -- Calpine Corporation 1996 Stock Incentive Plan and forms of
agreements thereunder.(b)
10.3.3 -- Calpine Corporation Employee Stock Purchase Plan and forms
of agreements thereunder.(b)
10.3.4 -- Amended and Restated Employment Agreement between Calpine
Corporation and Mr. Peter Cartwright.(*)
10.3.5 -- Executive Vice President Employment Agreement between
Calpine Corporation and Ms. Ann B. Curtis.(k)
10.3.6 -- Senior Vice President Employment Agreement between Calpine
Corporation and Mr. Ron A. Walter.(k)
10.3.7 -- Senior Vice President Employment Agreement between Calpine
Corporation and Mr. Robert D. Kelly.(k)
10.3.8 -- Executive Vice President Employment Agreement between
Calpine Corporation and Mr. Thomas R. Mason.(k)
10.4 -- Form of Indemnification Agreement for directors and
officers.(b)
21 -- Subsidiaries of the Company.(*)
23 -- Consents from Arthur Andersen for Form S-8.(*)
27 -- Financial Data Schedule.(*)
</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 Registration Statement on Form S-1
(Registration Statement No. 333-07497).
(c) Incorporated by reference to Registrant's Current Report on Form 8-K dated
August 29, 1996 and filed on September 13, 1996.
<PAGE> 88
(d) Incorporated by reference to Registrant's Annual Report on Form 10-K dated
December 31, 1996, and filed on March 27, 1996.
(e) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
dated June 30, 1997 and filed on August 14, 1997.
(f) Incorporated by reference to Registrant's Current Report on Form 8-K dated
March 31, 1998 and filed on April 14, 1998.
(g) Incorporated by reference to Registrant's Registration Statement on Form S-4
(Registration Statement No. 333-61047).
(h) Incorporated by reference to Registrant's Registration Statement on Form
S-3/A (Registration Statement No. 333-72583).
(i) Incorporated by reference to Registrant's Registration Statement on Form
S-3/A (Registration Statement No. 333-87427).
(j) Approximately 200 pages of this exhibit have been omitted pursuant to a
request for confidential treatment. The omitted language has been filed
separately with the Securities and Exchange Commission.
(k) Incorporated by reference to Registrant's Form 10-Q/A dated September 30,
1999, and filed on November 17, 1999.
(*) Filed herewith.
<PAGE> 1
EXHIBIT 4.8.1
CERTIFICATE OF TRUST
The undersigned, the trustees of Calpine Capital Trust II,
desiring to form a business trust pursuant to Delaware Business Trust Act, 12
Del. C. Section 3810 et seq., hereby certify as follows:
1. The name of the business trust being formed hereby (the "Trust")
is "Calpine Capital Trust II."
2. The name and business address of the trustee of the Trust which
has its principal place of business in the State of Delaware is
as follows:
The Bank of New York (Delaware)
White Clay Center, Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of the date of
filing.
Dated: January __, 2000
Name:
Title: Administrative Trustee
Name:
Title: Administrative Trustee
Name:
Title: Administrative Trustee
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:
Name:
Authorized Signatory
<PAGE> 2
THE BANK OF NEW YORK, as
Property Trustee
By:
Name:
Authorized Signatory
2
<PAGE> 1
EXHIBIT 4.8.2
================================
DECLARATION OF TRUST
CALPINE CAPITAL TRUST II
Dated as of January 24, 2000
================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions .............................................. 1
ARTICLE II
ORGANIZATION
SECTION 2.1 Name ..................................................... 4
SECTION 2.2 Office ................................................... 4
SECTION 2.3 Purpose .................................................. 4
SECTION 2.4 Authority ................................................ 5
SECTION 2.5 Title to Property of the Trust ........................... 5
SECTION 2.6 Powers of the Trustees ................................... 5
SECTION 2.7 Filing of Certificate of Trust ........................... 7
SECTION 2.8 Duration of Trust. ....................................... 7
SECTION 2.9 Responsibilities of the Depositor ........................ 7
SECTION 2.10 Declaration Binding on Securities Holders ................ 8
ARTICLE III
TRUSTEES
SECTION 3.1 Trustees ................................................. 8
SECTION 3.2 Administrative Trustees .................................. 9
SECTION 3.3 Delaware Trustee ......................................... 9
SECTION 3.4 Property Trustee ......................................... 10
SECTION 3.5 Not Responsible for Recitals or Sufficiency of
Declaration ........................................... 10
ARTICLE IV
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 4.1 Exculpation .............................................. 10
SECTION 4.2 Fiduciary Duty ........................................... 11
SECTION 4.3 Indemnification .......................................... 12
SECTION 4.4 Outside Businesses ....................................... 15
ARTICLE V
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
AMENDMENTS, TERMINATION, MISCELLANEOUS
SECTION 5.1 Amendments ............................................. 16
SECTION 5.2 Termination of Trust ................................... 16
SECTION 5.3 Governing Law .......................................... 17
SECTION 5.4 Headings ............................................... 17
SECTION 5.5 Successors and Assigns ................................. 17
SECTION 5.6 Partial Enforceability ................................. 17
SECTION 5.7 Counterparts ........................................... 17
</TABLE>
ii
<PAGE> 4
DECLARATION OF TRUST
OF
Calpine Capital Trust II
January 24, 2000
DECLARATION OF TRUST ("Declaration") dated and effective as of
January 24, 2000 by the Trustees (as defined herein), the Depositor (as defined
herein), and by the holders, from time to time, of undivided beneficial
interests in the assets of Trust to be issued pursuant to this Declaration;
WHEREAS, the parties hereto desire to establish a trust (the
"Trust") pursuant to the Delaware Business Trust Act for the purpose of issuing
and selling certain securities representing undivided beneficial interests in
the assets of the Trust and investing the proceeds thereof in certain Debentures
of the Debenture Issuer;
NOW, THEREFORE, it being the intention of the parties hereto that
the Trust constitute a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the exclusive benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
DEFINITIONS
SECTION I.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
<PAGE> 5
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration of Trust as modified, supplemented or amended
from time to time;
(d) all references in this Declaration to Articles and Sections are
to Articles and Sections of this Declaration unless otherwise
specified; and
(e) a reference to the singular includes the plural and vice versa.
"Administrative Trustee" means any Trustee other than the
Delaware Trustee and the Property Trustee (as hereinafter defined).
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act or any successor rule thereunder.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities" means securities representing undivided
beneficial ownership interests in the assets of the Trust with such terms as may
be set out in any amendment to this Declaration.
"Covered Person" means (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates and (b) any holder of Securities.
"Debenture Issuer" means the Parent in its capacity as the issuer
of the Debentures under the Indenture.
"Debentures" means the series of Debentures to be issued by the
Debenture Issuer and acquired by the Trust.
"Debenture Trustee" means the trustee under the Indenture until a
successor is appointed thereunder, and thereafter means such successor trustee.
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"Delaware Trustee" has the meaning set forth in Section 3.3.
"Depositor" means the Parent in its capacity as Depositor of the
Trust.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 4.3(b).
"Indemnified Person" means a Parent Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the indenture to be entered into between the
Parent and the Debenture Trustee and any indenture supplemental thereto pursuant
to which the Debentures are to be issued.
"Offering Circular" means the offering circular, dated as of
January [__], 2000, relating to the issuance by the Trust of Preferred
Securities.
"Parent" means Calpine Corporation, a Delaware corporation or any
successor entity in a merger.
"Parent Indemnified Person" means (a) any Administrative Trustee;
(b) any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any employee or agent of the Trust or its
Affiliates.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" means securities representing undivided
beneficial ownership interests in the assets of the Trust with such terms as may
be set out in any amendment to this Declaration.
"Property Trustee" has the meaning set forth in Section 3.4.
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"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
ARTICLE II
ORGANIZATION
SECTION II.1 Name.
The Trust created by this Declaration is named "Calpine Capital
Trust II." The Trust's activities may be conducted under the name of the Trust
or any other name deemed advisable by the Administrative Trustees.
SECTION II.2 Office.
The address of the principal office of the Trust is c/o Calpine
Corporation, 50 West San Fernando Street, San Jose, California 95113. At any
time, the Administrative Trustees may designate another principal office.
SECTION II.3 Purpose.
The Depositor hereby assigns, transfers, conveys and sets over to
the Trustees the sum of $10. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under the Business Trust Act,
and that this Declaration constitute the governing instrument of the Trust. The
Trustees are hereby authorized and directed to execute and file a certificate of
trust in the office of the Secretary of State of the State of Delaware in the
form attached hereto. The Trust is hereby established by the
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Depositor and the Trustees for the purposes of (i) issuing Preferred Securities
representing undivided beneficial interests in the assets of the Trust in
exchange for cash and investing the proceeds thereof in Debentures, (ii) issuing
and selling Common Securities to the Depositor representing undivided beneficial
interests in the assets of the Trust in exchange for cash and investing the
proceeds thereof in additional Debentures and (iii) engaging in such other
activities as are necessary, convenient or incidental thereto. The Trust shall
not borrow money, issue debt or reinvest proceeds derived from investments,
pledge any of its assets, or otherwise undertake (or permit to be undertaken)
any activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.
Concurrent with the first issuance of any Securities by the
Trust, the Depositor and the Trustees intend to enter into an amended and
restated Declaration of Trust, satisfactory to each such party to provide for
the contemplated operation of the Trust created hereby and the issuance of the
Preferred Securities and the Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Declaration of Trust, the
Trustees shall not have any duty or obligation hereunder or with respect to the
trust estate, except as otherwise required by applicable law or as may be
necessary to obtain, prior to such execution and delivery, any licenses,
consents or approvals required by applicable law or otherwise.
SECTION II.4 Authority.
Subject to the limitations provided in this Declaration, the
Administrative Trustees shall have exclusive and complete authority to carry out
the purposes of the Trust. An action taken by the Administrative Trustees in
accordance with their powers shall constitute the act of and serve to bind the
Trust. In dealing with the Administrative Trustees acting on behalf of the
Trust, no Person shall be required to inquire into the authority of the
Administrative Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Administrative
Trustees as set forth in this Declaration.
SECTION II.5 Title to Property of the Trust.
Subject to Section 2.6(c), legal title to all assets of the Trust
shall be vested in the Trust.
SECTION II.6 Powers of the Trustees.
The Administrative Trustees shall have the exclusive power and
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authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided further, that there shall be no
interests in the Trust other than the Securities and the issuance of the
Securities shall be limited to a one-time, simultaneous issuance of both
Preferred Securities and Common Securities;
(b) in connection with the issue and sale of the Preferred
Securities:
(i) assist in the preparation of the Offering Circular and
preliminary offering circular, if any, in each case prepared by
the Depositor, in relation to the offering and sale of the
Preferred Securities to qualified institutional buyers in
reliance of Rule 144A under the Securities Act and to execute and
file with the Commission, at such time as determined by the
Depositor a registration statement under the Securities Act
prepared by the Depositor, including any amendments thereto in
relation to the Preferred Securities, and all other
registrations, applications, statements, certificates, and other
instruments;
(ii) execute and file any documents prepared by the
Depositor, or take any acts as determined by the Depositor to be
necessary in order to qualify or register all or part of the
Preferred Securities in any state or foreign jurisdiction in
which the Depositor has determined to qualify or register such
Preferred Securities for sale;
(iii) execute and deliver letters, documents, or
instruments with The Depository Trust Company relating the
Preferred Securities;
(iv) execute and enter into a purchase agreement,
remarketing agreement, a registration rights agreement and other
related agreements providing for the sale and registration of the
Preferred Securities; and
(v) execute and file any agreement, certificate or other
document which such Administrative Trustee deems necessary or
appropriate in connection with the issuance and sale of the
Preferred
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Securities;
(c) to acquire the Debentures with the proceeds of the sale of
the Preferred Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Holders of Common Securities;
(d) to employ or otherwise engage employees and agents (who may
be designated as officers with titles) and managers, contractors, advisors and
consultants and provide for reasonable compensation for such services;
(e) to incur expenses that are necessary or incidental to carry
out any of the purposes of this Declaration; and
(f) to execute all documents or instruments, perform all duties
and powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.
SECTION II.7 Filing of Certificate of Trust.
On or after the date of execution of this Declaration, the
Trustees shall cause the filing of the Certificate of Trust for the Trust in the
form attached hereto as Exhibit A with the Secretary of State of the State of
Delaware.
SECTION II.8 Duration of Trust.
The Trust, absent dissolution pursuant to the provisions of
Section 5.2, shall have existence for fifty-five (55) years from the date
hereof.
SECTION II.9 Responsibilities of the Depositor.
In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare the Offering Circular and any preliminary offering
circular, and to prepare for filing by the Trust with the Commission the
registration statement pursuant to a registration rights agreement;
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(b) to determine the states and foreign jurisdictions in which to
take appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than actions which
must be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by the
Trust, as the Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to PORTAL
and to the New York Stock Exchange or any other national stock exchange or the
NASDAQ National Market for listing or quotation of the Preferred Securities
(including at the time of the Remarketing); and
(e) to negotiate the terms of a purchase agreement, a
registration rights agreement and a remarketing agreement relating to a
remarketing of the Preferred Securities and other related agreements providing
for the sale of the Preferred Securities.
SECTION II.10 Declaration Binding on Securities Holders.
Every Person by virtue of having become a holder of a Security or
any interest therein in accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms of, and shall be bound
by, this Declaration.
ARTICLE III
TRUSTEES
SECTION III.1 Trustees.
The number of Trustees initially shall be five (5), and
thereafter the number of Trustees shall be such number as shall be fixed from
time to time by a written instrument signed by the Depositor. The Depositor is
entitled to appoint or remove without cause any Trustee at any time; provided,
however that the number of Trustees shall in no event be less than two (2);
provided further that one Trustee, in the case of a natural person, shall be a
person who is a resident of the State of Delaware or that, if not a natural
person, is an entity that has its principal place of business in the State of
Delaware (the "Delaware Trustee"); provided further that there shall be at least
one trustee who is an employee or officer of, or is affiliated
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with the Parent (an "Administrative Trustee").
SECTION III.2 Administrative Trustees.
The initial Administrative Trustees shall be:
Peter Cartwright
Ann B. Curtis
Thomas R. Mason
(a) Except as expressly set forth in this Declaration, any power
of the Administrative Trustees may be exercised by, or with the consent of, any
one such Administrative Trustee;
(b) Any Administrative Trustee is authorized to execute on behalf
of the Trust any documents that the Administrative Trustees have the power and
authority to cause the Trust to execute pursuant to Section 2.6; and
(c) an Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purposes of signing any documents that the
Administrative Trustees have power and authority to cause the Trust to execute
pursuant to Section 2.6.
SECTION III.3 Delaware Trustee.
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
Notwithstanding any other provision of this Declaration, the
Delaware Trustee shall not be entitled to exercise any of the powers, nor shall
the Delaware Trustee have any of the duties and responsibilities of the Trustees
(except as required by the Business Trust Act) described in this Declaration.
The Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act.
Notwithstanding anything herein to the contrary, the Delaware Trustee shall not
be liable for the acts or omissions to act of the Trust or of the Administrative
Trustees except such acts as the Delaware Trustee is expressly obligated or
authorized to undertake under this Declaration or the Business Trust Act and
except for the negligence or willful misconduct of the Delaware Trustee.
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SECTION III.4 Property Trustee.
The Depositor hereby appoints The Bank of New York as the
Property Trustee, as the trustee meeting the requirements of an eligible trustee
of the Trust Indenture Act of 1939, as amended.
Notwithstanding any other provision of this Declaration, the
Property Trustee shall not be entitled to exercise any of the powers, nor shall
the Property Trustee have any of the duties and responsibilities of the Trustees
(except as required by the Business Trust Act) described in this Declaration.
Notwithstanding anything herein to the contrary, the Property Trustee shall not
be liable for the acts or omissions to act of the Trust or of the Administrative
Trustees except such acts as the Property Trustee is expressly obligated or
authorized to undertake under this Declaration or the Business Trust Act and
except for the negligence or willful misconduct of the Property Trustee.
SECTION III.5 Not Responsible for Recitals or Sufficiency of Declaration.
The recitals contained in this Declaration shall be taken as the
statements of the Depositor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration.
ARTICLE IV
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION IV.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to
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such acts or omissions; and
(b) an Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which distributions to holders of Securities might properly be paid.
SECTION IV.2 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity, are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person;
(b) unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between a Covered Persons; or
(ii) and an Indemnified Person whenever this Declaration
or any other agreement contemplated herein or therein provides
that an Indemnified Person shall act in a manner that is, or
provides terms that are, fair and reasonable to the Trust or any
holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obliga-
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tion of the Indemnified Person at law or in equity or otherwise; and
(c) whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider
such interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Trust
or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express
standard and shall not be subject to any other or different
standard imposed by this Declaration or by applicable law.
SECTION IV.3 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Parent Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Parent Indemnified Person against
expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Parent
Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full
extent per mitted by law, any Parent Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed
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action or suit by or in the right of the Trust to procure a judgment in
its favor by reason of the fact that he is or was a Parent Indemnified
Person against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Trust and except that no such indemnification shall be made in respect
of any claim, issue or matter as to which such Parent Indemnified Person
shall have been adjudged to be liable to the Trust unless and only to
the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses that such Court of Chancery or such other
court shall deem proper.
(iii) To the extent that a Parent Indemnified Person shall
be successful on the merits or otherwise (including dismissal of an
action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or proceeding
referred to in paragraphs (i) and (ii) of this Section 4.3(a), or in
defense of any claim, issue or matter therein, he shall be indemnified,
to the full extent permitted by law, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of
this Section 4.3(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Parent Indemnified Person is
proper in the circumstances because he has met the applicable standard
of conduct set forth in paragraphs (i) and (ii). Such determination
shall be made (1) by the Administrative Trustees by a majority vote of a
quorum consisting of such Administrative Trustees who were not parties
to such action, suit or proceeding, (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a
written opinion, or (3) by the holder(s) of the Common Securities of the
Trust.
(v) Expenses (including attorneys' fees) incurred by a
Parent Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs
(i) and (ii) of this Section 4.3(a) shall be paid by the Debenture
Issuer in advance of the
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final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Parent Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Debenture Issuer as authorized in this Section
4.3(a). Notwithstanding the foregoing, no advance shall be made by the
Debenture Issuer if a determination is reasonably and promptly made (i)
by the Administrative Trustees by a majority vote of a quorum of
disinterested Administrative Trustees, (ii) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a
written opinion or (iii) the holder(s) of the Common Securities of the
Trust, that, based upon the facts known to the Administrative Trustees,
counsel or the holder(s) of the Common Securities of the Trust at the
time such determination is made, such Parent Indemnified Person acted in
bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the Trust, or, with respect to any
criminal proceeding, that such Parent Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event shall
any advance be made in instances where the Administrative Trustees,
independent legal counsel or the holder(s) of the Common Securities of
the Trust reasonably determine that such person deliberately breached
his duty to the Trust or to the holder(s) of its Common Securities or
Preferred Securities.
(vi) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of this
Section 4.3(a) shall not be deemed exclusive of any other rights to
which those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of shareholders or disinterested
directors of the Debenture Issuer or of the holder(s) of the Preferred
Securities of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
All rights to indemnification under this Section 4.3(a) shall be deemed
to be provided by a contract between the Debenture Issuer and each
Parent Indemnified Person who serves in such capacity at any time while
this Section 4.3(a) is in effect. Any repeal or modification of this
Section 4.3(a) shall not affect any rights or obligations then existing.
(vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Parent
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the
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Debenture Issuer would have the power to indemnify him against such
liability under the provisions of this Section 4.3(a).
(viii) For purposes of this Section 4.3(a), references to
"the Trust" shall include, in addition to the resulting or surviving
entity, any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person
who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of
another entity, shall stand in the same position under the provisions of
this Section 4.3(a) with respect to the resulting or surviving entity as
he would have with respect to such constituent entity if its separate
existence had continued.
(ix) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 4.3(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a Parent Indemnified Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify (i) the Delaware
Trustee and the Property Trustee, (ii) any Affiliate of the Delaware Trustee or
the Property Trustee, and (iii) any officers, directors, stockholders, members,
partners, employees, representatives, nominees, custodians or agents of the
Delaware Trustee or the Property Trustee (each of the Persons in (i) through
(iii) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The provisions of this Section 4.3(b) shall survive the termination
of this Declaration or the resignation or removal of the Delaware Trustee or
Property Trustee.
SECTION IV.4 Outside Businesses.
Any Covered Person, the Depositor, the Delaware Trustee and the
Property Trustee may engage in or possess an interest in other business ventures
of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the holders of
Securities shall have no rights
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by virtue of this Declaration in and to such independent ventures or the income
or profits derived therefrom and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. None of any Covered Person, the Depositor, the Delaware Trustee or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Depositor, the Delaware Trustee and the Property Trustee shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Depositor or any
Affiliate of the Depositor, or may act as depositary, trustee or agent for, or
may act on any committee or body of holders of, securities or other obligations
of the Depositor or its Affiliates.
ARTICLE V
AMENDMENTS, TERMINATION, MISCELLANEOUS
SECTION V.1 Amendments.
At any time before the issue of any Securities, this Declaration
may be amended by, and only by, a written instrument executed by all of the
Administrative Trustees and the Depositor.
SECTION V.2 Termination of Trust.
(a) The Trust shall dissolve and be of no further force or
effect:
(i) upon the bankruptcy of the Depositor;
(ii) upon the filing of a certificate of dissolution or
its equivalent with respect to the Depositor or the revocation of
the Depositor's charter or of the Trust's certificate of trust;
(iii) upon the entry of a decree of judicial dissolution
of the Depositor, or the Trust; and
(iv) before the issue of any Securities, with the consent
of all of the Administrative Trustees and the Depositor.
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(b) As soon as is practicable after the occurrence of an event
referred to in Section 5.2(a), the Trustees shall file, after satisfaction of
all liabilities of the Trust in accordance with applicable law, a certificate of
cancellation with the Secretary of State of the State of Delaware and the Trust
shall terminate.
SECTION V.3 Governing Law.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION V.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION V.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named
or referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Depositor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
SECTION V.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION V.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same
17
<PAGE> 21
force and effect as though all of the signers had signed a single signature
page.
18
<PAGE> 22
IN WITNESS WHEREOF, the undersigned have caused these presents to
be executed as of the day and year first above written.
Administrative Trustee
Administrative Trustee
Administrative Trustee
THE BANK OF NEW YORK (DELAWARE), as
Delaware Trustee
By:
Authorized Signatory
THE BANK OF NEW YORK, as
Property Trustee
By:
Authorized Signatory
CALPINE CORPORATION as Depositor and
Debenture Issuer
19
<PAGE> 23
By:
Name:
Title:
20
<PAGE> 24
EXHIBIT A
(begins on next page)
21
<PAGE> 25
CERTIFICATE OF TRUST
The undersigned, the trustees of Calpine Capital Trust II,
desiring to form a business trust pursuant to Delaware Business Trust Act, 12
Del. C. Section 3810 et seq., hereby certify as follows:
(a) The name of the business trust being formed hereby (the
"Trust") is "Calpine Capital Trust II."
(b) The name and business address of the trustee of the Trust
which has its principal place of business in the State of
Delaware is as follows:
The Bank of New York (Delaware)
White Clay Center, Route 273
Newark, Delaware 19711
(c) This Certificate of Trust shall be effective as of the
date of filing.
Dated: January __, 2000
Name:
Title: Administrative Trustee
Name:
Title: Administrative Trustee
Name:
Title: Administrative Trustee
22
<PAGE> 26
THE BANK OF NEW YORK (DELAWARE), as
Delaware Trustee
By:
Name:
Authorized Signatory
THE BANK OF NEW YORK, as
Property Trustee
By:
Name:
Authorized Signatory
23
<PAGE> 1
EXHIBIT 4.8.3
CALPINE CORPORATION
TO
THE BANK OF NEW YORK,
as Trustee
-----------------
Indenture
Dated as of January 31, 2000
-----------------
up to $371,134,100
Convertible Subordinated Debentures due 2030
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I Definitions and Other Provisions of General Application.........2
SECTION 1.01 Definitions.....................................................2
SECTION 1.02 Compliance Certificates and Opinions...........................13
SECTION 1.03 Form of Documents Delivered to Trustee.........................14
SECTION 1.04 Acts of Holders; Record Dates..................................14
SECTION 1.05 Notices, Etc., to Trustee and the Company......................16
SECTION 1.06 Notice to Holders; Waiver......................................16
SECTION 1.07 Conflict with Trust Indenture Act..............................17
SECTION 1.08 Effect of Headings and Table of Contents.......................17
SECTION 1.09 Successors and Assigns.........................................17
SECTION 1.10 Separability Clause............................................17
SECTION 1.11 Benefits of Indenture..........................................17
SECTION 1.12 Governing Law..................................................17
SECTION 1.13 Legal Holidays.................................................17
ARTICLE II Security Forms.................................................18
SECTION 2.01 Forms Generally................................................18
SECTION 2.02 Initial Issuance to Property Trustee...........................18
SECTION 2.03 Additional Provisions Required in Global Security..............19
SECTION 2.04 Issuance of Global Securities to Holders.......................19
ARTICLE III The Securities.................................................20
SECTION 3.01 Title and Terms................................................20
SECTION 3.02 Denominations..................................................21
SECTION 3.03 Execution, Authentication, Delivery and Dating.................21
SECTION 3.04 Temporary Securities...........................................22
SECTION 3.05 Global Securities..............................................22
SECTION 3.06 Registration, Transfer and Exchange Generally;
Certain Transfers and Exchanges................................23
SECTION 3.07 Mutilated, Destroyed, Lost and Stolen Securities...............26
SECTION 3.08 Payment of Interest; Interest Rights Preserved.................27
SECTION 3.09 Persons Deemed Owners..........................................28
SECTION 3.10 Cancellation...................................................28
SECTION 3.11 Right of Set Off...............................................29
SECTION 3.12 CUSIP Numbers..................................................29
SECTION 3.13 Extension of Interest Payment Period; Notice of
</TABLE>
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<TABLE>
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Extension......................................................29
SECTION 3.14 Paying Agent, Security Registrar and Conversion Agent..........30
ARTICLE IV Satisfaction and Discharge.....................................30
SECTION 4.01 Satisfaction and Discharge of Indenture........................30
SECTION 4.02 Application of Trust Money.....................................31
ARTICLE V Remedies.......................................................32
SECTION 5.01 Events of Default..............................................32
SECTION 5.02 Acceleration of Maturity; Rescission and Annulment.............33
SECTION 5.03 Collection of Indebtedness and Suits for Enforcement
by Trustee.....................................................35
SECTION 5.04 Trustee May File Proofs of Claim...............................35
SECTION 5.05 Trustee May Enforce Claims Without Possession of
Securities.....................................................35
SECTION 5.06 Application of Money Collected.................................36
SECTION 5.07 Limitation on Suits............................................36
SECTION 5.08 Unconditional Right of Holders to Receive Principal
and Interest and Convert.......................................37
SECTION 5.09 Restoration of Rights and Remedies.............................37
SECTION 5.10 Rights and Remedies Cumulative.................................37
SECTION 5.11 Delay or Omission Not Waiver...................................37
SECTION 5.12 Control by Holders.............................................37
SECTION 5.13 Waiver of Past Defaults........................................38
SECTION 5.14 Undertaking for Costs..........................................38
SECTION 5.15 Waiver of Stay or Extension Laws...............................38
SECTION 5.16 Enforcement by Holders of Preferred Securities.................38
ARTICLE VI The Trustee....................................................39
SECTION 6.01 Certain Duties and Responsibilities............................39
SECTION 6.02 Notice of Defaults.............................................39
SECTION 6.03 Certain Rights of Trustee......................................40
SECTION 6.04 Not Responsible for Recitals or Issuance of Securities.........41
SECTION 6.05 May Hold Securities............................................41
SECTION 6.06 Money Held in Trust............................................41
SECTION 6.07 Compensation and Reimbursement.................................41
SECTION 6.08 Disqualification; Conflicting Interests........................42
SECTION 6.09 Corporate Trustee Required; Eligibility........................42
SECTION 6.10 Resignation and Removal; Appointment of Successor..............42
</TABLE>
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<TABLE>
<S> <C>
SECTION 6.11 Acceptance of Appointment by Successor.........................43
SECTION 6.12 Merger, Conversion, Consolidation or Succession
to Business....................................................44
SECTION 6.13 Preferential Collection of Claims Against Company..............44
ARTICLE VII Holders' Lists and Reports by Trustee and Company..............44
SECTION 7.01 Company to Furnish Trustee Names and Addresses
of Holders.....................................................44
SECTION 7.02 Preservation of Information; Communications to
Holders........................................................44
SECTION 7.03 Reports by Trustee.............................................45
SECTION 7.04 Reports by Company.............................................45
SECTION 7.05 Tax Reporting..................................................45
ARTICLE VIII Consolidation, Merger, Conveyance, Transfer or Lease...........46
SECTION 8.01 Company May Consolidate, Etc., Only on Certain Terms...........46
SECTION 8.02 Successor Substituted..........................................46
ARTICLE IX Supplemental Indentures........................................47
SECTION 9.01 Supplemental Indentures Without Consent of Holders.............47
SECTION 9.02 Supplemental Indentures with Consent of Holders................47
SECTION 9.03 Execution of Supplemental Indentures...........................49
SECTION 9.04 Effect of Supplemental Indentures..............................49
SECTION 9.05 Conformity with Trust Indenture Act............................49
SECTION 9.06 Reference in Securities to Supplemental Indentures.............49
ARTICLE X Covenants; Representations and Warranties......................49
SECTION 10.01 Payment of Principal and Interest..............................49
SECTION 10.02 Maintenance of Office or Agency................................49
SECTION 10.03 Money for Security Payments to Be Held in Trust................50
SECTION 10.04 Statement by Officers as to Default............................51
SECTION 10.05 Limitation on Dividends; Transactions with Affiliates;
Covenants as to the Trust......................................51
SECTION 10.06 Payment of Expenses of the Trust...............................52
SECTION 10.07 Registration Rights............................................52
ARTICLE XI Redemption of Securities.......................................52
</TABLE>
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<TABLE>
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SECTION 11.01 Optional Redemption............................................52
SECTION 11.02 [Reserved].....................................................53
SECTION 11.03 Tax Event Redemption...........................................53
SECTION 11.04 Redemption at Stated Maturity..................................54
SECTION 11.05 Selection by Trustee of Securities to Be Redeemed..............54
SECTION 11.06 Notice of Redemption...........................................55
SECTION 11.07 Deposit of Redemption Price....................................55
SECTION 11.08 Securities Payable on Redemption Date..........................56
SECTION 11.09 Securities Redeemed in Part....................................56
ARTICLE XII Subordination of Securities....................................56
SECTION 12.01 Agreement to Subordinate.......................................56
SECTION 12.02 Default on Senior Debt.........................................57
SECTION 12.03 Liquidation; Dissolution; Bankruptcy...........................57
SECTION 12.04 Subrogation....................................................58
SECTION 12.05 Trustee to Effectuate Subordination............................59
SECTION 12.06 Notice by the Company..........................................59
SECTION 12.07 Rights of the Trustee; Holders of Senior Debt..................60
SECTION 12.08 Subordination May Not Be Impaired..............................60
ARTICLE XIII Conversion of Securities.......................................61
SECTION 13.01 Conversion Rights..............................................61
SECTION 13.02 Conversion Procedures..........................................62
SECTION 13.03 Conversion Price Adjustments...................................64
SECTION 13.04 Reclassification, Consolidation, Merger or Sale of
Assets.........................................................68
SECTION 13.05 Notice of Adjustments of Conversion Price......................69
SECTION 13.06 Prior Notice of Certain Events.................................69
SECTION 13.07 Adjustments in Case of Fundamental Changes.....................70
SECTION 13.08 Dividend or Interest Reinvestment Plans........................73
SECTION 13.09 Certain Additional Rights......................................73
SECTION 13.10 Restrictions on Common Stock Issuable Upon
Conversion.....................................................74
SECTION 13.11 Trustee Not Responsible for Determining Conversion
Price or Adjustments...........................................74
</TABLE>
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<PAGE> 6
INDENTURE, dated as of January 31, 2000, between Calpine Corporation, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company") having its principal office at 50 West San
Fernando Street, San Jose, California 95113, and The Bank of New York, a New
York banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Calpine Capital Trust II, a Delaware business trust (the
"Trust"), governed by the Amended and Restated Declaration of Trust among the
Company, as sponsor, The Bank of New York, as property trustee (the "Property
Trustee"), and The Bank of New York (Delaware), as Delaware trustee (the
"Delaware Trustee"), and Peter Cartwright, Ann B. Curtis and Thomas R. Mason, as
trustees (together with the Property Trustee and the Delaware Trustee, the
"Issuer Trustees"), and the holders from time to time of undivided beneficial
interest in the assets of the Trust, dated as of January 31, 2000 (the
"Declaration"), pursuant to the Purchase Agreement (the "Purchase Agreement")
dated January 25, 2000, among the Company, the Trust and the Initial Purchasers
named therein, will issue and sell up to 6,000,000 (or up to 7,200,000 to the
extent the option granted by the Trust is exercised in full) of its Remarketable
Term Income Deferrable Equity Securities (HIGH TIDES)_ (the "Preferred
Securities") with a liquidation preference of $50 per Preferred Security, having
an aggregate liquidation amount with respect to the assets of the Trust of up to
$300,000,000 (or up to $360,000,000 to the extent the option granted by the
Trust is exercised in full);
WHEREAS, the trustees of the Trust, on behalf of the Trust, will
execute and deliver to the Company Common Securities evidencing an ownership
interest in the Trust, registered in the name of the Company, in an aggregate
amount equal to at least three percent of the capitalization of the Trust,
equivalent to up to 185,568 Common Securities, (or up to 222,682 to the extent
the option granted by the Trust is exercised in full) with a liquidation
preference of $50 per Common Security, having an aggregate liquidation amount
with respect to the assets of the Trust of up to $9,278,400 (or up to
$11,134,100 to the extent the option granted by the Trust is exercised in full)
(the "Common Securities");
WHEREAS, the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase Securities (as
defined below) from the Company in an aggregate principal amount of up to
$309,278,400 (or up to $371,134,100 to the extent the option granted by the
Trust is exercised in full);
WHEREAS, the Company is guaranteeing the payment of distributions
on the Preferred Securities (as defined herein), and payment of the Redemption
Price (as
<PAGE> 7
defined herein) and payments on liquidation with respect to the Preferred
Securities, to the extent provided in the Guarantee (the "Guarantee") between
the Company and The Bank of New York, as Guarantee Trustee, for the benefit of
the Holders of the Trust Securities from time to time;
WHEREAS, the Company has duly authorized the creation of an issue
of its Convertible Subordinated Debentures Due 2030 (the "Securities"), of
substantially the tenor and amount hereinafter set forth and to provide therefor
the Company has duly authorized the execution and delivery of this Indenture;
WHEREAS, so long as the Trust is a Holder of Securities, and any
Preferred Securities are outstanding, the Declaration provides that the Holders
of Preferred Securities may cause the Conversion Agent (as defined herein) to
(i) exchange such Preferred Securities for Securities held by the Trust and (ii)
immediately convert such Securities into Common Stock (as defined herein);
WHEREAS, the Company, the Trust, the Remarketing Agent (as
defined herein) and The Bank of New York, as Tender Agent have entered into a
Remarketing Agreement (as defined herein) dated as of the date hereof pursuant
to which such Remarketing Agent has agreed to use its best efforts to (i)
remarket all Preferred Securities tendered for remarketing (the "Remarketing")
and (ii) establish, beginning on the Reset Date (as defined herein), (a) the
rate at which distributions will accrue on the Preferred Securities, (b) the
number of shares of Common Stock, if any, into which each Preferred Security may
be converted and (c) the price, manner and time, if any, at which the Preferred
Securities may be redeemed; and
WHEREAS, all things necessary to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined herein) thereof, it is mutually agreed,
for the equal and proportionate benefit of all Holders of the Securities, as
follows:
<PAGE> 8
ARTICLE I
Definitions and Other
Provisions of General Application
SECTION 1.1 Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 1.04.
"Additional Amounts" has the meaning specified in Section
3.01(d).
"Additional Interest" has the meaning set forth in the
Registration Rights Agreement.
"Additional Payments" means Compounded Interest and Additional
Amounts, if any.
"Additional Sums" has the meaning specified in Section 3.01(d).
"Adjusted Reference Market Price" has the meaning specified in
Section 13.07(a)(i).
"Adjusted Relevant Price" has the meaning specified in Section
13.07(a)(i).
3
<PAGE> 9
"Administrative Action" has the meaning specified in the definition of
"Tax Event" in this Section 1.01.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Security Registrar, co-registrar, Paying Agent or
Conversion Agent.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Conversion Price" has the meaning specified in Section 13.01.
"Applicable Conversion Ratio" has the meaning specified in Section 13.01.
"Applicable Rate" means the rate at which the Securities accrue interest
and the corresponding Trust Securities accrue distributions. From the date of
original issuance of the Securities to (but excluding) the Reset Date, the
Applicable Rate shall be 5.50% per annum (the "Initial Rate"). Beginning with
and after the Reset Date, the Applicable Rate shall be the Term Rate (as defined
herein). In the event of a Registration Default, the Applicable Rate shall
increase as set forth in Section 10.07 hereof.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than a Saturday or a Sunday, or a day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed, or a day on which the corporate
trust office of the Property Trustee or the Trustee is closed for business.
"Closing Price" has the meaning specified in Section 13.07(b).
4
<PAGE> 10
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities" has the meaning specified in the Second Recital to
this Indenture.
"Common Securities Guarantee" means the Common Securities Guarantee
Agreement dated of even date herewith delivered by the Company for the benefit
of the holders of the Common Securities from time to time.
"Common Stock" includes any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Article XIII, shares issuable on conversion of Securities shall
include only shares of the class designated as the Common Stock, par value $.001
per share, of the Company at the date of this Indenture or shares of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided,
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable on conversion shall be substantially
in the proportion which the total number of shares of such class resulting from
all such reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
"Common Stock Fundamental Change" has the meaning specified in Section
13.07(b).
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
5
<PAGE> 11
"Company Transaction" has the meaning specified in Section 13.04.
"Compounded Interest" has the meaning specified in Section 3.13.
"Conversion Agent" means the Person appointed to act on behalf of the
Holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 13.02
hereof.
"Conversion Date" has the meaning specified in Section 13.02.
"Convertible Remarketing" means the remarketing of the Preferred
Securities in the Remarketing as securities which will be convertible into
Common Stock.
"Corporate Trust Office" means the principal office of the Trustee in New
York, New York, at which at any particular time its corporate trust business
shall be administered and which at the date of this Indenture is 101 Barclay
Street, Floor 21 West, New York, New York 10286.
"Declaration" has the meaning specified in the First Recital to this
Indenture.
"Debt" means (i) the principal of and premium and interest, if any, on
indebtedness for money borrowed, (ii) purchase money and similar obligations,
(iii) obligations under capital leases, (iv) guarantees, assumptions or purchase
commitments relating to, or other transactions as a result of which the Company
is responsible for the payment of such indebtedness of others, (v) renewals,
extensions and refunding of any such indebtedness, (vi) interest or obligations
in respect of any such indebtedness accruing after the commencement of any
insolvency or bankruptcy proceedings and (vii) net payment obligations
associated with derivative products such as interest rate and currency exchange
contracts, foreign exchange contracts, commodity contracts and similar
arrangements.
"Defaulted Interest" has the meaning specified in Section 3.08.
"Deferral Notice" has the meaning specified in Section 3.13.
"Deferral Period" has the meaning specified in Section 3.13.
"Delaware Trustee" has the meaning given it in the First Recital to this
Indenture.
6
<PAGE> 12
"Depositary" means The Depository Trust Company, or any successor thereto.
"Direct Action" has the meaning specified in Section 5.16.
"Dissolution Tax Opinion" has the meaning specified in the definition of
"Tax Event" in this Section 1.01.
"Entitlement Date" has the meaning specified in Section 13.07(b).
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"ex" date has the meaning specified in Section 13.03(vii).
"Expiration Date" has the meaning specified in Section 1.04(d).
"Expiration Time" has the meaning specified in Section 13.03(vi).
"Failed Final Remarketing" has the meaning specified in Section 2(d) of
the Remarketing Agreement.
"Fundamental Change" has the meaning specified in Section 13.07(b).
"Global Security" means a Security issued in the form prescribed in
Section 2.03, issued to the Depositary or its nominee, and registered in the
name of the Depositary or its nominee.
"Guarantee" has the meaning specified in the Fourth Recital to this
Indenture.
"Holder" means a Person in whose name a Security is registered in the
Security Register or a Person in whose name a Preferred Security is registered
in the List of Holders, as the case may be.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively.
7
<PAGE> 13
"Initial Conversion Price" has the meaning specified in Section 13.01.
"Initial Conversion Ratio" has the meaning specified in Section 13.01.
"Initial Purchasers," with respect to the Preferred Securities, means
Credit Suisse First Boston Corporation and ING Barings LLC.
"Initial Rate" has the meaning specified in the definition of "Applicable
Rate" in this Section 1.01.
"Initial Redemption Price" has the meaning specified in Section 11.01.
"Interest Payment Date" has the meaning specified in Section 3.01(b).
"Investment Company Event" has the meaning specified in the Declaration.
"Issuer Trustees" has the meaning specific in the First Recital to this
Indenture.
"List of Holders" has the meaning specified in the Declaration.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"90 Day Period" has the meaning specified in Section 11.03.
"NNM" means the National Market System of the National Association of
Securities Dealers, Inc., or any successor national automated interdealer
quotation system.
"Non-Stock Fundamental Change" has the meaning specified in Section
13.07(b).
"No Recognition Opinion" means the receipt by the Property Trustee of an
opinion of a nationally recognized independent tax counsel (reasonably
acceptable to the Issuer Trustees) experienced in such matters, which opinion
may rely on published revenue rulings of the Internal Revenue Service, to the
effect that the Holders of the Preferred Securities will not recognize any
income, gain or loss for United States federal
8
<PAGE> 14
income tax purposes as a result of the liquidation of the Trust and the
distribution of the Securities to the Holders of the Preferred Securities.
"Notice of Conversion" means the notice to be given by a Holder of
Preferred Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Securities for Securities and to convert such Securities
into Common Stock on behalf of such Holder.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under, or with respect to, any Debt (including claims for rescission).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 10.04 shall be the principal
executive, financial or accounting officer of the Company.
"OID" means original issue discount.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
"Optional Redemption" has the meaning specified in Section 11.01(a).
"Optional Redemption Date" means the date which is not less than 20, nor
more than 60, days following the date on which the Optional Redemption Notice is
sent, as specified in the Optional Redemption Notice (or if such date is not a
Business Day, the next succeeding Business Day).
"Optional Redemption Notice" has the meaning specified in Section
11.01(b).
"Optional Redemption Price" has the meaning specified in Section 11.01(a).
"Optional Redemption Ratio" has the meaning specified in Section
13.07(a)(i).
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this
9
<PAGE> 15
Indenture, except: (i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; (ii) Securities for whose payment or
redemption money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; provided, that if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made; and
(iii) Securities that have been paid pursuant to Article XI, converted into
Common Stock pursuant to Section 13.01, or in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Payment Resumption Date" has the meaning specified in Section 3.13(b).
"Person" means any individual, corporation, limited liability company,
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the First Recital to
this Indenture.
"Primary Treasury Dealer" has the meaning specified in the Remarketing
Agreement.
"Property Trustee" has the meaning specified in the First Recital to this
Indenture.
"Purchase Agreement" has the meaning specified in the First Recital to
this Indenture.
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"Purchased Shares" has the meaning specified in Section 13.03(vi).
"Purchaser Stock Price" has the meaning specified in Section 13.07(b).
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture,
including without limitation, the Optional Redemption Date with respect to an
Optional Redemption.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture,
including without limitation, the Optional Redemption Price with respect to an
Optional Redemption. "Redemption Tax Opinion" means the receipt by the Property
Trustee of an opinion of a nationally recognized independent tax counsel
(reasonably acceptable to the Issuer Trustees) experienced in such matters that,
as a result of a Tax Event, there is more than an insubstantial risk that (a)
the Trust would not be considered to be a grantor trust for United States
federal income tax purposes or (b) the Company would be precluded from deducting
the interest on the Securities for United States federal income tax purposes,
even after the Trust was liquidated and the Securities were distributed to the
Holders of the Preferred Securities.
"Reference Date" has the meaning specified in Section 13.03(iv).
"Reference Market Price" has the meaning specified in Section 13.07(b).
"Reference Treasury Dealer" has the meaning specified in the Remarketing
Agreement.
"Reference Treasury Dealer Quotations" has the meaning specified in the
Remarketing Agreement.
"Registrable Securities" has the meaning specified in Section 10.07.
"Registration Default" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" has the meaning specified in Section
10.07.
"Regular Record Date" has the meaning specified in Section 3.01(b).
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"Relevant Price" has the meaning specified in Section 13.07(b).
"Remarketing" has the meaning specified in the Seventh Recital to this
Indenture.
"Remarketing Agent" means an investment bank, broker, dealer, or other
organization which, in the opinion of the Company and the Trust, is qualified to
remarket the Preferred Securities substantially in accordance with the terms of
the Remarketing Agreement. The initial Remarketing Agent shall be Credit Suisse
First Boston Corporation. The term "Remarketing Agent" shall also include any
successor Person appointed as such by the Company and the Trust.
"Remarketing Agreement" means the Remarketing Agreement with the
Remarketing Agent dated the date hereof substantially in the form set forth in
Exhibit B to this Indenture and any substantially similar agreement entered into
by the Company with any successor Remarketing Agent.
"Remarketing Notice" shall have the meaning specified in the Remarketing
Agreement.
"Reset Date" means any date that is (i) not later than February 1, 2005
(or, if such day is not a Business Day, the next succeeding Business Day), and
(ii) not earlier than 70 business days prior to February 1, 2005, as may be
determined by the Remarketing Agent, in its sole discretion, for settlement of a
successful remarketing.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer, the controller or any assistant controller or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers, and having direct
responsibility for the administration of this Indenture, and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Preferred Securities" means each Preferred Security required
to bear the restricted securities legend required by Section 9.02(h) of the
Declaration.
"Restricted Securities" means each Security required to bear a Restricted
Securities Legend pursuant to Section 2.02 hereof.
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"Restricted Securities Legend" has the meaning specified in Section 2.02.
"Securities" has the meaning specified in the Fifth Recital to this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.06(a).
"Senior Debt" means (i) all indebtedness of the Company evidenced by
securities, debentures, bonds or other similar instruments issued by the
Company, (ii) all obligations to make net payment pursuant to the terms of
financial instruments, such as (a) securities contracts and foreign currency
exchange contracts, (b) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts, and (c) similar financial instruments; except, in the case of
(i) above, such indebtedness and obligations that are expressly stated to rank
junior in right of payment to, or pari passu in right of payment with, the
Securities, (iii) and indebtedness or obligations of others of the kind
described in (i) and (ii) above for the payment of which the Company is
responsible or liable as guarantor or otherwise and (iv) deferrals, renewals or
extensions of any such Senior Debt; provided, however, that Senior Debt shall
not be deemed to include (a) any Debt of the Company which, when incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, or any succession statute thereto, was
without recourse to the Company, (b) trade accounts payable and accrued
liabilities arising in the ordinary course of business, which will not
constitute Debt for purposes of the Preferred Securities (c) any Debt of the
Company to any of its subsidiaries, except to the extent incurred for the
benefit of third parties, (d) Debt to any employee of the Company and (e) Debt
that expressly provides that it is not senior in right of payment to the
Securities.
"Shelf Registration Statement" has the meaning specified in the
Registration Rights Agreement.
"Significant Subsidiary" of any Person means a Subsidiary of such Person
meeting the requirements set forth in Rule 1-02(w) of Regulation S-X of the
Securities Act.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.08.
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"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest or Additional Payments thereon,
means the date specified in such Security as the fixed date on which the
principal, together with any accrued and unpaid interest (and Additional
Payments, if any), of such Security or such installment of interest or
Additional Payments is due and payable.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Tax Event" means the receipt by the Property Trustee of an opinion of a
nationally recognized independent tax counsel to the Company (reasonably
acceptable to the Issuer Trustees) experienced in such matters (a "Dissolution
Tax Opinion") to the effect that, as a result of (a) any amendment to or change
(including any announced prospective change (which shall not include a proposed
change), provided that a Tax Event shall not occur more than 90 days before the
effective date of any such prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any judicial decision or official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (c) any amendment to
or change in the administrative position or interpretation of any Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental agency or
regulatory body, irrespective of the manner in which such amendment or change is
made known, which amendment or change is effective or such Administrative Action
or decision is announced, in each case, on or after the date of the date of
original issuance of the Securities or the issue date of the Preferred
Securities issued by the Trust, there is more than an insubstantial risk that
(x) if the Securities are held by the Property Trustee, (i) the Trust is, or
will be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to interest accrued or received on the
Securities or subject to more than a de minimis amount of other taxes, duties or
other governmental charges as determined by such counsel, or (ii) any portion of
interest payable by the Company to the Trust (or OID accruing) on the Securities
is not, or within 90 days of the date of such opinion will not be, deductible by
the Company in whole or in part for United States federal income tax purposes or
(y) with respect to Securities which are no longer held by the Property Trustee,
any portion of interest payable by the Company (or OID accruing) on the
Securities is not, or within 90 days of
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the date of such opinion will not be, deductible by the Company in whole or in
part for United States federal income tax purposes.
"Tender Notification Date" means a Business Day no earlier than 10
Business Days following the date of the Remarketing Notice, or such shorter
period as agreed to by the Remarketing Agent.
"Term Call Protections" means the price, manner and time, if any, at which
the Securities may be redeemed at the option of the Company after the Reset
Date. The Term Call Protections, if any, will be established in connection with
the Remarketing.
"Term Provisions" shall have the meaning specified in the Remarketing
Agreement.
"Term Rate" means the rate established by the Remarketing Agent in
connection with the Remarketing at which distributions shall accrue on the
Securities from and after the Reset Date.
"Term Redemption Price" has the meaning specified in Section 11.01(a).
"Trading Day" has the meaning specified in Section 13.07(b).
"Trust" has the meaning specified in the First Recital to this Indenture.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this Indenture was executed; provided, however, that in the
event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Preferred Securities.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
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"Voting Stock" of any Person means capital stock of such Person
which ordinarily has voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
SECTION 1.2 Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act or
reasonably requested by the Trustee in connection with such application or
request. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
applicable requirements of the Trust Indenture Act and any other applicable
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made or caused to be made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
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Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders; Record Dates. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given to or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments is or are delivered to the Trustee and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 6.01) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee or the Company, as the case may be, deems
sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Outstanding Securities entitled to give, make or take any request,
demand,
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authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 7.01) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to join in the
giving or making of (i) any notice of default, (ii) any declaration of
acceleration referred to in Section 5.02, (iii) any request to institute
proceedings referred to in Section 5.07(2) or (iv) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the date set by
the Trustee by which any such determination shall be made (the "Expiration
Date") by Holders of the requisite principal amount of Outstanding Securities on
such record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities of the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Company in writing and to
each Holder of Securities in the manner set forth in Section 1.06.
(e) The ownership of Securities shall be proved by the Security
Register.
(f) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(g) Without limiting the foregoing, a Holder entitled hereunder
to give or take any such action with regard to any particular Security may do so
with regard to all or
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any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any different part of such principal amount.
SECTION 1.5 Notices, Etc., to Trustee and the Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.6 Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at such
Holder's address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
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SECTION 1.7 Conflict with Trust Indenture Act. This Indenture is,
or will be upon qualification under the Trust Indenture Act, subject to the
provisions of the Trust Indenture Act and if any provision hereof limits,
qualifies or conflicts with a provision of the Trust Indenture Act that is
required under such Act to be a part of and govern this Indenture, the latter
provision shall control. Until such time as this Indenture is qualified under
the Trust Indenture Act, the parties hereto have agreed that the provisions of
Sections 310-317, inclusive, of the Trust Indenture Act shall be incorporated
herein by reference, subject to the provisions of this Indenture. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 1.8 Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.9 Successors and Assigns. All covenants and agreements
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 1.10 Separability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11 Benefits of Indenture. Nothing in this Indenture or
in the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior Debt, the
Holders of Preferred Securities (to the extent provided herein) and the Holders
of Securities, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 1.12 Governing Law. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.13 Legal Holidays. In any case where any Redemption
Date or Stated Maturity of any Security or the last date on which a Holder has
the right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest (and Additional Payments, if any) or principal or conversion
of the Securities need not be made on such date, but may be made on the next
succeeding Business Day (except that, if such Business
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Day is in the next succeeding calendar year, such Redemption Date or Stated
Maturity, as the case may be, shall be the immediately preceding Business Day)
with the same force and effect as if made on the Redemption Date or at the
Stated Maturity or on such last day for conversion, provided that no interest
shall accrue for the period from and after such Redemption Date or Stated
Maturity, as the case may be.
ARTICLE II
Security Forms
SECTION 1.14 Forms Generally. The Securities and the Trustee's
certificates of authentication shall be substantially in the form of Exhibit A
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing. Each Security shall be dated the date of
its authentication. The terms and provisions of the Securities set forth in
Exhibit A are part of the terms of this Indenture and to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 1.15 Initial Issuance to Property Trustee. The Securities
initially issued to the Property Trustee of the Trust shall be in the form of
one or more individual certificates in definitive, fully registered form without
coupons and shall bear the following legend (the "Restricted Securities Legend")
unless the Company determines otherwise in accordance with applicable law:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS SECURITY AND ANY COMMON STOCK OF THE COMPANY
ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS
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SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER
AND THE COMPANY THAT (A) THIS SECURITY AND ANY COMMON STOCK OF THE COMPANY
ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i)THROUGH (iii) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT
OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
SECTION 1.16 Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the provisions
contained in section 2.02, bear a legend in substantially the following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY
TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY
BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK) TO CALPINE
CORPORATION OR ITS AGENT FOR
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REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
SECTION 1.17 Issuance of Global Securities to Holders. The
Securities will be represented by one or more Global Securities registered in
the name of the Depositary or its nominee if, and only if, the Securities are
distributed to the holders of the Trust Securities. Until such time, the
Securities shall be registered in the name of and held by the Property Trustee.
Securities distributed to holders of book-entry Trust Securities shall be
distributed in the form of one or more Global Securities registered in the name
of the Depositary or its nominee, and deposited with the Security Registrar, as
custodian for such Depositary, or held by such Depositary for credit by the
Depositary to the respective accounts of the beneficial owners of the Securities
represented thereby (or such other accounts as they may direct). Securities
distributed to holders of Trust Securities other than book-entry Trust
Securities shall not be issued in the form of a Global Security or any other
form intended to facilitate book-entry trading in beneficial interests in such
Securities.
ARTICLE III
The Securities
SECTION 1.18 Title and Terms. (a) The aggregate principal amount
of Securities that may be authenticated and delivered under this Indenture is
limited to the sum of (a) $371,134,100 plus (b) such aggregate principal amount
(which may not exceed $61,855,700 aggregate principal amount of Securities, if
any, as shall be purchased by the Trust pursuant to an option granted by the
Trust in accordance with the terms and provisions of the Purchase Agreement,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
3.04, 3.05, 3.06, 3.07, 9.06, 11.09 or 13.01.
(b) The Securities shall be known and designated as the
"Convertible Subordinated Debentures Due 2030" of the Company. Their Stated
Maturity shall be February 1, 2030, and they shall bear interest at the
Applicable Rate, from January 31, 2030, or from the most recent Interest Payment
Date (as defined below) to which interest has been paid or duly provided for, as
the case may be, payable quarterly (subject to
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deferral as set forth herein), in arrears, on February 1, May 1, August 1 and
November 1 (each an "Interest Payment Date") of each year, commencing May 1,
2000 until the principal thereof is paid or made available for payment, and they
shall be paid to the Person in whose name the Security is registered at the
close of business on the regular record date for such interest installment,
which shall be the close of business on the fifteenth day of each January,
April, July and October next preceding the applicable Interest Payment Date (the
"Regular Record Date"). If the Reset Date is prior to the Regular Record Date
for the immediately following Interest Payment Date, then interest and
Additional Amounts, if any, accrued from and after the Reset Date to but
excluding the immediately following Interest Payment Date shall be paid on such
Interest Payment Date to the person in whose name each Security is registered on
the relevant Regular Record Date, subject to the right of the Company to
initiate a Deferral Period. If the Reset Date is on or after the Regular Record
Date for the immediately following Interest Payment Date, then (1) interest and
Additional Amounts, if any, accrued from and after the Regular Record Date to
but excluding the Reset Date shall be paid on the immediately following Interest
Payment Date to the person in whose name each Security is registered on the
relevant Regular Record Date and (2) interest and Additional Amounts, if any,
accrued from and after the Reset Date to but excluding the immediately following
Interest Payment Date shall be paid on the second Interest Payment Date
immediately following the Reset Date to the person in whose name each Security
is registered on the relevant Regular Record Date for such second Interest
Payment Date, subject in each case to the right of the Company to initiate a
Deferral Period. Interest will compound quarterly and will accrue at the
Applicable Rate on any interest installment in arrears for more than one quarter
or during an extension of an interest payment period as set forth in Section
3.13 hereof.
(c) The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed, will
be computed on the basis of the actual number of days elapsed in such a 30-day
month. In the event that any date on which interest is payable on the Securities
is not a Business Day, then payment of interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
(d) If at any time (including upon the occurrence of a Tax
Event) while the Property Trustee is the Holder of all the Securities, the Trust
or the Property Trustee is required to pay any taxes, duties, assessments or
governmental charges of whatever nature ("Additional Sums") (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, subject to the provisions of Section 11.03 hereof,
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the Company will pay as additional amounts on the Securities held by the
Property Trustee, such additional amounts ("Additional Amounts") as shall be
required so that the net amounts received and retained by the Trust and the
Property Trustee after paying such taxes, duties, assessments or other
governmental charges will be equal to the amounts the Trust and the Property
Trustee would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
(e) The principal of and interest (and Additional Payments, if
any) on the Securities shall be payable at the office or agency of the Company
in New York, New York maintained for such purpose and at any other office or
agency maintained by the Company for such purpose in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at any time that
the Property Trustee is not the sole holder of the Securities, payment of
interest may, at the option of the Company, be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or by wire transfer.
(f) The Securities shall be redeemable as provided in Article XI
hereof.
(g) The Securities shall be subordinated in right of payment to
Senior Debt as provided in Article XII hereof.
(h) The Securities shall be convertible as provided in Article
XIII hereof.
(i) The Securities shall rank pari passu with the Company's
Convertible Subordinated Debentures due 2029.
SECTION 1.19 Denominations. The Securities shall be issuable only
in registered form without coupons and only in denominations of $50 and integral
multiples thereof.
SECTION 1.20 Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
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At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and make available for delivery such
Securities as in this Indenture provided and not otherwise.
The Trustee shall have the right to decline to authenticate and
deliver any Securities under this Section if the Trustee, begin advised by
counsel, determines that such action may not lawfully be taken or if the Trustee
in good faith shall determine that such action would expose the Trustee to
personal liability to existing Holders.
No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 1.21 Temporary Securities. Pending the preparation of
definitive Securities complying with the requirements of Section 2.01, if
necessary, the Company may execute, and upon Company Order the Trustee shall
authenticate and make available for delivery, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
10.02, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 1.22 Global Securities. (a) Each Global Security
issued under this Indenture shall be registered in the name of the Depositary
designated by the
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Company for such Global Security or a nominee thereof and delivered to such
Depositary or a nominee thereof or custodian therefor, and each such Global
Security shall constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (i) such Depositary advises the Trustee in writing that
such Depositary is no longer willing or able to continue as a Depositary with
respect to such Global Security, and no successor depositary shall have been
appointed, or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, at a time when the Depositary is required to
be so registered to act as such depositary, (ii) the Company in its sole
discretion determines that such Global Security shall be so exchangeable or
(iii) there shall have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Security Registrar for exchange or cancellation
as provided in this Article III. If any Global Security is to be exchanged for
other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article III or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or canceled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Security
Registrar, whereupon the Trustee shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Security by the Depositary, accompanied by
registration instructions and, to the extent required by Section 3.06, a
certificate bearing the Restricted Securities Legend, the Trustee shall, subject
to Section 3.05(b) and as otherwise provided in this Article III, authenticate
and make available for delivery any Securities issuable in exchange for such
Global Security (or any portion thereof) in accordance with the instructions of
the Depositary. The Trustee shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.
(d) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interest pursuant to the rules and procedures of
the Depositary. Accordingly, any such owner's beneficial interests in a Global
Security shall be shown only on, and the transfer
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of such interest shall be effected only through, records maintained by the
Depositary or its nominee or its Agent Members. Neither the Trustee nor the
Security Registrar shall have any liability in respect of any transfers effected
by the Depositary.
(e) The rights of the beneficial interests in a Global Security
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.
SECTION 1.23 Registration, Transfer and Exchange Generally;
Certain Transfers and Exchanges. (a) The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the register maintained in
such office and in any other office or agency designated pursuant to Section
10.02 being herein sometimes collectively referred to as the "Security
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Securities and of transfers of
Securities. The Trustee is hereby appointed "Security Registrar" for the purpose
of registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 10.02 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount and bearing such restrictive legends as may be required by this
Indenture, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and
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the Security Registrar duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.04, 3.05, 9.06, 11.09 or 13.01 not
involving any transfer.
Neither the Company nor the Trustee shall be required (i) in the
case of a partial redemption of the Securities, to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 11.05 and ending at the close of business
on the day of such mailing or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
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(b) Transfer and Exchange Procedures and Restrictions. The
Securities may not be transferred except in compliance with the Restricted
Securities Legend unless otherwise determined by the Company in accordance with
applicable law. Upon any distribution of the Securities to the holders of the
Trust Securities in accordance with the Declaration, the Company and the Trustee
shall enter into a supplemental indenture pursuant to Section 9.01(6) to provide
for transfer procedures and restrictions with respect to the Securities
substantially similar to those contained in the Declaration to the extent
applicable in the circumstances existing at the time of such distribution.
Notwithstanding any other provision of the Indenture, transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 3.06(b) shall be made only in accordance with this Section
3.06(b).
(1) Non-Global Security to Global Security. If the Holder of a
Security (other than a Global Security) wishes at any time to transfer
all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Global
Security, such transfer may be effected only in accordance with the
provisions of this clause (b)(1) and subject to the rules and procedures
of the Depositary. Upon receipt by the Security Registrar of (A) such
Security as provided in Section 3.06(a) and instructions satisfactory to
the Security Registrar directing that a beneficial interest in the
Global Security in a specified principal amount not greater than the
principal amount of such Security be credited to a specified Agent
Member's account and (B) a Securities Certificate duly executed by such
Holder or such Holder's attorney duly authorized in writing, then the
Security Registrar shall cancel such Security (and issue a new Security
in respect of the untransferred portion thereof) as provided in Section
3.06(a) and increase the aggregate principal amount of the Global
Security by the specified principal amount as provided in Section
3.05(c).
(2) Non-Global Security to Non-Global Security. A Security that
is not a Global Security may be transferred, in whole or in part, to a
Person who takes delivery in the form of another Security that is not a
Global Security as provided in Section 3.06(a) provided, that if such
Security to be transferred in whole or in part is a Restricted Security,
the Security Registrar shall have received the assignment form attached
to the Security duly executed by the transferor Holder or such Holder's
attorney duly authorized in writing.
(3) Exchanges Between Global Security and Non-Global Security. A
beneficial interest in a Global Security may be exchanged for a Security
that is not a Global Security as provided in Section 3.05.
(c) Restricted Securities Legend. (1) Except as set forth
below, all Securities shall bear the Restricted Securities Legend set forth in
Section 2.02.
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(2) Subject to the following clauses of this Section 3.06(c), a
Security (other than a Global Security) that does not bear a Restricted
Securities Legend may be issued in exchange for or in lieu of a
Restricted Security or any portion thereof that bears such legend if, in
the Company's judgment, placing such a legend upon such new Security is
not necessary to ensure compliance with the registration requirements of
the Securities Act, and the Trustee, at the written direction of the
Company in the form of an Officers' Certificate, shall countersign and
deliver such a new Security.
(3) Notwithstanding the foregoing provisions of this Section
3.06(c), a successor Security of a Security that does not bear a
Restricted Securities Legend shall not bear such form of legend unless
the Company has reasonable cause to believe that such successor Security
is a "restricted security" within the meaning of Rule 144 under the
Securities Act, in which case the Trustee, at the written direction of
the Company in the form of an Officers' Certificate, shall countersign
and deliver a new Security bearing a Restricted Securities Legend in
exchange for such successor Security.
(4) Upon any sale or transfer of a Restricted Security (including
any Restricted Security represented by a Global Security) pursuant to an
effective registration statement under the Securities Act or pursuant to
Rule 144 under the Securities Act after such registration ceases to be
effective: (A) in the case of any Restricted Security that is a
definitive Security, the Security Registrar shall permit the Holder
thereof to exchange such Restricted Security for a definitive Security
that does not bear the Restricted Securities Legend and rescind any
restriction on the transfer of such Restricted Security; and (B) in the
case of any Restricted Security that is represented by a Global
Security, the Security Registrar shall permit the Holder of such Global
Security to exchange such Global Security for another Global Security
that does not bear the Restricted Securities Legend.
(5) If Restricted Securities are being presented or surrendered
for transfer or exchange then there shall be (if so required by the
Trustee), (A) if such Restricted Securities are being delivered to the
Security Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect; or (B) if such Restricted Securities are being transferred, a
certification from the transferor in as to the compliance with the
restrictions set forth in the Restricted Securities Legend.
SECTION 1.24 Mutilated, Destroyed, Lost and Stolen Securities. If
any mutilated Security is surrendered to the Trustee, the Company shall execute
and the Trustee shall authenticate and make available for delivery in exchange
therefor a new
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Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 1.25 Payment of Interest; Interest Rights Preserved.
Subject to Section 3.01(b), interest (and Additional Payments, if any) on any
Security which is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date.
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Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date (as defined below) for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of
the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this clause provided. Thereupon the Trustee shall fix a special
record date (the "Special Record Date") for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register,
not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and, if so
listed, upon such notice as may be required by such exchange (or by the
Trustee if the Securities are not listed), if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee;
provided that any such payment shall be made in coin or currency of the
United States of America which at the time of payment is a legal tender
for payment of public and private debt.
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Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue (including in each such case Additional
Payments), which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(and Additional Payments, if any) (whether or not punctually paid or duly
provided for) shall be paid to the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on such
Regular Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, interest whose Stated Maturity is after the date of
conversion of such Security shall not be payable, and the Company shall not make
nor be required to make any other payment, adjustment or allowance with respect
to accrued but unpaid interest (and Additional Payments, if any) on the
Securities being converted, which shall be deemed to be paid in full.
SECTION 1.26 Persons Deemed Owners. The Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest (and
Additional Payments, if any) on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary. No holder of any beneficial interest in any Global
Security held on its behalf by a Depositary shall have any rights under this
Indenture with respect to such Global Security, and such Depositary may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company or the
Trustee from giving effect to any written certification, proxy, or other
authorization furnished by a Depositary or impair, as between the Depositary and
such holders of beneficial interests, the operation of customary practices
governing the exercise of the rights of the Depositary (or its nominee) as
Holder of any Security.
SECTION 1.27 Cancellation. All Securities surrendered for
payment, redemption, registration of transfer or exchange or conversion shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for
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cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order; provided, however, that the Trustee shall not be required to destroy the
certificates representing such canceled Securities.
SECTION 1.28 Right of Set Off. Notwithstanding anything to the
contrary in this Indenture, the Company shall have the right to set off any
payment it is otherwise required to make hereunder to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee.
SECTION 1.29 CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, that any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
SECTION 1.30 Extension of Interest Payment Period; Notice of
Extension. (a) So long as no Event of Default has occurred and is continuing,
the Company shall have the right, at any time during the term of this Security,
from time to time to defer payments of interest by extending for successive
periods not exceeding 20 consecutive quarters for each such period (a "Deferral
Period"); provided that no Deferral Period may extend beyond (i) the maturity
(whether at February 1, 2030 or by declaration of acceleration, call for
redemption or otherwise) or (ii) in the case of a Deferral Period that begins
prior to the Reset Date, the Reset Date. To the extent permitted by applicable
law, interest, the payment of which has been deferred because of the extension
of the interest payment period pursuant to this Section 3.13, will bear interest
thereon at the Applicable Rate compounded quarterly for each quarter of the
Deferral Period ("Compounded Interest"). On the applicable Payment Resumption
Date, the Company shall pay all interest then accrued and unpaid on the
Securities, including any Compounded Interest that shall be payable, to the
Holders of the Securities in whose names the Securities are registered in the
Security Register on the Regular Record Date relating to such Payment Resumption
Date. A Deferral Period shall terminate upon the payment by the Company of all
interest then accrued and unpaid on the Securities (together with Additional
Payments), to the extent permitted by applicable law. Before the termination of
any Deferral Period, the Company may further extend such period as provided in
paragraph (b) of this Section 3.13, provided that such period together with all
such further
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extensions thereof shall not exceed 20 consecutive quarters or extend beyond (i)
the maturity (whether at February 1, 2030 or by declaration of acceleration,
call for redemption or otherwise) or (ii) in the case of a Deferral Period that
begins prior to the Reset Date, the Reset Date. Upon the termination of any
Deferral Period, and subject to the foregoing requirements, the Company may
elect to begin a new Deferral Period. No interest shall be due and payable
during a Deferral Period except on the Payment Resumption Date as determined
pursuant to paragraph (b) of this Section 3.13. There is no limitation on the
number of times that the Company may elect to begin a Deferral Period.
(b) The Company shall give the Holder of the Security and the
Trustee written notice (a "Deferral Notice") of its selection of a Deferral
Period at least ten days prior to the record date for any distributions that
would have been payable on the Trust Securities except for the decision to begin
or extend a Deferral Period. On or prior to the Regular Record Date immediately
preceding the Interest Payment Date on which the Company elects to pay all
interest then accrued and unpaid on the Securities, including Compounded
Interest (the "Payment Resumption Date"), the Company shall give the Holder of
the Security and the Trustee written notice that the Deferral Period will end on
such Payment Resumption Date. Notwithstanding the provision of such notice, the
Company may elect to further extend the Deferral Period, subject to the
limitations set forth in Section 3.13(a), by providing the Holder of the
Security and the Trustee with a new Deferral Notice not less than three Business
Days prior to the Regular Record Date immediately preceding the previously
scheduled Payment Resumption Date. The Company may elect to pay all interest
then accrued and unpaid on the Securities, including Compounded Interest, on an
Interest Payment Date prior to its most recently established Payment Resumption
Date; provided that the Company gives the Holder of the Security and the Trustee
a new Deferral Notice setting forth the revised Payment Resumption Date at least
three Business Days prior to the Regular Record Date for such revised Payment
Resumption Date.
(c) The quarter in which any Deferral Notice is given pursuant to
paragraph (b) hereof shall be counted as one of the 20 quarters permitted in the
maximum Deferral Period permitted under paragraph (a) hereof.
SECTION 1.31 Paying Agent, Security Registrar and Conversion
Agent. The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or Conversion Agent without prior notice. The Company or any of its
Affiliates may act in any such capacity.
ARTICLE IV
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Satisfaction and Discharge
SECTION 1.32 Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to any surviving rights
of conversion, registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 3.06 and (ii) Securities for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.03) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal and interest (and Additional Payments, if any) to the
date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as
the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
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(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.
SECTION 1.33 Application of Trust Money. Subject to the
provisions of the last paragraph of Section 10.03, all money deposited with the
Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest (and Additional Payments, if
any) for whose payment such money has been deposited with the Trustee. All
moneys deposited with the Trustee pursuant to Section 4.01 (and held by it or
any Paying Agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.
ARTICLE V
Remedies
SECTION 1.34 Events of Default. "Event of Default," wherever used
herein, means any one of the following events that has occurred and is
continuing (whatever the reason for such Event of Default and whether it shall
be occasioned by the provisions of Article XI or Article XII or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security,
including any Additional Payments, when it becomes due and payable, and
continuance of such default for a period of 30 days (subject to the
deferral of any due date in the case of a Deferral Period); or
(2) default in the payment of the principal or premium, if any,
of any Security at its Maturity;
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(3) default in the observation or performance in any material
respect of any covenant of the Company in this Indenture (other than a
covenant a default in the performance of which or the breach of which is
elsewhere in this Section specifically dealt with), and continuance of
such default for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
outstanding principal amount of the Securities a written notice
specifying such default and requiring it to be remedied; or
(4) failure by the Company to issue and deliver Common Stock
upon an election to convert the Securities into Common Stock; or
(5) the entry or a decree or order by a court having jurisdiction
in the premises adjudging the Company or any of its Significant
Subsidiaries as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any of its Significant Subsidiaries,
as the case may be, under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any of its Significant Subsidiaries or of
any substantial part of their property or ordering the winding up or
liquidation of their affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(6) the institution by the Company or any of its Significant
Subsidiaries of proceedings to be adjudicated a bankrupt or insolvent,
or the consent by the Company or such Significant Subsidiary to the
institution of bankruptcy or insolvency proceedings against the Company
or such Significant Subsidiary, or the filing by the Company or such
Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or the
consent by the Company or such Significant Subsidiary to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or such Significant Subsidiary or of any substantial part of any
their respective property, or the making by any of them of an assignment
for the benefit of creditors, or the admission by any of them in writing
of its inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate
action by the Company or any of its Significant Subsidiaries in
furtherance of any such action; or
(7) the voluntary or involuntary dissolution, winding up or
termination of the Trust, except in connection with (i) the distribution
of Securities to Holders of
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Preferred Securities in liquidation or redemption of their
interests in the Trust, (ii) the redemption of all of the outstanding
Preferred Securities of the Trust or (iii) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.
SECTION 1.35 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Outstanding
Securities and any other amounts payable hereunder (including any Additional
Payments) to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders); provided that, if the Property
Trustee is the sole Holder of the Securities and if upon an Event of Default,
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities fail to declare the principal of all the Securities to be
immediately due and payable, the Holders of at least 25% in aggregate
liquidation amount of Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee, and upon any such
declaration such principal and all accrued interest (and Additional Payments, if
any) shall become immediately due and payable. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of a series may annul
such declaration and waive the default by written notice to the Property
Trustee, the Company and the Trustee if the default (other than the nonpayment
of the principal of these Securities which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest (and Additional Payments, if any) and principal due
otherwise than by acceleration has been deposited with the Trustee. Should the
Holders of the Securities of such a series fail to annul such declaration and
waive such default, the Holders of a majority in aggregate liquidation amount of
the Preferred Securities shall have such right. Upon the effectiveness of any
such declaration such principal amount (or specified amount) of and the accrued
interest (including any Additional Payments) on all the Securities of such
series shall then become immediately due and payable; provided that the payment
of principal and interest on, and all other Obligations relating to, such
Securities (including Additional Payments) shall remain subordinated to the
extent provided in Article XII.
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At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as provided in this Article hereinafter, the Holders of
a majority in aggregate principal amount of the Outstanding Securities, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest and Additional Payments on all
Securities,
(B) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest (and
Additional Payments, if any) thereon at the rate borne by the
Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section 5.13.
The Company is required to file annually with the Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under this Indenture.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities
all or part of which are represented by a Global Security, a record date shall
be established for determining Holders of such Outstanding Securities entitled
to join in such notice, which record date shall be at the close of business on
the day the Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, however, that, unless such declaration of acceleration, or
rescission and annulment, as the case may be, shall have become effective by
virtue of the
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requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.02.
SECTION 1.36 Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
(1) default is made in the payment of any interest or any
Additional Payments on any Security when such interest or Additional
Payments become due and payable and such default continues for a period
of 30 days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest (including any Additional Payments) and,
to the extent that payment thereof shall be legally enforceable, interest on any
overdue principal and on any overdue interest (including any Additional
Payments), at the rate borne by the Securities, and, in addition thereto, all
amounts owing to the Trustee under Section 6.07.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 1.37 Trustee May File Proofs of Claim. In case of any
judicial proceeding relative to the Company (or any other obligor upon the
Securities), its property or its creditors, the Trustee shall be entitled and
empowered, by intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have claims of the
Holders and the Trustee allowed in any such proceeding. In particular, the
Trustee shall be authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
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similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it, and any predecessor Trustee under Section 6.07.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 1.38 Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing to the Trustee and any
predecessor Trustee under Section 6.07, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
SECTION 1.39 Application of Money Collected. Subject to Article
XII, any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest
(including any Additional Payments), upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.07;
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest (including any Additional Payments) on the
Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such
Securities for principal and interest (including any Additional
Payments), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
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SECTION 1.40 Limitation on Suits. Subject to Section 5.08, no
Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of
Default, in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 1.41 Unconditional Right of Holders to Receive Principal
and Interest and Convert. Notwithstanding any other provision in this Indenture,
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and (subject to Section
3.08) interest (including any Additional Payments) on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to convert such Security in accordance
with Article XIII and to institute suit for the enforcement of any such payment
and right to convert, and such rights shall not be impaired without the consent
of such Holder. If the Property Trustee is the sole Holder of the Securities,
any Holder of the Preferred Securities shall have the right to institute suit on
behalf of the Trust for the enforcement of any such payment and right to
convert.
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SECTION 1.42 Restoration of Rights and Remedies. If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 1.43 Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.07, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 1.44 Delay or Omission Not Waiver. No delay or omission
of the Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 1.45 Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided, that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture; and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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SECTION 1.46 Waiver of Past Defaults. Subject to Section 9.02
hereof, the Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of, premium, if any, or
interest (including any Additional Payments) on any Security (unless
such default has been cured and a sum sufficient to pay all matured
installments of interest (and Additional Payments, if any) and principal
due otherwise than by acceleration has been deposited with the Trustee);
or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 1.47 Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, a court
may require any party litigant in such suit to file an undertaking to pay the
costs of such suit, and may assess costs against any such party litigant, in the
manner and to the extent provided in the Trust Indenture Act; provided, that
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company or the Trustee or in any suit for the enforcement
of the right to receive the principal of and interest (and Additional Payments,
if any) on any Security or to convert any Security in accordance with Article
XIII.
SECTION 1.48 Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
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SECTION 1.49 Enforcement by Holders of Preferred Securities.
Notwithstanding anything to the contrary contained herein, but subject to
Article XII, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest, Additional
Payments or principal on the Securities on the date such interest, Additional
Payments or principal is otherwise payable, the Company acknowledges that, in
such event, a Holder of Preferred Securities may institute a legal proceeding
directly for enforcement of payment to such Holder of the principal of, interest
or Additional Payments on the Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such Holder (a
"Direct Action") on or after the due date specified in the Securities. The
Company may not amend this Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of all the Holders of Preferred
Securities. Notwithstanding any payment made to such Holder of Preferred
Securities by the Company in connection with a Direct Action, the Company shall
remain obligated to pay the principal of and interest (and Additional Payments,
if any) on the Securities held by the Trust or the Property Trustee, and the
Company shall be subrogated to the rights of the Holders of such Preferred
Securities with respect to payments on the Preferred Securities to the extent of
any payments made by the Company to such Holders in any Direct Action. The
Holders of Preferred Securities will not be able to exercise directly any other
remedy available to the Holders of the Securities.
ARTICLE VI
The Trustee
SECTION 1.50 Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default, the Trustee undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(b) In case 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.
(c) At the direction of the Remarketing Agent, the Trustee shall
(i) select the Primary Treasury Dealer to be a Reference Treasury Dealer and
(ii) determine the Reference Treasury Dealer Quotations, both in accordance with
the terms of the Remarketing Agreement. In addition, if the Securities are no
longer held by the Property Trustee, the Trustee shall act as Tender Agent in
accordance with the provisions of the Remarketing Agreement.
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(d) Notwithstanding the foregoing, (i) the duties and
responsibilities of the Trustee shall be as provided by the Trust Indenture Act
and (ii) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 1.51 Notice of Defaults. The Trustee shall give the
Holders notice of any default hereunder as and to the extent provided by the
Trust Indenture Act; provided, however, that in the case of any default of the
character specified in Section 5.01(3), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default.
SECTION 1.52 Certain Rights of Trustee. Subject to the provisions
of Section 6.01:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization
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and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to reasonable examination of the
books, records and premises of the Company, personally or by agent or
attorney at the sole cost of the Company;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith, without negligence
or willful misconduct, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture.
SECTION 1.53 Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of the Securities or the proceeds thereof.
SECTION 1.54 May Hold Securities. The Trustee, any Paying
Agent, any Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to
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Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Security Registrar, or such
other agent.
SECTION 1.55 Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 1.56 Compensation and Reimbursement. The Company
agrees:
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, fees,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee for, and
to hold it harmless against, any loss, liability or expense, including
taxes (other than taxes based upon, measured by or determined by the
income of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to all property and
funds held by it hereunder for any amount owing it or any predecessor Trustee
pursuant to this Section 6.07, except with respect to funds held in trust of the
benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection with an Event
of Default specified in Section 5.01(5) or Section 5.01(6); the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
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The provisions of this Section shall survive the termination of this Indenture.
SECTION 1.57 Disqualification; Conflicting Interests. If the
Trustee has or shall acquire a conflicting interest within the meaning of the
Trust Indenture Act, the Trustee shall either eliminate such interest or resign,
to the extent and in the manner provided by, and subject to the provisions of,
the Trust Indenture Act and this Indenture.
SECTION 1.58 Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee hereunder which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000 and has its corporate trust office in New
York, New York. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 1.59 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Securities, delivered to
the Trustee and to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of removal, the removed Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
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(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.08 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months; or
(2) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Company may remove the Trustee, or (ii) subject
to Section 5.14, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give written notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.06. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 1.60 Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and
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thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; provided, that on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments required to more fully and
certainly vest in and confirm to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 1.61 Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder; provided such
Person shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 1.62 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or any
other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE VII
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Holders' Lists and Reports by Trustee and Company
SECTION 1.63 Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than March 15 and October 15 in each
year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of a date not more than 15 days
prior to the delivery thereof, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 1.64 Preservation of Information; Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
SECTION 1.65 Reports by Trustee. (a) Within 60 days after March
15 of each year, commencing March 15, 2000, the Trustee shall transmit by
first-class mail to Holders such reports concerning the Trustee and its actions
under this Indenture as may be required pursuant to the Trust Indenture Act in
the manner provided pursuant thereto.
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(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 1.66 Reports by Company. The Company shall file with the
Trustee and the Commission, and transmit to Holders, such information, documents
and other reports, and such summaries thereof, as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant to such
Trust Indenture Act; provided, that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 1.67 Tax Reporting. The Company shall provide to the
Trustee on a timely basis such information as the Trustee requires to enable the
Trustee to prepare and file any form required to be submitted by the Company
with the Internal Revenue Service and the Holders relating to original issue
discount, including, without limitation, Form 1099-OID or any successor form.
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 1.68 Company May Consolidate, Etc., Only on Certain
Terms. The Company shall not consolidate with or merge with or into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person (other than a wholly owned Subsidiary of the Company),
and no Person shall consolidate with or merge with or into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:
(1) in case the Company shall consolidate with or merge with or
into another Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, the Person formed by
such consolidation or into which the Company is merged or the Person
which acquires by conveyance,
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transfer or lease, such properties and assets substantially as an
entirety shall be a corporation, limited liability company,
partnership or trust, shall be organized and validly existing under
the laws of the United States of America, any State thereof or the
District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, the due and punctual payment
of the principal of and interest (including any Additional Payments)
on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be
performed or observed and shall have provided for conversion rights
in accordance with Article XIII;
(2) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing;
(3) if at the time any Preferred Securities are outstanding, such
consolidation or merger or conveyance, transfer or lease of assets of
the Company is permitted under, and does not give rise to any breach or
violation of, the Declaration or the Guarantee; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this Article and with Article
IX and that all conditions precedent herein provided for relating to
such transaction have been complied with.
SECTION 1.69 Successor Substituted. Upon any consolidation of the
Company with, or merger of the Company into, any other Person or any conveyance,
transfer or lease of all or substantially all the properties and assets of the
Company on a consolidated basis in accordance with Section 8.01, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Securities.
ARTICLE IX
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Supplemental Indentures
SECTION 1.70 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred
upon the Company; or
(3) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article XIII; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture; provided, that
such action pursuant to this clause (4) shall not materially
adversely affect the interests of the Holders of the Securities or,
so long as any of the Preferred Securities shall remain outstanding,
the Holders of the Preferred Securities; or
(5) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act; or
(6) to make provision for transfer procedures, certification,
book-entry provisions, the form of restricted securities legends, if
any, to be placed on Securities, and all other matters required
pursuant to Section 3.06(b) or otherwise necessary, desirable or
appropriate in connection with the issuance of Securities to Holders
of Preferred Securities in the event of a distribution of Securities
by the Trust if a Tax Event or Investment Company Event occurs and
is continuing.
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SECTION 1.71 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal amount
of the Outstanding Securities, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) extend the Stated Maturity of the principal of, or any
installment of interest (including any Additional Payments) on, any
Security, or reduce the principal amount thereof, or reduce the rate or
extend the time for payment of interest thereon, or reduce any premium
payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Security or interest or any
Additional Payments thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or adversely affect the right to convert any Security
as provided in Article XIII (except as permitted by Section 9.01(3)), or
modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders,
(2) change the Reset Date,
(3) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for
any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture, or
(4) modify any of the provisions of this Section or Section 5.13,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
Notwithstanding anything to the contrary in this Indenture or the
Declaration, if the Property Trustee is the sole holder of the Securities, so
long as any of the Preferred Securities remains outstanding, no amendment shall
be made that adversely affects the Holders of such Preferred Securities, and no
termination of this Indenture shall occur, and no waiver of any Event of Default
or compliance with any covenant under this Indenture shall be effective, without
the prior consent of the Holders of the percentage of
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the aggregate principal amount of such Preferred Securities then outstanding
which is at least equal to the percentage of aggregate stated liquidation amount
of Outstanding Securities as shall be required under this Indenture to effect
any such amendment, termination or waiver.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
SECTION 1.72 Execution of Supplemental Indentures. In executing,
or accepting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Trustee shall be entitled to receive, and (subject to
Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 1.73 Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby. No such supplemental indenture shall directly or indirectly modify the
provisions of Article XII in any manner which might terminate or impair the
rights of the Senior Debt pursuant to such subordination provisions.
SECTION 1.74 Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act.
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SECTION 1.75 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
so modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE X
Covenants; Representations and Warranties
SECTION 1.76 Payment of Principal and Interest. The Company will
duly and punctually pay the principal of, interest and Additional Payments, if
any, on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1.77 Maintenance of Office or Agency. The Company will
maintain in the United States an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer, exchange or conversion and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in the United States) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the United States for such purposes. The Company will
give prompt 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 1.78 Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the principal of, interest or Additional Payments, if
any, on any of the
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Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, interest or Additional Payments,
if any, so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of, interest or Additional
Payments, if any, on any Securities, deposit with a Paying Agent a sum
sufficient to pay the principal, interest or Additional Payments, if any, so
becoming due, such sum to be held as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, interest or
Additional Payments, if any, on any Security and remaining unclaimed for two
years after such principal, interest or Additional Payments, if any, has become
due and payable shall be paid to the Company on Company Request, or (if then
held by the Company) shall be discharged from such trust; and the Holder of any
such Security shall, subject to relevant abandoned and unclaimed property laws,
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease.
SECTION 1.79 Statement by Officers as to Default. The Company
will deliver to the Trustee, within 120 days after the end of each fiscal year
of the
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Company ending after the date hereof, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the material terms, provisions and
conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge.
SECTION 1.80 Limitation on Dividends; Transactions with
Affiliates; Covenants as to the Trust. (a) If at such time (x) there shall have
occurred an Event of Default, (y) the Company shall be in default with respect
to its payment of any obligations under the Guarantee or (z) the Company shall
have given notice of its election to begin a Deferral Period as provided herein
and shall not have rescinded such notice, or such Deferral Period, or any
extension thereof, shall be continuing, the Company covenants that the Company
shall not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common and preferred stock) other than
stock dividends or distributions which consist of stock of the same class as
that on which the dividend or distribution is being paid, (ii) make any payment
of principal, interest or premium, if any, on or repay or repurchase or redeem
any debt securities of the Company that rank pari passu with or junior in
interest to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any Subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Securities (in each case, other than (A) dividends or distributions in Common
Stock, (B) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(C) payments under the Guarantee or the Common Securities Guarantee, (D)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or any other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior in interest to the Securities), (E)
the payment of fractional shares resulting from a result of a reclassification
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock or (F) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged).
(b) The Company also covenants and agrees (i) that it shall
directly or indirectly maintain 100% ownership of the Common Securities of the
Trust; provided, however, that any permitted successor of the Company hereunder
may succeed to the Company's ownership of such Common Securities and (ii) that
it shall use its reasonable efforts, consistent with the terms and provisions of
the Declaration, to cause the Trust
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(x) to remain a statutory business trust, except in connection with the
distribution of the Securities to the holders of Trust Securities in liquidation
of the Trust, the redemption of all of the Trust Securities of the Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (y) to otherwise continue to be classified as a grantor trust
for United States federal income tax purposes.
SECTION 1.81 Payment of Expenses of the Trust. In connection with
the offering, sale and issuance of the Securities to the Property Trustee in
connection with the sale of the Trust Securities by the Trust, the Company
shall:
(a) pay for all costs, fees and expenses relating to the
offering, sale and issuance of the Securities, including commissions to
the Initial Purchasers payable pursuant to the Purchase Agreement and
compensation of the Trustee in accordance with the provisions of Section
6.07;
(b) be responsible for and pay for all debts and obligations
(other than with respect to the Trust Securities) of the Trust, pay for
all costs and expenses of the Trust (including, but not limited to,
costs and expenses relating to the organization of the Trust, the
offering, sale and issuance of the Trust Securities (including
commissions to the initial purchasers in connection therewith), the fees
and expenses of the Property Trustee and the Delaware Trustee, the costs
and expenses relating to the operation of the Trust, including, without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing
or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the
acquisition, financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
SECTION 1.82 Registration Rights. The Holders of the Preferred
Securities, the Securities and the Guarantee and the shares of Common Stock
issuable upon conversion of the Securities (collectively, the "Registrable
Securities") are entitled to the benefits of a Registration Rights Agreement,
dated as of January 31, 2000, among the Company, the Trust and the Initial
Purchasers (the "Registration Rights Agreement"), including, without limitation,
the receipt of Additional Interest upon a Registration Default.
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ARTICLE XI
Redemption of Securities
SECTION 1.83 Optional Redemption. (a) The Company shall have the
right to redeem the Securities (an "Optional Redemption") (i) in whole or in
part, at any time or from time to time, prior to the Reset Date but on or after
February 5, 2003 until (but excluding) the Tender Notification Date, at a
Redemption Price (the "Initial Redemption Price") equal to the prices per $50
principal amount of Securities set forth in the following table, plus accrued
and unpaid interest, including Additional Payments, if any, to the Redemption
Date, if redeemed during the 12-month period ending on February 5:
<TABLE>
<CAPTION>
Price Per $50
Principal
Year Amount
---- --------------
<S> <C>
2004 $50.6875
2005 $50.0000;
</TABLE>
(ii) after the Reset Date (except in the event of a Failed Final Remarketing),
in accordance with the Term Call Protections, if any, established in the
Remarketing; and (iii) in whole or in part, at any time on or after the third
anniversary of the Reset Date following a Failed Final Remarketing at a
redemption price equal to 100% of the then outstanding aggregate principal
amount of the Securities to be redeemed, plus accrued and unpaid interest
thereon (any Redemption Price so established in the Remarketing or as a result
of a Failed Final Remarketing, the "Term Redemption Price", and, together with
the Initial Redemption Price, an "Optional Redemption Price"); provided,
however, that the company shall not be permitted to redeem any Securities
pursuant to this Section 11.01(a) during any Deferral Period.
(b) If the Company desires to consummate an Optional Redemption, it must
cause to be sent, at its own expense, notice of such intent (an "Optional
Redemption Notice"), via first-class mail, postage prepaid, to each Holder of
Securities (and, if the Preferred Securities are still outstanding, to each
Holder of the corresponding Preferred Securities) to be redeemed, at such
Holder's address appearing in the Security Register and the List of Holders, if
applicable, which Optional Redemption Notice shall comply with Section 11.06
hereof. Holders receiving an Optional Redemption Notice have the right, upon
notification of the Trustee and the Conversion Agent prior to the Optional
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Redemption Date, to convert their Securities called for redemption into Company
Common Stock at the Applicable Conversion Ratio on or prior to the Optional
Redemption Date in compliance with Article XIII hereof.
(c) In the case of any Optional Redemption, the Company must
notify the Trustee and the Property Trustee in writing of the Optional
Redemption Date, the principal amount of Securities to be redeemed and provide a
copy of the Optional Redemption Notice at least 60 days prior to sending the
Optional Redemption Notice, or such shorter period as agreed to by the Trustee
and Property Trustee in writing.
SECTION 1.84 [Reserved]
SECTION 1.85 Tax Event Redemption. (a) If a Tax Event has
occurred and is continuing and:
(1) the Company has received a Redemption Tax Opinion; or
(2) the Issuer Trustees shall have been informed by nationally
recognized independent tax counsel (reasonably acceptable to the Issuer
Trustees) experienced in such matters that a No Recognition Opinion
cannot be delivered,
then the Company shall have the right upon not less than 30 days nor more than
60 days notice to the Holders of the Securities and within 90 days following the
occurrence and continuation of a Tax Event to redeem the Securities in whole,
but not in part, for cash at $50 per $50 principal amount of the Securities plus
accrued and unpaid interest, including Additional Payments, if any, to the
Redemption Date, within 90 days following the occurrence of such Tax Event (the
"90 Day Period"); provided, however, that if, at the time there is available to
the Company or the Trust the opportunity to eliminate, within the 90 Day Period,
the Tax Event by taking some ministerial action, including, but not limited to,
filing a form or making an election, or pursuing some other similar reasonable
measure which, in the sole judgment of the Company, will have no adverse effect
on the Company, the Trust or the Holders of the Preferred Securities and will
involve no material cost, then the Company or the Trust shall pursue such
ministerial action or other measure in lieu of redemption; and provided further
that the Company shall have no right to redeem the Securities while the Trust is
pursuing any ministerial action or other similar measure pursuant to its
obligations under the Declaration.
(b) In the event that the Company redeems the Securities pursuant
to Section 11.03(a), Holders shall have the right upon notification of the
Trustee and the Conversion Agent, to convert their Securities or Preferred
Securities, if applicable, into Common Stock at the Applicable Conversion Ratio
prior to 5:00 p.m., New York City time, on the applicable Redemption Date.
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(c) If the Company opts not to redeem the Securities pursuant to
this Section 11.03, the Company shall be required to pay Additional Amounts in
respect of the Securities pursuant to Section 3.01 for so long as (i) a Tax
Event, or such other event pursuant to such Additional Amounts are payable, has
occurred and is continuing and (ii) the Property Trustee is the sole Holder of
the Securities.
SECTION 1.86 Redemption at Stated Maturity. The Company shall
repay all of the Outstanding Securities, if any, on February 1, 2030, at a price
equal to the aggregate principal amount thereof, plus any accrued and unpaid
interest, including Additional Payments, if any, to the Redemption Date.
SECTION 1.87 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee
pro rata, from the Outstanding Securities not previously called for redemption.
Such selection method may provide for the selection for redemption of portions
(equal to $50 or any integral multiple thereof) of the principal amount of the
Securities.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply
with respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1.88 Notice of Redemption. Notice of redemption (other
than with respect to a redemption which is an Optional Redemption) shall be
given by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed, at such Holder's address appearing in the Security Register.
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All notices of redemption (including, without limitation,
Optional Redemption Notices) given pursuant to this Article XI shall identify
the Securities to be redeemed (including, if relevant, CUSIP number) and shall
state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(4) the place or places where such Securities are to be
surrendered for payment of the Redemption Price, and
(5) the date on which the right to convert the Securities to be
redeemed will terminate and the places where such Securities may be
surrendered for conversion.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1.89 Deposit of Redemption Price. Prior to 10:00 a.m. New
York City time on any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.03) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest (together with
Additional Payments, if any) on, all the Securities which are to be redeemed on
that date.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 3.08) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 1.90 Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the
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Redemption Price and accrued interest) such Securities shall cease to bear
interest. Upon surrender of any such Security for redemption in accordance with
said notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest (including Additional Payments, if any) to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to the terms and
the provisions of Section 3.08.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate borne by the Security.
SECTION 1.91 Securities Redeemed in Part. (a) In the event of any
redemption in part, the Company shall not be required to (i) issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the date of mailing of a notice of redemption of
Securities selected for redemption and ending at the close of business on the
day of such mailing and (ii) register the transfer of or exchange any Securities
so selected for redemption, in whole or in part, except for the unredeemed
portion of any Securities being redeemed in part.
(b) If a partial redemption of the Securities would result in the
delisting of the Preferred Securities issued by the Trust from any national
securities exchange or other organization on which the Preferred Securities are
listed, the Company shall not be permitted to effect such partial redemption and
may only redeem the Securities in whole.
(c) Any Security which is to be redeemed only in part shall be
surrendered at a place of payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered. If a Global Security is surrendered, such new
Security will (subject to Section 3.06) also be a new Global Security.
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ARTICLE XII
Subordination of Securities
SECTION 1.92 Agreement to Subordinate. The Company covenants and
agrees, and each Holder of Securities by such Holder's acceptance thereof
likewise covenants and agrees, that all Securities shall be issued subject to
the provisions of this Article XII; and each Holder of a Security, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions. The payment by the Company of the principal of,
premium, if any, interest (including Additional Payments, if any) and other
Obligations with respect to all Securities issued hereunder shall, to the extent
and in the manner hereinafter set forth, be subordinated and junior in right of
payment to the prior payment in full in cash of principal of (and premium, if
any), interest and all other Obligations with respect to all Senior Debt,
whether outstanding at the date of this Indenture or thereafter incurred;
provided, however, that no provision of this Article XII shall prevent the
occurrence of any default or Event of Default hereunder.
SECTION 1.93 Default on Senior Debt. In the event and during the
continuation of any default by the Company in the payment of principal, premium,
if any, interest on or any other Obligation relating to, any Senior Debt when
the same becomes due and payable (a "payment default"), whether at maturity or
at a date fixed for prepayment or by declaration of acceleration or otherwise,
and such default continues beyond the period of grace, if any, specified in the
instrument evidencing such Senior Debt, then unless and until such default shall
have been cured or waived or shall have ceased to exist or all Senior Debt and
all Obligations relating thereto have been paid in full in cash, and in the
event that the maturity of any Senior Debt has been accelerated because of a
default, then no direct or indirect payment or distribution (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made with
respect to the principal of (including redemption payments), premium, if any, or
interest on, or any other Obligation relating to, the Securities or in respect
of any redemption, repayment, retirement, purchase or other acquisition of any
of the Securities.
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraph of this Section 12.02, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to the holders of Senior
Debt, or their respective representatives, or to the trustee or trustees under
any indenture pursuant to which any of such Senior Debt may have been issued, as
their respective interests may appear, but only to the extent that the holders
of the Senior Debt (or their representative or representatives or a trustee)
notify the Trustee in writing within 180 days of such payment of the amounts
then due and
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owing to the holders of such Senior Debt and only the amounts specified in such
notice to the Trustee shall be paid to the holders of such Senior Debt.
SECTION 1.94 Liquidation; Dissolution; Bankruptcy. Upon any
direct or indirect payment by or on behalf of the Company or direct or indirect
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, by set-off or otherwise, to creditors upon any
dissolution or winding up or liquidation or reorganization of the Company or
assignment for the benefit of creditors or marshaling of assets, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all amounts (including principal, premium, if any, and interest)
due or to become due upon all Senior Debt shall first be paid in full in cash,
or such payment thereof provided for in money in accordance with its terms,
before any payment or distribution is made on account of the principal (and
premium, if any), interest or any other Obligation relating to the Securities;
and upon any such dissolution or winding up or liquidation or reorganization,
any direct or indirect payment by the Company, or direct or indirect payment or
distribution (in cash, property, securities, by set-off or otherwise) to which
the Holders of the Securities or the Trustee would be entitled, except for the
provisions of this Article XII, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders of the Securities or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Debt (pro rata to such holders on the basis of the respective amounts of
Senior Debt held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Debt may have
been issued, as their respective interests may appear, to the extent necessary
to pay such Senior Debt in full, in cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Debt, before any
such payment or distribution is made to the Holders of Securities or to the
Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, by set-off or otherwise, prohibited by the foregoing,
shall be received by the Trustee or the Holders of the Securities before all
Senior Debt is paid in full in cash, or provision is made for such payment in
cash in accordance with its terms, such payment or distribution shall be held in
trust for the benefit of and shall be paid over or delivered to the holders of
Senior Debt or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Debt may have been issued, and their respective interests may appear, as
calculated by the Company, for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay such Senior Debt in full in cash
in accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Debt.
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For purposes of this Article XII, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XII with respect
to the Securities to the payment of all Senior Debt which may at the time be
outstanding; provided, that (i) such Senior Debt is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Debt are not, without the consent
of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company with or into,
another Person or the liquidation or dissolution of the Company following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety to another Person upon the terms and conditions provided for in Article
VIII hereof shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 12.03 if such other Person
shall, as a part of such consolidation, merger, conveyance, transfer or lease,
comply with the conditions stated in Article VIII hereof. Nothing in Section
12.02 or in this Section 12.03 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.07 hereof.
SECTION 1.95 Subrogation. Subject to the payment in full in cash
of all Senior Debt, the rights of the Holders of the Securities shall be
subrogated to the rights of the holders of such Senior Debt to receive payments
or distributions of cash, property or securities of the Company, as the case may
be, applicable to such Senior Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of such Senior
Debt of any cash, property or securities to which the Holders of the Securities
or the Trustee would be entitled except for the provisions of this Article XII,
and no payment over pursuant to the provisions of this Article XII, to or for
the benefit of the holders of such Senior Debt by Holders of the Securities or
the Trustee, shall, as between the Company, its creditors other than holders of
Senior Debt, and the Holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Debt. It is understood that the
provisions of this Article XII are and are intended solely for the purposes of
defining the relative rights of the Holders of the Securities, on the one hand,
and the holders of such Senior Debt on the other hand.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Debt, and the Holders of
the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including Additional Payments, if any) on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the
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Securities and creditors of the Company, as the case may be, other than the
holders of Senior Debt, nor shall anything herein or therein prevent the Trustee
or the Holder of any Security from exercising all remedies otherwise permitted
by applicable law upon default under this Indenture, subject to the rights, if
any, under this Article XII of the holders of such Senior Debt in respect of
cash, property or securities of the Company, as the case may be, received upon
the exercise of any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article XII, the Trustee, subject to the provisions of
Section 6.03, and the Holders of the Securities, shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XII; provided
that such court, trustee, receiver, agent or other Person has been apprised of,
or the order, decree or certificate makes reference to, the provisions of this
Article.
SECTION 1.96 Trustee to Effectuate Subordination. Each Holder of
Securities by such Holder's acceptance thereof authorizes and directs the
Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XII and
appoints the Trustee as such Holder's attorney-in-fact for any and all such
purposes.
SECTION 1.97 Notice by the Company. The Company shall give prompt
written notice to a Responsible Officer of the Trustee of any fact known to the
Company which would prohibit the making of any payment of monies to or by the
Trustee in respect of the Securities pursuant to the provisions of this Article
XII. Notwithstanding the provisions of this Article XII or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities pursuant to the provisions of
this Article XII, unless and until a Responsible Officer of the Trustee shall
have received written notice thereof at the Corporate Trust Office of the
Trustee from the Company or a holder or holders of Senior Debt or from any
trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 6.03 hereof, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.06 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose
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(including, without limitation, the payment of the principal of (and premium, if
any) or interest on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 6.03, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of such
Senior Debt or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Debt to participate in
any payment or distribution pursuant to this Article XII, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Debt held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the right of such Person under this Article XII, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
SECTION 1.98 Rights of the Trustee; Holders of Senior Debt. The
Trustee in its individual capacity shall be entitled to all the rights set forth
in this Article XII in respect of any Senior Debt at any time held by it, to the
same extent as any other holder of Senior Debt, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article XII, and no implied covenants or
obligations with respect to the holders of such Senior Debt shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of such Senior Debt and, subject to the provisions
of Section 6.03, the Trustee shall not be liable to any holder of such Senior
Debt if it shall pay over or deliver to Holders of Securities, the Company or
any other Person money or assets to which any holder of such Senior Debt shall
be entitled by virtue of this Article XII or otherwise.
SECTION 1.99 Subordination May Not Be Impaired. (a) No right of
any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and
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covenants of this Indenture, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with.
(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of the Holders of the Securities to the holders
of Senior Debt, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
such Senior Debt, or otherwise amend or supplement in any manner such Senior
Debt or any instrument evidencing the same or any agreement under which such
Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing such Senior Debt; (iii)
release any Person liable in any manner for the collection of such Senior Debt;
and (iv) exercise or refrain from exercising any rights against the Company and
any other Person.
(c) The subordination provisions of this Article XII shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Senior Debt is, pursuant to applicable law,
avoided, recovered, or rescinded or must otherwise be restored or returned by
any holder of Senior Debt, whether as a "voidable preference," "fraudulent
conveyance," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made.
(d) If, upon any proceeding referred to in Section 12.03, the
Trustee does not file a claim in such proceeding prior to fifteen Business Days
before the expiration of the time to file such claim, the holders of Designated
Senior Debt or their agent may file such claim on behalf of the Holders of the
Securities.
(e) The subordination provisions contained herein are solely for
the benefit of the holders from time to time of Senior Debt and their
representatives, assignees and beneficiaries and may not be rescinded, canceled,
amended or modified in any way other than, as to any holder of Senior Debt,
pursuant to an amendment or modification that is permitted by the documentation
relating to the Senior Debt applicable to such holder.
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ARTICLE XIII
Conversion of Securities
SECTION 1.100 Conversion Rights. Subject to and upon compliance
with the provisions of this Article, the Securities are convertible, at the
option of the Holder, at any time prior to 5:00 p.m. New York City time, on or
prior to the Tender Notification Date and, in the event of either a Convertible
Remarketing which does not fail or a Failed Final Remarketing, on and after the
Reset Date through February 1, 2030 (except that Securities called for
redemption by the Company shall be convertible at any time prior to 5:00 p.m.
New York City time, on any Redemption Date), into fully paid and nonassessable
shares of Common Stock of the Company. On or prior to the Tender Notification
Date, each Security is convertible at the option of the Holder into 0.4881
shares of Common Stock for each $50 in aggregate principal amount of Securities
(the "Initial Conversion Ratio") (equal to a conversion price of $102.4375
principal amount of Securities per share of Common Stock (the "Initial
Conversion Price")). On and after the Reset Date, the Securities may, at the
option of the Company and subject to the results of the Remarketing, become
nonconvertible or convertible into a different number of shares of Common Stock,
as determined by the Remarketing Agent in accordance with the terms of the
Remarketing Agreement. The conversion ratio and the equivalent conversion price
in effect at any given time are known as the "Applicable Conversion Ratio" and
the "Applicable Conversion Price", respectively, and are subject to adjustment
as described in this Article XIII. A Holder of Securities may convert any
portion of the principal amount of the Securities into that number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) obtained by dividing the principal amount of the
Securities to be converted by the Applicable Conversion Ratio. In case a
Security or portion thereof is called for redemption, such conversion right in
respect of the Security or portion so called shall expire at the close of
business on the corresponding Redemption Date, unless the Company defaults in
making the payment due upon redemption.
SECTION 1.101 Conversion Procedures. (a) In order to convert all or
a portion of the Securities, the Holder thereof shall deliver to the Conversion
Agent an irrevocable Notice of Conversion setting forth the principal amount of
Securities to be converted, together with the name or names, if other than the
Holder, in which the shares of Common Stock should be issued upon conversion
and, if such Securities are definitive Securities, surrender to the Conversion
Agent the Securities to be converted, duly endorsed or assigned to the Company
or in blank. In addition, a Holder of Preferred Securities may exercise its
right under the Declaration to convert such Preferred Securities into Common
Stock by delivering to the Conversion Agent an irrevocable Notice of Conversion
setting forth the information called for by the preceding sentence and directing
the Conversion Agent (i) to exchange such Preferred Security for a portion of
the
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Securities held by the Trust (at an exchange rate of $50 principal amount of
Securities for each Preferred Security) and (ii) to immediately convert such
Securities, on behalf of such Holder, into Common Stock of the Company pursuant
to this Article XIII and, if such Preferred Securities are in definitive form,
surrendering such Preferred Securities, duly endorsed or assigned to the Company
or in blank. So long as any Preferred Securities are outstanding, the Trust
shall not convert any Securities except pursuant to a Notice of Conversion duly
executed and delivered to the Conversion Agent by a Holder of Preferred
Securities.
If a Notice of Conversion is delivered on or after the Regular
Record Date and prior to the subsequent Interest Payment Date, the Holder will
be entitled to receive the interest payable on the subsequent Interest Payment
Date on the portion of Securities to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. Except as otherwise provided in the
immediately preceding sentence, in the case of any Security which is converted,
interest whose Stated Maturity is after the date of conversion of such Security
shall not be payable, and the Company shall not make nor be required to make any
other payment, adjustment or allowance with respect to accrued but unpaid
interest on the Securities being converted, which shall be deemed to be paid in
full. Each conversion shall be deemed to have been effected immediately prior to
the close of business on the day on which the Notice of Conversion was received
(the "Conversion Date") by the Conversion Agent from the Holder or from a Holder
of the Preferred Securities effecting a conversion thereof pursuant to its
conversion rights under the Declaration, as the case may be. The Person or
Persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
as of the Conversion Date. As promptly as practicable on or after the Conversion
Date, the Company shall issue and deliver at the office of the Conversion Agent,
unless otherwise directed by the Holder in the Notice of Conversion, a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with the cash payment, if any, in lieu
of any fraction of any share to the Person or Persons entitled to receive the
same. The Conversion Agent shall deliver such certificate or certificates to
such Person or Persons.
(b) Subject to the right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last paragraph of
Section 3.08 and the second paragraph of clause (a) of Section 13.02, the
Company's delivery upon conversion of the whole number of shares of Common Stock
into which the Securities are convertible (together with the cash payment, if
any, in lieu of fractional shares) shall be deemed to satisfy the Company's
obligation to pay the principal amount at Maturity of the portion of Securities
so converted and any unpaid interest (including Additional Payments) accrued on
such Securities at the time of such conversion.
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(c) No fractional shares of Common Stock will be issued as a
result of conversion, but in lieu thereof, the Company shall pay to the
Conversion Agent a cash adjustment in an amount equal to the same fraction of
the Closing Price of such fractional interest on the date on which the
Securities or Preferred Securities, as the case may be, were duly surrendered to
the Conversion Agent for conversion, or, if such day is not a Trading Day, on
the next Trading Day, and the Conversion Agent in turn will make such payment,
if any, to the Holder of the Securities or the Holder of the Preferred
Securities so converted.
(d) In the event of the conversion of any Security in part only,
a new Security or Securities for the unconverted portion thereof will be issued
in the name of the Holder thereof upon the cancellation thereof in accordance
with Section 3.06.
(e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the Holders of Preferred
Securities (in the exchange of Preferred Securities for Securities) and as agent
of the Holders of Securities (in the conversion of Securities into Common
Stock), as the case may be, directing it to effect such conversion transactions.
The Conversion Agent is hereby authorized (x) if the Trust exists, (i) to
exchange Securities held by or on behalf of the Trust from time to time for
Preferred Securities in connection with the conversion of such Preferred
Securities in accordance with this Article XIII and (ii) to convert all or a
portion of the Securities into Common Stock and thereupon to deliver such shares
of Common Stock in accordance with the provisions of this Article XIII and to
deliver to the Trust a new Security or Securities for any resulting unconverted
principal amount and (y) if the Trust no longer exists (i) to exchange
Securities held by the Holders in connection with the conversion of such
Securities in accordance with this Article XIII and (ii) to convert all or a
portion of the Securities into Common Stock and thereupon to deliver such shares
of Common Stock in accordance with the provisions of this Article XIII and to
deliver to such Holders a new Security or Securities for any resulting
unconverted principal amount.
(f) All shares of Common Stock delivered upon any conversion of
Restricted Securities shall bear a restrictive legend substantially in the form
of the legend required to be set forth on such Securities and shall be subject
to the restrictions on transfer provided in such legend and in Section 3.06(b)
hereof. Neither the Trustee nor the Conversion Agent shall have any
responsibility for the inclusion or content of any such restrictive legend on
such Common Stock; provided, however, that the Trustee or the Conversion Agent
shall have provided to the Company or to the Company's transfer agent for such
Common Stock, prior to or concurrently with a request to the Company to deliver
to such Conversion Agent certificates for such Common Stock, written notice that
the Securities delivered for conversion are Restricted Securities.
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SECTION 1.102 Conversion Price Adjustments. The Applicable
Conversion Price shall be subject to adjustment (without duplication) from time
to time as follows:
(i) In case the Company shall pay a dividend or make a
distribution on the Common Stock exclusively in Common Stock, the
Applicable Conversion Price in effect at the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced
by multiplying such Applicable Conversion Price by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and
the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the
purposes of this subparagraph (i), the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury of
the Company. In the event that such dividend or distribution is not so
paid or made, the Applicable Conversion Price shall again be adjusted to
be the Applicable Conversion Price which would then be in effect if such
dividend or distribution had not occurred.
(ii) In case the Company shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, rights or warrants,
in each case entitling the holders thereof to subscribe for or purchase
shares of Common Stock at a price per share less than the current market
price per share (determined as provided in subparagraph (vii)) of the
Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Applicable Conversion
Price in effect at the opening of business on the day following the date
fixed for such determination shall be reduced by multiplying such
Applicable Conversion Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the
total number of shares of Common Stock so offered for subscription or
purchase would purchase at such current market price and the denominator
shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. To the
extent that rights are not so issued or shares of Common Stock are not
so delivered after the expiration of such rights or warrants, the
Applicable Conversion Price shall be readjusted to the Applicable
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Conversion Price which would then be in effect if such date fixed
for the determination of stockholders entitled to receive such rights
or warrants had not been fixed. For the purposes of this subparagraph
(ii), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company.
(iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Applicable Conversion Price in effect at the opening of business on the
day following the day upon which such subdivision becomes effective
shall be proportionately reduced and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Applicable Conversion Price in effect at the
opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.
(iv) Subject to the last sentence of this subparagraph (iv), in
case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any
class or series of capital stock, cash or assets (including securities,
but excluding any rights or warrants referred to in subparagraph (ii) of
this Section 13.03, any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in subparagraph (i) of
this Section 13.03), the Applicable Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Applicable Conversion Price in effect immediately prior to the
effectiveness of the Applicable Conversion Price reduction contemplated
by this subparagraph (iv) by a fraction of which the numerator shall be
the current market price per share (determined as provided in
subparagraph (vii) of this Section 13.03) of the Common Stock on the
date fixed for the determination of stockholders entitled to receive
such distribution (the "Reference Date") less the fair market value (as
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors), on the Reference Date, of the portion of the evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of business on the
day following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the Applicable Conversion Price
shall again be adjusted to be the Applicable Conversion Price which
would then be in effect if such dividend or distribution had not
occurred. For purposes of this subparagraph (iv), any
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dividend or distribution that includes shares of Common Stock or
rights or warrants to subscribe for or purchase shares of Common Stock
shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, shares of capital stock, cash or assets other
than such shares of Common Stock or such rights or warrants (making any
Applicable Conversion Price reduction required by this subparagraph
(iv)) immediately followed by (2) a dividend or distribution of such
shares of Common Stock or such rights or warrants (making any further
Applicable Conversion Price reduction required by subparagraph (i) or
(ii) of this Section 13.03), except any shares of Common Stock included
in such dividend or distribution shall not be deemed "outstanding at the
close of business on the date fixed for such determination" within the
meaning of subparagraph (i) of this Section 13.03.
(v) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (x) cash
dividends that do not exceed the per share amount of the smallest of the
immediately four preceding quarterly cash dividends (as adjusted to
appropriately reflect any of the events referred to in subparagraphs
(i), (ii), (iii), (iv), (v) and (vi)), and (y) cash dividends, the per
share amount of which, together with the aggregate per share amount of
any other cash dividends paid within the 12 months preceding the date of
payment of such cash dividends, does not exceed 12.5% of the current
market price per share (determined as provided in subparagraph (vii) of
this Section 13.03) of the Common Stock on the Trading Day next
preceding the date of declaration of such dividend, the Applicable
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Applicable Conversion Price in effect
immediately prior to the effectiveness of the Applicable Conversion
Price reduction contemplated by this subparagraph (v) by a fraction of
which the numerator shall be the current market price per share
(determined as provided in subparagraph (vii) of this Section 13.03) of
the Common Stock on the date fixed for the payment of such distribution
less the amount of cash so distributed and not excluded as provided
applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of business on the
day following the date fixed for the payment of such distribution;
provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or
greater than the current market price per share (as defined in
subparagraph (vii) of this Section 13.03) of the Common Stock on the
record date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder of Securities shall
have the right to receive upon conversion the amount of cash such Holder
would have received had such Holder converted each Security immediately
prior to the record date for the distribution of the cash. In the event
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that such dividend or distribution is not so paid or made, the
Applicable Conversion Price shall again be adjusted to be the Applicable
Conversion Price which would then be in effect if such record date had
not been fixed.
(vi) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or
any portion of the Company's Common Stock shall expire and such tender
or exchange offer shall involve the payment by the Company or such
Subsidiary of consideration per share of Common Stock having a fair
market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of
the Board of Directors) at the last time (the "Expiration Time") tenders
or exchanges may be made pursuant to such tender or exchange offer (as
it shall have been amended) that exceeds 110% of the current market
price per share (determined as provided in subparagraph (vii) of this
Section 13.03) of the Common Stock on the Trading Day next succeeding
the Expiration Time, the Applicable Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Applicable Conversion Price in effect immediately prior to the
effectiveness of the Applicable Conversion Price reduction contemplated
by this subparagraph (vi) by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding (including any tendered
or exchanged shares) at the Expiration Time multiplied by the current
market price per share (determined as provided in subparagraph (vii) of
this Section 13.03) of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum of
(x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares)
at the Expiration Time and the current market price per share
(determined as provided in subparagraph (vii) of this Section 13.03) of
the Common Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the opening of
business on the day following the Expiration Time.
(vii) For the purpose of any computation under subparagraphs
(ii), (iv), (v) and (vi) of this Section 13.03, the current market price
per share of Common Stock on any date in question shall be deemed to be
the average of the daily Closing Prices for the ten consecutive Trading
Days prior to the earlier of the day in question and, if applicable, the
day before the "ex" date (as hereinafter defined) with respect to the
issuance or distribution requiring such computation; provided,
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however, that if the day in question or the "ex" date for any
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Applicable Conversion
Price pursuant to Section 13.03 (ii), (iv), (v) or (vi) occurs during
such 10 consecutive Trading Days, the Closing Price for each Trading Day
prior to such date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Applicable
Conversion Price is so required to be adjusted as a result of such other
event. For purposes of this subparagraph (vii), the term "ex" date (I)
when used with respect to any issuance or distribution, means the first
date on which the Common Stock trades regular way on the relevant
exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution,
(II) when used with respect to any subdivision or combination of shares
of Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which
such subdivision or combination becomes effective and (III) when used
with respect to any tender or exchange offer means the first date on
which the Common Stock trades regular way on such exchange or in such
market after the Expiration Time of such offer. Notwithstanding the
foregoing, whenever successive adjustments to the Applicable Conversion
Price are called for pursuant to this Section 13.03, such adjustments
shall be made to the current market price as may be necessary or
appropriate to effectuate the intent of this Section 13.03 and to avoid
unjust or inequitable results, as determined in good faith by the Board
of Directors.
(viii) The Company may make such reductions in the Applicable
Conversion Price, in addition to those required by subparagraphs (i),
(ii), (iii), (iv), (v) and (vi), as its Board of Directors considers to
be advisable to avoid or diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
(ix) No adjustment of the Applicable Conversion Price shall be
made upon the issuance of any shares of Common Stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock or options or
rights to purchase such shares pursuant to any present or future
employee, director or consultant benefit plan or program of the Company
or pursuant to any option, warrant, right, or exercisable, exchangeable
or convertible security outstanding as of the date the Securities were
first issued. There shall also be no adjustment of the Applicable
Conversion Price in case of the issuance of any Common Stock (or
securities convertible into or exchangeable for Common Stock), except as
specifically described above. Furthermore, no adjustment in the
Applicable Conversion Price shall be required unless such
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adjustment would require an increase or decrease of at least 1%
in the Applicable Conversion Price; provided, however, that any
adjustments which by reason of this subparagraph (ix) are not required
to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required.
SECTION 1.103 Reclassification, Consolidation, Merger or Sale of
Assets. In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale or transfer of all or substantially all of the assets
of the Company or (d) any compulsory share exchange) (each of the events in the
preceding clauses (a) through (d) being referred to as a "Company Transaction"),
in each case, as a result of which shares of Common Stock shall be converted
into the right to receive other securities, cash or other property, then lawful
provision shall be made as part of the terms of such Company Transaction whereby
the Holder of each Security then outstanding shall have the right thereafter to
convert such Security only into (i) in the case of any such transaction other
than a Common Stock Fundamental Change, the kind and amount of securities, cash
and other property receivable upon consummation of such Company Transaction by a
holder of the number of shares of Common Stock of the Company into which such
Security could have been converted immediately prior to such Company
Transaction, after giving effect to any adjustment in the Applicable Conversion
Price required by the provision of Section 13.07(a)(i), and (ii) in the case of
a Company Transaction involving a Common Stock Fundamental Change, common stock
of the kind received by holders of Common Stock as a result of such Common Stock
Fundamental Change in an amount determined pursuant to the provisions of Section
13.07(a)(ii). Holders of the Securities shall have no voting rights with respect
to any Company Transaction described in this Section 13.04.
The Company or the Person formed by such consolidation or
resulting from such merger or which acquired such assets or which acquires the
Company's shares, as the case may be, shall make provision in its certificate or
articles of incorporation or other constituent document to establish such right.
Such certificate or articles of incorporation or other constituent document
shall provide for adjustments which, for events subsequent to the effective date
of such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article XIII. The above provisions shall similarly apply to
successive transactions of the foregoing type.
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SECTION 1.104 Notice of Adjustments of Conversion Price. Whenever
the Applicable Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Applicable Conversion
Price and shall prepare a certificate signed by the Chief Financial Officer or
the Treasurer of the Company setting forth the adjusted Applicable Conversion
Price and showing in reasonable detail the facts upon which such adjustment is
based, and such certificate shall forthwith be filed with the Trustee, the
Conversion Agent and the transfer agent for the Preferred Securities and the
Securities; and
(b) a notice stating the Applicable Conversion Price has been
adjusted and setting forth the adjusted Applicable Conversion Price shall as
soon as practicable be mailed by the Company to all record Holders of Preferred
Securities and the Securities at their last addresses as they appear upon the
stock transfer books of the Company and the books and records of the Trust,
respectively.
SECTION 1.105 Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 13.03(iv) or (v) or (2)
authorize a tender or exchange offer that would require an adjustment
pursuant to Section 13.03(vi);
(ii) the Company shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or series or of any other rights or
warrants;
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change
in par value, or from par value to no par value, or from no par value to
par value), or of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company shall be
required, or of the sale or transfer of all or substantially all of the
assets of the Company or of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or other property;
or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
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then the Company shall (a) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the Holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the books and records of the Trust or (b) if
no Preferred Securities are outstanding, shall cause to be mailed to all Holders
at their last addresses as they shall appear in the Security Register, at least
fifteen days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record (if any) is to be
taken for the purpose of such dividend, distribution, rights or warrants or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
SECTION 1.106 Adjustments in Case of Fundamental Changes. (a)
Notwithstanding any other provision in this Article XIII to the contrary, in the
case of any Company Transaction involving a Fundamental Change, then the
Applicable Conversion Price will be adjusted immediately after such Fundamental
Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the Applicable
Conversion Price of the Securities shall thereupon become the lower of
(A) the Applicable Conversion Price immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Article XIII, and (B) the result
obtained by multiplying the greater of the Relevant Price or the then
applicable Reference Market Price by a fraction of which the numerator
shall be $50 and the denominator shall be the then-current Optional
Redemption Price or, on or prior to the Reset Date and at any time after
the Reset Date at which the Securities are not redeemable at the option
of the Company, an amount per Security determined by the Company in its
sole discretion, after consultation with an investment banking firm, to
be the equivalent of the hypothetical Redemption Price that would have
been applicable if the Securities had been redeemable during such period
(such fraction shall hereinafter be referred to as the "Optional
Redemption Ratio") (such product shall hereinafter be referred to as the
"Adjusted Relevant Price" or the "Adjusted Reference Market Price", as
the case may be); and
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(ii) in the case of a Common Stock Fundamental Change, the
Applicable Conversion Price of the Securities in effect immediately
prior to such Common Stock Fundamental Change, but after giving effect
to any other prior adjustments effected pursuant to this Article XIII,
shall thereupon be adjusted by multiplying such Applicable Conversion
Price by a fraction of which the numerator shall be the Purchaser Stock
Price and the denominator shall be the Relevant Price; provided,
however, that in the event of a Common Stock Fundamental Change in which
(A) 100% of the value of the consideration received by a holder of
Common Stock is common stock of the successor, acquiror or other third
party (and cash, if any, is paid only with respect to any fractional
interests in such common stock resulting from such Common Stock
Fundamental Change) and (B) all of the Common Stock shall have been
exchanged for, converted into or acquired for common stock (and cash
with respect to fractional interests) of the successor, acquiror or
other third party, the Applicable Conversion Price of the Securities in
effect immediately prior to such Common Stock Fundamental Change shall
thereupon be adjusted by multiplying such Applicable Conversion Price by
a fraction of which the numerator shall be one and the denominator shall
be the number of shares of common stock of the successor, acquiror, or
other third party received by a stockholder for one share of Common
Stock as a result of such Common Stock Fundamental Change.
(b) Definitions. The following definitions shall apply to terms
used in this Article XIII:
(1) "Closing Price" of any security on any day shall mean on any
day the last reported sale price of such security on such day, or in
case no sale takes place on such day, the average of the closing bid and
asked prices in each case on the principal national securities exchange
on which such securities are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on
the NNM or, if such securities are not listed or admitted to trading on
any national securities exchange or quoted on the NNM, the average of
the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected by the
Company for such purpose.
(2) "Common Stock Fundamental Change" shall mean any Fundamental
Change in which more than 50% of the value (as determined in good
faith by the Board of Directors) of the consideration received by
holders of Common Stock consists of common stock that for each of
the ten consecutive Trading Days immediately prior to and including
the Entitlement Date has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities
86
<PAGE> 92
exchange or quoted on the NNM, provided, however, that a
Fundamental Change shall not be a Common Stock Fundamental Change unless
either:
(A) the Company continues to exist after the occurrence of the
Fundamental Change and the Outstanding Preferred Securities
continue to remain Outstanding without having been converted into
another security; or
(B) not later than the occurrence of the Fundamental Change, the
Outstanding Securities are converted into or exchanged for
debentures of a corporation succeeding to the business of the
Company, which debentures have terms substantially similar to the
Securities.
(3) "Entitlement Date" shall mean the record date for
determination of the holders of Common Stock entitled to receive
securities, cash or other property in connection with a Non-Stock
Fundamental Change or a Common Stock Fundamental Change or, if there is
no such record date, the date upon which holders of Common Stock shall
have the right to receive such securities, cash or other property.
(4) "Fundamental Change" shall mean the occurrence of any
transaction or event in connection with a Company Transaction pursuant
to which all or substantially all of the Common Stock shall be exchanged
for, converted into, acquired for or constitute solely the right to
receive securities, cash or other property (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise); provided,
however, in the case of a Company Transaction involving more than one
such transaction or event, for purposes of adjustment of the Applicable
Conversion Price, such Fundamental Change shall be deemed to have
occurred when substantially all of the Common Stock of the Company shall
be exchanged for, converted into, or acquired for or constitute solely
the right to receive securities, cash or other property, but the
adjustment shall be based upon the highest weighted average of
consideration per share that a holder of Common Stock could have
received in such transactions or events as a result of which more than
50% of the Common Stock of the Company shall have been exchanged for,
converted into, or acquired for or constitute solely the right to
receive securities, cash or other property.
(5) "Non-Stock Fundamental Change" shall mean any Fundamental
Change other than a Common Stock Fundamental Change.
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<PAGE> 93
(6) "Purchaser Stock Price" shall mean, with respect to any
Common Stock Fundamental Change, the average of the daily Closing Prices
of the common stock received in such Common Stock Fundamental Change for
the ten consecutive Trading Days prior to and including the Entitlement
Date, as adjusted in good faith by the Board of Directors to
appropriately reflect any of the events referred to in subparagraphs
(i), (ii), (iii), (iv), (v) and (vi) of Section 13.03.
(7) "Reference Market Price" shall initially mean on the date of
original issuance of the Securities,$53.8125 (which is an amount derived
from the product of 66_% times the last reported sale price for the
Common Stock on the New York Stock Exchange Composite Tape on January
25, 2000, rounded to the nearest one-sixteenth) and, in the event of any
adjustment to the Applicable Conversion Price from such date to (but
excluding) the Reset Date, other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so
that the ratio of the Reference Market Price to the Applicable
Conversion Price after giving effect to any such adjustment shall always
be the same as the ratio of $53.8125 to the Initial Conversion Price. If
the Securities are convertible into Common Stock on and after the Reset
Date, the Reference Market Price on such date will be an amount equal to
the product of 66_% times the Closing Price of the Common Stock on the
Reset Date (such product rounded to the nearest one-sixteenth) and, in
the event of any adjustment to the Applicable Conversion Price from the
Reset Date and thereafter, other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so
that the ratio of the Reference Market Price to the Applicable
Conversion Price after giving effect to any such adjustment shall always
be the same as the ratio of the Closing Price of the Common Stock on the
Reset Date to the Term Conversion Price.
(8) "Relevant Price" shall mean (i) in the event of a Non-Stock
Fundamental Change in which the holders of the Common Stock receive only
cash, the amount of cash received by a stockholder for one share of
Common Stock and (ii) in the event of any other Non-Stock Fundamental
Change or any Common Stock Fundamental Change, the average of the daily
Closing Prices of the Common Stock for the ten consecutive Trading Days
prior to and including the Entitlement Date, in each case, as adjusted
in good faith by the Company to appropriately reflect any of the events
referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of
Section 13.03.
(9) "Trading Day" shall mean a day on which securities are traded
on the national securities exchange or quotation system used to
determine the Closing Price.
88
<PAGE> 94
SECTION 1.107 Dividend or Interest Reinvestment Plans. (a)
Notwithstanding the foregoing provisions, the issuance of any shares of Common
Stock pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under any such plan, and
the issuance of any shares of Common Stock or options or rights to purchase such
shares pursuant to any employee benefit plan or program of the Company or
pursuant to any option, warrant, right or exercisable, exchangeable or
convertible security outstanding as of the date the Securities were first
issued, shall not be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the Company to which any
of the adjustment provisions described above applies.
(b) There shall also be no adjustment of the Applicable
Conversion Price in case of the issuance of any stock (or securities convertible
into or exchangeable for stock) of the Company except as specifically described
in this Article XIII.
SECTION 1.108 Certain Additional Rights. Notwithstanding any
other provision of this Article XIII to the contrary, rights, warrants,
evidences of indebtedness, other securities, cash or other assets (including,
without limitation, any rights distributed pursuant to any stockholder rights
plan) shall be deemed not to have been distributed for purposes of this Article
XIII if the Company makes proper provision so that each Holder who converts a
Security (or any portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled to receive
upon such conversion, in addition to the shares of Common Stock issuable upon
such conversion, the amount and kind of such distributions that such Holder
would have been entitled to receive if such Holder had, immediately prior to
such determination date, converted such Security into Common Stock.
SECTION 1.109 Restrictions on Common Stock Issuable Upon
Conversion. (a) Shares of Common Stock to be issued upon conversion of a
Security in respect of Restricted Preferred Securities (as defined in the
Declaration) shall bear such restrictive legends as the Company may provide in
accordance with applicable law.
(b) If shares of Common Stock to be issued upon conversion of a
Security in respect of Restricted Preferred Securities are to be registered in a
name other than that of the Holder of such Preferred Security, then the Person
in whose name such shares of Common Stock are to be registered must deliver to
the Conversion Agent a certificate satisfactory to the Company and signed by
such Person, as to compliance with the restrictions on transfer applicable to
such Preferred Security. Neither the Trustee nor any Conversion Agent or
Registrar shall be required to register in a name other than that of the Holder
shares of Common Stock or such Preferred Securities issued upon conversion of
any such Security in respect of such Preferred Securities not so accompanied by
a properly completed certificate.
89
<PAGE> 95
SECTION 1.110 Trustee Not Responsible for Determining Conversion
Price or Adjustments. Neither the Trustee nor any Conversion Agent shall at any
time be under any duty or responsibility to any Holder of any Security to
determine whether any facts exist which may require any adjustment of the
Applicable Conversion Price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same. Neither
the Trustee nor any Conversion Agent shall be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock or of
any securities or property, which may at any time be issued or delivered upon
the conversion of any Security; and neither the Trustee nor any Conversion Agent
makes any representation with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of any
Security for the purpose of conversion, or, except as expressly herein provided,
to comply with any of the covenants of the Company contained in Article X or
this Article XIII.
[Signature page follows.]
90
<PAGE> 96
This Indenture may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, as of the day and year first above written.
CALPINE CORPORATION
By:______________________________________
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By: ______________________________________
Name:
Title:
<PAGE> 97
EXHIBIT A
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
[Include if a Global Security: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE
DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR A SECURITY REGISTERED IN THE NAME
OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK) TO CALPINE CORPORATION 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 REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
[Include Restricted Securities Legend if required under Section 2.02: THIS
SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), AND THIS SECURITY AND ANY COMMON STOCK OF THE COMPANY ISSUABLE UPON
CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE
1
<PAGE> 98
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER AND THE COMPANY
THAT (A) THIS SECURITY AND ANY CLASS A COMMON STOCK OF THE COMPANY ISSUABLE UPON
CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iii) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.]
CALPINE CORPORATION
Convertible Subordinated
Debenture Due 2030
No. $[______]
[CUSIP No. ______]
CALPINE CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware (herein called "the Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to __________, or registered assigns,
the principal sum [indicated on Schedule A hereof](1) [of [Amount]](2) ($[____])
on February 1, 2030.
- --------------------
(1) Applicable to Global Securities only.
(2) Applicable to certificated Securities only.
2
<PAGE> 99
Interest Payment Dates: February 1, May 1, August 1 and November 1,
commencing May 1, 2000
Regular Record Dates: The close of business on the fifteenth day of each
January, May, August and November immediately
preceding the applicable Interest Payment Date
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
3
<PAGE> 100
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed manually or by facsimile by its duly authorized officers.
Dated: January 31, 2000,
CALPINE CORPORATION
By:________________________
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: January 31, 2000 THE BANK OF NEW YORK,
as Trustee
By: _______________________
Authorized Signatory
4
<PAGE> 101
[FORM OF REVERSE OF SECURITY]
CALPINE CORPORATION
Convertible Subordinated
Debenture Due 2030(3)
1. Interest. CALPINE CORPORATION, a Delaware corporation (the "Company"),
is the issuer of this Convertible Subordinated Debenture Due 2030 (the
"Security") limited in aggregate principal amount to $309,278,400 (or up to
$371,134,100 to the extent the option granted by the Trust is exercised in
full), issued under the Indenture hereinafter referred to. The Company promises
to pay interest on the Securities in cash from January 31, 2000 or from the most
recent interest payment date to which interest has been paid or duly provided
for, quarterly (subject to deferral for up to 20 consecutive quarters as
described in Section 3 hereof) in arrears on February 1, May 1, August 1 and
November 1 of each year (each such date, an "Interest Payment Date"), commencing
May 1, 2000, at the Applicable Rate, plus Additional Payments, if any, until the
principal hereof shall have become due and payable. If the Reset Date is prior
to the Regular Record Date for the immediately following Interest Payment Date,
then interest and Additional Amounts, if any, accrued from and after the Reset
Date to but excluding the immediately following Interest Payment Date shall be
paid on such Interest Payment Date to the person in whose name each Security is
registered on the relevant Regular Record Date, subject to the right of the
Company to initiate a Deferral Period. If the Reset Date is on or after the
Regular Record Date for the immediately following Interest Payment Date, then
(1) interest and Additional Amounts, if any, accrued from and after the Regular
Record Date to but excluding the Reset Date shall be paid on the immediately
following Interest Payment Date to the person in whose name each Security is
registered on the relevant Regular Record Date and (2) interest and Additional
Amounts, if any, accrued from and after the Reset Date to but excluding the
immediately following Interest Payment Date shall be paid on the second Interest
Payment Date immediately following the Reset Date to the person in whose name
each Security is registered on the relevant Regular Record Date for such second
Interest Payment Date, subject in each case to the right of the Company to
initiate a Deferral Period. Prior to the Reset Date, the Applicable Rate shall
be 5.50% per annum. On and after the Reset Date, the Applicable Rate shall
- --------
(3) All terms used in this Security which are defined in the Indenture or in
the Declaration referred to herein shall have the meanings assigned to them in
the Indenture or the Declaration, as the case may be.
<PAGE> 102
be the rate established by the Remarketing Agent to be effective on the Reset
Date. Upon a Registration Default, the Applicable Rate shall be adjusted as set
forth in the Registration Rights Agreement.
The amount of interest payable for any period will be computed on
the basis of twelve 30-day months and a 360-day year. To the extent lawful, the
Company shall pay interest on overdue installments of interest (without regard
to any applicable grace period) at the rate borne by the Securities, compounded
quarterly. Any interest paid on this Security shall be increased to the extent
necessary to pay Additional Sums as set forth in this Security.
2. Additional Amounts. The Company shall pay to Calpine Capital
Trust II (and its permitted successors or assigns under the Declaration) (the
"Trust") such additional amounts as may be necessary in order that the amount of
dividends or other distributions then due and payable by the Trust on the
Preferred Securities that at any time remain outstanding in accordance with the
terms thereof shall not be reduced as a result of any additional taxes, duties
and other governmental charges of whatever nature (other than withholding taxes)
imposed by the United States or any other taxing authority.
3. Extension of Interest Payment Period. So long as no Event of
Default has occurred and is continuing, the Company shall have the right, at any
time during the term of this Security, from time to time to defer payments of
interest by extending the interest payment period of such Security for up to 20
consecutive quarters (a "Deferral Period"); provided that no Deferral Period may
extend beyond (i) the maturity (whether at February 1, 2030 or by declaration of
acceleration, call for redemption or otherwise) or (ii) in the case of a
Deferral Period that begins prior to the Reset Date, the Reset Date. To the
extent permitted by applicable law, interest, the payment of which has been
deferred because of the extension of the interest payment period pursuant to
Section 3.13 of the Indenture, will bear interest thereon at the Applicable Rate
compounded quarterly for each quarter of the Deferral Period ("Compounded
Interest"). On the applicable Payment Resumption Date, the Company shall pay all
interest then accrued and unpaid on the Securities, including any Compounded
Interest that shall be payable to the Holders of the Securities in whose names
the Securities are registered in the Security Register on the record date fixed
for such Payment Resumption Date. Before the termination of any Deferral Period,
the Company may further extend such period, provided that such period together
with all such further extensions thereof shall not exceed 20 consecutive
quarters or extend beyond (i) the maturity (whether at February 1, 2030 or by
declaration of acceleration, call for redemption or otherwise) or (ii) in the
case of a Deferral Period that begins prior to the Reset Date, the Reset Date.
Upon the termination of any Deferral Period and upon the payment of all
Compounded Interest and Additional Sums (together, "Additional Payments"), if
any, then due, the Company may commence a new Deferral
<PAGE> 103
Period, subject to the foregoing requirements. No interest shall be due and
payable during a Deferral Period except on the applicable Payment Resumption
Date.
The Company shall give the Holder of the Security and the Trustee
written notice (a "Deferral Notice") of its selection of a Deferral Period at
least ten days prior to the record date for any distributions that would have
been payable on the Trust Securities except for the decision to begin or extend
such Deferral Period. The Company may elect to pay all interest then accrued and
unpaid on the Securities, including Compounded Interest, on an Interest Payment
Date prior to its most recently established Payment Resumption Date, provided
that the Company gives the Holder of the Security and the Trustee a new Deferral
Notice setting forth the revised Payment Resumption Date at least three Business
Days prior to the Regular Record Date for such revised Payment Resumption Date.
The quarter in which any Deferral Notice is given pursuant to the
second paragraph of this Section 3 shall be counted as one of the 20 quarters
permitted in the maximum Deferral Period permitted under the first paragraph of
this Section 3.
4. Method of Payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest installment, which shall be the close of business
on the fifteenth day of January, April, July or October as applicable,
immediately preceding each Interest Payment Date (the "Regular Record Date"),
commencing January 15, 2000, or such other Person as described herein or
therein. If the Reset Date is prior to the Regular Record Date for the
immediately following Interest Payment Date, then interest and Additional
Amounts, if any, accrued from and after the Reset Date to but excluding the
immediately following Interest Payment Date shall be paid on such Interest
Payment Date to the person in whose name each Security is registered on the
relevant Regular Record Date, subject to the right of the Company to initiate a
Deferral Period. If the Reset Date is on or after the Regular Record Date for
the immediately following Interest Payment Date, then (1) interest and
Additional Amounts, if any, accrued from and after the Regular Record Date to
but excluding the Reset Date shall be paid on the immediately following Interest
Payment Date to the person in whose name each Security is registered on the
relevant Regular Record Date and (2) interest and Additional Amounts, if any,
accrued from and after the Reset Date to but excluding the immediately following
Interest Payment Date shall be paid on the second Interest Payment Date
immediately following the Reset Date to the person in whose name each Security
is registered on the relevant Regular Record Date for such second Interest
Payment Date, subject in each case to the right of the Company to initiate a
Deferral Period. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date
and may
3
<PAGE> 104
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than
ten days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture; provided that
any such payment will be made in such coin or currency of the United States of
America which at the time is a legal tender for payment of public and private
debts.
Payment of the principal of and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in New
York, New York, in such coin or currency of the United States of America which
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at any time that the Property Trustee is not the sole
Holder of the Securities, payment of interest may, at the option of the Company,
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or by wire transfer.
5. Paying Agent and Security Registrar. The Trustee will act as
Paying Agent, Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such capacity.
6. Indenture. The Company issued the Securities under an
indenture, dated as of January 31, 2000 (the "Indenture"), between the Company
and The Bank of New York, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Trustee, the Company and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "Trust Indenture Act") as in effect on the date of the
Indenture. The Securities are subject to, and qualified by, all such terms,
certain of which are summarized hereon, and Holders are referred to the
Indenture and the Trust Indenture Act for a statement of such terms. The
Securities are unsecured general obligations of the Company limited to
$309,278,400 in aggregate principal amount (or up to $371,134,100 to the extent
the option granted by the Trust is exercised in full) and subordinated in right
of payment to all existing and future Senior Debt of the Company. No reference
herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of
4
<PAGE> 105
and interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
7. Optional Redemption. The Securities are redeemable at the
Company's option at any time and from time to time (an "Optional Redemption")
(i) in whole or in part, at any time or from time to time, prior to the Reset
Date but on or after February 5, 2003 until (but excluding) the Tender
Notification Date, at a Redemption Price (the "Initial Redemption Price") equal
to the prices per $50 principal amount of Securities set forth in the table
below, plus any accrued and unpaid interest, including Additional Payments, if
any, to the Redemption Date, if redeemed during the 12-month period ending on
February 5:
<TABLE>
<CAPTION>
Price Per $50
Principal
Year Amount
---- -------------
<S> <C>
2004 ............................ $50.6875
2005 ............................ $50.0000;
</TABLE>
(ii) after the Reset Date (except in the event of a Failed Final Remarketing),
in accordance with the Term Call protections, if any, established in connection
with the Remarketing and (iii) in whole or in part, at any time on or after the
third anniversary of the Reset Date following a Failed Final Remarketing at a
redemption price equal to 100% of the then outstanding aggregate principal
amount of the Securities to be redeemed, plus accrued and unpaid interest
thereon.
If the Company desires to consummate an Optional Redemption, it
must cause to be sent, at its own expense, notice of such intent (an "Optional
Redemption Notice"), via first-class mail, postage prepaid, to each Holder of
Securities to be redeemed, at such Holder's address appearing in the Security
Register. Holders receiving an Optional Redemption Notice have the right, upon
notification of the Trustee and the Conversion Agent on or prior to the Optional
Redemption Date, to convert their Securities called for redemption into common
stock of the Company, par value $.001 per share ("Common Stock"), at the
Applicable Conversion Ratio prior to the Optional Redemption Date in compliance
with Article XIII of the Indenture. "Optional Redemption Date" means the date
which is not less than 20, nor more than 60, days following the date on which
the Optional Redemption Notice is sent, as specified in the Optional Redemption
Notice (or if such date is not a Business Day, the next succeeding Business
Day).
5
<PAGE> 106
Securities in denominations larger than $50 may be redeemed in
part but only in integral multiples of $50. In the event of a redemption of less
than all of the Securities, the Securities will be chosen for redemption by the
Trustee pro rata in accordance with the Indenture. In the event of redemption of
this Security in part only, a new Security or Securities for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof. On and after the Redemption Date, interest ceases to accrue
on the Securities or portions of them called for redemption.
8. The Remarketing. At least 30 Business Days but not more than
90 Business Days prior to February 1, 2005, the Company will cause a notice to
be sent to all Holders of Securities stating whether it intends to remarket the
Securities as Securities which will be convertible into Common Stock or which
will be nonconvertible. All Securities will be deemed tendered for remarketing
unless the Holder thereof delivers irrevocable notice to the contrary to the
Tender Agent prior to 5:00 pm New York Time on the Tender Notification Date (or,
if such day is not a Business Day, the next succeeding Business Day)(the "Tender
Notification Date"). The Remarketing Agent will establish, pursuant to the terms
of the Remarketing Agreement, the Term Provisions, including the Term Rate at
which interest will accrue on the Securities, to be effective beginning on the
Reset Date. A Holder of Securities that has not duly given notice that it will
retain its Securities will cease to have any further rights with respect to such
Securities upon the successful remarketing thereof, except the right of such
Holder to receive an amount equal to (i) from the proceeds of the Remarketing,
101% of the aggregate principal amount of the Securities, plus (ii) from the
Company, any accrued but unpaid interest (including Additional Payments, if any)
to (but excluding) the Reset Date. In the event of a Failed Final Remarketing,
the Remarketing Agent will set the Term Provisions in accordance with the
Remarketing Agreement.
9. Optional Redemption Upon Tax Event. Subject to the conditions
set forth in the Indenture, the Securities are subject to redemption in whole,
but not in part, if a Tax Event shall occur and be continuing, at any time
within 90 days following the occurrence of such Tax Event, at a Redemption Price
equal to $50 per $50 principal amount thereof, plus accrued but unpaid interest,
including Additional Payments, if any, to the Redemption Date.
In lieu of the foregoing, the Company shall also have the option
of causing the Securities to remain outstanding and pay Additional Sums on the
Securities.
10. Notice of Redemption in Connection with a Tax Event. In case
of a redemption in connection with a Tax Event, notice of redemption will be
mailed by first-class mail, postage prepaid, at least 30 days but not more than
60 days before the Redemption Date to each Holder of the Securities to be
redeemed at such Holder's address appearing in the Security Register.
6
<PAGE> 107
11. Mandatory Redemption. The Securities will mature, and the
Company must redeem the securities in whole and not in part, on February 1, 2030
at a price equal to the aggregate principal amount thereof, plus accrued and
unpaid interest, including Additional Payments, if any, to the Redemption Date.
The failure of the Company to redeem all Outstanding Securities on February 1,
2030 shall constitute an Event of Default.
12. No Sinking Fund. There are no sinking fund payments with
respect to the Securities.
13. Payment to Registered Holders; Cessation of Interest
Accrual Upon Redemption.
If this Security is redeemed subsequent to a Regular Record Date
with respect to any Interest Payment Date specified above and on or prior to
such Interest Payment Date, then any accrued interest (and Additional Payments,
if any) will be paid to the person in whose name this Security is registered at
the close of business on such record date.
On or after the Redemption Date, interest will cease to accrue on
the Securities, or portion thereof, called for redemption.
14. Subordination. The payment of the principal of, interest on
or any other amounts due on the Securities is subordinated in right of payment
to all existing and future Senior Debt (as defined below) of the Company, as
described in the Indenture. Each Holder, by accepting a Security, agrees to such
subordination and authorizes and directs the Trustee on its behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and appoints the Trustee as its attorney-in-fact for such purpose.
"Senior Debt" means (i) all indebtedness of the Company evidenced
by securities, debentures, bonds or other similar instruments issued by the
Company, (ii) all obligations to make payment pursuant to the terms of financial
instruments, such as (a) securities contracts and foreign currency exchange
contracts, (b) derivative instruments, such as swap agreements (including
interest rate and foreign exchange rate swap agreements), cap agreements, floor
agreements, collar agreements, interest rate agreements, foreign exchange
agreements, options, commodity futures contracts and commodity options
contracts, and (c) similar financial instruments; except, in the case of (i)
above, such indebtedness and obligations that are expressly stated to rank
junior in right of payment to, or pari passu in right of payment with, the
Securities, (iii) and indebtedness or obligations of others of the kind
described in (i) and (ii) above for the
7
<PAGE> 108
payment of which the Company is responsible or liable as guarantor or otherwise
and (iv) deferrals, renewals or extensions of any such Senior Debt; provided,
however, that Senior Debt shall not be deemed to include (a) any Debt of the
Company which, when incurred and without respect to any election under Section
1111(b) of the United States Bankruptcy Code of 1978, was without recourse to
the Company, (b) trade accounts payable and accrued liabilities arising in the
ordinary course of business, which will not constitute Debt for purposes of the
Preferred Securities, (c) any Debt of the Company to any of its subsidiaries,
except to the extent incurred for the benefit of third parties, (d) Debt to any
employee of the Company and (e) Debt that expressly provides that it is not
senior in right of payment to the Securities.
15. Conversion. The Holder of any Security has the right,
exercisable at any time prior to 5:00 p.m. New York City time, on or prior to
the Tender Notification Date or, in the event of a Convertible Remarketing or a
Failed Final Remarketing, from and after the Reset Date through February 1, 2030
(except that Securities called for redemption by the Company will be convertible
at any time prior to 5:00 p.m., New York City time, on any Redemption Date) to
convert the principal amount thereof (or any portion thereof that is an integral
multiple of $50) into shares of Common Stock. On or Prior to the Tender
Notification Date, each Security is convertible, at the option of the Holder
into 0.4881 shares of Common Stock for each $50 in aggregate principal amount of
Securities (equivalent to a conversion price of $102.4375 per share of Common
Stock). On and after the Reset Date, the Securities may, at the option of the
Company and subject to the results of the Remarketing, become nonconvertible or
convertible into a different number of shares of Common Stock. The conversion
ratio and equivalent conversion price in effect at any time are known as the
"Applicable Conversion Price" and the "Applicable Conversion Ratio,"
respectively, and are subject to adjustment under certain circumstances. If a
Security is called for redemption, the conversion right will terminate at 5:00
p.m. New York City time on the corresponding Redemption Date, unless the Company
defaults in making the payment due upon redemption.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment of an installment of interest and prior to the opening of
business on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date will be paid to
the registered Holder of such Security on such Regular Record Date. In such
event, such Security, when surrendered for conversion, need not be accompanied
by payment of an amount equal to the interest payable on such Interest Payment
Date on the portion so
8
<PAGE> 109
converted. The number of shares issuable upon conversion of a Security is
determined by dividing the principal amount of the Security converted by the
Applicable Conversion Price in effect on the Conversion Date. No fractional
shares will be issued upon conversion but a cash adjustment will be made for any
fractional interest. The outstanding principal amount of any Security shall be
reduced by the portion of the principal amount thereof converted into shares of
Common Stock.
16. Registration Rights. In addition to the rights provided to
Holders of Securities in the Indenture, Holders of Restricted Securities shall
have all the rights set forth in the Registration Rights Agreement.
17. Registration, Transfer, Exchange and Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in New York, New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $50 and integral multiples thereof. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to due presentment of
this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary. In the event of redemption or
conversion of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
18. Persons Deemed Owners. Except as provided in Section 3
hereof, the registered Holder of a Security may be treated as its owner for all
purposes.
19. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, Holders of
Securities entitled to the money must look to the Company for payment unless an
abandoned property law
9
<PAGE> 110
designates another Person and all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
20. Events of Default and Remedies. The Securities shall have the
Events of Default as set forth in Section 5.01 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least 25%
in aggregate principal amount of the Outstanding Securities by notice to the
Company and the Trustee may declare all amounts payable on the Securities
(including any Additional Payments) to be due and payable immediately; provided
that, if the Property Trustee is the sole Holder of the Securities and if upon
an Event of Default, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the then Outstanding Securities fail to declare
the principal of all the Securities to be immediately due and payable, the
Holders of at least 25% in aggregate liquidation amount of Preferred Securities
then outstanding shall have such right by a notice in writing to the Company and
the Trustee, and upon any such declaration such principal and all accrued
interest (and Additional Payments, if any) shall become immediately due and
payable. The Holders of a majority in aggregate principal amount of the
Outstanding Securities may annul such declaration and waive the default by
written notice to the Property Trustee, the Company and the Trustee if the
default (other than the nonpayment of the principal of these Securities which
has become due solely by such acceleration) has been cured and a sum sufficient
to pay all matured installments of interest (and Additional Payments, if any)
and principal due otherwise than by acceleration has been deposited with the
Trustee. Should the Holders of the Securities of such a series fail to annul
such declaration and waive such default, the Holders of a majority in aggregate
liquidation amount of the Preferred Securities shall have such right. Upon the
effectiveness of any such declaration such principal amount (or specified
amount) of and the accrued interest (including any Additional Payments) on all
the Securities of such series shall then become immediately due and payable; and
provided further that the payment of principal and interest on such Securities
shall remain subordinated to the extent provided in the Indenture.
In the case of an Event of Default, the Holders of a majority in
principal amount of the Securities then Outstanding by written notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the Outstanding Securities issued under the Indenture may
direct the Trustee in its exercise of any trust or power. The Company must
furnish annually compliance
10
<PAGE> 111
certificates to the Trustee. The above description of Events of Default and
remedies is qualified by reference to, and subject in its entirety by, the more
complete description thereof contained in the Indenture.
21. Amendments, Supplements and Waivers. The Indenture permits,
subject to the rights of the Holders of Preferred Securities set forth therein
and in the Declaration and with certain other exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, subject to the
rights of the Holders of the Preferred Securities set forth therein and in the
Declaration, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
therefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security. The above description of amendments, supplements and
waivers is qualified by reference to, and subject in its entirety by the more
complete description thereof contained in the Indenture.
22. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not a Trustee, subject to certain
limitations provided for in the Indenture and in the Trust Indenture Act. Any
Agent may do the same with like rights.
23. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
24. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
25. Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
11
<PAGE> 112
26. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
The Company will furnish to any Holder of the Securities upon
written request and without charge a copy of the Indenture. Request may be made
to:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
12
<PAGE> 113
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Your Signature:
----------------------------------------------------------
(Sign exactly as your name appears on the other side of this
Security)
Date:
--------------------------
Signature Guarantee:(4)
-------------------------------------------------------
- ----------
(4) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition, to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
1
<PAGE> 114
[Include the following if the Security bears a Restricted Securities Legend --
In connection with any transfer of any of the Securities evidenced by this
certificate, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without
transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(3) [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities Act
of 1933; or
(4) [ ] transferred pursuant to an effective registration
statement under the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if box (2) or (3) is
checked, the Trustee may require, prior to registering any such transfer of the
Securities such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
Signature
- --------------------------------------------
STAMP, all in accordance with the Securities Exchange Act of 1934, (as amended.)
2
<PAGE> 115
Signature Guarantee:(5)
Signature must be guaranteed Signature
- -------------------------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.]
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
------------------------
NOTICE: [To be executed by
an executive officer]
- -----------
(5) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
3
<PAGE> 116
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be
$____. The following increases or decreases in the principal amount of this
Global Security have been made:
<TABLE>
<CAPTION>
=====================================================================================
Amount of
increase in
Principal
Amount of this
Global Principal Signature of
Security Amount of Amount of this authorized
including upon decrease in Global Security officer of
exercise of Principal following such Trustee or
over-allotment Amount of this decrease or Securities
Date Made option Global Security increase Custodian
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
=====================================================================================
</TABLE>
4
<PAGE> 117
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
=====================================================================================
</TABLE>
5
<PAGE> 118
ELECTION TO CONVERT
To: Calpine Corporation
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into Common Stock of Calpine Corporation in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.
Any Holder, upon the exercise of its conversion rights in accordance with the
terms of the Indenture and the Security, agrees to be bound by the terms of the
Registrations Rights Agreement relating to the Common Stock issuable upon
conversion of the Securities.
Date:______________, ____
in whole __
Portions of Security to be
converted ($50 or integral
multiples thereof):
$_________________
--------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
____________________________________________
____________________________________________
____________________________________________
Signature Guarantee:(6)_____________________
- -------------------
(6) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities
<PAGE> 119
- --------------------
Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.)
<PAGE> 1
EXHIBIT 4.8.4
REMARKETING AGREEMENT, dated as of January 31, 2000
(this "Agreement"), among (i) Calpine Corporation, a
Delaware corporation (the "Company"), (ii) Calpine Capital
Trust II, a Delaware business trust (the "Trust"), (iii)
The Bank of New York, as Tender Agent and (iv) Credit
Suisse First Boston Corporation, a Massachusetts
corporation (together with its successors and assigns, the
"Remarketing Agent").
RECITALS
WHEREAS the Trust is a statutory business trust that has been
created under Delaware law and exists pursuant to the Trust Agreement (as
defined below) and a certificate of trust filed with the Delaware Secretary of
State; and
WHEREAS the Trust is issuing on today's date or has heretofore
issued $300,000,000 (or up to $360,000,000 to the extent the option granted by
the Trust is exercised in full) aggregate Liquidation Amount (as defined below)
of Remarketable Term Income Deferrable Equity Securities (the "HIGH TIDES_")
representing preferred undivided beneficial interests in the assets of the Trust
and has used the proceeds of the HIGH TIDES, together with the proceeds of
$9,278,400 (or up to $11,134,100 to the extent the option granted by the Trust
is exercised in full) aggregate Liquidation Amount of its Common Securities (as
defined in the Trust Agreement) of the Trust, to purchase $309,278,400 (or up to
$371,134,100 to the extent the option granted by the Trust is exercised in full)
aggregate principal amount of Convertible Subordinated Debentures Due 2030 (the
"Debentures") issued by the Company pursuant to the Indenture (as defined
below);
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. (a) The following terms shall have the meanings
indicated below:
"Additional Amounts" has the meaning specified in the Indenture.
"Administrative Trustees" has the meaning specified in the
definition of Trust Agreement in this Section 1.
"Broker-Dealer" has the meaning assigned to such term in Section
5.
<PAGE> 2
"Broker-Dealer Agreement" means an agreement between the
Remarketing Agent and a Broker-Dealer in substantially the form of Annex 1.
"Business Day" means a day other than (a) a Saturday or Sunday,
(b) a day on which banking institutions in the City of New York are authorized
or required by law or executive order to remain closed, or (c) a day on which
the Property Trustee's or Debenture Trustee's Corporate Trust Office (as defined
in the Trust Agreement with respect to the Property Trustee and in the Indenture
with respect to the Debenture Trustee) is closed for business.
"Cause" means any one of the following events or circumstances
shall have occurred and be continuing: (i) the bankruptcy or insolvency of the
Remarketing Agent; or (ii) the Remarketing Agent shall cease to be registered as
a broker-dealer under the Exchange Act.
"Closing Price" means for any security on any day the last
reported sale price of the security on that day, or in case no sale takes place
on that day, the average of the closing bid and asked prices in each case on the
principal national securities exchange on which the securities are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Market System of the National Association
of Securities Dealers, Inc. or any successor national automated interdealer
quotation system (the "NNM") or, if the securities are not listed or admitted to
trading on any national securities exchange or quoted on the NNM, the average of
the closing bid and asked prices of the security in the over-the-counter market
as furnished by any New York Stock Exchange member firm selected by the Company
for that purpose.
"Commission" means the Securities and Exchange Commission or any
successor thereto.
"Common Stock" has the meaning assigned to such term in the
Indenture.
"Company" has the meaning assigned to such term in the preamble
to this Agreement.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the Remaining Life
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the Remaining Life. If no United States Treasury
security has a maturity which is within a period from three months before to
three months after the Reset Date, the two most closely corresponding United
States Treasury securities shall be used as the Comparable Treasury
<PAGE> 3
Issue, and the rate being calculated shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month using such securities.
"Comparable Treasury Price" means (A) the arithmetic mean of five
Reference Treasury Dealer Quotations, after excluding the highest and lowest
such Reference Treasury Dealer Quotations, or (B) if the Debenture Trustee
obtains fewer than five such Reference Treasury Dealer Quotations, the
arithmetic mean of all such Reference Treasury Dealer Quotations.
"Convertible Remarketing" has the meaning specified in Section
2(d).
"Debenture Trustee" means The Bank of New York, as Trustee under
the Indenture (including its successors as Debenture Trustee thereunder).
"Debentures" has the meaning assigned to such term in the
recitals to this Agreement.
"Declaration Trustees" means collectively, the Property Trustee,
the Delaware Trustee and the Administrative Trustees.
"Delaware Trustee" has the meaning specified in the definition of
"Trust Agreement" in this Section 1.
"Disclosure Documents" means the Registration Statement, or if
the Registration Statement is not required to be filed with the Commission
pursuant to Section 2(b), the Nonregistered Offering Documents, including any
preliminary offering document or Preliminary Prospectus, as applicable, and as
each may be amended or supplemented, and in each case, including any information
incorporated by reference therein.
"Effective Time" means the date and time as of which the
Registration Statement or its most recent post-effective amendment is declared
effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated thereunder.
"Exchange Act Reports" means any annual or other reports of the
Company or the Trust filed with the Commission or sent to holders of their
securities, in each case pursuant to the Exchange Act.
"Failed Final Remarketing" has the meaning specified in Section
2(d).
3
<PAGE> 4
"Failed Remarketing" means an Initial Failed Remarketing or a
Final Failed Remarketing.
"Final Remarketing" has the meaning specified in Section 2(d).
"Final Remarketing Period" means the period beginning on the
Business Day immediately following the Initial Remarketing Termination Date and
ending on the day which is ten (10) Business Days (or such shorter period as
shall be agreed to by the Remarketing Agent) after the Initial Remarketing
Termination Date.
"Final Reset Date" means February 1, 2005.
"Global Security Certificate" has the meaning assigned to (i) the
term "Global Preferred Securities" in the Trust Agreement if the Subject
Securities are HIGH TIDES or (ii) the term "Global Security" in the Indenture if
the Subject Securities are Debentures.
"HIGH TIDES" has the meaning assigned to such term in the
recitals to this Agreement.
"Indenture" means the Indenture, dated as of January 31, 2000,
between the Company and the Debenture Trustee, as such Indenture may from time
to time be amended, modified or supplemented.
"Initial Failed Remarketing" has the meaning specified in Section
2(d).
"Initial Remarketing" has the meaning specified in Section 2(d).
"Initial Remarketing Period" means the period beginning on the
first Business Day immediately following the Tender Notification Date and ending
on the day which is ten (10) Business Days (or such shorter period as shall be
agreed to by the Remarketing Agent) after the Tender Notification Date.
"Initial Remarketing Termination Date" means the tenth (10)
Business Day following the Tender Notification Date (or such shorter period as
shall be agreed to by the Remarketing Agent).
"Interest" means all quarterly payments, interest on quarterly
payments not paid on the applicable Interest Payment Date and Additional
Amounts, as applicable.
4
<PAGE> 5
"Interest Payment Date" has the meaning specified in the
Indenture and the Trust Agreement.
"Liquidation Amount" means, with respect to a HIGH TIDES or
Common Security, its stated liquidation amount of $50.
"Market Event" means the occurrence of (i) a change in U.S. or
international financial, political or economic conditions or currency exchange
rates or exchange controls as would, in the sole judgment of the Remarketing
Agent, be likely to prejudice materially the success of the Remarketing, issue,
sale or distribution of the Subject Securities, or (ii) (A) any change, or any
development or event involving a prospective change, in the condition (financial
or other), business, properties or results of operations of the Company and its
subsidiaries taken as a whole which, in the sole judgment of the Remarketing
Agent, is material and adverse and makes it impractical or inadvisable to
proceed with completion of the Remarketing or the sale of and payment for the
Subject Securities; (B) any downgrading in the rating of the Subject Securities
or any other debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of the Subject Securities or any other
debt securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (C) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market; (D)
any banking moratorium declared by U.S. Federal or New York authorities; or (E)
any outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency if, in the sole judgment of the
Remarketing Agent, the effect of any of the events specified in (B), (C), (D) or
(E) makes it impractical or inadvisable to proceed with completion of the
Remarketing or the sale of and payment for the Subject Securities.
"Maximum Rate" means a rate per annum equal to the Treasury Rate
plus 6%.
"No Registration Opinion" means an opinion of Securities Counsel
that the securities issuable in the Remarketing do not need to be registered
under the Securities Act and that no other filing of any kind is required to be
made with the Commission as a condition to the sale of such securities, which No
Registration Opinion shall be reasonably satisfactory to the Remarketing Agent
and its counsel.
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<PAGE> 6
"Nonconvertible Remarketing" has the meaning specified in Section
2(d).
"Nonregistered Offering Documents" has the meaning specified in
Section 6(a).
"Notice of Purchasers" means a notice delivered by the
Remarketing Agent on the Reset Date to (i) the Tender Agent if the Subject
Securities are not evidenced by a Global Security Certificate on the Reset Date
or (ii) The Depository Trust Company if the Subject Securities are evidenced by
a Global Security Certificate on the Reset Date, in either case naming the
parties who will purchase the Subject Securities from the Remarketing Agent.
"Offering Circular" means the Confidential Offering Circular,
dated January 25, 2000, related to the initial offer and sale of the HIGH TIDES.
"Par Amount" means $50 per Subject Security.
"Paying Agent" has the meaning specified in the Trust Agreement.
"Preliminary Prospectus" means each prospectus included in the
Registration Statement, or amendment thereof, before it becomes effective under
the Securities Act and any prospectus which may be filed by the Company with the
Commission pursuant to Rule 424(a) (or any successor applicable rule) of the
rules and regulations under the Securities Act (the "Rules and Regulations") in
connection with the Registration Statement.
"Primary Treasury Dealer" has the meaning specified in the
definition of Quotation Agent in this Section 1.
"Property Trustee" has the meaning specified in the definition of
Trust Agreement in this Section 1.
"Prospectus" means the final prospectus which will be filed with
the Commission pursuant to Rule 424(b) (or any successor applicable rule) of the
Rules and Regulations and deemed to be a part of the Registration Statement at
the time of its effectiveness under the Securities Act pursuant to paragraph (b)
of Rule 430A (or any successor applicable rule) of the Rules and Regulations.
"Quotation Agent" means Credit Suisse First Boston Corporation and its
successors; provided, however, that if Credit Suisse First Boston Corporation
shall cease to be a primary United States Government securities dealer in The
City of New York (a
6
<PAGE> 7
"Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer" means (i) the Quotation Agent and
(ii) any other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer, the arithmetic mean, as determined by the
Debenture Trustee of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding the Reset Date.
"Registration Statement" means a registration statement covering
the securities to be issued in the Remarketing filed with the Commission
pursuant to the Securities Act, including any amendments thereto and any
document or other information incorporated by reference therein.
"Remaining Life" means the period beginning on (and including)
the Reset Date and ending on February 1, 2030.
"Remarketing" has the meaning specified in Section 2(b).
"Remarketing Agent" has the meaning assigned to such term in the
preamble to this Agreement and, upon the appointment of a successor Remarketing
Agent in accordance with Section 10, shall mean such successor Remarketing
Agent.
"Remarketing Conditions" means the following factors: (i)
short-term and long-term market rates and indices of such short-term and
long-term rates, (ii) market supply and demand for short-term and long-term
securities, (iii) yield curves for short-term and long-term securities
comparable to the Subject Securities, (iv) industry and financial conditions
which may affect the Subject Securities, (v) the number of Subject Securities to
be remarketed, (vi) the number of potential purchasers, (vii) the current
ratings by nationally recognized statistical rating organizations of long-term
subordinated debt of the Company and of other outstanding capital securities of
the Company's trust subsidiaries, (viii) the number of shares of Common Stock,
if any, into which the Subject Securities will be convertible and (ix) the
length and type of call protections, if any.
"Remarketing Notice" has the meaning specified in Section 2(d).
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<PAGE> 8
"Reset Date" means any date (1) not later than the Final Reset
Date, or, if such date is not a Business Day, the next succeeding Business Day
and (2) not earlier than 70 Business Days prior to the Final Reset Date, as may
be determined by the Remarketing Agent, in its sole discretion, for settlement
of a successful Remarketing.
"Rules and Regulations" has the meaning specified in the
definition of Preliminary Prospectus in this Section 1.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder.
"Securities Counsel" means counsel experienced in matters
relating to securities law.
"Subject Securities" means (i) the HIGH TIDES if, on the Reset
Date, the Debentures have not been distributed to holders of HIGH TIDES in
connection with a liquidation or dissolution of the Trust or (ii) otherwise, the
Debentures.
"Tender Agent" means (i) the Property Trustee if the Subject
Securities are HIGH TIDES or (ii) the Debenture Trustee if the Subject
Securities are Debentures.
"Tender Notification Date" means a Business Day no earlier than
ten (10) Business Days following the date of the Remarketing Notice (or such
shorter period as shall be agreed to by the Remarketing Agent).
"Term Call Protections" has the meaning assigned to such term in
Section 2(c).
"Term Conversion Ratio" has the meaning assigned to such term in
Section 2(c).
"Term Conversion Price" has the meaning assigned to such term in
Section 2(c).
"Term Provisions" has the meaning specified in Section 2(c).
"Term Rate" has the meaning assigned to such term in Section
2(c).
"Treasury Rate" means (i) the yield, under the heading which represents the
average for the week immediately prior to the date of calculation, appearing in
the most recently published statistical release designated H.15(519) or any
successor publication which is published weekly by the Federal Reserve and which
establishes yields on actively
8
<PAGE> 9
traded United States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding to the
Remaining Life (if no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or does
not contain such yields, the rate per annum equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for the Reset Date. The Treasury
Rate shall be calculated by the Remarketing Agent on the third Business Day
preceding the Reset Date.
"Trust" has the meaning assigned to such term in the preamble to
this Agreement.
"Trust Agreement" means the Amended and Restated Declaration of
Trust, dated as of January 31, 2000, among the Company, as Depositor, The Bank
of New York, as Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as Delaware Trustee (the "Delaware Trustee"), Peter Cartwright, Ann
B. Curtis and Thomas R. Mason (the "Administrative Trustees") and the holders
from time to time of undivided beneficial interests in the assets of the Trust,
as such agreement may from time to time be amended, modified or supplemented.
(b) Capitalized terms used herein and not otherwise defined but
defined in the Trust Agreement or Indenture shall have the meanings assigned to
such terms in the Trust Agreement or the Indenture, as applicable.
2. Acceptance and Performance of Duties. The Remarketing Agent,
the Company, the Trust and the Tender Agent agree as follows:
(a) The Remarketing Agent will perform the duties and obligations
of Remarketing Agent for the Remarketed Securities as specified in the Trust
Agreement (if the Tendered Securities are the HIGH TIDES), the Indenture (if the
Tendered Securities are the Debentures) and in this Agreement in good faith and
in compliance with the provisions of applicable laws.
(b) The Remarketing Agent will use its best efforts to remarket
all Subject Securities tendered or deemed tendered for sale in accordance with
the terms and provisions of this Agreement (the "Remarketing"); provided,
however, that the Remarketing Agent will not be obligated to attempt to remarket
such Subject Securities, or to determine the Term Rate pursuant to Section 2(c)
below, if (A) in the Remarketing Agent's judgment
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<PAGE> 10
any (i) Disclosure Document provided by the Trust or the Company in connection
with the Remarketing or (ii) document publicly disclosed (including in a filing
pursuant to the Exchange Act) by or on behalf of the Trust or the Company,
includes any untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless the Remarketing Agent is
satisfied in its sole discretion that such statement or omission has been
properly corrected, (B) unless the Company provides a No Registration Opinion to
the Remarketing Agent prior to the Tender Notification Date, the Company and the
Trust (if applicable) shall have failed to have the Registration Statement
declared effective by the Commission on or prior to the Tender Notification Date
and remain effective at least through and including the Reset Date, provided
that the Registration Statement may be declared effective later than the Tender
Notification Date if the Company provides an opinion of Securities Counsel to
the Remarketing Agent to the effect that such Registration Statement need not
become effective until the date the Initial Remarketing Period is required to
commence and the Remarketing Agent consents to such delay or (C) the Company
fails to comply with the requirements set forth in Section 6(c) of this
Agreement. The Remarketing Agent may, but except as provided in Section 11 shall
not be obligated to, purchase tendered Subject Securities for its own account.
(c) The Remarketing Agent has agreed to use its best efforts to
remarket all Subject Securities tendered for Remarketing on the Tender
Notification Date. The Remarketing Agent will establish, effective beginning on
the Reset Date, (i) the rate (the "Term Rate") per annum at which Interest will
accrue on the Subject Securities, (ii) the term conversion ratio and price,
which determine the number of shares of Common Stock, if any, into which each
Subject Security may be converted (respectively, the "Term Conversion Ratio" and
the "Term Conversion Price") and (iii) the price, manner and time, if any, at
which the Subject Securities may be redeemed (the "Term Call Protections" and
together with the Term Rate, Term Conversion Ratio and Term Conversion Price,
the "Term Provisions"). The Remarketing Agent will use its best efforts to
establish the Term Provisions most favorable to the Company consistent with the
successful remarketing of Subject Securities tendered therefor at a price equal
to 101% of the aggregate Par Amount thereof; provided that each Subject Security
will have the same Term Provisions; provided that the Term Provisions may not
permit the Company to redeem the Subject Securities for a price less than the
aggregate Par Amount thereof plus any accrued and unpaid Interest thereon; and,
provided further, that if no Subject Security is tendered for remarketing on the
Tender Notification Date, the Remarketing will not take place (although the
Remarketing will not be deemed to have failed), and the Remarketing Agent will
set the Term Provisions in a manner consistent with the Remarketing Notice that
it believes, in its sole discretion, would result in a price per Subject
Security equal to 101% of its Par Amount.
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<PAGE> 11
(d) The remarketing process will commence on the first Business
Day following the Tender Notification Date and will be conducted on the
following schedule and in the following manner:
<TABLE>
<S> <C>
At Least 30 Business Days , But Not The Trust shall cause a notice (the
More Than 90 Business Days Prior to "Remarketing Notice") to be sent to holders of
the Final Reset Date: the Subject Securities stating whether it
intends to remarket the Subject
Securities as securities which will be
convertible into Common Stock of the
Company (a "Convertible Remarketing")
or which will be nonconvertible (a
"Nonconvertible Remarketing").
The date of the Remarketing Notice Each outstanding Subject Security shall be
through the Tender Notification deemed to have been tendered for remarketing
Date: unless the holder thereof has given
irrevocable notice to the contrary to
the Tender Agent (which the Tender
Agent will promptly remit to the
Remarketing Agent). Such irrevocable
notice, which may be telephonic or
written, must be delivered prior to
5:00 p.m., New York City time, on the
Tender Notification Date. A holder's
notice of an election to retain
Subject Securities must state the
number of Subject Securities to be
retained (which must be all of the
Subject Securities represented by the
applicable certificate, unless such
certificate is a Global Security
Certificate), the number of the
certificate representing the Subject
Securities not to be deemed to have
been so tendered and the number of
Subject Securities represented by such
certificate. Any transferee of a
Subject Security for which such notice
has been provided shall be bound
thereby. The failure by a holder of
Subject Securities to give timely
notice of an election to retain all
(or, in the case of a Global Security
Certificate, any part) of such
holder's Subject Securities will
constitute the irrevocable tender for
sale in the Remarketing of all the
Subject Securities it holds. A holder
of Subject Securities which has
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C>
not duly given notice that it will not
tender and retain its Subject
Securities will cease to have any
further rights with respect to such
Subject Securities upon the successful
remarketing thereof, except the right
of such holder to receive an amount
equal to (i) from the proceeds of the
Remarketing, 101% of the aggregate
liquidation amount thereof, plus (ii)
from the Company, any accrued and
unpaid Interest thereon to (but
excluding) the Reset Date.
Beginning the First Business Day If any Subject Securities are tendered for
Following the Tender Notification remarketing, the Remarketing Agent will
Date: commence a Convertible Remarketing or a
Nonconvertible Remarketing, as the
case may be (in either case, an
"Initial Remarketing"), in accordance
with the terms of this Agreement and
pursuant to the instructions set forth
in the Remarketing Notice. The
Remarketing Agent will determine, and
upon request make available to
interested persons nonbinding
indications of, the Term Provisions
based upon then-current Remarketing
Conditions. The Remarketing Agent will
solicit and receive orders from
prospective investors to purchase
tendered Subject Securities. The
Initial Remarketing shall be deemed to
have failed (an "Initial Failed
Remarketing") if (i) despite using its
best efforts, the Remarketing Agent is
unable to establish, prior to the
Initial Remarketing Termination Date,
a Term Rate which is less than or
equal to the Maximum Rate, (ii) the
Remarketing Agent is excused from
Remarketing the Subject Securities
because of (a) the failure by the
Company or the Trust to satisfy a
condition in this Agreement or (b) the
occurrence of a Market Event, (iii)
there is no Remarketing Agent on the
first day of the Initial Remarketing
Period, or (iv) prior to the Initial
Remarketing Termination Date, Term
</TABLE>
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<PAGE> 13
<TABLE>
<S> <C>
Provisions are established by the
Remarketing Agent, but the Remarketing
Agent is unable to consummate the sale
of one or more of the Subject
Securities tendered for remarketing
because of the occurrence of a Market
Event.
Remainder of the Initial The Remarketing Agent will continue, if
Remarketing Period: necessary, using its best efforts to remarket
the Subject Securities tendered for
remarketing as described above,
adjusting the non-binding indications
of the Term Provisions necessary to
establish the Term Provisions most
favorable to the Company consistent
with remarketing all Subject
Securities tendered therefor at 101%
of the Par Amount, until the Initial
Remarketing is completed or is deemed
to have failed. See the definition of
an Initial Failed Remarketing above.
Promptly upon determination of the
Term Provisions, the Remarketing Agent
will communicate such Term Provisions
to the Tender Agent, which will
communicate such Term Provisions to
the Declaration Trustees (if the Trust
has not dissolved), the Trust (if the
Trust has not dissolved), the
Debenture Trustee, the Paying Agent,
the Company and each holder (if any)
which timely elected not to tender all
of its Subject Securities for
remarketing, by delivery of a written
notice or by telephone promptly
confirmed by telecopy or writing.
Beginning the First Business Day If the Initial Remarketing fails because the
Following an Initial Failed Remarketing Agent was not able to establish a
Remarketing (if applicable): Term Rate less than or equal to the Maximum
Rate prior to the Initial Remarketing
Termination Date, the Remarketing Agent will
commence a second remarketing (the "Final
Remarketing"), which will be a Convertible
Remarketing if the Initial Remarketing was a
Nonconvertible Remarketing and a
Nonconvertible Remarketing if the Initial
Remarketing was a Convertible Remarketing.
The
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
Remarketing Agent will determine, and
upon request make available to
interested persons nonbinding
indications of, the Term Provisions
based upon then-current Remarketing
Conditions. The Remarketing Agent will
solicit and receive orders from
prospective investors to purchase
tendered Subject Securities. The Final
Remarketing will be deemed to have
failed (a "Failed Final Remarketing")
if (i) despite using its best efforts,
the Remarketing Agent is still not
able to establish a Term Rate less
than or equal to the Maximum Rate
prior to the expiration of the Final
Remarketing Period, (ii) the
Remarketing Agent is excused from
Remarketing the Subject Securities
because of (a) the failure by the
Company or the Trust to satisfy a
condition in this Agreement or (b) the
occurrence of a Market Event or (iii)
Term Provisions are established by the
Remarketing Agent, but the Remarketing
Agent is unable to consummate the sale
of one or more of the Subject
Securities tendered for remarketing
because of the occurrence of a Market
Event.
Remainder of the Final Remarketing The Remarketing Agent will continue, if
Period (if applicable): necessary, to use its best efforts to remarket
the Subject Securities, as described
above, adjusting the non-binding
indications of the Term Provisions as
necessary to establish the Term
Provisions most favorable to the
Company consistent with remarketing
all Subject Securities tendered
therefor at 101% of the Par Amount
until the Final Remarketing is
completed or is deemed to have failed.
See the definition of a Failed Final
Remarketing above. If the Remarketing
Agent is able to establish a Term Rate
less than or equal to the Maximum Rate
during the Final Remarketing Period,
it will promptly communicate such Term
Provisions to the Tender Agent, which
will communicate such Term Provisions
to the
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C>
Declaration Trustees (if the Trust has
not dissolved), the Trust (if the
Trust has not dissolved), the
Debenture Trustee, the Paying Agent,
the Company and each holder (if any)
which timely elected not to tender all
of its Subject Securities for
remarketing, by delivery of a written
notice or by telephone promptly
confirmed by telecopy or writing.
Reset Date: New holders must deliver the purchase price
for the remarketed securities in same-day
funds to the Remarketing Agent and the
Remarketing Agent will deliver such purchase
price to the Tender Agent (in like funds).
Settlement of transactions in connection with
the remarketing will take place on the Reset
Date, or such date as the Remarketing Agent
may, in its sole discretion, determine, or as
otherwise required by applicable law.
Payments to tendering holders who hold Subject
Securities in the form of one or more Global
Security Certificates will be made in the
manner provided in the Prospectus under
"Description of HIGH TIDES--Form, Book-Entry
Procedures and Transfer." Tendering holders
who hold Subject Securities in certificated
form (other than in the form of Global
Security Certificates) must deliver their
certificates properly endorsed for transfer to
the Tender Agent by 2:30 p.m. on the Reset
Date (or any succeeding date) to receive
payment of the purchase price for their
Subject Securities. Subject to compliance
with the preceding two sentences, the Tender
Agent will pay former holders the proceeds of
the Remarketing of their Subject Securities by
the Remarketing Agent. In the event of a
Failed Final Remarketing, the Term Rate shall
be a rate equal to the Treasury Rate plus 6%
per annum, the Term Conversion Price will be
equal to 105% of the average Closing Price of
the Company's Common Stock for the five (5)
consecutive trading days after
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
the Final Remarketing Period, and the
Remarketing Agent shall set any other
terms not provided for herein upon a
Failed Final Remarketing. In the event
of a Failed Final Remarketing, all
outstanding Subject Securities will be
redeemable by the Company, in whole or
in part, at any time on or after the
third anniversary of the Reset Date at
a redemption price equal to 100% of
the aggregate principal amount or
liquidation amount, as the case may
be, thereof, plus accrued and unpaid
interest or distributions, as the case
may be, thereon. On and after the
Reset Date, the terms of all Subject
Securities, whether or not tendered
for remarketing, will be modified by
the Term Provisions, as the same shall
be established by the Remarketing
Agent. If the Subject Securities are
not held by The Depository Trust
Company or its nominee in the form of
one or more Global Security
Certificates, certificates
representing remarketed Subject
Securities will be issued to the
purchasers thereof, irrespective of
whether the certificates formerly
representing such Subject Securities
have been delivered to the Tender
Agent.
</TABLE>
3. Representations, Warranties, Covenants and Agreements of the
Company and the Remarketing Agent. (a) The Company and the Trust each represent,
warrant, covenant and agree with the Remarketing Agent as follows:
(i) the Company and the Trust each have full power and authority
to enter into this Agreement and will have full power and authority to
enter into any agreements which it may enter into in connection with the
Remarketing; this Agreement and the transactions contemplated hereby
have been, and each other such agreement and the transactions
contemplated thereby will be, duly authorized, executed and delivered by
the Company and the Trust, as applicable; and this Agreement is, and
each such other agreement will be at the Reset Date, a valid and binding
obligation of the Company and the Trust, as applicable, enforceable
against the Company and the Trust, as applicable, in accordance with its
terms;
16
<PAGE> 17
(ii) the consummation of the transactions contemplated herein do
not now, and the consummation of the transactions contemplated in any
other agreement entered into by the Company and the Trust, as
applicable, in connection with the Remarketing will not, at the Reset
Date, conflict with or constitute a breach of, or a default under, or
result in the creation or imposition of any lien, charge or other
encumbrance upon any property or assets of the Trust, the Company or any
of the Company's subsidiaries pursuant to any contract, indenture,
declaration of trust, deed of trust, mortgage, loan agreement, note,
lease or other instrument or agreement to which the Trust, the Company
or any of its subsidiaries is or will be a party or by which it or any
of them may be bound, or to which any of the property or assets of any
of them is or will be subject, nor will such actions result in any
violation of the provisions of the certificate of incorporation, the
by-laws or other organizational document of the Trust, the Company or
any of its subsidiaries or any statute (including the Securities Act,
the Exchange Act and state securities laws) or any order, rule or
regulation of any court or governmental agency or body (including the
Commission) which has or will have jurisdiction over the Trust, the
Company or any of its subsidiaries or any of their material property or
assets except for a conflict, breach, default, lien, charge or
encumbrance which could not reasonably be expected to have a material
adverse effect on the consummation of the transactions contemplated
herein or therein;
(iii) all required consents, rulings and approvals of
governmental authorities (other than "Blue Sky" authorities) required in
connection with the execution and delivery by the Company and the Trust
of this Agreement and any agreement entered into by the Company and the
Trust in connection with the transactions contemplated by any Disclosure
Documents, and the performance by the Company and the Trust of its
obligations hereunder and thereunder, have been obtained and are in full
force and effect and, at the Reset Date, will have been obtained and be
in full force and effect;
(iv) except as disclosed in the Disclosure Documents, neither
the Trust, the Company nor any of its subsidiaries is or, at the Reset
Date, will be (i) in violation of its certificate of incorporation,
by-laws or other organizational document, (ii) in default in any
respect, and no event has occurred or will have occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition
contained in any contract, indenture, declaration of trust, deed of
trust, mortgage, loan agreement, note, lease or other instrument or
agreement to which it is or will be bound or to which any of its
properties or assets is or will be subject or
17
<PAGE> 18
(iii) in violation of any law, ordinance, governmental rule, regulation
or court decree to which it or its property or assets may be subject;
(v) the Disclosure Documents, including as provided in Section
3(x), will not, at the Effective Time and thereafter through and
including the Reset Date, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
no representation or warranty is made as to information contained in or
omitted from the Disclosure Documents in reliance upon and in conformity
with written information furnished to the Company by the Remarketing
Agent specifically for inclusion therein;
(vi) the financial statements of the Company contained (or
incorporated by reference) in the Disclosure Documents will present
fairly the financial position of the Company as of the dates indicated,
and the results of operations and changes in financial position of the
Company for the periods covered, in conformity with generally accepted
accounting principles applied on a consistent basis, except as otherwise
set forth therein;
(vii) after the date of the most recent financial statements of
the Company contained (or incorporated by reference) in the Disclosure
Documents, there will not have been any material adverse change in the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole, except
as disclosed in the Disclosure Documents;
(viii) except as disclosed in the Disclosure Documents, there
will be no legal or governmental proceedings pending at the Reset Date
to which the Trust, the Company or any of its subsidiaries is a party or
of which any material property or assets of the Trust, the Company or
any of its subsidiaries is the subject which, if determined adversely to
the Trust, the Company or any of its subsidiaries, might have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries,
taken as a whole;
(ix) any description of a contract, indenture, declaration of
trust, deed of trust, mortgage, loan agreement, note, lease or other
instrument or agreement contained in the Disclosure Documents will be,
at the Effective Time and thereafter through and including the Reset
Date, true, complete and correct in all material respects; and
18
<PAGE> 19
(x) If the Registration Statement is filed, the Registration
Statement at the Effective Time will conform to the requirements of the
Securities Act and the Rules and Regulations and 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 not misleading, and the Prospectus, as of the Effective Time and
thereafter through and including the Reset Date, will conform to the
requirements of the Securities Act and the Rules and Regulations and
will not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided that no representation or warranty is made as to
information contained in or omitted from any Preliminary Prospectus, the
Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Company by the
Remarketing Agent specifically for inclusion therein.
(b) The Remarketing Agent represents, warrants, covenants and
agrees with the Company that if it shall not have received a No Registration
Opinion and the Registration Statement shall not be effective on the Tender
Notification Date (or such later date as may be provided in Section 2(b)), the
Remarketing Agent will offer and sell the Subject Securities only in compliance
with the federal and state securities laws applicable to unregistered sales of
securities in effect at the time of the Remarketing.
4. Fees and Expenses. (a) The Company agrees to pay to the
Remarketing Agent upon settlement of the transactions contemplated by the
Remarketing (i) as compensation for its services hereunder, a fee equal to 1% of
the aggregate Par Amount of outstanding Subject Securities on the Reset Date
upon settlement of the transactions contemplated by the Remarketing, plus (ii)
all out-of-pocket expenses reasonably incurred by the Remarketing Agent in
connection with the performance of its duties; provided that if both the Initial
Remarketing and the Final Remarketing fail, the Company shall not be required to
pay any fees to, or reimburse any out-of-pocket expenses of, the Remarketing
Agent.
(b) The Remarketing Agent acknowledges and agrees that the
performance of its duties hereunder will be without charge to holders or
purchasers of the Subject Securities other than the Company.
5. Broker-Dealer Participation. The Remarketing Agent shall enter
into Broker-Dealer Agreements with all broker-dealers ("Broker-Dealers"), if
any, which it selects to have participate in the remarketing process; provided
that (i) such Broker-Dealers agree to comply with the terms of this Agreement,
including the terms of Section 3(b) of this Agreement, (ii) any fees or
commissions paid to the Broker-Dealers
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<PAGE> 20
shall be paid by the Remarketing Agent out of the fees it is paid pursuant to
Section 4(a), and (iii) the Remarketing Agent agrees to provide to the Company
an executed copy of each Broker-Dealer Agreement. None of the Remarketing Agent,
the Trust and the Company shall be responsible for the out-of-pocket expenses of
such Broker-Dealers or for ensuring compliance by such Broker-Dealers with the
terms of this Agreement (except, with respect to the Remarketing Agent, as
specifically set forth in the Broker-Dealer Agreement).
6. Disclosure Documents and Other Information. (a) If (i) the
Registration Statement is not required to be filed with the Commission pursuant
to the provisions of Section 2(b) of this Agreement and (ii) the Remarketing
Agent determines that it is necessary or desirable to use a disclosure document
in connection with the performance of its obligation to remarket the Subject
Securities, the Remarketing Agent will notify the Company and the Company and
the Trust will provide to the Remarketing Agent prior to the Tender Notification
Date at the Company's expense a disclosure document or documents reasonably
satisfactory to the Remarketing Agent and its counsel in respect of the Subject
Securities (collectively, and including any documents or other information
incorporated by reference therein, the "Nonregistered Offering Documents"). The
Company and the Trust will supply the Remarketing Agent at the Company's expense
with such number of copies of the Disclosure Documents as the Remarketing Agent
reasonably requests from time to time. The Company will supplement and amend the
Disclosure Documents so that at all times they will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements in the Disclosure Documents, in light of the circumstances under
which they were made, not misleading.
(b) The Company and the Trust each agrees to furnish to the
Remarketing Agent (i) as promptly as practicable after they are available, all
regular and periodic reports, if any, which the Company or the Trust files with
the Commission, if any, under the Exchange Act and all reports which the Company
or the Trust provides generally to holders of its publicly held securities and
(ii) from time to time, such other information concerning the Company and the
Trust as the Remarketing Agent may reasonably request.
(c) The Company and the Trust will provide the Remarketing Agent
with such certificates, opinions of counsel, accountants' letters and other
support for the information contained in any Disclosure Documents as the
Remarketing Agent and its counsel may reasonably request.
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<PAGE> 21
(d) If the Registration Statement is filed with the Commission,
the Company and the Trust agree that they will:
(i) prepare the Registration Statement in conformity with the
requirements of the Securities Act and the Rules and Regulations;
(ii) cause the Registration Statement to become effective prior
to the Tender Notification Date (or such later date as may be permitted
in accordance with the provisions of Section 2(b));
(iii) prepare the Prospectus in a form approved by the
Remarketing Agent and file the Prospectus in accordance with Rule 424(b)
(or any successor applicable rule) under the Securities Act and Rule
430A(a)(3) (or any successor applicable rule) under the Securities Act;
make no further amendment or any supplement to the Registration
Statement or to the Prospectus except as permitted herein; advise the
Remarketing Agent, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and furnish the Remarketing Agent with copies
thereof; advise the Remarketing Agent, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus, of the suspension of the qualification of the securities
covered by such Registration Statement for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, promptly use its reasonable best efforts to obtain its
withdrawal;
(iv) furnish promptly to the Remarketing Agent and to counsel for
the Remarketing Agent a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed
therewith;
(v) deliver promptly to the Remarketing Agent such number of the
following documents as the Remarketing Agent shall reasonably request:
(1) conformed copies of the Registration Statement as originally filed
with the Commission and each amendment thereto (in each case excluding
exhibits) and (2) each Preliminary Prospectus, the Prospectus and any
amended or supplemented Prospectus; and, if the delivery of a Prospectus
is required at any time
21
<PAGE> 22
after the Effective Time in connection with the offering or sale of the
securities covered by the Registration Statement and if at such time any
events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary to amend or supplement the
Prospectus in order to comply with the Securities Act, notify the
Remarketing Agent and, upon its request, prepare and furnish without
charge to the Remarketing Agent as many copies as the Remarketing Agent
may from time to time reasonably request of an amended or supplemented
Prospectus which will correct such statement or omission or effect such
compliance;
(vi) file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Trust, the Company or the
Remarketing Agent, be required by the Securities Act or requested by the
Commission;
(vii) prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 (or any applicable successor rule) of the Rules and
Regulations, furnish a copy thereof to the Remarketing Agent and counsel
for the Remarketing Agent;
(viii) as soon as practicable after the Effective Time, make
generally available to the Trust's and the Company's security holders
and deliver to the Remarketing Agent an earnings statement of the
Company and its subsidiaries (which need not be audited) complying with
Section 11(a) (or any applicable successor section) of the Securities
Act and the Rules and Regulations (including, at the option of the
Company, Rule 158 (or any applicable successor rule));
(ix) promptly from time to time take such action as the
Remarketing Agent may request to qualify the securities covered by the
Registration Statement for offering and sale under the securities laws
of such jurisdictions as the Remarketing Agent may request and to take
all steps necessary to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Subject
Securities; provided, however, that in connection therewith the Trust or
the Company will not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction
where it is not so qualified; and
22
<PAGE> 23
(x) use its best effort to have the Subject Securities listed on
any securities exchange or quoted in any automated inter-dealer
quotation system reasonably requested by the Remarketing Agent.
7. Indemnification. (a) The Company and the Trust will indemnify
and hold harmless the Remarketing Agent its partners, directors and officers and
each person, if any, who controls such Remarketing Agent within the meaning of
Section 15 of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Remarketing Agent may become
subject, under the Securities Act or the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Disclosure Document, or any amendment or
supplement thereto, or any Exchange Act Report or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein not misleading, in the light of the
circumstances under which they were made, and will reimburse the Remarketing
Agent for any legal or other expenses reasonably incurred by the Remarketing
Agent in connection with investigating or defending any such loss, claim, damage
liability or action as such expenses are incurred; provided, however, that the
Company and the Trust will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any Disclosure Document in reliance upon and in conformity with written
information furnished to the Company and the Trust by the Remarketing Agent
specifically for use therein.
(b) The Remarketing Agent will indemnify and hold harmless the
Company and the Trust and their respective directors, officers and trustees and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, against any losses, claims, damages or liabilities to
which the Company or the Trust may become subject, under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Disclosure Documents, or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or the Trust by the
Remarketing Agent specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Company or the Trust in connection
with investi-
23
<PAGE> 24
gating or defending any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under subsection (a) or (b) above. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes (i) an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action and (ii) does
not include a statement as to, or an admission of, fault, culpability or a
failure to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Remarketing Agent on the other from the
Remarketing of the Subject Securities in accordance with this Agreement or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Remarketing Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Remarketing
Agent on the other shall be deemed to be in the same
24
<PAGE> 25
proportion as the aggregate outstanding Liquidation Amount (if the Subject
Securities are HIGH TIDES) or principal amount (if the Subject Securities are
Debentures) bear to the fees received by the Remarketing Agent from the Company
under this Agreement. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Remarketing Agent and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), the
Remarketing Agent shall not be required to contribute any amount in excess of
the amount by which the aggregate outstanding Liquidation Amount (if the Subject
Securities are HIGH TIDES) or principal amount (if the Subject Securities are
Debentures) of the Subject Securities remarketed exceeds the amount of any
damages which the Remarketing Agent has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
(e) The obligations of the Company and the Trust under this
Section shall be in addition to any liability which the Company and the Trust
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Remarketing Agent within the meaning of the
Securities Act or the Exchange Act; and the obligations of the Remarketing Agent
under this Section shall be in addition to any liability which the Remarketing
Agent may otherwise have and shall extend, upon the same terms and conditions,
to each person, if any, who controls the Company or the Trust within the meaning
of the Securities Act or the Exchange Act.
8. Remarketing Agent's Liabilities. The Remarketing Agent shall
incur no liability to the Company, the Debenture Trustee, the Property Trustee,
the Administrative Trustees, the Delaware Trustee, the Tender Agent or any
holder of Subject Securities for its actions as Remarketing Agent pursuant to
the terms hereof and of the Trust Agreement or Indenture without gross
negligence or in the absence of wilful misconduct. The undertaking of the
Remarketing Agent to remarket any Subject Securities shall be on a "best
efforts" basis.
9. Termination. This Agreement will terminate upon the earliest
to occur of the following: (i) the written agreement of all parties hereto; (ii)
the date that no Debenture is outstanding; and (iii) the day immediately
following the Reset Date. The provisions of Sections 7, 8, 11 and 12 hereof will
continue in effect as to actions
25
<PAGE> 26
prior to the date of termination, and each party will pay to the others any
amounts owing at the time of termination.
10. Resignation and Removal; Appointment of Successor. (a) The
Remarketing Agent may resign at any time hereunder by giving at least 30 days'
written notice thereof to the Company and the Tender Agent. No successor need
have accepted its appointment for such resignation to be effective.
(b) The Remarketing Agent may be removed at any time for Cause by
the holders of a majority in aggregate Par Amount of the Subject Securities
outstanding, by written notice to the Remarketing Agent, the Tender Agent and
the Company. No successor need have accepted its appointment for such removal to
be effective.
(c) If the Remarketing Agent resigns or is removed in accordance
with Section 10(b), the Company will use its best efforts to appoint as the
successor Remarketing Agent hereunder an investment bank, broker, dealer or
other organization which, in the judgment of the Company, is qualified to
remarket the Subject Securities and to establish the Term Provisions. If the
Company fails to so appoint a successor Remarketing Agent reasonably promptly,
in light of the proximity of the Tender Notification Date, or if such successor
fails to accept such appointment, the holders of not less than 25% in aggregate
Par Amount of the Subject Securities outstanding, by written notice to the
Tender Agent and the Company, may appoint a successor Remarketing Agent which is
an investment bank, broker, dealer or other organization qualified to remarket
the Subject Securities and to establish the Term Provisions; provided that for
purposes of determining the holders of not less than 25% in aggregate Par Amount
of the Subject Securities outstanding, Subject Securities owned by the Company,
the Trust or any trustee or administrator of the Trust or any affiliate of any
of the foregoing shall be disregarded and deemed not to be outstanding.
(d) A successor Remarketing Agent shall accept its appointment by
executing and delivering a written instrument of acceptance to the Tender Agent
and the Company.
(e) The provisions of Sections 7, 8, 11 and 12 hereof will
continue in effect as to actions of the Remarketing Agent prior to the date of
resignation or removal, and the Remarketing Agent will pay to and have the right
to receive from the other parties hereto any amounts owing at the time of such
event.
(f) The Tender Agent shall provide written notice of each
resignation and each removal of the Remarketing Agent and each appointment of a
successor Remarketing Agent and such successor's acceptance thereof by
first-class mail, postage
26
<PAGE> 27
prepaid, to the holders of the Subject Securities as their names and addresses
appear in the applicable register.
(g) Any corporation or other entity into which the Remarketing
Agent may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Remarketing Agent may be a party, or any corporation succeeding to all or
substantially all of the business of the Remarketing Agent, shall be the
successor of the Remarketing Agent hereunder, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
11. Dealing in Subject Securities by Remarketing Agent. The
Remarketing Agent, either as principal or agent, may buy, sell, own, hold and
deal in Subject Securities, and may join in any action which any owner of the
Subject Securities may be entitled to take with like effect as if it did not act
in any capacity hereunder. Except as provided in the next succeeding sentence,
the Remarketing Agent is under no obligation at any time to purchase Subject
Securities. If the Term Rate is established by the Remarketing Agent but on the
Reset Date the Remarketing Agent is unable to consummate the sale of one or more
Subject Securities tendered for remarketing, the Remarketing Agent shall
purchase such Subject Securities on the Reset Date for 101% of their aggregate
Par Amount; provided, however, that the Remarketing Agent shall have no
obligation to purchase such Subject Securities in the event of a Failed
Remarketing. The Remarketing Agent agrees that the purchase of Subject
Securities for its own account or the account of its affiliates will be upon
terms no more favorable to it than those pertaining to the purchase of Subject
Securities in the market (which shall be determined by the Remarketing Agent in
its sole discretion) in general at the time of such purchase and that neither it
nor its affiliates will elect to retain Subject Securities on the Reset Date if
the Subject Securities could be remarketed pursuant to this Agreement on terms
more favorable to the Trust or the Company than the terms upon which the
Remarketing Agent or such affiliates would continue to hold it. The Remarketing
Agent, either as principal or agent, may also engage in or be interested in any
financial or other transaction with the Trust or the Company and may act as
depository, trustee or agent for any committee or body of owners of Subject
Securities or other obligations of the Trust or the Company as freely as if it
had no obligations hereunder or under the Trust Agreement or Indenture.
12. Records. The Remarketing Agent agrees to keep books and
records relating to its activities as Remarketing Agent in accordance with
standard industry practice.
27
<PAGE> 28
13. Purchase and Sales by Company. While the Company and its
affiliates may from time to time purchase, hold and sell Subject Securities, the
Company and the Remarketing Agent acknowledge that neither the Company nor any
affiliate of the Company may acquire or bid to acquire Subject Securities on the
Reset Date or submit orders in the Remarketing. The Remarketing Agent agrees
that it will not knowingly remarket any Subject Securities to the Company or any
of its affiliates.
14. Communication of Remarketing Conditions. The Remarketing
Agent agrees, upon request from time to time by any holder of Subject Securities
and to the extent the Remarketing Agent deems advisable, to advise such holder
of current Remarketing Conditions.
15. Notices. Unless otherwise provided herein, all notices,
requests, demands and formal actions hereunder shall be in writing and mailed or
sent by facsimile transmission or delivered, as follows:
If to the Company:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Secretary
Telephone: (408) 995-5115
Telecopy: (408) 995-0505
If to the Tender Agent:
The Bank of New York, as Tender Agent
101 Barclay Street
Floor 21 West
New York, New York 10286
Telephone: (212) 815-5783
Telecopy: (212) 815-5915
28
<PAGE> 29
If to the Trust:
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Secretary
Telephone: (408) 995-5115
Telecopy: (408) 995-0505
If to the Remarketing Agent:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Attention: Transactions Advisory Group - Joseph D. Fashano
Telephone: (212) 325-2107
Telecopy: (212) 325-4296
Each of the above parties may, by written notice given hereunder
to the others, designate any further or different addresses or telecopier
numbers to which subsequent notices, certificates, requests or other
communications shall be sent. In addition, the parties hereto may agree to any
other means by which subsequent notices, certificates, requests or other
communications may be sent.
16. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by, the respective successors and
assigns of the Company, the Trust, the Tender Agent, the Remarketing Agent and
the holders of the Subject Securities.
17. The Tender Agent. In serving as the Tender Agent hereunder,
the Debenture Trustee shall be entitled to the protections and benefits of
Sections 6.01(d), 6.03, 6.06 and 12.07 of the Indenture and the Property Trustee
shall be entitled to the protections and benefits of Sections 3.09, 3.10 and
10.04 of the Trust Agreement.
18. Entire Agreement. Except as otherwise provided herein, this
Agreement contains the entire agreement between the parties relating to the
subject matter hereof, and there are no other representations, endorsements,
promises, agreements or understandings, oral, written or inferred, among the
parties.
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<PAGE> 30
19. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
20. Amendment; Waiver. (a) This Agreement shall not be deemed or
construed to be modified, amended, rescinded, canceled or waived, in whole or in
part, except by a written instrument signed by a duly authorized representative
of each of the Company, the Tender Agent, the Administrative Trustees and the
Remarketing Agent.
(b) Failure of any party to exercise any right or remedy under
this Agreement in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
21. Severability. If any clause, provision or section of this
Agreement shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any of the remaining clauses, provisions or sections
hereof.
22. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
shall constitute but one and the same instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart signed by the party against which enforcement of this Agreement is
sought.
23. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
CALPINE CORPORATION
By:
---------------------------------
Name:
Title:
CALPINE CAPITAL TRUST II
By:
---------------------------------
Name:
Title: Administrative Trustee
THE BANK OF NEW YORK, as Tender Agent,
By:
---------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
CORPORATION,
By:
---------------------------------
Name:
Title:
31
<PAGE> 1
EXHIBIT 4.8.5
CALPINE CAPITAL TRUST II
UP TO 7,200,000 HIGH TIDES
5 1/2% Convertible Preferred Securities
Remarketable Term Income Deferrable Equity Securities (HIGH TIDES)
(Liquidation Preference $50 per HIGH TIDES)
Guaranteed to the extent set forth in the
Preferred Securities Guarantee Agreement
by, and convertible into
Common Stock of,
Calpine Corporation
REGISTRATION RIGHTS AGREEMENT
January 31, 2000
Credit Suisse First Boston Corporation
ING Barings LLC
Acting on behalf of itself and
the several Purchasers
pursuant to the Purchase Agreement
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Dear Sirs:
Calpine Capital Trust II, a statutory business trust formed under the laws of
the State of Delaware (the "Trust") by, inter alia, Calpine Corporation, a
Delaware corporation (the "Company"), proposes to issue and sell (the "Initial
Placement") to Credit Suisse First Boston Corporation and the other initial
purchasers (collectively, the "Purchasers") named in Schedule A to the Purchase
Agreement dated January 31, 2000 (the "Purchase Agreement"), among the
Purchasers, the Company and the
<PAGE> 2
Trust, upon the terms set forth in the Purchase Agreement, up to 6,000,000 (or
up to 7,200,000 to the extent the option granted by the Trust to the Purchasers
pursuant to the Purchase Agreement is exercised in full) of its Remarketable
Term Income Deferrable Equity Securities (HIGH TIDES)_, liquidation preference
$50 per security (the "Preferred Securities"). The proceeds of the sale by the
Trust of the Preferred Securities and the Common Securities of the Trust,
liquidation preference $50 per Common Security (the "Common Securities"), are to
be invested in the Convertible Subordinated Debentures due 2030 of the Company
issued pursuant to the Indenture dated January 31, 2000 between the Company and
The Bank of New York, as Trustee (the "Debentures") having an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Securities and the Common Securities. As an inducement to you to enter into the
Purchase Agreement and in satisfaction of a condition to your obligations
thereunder, the Trust and the Company agree with you, (i) for the benefit of the
Purchasers and (ii) for the benefit of the registered holders, including the
Purchasers (each of the foregoing a "Holder" and together the "Holders"), from
time to time of the Preferred Securities, the Debentures and the Common Stock of
Calpine Corporation, par value $.001 per share (such Common Stock being referred
to as the "Common Stock"), of the Company issuable upon conversion of the
Debentures, for which the Preferred Securities are exchangeable, as follows:
1. Definitions. Capitalized terms used herein without definition shall
have their respective meanings set forth in or pursuant to the Purchase
Agreement or, if not defined therein, in the Offering Circular dated January 25,
2000, in respect of the Preferred Securities or, if not defined therein, in the
Amended and Restated Declaration of Trust dated as of January 31, 2000 (the
"Declaration") relating to the Trust. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"Act" or "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such specified person. For purposes of this definition, control of a
person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such person whether by contract or otherwise; the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Rate" means the rate at which the Preferred Securities accrue
distributions and the Debentures accrue interest. The Applicable Rate shall be
2
<PAGE> 3
5.50% per annum from the date of original issuance of the Preferred Securities
to (but excluding) the Reset Date. From the Reset Date, the Applicable Rate will
be the Term Rate established by the Remarketing Agent to be effective on the
Reset Date. The Applicable Rate will be increased upon the occurrence of a
Registration Default, as set forth in Section 7(a) hereof.
"Business Day" means any day other than (i) a Saturday or Sunday,
(ii) a day on which banking institutions in The City of New York are authorized
or required by law to close or (iii) a day on which the corporate trust office
of the Debenture Trustee or the Property Trustee is closed for business.
"Closing Date" has the meaning given such term in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in the first paragraph
to this Agreement.
"Company" has the meaning set forth in the first paragraph to
this Agreement.
"Debentures" has the meaning set forth in the first paragraph to
this Agreement.
"Debenture Trustee", "Guarantee Trustee" and "Property Trustee"
each means The Bank of New York.
"Effectiveness Deadline" means the 150th day following the
Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Filing Deadline" means the 60th day following the Closing Date.
"Guarantee" means the guarantee by the Company of the Preferred
Securities pursuant to a Guarantee Agreement dated as of January 31, 2000
between the Company and the Guarantee Trustee.
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"Holder" and "Holders" each has the meaning set forth in the
first paragraph to this Agreement.
"Initial Placement" has the meaning set forth in the first
paragraph to this Agreement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering,
if any, as set forth in Section 6 hereof.
"Preferred Securities" has the meaning set forth in the first
paragraph to this Agreement.
"Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act), with
respect to the terms of the offering of any portion of the Securities covered by
such Shelf Registration Statement, as amended or supplemented by all amendments
(including post-effective amendments) and supplements to the Prospectus.
"Purchase Agreement" has the meaning set forth in the first
paragraph to this Agreement.
"Purchasers" has the meaning set forth in the first paragraph to
this Agreement.
"Registrable Securities" has the meaning specified in the
Indenture.
"Registration Default" has the meaning given to such term in
Section 7(a) hereof.
"Remarketing Agent" has the meaning specified in the Indenture.
"Reset Date" means February 1, 2005 (or, if such day is not a
Business Day, the next succeeding Business Day), or such earlier day as may be
determined by the Remarketing Agent, in its sole discretion, for settlement of a
successful remarketing.
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<PAGE> 5
"Securities" means the Preferred Securities, the Debentures, the
Common Stock and the Guarantee, individually and collectively.
"Shelf Registration" means a registration effected pursuant to
Section 2 hereof.
"Shelf Registration Period" has the meaning set forth in Section
2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement filed under the Securities Act on an appropriate form providing for
the registration of, and the sale on a continuous or delayed basis by the
Holders of, all of the Registrable Securities pursuant to Rule 415 under the
Securities Act and/or any similar rule that may be adopted by the Commission,
filed by the Company and the Trust pursuant to the provisions of Section 2 of
this Agreement, including the Prospectus contained therein, any amendments and
supplements to such registration statement, including post-effective amendments,
and all exhibits and all material incorporated by reference in such registration
statement.
"Suspension Period" has the meaning set forth in Section 7(b)
hereof.
"Term Rate" means the rate established by the Remarketing Agent
(as defined in the Indenture) in connection with the Remarketing (as defined in
the Indenture) at which interest will accrue on the Debentures and distributions
will accrue on the Preferred Securities on and after the Reset Date.
"Trust" has the meaning set forth in the first paragraph to this
Agreement.
"Trustee" means the Guarantee Trustee, the Debenture Trustee or
the Property Trustee, as applicable.
"Underwriter" means any underwriter of Securities in connection
with an offering thereof under a Shelf Registration Statement.
2. Shelf Registration. (a) The Trust and the Company shall as promptly as
practicable prepare and, not later than the Filing Deadline, shall file with the
Commission and thereafter shall each use their best efforts to cause to be
declared effective under the Act as soon as practicable, but in no event later
than the Effectiveness Deadline, a Shelf Registration Statement relating to the
offer and sale of the Securities by the Holders from time to time in accordance
with the methods of
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<PAGE> 6
distribution elected by such Holders and set forth in such Shelf Registration
Statement; provided, however, that no Holder (other than a Purchaser) shall be
entitled to have the Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(1) The Trust and the Company shall each use its best efforts
(1) to keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus included therein to
be lawfully delivered by the Holders of the relevant Securities,
for a period of two years (or for such other period as shall be
required under Rule 144(k) of the Securities Act or any successor
rule thereto) from the date of its effectiveness or such shorter
period that will terminate upon the earlier of the following (in
any such case, such period being called the "Shelf Registration
Period"):
(A) when all the Preferred Securities covered by the Shelf
Registration Statement have been sold pursuant to the
Shelf Registration Statement,
(B) when all Debentures issued to Holders in respect of
Preferred Securities that had not been sold pursuant to
the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement, or
(C) when all shares of Common Stock issued upon conversion
of any such Preferred Securities or any such Debentures
that had not been sold pursuant to the Shelf Registration
Statement have been sold pursuant to the Shelf
Registration Statement and
(2) during the Shelf Registration Period, promptly upon
the request of any Holder to take any action reasonably necessary
to register the sale of any Securities of such Holder and to
identify such Holder as a selling securityholder.
The Trust and the Company shall be deemed not to have used their best
efforts to keep the Shelf Registration Statement effective during the Shelf
Registration Period if they voluntarily take any action that would result in
Holders of
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<PAGE> 7
Securities covered thereby not being able to offer and sell such Securities
during such period, unless such action is required by applicable law.
(2) Notwithstanding any provisions of this Agreement to the
contrary, the Trust and the Company shall cause the Shelf Registration Statement
and the related Prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or supplement, (i)
to comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission and (ii) not to
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3. Registration Procedures. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(1) The Trust and the Company shall furnish to (i) the
Purchasers, and (ii) any other Holders who so request, and their respective
counsel and accountants, prior to the filing thereof with the Commission, a copy
of any Shelf Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included therein and shall
each use its best efforts to reflect in each such document, when so filed with
the Commission, such comments as the Purchasers and such other Holders
reasonably may propose.
(2) The Trust and the Company shall give written notice to the
Purchasers and the Holders:
(1) when the Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when the
Shelf Registration Statement or any post-effective amendment
thereto has become effective; and
(2) of any written request by the Commission for
amendments or supplements to the Shelf Registration Statement or
the Prospectus included therein or for additional information.
(3) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement
or the initiation of any proceedings for that purpose;
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<PAGE> 8
(4) of the receipt by the Trust or the Company of any
notification with respect to the suspension of the qualification
of the Securities included therein for sale in any state or the
initiation or threatening of any proceeding for such purpose; and
(5) of the happening, during the Shelf Registration
Period, of any event that requires the making of any changes in
the Shelf Registration Statement or the Prospectus so that, as of
such date, the Registration Statement and the Prospectus do not
contain an untrue statement of a material fact and do not omit to
state a material fact required to be stated therein or necessary
to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading (which advice shall be accompanied by an instruction
to suspend the use of the Prospectus until the requisite changes
have been made).
(3) Each of the Trust and the Company shall use its best efforts
to prevent the issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of any Shelf Registration Statement at the earliest
possible time.
(4) The Trust and the Company shall furnish to each Purchaser and
each requesting Holder of Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendment thereto (including, to
any such Purchaser or Holder who so requests, any reports or other documents
incorporated therein by reference), including financial statements and schedules
included therein, and, if such Holder so requests, all exhibits (including those
incorporated by reference).
(5) The Trust and the Company shall, during the Shelf
Registration Period, deliver to each Holder of Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and each of the Trust and the Company consents to the
use, in accordance with the terms of this Agreement, of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of Securities in
connection with the offering and sale of the Securities covered by the
Prospectus or any amendment or supplement thereto during the Shelf Registration
Period.
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<PAGE> 9
(6) Prior to any offering of Securities pursuant to any Shelf
Registration Statement, the Trust and the Company shall register or qualify, or
shall cooperate with the Holders of Securities included therein and their
respective counsel in connection with the registration or qualification of, such
Securities for offer and sale under the securities or blue sky laws of such
states as any such Holders reasonably request in writing and do any and all
other acts or things necessary or advisable to enable the offer and sale in such
states of the Securities covered by such Shelf Registration Statement; provided,
however, that neither the Trust nor the Company will be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
(7) Unless the applicable Securities shall be in book-entry only
form, the Trust and the Company shall cooperate with the Holders of Securities
to facilitate the timely preparation and delivery of certificates representing
Securities to be sold pursuant to any Shelf Registration Statement free of any
restrictive legends and in such permitted denominations and registered in such
names as Holders may request in connection with the sale of Securities pursuant
to such Shelf Registration Statement.
(8) Upon the occurrence of any event contemplated by paragraphs
(ii) through (v) of Section 3(b) above (other than a request by the Commission
solely for additional information as referred to in Section 3(b)(ii) and unless
directed otherwise by the Commission), the Trust and the Company shall promptly
prepare and file a post-effective amendment to any Shelf Registration Statement
or an amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to Holders or purchasers of
the Securities included therein, the Prospectus will not contain an 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 the light of the
circumstances under which they were made, not misleading. If the Company or the
Trust notifies the Purchasers or the Holders of the Securities in accordance
with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
Prospectus until the requisite changes to the Prospectus have been made, then
the Purchasers and the Holders of the Securities shall suspend use of the
Prospectus for such time.
(9) Not later than the effective date of any Shelf Registration
Statement hereunder, the Trust and the Company shall provide a CUSIP number for
the Preferred Securities (and, in the event of and at the time of any
distribution thereof to Holders, the Debentures,) registered under such Shelf
Registration
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<PAGE> 10
Statement, and provide the applicable Trustee with certificates for such
Securities, in a form eligible for deposit with The Depository Trust Company.
(10) The Trust and the Company shall use their best efforts to
comply with all applicable rules and regulations of the Commission and shall
make generally available to their security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) as soon as practicable
after the effective date of the applicable Shelf Registration Statement an
earning statement satisfying the provisions of Section 11(a) of the Securities
Act, but in no event later than 45 days after the end of a 12-month period (or
90 days, if such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(11) The Trust and the Company shall cause the Indenture, the
Declaration and the Guarantee to be qualified under the Trust Indenture Act in a
timely manner and containing such changes, if any, as shall be necessary for
such qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, Declaration or Guarantee, the
Company or Trust (as applicable) shall appoint a new trustee thereunder pursuant
to the applicable provisions of such agreement.
(12) The Trust and the Company may require each Holder of
Securities to be sold pursuant to any Shelf Registration Statement as a
condition to the registration of such Holder's Securities thereunder to furnish
to the Trust and the Company such information regarding the Holder and the
distribution of such Securities as the Trust and the Company may from time to
time reasonably require for inclusion in such Shelf Registration Statement. Each
Holder who offers and sells Securities by means of the Shelf Registration
Statement shall do so in accordance with the terms thereof and the requirements
of the Securities Act.
(13) The Trust and the Company shall, if requested, promptly
incorporate in a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters, if any,
reasonably agree should be included therein and to which the Trust and the
Company do not reasonably object and shall make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
they are notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
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<PAGE> 11
(14) The Trust and the Company shall enter into such customary
agreements (including underwriting agreements in customary form) to take all
other appropriate actions in order to expedite or facilitate the registration or
the disposition of the Securities, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures substantially identical to those set
forth in Section 5 hereof (or such other customary provisions and procedures
acceptable to the Managing Underwriters, if any) with respect to all parties to
be indemnified pursuant to Section 5 hereof.
(15) The Trust and the Company shall (i) make reasonably
available for inspection by the Holders of Securities to be registered
thereunder, any underwriter participating in any disposition pursuant to such
Shelf Registration Statement, and any attorney, accountant or other agent
retained by such Holders or any such underwriter, all relevant financial and
other records, pertinent corporate documents and properties of the Trust and the
Company and its subsidiaries as shall be requested in connection with the
discharge of their due diligence obligations; (ii) cause the Company's officers,
directors, employees and independent public accountants and any relevant
Trustees to supply at the Company's expense all relevant information reasonably
requested by such Holders or any such underwriter, attorney, accountant or agent
in connection with any such Shelf Registration Statement as is customary for
similar due diligence examinations; provided, however, that any information that
is designated in writing by the Trust and the Company in good faith as
confidential at the time of delivery of such information shall be kept
confidential by such Holders or any such underwriter, attorney, accountant or
agent, unless such disclosure is made in connection with a court proceeding or
required by law, or such information becomes available to the public generally
or through a third party without an accompanying obligation of confidentiality;
and provided further that the foregoing inspection and information gathering
shall be coordinated on behalf of the Holders and the other parties entitled
thereto by one counsel who shall be Skadden, Arps, Slate, Meagher & Flom LLP
unless another nationally-recognized law firm with specialization in securities
laws shall be chosen by the Company; (iii) make such representations and
warranties to the Holders of Securities registered thereunder and the
underwriters, if any, in form, substance and scope as are customarily made by
the issuers to underwriters in primary underwritten offerings and covering
matters as are customarily covered in representations and warranties requested
in primary underwritten offerings including, but not limited to, those set forth
in the Purchase Agreement; (iv) obtain opinions of counsel to the Trust and the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters, if
any) addressed to each
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<PAGE> 12
selling Holder and the underwriters, if any, thereof and dated, in the case of
the initial opinion, the effective date of such Shelf Registration Statement (it
being agreed that the matters to be covered by such opinion shall include,
without limitation, the due incorporation and good standing of the Trust, the
Company and its Subsidiaries; the due authorization, execution and delivery of
the relevant agreement of the type referred to in Section 3(n) hereof; the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the applicable Securities; the absence of material legal or
governmental proceedings involving the Trust, the Company and its Subsidiaries;
the absence of governmental approvals required to be obtained in connection with
the Shelf Registration Statement, the offering and sale of the applicable
Securities, or any agreement of the type referred to in Section 3(n) hereof; the
compliance as to form of such Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture, the Declaration and the
Guarantee with the requirements of the Securities Act and the Trust Indenture
Act; and, as of the date of the opinion and as of the effective date of the
Shelf Registration Statement or most recent post-effective amendment thereto, as
the case may be, that such counsel do not believe that such Shelf Registration
Statement and the prospectus included therein, as then amended or supplemented,
and any documents incorporated by reference therein contain an untrue statement
of a material fact or omit to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of any such documents, in the light of the circumstances existing at
the time that such documents were filed with the Commission under the Exchange
Act); (v) cause its officers to execute and deliver all customary documents and
certificates and updates thereof requested by such Holders and any underwriters
of the applicable Securities and (vi) cause its independent public accountants
and the independent public accountants with respect to any other entity for
which financial information is provided in the Shelf Registration Statement to
provide to the Holders of the applicable Securities and any underwriter therefor
a comfort letter in customary form and covering matters of the type customarily
covered in comfort letters in connection with primary underwritten offerings,
subject to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72. The foregoing actions set
forth in clauses (iii), (iv), (v) and (vi) of this Section 3(o) shall be
performed at (A) the effectiveness of such Shelf Registration Statement and each
post-effective amendment thereto and (B) each closing under any underwritten
offering of the Securities to the extent required under any related underwriting
or similar agreement.
(16) Each of the Trust and the Company will use its best efforts to cause
the Common Stock relating to such Shelf Registration Statement to be listed
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<PAGE> 13
on each securities exchange, over-the-counter market, or respective counterpart
if any, on which any shares of Common Stock are then listed.
(17) The Trust and the Company shall, in the event that any
broker-dealer registered under the Exchange Act shall underwrite any Securities
or participate as a member of an underwriting syndicate or selling group or
"assist in the distribution" (within the meaning of the Rules of Fair Practice
and the By-Laws of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as a Holder of such Securities or as an underwriter,
a placement or sales agent or a broker or dealer in respect thereof, or
otherwise, assist such broker-dealer in complying with the requirements of such
Rules and By-Laws, including, without limitation, by (A) if such Rules or
By-Laws, including Rule 2720, shall so require, engaging a "qualified
independent underwriter" (as defined in Rule 2720) to participate in the
preparation of the Shelf Registration Statement relating to such Securities, to
exercise usual standards of due diligence in respect thereto and, if any portion
of the offering contemplated by such Shelf Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof and (C) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply with
the requirements of the Rules of Fair Practice of the NASD.
(18) The Trust and the Company shall use their best efforts to
take all other steps necessary to effect the registration, offering and sale of
the Securities covered by the Shelf Registration Statement contemplated hereby.
4. Registration Expenses. (a) All expenses incident to the
Company's and the Trust's performance of and compliance with this Agreement will
be borne by the Company, regardless of whether a Shelf Registration Statement is
ever filed or becomes effective, including without limitation;
(1) all registration and filing fees and expenses;
(2) all fees and expenses of compliance with federal
securities and state "blue sky" or securities laws;
(3) all expenses of printing (including printing
certificates for the Securities without the Restrictive Legend to
be issued and printing of Prospectuses), messenger and delivery
services and telephone;
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<PAGE> 14
(4) all fees and disbursements of counsel for the Company
and the Trust;
(5) all application and filing fees in connection with
listing the Securities on a national securities exchange or
automated quotation system pursuant to the requirements hereof;
and
(6) all fees and disbursements of independent certified
public accountants of the Company and the Trust (including the
expenses of any special audit and comfort letters required by or
incident to such performance).
The Company and the Trust will bear their internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any person, including special experts,
retained by the Company or the Trust.
(2) In connection with any Shelf Registration Statement required
by this Agreement, the Company and the Trust will reimburse the Purchasers and
the Holders who are selling or reselling Securities pursuant to the Shelf
Registration Statement for the reasonable fees and disbursements of not more
than one counsel, who shall be Skadden, Arps, Slate, Meagher & Flom LLP unless
another nationally-recognized law firm with specialization in securities laws
shall be chosen by the Company.
5. Indemnification and Contribution. (a) In connection with any Shelf
Registration Statement, the Trust and the Company, jointly and severally, agree
to indemnify and hold harmless the Purchasers, each Holder of Securities covered
thereby (including the Purchasers), their respective partners, directors, and
officers and each person, if any, who controls the Purchasers or any such Holder
within the meaning of Section 15 of the Securities Act (each Purchaser, Holder
and such controlling persons are referred to collectively as the "Indemnified
Parties") against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including, but not limited to, any losses,
claims, damages, liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of
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<PAGE> 15
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement as originally filed or in any
amendment or supplement thereof, or in any preliminary Prospectus or Prospectus,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in the light of the circumstances under which they were made, and shall
reimburse each such Indemnified Party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that (i) the Company and the Trust will not be liable in any case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchasers or any
such Holder specifically for inclusion therein and (ii) the foregoing indemnity,
with respect to any untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary Prospectus relating to a Shelf
Registration Statement, shall not inure to the benefit of any Holder (or any
person controlling such Holder) from whom the person asserting any such losses,
claims, damages or liabilities purchased the Securities concerned, to the extent
that a Prospectus relating to such Securities was required to be delivered by
such Holder under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Securities to such person, a copy of the final
Prospectus if the Company had previously furnished copies thereof to such Holder
at or prior to the written confirmation of the sale of such Securities to such
person and the untrue statement or alleged untrue statement or omission or
alleged omission contained in the preliminary prospectus was corrected in the
final prospectus (or the final prospectus as supplemented). This indemnity
agreement will be in addition to any liability which the Company or the Trust
may otherwise have.
The Trust and the Company, jointly and severally, shall also
indemnify underwriters, their officers, directors and each person who controls
such underwriters within the meaning of the Securities Act or the Exchange Act
to the same extent as provided above with respect to the indemnification of the
Holders of the Securities and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 3(n)
and Section 6 hereof.
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(1) Each Holder of Securities covered by a Shelf Registration
Statement (including the Purchasers) severally, and not jointly, agrees to
indemnify and hold harmless (i) the Trust and the Company, (ii) each of the
directors of the Company, (iii) each of its officers who signs such Shelf
Registration Statement and (iv) each person who controls the Trust or the
Company within the meaning of either the Securities Act or the Exchange Act to
the same extent as the foregoing indemnity from the Trust and the Company, but
only in respect of written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(2) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability it may have to any indemnified party otherwise than under
paragraph (a) or (b) above. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of such
indemnified party, be counsel to the indemnifying party), and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action and does not include a statement as
to or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(3) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b)
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above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the Initial Placement and the Shelf
Registration Statement, or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Trust or the Company on the
one hand or such Holder or such other indemnified party, as the case may be, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to
the Shelf Registration Statement exceeds the amount of damages which such
Holders have otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Trust or the Company
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as the Trust and the Company.
(4) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
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<PAGE> 18
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Underwritten Offering. If, pursuant to written notice delivered to
the Company by the Holders of a majority in aggregate liquidation amount of the
Preferred Securities, a majority in aggregate principal amount of the Debentures
or a majority of holders of the Common Stock, as the case may be, registered
pursuant to a Shelf Registration, such Holders so elect, the offer and sale of
any such Preferred Securities, Debentures and/or Common Stock may be effected in
the form of an underwritten offering. In any such underwritten offering, the
investment banker or bankers and manager or managers that will administer the
offering will be selected by, and the underwriting arrangements with respect
thereto will be approved by, the Company; provided, however, that such
investment bankers and managers and underwriting arrangements must be reasonably
satisfactory to the Holders of a majority of the Securities to be included in
such offering. No Holder may participate in any underwritten offering
contemplated hereby unless such Holder (a) agrees to sell such Holder's
Securities in accordance with any approved underwriting arrangements, and (b)
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such approved underwriting arrangements.
7. Changes to the Applicable Rate Under Certain Circumstances. (a) The
Applicable Rate at which interest is paid on the Debentures (including in
respect of amounts accruing during any Deferral Period), and distributions are
paid on the Preferred Securities shall be adjusted as follows, if any of the
following events occur (each such event in clauses (i) through (iii) below, a
"Registration Default"):
(1) if a Shelf Registration Statement is not filed with
the Commission on or prior to the Filing Deadline;
(2) if the Shelf Registration Statement is not declared
effective by the Commission on or prior to the Effectiveness
Deadline;
(3) if (A) after the Shelf Registration Statement is
declared effective, such Shelf Registration Statement ceases
to be effective prior to the end of the Shelf Registration
Period or (B) such Shelf Registration Statement or the related
Prospectus ceases to be usable in connection with resales of
Securities covered by such Shelf Registration Statement prior
to the end of the Shelf Registration Period be-
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<PAGE> 19
cause either (1) any event occurs as a result of which the
related Prospectus forming part of such Shelf Registration
Statement would include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances in which
they were made not misleading or (2) it shall be necessary to
amend such Shelf Registration Statement, or supplement the
related Prospectus, to comply with the Securities Act or the
Exchange Act or the respective rules thereunder.
Each of the foregoing will constitute a Registration Default
whatever the reason for any such event and whether it is voluntary or
involuntary or is beyond the control of the Company or pursuant to operation of
law or as a result of any action or inaction by the Commission.
Additional Interest shall accrue on the Securities over and above
the interest set forth in the title of the Securities from and including the
date on which any such Registration Default shall occur to but excluding the
date on which all such Registration Defaults have been cured, at a rate of 0.50%
per annum (the "Additional Interest Rate"). The increase in the Applicable Rate
attributable to any Registration Default shall cease to be effective from the
date such Registration Default is cured, and the Applicable Rate shall be
reduced at such time to the Applicable Rate in effect immediately prior to such
Registration Default; provided, however, in the event a Registration Default
occurs prior to the Reset Date and is cured on or after the Reset Date, the
Applicable Rate shall be the Term Rate from the date such Registration Default
is cured.
(2) A Registration Default referred to in Section 7(a)(iii) shall be
deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related Prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related Prospectus or (y) the occurrence of other material
events or developments with respect to the Trust or the Company that would need
to be described in such Registration Statement or the related Prospectus and
(ii) in the case of clause (y), the Trust and the Company are proceeding
promptly and in good faith to amend or supplement such Registration Statement
and related Prospectus to describe such events; provided, however, that in any
case if such Registration Default occurs for a continuous period in excess of
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<PAGE> 20
30 days, Additional Interest shall be payable in accordance with the above
paragraph from the day such Registration Default occurred until such
Registration Default is cured.
(3) Any amounts of Additional Interest due pursuant to Section
7(a) will be payable in cash on the regular interest payment dates (or such
other time as provided in the Indenture or Declaration, as applicable, for the
payment of interest or distributions) with respect to the Securities. The amount
of Additional Interest will be determined by multiplying the applicable
Additional Interest Rate by the principal amount of the Securities and further
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest Rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.
8. Rules 144 and 144A. The Company and the Trust shall use their best
efforts to file the reports required to be filed by them under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Company or
the Trust is not required to file such reports, it will, upon the request of any
Holder of Securities, make publicly available other information so long as
necessary to permit sales of their securities pursuant to Rules 144 and 144A of
the Securities Act, or any successor regulation or statute thereto. The Company
and the Trust covenant that they will take such further action as any Holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Company and the Trust
will provide a copy of this Agreement to prospective purchasers of Securities
identified to the Company or the Trust by the Purchasers upon request. Upon the
request of any Holder of Securities, the Company and the Trust shall deliver to
such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company and the Trust to register any of their securities
pursuant to the Exchange Act.
9. Miscellaneous.
(1) Remedies. The Company and the Trust each acknowledge and agree
that any failure by either of them to comply with their respective obligations
under Section 2 hereof may result in material irreparable injury to the
Purchasers or the Holders for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that, in
the event of any such
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<PAGE> 21
failure, the Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Company's and the Trust's obligations under Section
2 hereof. The Company and the Trust each further agree to waive the defense in
any action for specific performance of Section 2 hereof that a remedy at law
would be adequate.
(2) No Inconsistent Agreements. The Trust and the Company have
not, as of the date hereof, entered into, nor shall they on or after the date
hereof, enter into, any agreement with respect to their securities or otherwise
that is inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(3) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Trust and the Company have
obtained the written consent of a majority in principal amount, liquidation
preference or voting rights (as applicable ) of the Securities affected by such
amendment, qualification, modification, supplement, waiver or consent.
(4) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be mailed, delivered,
telegraphed and confirmed or faxed and confirmed:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with respect to the Debentures; or the Declaration, with respect to the
Preferred Securities; with a copy in a like manner to Credit Suisse
First Boston Corporation;
(2) if to any or all of the Purchasers, initially at the address
set forth in the Purchase Agreement; and
(3) if to the Trust or the Company, initially at its address set
forth in the Purchase Agreement.
The Purchaser or the Trust and the Company by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
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(5) Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and/or the
Trust, on the one hand, and the Purchasers, on the other hand, and shall have
the right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder.
(6) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
and the Holders, including, without the need for an express assignment or any
consent by the Trust or the Company thereto, subsequent Holders of Securities.
The Trust and the Company hereby agree to extend the benefits of this Agreement
to any Holder of Securities and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(7) 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.
(8) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(9) 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.
(10) Securities Held by the Company or the Trust. Whenever the
consent or approval of Holders of a specified percentage of principal amount of
Securities is required hereunder, Securities held by the Company, the Trust or
their affiliates (other than subsequent Holders of Securities if such subsequent
Holders are deemed to be affiliates solely by reason of their holdings of such
Securities) shall not be considered to be outstanding and shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(11) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining
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<PAGE> 23
provisions hereof shall not be in any way impaired or affected thereby, it being
intended that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(Signature page follows.)
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<PAGE> 24
Please confirm that the foregoing correctly sets forth the
agreement between the Company, the Trust and you.
Very truly yours,
CALPINE CAPITAL TRUST II
By: ___________________________
Name:
Title: Administrative Trustee
CALPINE CORPORATION
By: ___________________________
Name:
Title:
The foregoing Registration Rights Agreement is hereby confirmed
and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
ING BARINGS LLC
Acting on behalf of itself and
the several Purchasers
pursuant to the Purchase Agreement
By: ___________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.8.6
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CALPINE CAPITAL TRUST II
January 31, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I Interpretation and Definitions
Section 1.01 Definitions 2
ARTICLE II Trust Indenture Act
Section 2.01 Trust Indenture Act; Application 11
Section 2.02 Lists of Holders of Securities 12
Section 2.03 Reports by the Property Trustee 12
Section 2.04 Periodic Reports to Property Trustee 12
Section 2.05 Evidence of Compliance with Conditions Precedent 12
Section 2.06 Events of Default; Waiver 12
Section 2.07 Event of Default; Notice 14
ARTICLE III Organization
Section 3.01 Name 15
Section 3.02 Office 15
Section 3.03 Purpose 15
Section 3.04 Authority 15
Section 3.05 Title to Property of the Trust 16
Section 3.06 Powers and Duties of the Administrative Trustees 16
Section 3.07 Prohibition of Actions by the Trust and the Trustees 19
Section 3.08 Powers and Duties of the Property Trustee 20
Section 3.09 Certain Duties and Responsibilities of the Property Trustee 22
Section 3.10 Certain Rights of Property Trustee 24
Section 3.11 Delaware Trustee 26
Section 3.12 Execution of Documents 26
Section 3.13 Not Responsible for Recitals or Issuance of Securities 26
Section 3.14 Duration of Trust 26
Section 3.15 Mergers 26
ARTICLE IV Depositor
Section 4.01 Depositor's Purchase of Common Securities 28
Section 4.02 Responsibilities of the Depositor 28
Section 4.03 Guarantee of Payment of Trust Obligations 29
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V Trustees
Section 5.01 Number of Trustees 29
Section 5.02 Delaware Trustee 30
Section 5.03 Property Trustee; Eligibility 30
Section 5.04 Qualifications of Administrative Trustees and Delaware Trustee
Generally 31
Section 5.05 Initial Trustees 31
Section 5.06 Appointment, Removal and Resignation of Trustees 32
Section 5.07 Vacancies among Trustees 34
Section 5.08 Effect of Vacancies 34
Section 5.09 Meetings 35
Section 5.10 Delegation of Power 35
Section 5.11 Merger, Conversion, Consolidation or Succession to Business 35
ARTICLE VI Distributions
Section 6.01 Distributions 36
ARTICLE VII Issuance of Securities
Section 7.01 General Provisions Regarding Securities 36
Section 7.02 Execution and Authentication 37
Section 7.03 Form and Dating 38
Section 7.04 Registrar, Paying Agent, Conversion Agent and Tender Agent 40
Section 7.05 Paying Agent to Hold Money in Trust 41
Section 7.06 Replacement Securities 41
Section 7.07 Outstanding Preferred Securities 42
Section 7.08 Preferred Securities in Treasury 42
Section 7.09 Temporary Securities 42
Section 7.10 Cancellation 42
ARTICLE VIII Termination of Trust
Section 8.01 Dissolution of Trust 43
ARTICLE IX Transfer and Exchange
Section 9.01 General 44
Section 9.02 Transfer Procedures and Restrictions 45
Section 9.03 Deemed Security Holders 49
Section 9.04 Notices to Depositary 49
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 9.05 Appointment of Successor Depositary 49
ARTICLE X Limitation of Liability of
Holders of Securities, Trustees or Others
Section 10.01 Liability 50
Section 10.02 Exculpation 50
Section 10.03 Fiduciary Duty 50
Section 10.04 Indemnification 51
Section 10.05 Outside Businesses 52
ARTICLE XI Accounting
Section 11.01 Fiscal Year 52
Section 11.02 Certain Accounting Matters 52
Section 11.03 Banking 53
Section 11.04 Withholding 53
ARTICLE XII Amendments and Meetings
Section 12.01 Amendments 54
Section 12.02 Meetings of the Holders of Securities; Action by Written Consent 54
ARTICLE XIII Representations of Property
Trustee and Delaware Trustee
Section 13.01 Representations and Warranties of Property Trustee 56
Section 13.02 Representations and Warranties of Delaware Trustee 56
ARTICLE XIV Registration Rights
Section 14.01 Registration Rights 57
ARTICLE XV Miscellaneous
Section 15.01 Notices 58
Section 15.02 Governing Law 59
Section 15.03 Intention of the Parties 59
Section 15.04 Headings 59
Section 15.05 Successors and Assigns 59
Section 15.06 Partial Enforceability 59
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 15.07 Counterparts 60
</TABLE>
iii
<PAGE> 6
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CALPINE CAPITAL TRUST II
January 31, 2000
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration"), dated
and effective as of January 31, 2000, by the undersigned trustees (together with
all other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), Calpine
Corporation, a Delaware corporation, as trust Depositor (the "Depositor"), and
by the holders, from time to time, of undivided beneficial interests in the
assets of the Trust (as defined below) issued pursuant to this Declaration;
WHEREAS, the Trustees and the Depositor established Calpine
Capital Trust II (the "Trust") under the Business Trust Act (as hereinafter
defined) pursuant to a Declaration of Trust dated as of January 24, 2000 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on January 25, 2000, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer (as hereinafter defined);
WHEREAS, as of the date hereof, no interests of the Trust have
been issued;
WHEREAS, all of the Trustees and the Depositor, by this
Declaration, amend and restate in its entirety each and every term and provision
of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE> 7
ARTICLE I
Interpretation and Definitions
Section 1.1 Definitions. Unless the context otherwise requires:
(1) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this
Declaration, and any capitalized term not defined in this Declaration shall have
the meaning assigned thereto in the Indenture;
(2) a term defined anywhere in this Declaration or the Indenture
has the same meaning throughout;
(3) all references to "the Declaration" or "this Declaration" are
to this Declaration as modified, supplemented or amended from time to time;
(4) all references in this Declaration to Articles, Sections,
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;
(5) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(6) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(7) a reference to the singular includes the plural and vice
versa.
"Additional Amounts" has the meaning specified in the Indenture.
"Administrative Action" has the meaning set forth in the
definition of "Tax Event" in this Section 1.01.
"Administrative Trustee" means any Trustee other than the
Property Trustee and the Delaware Trustee.
"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
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<PAGE> 8
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-Registrar.
"Appointment Event" means an event defined in the terms of the
Preferred Securities, as set forth in Annex I, which entitles the Holders of a
Majority in liquidation amount of the Preferred Securities to appoint a Special
Trustee.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Beneficiaries" has the meaning set forth in Section 4.03(a).
"Book Entry Interest" means a beneficial interest in a Global
Preferred Securities Certificate, ownership and transfers of which shall be
maintained and made through book entries by a Depositary as described in Section
9.02.
"Business Day" means any day other than a Saturday or a Sunday, a
day on which banking institutions in New York, New York are authorized or
required by law to close, or a day on which the corporate trust office of the
Property Trustee or the Debenture Trustee is closed for business.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.
"Certificate" means a certificate in global or definitive form
representing a Common Security or a Preferred Security.
"Change in 1940 Act Law" has the meaning specified in paragraph
4(d) of Annex I.
"Closing Date" means January 31, 2000.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor legislation.
3
<PAGE> 9
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section 7.01(a).
"Common Securities Guarantee" means the guarantee agreement to be
dated as of January 31, 2000 of the Depositor in respect of the Common
Securities.
"Common Stock" has the meaning specified in the Indenture.
"Compounded Interest" has the meaning specified in the Indenture.
"Conversion Agent" has the meaning set forth in Section 7.04.
"Conversion Date" has the meaning specified in paragraph 5(b) of
Annex I.
"Conversion Request" has the meaning specified in paragraph 5(b)
of Annex I.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Event of Default" in respect of the Securities means
an Event of Default (as defined in the Indenture) has occurred and is continuing
in respect of the Debentures.
"Debenture Issuer" means the Depositor in its capacity as issuer
of the Debentures.
"Debentures" means the series of Debentures to be issued by the
Debenture Issuer under the Indenture and to be held by the Property Trustee, in
the form attached to the Indenture as Exhibit A.
"Debenture Trustee" means The Bank of New York, a New York
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Declaration" means this Amended and Restated Declaration of
Trust as originally executed or as it may from time to time be supplemented or
amended.
4
<PAGE> 10
"Declaration Trustees" means collectively, the Administrative
Trustees, the Property Trustee and the Delaware Trustee.
"Deferral Period" has the meaning specified in paragraph 2(b) of
Annex I.
"Definitive Preferred Securities" means any Preferred Securities
in definitive form issued by the Trust.
"Delaware Trustee" has the meaning set forth in Section 5.02.
"Depositary" means The Depository Trust Company, the initial
clearing agency, until a successor shall be appointed pursuant to Section 9.05,
and thereafter means such successor Depositary.
"Depositor" means Calpine Corporation, a Delaware corporation, or
any successor entity in a merger, consolidation or amalgamation, in its capacity
as Depositor of the Trust.
"Direct Action" has the meaning specified in Section 3.08(e).
"Disclosure Documents" has the meaning specified in the
Remarketing Agreement.
"Dissolution Tax Opinion" has the meaning specified in the
definition of Tax Event in this Section 1.01.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.01.
"Event of Default" means:
(1) a Debenture Event of Default; or
(2) default by the Trust in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days (subject to the deferral of any due date
in the case of a Deferral Period); or
(3) default by the Trust in the payment of any
Redemption Price of any Security when it becomes due and payable; or
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<PAGE> 11
(4) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in the Declaration
(other than a covenant or warranty, a default in the performance of
which or the breach of which is addressed in clause (ii) or (iii)
above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
defaulting Declaration Trustee or Declaration Trustees by the holders of
at least 25% in aggregate liquidation amount of the outstanding
Preferred Securities, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Declaration; or
(5) the failure of the Depositor to appoint a successor
Property Trustee in the manner required by Section 5.06(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation, and the rules and
regulations promulgated thereunder.
"Failed Final Remarketing" has the meaning specified in the
Remarketing Agreement.
"Fiscal Year" shall have the meaning specified in Section 11.01.
"Global Preferred Securities" means Rule 144A Global Preferred
Securities and/or Unrestricted Global Preferred Securities, as the context
requires.
"Holder" means a Person in whose name a Certificate representing
a Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Indemnified Person" means (a) any Trustee; (b) any Affiliate of
any Trustee; (c) any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee; or (d) any employee or
agent of the Trust or its Affiliates.
"Indenture" means the Indenture, dated as of January 31, 2000,
between the Debenture Issuer and the Debenture Trustee, as it may be amended
from time to time.
"Initial Conversion Price" has the meaning specified in paragraph
5(a) of Annex I.
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<PAGE> 12
"Initial Rate" has the meaning specified in paragraph 2(a) of
Annex I.
"Initial Redemption Price" has the meaning specified in the
Indenture.
"Investment Company" means an investment company as defined in
the Investment Company Act, and the rules and regulations promulgated
thereunder.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning specified in paragraph
4(d) of Annex I.
"Legal Action" has the meaning set forth in Section 3.06(g).
"Like Amount" means (i) with respect to a redemption of
Securities, Securities having an aggregate liquidation amount equal to that
portion of the principal amount of Debentures to be contemporaneously redeemed
in accordance with the Indenture, allocated to such Securities based upon the
relative liquidation amounts of such classes and the proceeds of which will be
used to pay the applicable Redemption Price of such Securities and (ii) with
respect to a distribution of Debentures to Holders of the Securities in
connection with a dissolution and liquidation of the Trust, Debentures having a
principal amount equal to the aggregate liquidation amount of the Securities of
the Holder to whom such Debentures are distributed.
"Liquidation Distribution" has the meaning specified in paragraph
3 of Annex I.
"List of Holders" has the meaning set forth in Section 2.02(a).
"Majority in liquidation amount of the Securities" means, except
as provided in the terms of the Securities and by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities voting separately as a class, who are the record
owners of more than 50% of the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"Ministerial Action" has the meaning set forth in paragraph 4(d)
in Annex I.
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<PAGE> 13
"No Recognition Opinion" has the meaning specified in paragraph
4(d) of Annex I.
"Obligations" means any costs, expenses or liabilities of the
Trust, other than obligations of the Trust to pay to Holders of any Securities
or other similar interests in the Trust the amounts due such Holders pursuant to
the terms of the Securities or such other similar interests, as the case may be.
"Offering Circular" means the confidential offering circular,
dated January 25, 2000, relating to the issuance by the Trust of Preferred
Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(1) a statement that each officer signing the Certificate has
read the covenant or condition and the definition relating thereto;
(2) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the
Certificate;
(3) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"OID" means original issue discount.
"Optional Closing Date" has the meaning assigned to such term in
the Purchase Agreement.
"Optional Redemption" has the meaning specified in the Indenture.
"Participants" has the meaning set forth in Section 7.03(b).
"Paying Agent" has the meaning specified in Section 7.04.
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"Payment Amount" has the meaning specified in Section 6.01.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" has the meaning specified in Section
7.01(a).
"Preferred Securities Guarantee" means the guarantee agreement to
be dated as of January 31, 2000, between the Depositor and The Bank of New York,
as Guarantee Trustee, in respect of the Preferred Securities.
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant or
as an indirect participant, in each case in accordance with the rules of such
Depositary).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.03.
"Property Trustee Account" has the meaning set forth in Section
3.08(c).
"Pro Rata" has the meaning specified in paragraph 9 of Annex I.
"Purchase Agreement" has the meaning set forth in Section 7.03.
"QIBs" has the meaning set forth in Section 7.03(a).
"Quorum" means a majority of the Administrative Trustees or, if
there are only two Administrative Trustees, both of them.
"Redemption Price" has the meaning specified in the Indenture.
"Redemption Tax Opinion" has the meaning specified in paragraph 4
(d) of Annex I.
"Registrar" has the meaning set forth in Section 7.04.
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"Registration Default" has the meaning specified in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated January 31, 2000, among the Depositor, the Trust and the
initial Purchasers named in the Purchase Agreement.
"Registration Statement" has the meaning specified in the
Registration Rights Agreement.
"Related Party" means, with respect to the Depositor, any direct
or indirect wholly owned subsidiary of the Depositor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Depositor.
"Remarketing" has the meaning specified in the Remarketing
Agreement.
"Remarketing Agent" has the meaning specified in the Indenture.
"Remarketing Agreement" means the Remarketing Agreement, dated
January 31, 2000 among the Depositor, the Trust, the Tender Agent and the
Remarketing Agent.
"Responsible Officer" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Restricted Preferred Securities" shall mean the Rule 144A Global
Preferred Securities.
"Restricted Securities Legend" has the meaning specified in
Section 9.02(h).
"Rule 144A" has the meaning specified in Section 7.03(a).
"Rule 144A Global Preferred Security" has the meaning specified
in Section 7.03(a).
"Securities" means the Common Securities and the Preferred
Securities.
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"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation, and the rules and regulations
promulgated thereunder.
"Securities Guarantee" means the Common Securities Guarantee and
the Preferred Securities Guarantee.
"Shelf Registration Statement" has the meaning specified in the
Registration Rights Agreement.
"Special Trustee" means a trustee appointed by the Holders of a
Majority in liquidation amount of the Preferred Securities in accordance with
Section 5.06(ii)(B).
"Successor Delaware Trustee" has the meaning set forth in Section
5.06(c).
"Successor Entity" has the meaning specified in Section 3.15(b)
"Successor Property Trustee" has the meaning set forth in Section
5.06(a).
"Successor Securities" has the meaning specified in Section
3.15(b).
"Super Majority" has the meaning set forth in Section
2.06(a)(ii).
"Tax Event" means the receipt by the Property Trustee of an
opinion of nationally recognized independent tax counsel to the Depositor
(reasonably acceptable to the Trustees) experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (i) any amendment
to or change (including any announced prospective change (which shall not
include a proposed change), provided that a Tax Event shall not occur more than
90 days before the effective date of any such prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (ii) any judicial decision
or official administrative pronouncement, ruling, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (iii) any amendment to
or change in the administrative position or interpretation of any Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental agency or
regulatory body, irrespective of the manner in which such amendment or change is
made known, which amendment or change is effective or such Administrative Action
or decision is announced, in each case, on or after the date of original
issuance of the Debentures or the issue date of the Preferred Securities issued
by
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the Trust, there is more than an insubstantial risk that (a) if the Debentures
are held by the Property Trustee, (x) the Trust is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect to interest accrued or received on the Debentures or subject to more
than a de minimis amount of other taxes, duties or other governmental charges as
determined by such counsel, or (y) any portion of interest payable by the
Depositor to the Trust (or OID accruing) on the Debentures is not, or within 90
days of the date of such opinion will not be, deductible by the Depositor in
whole or in part for United States federal income tax purposes or (b) with
respect to Debentures which are no longer held by the Property Trustee, any
portion of interest payable by the Depositor (or OID accruing) on the Debentures
is not, or within 90 days of the date of such opinion will not be, deductible by
the Depositor in whole or in part for United States federal income tax purposes.
"Tender Agent" means the Property Trustee if any Preferred
Securities are outstanding and the Debenture Trustee if the Debentures have been
distributed to the Holders of the Preferred Securities.
"Tender Notification Date" has the meaning specified in the
Indenture.
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Securities or by the Trust Indenture Act, Holders
of outstanding Securities voting together as a single class or, as the context
may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities, voting separately as a class, representing 10% of
the aggregate liquidation amount (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
"Term Provisions" has the meaning specified in the Remarketing
Agreement.
"Term Call Protections" has the meaning specified in the
Remarketing Agreement.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust" has the meaning specified in the first recital of this
Agreement.
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"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation, and the rules and
regulations promulgated thereunder.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Unrestricted Global Preferred Security" has the meaning set
forth in Section 9.02(b).
ARTICLE II
Trust Indenture Act
Section 1.2 Trust Indenture Act; Application. (a) This
Declaration is, or will be upon qualification under the Trust Indenture Act,
subject to the provisions of the Trust Indenture Act that are required to be
part of this Declaration, which are incorporated by reference in and made part
of this Declaration and shall, to the extent applicable, be governed by such
provisions. This Declaration will not be qualified under the Trust Indenture Act
except upon the effectiveness of the Shelf Registration Statement.
(1) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(2) Until such time as this Declaration is qualified under the
Trust Indenture Act, the parties hereto agree that the provisions of Sections
310 to 317, inclusive, of the Trust Indenture Act shall be incorporated herein
by reference, subject to the provisions of this Declaration, and to the extent
that any provision of this Declaration limits, qualifies or conflicts with the
duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act,
such imposed duties shall control.
(3) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
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Section 1.3 Lists of Holders of Securities. (a) Each of the
Depositor and the Administrative Trustees on behalf of the Trust shall provide
the Property Trustee (i) within 14 days after each record date for payment of
Distributions, a list, in such form as the Property Trustee may reasonably
require, of the names and addresses of the Holders of the Securities ("List of
Holders") as of such record date, provided that neither the Depositor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Property Trustee by the Depositor and
the Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in its capacity as Paying Agent (if acting in
such capacity), provided that the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(1) The Property Trustee shall comply with its obligations under
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
Section 1.4 Reports by the Property Trustee. Within 60 days after
March 15 of each year, commencing March 15, 2000, the Property Trustee shall
provide to the Holders of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
Section 1.5 Periodic Reports to Property Trustee. Each of the
Depositor and the Administrative Trustees on behalf of the Trust shall provide
to the Property Trustee such documents, reports and information as required by
Section 314 of the Trust Indenture Act (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act, such
compliance certificate to be delivered annually on or before 120 days after the
end of each fiscal year of the Depositor.
Section 1.6 Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
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Section 1.7 Events of Default; Waiver. (a) The Holders of a
Majority in liquidation amount of Preferred Securities may, by vote, on behalf
of the Holders of all of the Preferred Securities, waive any past Event of
Default in respect of the Preferred Securities and its consequences, provided
that, if the Event of Default:
(1) is caused by a Debenture Event of Default that is not
waivable under the Indenture, the Event of Default under the Declaration
shall also not be waivable;
(2) is caused by a Debenture Event of Default that
requires the consent or vote of greater than a majority in principal
amount of the holders of the Debentures (a "Super Majority") to be
waived under the Indenture, the Event of Default under the Declaration
may only be waived by the vote of the Holders of at least the proportion
in liquidation amount of the Preferred Securities that the relevant
Super Majority represents of the aggregate principal amount of the
Debentures outstanding;
(3) is the result of a default by the Trust in the payment
of any Distribution when it becomes due and payable, which default has
continued for 30 days (subject to the deferral of any due date in the
case of a Default Period), the Event of Default shall not be waivable;
or
(4) is the result of a default by the Trust in the payment
of any Redemption Price of any Preferred Security when it becomes due
and payable, the Event of Default shall not be waivable.
The foregoing provisions of this Section 2.06(a) shall be in lieu
of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
Upon such waiver, any such default shall cease to exist, and any
Event of Default with respect to the Preferred Securities arising therefrom
shall be deemed to have been cured for every purpose of this Declaration, but no
such waiver shall extend to any subsequent or other default or an Event of
Default with respect to the Preferred Securities or impair any right consequent
thereon. Any waiver by the Holders of the Preferred Securities of an Event of
Default with respect to the Preferred Securities shall also be deemed to
constitute a waiver by the Holders of the Common Securities of any such Event of
Default with respect to the Common Securities for all purposes of this
Declaration without any further act, vote, or consent of the Holders of the
Common Securities.
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(2) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the Event of Default is
caused by a Debenture Event of Default that:
(1) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of
Default under the Declaration as provided below in this Section 2.06(b),
the Event of Default under the Declaration shall also not be waivable;
or
(2) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under the Declaration as provided
below in this Section 2.06(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Preferred Securities that
the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and its consequences until the effects of all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.06(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of
the Trust Indenture Act and such Section 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.06(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(3) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing
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provisions of this Section 2.06(c) shall be in lieu of Section 316(a)(1)(B) of
the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act
is hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.
Section 1.8 Event of Default; Notice. (a) The Property Trustee
shall, within ten Business Days after the occurrence of an Event of Default
actually known to the Property Trustee, (i) transmit by mail, first-class
postage prepaid, to the Holders of the Securities, and (ii) transmit by any
means provided for in this Declaration to the Administrative Trustees and the
Depositor, notices of all defaults actually known to the Property Trustee,
unless such defaults have been cured or waived before the giving of such notice
(the term "defaults" for the purposes of this Section 2.07(a) being hereby
defined to be an Event of Default, not including any periods of grace and
irrespective of the giving of any notice); provided that, except for a default
in the payment of principal of (or premium, if any) or interest on any of the
Debentures or in the payment of any sinking fund installment established for the
Debentures, the Property Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee, or a trust
committee of directors and/or Responsible Officers of the Property Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders of the Securities.
(1) The Property Trustee shall not be deemed to have knowledge of
any default except:
(1) a default under Sections 5.01(1) and 5.01(2)
of the Indenture; or
(2) any default as to which the Property Trustee shall
have received written notice.
ARTICLE III
Organization
Section 1.9 Name. The Trust is named "Calpine Capital Trust II,"
as such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Securities. The Trust's activities
may be conducted under the name of the Trust or any other name deemed advisable
by the Administrative Trustees.
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Section 1.10 Office. The address of the principal office of the
Trust is c/o Calpine Corporation, 50 West San Fernando Street, San Jose,
California 95113, Attention: General Counsel. On ten Business Days' written
notice to the Holders of Securities, the Administrative Trustees may designate
another principal office.
Section 1.11 Purpose. The exclusive purposes and functions of the
Trust are (a) to issue and sell the Securities and use the proceeds from such
sale to acquire the Debentures, and (b) except as otherwise limited herein, to
engage in only those other activities necessary or incidental thereto. The Trust
shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States Federal income tax purposes as a grantor trust.
Section 1.12 Authority. (a) Subject to the limitations provided
in this Declaration and to the specific duties of the Property Trustee, the
Administrative Trustees shall have exclusive and complete authority to carry out
the purposes of the Trust. An action taken by the Administrative Trustees in
accordance with their powers shall constitute the act of and serve to bind the
Trust and an action taken by the Property Trustee in accordance with its powers
shall constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no Person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
(1) Except as expressly set forth in this Declaration and except
if a meeting of the Administrative Trustees is called with respect to any matter
over which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(2) An Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purposes of signing any documents which the
Administrative Trustees have power and authority to cause the Trust to execute
pursuant to Section 3.06.
Section 1.13 Title to Property of the Trust. Except as provided
in Section 3.08 with respect to the Debentures and the Property Trustee Account
or as otherwise provided in this Declaration, legal title to all assets of the
Trust shall be vested in the Trust. The Holders shall not have legal title to
any part of the assets of the Trust, but shall have an undivided beneficial
interest in the assets of the Trust.
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Section 1.14 Powers and Duties of the Administrative Trustees.
The Administrative Trustees shall have, together (except in the case of
paragraphs (a), (b) and (c) of this Section 3.06) with any Special Trustee
holding office pursuant to Section 5.06, if any, the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(1) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided further, that there shall be no
interests in the Trust other than the Securities, and the issuance of Securities
shall be limited to simultaneous issuances of both Preferred Securities and
Common Securities on the Closing Date and any Optional Closing Date;
(2) in connection with the issue and sale of the Preferred
Securities to:
(1) assist in the preparation of the Offering Circular and
preliminary offering circular, if any, in each case prepared by the
Depositor, in relation to the offering and sale of the Preferred
Securities to qualified institutional buyers in reliance of Rule 144A
under the Securities Act and to execute and file with the Commission, at
such time as determined by the Depositor (whether in accordance with the
Registration Rights Agreement or otherwise), a registration statement on
Form S-3, or other form as applicable, prepared by the Depositor,
including any amendments thereto in relation to the Preferred
Securities;
(2) execute and file any documents prepared by the
Depositor, or take any acts as determined by the Depositor to be
necessary in order to qualify or register all or part of the Preferred
Securities in any State or foreign jurisdiction in which the Depositor
has determined to qualify or register such Preferred Securities for
sale;
(3) execute and file an application, prepared by the
Depositor, to the Private Offerings, Resale and Trading through
Automated Linkages ("PORTAL") Market and, at such time as determined by
the Depositor (whether pursuant to the Registration Rights Agreement or
otherwise), to the New York Stock Exchange, Inc. or any other national
stock exchange or the NASDAQ National Market for listing or quotation of
the Preferred Securities, but if and only if the Depositor has so
instructed the Administrative Trustees to make such filing;
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(4) to execute and deliver letters, documents, or
instruments with The Depository Trust Company relating the Preferred
Securities;
(5) execute and file with the Commission a registration
statement on Form 8-A, at such time as determined by the Depositor,
including any amendments thereto, prepared by the Depositor relating to
the registration of the Preferred Securities under Section 12 of the
Exchange Act, but if and only if the Depositor has so instructed the
Administrative Trustees to make such filing; and
(6) execute and enter into the Remarketing Agreement, the
Registration Rights Agreement and the Purchase Agreement and other
related agreements providing for the sale of the Preferred Securities;
and
(7) and to execute and file any agreement, certificate or
other document which such Administrative Trustee deems necessary or
appropriate in connection with the issuance and sale of the Preferred
Securities;
(3) to acquire the Debentures with the proceeds of the sale of
the Preferred Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Holders of Common Securities;
(4) to give the Depositor and the Property Trustee prompt written
notice of the occurrence of a Tax Event or an Investment Company Event; provided
that the Administrative Trustees (and Special Trustee, if any) shall consult
with the Depositor and the Property Trustee before taking or refraining from
taking any Ministerial Action in relation to a Tax Event or Investment Company
Event;
(5) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(6) to take all actions and perform such duties as may be
required of the Administrative Trustees pursuant to the terms of the Securities;
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(7) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(8) to employ or otherwise engage employees and agents (who may
be designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(9) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(10) to give the certificate required by Section 314(a)(4) of the
Trust Indenture Act to the Property Trustee, which certificate may be executed
by any Administrative Trustee;
(11) to incur expenses that are necessary or incidental to carry
out any of the purposes of the Trust;
(12) to act as, or appoint another Person to act as, Registrar,
Conversion Agent, Paying Agent, Tender Agent and transfer agent for the
Securities;
(13) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(14) to execute all documents or instruments, perform all duties
and powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(15) to take all action that may be necessary or appropriate for
the preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
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(16) to take any action, not inconsistent with this Declaration
or with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.06, including, but not limited to:
(1) causing the Trust not to be deemed to be an
Investment Company required to be registered under the Investment
Company Act;
(2) causing the Trust to be classified for United States
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation or partnership; and
(3) cooperating with the Debenture Issuer to ensure that
the Debentures will be treated as indebtedness of the Debenture Issuer
for United States federal income tax purposes,
provided that such action does not adversely affect the interests of Holders;
and
(17) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Administrative Trustees, on
behalf of the Trust.
The Administrative Trustees must exercise the powers set forth in
this Section 3.06 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.03, and the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.03.
Subject to this Section 3.06, the Administrative Trustees shall
have none of the powers or the authority of the Property Trustee set forth in
Section 3.08.
Any expenses incurred by the Administrative Trustee (or the
Special Trustee, if any) pursuant to this Section 3.06 shall be reimbursed by
the Debenture Issuer.
The Administrative Trustees shall take all action on behalf of
the Trust that are not specifically required by this Declaration to be taken by
any other Trustee.
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Section 1.15 Prohibition of Actions by the Trust and the
Trustees. (a The Trust shall not, and the Trustees (including the Property
Trustee) on behalf of the Trust shall not, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust shall not
and the Trustees (including the Property Trustee) shall cause the Trust not to:
(1) invest any proceeds received by the Trust from holding
the Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(2) acquire any assets other than as expressly
provided herein;
(3) possess Trust property for other than a Trust
purpose;
(4) make any loans or incur any indebtedness other
than loans represented by the Debentures;
(5) possess any power or otherwise act in such a
way as to vary the Trust assets or the terms of the Securities in
any way whatsoever;
(6) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust other
than the Securities; or
(7) other than as provided in the Declaration or Annex I
hereto, (A) direct the time, method and place of exercising any trust or
power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under Section
5.14 of the Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of all the Debentures shall be due and
payable, or (D) consent to any amendment, modification or termination of
the Indenture or the Debentures where such consent shall be required
unless, in the case of each action described in clause (A), (B), (C) or
(D), the Trust shall have received an opinion of a nationally recognized
independent counsel experienced in such matters to the effect that such
modification will not cause more than an insubstantial risk that for
United States federal income tax purposes the Trust will not be
classified as a grantor trust.
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Section 1.16 Powers and Duties of the Property Trustee. (a) The
legal title to the Debentures shall be owned by and held of record in the name
of the Property Trustee in trust for the benefit of the Holders of the
Securities. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.06. To the fullest
extent permitted by law, such vesting and cessation of title shall be effective
whether or not conveyancing documents with regard to the Debentures have been
executed and delivered.
(1) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(2) The Property Trustee shall:
(1) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the name of
and under the exclusive control of the Property Trustee on behalf of the
Holders of the Securities and, upon the receipt of payments of funds
made in respect of the Debentures held by the Property Trustee, deposit
such funds into the Property Trustee Account and make payments to the
Holders of the Preferred Securities and Holders of the Common Securities
from the Property Trustee Account in accordance with Section 6.01. Funds
in the Property Trustee Account shall be held uninvested until disbursed
in accordance with this Declaration.
(2) engage in such ministerial activities as so directed
and as shall be necessary or appropriate to effect the redemption of the
Preferred Securities and the Common Securities to the extent the
Debentures are redeemed or mature; and
(3) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as so directed as shall be
necessary or appropriate to effect the distribution of the Debentures to
Holders of Securities upon the occurrence of certain special events (as
may be defined in the terms of the Securities) arising from a change in
law or a change in legal interpretation or other specified circumstances
pursuant to the terms of the Securities.
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(3) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Securities.
(4) The Property Trustee shall take any Legal Action which arises
out of or in connection with an Event of Default or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided, however, that if a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Depositor as
issuer of the Debentures to pay interest or principal on the Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a Holder of Preferred Securities may
institute a legal proceeding directly, subject to the terms of the Indenture
(including the subordination provisions set forth in Article XII thereof), for
enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Securities. In connection with such Direct
Action, the Holders of the Common Securities will be subrogated to the rights of
such Holder of Preferred Securities to the extent of any payment made by the
Depositor to such Holder of Preferred Securities in such Direct Action. In
addition, if the Property Trustee fails to enforce its rights under the
Debentures (other than rights arising from an Event of Default described in the
immediately preceding sentence) after any Holder of Preferred Securities shall
have made a written request to the Property Trustee to enforce such rights, such
Holder of Preferred Securities may, to the fullest extent permitted by law,
institute a direct action to enforce the rights of the Property Trustee or any
other Person. Except as provided in the preceding sentences, the Holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.
(5) The Property Trustee shall not resign as a Trustee unless
either:
(1) the Trust has been completely liquidated and
the proceeds of the liquidation distributed to the Holders of
Securities pursuant to the terms of the Securities; or
(2) a Successor Property Trustee has been appointed and
has accepted that appointment in accordance with Section 5.06.
(6) The Property Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the Property
Trustee shall, for the benefit of
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Holders of the Securities, enforce its rights as holder of the Debentures
subject to the rights of the Holders pursuant to the terms of such Securities.
(7) The Property Trustee shall act as the initial Paying Agent
and Registrar to pay Distributions, redemption payments or liquidation payments
on behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent
may be removed by the Administrative Trustees at any time and a successor Paying
Agent or additional Paying Agents may be appointed at any time by the
Administrative Trustees. The Paying Agent may resign upon 30 days' written
notice to the Property Trustee, the Administrative Trustees and the Depositor.
(8) Subject to this Section 3.08, the Property Trustee shall have
none of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.06.
The Property Trustee must exercise the powers set forth in this
Section 3.08 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set out
in Section 3.03.
Section 1.17 Certain Duties and Responsibilities of the Property
Trustee. (a The Property Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration and no implied covenants shall be read into this Declaration against
the Property Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(1) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default that may have
occurred:
(1) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this
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Declaration and in the Securities and the Property Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Declaration
and in the Securities, and no implied covenants or obligations
shall be read into this Declaration or the Securities against
the Property Trustee; and
(2) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely, as
to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of
this Declaration (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated
therein);
(2) the Property Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(3) the Property Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a Majority
in liquidation amount of the Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under this Declaration;
(4) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers;
(5) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Property Trustee Account shall be to deal with such property in a
similar manner as the Property Trustee deals with similar property for
its own
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account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Declaration and the Trust
Indenture Act;
(6) the Property Trustee shall have no duty or liability
for or with respect to the value, genuineness, existence or sufficiency
of the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith;
(7) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
with the Depositor. Money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant to
Section 3.08(c)(i) and except to the extent otherwise required by law;
and
(8) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Declaration, nor shall
the Property Trustee be liable for the default or misconduct of the
Administrative Trustees or the Depositor.
Section 1.18 Certain Rights of Property Trustee. (a) Subject to
the provisions of Section 3.09:
(1) the Property Trustee may rely conclusively and shall
be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the proper party
or parties;
(2) any direction or act of the Depositor or the
Administrative Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officers' Certificate;
(3) whenever in the administration of this Declaration,
the Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an
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Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Depositor or the Administrative Trustees;
(4) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(5) the Property Trustee may consult with counsel of its
choice or other experts and the advice or opinion of such counsel and
experts with respect to legal matters or advice within the scope of such
experts' area of expertise shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion,
such counsel may be counsel to the Depositor or any of its Affiliates,
and may include any of its employees. The Property Trustee shall have
the right at any time to seek instructions concerning the administration
of this Declaration from any court of competent jurisdiction;
(6) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at
the request or direction of any Holder, unless such Holder shall have
provided to the Property Trustee security satisfactory to the Property
Trustee, against the costs, expenses (including its attorneys' fees and
expenses) and liabilities that might be incurred by it in complying with
such request or direction, including such reasonable advances as may be
requested in writing by the Property Trustee, provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to relieve the
Property Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Declaration;
(7) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, security, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Property
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;
(8) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
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or through agents or attorneys and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(9) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and
the signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property Trustee
to so act or as to its compliance with any of the terms and provisions
of this Declaration, both of which shall be conclusively evidenced by
the Property Trustee's or its agent's taking such action;
(10) whenever in the administration of this Declaration
the Property Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder the Property Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in liquidation amount of the Securities
as would be entitled to direct the Property Trustee under the terms of
the Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be protected in
acting in accordance with such instructions;
(11) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Declaration; and
(12) the Property Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose
any duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such
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right, power, duty or obligation. No permissive power or authority available to
the Property Trustee shall be construed to be a duty.
Section 1.19 Delaware Trustee. Notwithstanding any other
provision of this Declaration other than Section 5.02, the Delaware Trustee
shall not be entitled to exercise any powers, nor shall the Delaware Trustee
have any of the duties and responsibilities of the Administrative Trustees or
the Property Trustee (except as required by the Business Trust Act) described in
this Declaration. Except as set forth in Section 5.02, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
Section 1.20 Execution of Documents. Except as otherwise required
by applicable law, any Administrative Trustee is authorized to execute on behalf
of the Trust any documents that the Administrative Trustees have the power and
authority to execute pursuant to Section 3.06; provided that, the registration
statement referred to in Section 3.06(b)(i), including any amendments thereto,
shall be signed by a majority of the Administrative Trustees.
Section 1.21 Not Responsible for Recitals or Issuance of
Securities. The recitals contained in this Declaration and the Securities shall
be taken as the statements of the Depositor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration, the Debentures or the Securities.
Section 1.22 Duration of Trust. The Trust, unless dissolved
pursuant to the provisions of Article VIII hereof, shall exist until February 1,
2035.
Section 1.23 Mergers. (a) The Trust may not consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets substantially as an entirety to any Person, except as
described in Section 3.15(b) and (c) of this Declaration or paragraph 3 of Annex
I.
(1) The Trust may, with the consent of a majority of the
Administrative Trustees and without the consent of the Holders of the
Securities, the Delaware Trustee or the Property Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State or the District of Columbia; provided that:
(1) if the Trust is not the surviving entity, the
successor entity (the "Successor Entity") either:
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(1) expressly assumes all of the
obligations of the Trust under the Securities; or
(2) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") as long as the Successor
Securities rank, with respect to participation in the profits and
Distributions or in the assets of the Successor Entity at least
as high as the Preferred Securities rank with respect to
participation in the profits and dividends or in the assets of
the Trust;
(2) the Debenture Issuer expressly acknowledges a trustee
of the Successor Entity that possesses the same powers and duties as the
Property Trustee as the Holder of the Debentures;
(3) to the extent the Preferred Securities are listed on
any national securities exchange or with another organization for
listing or quotation, the Preferred Securities or any Successor
Securities shall be so listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities
exchange or with any other organization on which the Preferred
Securities are then listed or quoted;
(4) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(5) such merger, consolidation, amalgamation or
replacement does not adversely affect the powers, preferences and other
special rights of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect;
(6) such Successor Entity has a purpose
substantially identical and limited to that of the Trust;
(7) prior to such merger, consolidation, amalgamation or
replacement, the Depositor has received an opinion of a nationally
recognized independent counsel (reasonably acceptable to the Property
Trustee) to the Trust experienced in such matters to the effect that:
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(1) following such merger, consolidation,
amalgamation or replacement, the Trust or the Successor Entity
will continue to be treated as a grantor trust for United States
federal income tax purposes;
(2) following such merger, consolidation,
amalgamation or replacement, neither the Depositor nor the
Successor Entity will be required to register as an Investment
Company;
(3) such merger, consolidation, amalgamation or
replacement will not adversely affect the limited liability of
the Holders of the Securities (including any Successor
Securities);
(8) the Depositor or any permitted successor or assignee
directly or indirectly owns all the common securities of such successor
entity and provides a guarantee to the Holders of the Successor
Securities with respect to the Successor Entity having substantially the
same terms as the Preferred Securities Guarantee; and
(9) such merger, consolidation, amalgamation, replacement
or lease is not a taxable event for the Holders of the Preferred
Securities.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except
with the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE IV
Depositor
Section 1.24 Depositor's Purchase of Common Securities. On the
Closing Date and any Optional Closing Date the Depositor will purchase an amount
of Common Securities issued by the Trust such that the aggregate liquidation
amount of
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such Common Securities purchased by the Depositor shall at such date equal at
least 3% of the total capital of the Trust.
Section 1.25 Responsibilities of the Depositor. In connection
with the issue and sale of the Preferred Securities, the Depositor shall have
the exclusive right and responsibility to engage in the following activities:
(1) to prepare the Offering Circular and to prepare for filing by
the Trust with the Commission the Shelf Registration Statement, including any
amendments thereto;
(2) to determine the States and foreign jurisdictions, if any, in
which to take appropriate action to qualify or register for sale all or part of
the Preferred Securities and to do any and all such acts (including at the time
of the Remarketing), other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of any such
States and foreign jurisdictions;
(3) if so determined by the Depositor, to prepare for filing by
the Trust an application to PORTAL, the New York Stock Exchange or any other
national stock exchange or the NASDAQ National Market for listing or quotation
of the Preferred Securities (including at the time of the Remarketing);
(4) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the Preferred
Securities (both at the time of their original issuance and at the time of the
Remarketing, if required) under Section 12 of the Exchange Act, including any
amendments thereto, if the Depositor in its sole discretion determines such a
filing is necessary or appropriate; and
(5) to negotiate the terms of the Purchase Agreement, the
Registration Rights Agreement and the Remarketing Agreement and other related
agreements providing for the sale of the Preferred Securities (both at the time
of their original issuance and at the time of the Remarketing).
Section 1.26 Guarantee of Payment of Trust Obligations.
(1) Subject to the terms and conditions of this Section 4.03, the
Depositor hereby irrevocably and unconditionally guarantees, to the extent set
forth in the Securities Guarantees and subject to the terms of the Indenture
(including the subordination provisions set forth in Article XII thereof), to
each Person to whom the Trust is now
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or hereafter becomes indebted or liable (the "Beneficiaries") the full payment,
when and as due, of any and all Obligations to such Beneficiaries.
(2) The agreement of the Depositor in Section 4.03(a) is intended
to be for the benefit of, and to be enforceable by, all such Beneficiaries,
whether or not such Beneficiaries have received notice hereof.
(3) The agreement of the Depositor set forth in Section 4.03(a)
shall terminate and be of no further force and effect upon the later of (a) the
date on which full payment has been made of all amounts payable to all Holders
of all the Preferred Securities (whether upon redemption, liquidation, exchange
or otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that such agreement shall continue to be effective or shall
be reinstated, as the case may be, if at any time any Holder of Preferred
Securities or any Beneficiary must restore payment of any sums paid under the
Preferred Securities, under any Obligation, under the Preferred Securities
Guarantee or under this Agreement for any reason whatsoever. Such agreement is
continuing, irrevocable, unconditional and absolute.
ARTICLE V
Trustees
Section 1.27 Number of Trustees. The number of Trustees shall
initially be five (5), consisting of three (3) Administrative Trustees, the
Delaware Trustee and the Property Trustee, and:
(1) at any time before the issuance of any Securities, the
Depositor may, by written instrument, increase or decrease the number of
Trustees; and
(2) after the issuance of any Securities:
(1) the number of Trustees may be increased or decreased,
except as provided in Sections 5.01(b)(ii) and 5.06(a)(ii)(B) with
respect to the Special Trustee, by vote of the Holders of a Majority in
liquidation amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities; provided, however,
that, the number of Trustees shall in no event be less than two (2);
provided, further, that (1) one Trustee, in the case of a natural
person, shall be a person who is a resident of the State of Delaware or
that, if not a natural person, is an entity which has its principal
place of business in the State of
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Delaware; (2) there shall be at least one Trustee who is an employee or
officer of, or is affiliated with the Depositor (an "Administrative
Trustee"); and (3) one Trustee shall be the Property Trustee for so long
as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee
if it meets the applicable requirements.
(2) the number of Trustees shall be increased
automatically by one (1) if an Appointment Event has occurred and is
continuing and the Holders of a Majority in liquidation amount of the
Preferred Securities appoint a Special Trustee in accordance with
Section 5.06(a)(ii).
Section 1.28 Delaware Trustee. If required by the Business Trust
Act, one Trustee (the "Delaware Trustee") shall be (a) a natural person who is a
resident of the State of Delaware; or (b) if not a natural person, an entity
which has its principal place of business in the State of Delaware, and
otherwise meets the requirements of applicable law, provided that, if the
Property Trustee has its principal place of business in the State of Delaware
and otherwise meets the requirements of applicable law, then the Property
Trustee shall also be the Delaware Trustee and Section 3.11 shall have no
application. The initial Delaware Trustee shall be The Bank of New York
(Delaware).
Section 1.29 Property Trustee; Eligibility. (a) There shall at
all times be one Trustee which shall act as Property Trustee which shall:
(1) not be an Affiliate of the Depositor; and
(2) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Commission to act as an institutional trustee under the
Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least fifty
million U.S. dollars ($50,000,000), and subject to supervision or
examination by federal, state, territorial or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then for the purposes of this
Section 5.03(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
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(2) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.03(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.06(e).
(3) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
(4) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(5) The initial Property Trustee shall be The Bank of New York.
Section 1.30 Qualifications of Administrative Trustees and
Delaware Trustee Generally. Each Administrative Trustee and the Delaware Trustee
(unless the Property Trustee also acts as Delaware Trustee) shall be either a
natural person who is at least 21 years of age or a legal entity that shall act
through one or more Authorized Officers.
Section 1.31 Initial Trustees. The initial Administrative
Trustees shall be:
Peter Cartwright
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Ann B. Curtis
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Thomas R. Mason
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
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The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
Section 1.32 Appointment, Removal and Resignation of Trustees.
Except as provided otherwise in this Section 5.06, Trustees may be appointed or
removed without cause at any time:
(1) until the issuance of any Securities, by
written instrument executed by the Depositor; and
(2) after the issuance of any Securities:
(1) other than in respect to a Special Trustee, by
vote of the Holders of a Majority in liquidation amount of the
Common Securities voting as a class at a meeting of the Holders
of the Common Securities, unless a Debenture Event of Default
shall have occurred and be continuing, in which event the
Property Trustee and the Delaware Trustee may only be removed by
the Holders of a Majority in liquidation amount of the Preferred
Securities, voting as a class at a meeting of the Holders of the
Preferred Securities; and
(2) if an Appointment Event has occurred and is
continuing, one (1) additional trustee (the "Special Trustee"),
who shall have the same rights, powers and privileges as an
Administrative Trustee, may be appointed by vote of the Holders
of a Majority in liquidation amount of the Preferred Securities,
voting as a class at a meeting of the Holders of the Preferred
Securities, and such Special Trustee may only be removed
(otherwise than by the
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operation of Section 5.06(e)), by vote of the Holders of a
Majority in liquidation amount of the Preferred Securities
voting as a class at a meeting of the Holders of the Preferred
Securities. (1) (2) The Trustee that acts as Property Trustee
shall not be removed in accordance with Section 5.06 until a
successor Property Trustee meeting the requirements of Section
5.03 (a "Successor Property Trustee") has been appointed and has
accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the Administrative
Trustees and the Depositor.
(3) The Depositor shall remove the Property Trustee by written
instrument upon:
(1) the entry or a decree or order by a court having
jurisdiction in the premises adjudging the Property Trustee as bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Property Trustee under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Property Trustee or of any substantial
part of its property or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(2) the institution by the Property Trustee of proceedings
to be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Property Trustee or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due and its willingness to be adjudicated a bankrupt, or
the taking of corporate action by the Property Trustee in furtherance of
any such action.
The Depositor shall appoint a Successor Property Trustee within 60 days of such
an event.
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(4) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.06(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Sections 5.02 and 5.04 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Trustees and the Depositor.
(5) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation,
provided that a Special Trustee shall only hold office while an Appointment
Event is continuing and shall cease to hold office immediately after the
Appointment Event pursuant to which the Special Trustee was appointed and all
other Appointment Events cease to be continuing. Any Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing signed by the Trustee and delivered to the Depositor and the Trust,
which resignation shall take effect upon such delivery or upon such later date
as is specified therein; provided, however, that:
(1) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(1) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Property Trustee and delivered to the
Trust, the Depositor and the resigning Property Trustee; or
(2) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed
to the Holders of the Securities;
(2) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Depositor and the resigning Delaware Trustee; and
(3) no such resignation of a Special Trustee shall be
effective until the 60th day following delivery of the instrument of
resignation of the Special Trustee to the Depositor and the Trust or
such later date specified in such instrument during which period the
Holders of the Preferred Securities shall have the right to appoint a
successor Special Trustee as provided in this Section 5.06.
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(6) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with this Section 5.06.
(7) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.06 within 60 days after delivery to the Depositor and the Trust of an
instrument of resignation or removal, the resigning Property Trustee or Delaware
Trustee, resigning or being removed as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Property Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper and prescribe, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.
(8) No Property Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
Section 1.33 Vacancies among Trustees. If a Trustee ceases to
hold office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01, or if the number of Trustees is increased pursuant to Section
5.01, a vacancy shall occur. A resolution certifying the existence of such
vacancy by a majority of the Administrative Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.06.
Section 1.34 Effect of Vacancies. The death, resignation,
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee shall not operate to dissolve,
terminate or annul the Trust. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of a
Administrative Trustee in accordance with Section 5.06, the Administrative
Trustees in office, regardless of their number, shall have all the powers
granted to the Administrative Trustees and shall discharge all the duties
imposed upon the Administrative Trustees by this Declaration.
Section 1.35 Meetings. Meetings of the Administrative Trustees
shall be held from time to time upon the call of any Administrative Trustee.
Regular meetings of the Administrative Trustees may be held at a time and place
fixed by resolution of the Administrative Trustees. Notice of any meetings of
the Administrative Trustees shall be hand delivered or otherwise delivered in
writing (including by facsimile or overnight courier) not less than 24 hours
before such meeting. Notices shall contain a brief statement of the time, place
and anticipated purposes of the meeting. The presence
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(whether in person or by telephone) of an Administrative Trustee at a meeting
shall constitute a waiver of notice of such meeting except where an
Administrative Trustee attends a meeting for the express purpose of objecting to
the transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration, any
action of the Administrative Trustees may be taken at a meeting by vote of a
majority of the Administrative Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting and without prior notice by the
unanimous written consent of the Administrative Trustees.
In the event there is only one Administrative Trustee, any and
all action of such Administrative Trustee shall be evidenced by a written
consent of such Administrative Trustee. In the event a Special Trustee is
holding office pursuant to Section 5.06, such Special Trustee shall have the
same rights as an Administrative Trustee with respect to notice and
participation in a meeting of the Administrative Trustees.
Section 1.36 Delegation of Power.
(1) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.06, including any registration statement or amendment
thereto filed with the Commission, or making any other governmental filing; and
(2) the Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is not
prohibited by applicable law or contrary to the provisions of the Trust, as set
forth herein.
Section 1.37 Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the case
may be, shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of the Property Trustee or the Delaware Trustee, as
the case may be, shall be the successor of the Property Trustee or the Delaware
Trustee, as the case may be, hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any
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paper or any further act on the part of any of the parties hereto other than as
required by applicable law.
ARTICLE VI
Distributions
Section 1.38 Distributions. Holders shall receive Distributions
in accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Preferred Securities and the Common
Securities in accordance with the preferences set forth in the terms attached as
Annex I hereto. If and to the extent that the Debenture Issuer makes a payment
of interest (including Compounded Interest (as defined in the Indenture) and
Additional Amounts (as defined in the Indenture)) premium and principal on the
Debentures held by the Property Trustee (the amount of any such payment being a
"Payment Amount"), the Property Trustee shall and is directed, to the extent
funds are available for that purpose, to make a distribution (a "Distribution")
of the Payment Amount to Holders.
ARTICLE VII
Issuance of Securities
Section 1.39 General Provisions Regarding Securities.
(1) The Administrative Trustees shall on behalf of the Trust
issue one class of convertible preferred securities, designated as Remarketable
Term Income Deferrable Equity Securities (HIGH TIDES)_, liquidation amount $50
per HIGH TIDES, representing undivided beneficial interests in the assets of the
Trust (the "Preferred Securities"), having such terms as are set forth in Annex
I (including as such terms may be modified in accordance with the provisions of
the Remarketing Agreement) and one class of convertible common securities,
liquidation amount $50, representing undivided beneficial interests in the
assets of the Trust (the "Common Securities"), having such terms as are set
forth in Annex I. On the Reset Date and as contemplated by the Remarketing
Agreement, the Trust may also issue securities having Term Provisions to be set
by the Remarketing Agent in accordance with the terms of the Remarketing
Agreement. The Trust shall have no securities or other interests in the assets
of the Trust other than the Preferred Securities and the Common Securities. The
Trust shall issue no Securities in bearer form.
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(2) The consideration received by the Trust for the issuance of
the Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(3) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable, subject to Section 10.01 with respect to the
Common Securities.
(4) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
(5) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have covenanted to treat the Debentures as
indebtedness and the Securities as evidence of an indirect beneficial ownership
interest in the Debentures.
Section 1.40 Execution and Authentication.
(1) The Securities shall be signed on behalf of the Trust by one
Administrative Trustee. In case any Administrative Trustee who shall have signed
any of the Securities shall cease to be such Administrative Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not ceased to be such Administrative Trustee; and any Securities may be
signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Administrative Trustees, although at
the date of the execution and delivery of the Declaration any such person was
not such an Administrative Trustee.
(2) One Administrative Trustee shall sign the Preferred
Securities for the Trust by manual or facsimile signature. Unless otherwise
determined by the Trust, such signature shall, in the case of Common Securities,
be a manual signature.
A Preferred Security shall not be valid until authenticated by
the manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Preferred Securities for
original issue by
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executing the Property Trustee's certificate of authentication contained in the
form of Preferred Securities attached hereto as Exhibit A-1. The aggregate
number of Preferred Securities outstanding at any time shall not exceed the
number set forth in the terms in Annex I hereto except as provided in Sections
7.06 and 7.07.
The Property Trustee may appoint an authenticating agent
acceptable to the Trust to authenticate Preferred Securities. An authenticating
agent may authenticate Preferred Securities whenever the Property Trustee may do
so. Each reference in this Declaration to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee to deal with the Depositor or an Affiliate.
The Trustee shall have the right to decline to authenticate and
deliver any Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if the Trustee
in good faith shall determine that such action would expose the Trustee to
personal liability to existing Holders.
Section 1.41 Form and Dating. The Preferred Securities and the
Property Trustee's certificate of authentication shall be substantially in the
form of Exhibit A-1 and the Common Securities shall be substantially in the form
of Exhibit A-2, each of which is hereby incorporated in and expressly made a
part of this Declaration. Certificates may be printed, lithographed or engraved
or may be produced in any other manner as is reasonably acceptable to the
Administrative Trustees, as evidenced by their execution thereof. The Securities
may have letters, numbers, notations or other marks of identification or
designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject, if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the Trust).
The Trust at the direction of the Depositor shall furnish any such legend not
contained in Exhibit A-1 to the Property Trustee in writing. Each Preferred
Security shall be dated the date of its authentication. The terms and provisions
of the Securities set forth in Annex I and the forms of Securities set forth in
Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent
applicable, the Property Trustee and the Depositor, by their execution and
delivery of this Declaration, expressly agree to such terms and provisions and
to be bound thereby.
The Preferred Securities are being offered and sold by the Trust
pursuant to a Purchase Agreement relating to the Preferred Securities, dated
January 25, 2000, among the Trust, the Depositor and the Purchasers named
therein (the "Purchase Agreement").
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(1) Global Securities. Preferred Securities offered and sold to
Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the
Securities Act ("Rule 144A") as provided in the Purchase Agreement, shall be
initially issued in the form of one or more permanent global Securities in
definitive, fully registered form without distribution coupons with the
appropriate global legends and Restricted Securities Legend set forth in Exhibit
A-1 hereto (each, a "Rule 144A Global Preferred Security"), which shall be
deposited on behalf of the purchasers of the Preferred Securities represented
thereby with the Property Trustee, at its New York office, as custodian for the
Depositary, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Trust and authenticated by the Property Trustee
as provided herein. The number of Preferred Securities represented by the Rule
144A Global Preferred Security may from time to time be increased or decreased
by adjustments made on the records of the Property Trustee and the Depositary or
its nominee as hereinafter provided.
(2) Book-Entry Provisions. This Section 7.03(b) shall apply only
to the Rule 144A Global Preferred Securities and such other Preferred Securities
in global form as may be authorized by the Trust to be deposited with or on
behalf of the Depositary.
An Administrative Trustee on behalf of the Trust shall execute
and the Property Trustee shall, in accordance with this Section 7.03,
authenticate and deliver initially one or more Rule 144A Global Preferred
Securities that (a) shall be registered in the name of Cede & Co. or other
nominee of the Depositary and (b) shall be delivered by the Trustee to such
Depositary or pursuant to the Depositary's written instructions or held by the
Trustee as custodian for the Depositary.
Unless and until definitive, fully registered certificated
Preferred Securities have been issued to the Preferred Security Beneficial
Owners pursuant to Section 7.03:
(1) the provisions of this Section 7.03 shall be
in full force and effect;
(2) the Trust, the Trustees, the Registrar and the Paying
Agent shall be entitled to deal with the Depositary for all purposes of
this Declaration (including the payment of Distributions on the Global
Preferred Security and receiving approvals, votes or consents hereunder)
as the Holder of the Preferred Securities and the sole holder of the
Global Preferred Security and shall have no obligation to the Preferred
Security Beneficial Owners;
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(3) to the extent that the provisions of this Section 7.03
conflict with any other provisions of this Declaration, the provisions
of this Section 7.03 shall control; and
(4) the rights of the Preferred Security Beneficial Owners
shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such Preferred Security
Beneficial Owners and the Depositary and/or the Participants and the
Depositary shall receive and transmit payments of Distributions on the
Global Preferred Securities to such Participants. The Depositary will
make book-entry transfers among the Participants and receive and
transmit payments of Distributions on the Global Preferred Securities to
such Participants; provided, that solely for the purposes of determining
whether the Holders of the requisite amount of Preferred Securities have
voted on any matter provided for in this Declaration, so long as
Definitive Preferred Security Certificates have not been issued, the
Trustees may conclusively rely on, and shall be protected in relying on,
any written instrument (including a proxy) delivered to the Trustees by
the Depositary setting forth the Preferred Security Beneficial Owners'
votes or assigning the right to vote on any matter to any other Persons
either in whole or in part.
Members of, or participants in, the Depositary ("Participants")
shall have no rights under this Declaration with respect to any Global Preferred
Security held on their behalf by the Depositary or by the Property Trustee as
the custodian of the Depositary or under such Global Preferred Security, and the
Depositary may be treated by the Trust, the Property Trustee and any agent of
the Trust or the Property Trustee as the absolute owner of such Global Preferred
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Trust, the Property Trustee or any agent of the Trust
or the Property Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Participants, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Preferred Security.
(3) Certificated Securities. Except as provided in Section
7.03(d), owners of beneficial interests in the Global Preferred Security will
not be entitled to receive physical delivery of certificated Preferred
Securities.
(4) Subject to Section 9.05, a Global Preferred Security
deposited with the Depositary or with the Property Trustee as custodian for the
Depositary pursuant to this Section 7.03 shall be transferred to the beneficial
owners thereof in the form of
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certificated Preferred Securities only if such transfer complies with Section
9.02 and (i) the Depositary notifies the Depositor that it is unwilling or
unable to continue as Depositary for such Global Preferred Security or if at any
time such Depositary ceases to be a "clearing agency" registered under the
Exchange Act, at a time when the Depositary is required to be so registered to
act as such depositary, (ii) the Administrative Trustees decide in their sole
discretion determines that such Global Preferred Security shall be so
exchangeable, or (iii) an Event of Default has occurred and is continuing.
(5) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 7.03 shall be surrendered by the Depositary to the
Property Trustee located in the Borough of Manhattan, City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Property Trustee shall authenticate and deliver, upon such transfer of each
portion of such Global Preferred Security, an equal aggregate liquidation amount
of Preferred Securities of authorized denominations in the form of certificated
Preferred Securities. Any portion of a Global Preferred Security transferred
pursuant to this Section shall be registered in such names and such amounts as
the Depositary shall direct. Any Preferred Security in the form of certificated
Preferred Securities delivered in exchange for an interest in the Rule 144A
Global Preferred Security shall, except as otherwise provided by Section 9.02,
bear the Restricted Securities Legend set forth in Section 9.02(h).
(6) Subject to the provisions of Section 7.03(e), the registered
holder of a Global Preferred Security may grant proxies and otherwise authorize
any Person, including Participants and Persons that may hold interests through
Participants, to take any action which a holder is entitled to take under this
Declaration or the Securities.
(1)
(7) In the event of the occurrence of any of the events specified
in Section 7.03(d), the Trust will promptly make available to the Property
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without distribution coupons.
Section 1.42 Registrar, Paying Agent, Conversion Agent and Tender
Agent. The Administrative Trustees shall maintain in the Borough of Manhattan,
City of New York, State of New York (i) an office or agency where Preferred
Securities may be presented for registration of transfer or for exchange
("Registrar"), (ii) an office or agency where Preferred Securities may be
presented for payment ("Paying Agent") and (iii) an office or agency where
Securities may be presented for conversion ("Conversion Agent"). The Registrar
shall keep a register of the Preferred Securities and of their transfer and
exchange. The Administrative Trustees may appoint the Registrar, the Paying
Agent and the Conversion Agent and may appoint one or more co-Registrars, one or
more additional
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paying agents and one or more additional conversion agents in such other
locations as it shall determine. The term "Paying Agent" includes any additional
paying agent and the term "Conversion Agent" includes any additional conversion
agent. The Administrative Trustees may change any Paying Agent, Registrar,
co-Registrar or Conversion Agent without prior notice to any Holder; provided
that the Administrative Trustees shall provide notice of such change to all
Holders promptly thereafter. The Administrative Trustees shall notify the
Property Trustee of the name and address of any Agent not a party to this
Declaration. If the Administrative Trustees fail to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Property Trustee
shall act as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar, or Conversion Agent. The Trust shall act as Paying Agent, Registrar,
co-Registrar, and Conversion Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar,
Paying Agent, and Conversion Agent for the Preferred Securities. The Property
Trustee shall also serve as Tender Agent and shall have the responsibilities of
such described in the Remarketing Agreement for so long as the Debentures are
held by the Property Trustee.
Section 1.43 Paying Agent to Hold Money in Trust. The Trust shall
require each Paying Agent other than the Property Trustee to agree in writing
that the Paying Agent will hold in trust for the benefit of Holders or the
Property Trustee all money held by the Paying Agent for the payment of principal
or distribution on the Securities, and will notify the Property Trustee if there
are insufficient funds. While any such insufficiency continues, the Property
Trustee may require a Paying Agent to pay all money held by it to the Property
Trustee. The Administrative Trustees at any time may require a Paying Agent to
pay all money held by it to the Property Trustee and to account for any money
disbursed by it. Upon payment over to the Property Trustee, the Paying Agent (if
other than the Trust or an Affiliate of the Trust) shall have no further
liability for the money. If the Trust or the Depositor or an Affiliate of the
Trust or the Depositor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.
Section 1.44 Replacement Securities. If the Holder of a Security
claims that the Security has been lost, destroyed or wrongfully taken or if such
Security is mutilated and is surrendered to the Trust or in the case of the
Preferred Securities to the Property Trustee, an Administrative Trustee on
behalf of the Trust shall issue and the Property Trustee shall authenticate a
replacement Security if the Property Trustee's and such Administrative Trustee's
requirements, as the case may be, are met. If required by the Property Trustee
or such Administrative Trustee, an indemnity bond must be sufficient in the
judgment of both to protect the Trustees, the Depositor or any authenticating
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agent from any loss which any of them may suffer if a Security is replaced. The
Depositor may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, or is about to be purchased by
the Depositor pursuant to Article IV hereof, the Depositor in its discretion
may, instead of the Trust's issuing a new Security, pay or purchase such
Security, as the case may be.
Every replacement Security is an additional obligation of the
Trust.
Section 1.45 Outstanding Preferred Securities. The Preferred
Securities outstanding at any time are all the Preferred Securities
authenticated by the Property Trustee except for those canceled by it, those
delivered to it for cancellation, and those described in this Section as not
outstanding.
If a Preferred Security is replaced, paid or purchased pursuant
to Section 7.06 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Preferred
Security is held by a protected purchaser (as such term is used in Section 8-405
of the Delaware Uniform Commercial Code).
If Preferred Securities are considered paid in full in accordance
with the terms of this Declaration, they cease to be outstanding and
Distributions on them ceases to accumulate.
A Preferred Security does not cease to be outstanding because one
of the Trust, the Depositor or an Affiliate of the Depositor holds the Security.
Section 1.46 Preferred Securities in Treasury. In determining
whether the Holders of the required amount of Securities have concurred in any
direction, waiver or consent, Preferred Securities owned by the Trust, the
Depositor or an Affiliate of the Depositor, as the case may be, shall be
disregarded and deemed not to be outstanding, except that for the purposes of
determining whether the Property Trustee shall be fully protected in relying on
any such direction, waiver or consent, only Securities which the Property
Trustee knows are so owned shall be so disregarded.
Section 1.47 Temporary Securities. Until definitive Securities
are ready for delivery, the Trust may prepare and, in the case of the Preferred
Securities, the Property Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Trust considers appropriate for temporary
Securities. Without unreasonable delay, the Trust
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shall prepare and deliver to the Property Trustee Preferred Securities in
certificated form (other than in the case of Preferred Securities in global
form) and thereupon any or all temporary Preferred Securities (other than any
such Preferred Securities in global form) may be surrendered in exchange
therefor, at the office of the Registrar, and the Property Trustee shall
authenticate and deliver an equal aggregate liquidation amount of definitive
Preferred Securities in certificated form in exchange for temporary Preferred
Securities (other than any such Preferred Securities in global form).
Section 1.48 Cancellation. Any Administrative Trustee on behalf
of the Trust at any time may deliver Preferred Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall
forward to the Property Trustee any Preferred Securities surrendered to them for
registration of transfer, redemption, conversion, exchange or payment. The
Property Trustee shall promptly cancel all Preferred Securities, surrendered for
registration of transfer, redemption, conversion, exchange, payment, replacement
or cancellation and shall return such canceled Preferred Securities to the
Administrative Trustees. The Trust may not issue new Preferred Securities to
replace Preferred Securities that it has paid or that have been delivered to the
Property Trustee for cancellation or that any Holder has converted.
ARTICLE VIII
Termination of Trust
Section 1.49 Dissolution of Trust. (a) The Trust shall dissolve
upon the earliest to occur of the following:
(1) the bankruptcy of the Holder of the Common
Securities or the Depositor;
(2) the filing of a certificate of dissolution or its
equivalent with respect to the Holder of the Common Securities or the
Depositor; the revocation of the charter of the Holder of the Common
Securities or the Depositor and the expiration of 90 days after the date
of revocation without a reinstatement thereof;
(3) a written direction of the Depositor to dissolve the
Trust and distribute a Like Amount of Debentures to Holders of the
Securities in accordance with the terms of the Securities;
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(4) all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the Securities;
(5) the expiration of the term of the Trust as set forth
in Section 3.14 hereof;
(6) the entry of a decree of judicial dissolution
of the Holder of the Common Securities, the Depositor or the Trust;
(7) upon distribution of the Common Stock of the
Depositor to Holders of all outstanding Securities upon conversion
of all such Securities; or
(8) before the issuance of any Securities, with
the consent of all the Administrative Trustees and the Depositor.
(2) As soon as is practicable after the occurrence of an event
referred to in Section 8.01(a), and after the completion of the winding up of
the affairs of the Trust, the Trustees shall file a certificate of cancellation
with the Secretary of State of the State of Delaware.
(3) The provisions of Section 3.09 and Article X shall survive
the termination of the Trust.
ARTICLE IX
Transfer and Exchange
Section 1.50 General.
(1) When Preferred Securities are presented to the Registrar or a
co-Registrar with a request to register a transfer or to exchange them for an
equal number of Preferred Securities represented by different certificates, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfers and
exchanges, the Administrative Trustees shall prepare and one Administrative
Trustee shall execute and the Property Trustee shall authenticate Preferred
Securities at the Registrar's request.
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(2) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
Subject to this Article IX, the Depositor and any Related Party
may only transfer Common Securities (i) in accordance with Article VIII of the
Indenture, or (ii) to the Depositor or a Related Party of the Depositor;
provided that, any such transfer is subject to the condition precedent that the
transferor obtain the written opinion of nationally recognized independent
counsel experienced in such matters that such transfer would not cause more than
an insubstantial risk that:
(1) the Trust would not be classified for United
States federal income tax purposes as a grantor trust; and
(2) the Trust would be an Investment Company or the
transferee would become an Investment Company.
(3) The Administrative Trustees shall provide for the
registration of Securities and of transfers of Securities, which will be
effected without charge but only upon payment (with such indemnity as the
Administrative Trustees may require) in respect of any tax or other governmental
charges that may be imposed in relation to it. Upon surrender for registration
of transfer of any Securities, the Administrative Trustees shall cause one or
more new Securities to be issued and authenticated by the Property Trustee in
the name of the designated transferee or transferees. Every Security surrendered
for registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Administrative Trustees duly executed by
the Holder or such Holder's attorney duly authorized in writing. Each Security
surrendered for registration of transfer shall be cancelled in accordance with
Section 7.10. A transferee of a Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Security. By acceptance of a Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.
(4) The Trust shall not be required (i) to issue, register the
transfer of, or exchange, Preferred Securities during a period beginning at the
opening of business 15 days before the day of any selection of Preferred
Securities for redemption set forth in the terms of the Securities as set forth
in Annex I hereto and ending at the close of business on the day of selection,
or (ii) to register the transfer or exchange of any Preferred Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Preferred Security being redeemed in part.
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(5) All Preferred Securities issued upon any transfer or exchange
pursuant to the terms of this Declaration shall evidence the same security and
shall be entitled to the same benefits under this Declaration as the Preferred
Securities surrendered upon such transfer or exchange.
Section 1.51 Transfer Procedures and Restrictions.
(1) General. Subject to Sections 9.02(b) and 9.02(h)(ii), if
Preferred Securities are issued upon the transfer, exchange or replacement of
Preferred Securities bearing the Restricted Securities Legend set forth in
Exhibit A-1 hereto, or if a request is made to remove such Restricted Securities
Legend on Preferred Securities, the Preferred Securities so issued shall bear
the Restricted Securities Legend, or the Restricted Securities Legend shall not
be removed, as the case may be, unless there is delivered to the Trust and the
Property Trustee such satisfactory evidence, which may include an opinion of
counsel licensed to practice law in the State of New York, as may be reasonably
required by the Depositor, that (i) neither the legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof comply
with the provisions of Rule 144A or (ii) that such Securities are not
"restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision of such satisfactory evidence, the Property Trustee, at the written
direction of the Trust, shall authenticate and deliver Preferred Securities that
do not bear the Restricted Securities Legend.
(2) Transfers After Effectiveness of Shelf Registration
Statement. After the effectiveness of a Shelf Registration Statement for any
Preferred Securities, all requirements pertaining to Restricted Securities
Legends on any Preferred Security included within such Shelf Registration
Statement will cease to apply, and beneficial interests in a Preferred Security
in global form without Restricted Securities Legends will be available to
transferees of such Preferred Securities upon directions to transfer such
Holder's beneficial interest in the Rule 144A Global Preferred Security. After
the effectiveness of the Shelf Registration Statement, an Administrative Trustee
on behalf of the Trust shall execute and the Property Trustee shall authenticate
a Preferred Security in global form without the Restricted Securities Legend
(the "Unrestricted Global Preferred Security") to deposit with the Depositary to
evidence transfers of beneficial interests from the Rule 144A Global Preferred
Security.
(3) Transfer and Exchange of Definitive Preferred Securities.
When Definitive Preferred Securities are presented to the Registrar or
co-Registrar
(x) to register the transfer of such
Definitive Preferred Securities; or
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(y) to exchange such Definitive Preferred
Securities for an equal number of Definitive
Preferred Securities of another denomination;
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Preferred Securities surrendered for
transfer or exchange:
(1) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the
Administrative Trustees and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writing.
(2) in the case of Definitive Preferred Securities that
are Restricted Preferred Securities, are being transferred or exchanged
(x) pursuant to an effective registration statement under the Securities
Act or (y) pursuant to, and in compliance with, clause (A) or (B) below:
(1) if such Restricted Preferred Securities are
being delivered to the Registrar by a Holder for registration in
the name of such Holder, without transfer, such Holder shall
deliver a certification to that effect (in the form set forth on
the reverse of the Preferred Security); or
(2) if such Restricted Preferred Securities are
being transferred pursuant to an exemption from registration in
accordance with Rule 144A under the Securities Act such Holder
shall deliver: (i) a certification to that effect (in the form
set forth on the reverse of the Preferred Security) and (ii) if
the Trust or Registrar so requests, evidence reasonably
satisfactory to them as to the compliance with the restrictions
set forth in the Restricted Securities Legend.
Definitive Preferred Securities that are transferred to QIBs in
accordance with Rule 144A under the Securities Act must be delivered to QIBs in
the form of a beneficial interest in the Rule 144A Global Preferred Security in
accordance with Section 9.02(d) except as otherwise provided in Section 7.03(d).
(4) Restrictions on Transfer of a Definitive Preferred Security
for a Beneficial Interest in a Global Preferred Security. A Definitive Preferred
Security may not be exchanged for a beneficial interest in a Global Preferred
Security except upon
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satisfaction of the requirements set forth below. Upon receipt by the Property
Trustee of a Definitive Preferred Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Property
Trustee, together with written instructions directing the Property Trustee to
make, or to direct the Depositary to make, an adjustment on its books and
records with respect to such Global Preferred Security to reflect an increase in
the number of the Preferred Securities represented by the Global Preferred
Security, then the Property Trustee shall cancel such Definitive Preferred
Security and cause, or direct the Depositary to cause, the aggregate number of
Preferred Securities represented by the Global Preferred Security to be
increased accordingly. If no Global Preferred Securities are then outstanding,
an Administrative Trustee on behalf of the Trust shall execute and the Property
Trustee shall authenticate, upon written order of any Administrative Trustee, an
appropriate number of Preferred Securities in global form.
(5) Transfer and Exchange of Global Preferred Securities. The
transfer and exchange of Global Preferred Securities or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Declaration (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor.
(6) Transfer of a Beneficial Interest in a Global Preferred
Security for a Definitive Preferred Security. Definitive Preferred Securities
issued in exchange for a beneficial interest in a Global Preferred Security
pursuant to this Section 9.02(f) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
Participants or indirect participants or otherwise, shall instruct the Property
Trustee. The Property Trustee shall deliver such Preferred Securities to the
Persons in whose names such Preferred Securities are so registered in accordance
with the instructions of the Depositary.
(7) Restrictions on Transfer and Exchange of Global Preferred
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in Section 7.03), a Global Preferred Security may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or another nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
(8) Legend.
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(1) Except as permitted by the following paragraph (ii),
each Preferred Security certificate evidencing the Global Preferred
Securities and the Definitive Preferred Securities (and all Preferred
Securities issued in exchange therefor or substitution thereof) shall
bear a legend the "Restricted Securities Legend") in substantially the
following form:
"EACH OF THE PREFERRED SECURITIES (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND EACH OF
THE PREFERRED SECURITIES AND ANY DEBENTURES ISSUED UPON EXCHANGE FOR THE
PREFERRED SECURITIES REPRESENTED HEREBY AND ANY COMMON STOCK ISSUABLE
UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF EACH OF THE PREFERRED SECURITIES
IS HEREBY NOTIFIED THAT THE SELLER OF EACH OF THE PREFERRED SECURITIES
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS PREFERRED SECURITY AGREES FOR THE BENEFIT OF
THE ISSUER AND THE COMPANY THAT (A) THIS PREFERRED SECURITY AND ANY
DEBENTURES OR COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (ii) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iii)
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
EACH OF THE PREFERRED SECURITIES FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
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(2) Upon any sale or transfer of a Restricted Preferred
Security (including any Restricted Preferred Security represented by a
Global Preferred Security) pursuant to Rule 144 under the Securities Act
or an effective registration statement under the Securities Act the
Registrar shall permit the Holder thereof to exchange such Restricted
Preferred Security for an interest in the Unrestricted Global Preferred
Security.
(9) Cancellation or Adjustment of Global Preferred Security. At
such time as all beneficial interests in a Global Preferred Security have either
been exchanged for Definitive Preferred Securities to the extent permitted by
the Declaration or redeemed, repurchased or cancelled in accordance with the
terms of this Declaration, such Global Preferred Security shall be returned to
the Depositary for cancellation or retained and cancelled by the Property
Trustee. At any time prior to such cancellation, if any beneficial interest in a
Global Preferred Security is exchanged for Definitive Preferred Securities,
Preferred Securities represented by such Global Preferred Security shall be
reduced and an adjustment shall be made on the books and records of the Property
Trustee (if it is then the Registrar for such Global Preferred Security) with
respect to such Global Preferred Security, by the Property Trustee or the
Registrar, to reflect such reduction.
(10) No Obligation of the Property Trustee.
(1) The Property Trustee shall have no responsibility or
obligation to any Preferred Security Beneficial Owner, a Participant in
the Depositary or other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any Participant thereof,
with respect to any ownership interest in the Preferred Securities or
with respect to the delivery to any Participant, Preferred Security
Beneficial Owner or other Person (other than the Depositary) of any
notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Preferred Securities. All notices
and communications to be given to the Holders and all payments to be
made to Holders under the Preferred Securities shall be given or made
only to or upon the order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Preferred Security).
The rights of Preferred Security Beneficial Owners in any Global
Preferred Security shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The
Property Trustee may conclusively rely and shall be fully protected in
relying upon information furnished by the Depositary or agent thereof
with respect to its Participants and any Preferred Security Beneficial
Owners.
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(2) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in any
Preferred Security (including any transfers between or among Depositary
Participants or Preferred Security Beneficial Owners in any Global
Preferred Security) other than to require delivery of such certificates
and other documentation or evidence as are expressly required by, and to
do so if and when expressly required by, the terms of this Declaration,
and to examine the same to determine substantial compliance as to form
with the express requirements hereof.
Section 1.52 Deemed Security Holders. The Trustees may treat the
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Property Trustee, the Registrar or a
co-Registrar shall have actual or other notice thereof.
Section 1.1
Section 1.53 Notices to Depositary. Whenever a notice or other
communication to the Preferred Security Holders is required under this
Declaration, the Administrative Trustees shall, in the case of any Global
Preferred Security, give all such notices and communications specified herein to
be given to the Preferred Security Holders to the Depositary and shall have no
notice obligations to the Preferred Security Beneficial Owners.
Section 1.54 Appointment of Successor Depositary. If the
Depositary elects to discontinue its services as securities depositary with
respect to the Preferred Securities, the Administrative Trustees may, in their
sole discretion, appoint a successor Depositary with respect to such Preferred
Securities.
ARTICLE X
Limitation of Liability of Holders of Securities, Trustees or Others
Section 1.55 Liability. (a) Except as expressly set forth in
this Declaration, the Securities Guarantee and the terms of the Securities, the
Depositor shall not be:
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(1) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(2) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(2) The Holder of the Common Securities shall be liable for all
of the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(3) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
Section 1.56 Exculpation. (a) No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(1) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
Section 1.57 Fiduciary Duty. (a) To the extent that, at law or in
equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of an Indemnified Person
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otherwise existing at law or in equity (other than the duties imposed on the
Property Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified Person.
(1) Unless otherwise expressly provided herein:
(1) whenever a conflict of interest exists or
arises between an Indemnified Person and any Covered Person; or
(2) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall
act in a manner that is, or provides terms that are, fair and reasonable
to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(2) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision
(1) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person; or
(2) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
Section 1.58 Indemnification. (a) To the fullest extent permitted
by applicable law, the Debenture Issuer shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage, liability, tax, penalty,
expense or claim of any
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kind or nature whatsoever incurred by such Indemnified Person by reason of the
creation, operation or termination of the Trust or any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of authority conferred on such Indemnified Person by this Declaration, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions. The Debenture Issuer shall be
entitled to participate in the defense of any action arising hereunder and, to
the extent it may wish, assume the defense thereof, with counsel satisfactory to
such Indemnified Persons (who shall not, except with the consent of the
Indemnified Persons, be counsel to the Debenture Issuer). Upon assuming such
defense, the Debenture Issuer shall not be liable for any legal or other
expenses subsequently incurred by such Indemnified Persons in connection with
the defense thereof, other than reasonable costs of investigation. The Debenture
Issuer shall not, without the prior written consent of the Indemnified Persons,
effect any settlement of any pending or threatened action in respect of which
any Indemnified Person is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Person unless such settlement (i)
includes an unconditional release of such Indemnified Person from all liability
on any claims that are the subject matter of such action and (ii) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act by or on behalf of an Indemnified Person.
(1) To the fullest extent permitted by applicable law, expenses
(including legal fees and expenses) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Debenture Issuer prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Debenture Issuer
of an undertaking by or on behalf of the Indemnified Person to repay such amount
if it shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 10.4(a). The indemnification shall survive
the termination of this Declaration.
Section 1.59 Outside Businesses. Any Covered Person, the
Depositor, the Delaware Trustee and the Property Trustee (subject to Section
5.03(c)) may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. None of the Depositor, any Covered Person, the Delaware Trustee,
the Administrative Trustees or the Property Trustee shall be obligated to
present
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any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken by
the Trust, and any Covered Person, the Depositor, the Delaware Trustee and the
Property Trustee shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Covered Person, the Delaware Trustee and
the Property Trustee may engage or be interested in any financial or other
transaction with the Depositor or any Affiliate of the Depositor, or may act as
depositary for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of the Depositor or its Affiliates.
ARTICLE XI
Accounting
Section 1.60 Fiscal Year. The fiscal year ("Fiscal Year") of the
Trust shall be the calendar year, or such other year as is required by the Code.
Section 1.61 Certain Accounting Matters.
(1) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The books of account
and the records of the Trust shall be examined by and reported upon as of the
end of each Fiscal Year by a firm of independent certified public accountants
selected by the Administrative Trustees.
(2) The Administrative Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss;
(3) The Administrative Trustees shall cause to be duly prepared and delivered to
each of the Holders of Securities, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a
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later date, the Administrative Trustees shall endeavor to deliver all such
statements within 30 days after the end of each Fiscal Year of the Trust.
(4) The Administrative Trustees shall cause to be duly prepared
and filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.
Section 1.62 Banking. The Administrative Trustees on behalf of
the Trust shall maintain one or more bank accounts in the name and for the sole
benefit of the Trust; provided, however, that all payments of funds in respect
of the Debentures held by the Property Trustee shall be made directly to the
Property Trustee Account and no other funds of the Trust shall be deposited in
the Property Trustee Account. The sole signatories for such accounts shall be
designated by the Administrative Trustees; provided, however, that the Property
Trustee shall designate the signatories for the Property Trustee Account.
Section 1.63 Withholding. The Trust and the Administrative
Trustees on behalf of the Trust shall comply with all withholding requirements
under United States federal, state and local law. The Administrative Trustees on
behalf of the Trust shall request, and the Holders shall provide to the
Administrative Trustees, such forms or certificates as are necessary to
establish an exemption from withholding with respect to each Holder, and any
representations and forms as shall reasonably be requested by the Administrative
Trustees on behalf of the Trust to assist it in determining the extent of, and
in fulfilling the Trust's withholding obligations. The Administrative Trustees
shall file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the extent
that the Trust is required to withhold and pay over any amounts to any authority
with respect to Distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited to
an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Administrative
Trustees on behalf of the Trust may reduce subsequent Distributions by the
amount of such withholding.
ARTICLE XII
Amendments and Meetings
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Section 1.64 Amendments. (a) Except as otherwise provided in this
Declaration or by any applicable terms of the Securities, this Declaration may
be amended from time to time by the Depositor, the Property Trustee and the
Administrative Trustees, without the consent of the Holders of the Securities,
(i) to cure any ambiguity, correct or supplement any provision in the
Declaration that may be inconsistent with any other provision, or to make any
other provisions with respect to ministerial matters or questions arising under
the Declaration, which shall not be inconsistent with the other provisions of
the Declaration, or (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
not be taxable as a corporation or will be classified for United States federal
income tax purposes as a grantor trust at all times that any Securities are
outstanding or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any Holder of Securities, and any such
amendments of the Declaration shall become effective when notice thereof is
given to the Holders of the Securities.
(1) Except as provided in (c) below, and the terms of the
Securities, this Declaration may be amended by the Trustees and the Depositor
with (i) the consent of Holders representing not less than a Majority in
liquidation amount of the outstanding Preferred Securities, and (ii) receipt by
the Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status as an "investment
company" under the Investment Company Act.
(2) Without the consent of each Holder of Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Securities of a specified
date or (ii) restrict the right of a Holder of Securities to institute suit for
the enforcement of any such payment on or after such date.
Section 1.65 Meetings of the Holders of Securities; Action by
Written Consent. (a) Meetings of the Holders of any class of Securities may be
called at any time by the Administrative Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration, the
terms of the Securities or the rules of any stock exchange on which the
Preferred Securities are listed or admitted for trading. Except as otherwise set
forth in the terms of the Securities, the Administrative Trustees shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 25% in
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liquidation amount of such class of Securities. Such direction shall be given by
delivering to the Administrative Trustees one or more requests in a writing
stating that the signing Holders of Securities wish to call a meeting and
indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a meeting shall specify in writing the
Certificates held by the Holders of Securities exercising the right to call a
meeting and only those Securities represented by the Certificates so specified
shall be counted for purposes of determining whether the required percentage set
forth in the second sentence of this paragraph has been met.
(1) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(1) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days and
not more than 60 days before the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is permitted or
required under this Declaration or the rules of any stock exchange on
which the Preferred Securities are listed or admitted for trading, such
vote, consent or approval may be given at a meeting of the Holders of
Securities. Any action that may be taken at a meeting of the Holders of
Securities may be taken without a meeting and without prior notice if a
consent in writing setting forth the action so taken is signed by the
Holders of Securities owning not less than the minimum aggregate
liquidation amount of Securities that would be necessary to authorize or
take such action at a meeting at which all Holders of Securities having
a right to vote thereon were present and voting. Prompt notice of the
taking of action without a meeting shall be given to the Holders of
Securities entitled to vote who have not consented in writing. The
Administrative Trustees may specify that any written ballot submitted to
the Holders for the purpose of taking any action without a meeting shall
be returned to the Trust within the time specified by the Administrative
Trustees;
(2) each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of Securities executing it. Except as otherwise provided herein,
all matters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial
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interpretations thereunder, as if the Trust were a Delaware corporation
and the Holders of the Securities were stockholders of a Delaware
corporation;
(3) each meeting of the Holders of the Securities shall be
conducted by the Administrative Trustees or by such other Person that
the Administrative Trustees may designate; and
(4) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules of
any stock exchange on which the Preferred Securities are then listed or
trading, provide otherwise, the Administrative Trustees, in their sole
discretion, shall establish all other provisions relating to meetings of
Holders of Securities, including notice of the time, place or purpose of
any meeting at which any matter is to be voted on by any Holders of
Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting
in person or by proxy or any other matter with respect to the exercise
of any such right to vote.
ARTICLE XIII
Representations of Property Trustee and Delaware Trustee
Section 1.66 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents and warrants to the
Trust and to the Depositor at the date of this Declaration, at the Closing Date
and at each Optional Closing Date, if any, and each Successor Property Trustee
represents and warrants to the Trust and the Depositor at the time of the
Successor Property Trustee's acceptance of its appointment as Property Trustee
that:
(1) The Property Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
(2) The execution, delivery and performance by the Property
Trustee of the Declaration have been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee, and constitutes a legal, valid
and binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws
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affecting creditors' rights generally and to general principles of equity and
the discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
(3) The execution, delivery and performance of the Declaration by
the Property Trustee do not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Property Trustee.
(4) No consent, approval or authorization of, or registration
with or notice to, any New York or federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the Declaration.
(e) The Property Trustee satisfies the qualifications set forth
in Section 5.03 and shall not create, incur or assume or suffer to exist any
mortgage, pledge, hypothecation, encumbrance, lien or other change or security
interest upon the Debentures.
Section 1.67 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Depositor at the date of this Declaration, at the Closing Date
and at each Optional Closing Date, if any, and each Successor Delaware Trustee
represents and warrants to the Trust and the Depositor at the time of the
Successor Property Trustee's acceptance of its appointment as Delaware Trustee
that:
(1) The Delaware Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
(2) The execution, delivery and performance by the Delaware
Trustee of the Declaration have been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. The Declaration has been duly
executed and delivered by the Delaware Trustee, and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
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(3) The execution, delivery and performance of the Declaration by
the Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Delaware Trustee.
(4) No consent, approval or authorization of, or registration
with or notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of the Declaration.
(5) The Delaware Trustee is an entity which has its principal
place of business in the State of Delaware.
(6) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration.
ARTICLE XIV
Registration Rights
Section 14.01. Registration Rights. The Holders of the Preferred
Securities, the Debentures, the Guarantee and the shares of Common Stock of the
Depositor issuable upon conversion of the Securities are entitled to the
benefits of a Registration Rights Agreement.
ARTICLE XV
Miscellaneous
Section 1.68 Notices. All notices provided for in this
Declaration shall be in writing, duly signed by the party giving such notice,
and shall be delivered, telecopied or mailed by registered or certified mail, as
follows:
(1) if given to the Trust, in care of the Administrative Trustees
at the Trust's mailing address set forth below (or such other address as the
Administrative Trustees may give notice of to the Holders of the Securities):
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Calpine Capital Trust II
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Secretary
(2) if given to the Property Trustee, at the mailing address set
forth below (or such other address as the Property Trustee may give notice of to
the Holders of the Securities):
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
(3) if given to the Delaware Trustee, at the mailing address set
forth below (or such other address as the Delaware Trustee may give notice of to
the Holders of the Securities):
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(4) if given to the Holder of the Common Securities, at the
mailing address of the Depositor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Secretary
(5) if given to any other Holder, at the address set forth on the
books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or
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other document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
Section 1.69 Governing Law. This Declaration and the rights of
the parties hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies shall be governed
by such laws without regard to principles of conflict of laws. Sections 3540 and
3561 of Title 12 of the Delaware Code shall not apply to the Trust. To the
fullest extent permitted by law, there shall not be applicable to the parties
hereunder or this Declaration any provision of the laws (statutory or common) of
the State of Delaware pertaining to trusts that relate to or regulate, in a
manner inconsistent with the terms hereof (A) the filing with any court or
governmental body or agency of trustee accounts or schedules of trustee fees and
charges, (B) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust, (C) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (D) fees or other sums payable to trustees, officers,
agents, or employees of a trust, (E) the allocation of receipts and expenditures
to income or principal, (F) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets or (G)
the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent with the
limitations or liabilities or authorities and powers of the trustees hereunder
as set forth or referenced in this Declaration.
Section 1.70 Intention of the Parties. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
Section 1.71 Headings. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
Section 1.72 Successors and Assigns. Whenever in this Declaration
any of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Declaration by the Depositor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
Section 1.73 Partial Enforceability. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held
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invalid, the remainder of this Declaration, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
Section 1.74 Counterparts. This Declaration may contain more than
one counterpart of the signature page and this Declaration may be executed by
the affixing of the signature of each of the Trustees to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has caused these presents to
be executed as of the day and year first above written.
Peter Cartwright,
as Administrative Trustee
------------------------------------
Ann B. Curtis,
as Administrative Trustee
------------------------------------
Thomas R. Mason,
as Administrative Trustee
------------------------------------
Calpine Corporation,
as Depositor and Debenture Issuer
By:
---------------------------------
Name:
Title:
The Bank of New York,
as Delaware Trustee
By:
---------------------------------
Name:
Title:
The Bank of New York,
as Property Trustee
By:
---------------------------------
Name:
Title:
<PAGE> 79
ANNEX I
TERMS OF
Remarketable Term Income Deferrable
Equity Securities (HIGH TIDES_) and
HIGH TIDES Common Securities
Pursuant to Section 7.01 of the Amended and Restated Declaration
of Trust, dated as of January 31, 2000 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration or the Indenture (as defined in the
Declaration) or, if not defined in the Declaration, Indenture or Remarketing
Agreement, as defined in the Offering Circular (as defined in the Declaration):
1. Designation and Number.
(a) "Preferred Securities." 7,200,000 (including 1,200,000 relating to
the exercise of the full amount of the option granted by the Trust) Preferred
Securities of the Trust with an aggregate liquidation preference with respect to
the assets of the Trust of THREE HUNDRED SEVENTY-ONE MILLION ONE HUNDRED
THIRTY-FOUR THOUSAND ONE HUNDRED Dollars ($371,134,100) (including SIXTY-ONE
MILLION EIGHT HUNDRED FIFTY-FIVE THOUSAND SEVEN HUNDRED Dollars ($61,855,700)
relating to the exercise of the full amount of the option granted by the Trust),
and a liquidation amount with respect to the assets of the Trust of $50 per
Preferred Security, are hereby designated for the purposes of identification
only as "Remarketable Term Income Deferrable Equity Securities (HIGH TIDES_)"
(the "Preferred Securities"). The Preferred Security Certificates evidencing the
Preferred Securities shall be substantially in the form attached hereto as
Exhibit A-1, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform to the rules
of any stock exchange or other organization on which the Preferred Securities
are listed, if any.
(b) "Common Securities." 222,682 (including 37,114 relating to the
exercise of the full amount of the option granted by the Trust) Common
Securities of the Trust with an aggregate liquidation amount with respect to the
assets of the Trust of ELEVEN MILLION ONE HUNDRED THIRTY-FOUR THOUSAND ONE
HUNDRED Dollars ($11,134,100) (including ONE MILLION EIGHT HUNDRED FIFTY-FIVE
THOUSAND SEVEN HUNDRED Dollars ($1,855,700) relating to the
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exercise of the full amount of the option granted by the Trust) and a
liquidation amount with respect to the assets of the Trust of $50 per Common
Security, are hereby designated for the purposes of identification only as "HIGH
TIDES Common Securities" (the "Common Securities"). The Common Security
Certificates evidencing the Common Securities shall be substantially in the form
attached hereto as Exhibit A-2, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will accrue at the Applicable
Rate applied to the stated liquidation amount of $50 per Security, such rate
being the rate of interest payable on the Debentures to be held by the Property
Trustee. The Applicable Rate will be 5_% per annum (the "Initial Rate") from
January 31, 2000 to but excluding the Reset Date. From the Reset Date, the
Applicable Rate will be the Term Rate established by the Remarketing Agent to be
effective on the Reset Date. The Applicable Rate will be increased by 0.50% per
annum during the continuation of a Registration Default until such Registration
Default is cured. Distributions in arrears for more than one quarter will bear
interest thereon compounded quarterly at the Applicable Rate (to the extent
permitted by applicable law) as described in the Declaration. The term
"Distributions" as used herein includes such quarterly Distributions, additional
Distributions on quarterly Distributions not paid on the applicable Distribution
Date and Additional Amounts, as applicable. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
(b) Distributions on the Securities will be cumulative, will accrue from
January 31, 2000 and will be payable quarterly in arrears, on the following
dates, which dates correspond to the interest payment dates on the Debentures:
February 1, May 1, August 1 and November 1 of each year, commencing on May 1,
2000, except as otherwise described below (each such date being a "Distribution
Date"). The Reset Date is any date (1) not later than February 1, 2005 (or, if
such day is not a Business Day, the next succeeding Business Day), and (2) not
earlier than 70 Business Days prior to February 1, 2005, as may be determined by
the Remarketing Agent, in its sole discretion, for settlement of a successful
remarketing. The fifteenth day of the month immediately preceding each
Distribution Date is the record date for determining which
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holders of Securities shall be paid the Distributions and Additional Amounts, if
any, payable on such Distribution Date. If the Reset Date is prior to the record
date for the immediately following Distribution Date, then Distributions and
Additional Amounts, if any, accrued from and after the Reset Date to but
excluding the immediately following Distribution Date shall be paid on such
Distribution Date to the person in whose name each Security is registered on the
relevant record date, subject to our right to initiate a Deferral Period. If the
Reset Date is on or after the record date for the immediately following
Distribution Date, then (1) Distributions and Additional Amounts, if any,
accrued from and after the record date to but excluding the Reset Date shall be
paid on the immediately following Distribution Date to the person in whose name
each Security is registered on the relevant record date and (2) Distributions
and Additional Amounts, if any, accrued from and after the Reset Date to but
excluding the immediately following Distribution Date shall be paid on the
second Distribution Date immediately following the Reset Date to the person in
whose name each Security is registered on the relevant record date for such
second Distribution Date, subject in each case to our right to initiate a
Deferral Period.
So long as no Debenture Event of Default has occurred and is continuing,
the Depositor has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for a
period not exceeding 20 consecutive quarters (each a "Deferral Period") and, as
a consequence of such deferral, Distributions will also be deferred. Despite
such deferral, quarterly Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at the Applicable Rate
compounded quarterly during any such Deferral Period. Prior to three Business
Days before a Regular Record Date relating to a Payment Resumption Date (as
defined in the Indenture), the Depositor may further extend such Deferral
Period; provided that such Deferral Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarters or extend
beyond (i) the maturity (whether at the stated maturity or by declaration of
acceleration, call for redemption or otherwise) of the Debentures under the
Indenture and (ii) in the case of a Deferral Period which begins prior to the
Reset Date, the Reset Date. Payments of accrued Distributions will be payable to
Holders as they appear on the books and records of the Trust on the Regular
Record Date for the relevant Payment Resumption Date. Upon the termination of
any Deferral Period and the payment of all amounts then due, the Depositor may
commence a new Deferral Period, subject to the above requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust at the close of
business on the relevant record dates. The relevant record dates shall be on the
fifteenth day of the month immediately preceding each relevant payment date,
except as otherwise described in this Annex I to the Declaration. Subject to any
applicable laws and
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regulations and the provisions of the Declaration, each such payment in respect
of Preferred Securities being held in book-entry form through The Depository
Trust Company (the "Depositary"), or any successor Depositary appointed pursuant
to the Declaration, will be made as described under the heading "Description of
HIGH TIDES -- Form, Book-Entry Procedures and Transfer" in the Offering
Circular. The relevant record dates for the Common Securities shall be the same
record dates as for the Preferred Securities. Distributions payable on any
Securities that are not punctually paid on any Distribution payment date, as a
result of the Depositor having failed to make a payment under the Debentures,
will cease to be payable to the Person in whose name such Securities are
registered on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered on
the special record date or other specified date determined in accordance with
the Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distribution payable on such date
will be made on the next succeeding day that is a Business Day (and without any
additional Distributions or other payment in respect of any such delay) except
that, with respect to any Redemption Date, if such Business Day is in the next
succeeding calendar year, such Redemption Date shall be the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(d) In the event of an election by the Holder to convert its Securities
through the Conversion Agent into Common Stock pursuant to the terms of the
Securities as forth in this Annex I to the Declaration, no payment, allowance or
adjustment shall be made with respect to accumulated and unpaid Distributions on
such Securities, or be required to be made; provided that Holders of Securities
at the close of business on any record date for the payment of Distributions
will be entitled to receive the Distributions payable on such Securities on the
corresponding payment date notwithstanding the conversion of such Securities
into Common Stock following such record date.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution of the Trust,
the Trust shall be liquidated by the Trustees as expeditiously as the Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders of the
Securities a Like Amount of Debentures, unless such distribution would not be
practical, in which event such Holders will
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be entitled to receive out of the assets of the Trust available for distribution
to Holders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the aggregate liquidation amount
thereof plus accrued and unpaid Distributions thereon to the date of payment
(such amount being the "Liquidation Distribution"). If such Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Securities shall be paid on a Pro
Rata basis in accordance with paragraph 9. The Holder of the Common Securities
will be entitled to receive Distributions upon any such liquidation Pro Rata
with the Holders of the Preferred Securities, except as provided in paragraph
10.
4. Redemption and Distribution.
(a) Upon the repayment or payment of the Debentures in whole or in part,
whether at maturity or upon redemption or otherwise (other than following any
distribution of the Debentures to the Holders), the proceeds from such repayment
or redemption shall be simultaneously applied to redeem, on a Pro Rata basis, a
Like Amount of Securities, on the redemption date, in an amount per Security
equal to the applicable Redemption Price, payable in cash, which Redemption
Price will be equal to (i) the liquidation amount of each of the Securities plus
any accrued and unpaid Distributions thereon (A) in the case of the repayment of
the Debentures at stated maturity, or (B) in the case of a redemption of the
Debentures in certain limited circumstances set forth in the Indenture upon the
occurrence of a Tax Event, or (ii) (A) in the case of an Optional Redemption
after February 5, 2003 until but excluding the Tender Notification Date, the
Initial Redemption Price; (B) in the case of an Optional Redemption on or after
the Reset Date (except in the event of a Failed Final Remarketing), in
accordance with the Term Call Protections or (C) in the event of a Failed Final
Remarketing, 100% of the then outstanding aggregate principal amount of the
Securities being redeemed, plus accrued and unpaid interest thereon.
(b) If fewer than all the outstanding Securities are to be so redeemed,
the Common Securities and the Preferred Securities will be redeemed Pro Rata and
the Preferred Securities to be redeemed will be as described in Paragraph
4(f)(ii) below.
(c) The Depositor, as the Holder of the outstanding Common Securities,
shall have the right at any time (including, without limitation, upon the
occurrence of a Tax Event or Investment Company Event) to dissolve the Trust
and, after satisfaction of the creditors of the Trust, cause a Like Amount of
the Debentures to be distributed to the Holders of the Securities in liquidation
of the Trust, provided that neither the Depositor nor the Administrative
Trustees may cause the dissolution of the Trust during the period beginning on
the Business Day following the Tender Notification
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Date and ending on the Reset Date (other than upon the occurrence of a Tax Event
or an Investment Company Event), provided that the Administrative Trustees shall
have received a No Recognition Opinion (as defined below) prior to the
dissolution of the Trust.
(d) If, at any time, a Tax Event shall occur and be continuing the
Depositor shall cause the Trustees to dissolve the Trust and, after satisfaction
of the creditors of the Trust, cause a Like Amount of Debentures to be
distributed to the Holders of the Securities in liquidation of the Trust within
90 days following the occurrence of such Tax Event; provided, however, that such
dissolution, liquidation and distribution shall be conditioned on (i) the
Trustees' receipt of an opinion of a nationally recognized independent tax
counsel (reasonably acceptable to the Trustees) experienced in such matters (a
"No Recognition Opinion"), which opinion may rely on published revenue rulings
of the Internal Revenue Service, to the effect that the Holders of the Preferred
Securities will not recognize any income, gain or loss for United States federal
income tax purposes as a result of such dissolution and distribution of
Debentures, and (ii) the Depositor being unable to avoid such Tax Event within
such 90-day period by taking some ministerial action or pursuing some other
reasonable measure that, in the sole judgment of the Depositor, will have no
adverse effect on the Trust, the Depositor or the Holders of the Preferred
Securities and will involve no material cost ("Ministerial Action").
If (i) the Depositor has received an opinion (a "Redemption Tax Opinion")
of a nationally recognized independent tax counsel (reasonably acceptable to the
Trustees) experienced in such matters that, as a result of a Tax Event, there is
more than an insubstantial risk that (a) the Trust would not be considered to be
a grantor trust for United States federal income tax purposes or (b) the
Depositor would be precluded from deducting the interest on the Debentures for
United States federal income tax purposes, even after the Debentures were
distributed to the Holders of Securities upon liquidation of the Trust as
described in this paragraph 4(d), or (ii) the Trustees shall have been informed
by such tax counsel that it cannot deliver a No Recognition Opinion, the
Depositor shall have the right, upon not less than 30 nor more than 60 days'
notice, and within 90 days following the occurrence and continuation of such Tax
Event, to redeem the Debentures in whole, but not in part, for cash, for the
principal amount plus accrued and unpaid interest thereon and, following such
redemption, all the Securities will be redeemed by the Trust at the liquidation
amount of $50 per Security plus accrued and unpaid Distributions thereon;
provided, however, that, if at the time there is available to the Depositor or
the Trust the opportunity to eliminate, within such 90-day period, the Tax Event
by taking some Ministerial Action, the Trust or the Depositor will pursue such
Ministerial Action in lieu of redemption.
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In lieu of the foregoing options, the Depositor shall also have the
option of causing the Securities to remain outstanding and pay Additional
Amounts on the Debentures.
"Tax Event" means that the Property Trustee shall have received an
opinion of a nationally recognized independent tax counsel to the Depositor
(reasonably acceptable to the Trustees) experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (i) any amendment
to, or change (including any announced prospective change (which shall not
include a proposed change), provided that a Tax Event shall not occur more than
90 days before the effective date of any such prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority therefor or therein, (ii) any judicial decision
or official administrative pronouncement, ruling, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (iii) any amendment to
or change in the administrative position or interpretation of any Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case, by any legislative body, court, governmental agency or
regulatory body, irrespective of the manner in which such amendment or change is
made known, which amendment or change is effective or such Administrative Action
or decision is announced, in each case, on or after the date of original
issuance of the Debentures or the issue date of the Preferred Securities issued
by the Trust, there is more than an insubstantial risk that (a) if the
Debentures are held by the Property Trustee, (x) the Trust is, or will be within
90 days of the date of such opinion, subject to United States federal income tax
with respect to interest accrued or received on the Debentures or subject to
more than a de minimis amount of other taxes, duties or other governmental
charges as determined by such counsel, or (y) any portion of interest payable by
the Depositor to the Trust (or OID accruing) on the Debentures is not, or within
90 days of the date of such opinion will not be, deductible by the Depositor in
whole or in part for United States federal income tax purposes or (b) with
respect to Debentures which are no longer held by the Property Trustee, any
portion of interest payable by the Depositor (or OID accruing) on the Debentures
is not, or within 90 days of the date of such opinion will not be, deductible by
the Depositor in whole or in part for United States federal income tax purposes.
If an Investment Company Event (as hereinafter defined) shall occur and
be continuing, the Depositor shall cause the Trustees to dissolve the Trust and,
after satisfaction to creditors of the Trust, cause a Like Amount of the
Debentures to be distributed to the Holders of the Securities in liquidation of
the Trust within 90 days following the occurrence of such Investment Company
Event.
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"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), to the effect that the Trust is or will
be considered an Investment Company which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective on or
after the date of the Offering Circular.
After the date fixed for any distribution of Debentures: (i) the
Securities will no longer be deemed to be outstanding, (ii) the Depositary or
its nominee (or any successor Depositary or its nominee), as record Holder of
Preferred Securities represented by global certificates, will receive a
registered global certificate or certificates representing the Debentures to be
delivered upon such distribution and (iii) any certificates representing
Securities, except for certificates representing Preferred Securities held by
the Depositary or its nominee (or any successor Depositary or its nominee), will
be deemed to represent Debentures having an aggregate principal amount equal to
the aggregate stated liquidation amount of such Securities, with accrued and
unpaid interest equal to accrued and unpaid Distributions on such Securities
until such certificates are presented to the Depositor or its agent for transfer
or reissuance.
(e) The Securities will not be redeemed unless all accrued and unpaid
Distributions have been paid on all Securities for all quarterly Distribution
periods terminating on or before the date of redemption.
(f) Redemption, Distribution and Remarketing Procedures.
(1) Holders will be given not less than 20 nor more than 60 days
notice of an Optional Redemption. Holders will be given at least 30 days
but not more than 60 days notice of a redemption pursuant to paragraph
4(d). Notice of distribution of Debentures in exchange for the Securities
will be given by the Administrative Trustees on behalf of the Trust by
mail to each Holder of Securities to be exchanged not fewer than 30 nor
more than 60 days before the date fixed for exchange thereof. For
purposes of the calculation of the date of redemption or exchange and the
dates on which notices are given pursuant to this paragraph 4(f)(i)
(other than notices in connection with a Remarketing, the terms of which
shall be governed by the Remarketing Agreement), a redemption or
distribution notice shall be deemed to be given on the day such notice is
first mailed by first-class
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mail, postage prepaid, to Holders of Securities. Each redemption or
distribution notice shall be addressed to the Holders of Securities at
the address of each such Holder appearing in the books and records of the
Trust. No defect in the redemption or distribution notice or in the
mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any
other Holder.
(2) In the event that fewer than all the outstanding Securities
are to be redeemed, the Securities to be redeemed shall be redeemed Pro
Rata from each Holder of Securities, it being understood that, in respect
of Preferred Securities registered in the name of and held of record by
the Depositary (or any successor Depositary) or any nominee, the
distribution of the proceeds of such redemption will be made to each
Participant (or Person on whose behalf such nominee holds such
securities) in accordance with the procedures applied by such agency or
nominee.
(3) If Securities are to be redeemed and the Administrative
Trustees on behalf of the Trust gives a redemption or distribution
notice, which notice may only be issued if the Debentures are redeemed as
set out in this paragraph 4 (which notice will be irrevocable), then (A)
with respect to Preferred Securities held in book-entry form, by 10:00
a.m., New York City time, on the redemption date, to the extent funds are
available, with respect to Preferred Securities held in global form, the
Property Trustee will deposit irrevocably with the Depositary (or
successor Depositary) funds sufficient to pay the amount payable on
redemption with respect to such Preferred Securities and will give the
Depositary irrevocable instructions and authority to pay the amount
payable on redemption to the Holders of such Preferred Securities, and
(B) with respect to Preferred Securities issued in certificated form and
Common Securities, to the extent funds are available, the Property
Trustee will irrevocably deposit with the Paying Agent funds sufficient
to pay the amount payable on redemption to the Holders of such Securities
and will give the Paying Agent irrevocable instructions and authority to
pay the amount payable on redemption to the Holders thereof upon
surrender of their certificates. If a redemption or distribution notice
shall have been given and funds deposited as required, then on the date
of such deposit, all rights of Holders of such Securities so called for
redemption will cease, except the right of the Holders of such Securities
to receive the Redemption Price, but without
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interest on such Redemption Price, and such Securities will cease to be
outstanding. Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any
Securities that have been so called for redemption. If any date fixed for
redemption of Securities is not a Business Day, then payment of the
amount payable on such date will be made on the next succeeding day that
is a Business Day (without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on
such date fixed for redemption. If payment of the Redemption Price in
respect of any Securities is improperly withheld or refused and not paid
either by the Trust or by the Depositor as guarantor pursuant to the
relevant Securities Guarantee, Distributions on such Securities will
continue to accrue at the then applicable rate, from the original
redemption date to the date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the amount payable upon redemption (other than for purposes
of calculating any premium).
(4) Redemption and/or distribution notices, as applicable, shall
be sent by the Administrative Trustees on behalf of the Trust to (A) in
the case of Preferred Securities held in book-entry form, the Depositary
and, in the case of Preferred Securities held in certificated form, the
Holders of such certificates and (B) in respect of the Common Securities,
the Holder thereof.
(5) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), the Depositor
or any of its subsidiaries may at any time and from time to time purchase
outstanding Preferred Securities, including by tender, in the open market
or by private agreement; provided that neither the Depositor nor any of
its Affiliates may purchase Preferred Securities on the Reset Date or
submit orders in the Remarketing.
5. Conversion Rights.
The Holders of Securities shall have the right at any time prior to 5:00
p.m., New York City time, on the Tender Notification Date and, in the event of a
Convertible Remarketing or a Final Failed Remarketing, from and after the Reset
Date to and including February 1, 2030 (except that Securities called for
redemption by the
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Depositor will be convertible at any time prior to 5:00 p.m., New York City time
on any Redemption Date), at their option, to cause the Conversion Agent to
convert Securities, on behalf of the converting Holders, into shares of Common
Stock (as defined in the Indenture) in the manner described herein on and
subject to the following terms and conditions:
(a) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Common Stock pursuant to the
Holder's direction to the Conversion Agent to exchange such Securities for a
portion of the Debentures theretofore held by the Trust on the basis of one
Security per $50 principal amount of Debentures, and immediately convert such
amount of Debentures into fully paid and nonassessable shares of Common Stock on
or prior to the Tender Notification Date, into 0.4881 shares of Common Stock per
$50 principal amount of Debentures (which is equivalent to a conversion price of
$102.4375 per share of Common Stock, subject to certain adjustments set forth in
the Indenture (as so adjusted, "Initial Conversion Price")). On and after the
Reset Date, the Securities may, at the option of the Trust and subject to the
results of the Remarketing, become nonconvertible or convertible into a
different number of shares of Common Stock.
(b) In order to convert Securities into Common Stock the Holder shall
submit to the Conversion Agent at the office referred to above an irrevocable
request to convert Securities on behalf of such Holder (the "Conversion
Request"), together, if the Securities are in certificated form, with such
certificates. The Trust shall not cause the conversion of any Debentures except
pursuant to such a Conversion Request. The Conversion Request shall (i) set
forth the number of Securities to be converted and the name or names, if other
than the Holder, in which the shares of Common Stock should be issued and (ii)
direct the Conversion Agent (a) to exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange specified in the preceding
paragraph) and (b) to immediately convert such Debentures on behalf of such
Holder, into Common Stock (at the conversion rate specified in the preceding
paragraph). The Conversion Agent shall notify the Property Trustee of the
Holder's election to exchange Securities for a portion of the Debentures held by
the Trust and the Property Trustee shall, upon receipt of such notice, deliver
to the Conversion Agent the appropriate principal amount of Debentures for
exchange in accordance with this Section 5. The Conversion Agent shall thereupon
notify the Depositor of the Holder's election to convert such Debentures into
shares of Common Stock. Holders of Securities at the close of business on a
Distribution record date will be entitled to receive the Distribution payable on
such Securities on the corresponding Distribution payment date notwithstanding
the conversion of such Securities following such record date but prior to such
distribution payment date. Except as provided above, neither the Trust nor the
Depositor will make, or be required to make, any payment, allowance or
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adjustment upon any conversion on account of any accumulated and unpaid
Distributions accrued on the Securities, whether or not in arrears, (including
any Additional Amounts accrued thereon) surrendered for conversion, or on
account of any accumulated and unpaid dividends on the shares of Common Stock
issued upon such conversion, except to the extent that such shares are held of
record on the record date for any such Distributions. Securities shall be deemed
to have been converted immediately prior to the close of business on the day on
which a Notice of Conversion relating to such Securities is received by the
Trust in accordance with the foregoing provision (the "Conversion Date"). The
Person or Persons entitled to receive the Common Stock issuable upon conversion
of the Debentures shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on or
after the Conversion Date, the Depositor shall issue and deliver at the office
of the Conversion Agent a certificate or certificates for the number of full
shares of Common Stock issuable upon such conversion, together with the cash
payment, if any, in lieu of any fraction of any share to the Person or Persons
entitled to receive the same, unless otherwise directed by the Holder in the
notice of conversion and the Conversion Agent shall distribute such certificate
or certificates to such Person or Persons.
(c) Each Holder of a Security by his acceptance thereof appoints The Bank
of New York "Conversion Agent" for the purpose of effecting the conversion of
Securities in accordance with this Section 5. In effecting the conversion and
transactions described in this Section 5, the Conversion Agent shall be acting
as agent of the Holders of Securities directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to exchange
Securities from time to time for Debentures held by the Trust in connection with
the conversion of such Securities in accordance with this Section 5 and (ii) to
convert all or a portion of the Debentures into Common Stock and thereupon to
deliver such shares of Common Stock in accordance with the provisions of this
Section and to deliver to the Trust a new Debenture or Debentures for any
resulting unconverted principal amount.
(d) No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, such fractional interest will be paid in cash
by the Depositor to the Trust, which in turn will make such payment to the
Holder or Holders of Securities so converted.
(e) The Depositor shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of the Debentures, free from any preemptive or other similar rights,
such number of shares of Common Stock as shall from time to time be issuable
upon the conversion of all the Debentures then outstanding. Notwithstanding the
foregoing, the Depositor
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shall be entitled to deliver upon conversion of Debentures, shares of Common
Stock reacquired and held in the treasury of the Depositor (in lieu of the
issuance of authorized and unissued shares of Common Stock), so long as any such
treasury shares are free and clear of all liens, charges, security interests or
encumbrances. Any shares of Common Stock issued upon conversion of the
Debentures shall be duly authorized, validly issued and fully paid and
nonassessable. The Property Trustee shall deliver the shares of Common Stock
received upon conversion of the Debentures to the converting Holder free and
clear of all liens, charges, security interests and encumbrances, except for
United States withholding taxes. Each of the Depositor and the Administrative
Trustees on behalf of the Trust shall prepare and shall use its best efforts to
obtain and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all applicable
requirements as to registration or qualification of the Common Stock (and all
requirements to list the Common Stock issuable upon conversion of Debentures
that are at the time applicable), in order to enable the Depositor to lawfully
issue Common Stock to the Trust upon conversion of the Debentures and the Trust
to lawfully deliver the Common Stock to each Holder upon conversion of the
Securities.
(f) The Depositor will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Debentures and the delivery of the shares of Common Stock by the Trust upon
conversion of the Securities. The Depositor shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that in which
the Securities so converted were registered, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the Trust
the amount of any such tax, or has established to the satisfaction of the Trust
that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the requirement of
the Trust to withhold taxes pursuant to the terms of the Securities set forth in
this Annex I to the Declaration or in the Declaration itself or otherwise
require the Property Trustee or the Trust to pay any amounts on account of such
withholdings.
6. Voting Rights - Preferred Securities.
(a) Except as provided under paragraphs 6(b) and 8, as otherwise required
by law, the Declaration and the Indenture, the Holders of the Preferred
Securities will have no voting rights.
(b) In addition to the rights of the Holders of the Preferred Securities
with respect to the enforcement of payment of principal and interest on the
Debentures set
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forth herein, in the Declaration or in the Indenture, if (i) a Debenture Event
of Default occurs and is continuing or (ii) the Depositor defaults under the
Preferred Securities Guarantee (each of (i) and (ii) being an "Appointment
Event"), then the Holders of the Preferred Securities, acting as a single class,
will be entitled by the vote of a Majority in liquidation amount of the
Preferred Securities to appoint a Special Trustee in accordance with Section
5.06(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other
than the Depositor, or any entity directly or indirectly controlling or
controlled by or under direct or indirect common control with the Depositor)
will be entitled to nominate any Person to be appointed as Special Trustee. Not
later than 30 days after such right to appoint a Special Trustee arises, the
Trustees (other than the Delaware Trustee) will convene a meeting for the
purpose of appointing a Special Trustee. If the Trustees fail to convene such
meeting within such 30-day period, the Holders of not less than 10% in aggregate
liquidation amount of the Preferred Securities will be entitled to convene such
meeting in accordance with Section 12.02 of the Declaration. The record date for
such meeting will be the close of business on the Business Day that is one
Business Day before the day on which notice of the meeting is sent to the
Holders. The provisions of the Declaration relating to the convening and conduct
of the meetings of the Holders will apply with respect to any such meeting.
Any Special Trustee so appointed shall cease to be a Special Trustee if
the Appointment Event pursuant to which the Special Trustee was appointed and
all other Appointment Events cease to be continuing. A Special Trustee may be
removed without cause at any time by vote of the Holders of a Majority in
liquidation amount of the Preferred Securities at a meeting of the Holders of
the Preferred Securities in accordance with Section 5.06(ii)(B) of the
Declaration. The Holders of 10% in liquidation amount of the Preferred
Securities will be entitled to convene such a meeting in accordance with Section
12.02 of the Declaration. The record date for such meeting will be the close of
business on the Business Day which is one Business Day before the day on which
the notice of meeting is sent to Holders. Notwithstanding the appointment of a
Special Trustee, the Depositor shall retain all rights under the Indenture,
including the right to defer payments of interest by extending the interest
payment period on the Debentures.
Subject to the requirements set forth in this paragraph and as long as
the Debentures are held by the Trust, the Holders of a majority in liquidation
amount of the outstanding Preferred Securities, voting separately as a class
may, and the Trustees shall not, without obtaining the prior approval of the
Holders of a Majority in aggregate liquidation amount of all Preferred
Securities (i) direct the time, method, and place of conducting any proceeding
for any remedy available to the Property Trustee under the Indenture, or
executing any trust or power conferred upon the Property Trustee with respect to
the Debentures, (ii) waive any past default and its conse-
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quences that is waivable under Section 5.14 of the Indenture or otherwise, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where such
consent shall be required, provided, however, that, where a consent under the
Indenture would require the consent or act of the Holders of greater than a
majority in principal amount of Debentures affected thereby (a "Super
Majority"), the Property Trustee may only give such consent or take such action
at the direction of the Holders of at least the proportion in liquidation
preference of the Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding. The
Property Trustee shall not, and none of the other Trustees shall in any event,
revoke any action previously authorized or approved by a vote of the Holders of
the Preferred Securities, except by a subsequent vote of the Holders of the
Preferred Securities. Other than with respect to directing the time, method and
place of conducting any remedy available to the Property Trustee or the
Debenture Trustee as set forth above, the Property Trustee shall not take any
action in accordance with the directions of the Holders of the Preferred
Securities under this paragraph unless the Property Trustee has obtained an
opinion of tax counsel experienced in such matters to the effect that, as a
result of such action, the Trust will not fail to be classified as a grantor
trust for United States federal income tax purposes.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption on the redemption
date), then a Holder of Preferred Securities may directly institute a legal
proceeding, subject to the terms of the Indenture (including the subordination
provisions set forth in Article XII thereof), for enforcement of payment to such
Holder (a "Direct Action") of the principal of or interest on the Debentures
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such Holder on or after the respective due date
specified in the Debentures. Except as provided in the preceding sentence, the
Holders of Preferred Securities will not be able to exercise directly any other
remedy available to the Holders of the Debentures. In connection with any Direct
Action, the Holder of the Common Securities will be subrogated to the rights of
such Holder of Preferred Securities under the Declaration to the extent of any
payment made by the Debenture Issuer to such Holder of Preferred Securities in
such Direct Action. In addition, if the Property Trustee fails to enforce its
rights under the Debentures (other than rights arising from an Event of Default
described in the immediately preceding sentence) after any Holder of Preferred
Securities shall have made a written request to the Property Trustee to enforce
such rights, such Holder of Preferred Securities may, to the fullest extent
permitted by law, institute a direct action on behalf of the Trust to
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enforce the rights of the Debenture Trustee, the Property Trustee or any other
Person in accordance with the terms of the Indenture or the Declaration, as the
case may be.
Any approval or direction of Holders of Preferred Securities may be given
at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which Holders without prior notice of Preferred Securities are
entitled to vote, to be mailed to each Holder of record of Preferred Securities.
Each such notice will include a statement setting forth the following
information (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Depositor, the Trustees or any Affiliate of the
Depositor or the Trustee shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding,
except that for the purposes of determining whether the Property Trustee shall
be fully protected in relying on any such direction, waiver or consent, only
Securities which the Property Trustee knows are so owned shall be so
disregarded.
7. Voting Rights - Common Securities.
(a) Except as provided under paragraphs 7(b), (c) and 8, in the Business
Trust Act and as otherwise required by law and the Declaration, the Holders of
the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace any Trustee,
subject to the exclusive right of the Holders of the Preferred Securities to
appoint, remove or replace a Special Trustee unless a Debenture Event of Default
shall have occurred and be continuing, in which event the Property Trustee and
the Delaware Trustee may only be removed by the Holders of a Majority in
liquidation amount of the Preferred Securities, voting as a class at a meeting
of the Holders of the Preferred Securities; and
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(c) Subject to Section 2.06 of the Declaration and only after the Event
of Default with respect to the Preferred Securities has been cured, waived, or
otherwise eliminated and subject to the requirements of the second to last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the Property
Trustee under the Declaration, including (i) directing the time, method, place
of conducting any proceeding for any remedy available to the Debenture Trustee,
or exercising any trust or power conferred on the Debenture Trustee with respect
to the Debentures, (ii) waive any past default and its consequences that is
waivable under Section 5.14 of the Indenture, or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable, provided that, where a consent or action under the Indenture
would require the consent or act of the Holders of greater than a majority in
principal amount of Debentures affected thereby (a "Super Majority"), the
Property Trustee may only give such consent or take such action at the direction
of the Holders of at least the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Pursuant to this paragraph 7(c),
the Property Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Preferred Securities, except by a
subsequent vote of the Holders of the Preferred Securities. Other than with
respect to directing the time, method and place of conducting any remedy
available to the Property Trustee or the Debenture Trustee as set forth above,
the Property Trustee shall not take any action in accordance with the directions
of the Holders of the Common Securities under this paragraph unless the Property
Trustee has obtained an opinion of tax counsel to the effect that, as a result
of such action the Trust will not fail to be classified as a grantor trust for
United States federal income tax purposes. If the Property Trustee fails to
enforce its rights under the Debentures after any Holder of Common Securities
shall have made a written request to the Property Trustee to enforce such
rights, such Holder of Common Securities may, to the fullest extent permitted by
law, institute a legal proceeding directly against the Depositor, to enforce the
Property Trustee's rights, as holder of the Debentures, under the Indenture,
without first instituting any legal proceeding against the Property Trustee or
any other Person.
Any approval or direction of Holders of Common Securities may be given at
a separate meeting of Holders of Common Securities convened for such purpose, at
a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent without prior notice. The Administrative Trustees will cause a
notice of any meeting at which Holders of Common Securities are entitled to vote
to be mailed to each Holder of record of Common Securities. Each such notice
will include a statement setting forth (i) the date of such meeting, (ii) a
description of any resolution proposed
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for adoption at such meeting on which such Holders are entitled to vote and
(iii) instructions for the delivery of proxies.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.01 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Administrative Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or rights of the Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in Section 8.01
of the Declaration, then the Holders of outstanding Securities will be entitled
to vote on such amendment or proposal (but not on any other amendment or
proposal) and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in liquidation amount of the
Securities, voting together as a single class, provided, however, that, the
rights of Holders of Preferred Securities under Article V of the Declaration to
appoint, remove or replace a Special Trustee shall not be amended without the
consent of each Holder of Preferred Securities; and provided further that if any
amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a Majority in liquidation amount of such class of Securities.
(b) In the event the consent of the Property Trustee as the holder of the
Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the direction of the Holders of the Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by at least
the same proportion in aggregate stated liquidation preference of the
Securities; provided, however, that the Property Trustee shall not take any
action in accordance with the directions of the Holders of the Securities under
this paragraph 8(b) unless the Property Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States federal income tax
the Trust will not be classified as other than a grantor trust on account of
such action.
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9. Pro Rata.
A reference in these terms of the Securities to any payment, Distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, on any Distribution Date or redemption date an
Event of Default under the Declaration has occurred and is continuing, in which
case no payment of any Distribution on, or amount payable upon redemption of,
any Common Security, and no other payment on account of the redemption,
liquidation or other acquisition of Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all
outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the amount payable upon redemption
of the Preferred Securities, the full amount of such amount in respect of all
outstanding Preferred Securities shall have been made or provided for, and all
funds available to the Property Trustee shall first be applied to the payment in
full in cash of all Distributions on, or the amount payable upon redemption of
Preferred Securities then due and payable.
10. Ranking.
The Preferred Securities rank pari passu and payment thereon shall be
made Pro Rata with the Common Securities except that, where a Debenture Event of
Default occurs and is continuing in respect of the Debentures held by the
Property Trustee, the rights of Holders of the Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption and otherwise
are subordinated to the rights to payment of the Holders of the Preferred
Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein, and to the provisions of the Indenture
including the subordination provisions therein, which are each incorporated by
reference herein and which include, among other things, provisions relating to
certain rights of the Holders of the Preferred Securities all as set forth
therein.
12. No Preemptive Rights.
A-18
<PAGE> 98
The Holders of the Securities shall have no preemptive or similar rights
to subscribe for any additional securities.
13. Registration Rights.
The Holders of the Preferred Securities shall have all the rights and
obligations set forth in the Registration Rights Agreement.
14. Miscellaneous.
These terms constitute a part of the Declaration.
The Depositor will provide a copy of the Declaration, the Preferred
Securities Guarantee or the Common Securities Guarantee, as may be appropriate,
and the Indenture to a Holder without charge on written request to the Depositor
at its principal place of business.
A-19
<PAGE> 99
EXHIBIT A-1
FORM OF
PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include the following Restricted Securities Legend on all Rule 144A
Global Preferred Securities unless otherwise determined by the Depositor in
accordance with applicable law -- EACH OF THE PREFERRED SECURITIES (OR ITS
PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND EACH
OF THE PREFERRED SECURITIES AND ANY DEBENTURES ISSUED UPON EXCHANGE FOR THE
PREFERRED SECURITIES REPRESENTED HEREBY AND ANY COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF EACH OF THE PREFERRED SECURITIES IS HEREBY NOTIFIED THAT THE SELLER
OF EACH OF THE PREFERRED SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS PREFERRED SECURITY AGREES FOR THE BENEFIT OF THE
ISSUER AND THE COMPANY THAT (A) PREFERRED SECURITY AND ANY DEBENTURES OR COMMON
STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (iii) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH
(iii) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PUR-
A-1-1
<PAGE> 100
CHASER OF EACH OF THE PREFERRED SECURITIES FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.]
[Include if Preferred Security is in global form and The Depository Trust
Company is the Depository -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[Include if Preferred Security is in global form -- TRANSFERS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO
BELOW.]
A-1-2
<PAGE> 101
Certificate Number
Number of Preferred Securities
Aggregate Liquidation Value $
CUSIP NO. __________
Preferred Securities
of
Calpine Capital Trust II
Remarketable Term Income Deferrable Equity Securities (HIGH TIDES)_*
(liquidation amount $50 per HIGH TIDE)
Calpine Capital Trust II, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
________________________ (the "Holder") is the registered owner of preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the Remarketable Term Income Deferrable Equity
Securities (HIGH TIDES)_*(liquidation amount $50 per HIGH TIDE) (the "Preferred
Securities"). Subject to the restrictions set forth in the Declaration (as
defined below), the Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities represented hereby are issued and shall
in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust, dated as of January 31, 2000, as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Preferred Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Preferred Securities Guarantee to the extent provided therein. The Depositor
will provide a copy of the Declaration, the Preferred Securities Guarantee and
the Indenture to a Holder without charge upon written request to the Trust at
its principal place of business.
Reference is hereby made to select provisions of the Preferred Securities
set forth on the reverse hereof, which select provisions shall for all purposes
have the same effect as if set forth at this place.
- ----------
* The terms Remarketable Term Income Deferrable Equity Securities (HIGH
TIDES)_ and HIGH TIDES_ are registered servicemarks of Credit Suisse First
Boston Corporation.
A-1-3
<PAGE> 102
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred Securities
as evidence of indirect beneficial ownership in the Debentures.
Unless the Property Trustee's (or its authorized designee's)
Certificate of Authentication hereon has been properly executed, these Preferred
Securities shall not be entitled to any benefit under the Declaration or be
valid or obligatory for any purpose.
A-1-4
<PAGE> 103
IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day
of _________, 2000.
Calpine Capital Trust II
By:
---------------------------------
Name:
Title: Administrative Trustee
[CONTINUED ON NEXT PAGE]
A-1-5
<PAGE> 104
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated: ________, 2000
The Bank of New York,
as Property Trustee
By:
---------------------------------
Authorized Signatory
A-1-6
<PAGE> 105
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will accrue at the
Applicable Rate applied to the stated liquidation amount of $50 per Preferred
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. The Applicable Rate will be 5 1/2% per annum (the
"Initial Rate") from the date of original issuance of the Securities to be
excluding the Reset Date, and the Term Rate from the Reset Date and thereafter.
The Term Rate will be the rate established by the Remarketing Agent to be
effective on the Reset Date. The Applicable Rate will be increased by 0.50% per
annum during the continuation of a Registration Default. Distributions in
arrears for more than one quarter will bear interest thereon compounded
quarterly at the Applicable Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes such quarterly Distributions,
additional Distributions on quarterly Distributions not paid on the applicable
Distribution Date and Additional Amounts, as applicable. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, Distributions on the Preferred
Securities will be cumulative, will accrue from January 31, 2000 and will be
payable quarterly in arrears on February 1, May 1, August 1 and November 1, of
each year (except as provided below), commencing on May 1, 2000 to Holders of
record at the close of business on the fifteenth day of the month immediately
preceding the applicable payment date, which payment dates shall correspond to
the interest payment dates (each an "Interest Payment Date") on the Debentures.
The Reset Date is any date (1) not later than February 1, 2005 (or, if such day
is not a Business Day, the next succeeding Business Day), and (2) not earlier
than 70 Business Days prior to February 1, 2005, as may be determined by the
Remarketing Agent, in its sole discretion, for settlement of a successful
remarketing. The fifteenth day of the month immediately preceding each
Distribution Date is the record date for determining which holders of Preferred
Securities shall be paid the Distributions and Additional Amounts, if any,
payable on such Distribution Date. If the Reset Date is prior to the record date
for the immediately following Distribution Date, then Distributions and
Additional Amounts, if any, accrued from and after the Reset Date to but
excluding the immediately following Distribution Date shall be paid on such
Distribution Date to the person in whose name each Preferred Security is
registered on the relevant record date, subject
1
<PAGE> 106
to our right to initiate a Deferral Period. If the Reset Date is on or after the
record date for the immediately following Distribution Date, then (1)
Distributions and Additional Amounts, if any, accrued from and after the record
date to but excluding the Reset Date shall be paid on the immediately following
Distribution Date to the person in whose name each Preferred Security is
registered on the relevant record date and (2) Distributions and Additional
Amounts, if any, accrued from and after the Reset Date to but excluding the
immediately following Distribution Date shall be paid on the second Distribution
Date immediately following the Reset Date to the person in whose name each
Preferred Security is registered on the relevant record date for such second
Distribution Date, subject in each case to our right to initiate a Deferral
Period. So long as no Debenture Event of Default has occurred and is continuing,
the Debenture Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period from time to time on the
Debentures for a period not exceeding 20 consecutive quarters (each a "Deferral
Period") and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at the
Applicable Rate compounded quarterly during any such Deferral Period. Prior to
the termination of any such Deferral Period, the Debenture Issuer may further
extend such Deferral Period; provided that such Deferral Period together with
all such previous and further deferrals thereof may not exceed 20 consecutive
quarters or extend beyond (i) the maturity (whether at the stated maturity or by
declaration of acceleration, call for redemption or otherwise) of the Debentures
under the Indenture or (ii) in the case of a Deferral period which begins prior
to the Reset Date, the Reset Date. Payments of accrued Distributions will be
payable on an Interest Payment Date elected by the Company to Holders as they
appear on the books and records of the Trust on the record date for such
Interest Payment Date. Upon the termination of any Deferral Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Deferral Period, subject to the above requirements.
The Preferred Securities shall be redeemable as provided in the
Declaration.
The Preferred Securities shall be convertible into shares of Common
Stock, through (i) the exchange of Preferred Securities for a portion of the
Debentures and (ii) the immediate conversion of such Debentures into Common
Stock, in the manner and according to the terms set forth in the Declaration.
[Include if the Preferred Security contains a Restricted Securities
Legend -- Holders of Restricted Preferred Securities shall have all the rights
and obligations set forth in the Registration Rights Agreement.]
2
<PAGE> 107
CONVERSION REQUEST
To: The Bank of New York,
as Property Trustee of
Calpine Capital Trust II
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Preferred Securities, or the portion below
designated, into Common Stock (as such term is defined in the Indenture, dated
January 31, 2000, between Calpine Corporation and The Bank of New York, as
Debenture Trustee) of CALPINE CORPORATION in accordance with the terms of the
Amended and Restated Declaration of Trust (as amended from time to time, the
"Declaration"), dated as of January 31, 2000, by Peter Cartwright, Ann B. Curtis
and Thomas R. Mason, as Administrative Trustees, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Property Trustee,
Calpine Corporation, as Depositor and Debenture Issuer, and by the Holders, from
time to time, of undivided beneficial interests in the assets of the Trust to be
issued pursuant to the Declaration. Pursuant to the aforementioned exercise of
the option to convert these Preferred Securities, the undersigned hereby directs
the Conversion Agent (as that term is defined in the Declaration) to (i)
exchange such Preferred Securities for a portion of the Debentures (as that term
is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Securities set forth as Annex I to the
Declaration) and (ii) immediately convert such Debentures on behalf of the
undersigned, into Common Stock (at the conversion rate specified in the terms of
the Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in accordance with
the terms of the Declaration and the Preferred Securities, agrees to be bound by
the terms of the Registration Rights Agreement relating to Common Stock issuable
upon conversion of the Preferred Securities.
1
<PAGE> 108
Date: ____________, ____
in whole __ in part
Number of Preferred Securities to be
converted:
--------------------------------------------
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares
of Common Stock are to be issued, along with
the address or addresses of such person or
persons
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number
--------------------------------------------
--------------------------------------------
--------------------------------------------
Signature Guarantee:**
----------------------
- ----------
** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
2
<PAGE> 109
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee:***_________________________________________________________
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF RESTRICTED
PREFERRED SECURITIES
- ----------
*** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
1
<PAGE> 110
This certificate relates to _____________ Preferred Securities held in (check
applicable space) ____ book-entry or ____ definitive form by the undersigned.
(A) The undersigned (check one box below):
[ ] has requested the Property Trustee by written order to deliver in
exchange for its beneficial interest in the Rule 144A Global Preferred
Security held by the Depositary a Preferred Security or Preferred
Securities in definitive, registered form in such number equal to its
beneficial interest in such Rule 144A Global Preferred Security (or the
number thereof indicated above); or
[ ] has requested the Property Trustee by written order to exchange its
Preferred Security in definitive registered form for an interest in the
Rule 144A Global Preferred Security held by the Depositary in such
number equal to number of Preferred Securities in definitive registered
form so held; or
[ ] has requested the Property Trustee by written order to exchange or
register the transfer of a Preferred Security or Preferred Securities.
(B) The undersigned confirms that such Securities are being (check one box
below):
(1) [ ] acquired for the undersigned's own account, without
transfer (in satisfaction of Section 9.02(c)(ii)(A) of the
Declaration); or
(2) [ ] transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(3) [ ] transferred pursuant to Rule 144 of the Securities Act of
1933; or
(4) [ ] transferred pursuant to an effective registration
statement under the Securities Act.
Unless one of the boxes in (B) above is checked, the Property Trustee will
refuse to register any of the Preferred Securities evidenced by this certificate
in the name of any person other than the registered Holder thereof; provided,
however, that if box (2) or (3) is checked, the Property Trustee may require,
prior to registering any such transfer of the Preferred Securities such legal
opinions, certifications and other information as the Trust has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements
2
<PAGE> 111
of the Securities Act of 1933, such as the exemption provided by Rule 144 under
such Act.
Signature
Signature Guarantee:****
Signature must be guaranteed Signature
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing these
Preferred Securities for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Trust as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
- ----------
**** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)
3
<PAGE> 112
Dated:
------------------------- ------------------------------------
NOTICE: To be executed by an
executive officer
4
<PAGE> 113
EXHIBIT A-2
FORM OF
COMMON SECURITY
[FORM OF FACE OF SECURITY]
[THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN EFFECTIVE REGISTRATION
STATEMENT.]
[OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED HEREIN), THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
RELATED PARTY (AS DEFINED IN THE DECLARATION) OF CALPINE CORPORATION]
Certificate Number Number of Common Securities
Common Securities
of
Calpine Capital Trust II
HIGH TIDES Common Securities
(liquidation amount $50 per HIGH TIDES Common Security)
Calpine Capital Trust II, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
_______________________ (the "Holder") is the registered owner of common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the HIGH TIDES Common Securities (liquidation
amount $50 per Remarketable Common Security) (the "Common Securities"). Subject
to the restrictions set forth in the Declaration (as defined below), the Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Amended and Restated Declaration of Trust of the Trust,
dated as of January 31, 2000, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common
A-2-1
<PAGE> 114
Securities as set forth in Annex I to the Declaration. Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration. The
Depositor will provide a copy of the Declaration and the Indenture to a Holder
without charge upon written request to the Depositor at its principal place of
business.
Reference is hereby made to select provisions of the Common Securities
set forth on the reverse hereof, which select provisions shall for all purposes
have the same effect as if set forth at this place.
Upon receipt of this certificate, the Depositor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal
income tax purposes the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
A-2-2
<PAGE> 115
IN WITNESS WHEREOF, the Trust has executed this certificate this day of
______, 20__.
Calpine Capital Trust II
By:
---------------------------------
Name:
Title: Administrative Trustee
A-2-3
<PAGE> 116
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will accrue at the
Applicable Rate applied to the stated liquidation amount of $50 per Common
Security, such rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. The Applicable Rate will be 5_% per annum (the
"Initial Rate") from the date of original issuance of the Securities to be
excluding the Reset Date, and the Term Rate from the Reset Date and thereafter.
The Term Rate will be the rate established by the Remarketing Agent to be
effective on the Reset Date. Distributions in arrears for more than one quarter
will bear interest thereon compounded quarterly at the Applicable Rate (to the
extent permitted by applicable law). The term "Distributions" as used herein
includes quarterly Distributions, additional Distributions on quarterly
Distributions not paid on the applicable Distribution Date and Additional
Amounts, as applicable. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Property Trustee and
to the extent the Property Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed per 30-day month.
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from January 31, 2000 and will be
payable quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year (except as provided below), commencing on May 1, 2000 to Holders of
record at the close of business on the fifteenth day of the month immediately
preceding the applicable payment date, which payment dates shall correspond to
the interest payment dates (each, an "Interest Payment Date") on the Debentures.
The Reset Date is any date (1) not later than February 1, 2005, or if the day is
not a Business Day, the next succeeding Business Day, and (2) not earlier than
70 Business Days prior to February 1, 2005, as may be determined by the
Remarketing Agent, in its sole discretion, for settlement of a successful
remarketing. The fifteenth day of the month immediately preceding each
Distribution Date is the record date for determining which holders of Common
Securities shall be paid the Distributions and Additional Amounts, if any,
payable on such Distribution Date. If the Reset Date is prior to the record date
for the immediately following Distribution Date, then Distributions and
Additional Amounts, if any, accrued from and after the Reset Date to but
excluding the immediately following Distribution Date shall be paid on such
Distribution Date to the person in whose name each Common Security is registered
on the relevant record date, subject to our right to initiate a Deferral Period.
If the Reset Date is on or after the record date for the immediately following
Distribution Date, then (1) Distributions and Additional
<PAGE> 117
Amounts, if any, accrued from and after the record date to but excluding the
Reset Date shall be paid on the immediately following Distribution Date to the
person in whose name each Common Security is registered on the relevant record
date and (2) Distributions and Additional Amounts, if any, accrued from and
after the Reset Date to but excluding the immediately following Distribution
Date shall be paid on the second Distribution Date immediately following the
Reset Date to the person in whose name each Common Security is registered on the
relevant record date for such second Distribution Date, subject in each case to
our right to initiate a Deferral Period. So long as no Debenture Event of
Default has occurred and is continuing, the Debenture Issuer has the right under
the Indenture to defer payments of interest by extending the interest payment
period from time to time on the Debentures for a period not exceeding 20
consecutive quarters (each a "Deferral Period") and, as a consequence of such
deferral, Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Applicable Rate compounded quarterly during
any such Deferral Period. Prior to the termination of any such Deferral Period,
the Debenture Issuer may further extend such Deferral Period; provided that such
Deferral Period together with all such previous and further deferrals thereof
may not exceed 20 consecutive quarters or extend beyond (i) the maturity
(whether at the stated maturity or by declaration of acceleration, call for
redemption or otherwise) of the Debentures under the Indenture or (ii) in the
case of a Deferral Period which begins prior to the Reset Date, the Reset Date.
Payments of accrued Distributions will be payable on an Interest Payment Date
elected by the Company to Holders as they appear on the books and records of the
Trust on the record date for such Interest Payment Date. Upon the termination of
any Deferral Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Deferral Period, subject to the above requirements.
The Common Securities shall be redeemable as provided in the Declaration.
The Common Securities shall be convertible into shares of Common Stock,
through (i) the exchange of Common Securities for a portion of the Debentures
and (ii) the immediate conversion of such Debentures into Common Stock, in the
manner and according to the terms set forth in the Declaration; provided that no
Common Securities may be converted into Common Stock unless all outstanding
Common Securities are converted into Common Stock, which conversion will result
in the dissolution of the Trust.
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<PAGE> 118
CONVERSION REQUEST
To: The Bank of New York,
as Property Trustee of
Calpine Capital Trust II
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock (as such term is defined in the Indenture, dated
January 31, 2000, between Calpine Corporation and The Bank of New York, as
Debenture Trustee) of CALPINE CORPORATION in accordance with the terms of the
Amended and Restated Declaration of Trust (as amended from time to time, the
"Declaration"), dated as of January 31, 2000, by Peter Cartwright, Ann B. Curtis
and Thomas R. Mason, as Administrative Trustees, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Property Trustee,
Calpine Corporation, as Depositor and Debenture Issuer, and by the Holders, from
time to time, of undivided beneficial interests in the assets of the Trust to be
issued pursuant to the Declaration. Pursuant to the aforementioned exercise of
the option to convert these Common Securities, the undersigned hereby directs
the Conversion Agent (as that term is defined in the Declaration) to (i)
exchange such Common Securities for a portion of the Debentures (as that term is
defined in the Declaration) held by the Trust (at the rate of exchange specified
in the terms of the Securities set forth as Annex I to the Declaration) and (ii)
immediately convert such Debentures on behalf of the undersigned, into Common
Stock (at the conversion rate specified in the terms of the Securities set forth
as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Any holder, upon the exercise of its conversion rights in accordance with
the terms of the Declaration and the Common Securities, agrees to be bound by
the terms of the Registration Rights Agreement relating to Common Stock issuable
upon conversion of the Common Securities.
<PAGE> 119
Date: ____________, ____
in whole __ in part
Number of Common Securities to be converted:
___________________
If a name or names other than the
undersigned, please indicate in the spaces
below the name or names in which the shares
of Common Stock are to be issued, along with
the address or addresses of such person or
persons
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or
Other Identifying Number
--------------------------------------------
--------------------------------------------
--------------------------------------------
Signature Guarantee:*****
-------------------
- ----------
***** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar,
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<PAGE> 120
- ----------
which requirements include membership or participation in the Securities
Transfer Agents Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Registrar in addition to,
or in substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
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<PAGE> 121
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------- agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date:
------------------------
Signature:
-------------------
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee:******______________________________________________________
- --------
****** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.)
<PAGE> 1
EXHIBIT 4.8.7
================================================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
BETWEEN
CALPINE CORPORATION
AND
THE BANK OF NEW YORK
DATED AS OF
JANUARY 31, 2000
================================================================================
<PAGE> 2
GUARANTEE AGREEMENT, dated as of January 31, 2000, executed and
delivered by Calpine Corporation, a Delaware corporation (the "Guarantor"), and
The Bank of New York, a New York banking corporation, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the HIGH TIDES (as defined herein) of Calpine Capital Trust II, a Delaware
statutory business trust (the "Trust").
WHEREAS pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of January 31, 2000, executed by the Guarantor, as
Depositor, The Bank of New York (Delaware), as Delaware Trustee, The Bank of New
York, as Property Trustee, and the Administrative Trustees named therein, the
Trust is issuing $300,000,000 ($360,000,000 including the aggregate liquidation
amount of its 5% Convertible Preferred Securities, Remarketable Term Income
Deferred Equity Securities (HIGH TIDES), liquidation amount $50 per security
(the "HIGH TIDES") and $9,278,400 ($11,134,100 including the option) aggregate
liquidation amount of its Common Securities, liquidation amount $50 per security
(the "Common Securities" and collectively with the HIGH TIDES, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust and having the terms set forth in the Declaration;
WHEREAS the Trust Securities will be issued by the Trust and the
proceeds thereof will be used to purchase the Convertible Subordinated
Debentures due 2030 (the "Debentures") of the Guarantor which will be deposited
with The Bank of New York as Property Trustee under the Declaration, as trust
assets; and
WHEREAS as incentive for the Holders to purchase HIGH TIDES, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the HIGH TIDES the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder
of HIGH TIDES, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the HIGH TIDES.
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Guarantee Agreement,
the terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Declaration as in effect on the date hereof.
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<PAGE> 3
"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; provided, however, that the Trust
shall be deemed not to be an Affiliate of the Guarantor. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; the terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"Common Securities" shall have the meaning specified in the
first recital of this Guarantee Agreement.
"Debt" means (i) the principal of and premium, if any, and
unpaid interest on indebtedness for money borrowed, (ii) purchase money and
similar obligations, (iii) obligations under capital leases, (iv) guarantees,
assumptions or purchase commitments relating to, or other transactions as a
result of which the Guarantor is responsible for the payment of such
indebtedness of others, (v) renewals, extensions and refunding of any such
indebtedness, (vi) interest or obligations in respect of any such indebtedness
accruing after the commencement of any insolvency or bankruptcy proceedings and
(vii) net obligations associated with derivative products such as interest rate
and currency exchange contracts, foreign exchange contracts, commodity contracts
and similar arrangements.
"Declaration" shall have the meaning specified in the first
recital to this Guarantee Agreement.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received notice of default and shall not have
cured such default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the HIGH TIDES, to the
extent not paid or made by or on behalf of the Trust: (i) any accrued and unpaid
Distributions required to be paid on the HIGH TIDES, to the extent the Trust
shall have funds on hand available therefor at such time, (ii) the applicable
Redemption Price, with respect to the HIGH TIDES called for redemption by the
Trust to the extent the Trust shall have funds on hand available therefor at
such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of the Trust, unless Debentures are distributed to the Holders of
the HIGH TIDES or all the HIGH TIDES are redeemed, the lesser of (a) the
aggregate of the liquidation amount of $50 per HIGH TIDES plus accrued and
unpaid Distributions on the HIGH TIDES to the date of payment (the "Liquidation
Distribution") to the extent the Trust shall have funds on hand available to
make such payment at such time and (b) the amount of assets of the Trust
remaining available for distribution to Holders of the HIGH TIDES upon
liquidation of the Trust after satisfaction of liabilities to creditors of the
Trust as required by applicable law.
2
<PAGE> 4
"Guarantee Trustee" means The Bank of New York, a New York
banking corporation, until a Successor Guarantee Trustee has been appointed and
has accepted such appointment pursuant to the terms of this Guarantee Agreement
and thereafter means each such Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first
paragraph of this Guarantee Agreement.
"HIGH TIDES" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Debentures" shall have the meaning specified in the second
recital of this Guarantee Agreement.
"Holder" means any holder, as registered on the books and
records of the Trust, of any HIGH TIDES; provided, however, that in determining
whether the holders of the requisite percentage of HIGH TIDES have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor or the
Guarantee Trustee.
"Indenture" means the Indenture dated as of January 31, 1999 as
amended or supplemented, between the Guarantor and The Bank of New York, as
trustee, relating to the issuance of Debentures.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in liquidation amount of the HIGH TIDES" means, except
as provided in the terms of the HIGH TIDES or by the Trust Indenture Act, a vote
by the Holder(s), voting separately as a class, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid distributions to
the date upon which the voting percentages are determined) of all then
outstanding HIGH TIDES.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, President or a
Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of such
Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to
3
<PAGE> 5
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" when used with respect to the Guarantee
Trustee means any officer assigned to the Corporate Trust Office, including any
vice president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers,
and having direct responsibility for the administration of this Guarantee
Agreement, and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Senior Debt" means (i) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by the Company, (ii) all
obligations to make net payment pursuant to the terms of financial instruments,
such as (a) securities contracts and foreign currency exchange contracts, (b)
derivative instruments, such as swap agreements (including interest rate and
foreign exchange rate swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (c) similar
financial instruments; except, in the case of (i) above, such indebtedness and
obligations that are expressly stated to rank junior in right of payment to, or
pari passu in right of payment with, the Debentures, (iii) and indebtedness or
obligations of others of the kind described in (i) and (ii) above for the
payment of which the Company is responsible or liable as guarantor or otherwise
and (iv) deferrals, renewals or extensions of any such Senior Debt; provided,
however, that Senior Debt shall not be deemed to include (a) any Debt of the
Company which, when incurred and without respect to any election under Section
1111(b) of the United States Bankruptcy Code of 1978, was without recourse to
the Company, (b) trade accounts payable in the ordinary course of business,
which will not constitute debt for purposes of the HIGH TIDES, (c) any Debt of
the Company to any of its subsidiaries, except to the extent incurred for the
benefit of third parties, (d) Debt to any employee of the Company and (e) Debt
that expressly provides that it is not senior in right of payment to the HIGH
TIDES.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under Section
4.01.
"Trust" shall have the meaning specified in the first paragraph
of this Guarantee Agreement.
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<PAGE> 6
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb), as amended, and the rules and regulations
promulgated thereunder.
"Trust Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This
Guarantee Agreement is, or upon qualification under the Trust Indenture Act will
be, = subject to the provisions of the Trust Indenture Act that are required to
be part of this Guarantee Agreement, which are incorporated by reference in and
made part of this Guarantee Agreement and shall, to the extent applicable, be
governed by such provisions. This Guarantee Agreement will not be qualified
under the Trust Indenture Act except upon the effectiveness of the Shelf
Registration Statement.
(b) Until such time as this Guarantee Agreement is qualified
under the Trust Indenture Act, the parties hereto agree that the provisions of
Sections 310-317, inclusive, of the Trust Indenture Act shall be incorporated
herein by reference, subject to the provisions of this Guarantee Agreement and
to the extent that any provision of this Guarantee Agreement limits, qualifies
or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
SECTION 2.02. Lists of Holders of Securities. (a) The Guarantor
shall provide the Guarantee Trustee (i) within 14 days after each record date
for payment of Distributions, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the HIGH TIDES
("List of Holders") as of such record date, provided that the Guarantor shall
not be obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Guarantee
Trustee by the Guarantor on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Guarantee Trustee.
(b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days
after May 15 of each year, commencing May 15, 2000, the Guarantee Trustee shall
provide to the Holders of the HIGH TIDES such reports as are required by Section
313 of the Trust Indenture Act, if any, in the form and in the manner provided
by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to The Guarantee Trustee. The
Guarantor shall provide to the Guarantee Trustee such documents, reports and
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<PAGE> 7
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by any officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a
Majority in liquidation amount of the HIGH TIDES may, by vote, on behalf of all
the Holders, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent therefrom.
SECTION 2.07. Event of Default; Notice. (a) The Guarantee
Trustee shall, within 10 days after the occurrence of an Event of Default,
transmit by mail, first class postage prepaid, to the Holders, notices of all
Events of Default known to the Guarantee Trustee, unless such Events of Default
have been cured before the giving of such notice; provided, that, except in the
case of a default in the payment of a Guarantee Payment, the Guarantee Trustee
shall be protected in withholding such notice if and so long as the Board of
Directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Guarantee Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless a Responsible Officer of the Guarantee
Trustee shall have received written notice of such Event of Default.
SECTION 2.08. Conflicting Interests. The Declaration shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
ARTICLE III
Powers, Duties and Rights of the
Guarantee Trustee
6
<PAGE> 8
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a)
This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit
of the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing,
the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders.
(c) The Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Guarantee Agreement, and no implied covenants shall be read into
this Guarantee Agreement against the Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.06), the Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Guarantee Agreement, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default
that may have occurred:
(A) the duties and obligations of the
Guarantee Trustee shall be determined solely by the
express provisions of this Guarantee Agreement, and the
Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part
of the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Guarantee
Trustee and conforming to the requirements of this
Guarantee Agreement; but in the case of any such
certificates or opinions that by any provision hereof or
of the Trust Indenture Act are specifically required to
be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Guarantee Agreement;
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<PAGE> 9
(ii) the Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer of the Guarantee Trustee, unless it shall be proved that
the Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not
less than a Majority in liquidation amount of the HIGH TIDES
relating to the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee
Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance
of any of its duties or in the exercise of any of its rights or
powers.
SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject
to the provisions of Section 3.01:
(i) The Guarantee Trustee may conclusively rely and
shall be fully protected in acting or refraining from acting
upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document reasonably believed by it to be genuine and to
have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor
contemplated by this Guarantee Agreement shall be sufficiently
evidenced by an Officers' Certificate unless otherwise
prescribed herein.
(iii) Whenever, in the administration of this
Guarantee Agreement, the Guarantee Trustee shall deem it
desirable that a matter relating to compliance by the Guarantor
with any of its obligations contained in this Guarantee
Agreement be proved or established before taking, suffering or
omitting to take any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate (with respect to
the Guarantor) which, upon receipt of such request from the
Guarantee Trustee, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel of its selection, and the advice or opinion of such
legal counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted to be taken by it hereunder in good
faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its
Affiliates and may be one of its employees. The Guarantee
Trustee
8
<PAGE> 10
shall have the right at any time to seek instructions concerning
the administration of this Guarantee Agreement from any court of
competent jurisdiction.
(v) The Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it
by this Guarantee Agreement at the request or direction of any
Holder, unless such Holder shall have provided to the Guarantee
Trustee such security and indemnity reasonably satisfactory to
it, against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in
complying with such request or direction, including such
reasonable advances as may be requested by the Guarantee
Trustee; provided, that nothing contained in this Section
3.02(a)(v) shall be taken to relieve the Guarantee Trustee, upon
the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Guarantee
Agreement.
(vi) The Guarantee Trustee shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document,
but the Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit.
(vii) The Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through its agents or attorneys, and
the Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or
attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Guarantee
Trustee (A) may request instructions from the Holders, (B) may
refrain from enforcing such remedy or right or taking such other
action until such instructions are received and (C) shall be
fully protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
Guarantee Trustee and its directors, officers, agents and employees for, and to
hold them harmless against, any and all loss, damage, claim, liability or
expense incurred without negligence or bad faith on the part of the Guarantee
Trustee, arising out of or in
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<PAGE> 11
connection with the acceptance or administration of this Guarantee Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The Guarantor shall be entitled to participate in the defense
of any action arising hereunder and, to the extent it may wish, assume the
defense thereof, with counsel satisfactory to the Guarantee Trustee (who shall
not, except with the consent of the Guarantee Trustee, be counsel to Guarantor).
Upon assuming such defense, the Guarantor shall not be liable for any legal or
other expenses subsequently incurred by the Guarantee Trustee in connection with
the defense thereof, other than reasonable costs of investigation. The Guarantor
shall not, without the prior written consent of the Guarantee Trustee, effect
any settlement of any pending or threatened action in respect of which the
Guarantee Trustee is or could have been a party and indemnity could have been
sought hereunder by the Guarantee Trustee unless such settlement (i) includes an
unconditional release of the Guarantee Trustee from all liability on any claims
that are the subject matter of such action and (ii) does not include a statement
as to, or an admission of, fault, culpability or a failure to act by or on
behalf of the Guarantee Trustee. The Guarantee Trustee will not claim or exact
any lien or charge on any Guarantee Payments as a result of any amount due to it
under this Guarantee Agreement. This indemnity shall survive the termination of
this Guarantee Agreement or the resignation or removal of the Guarantee Trustee.
SECTION 3.04. Expenses. The Guarantor shall from time to time
reimburse the Guarantee Trustee for its expenses and costs incurred in
connection with the performance of its duties hereunder. This reimbursement
obligation shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee; Eligibility. (a) There shall at
all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000, and shall be a corporation
meeting the requirements of Section 310(c) of the Trust
Indenture Act. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority, then,
for the purposes of this Section and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).
10
<PAGE> 12
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of the
Guarantee Trustee. (a) Subject to Section 4.02(b), in the absence of the
existence of an Event of Default, the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
by written instrument executed by such Successor Guarantee Trustee and delivered
to the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by instrument in writing executed by
such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within 30
days after delivery to the Guarantor of an instrument of resignation or notice
of removal by the Guarantor, the retiring Guarantee Trustee may petition, at the
expense of the Guarantor, any court of competent jurisdiction for appointment of
a Successor Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
Guarantee
SECTION 5.01. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by or on behalf of the Trust),
as and when due, regardless of any defense, right of set-off or counterclaim
which the Trust may have or assert. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Trust to pay such amounts to the
Holders. The Guarantor shall give written notice to the Guarantee Trustee as
promptly as practicable in the event it makes any direct payment hereunder.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of the Guarantee Agreement and, with respect to its
11
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obligations under Section 5.01, hereby waives presentment, demand for payment,
any right to require a proceeding first against the Guarantee Trustee, Trust or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.03. Obligations Not Affected. The obligations,
covenants, agreements and duties of the Guarantor under this Guarantee Agreement
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the HIGH TIDES to be
performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of
all or any portion of the Distributions (other than any extension of
time for payment of Distributions that results from the extension of any
interest payment period on the Debentures as so provided in the
Indenture), Redemption Price, Liquidation Distribution or any other sums
payable under the terms of the HIGH TIDES or the extension of time for
the performance of any other obligation under, arising out of, or in
connection with, the HIGH TIDES;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
HIGH TIDES, or any action on the part of the Trust granting indulgence
or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings affecting, the
Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the HIGH
TIDES;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly
acknowledges that: (i) this Guarantee Agreement will be deposited with the
Guarantee
12
<PAGE> 14
Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee
has the right to enforce this Guarantee Agreement on behalf of the Holders;
(iii) the Holders of a Majority in liquidation amount of the HIGH TIDES have the
right among themselves, the other Holders, if any, and the Guarantee Trustee to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly against the Guarantor to enforce, subject to the subordination
provisions hereof, its rights under this Guarantee Agreement, without first
instituting a legal proceeding against the Trust or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement
creates a guarantee of payment and not of collection. This Guarantee Agreement
will not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by the Trust) or upon
distribution of Debentures to Holders as provided in the Declaration.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to
all (if any) rights of the Holders against the Trust in respect of any amounts
paid to the Holders by the Guarantor under this Guarantee Agreement and shall
have the right to waive payment by the Trust pursuant to Section 5.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders. Any amounts paid over to
and not subsequently recovered from the Holders pursuant to any insolvency law
shall be deemed to have been applied by the Holders to the Guarantee Payments.
SECTION 5.07. Independent Obligations. The Guarantor
acknowledges that its obligations hereunder are independent of the obligations
of the Trust with respect to the HIGH TIDES and that the Guarantor shall
(without duplication of amounts paid by or on behalf of the Trust) be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof,
but subject to Section 6.01 hereof.
ARTICLE VI
Covenants and Subordination
13
<PAGE> 15
SECTION 6.01. Subordination. This Guarantee Agreement will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt of the Guarantor in accordance
with the terms of Article XII of the Indenture, which terms (including the
definitions of all defined terms used therein) are incorporated herein, mutatis
mutandis, by this reference (it being understood and agreed that each notice
from holders of Senior Debt (or their agent or representative) to the Trustee
under the Indenture shall constitute a notice to the Guarantee Trustee
hereunder.
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement
shall rank pari passu with any similar guarantee agreements issued by the
Guarantor on behalf of the holders of trust securities issued by a trust created
by the Guarantor similar to Calpine Capital Trust II.
ARTICLE VII
Termination
SECTION 7.01. Termination. This Guarantee Agreement shall
terminate and be of no further force and effect upon (i) full payment of the
Redemption Price of all HIGH TIDES, (ii) the distribution of Debentures to the
Holders in exchange for all of the HIGH TIDES, (iii) full payment of the amounts
payable in accordance with the Declaration upon liquidation of the Trust or (iv)
distribution of the Guarantor's common stock to the Holders in respect of the
conversion of all of the HIGH TIDES. Notwithstanding the foregoing, this
Guarantee Agreement will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must repay any sums paid with respect to
HIGH TIDES or this Guarantee Agreement.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Successors and Assigns. All guarantees and
agreements contained in this Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the HIGH TIDES then outstanding. Except
in connection with a consolidation, merger or sale involving the Guarantor that
is permitted under Article VIII of the Indenture and pursuant to which the
assignee agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder.
SECTION 8.02. Amendments. Except with respect to any changes
which do not adversely affect the rights of the Holders in any material respect
(in which case no consent of the Holders will be required), this Guarantee
Agreement may only be amended with the prior approval of the Holders of not less
than a Majority in liquidation amount of the HIGH TIDES. The provisions of
Article XII of the Declaration concerning meetings of the Holders shall apply to
the giving of such approval.
14
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SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied (confirmed by delivery
of the original) or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth
below or such other address, facsimile number or to the attention of
such other Person as the Guarantor may give notice to the Holders:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Facsimile No.: (408) 995-0505
Attention: Corporate Secretary
(b) if given to the Trust, in care of the Guarantor, at the
Trust's (and the Guarantee Trustee's) address set forth below or such
other address as the Trust may, at the Trusts's direction, give notice
to the Holders:
Calpine Capital Trust II
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
Facsimile No.: (408) 995-0505
Attention: Secretary
15
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with a copy to:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, NY 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Administration
(c) if given to the Guarantee Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, NY 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Administration
(d) if given to any Holder, at the address set forth on the
books and records of the Trust.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for
the benefit of the Holders (subject to the benefits inuring to the holders of
Senior Debt pursuant to the subordination provisions hereof) and is not
separately transferable from the HIGH TIDES.
SECTION 8.05. Interpretation. In this Guarantee Agreement,
unless the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but
not defined in the preamble hereto have the respective meanings assigned
to them in Section 1.01;
(b) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
16
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(d) all references in this Guarantee Agreement to Articles
and Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined
in this Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 8.06 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
17
<PAGE> 19
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
Calpine Corporation
by
----------------------------------------
Name:
Title:
The Bank of New York, as Guarantee Trustee,
by
-----------------------------------------
Name:
Title:
18
<PAGE> 20
CCPA - CALPINE RIGHT OF ENTRY AND LICENSE AGREEMENT
EXHIBIT A
DESCRIPTION OF PROPERTY
Twelve geothermal steam and injection wells named and located as follows:
<TABLE>
<CAPTION>
Township Range Section Wells
- -------- ----- ------- -----
<S> <C> <C> <C>
12N 9W 35 Prati 8, Prati 9
12N 9W 36 Prati 2, Prati 4, Prati 5,
Prati 14, Prati 50, Prati State 1
11N 9W 1 Prati State 10, Prati State 12,
Prati State 24, Prati State 54
</TABLE>
and roads as needed to access these well locations.
<PAGE> 1
EXHIBIT 10.2.1
CREDIT AGREEMENT
among
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
(Borrower)
and
THE BANK OF NOVA SCOTIA CREDIT SUISSE FIRST BOSTON
(Lead Arranger, LC Bank and (Lead Arranger, Syndication Agent
Administrative Agent) and Bookrunner)
and
TD SECURITIES (USA) INC.
(Co-Arranger and Co-Documentation Agent)
and
CIBC WORLD MARKETS CORP.
(Co-Arranger and Co-Documentation Agent)
and
THE BANKS PARTIES HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE 1 DEFINITIONS........................................................................1
1.1 Definitions..........................................................................1
1.2 Rules of Interpretation..............................................................1
ARTICLE 2 THE CREDIT FACILITIES..............................................................1
2.1 Loans................................................................................1
2.1.1 Loan Facility....................................................................1
2.1.2 Interest Provisions Relating to Loans............................................2
2.1.3 Promissory Notes.................................................................4
2.1.4 Loan Funding.....................................................................4
2.1.5 Conversion of Loans..............................................................5
2.1.6 Prepayments......................................................................5
2.2 Letter of Credit Facilities..........................................................6
2.2.1 Issuance of the Letters of Credit................................................6
2.2.2 Availability.....................................................................6
2.2.3 Notice of LC Activity............................................................6
2.2.4 Reimbursement....................................................................7
2.2.5 Reimbursement Obligation Absolute................................................7
2.2.6 Reduction and Reinstatement of Stated Amount.....................................8
2.2.7 Bank Participation...............................................................9
2.2.8 Commercial Practices.............................................................9
2.2.9 Term of Letters of Credit.......................................................10
2.3 Total Commitments...................................................................10
2.3.1 Loan Commitment.................................................................10
2.3.2 Letter of Credit Commitment.....................................................10
2.3.3 Reductions and Cancellations....................................................10
2.4 Fees................................................................................11
2.4.1 Fee Letter......................................................................11
2.4.2 Loan Commitment Fees............................................................11
2.4.3 Activation Fee..................................................................11
2.5 Letter of Credit Fees...............................................................11
2.6 Other Payment Terms.................................................................12
2.6.1 Place and Manner................................................................12
2.6.2 Date............................................................................12
2.6.3 Late Payments...................................................................12
2.6.4 Net of Taxes, Etc...............................................................12
2.6.5 Application of Payments.........................................................14
2.6.6 Failure to Pay Administrative Agent.............................................14
2.6.7 Withholding Exemption Certificates..............................................14
2.7 Pro Rata Treatment..................................................................15
2.7.1 Borrowings, Commitment Reductions, Etc..........................................15
</TABLE>
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<TABLE>
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2.7.2 Sharing of Payments, Etc........................................................15
2.8 Change of Circumstances.............................................................16
2.8.1 Inability to Determine Rates....................................................16
2.8.2 Illegality......................................................................16
2.8.3 Increased Costs.................................................................17
2.8.4 Capital Requirements............................................................17
2.8.5 Notice; Participating Banks' Rights.............................................18
2.9 Funding Losses......................................................................18
2.10 Alternate Office; Minimization of Costs.............................................18
2.11 Extension of Loan Maturity Date.....................................................19
ARTICLE 3 CONDITIONS PRECEDENT..............................................................21
3.1 Conditions Precedent to the Closing Date............................................21
3.1.1 Resolutions.....................................................................21
3.1.2 Incumbency......................................................................21
3.1.3 Formation Documents.............................................................21
3.1.4 Good Standing Certificates......................................................21
3.1.5 Satisfactory Proceedings........................................................22
3.1.6 Operative Documents.............................................................22
3.1.7 Certificates of Borrower........................................................23
3.1.8 Legal Opinions..................................................................23
3.1.9 Certificate of Insurance Consultant.............................................23
3.1.10 Insurance.......................................................................23
3.1.11 Certificate of the Independent Engineer.........................................23
3.1.12 Reports of the Environmental Consultant.........................................23
3.1.13 Certificate of the Fuel Consultant..............................................24
3.1.14 Certificate of Power Marketing Consultant.......................................24
3.1.15 Power Marketing Plan............................................................24
3.1.16 Fuel Plan.......................................................................24
3.1.17 No Change in Tax Laws...........................................................24
3.1.18 Absence of Litigation...........................................................24
3.1.19 Payment of Filing Fees..........................................................25
3.1.20 Financial Statements............................................................25
3.1.21 UCC Reports.....................................................................25
3.1.22 Project Budgets.................................................................25
3.1.23 Project Schedules...............................................................25
3.1.24 Base Case Project Projections...................................................25
3.1.25 No Material Adverse Change......................................................26
3.1.26 A.L.T.A. Surveys................................................................26
3.1.27 Title Policies..................................................................26
3.1.28 Regulatory Status...............................................................27
3.1.29 Establishment of Accounts.......................................................27
3.1.30 Representations and Warranties of Partners, Calpine and Borrower................27
3.1.31 Utilities.......................................................................27
</TABLE>
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<TABLE>
<S> <C>
3.1.32 Mechanics' Lien Indemnity.......................................................27
3.1.33 Payment of Bank and Consultants Fees............................................27
3.2 Conditions Precedent to the Initial Funding of the Initial Projects.................28
3.2.1 Borrower Equity.................................................................28
3.2.2 No Change in Tax Laws...........................................................28
3.2.3 Base Case Project Projections...................................................28
3.2.4 Calpine Compliance..............................................................28
3.2.5 Schedule of Applicable Permits and Applicable Third Party Permits...............28
3.2.6 Calpine Corporation Credit Rating...............................................29
3.2.7 Notice to Proceed...............................................................29
3.2.8 Real Estate Rights..............................................................29
3.2.9 Project Pre-Funding Requirements................................................29
3.3 Conditions Precedent to the Initial Funding of the Subsequent Projects..............30
3.3.1 Subsequent Project..............................................................30
3.3.2 Resolutions.....................................................................30
3.3.3 Incumbency......................................................................30
3.3.4 Formation Documents.............................................................30
3.3.5 Good Standing Certificates......................................................31
3.3.6 Satisfactory Proceedings........................................................31
3.3.7 Operative Documents.............................................................31
3.3.8 Certificate of Borrower.........................................................32
3.3.9 Legal Opinions..................................................................32
3.3.10 Certificate of Insurance Consultant.............................................33
3.3.11 Insurance.......................................................................33
3.3.12 Certificate of the Independent Engineer.........................................33
3.3.13 Reports of the Environmental Consultant.........................................33
3.3.14 Certificate of the Fuel Consultant..............................................34
3.3.15 Certificate of Power Marketing Consultant.......................................34
3.3.16 Power Marketing Plan............................................................34
3.3.17 Fuel Plan.......................................................................34
3.3.18 Schedule of Applicable Permits and Applicable Third Party Permits...............34
3.3.19 No Change in Tax Laws...........................................................35
3.3.20 Absence of Litigation...........................................................35
3.3.21 Payment of Filing Fees..........................................................36
3.3.22 Financial Statements............................................................36
3.3.23 UCC Reports.....................................................................36
3.3.24 Project Budgets.................................................................36
3.3.25 Project Schedule................................................................37
3.3.26 Base Case Project Projections...................................................37
3.3.27 No Material Adverse Change......................................................37
3.3.28 A.L.T.A. Surveys................................................................37
3.3.29 Title Policies..................................................................38
3.3.30 Regulatory Status...............................................................38
3.3.31 Notice to Proceed...............................................................38
</TABLE>
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<TABLE>
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3.3.32 Representations and Warranties of Partners, Calpine and Borrower..............39
3.3.33 Utilities.......................................................................39
3.3.34 Mechanics' Lien Indemnity.......................................................39
3.3.35 Calpine Compliance..............................................................39
3.3.36 Calpine Guaranty................................................................39
3.3.37 Debt to Capitalization Ratio....................................................39
3.3.38 Debt to Collateral Value Ratio..................................................39
3.3.39 Updated Exhibits................................................................40
3.3.40 Diversification Requirements....................................................40
3.4 Conditions Precedent to Each Credit Event...........................................40
3.4.1 Monthly Drawdown Frequency......................................................40
3.4.2 Notice of Borrowing.............................................................40
3.4.3 Drawdown Certificate and Engineer's Certificate.................................40
3.4.4 Amount..........................................................................41
3.4.5 Title Policy Endorsement........................................................41
3.4.6 Lien Releases...................................................................41
3.4.7 Applicable Permits..............................................................41
3.4.8 Equity Contributions............................................................42
3.4.9 Additional Documentation........................................................42
3.4.10 Acceptable Work; No Liens.......................................................42
3.4.11 Casualty........................................................................42
3.4.12 Absence of Litigation...........................................................42
3.4.13 Insurance.......................................................................42
3.4.14 Available Construction Funds....................................................42
3.4.15 Representations and Warranties..................................................43
3.4.16 No Event of Default or Inchoate Default.........................................43
3.4.17 Operative Documents, Applicable Permits and Applicable Third Party
Permits in Effect............................................................43
3.4.18 No Material Adverse Effect......................................................43
3.4.19 Third Party Funding.............................................................43
3.4.20 Debt to Capitalization Ratio....................................................43
3.4.21 Debt to Collateral Value Ratio..................................................43
3.4.22 Interest Coverage Ratio.........................................................43
3.5 Conditions Precedent to Final Completion............................................44
3.5.1 Notice of Completion............................................................44
3.5.2 Completion......................................................................44
3.5.3 Annual Budget...................................................................44
3.5.4 Insurance.......................................................................44
3.5.5 Applicable Permits and Applicable Third Party Permits...........................44
3.5.6 A.L.T.A. Surveys................................................................45
3.5.7 Title Policy....................................................................45
3.5.8 Project Pre-Completion Requirements.............................................46
3.5.9 Operating Plans.................................................................46
3.6 Conditions Precedent to the Issuance of Letters of Credit...........................46
</TABLE>
iv
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<TABLE>
<S> <C>
3.6.1 Representations and Warranties True and Correct.................................46
3.6.2 No Event of Default or Inchoate Default.........................................46
3.6.3 Operative Documents, Applicable Permits and Applicable Third Party Permits in
Effect.......................................................................46
3.6.4 No Material Adverse Effect......................................................46
3.6.5 Interest Coverage Ratio.........................................................46
3.6.6 Project Pre-Funding Requirements................................................46
3.6.7 Debt to Collateral Value Ratio..................................................46
3.6.8 Project Status..................................................................47
3.7 Failure of Conditions Precedent to be Satisfied for a Particular Project............47
3.8 Funding of Equity...................................................................48
3.9 No Approval of Work.................................................................49
3.10 Waiver of Funding; Adjustment of Drawdown Requests..................................49
ARTICLE 4 REPRESENTATIONS AND WARRANTIES....................................................49
4.1 Organization........................................................................49
4.2 Authorization; No Conflict..........................................................50
4.3 Enforceability......................................................................50
4.4 Compliance with Law.................................................................50
4.5 Business, Debt, Contracts, Joint Ventures Etc.......................................50
4.6 Adverse Change......................................................................51
4.7 Investment Company Act, Etc.........................................................51
4.8 ERISA...............................................................................51
4.9 Permits.............................................................................51
4.10 Qualifying Facility/Exempt Wholesale Generator......................................51
4.11 Hazardous Substance.................................................................52
4.12 Litigation..........................................................................53
4.13 Labor Disputes and Acts of God......................................................53
4.14 Project Documents...................................................................53
4.15 Disclosure..........................................................................54
4.16 Private Offering by Borrower........................................................54
4.17 Taxes...............................................................................54
4.18 Governmental Regulation.............................................................54
4.19 Regulation U, Etc...................................................................55
4.20 Project Budgets; Projections........................................................55
4.21 Financial Statements................................................................55
4.22 Existing Defaults...................................................................55
4.23 No Default..........................................................................55
4.24 Offices, Location of Collateral.....................................................56
4.25 Title and Liens.....................................................................56
4.26 Trademarks..........................................................................56
4.27 Collateral..........................................................................57
4.28 Sufficiency of Project Documents....................................................57
4.29 Utilities...........................................................................58
</TABLE>
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<TABLE>
<S> <C>
4.30 Roads/Transmission Line.............................................................58
4.31 Proper Subdivision..................................................................58
4.32 Flood Zone Disclosure...............................................................58
4.33 Year 2000 Compliance................................................................58
4.34 Acquisition of Real Property........................................................59
ARTICLE 5 COVENANTS OF BORROWER.............................................................59
5.1 Use of Proceeds and Project Revenues................................................59
5.1.1 Proceeds........................................................................59
5.1.2 Revenues........................................................................59
5.2 Payment.............................................................................59
5.2.1 Credit Documents................................................................59
5.2.2 Project Documents...............................................................59
5.3 Warranty of Title...................................................................60
5.4 Notices.............................................................................60
5.5 Financial Statements................................................................62
5.6 Books, Records, Access..............................................................63
5.7 Compliance with Laws, Instruments, Etc..............................................63
5.8 Reports.............................................................................63
5.9 Existence, Conduct of Business, Properties, Etc.....................................65
5.10 Minimum Four-Quarter Portfolio Interest Coverage Ratio; Maximum Debt to
Capitalization Ratio.............................................................65
5.11 Indemnification.....................................................................66
5.12 Qualifying Facility/Exempt Wholesale Generator......................................68
5.13 Construction of Each Project........................................................69
5.14 Completion..........................................................................69
5.15 Operation of Projects and Annual Operating Budget...................................69
5.16 Preservation of Rights; Further Assurances..........................................70
5.17 Project Equity......................................................................71
5.18 Maintenance of Insurance............................................................72
5.19 Taxes and Other Government Charges..................................................72
5.20 Event of Eminent Domain.............................................................73
5.21 Power Marketing Plan; Fuel Plan.....................................................73
5.22 Utility Charges.....................................................................73
5.23 Project Document Scope of Liability.................................................73
5.24 Funded Subsequent Projects..........................................................73
ARTICLE 6 NEGATIVE COVENANTS................................................................73
6.1 Contingent Liabilities..............................................................73
6.2 Limitations on Liens................................................................74
6.3 Indebtedness........................................................................74
6.4 Sale or Lease of Assets.............................................................74
6.5 Changes.............................................................................78
6.6 Distributions.......................................................................78
6.7 Investments.........................................................................78
</TABLE>
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6.8 Transactions With Affiliates........................................................78
6.9 Regulations.........................................................................79
6.10 ERISA...............................................................................79
6.11 Partnerships, etc...................................................................79
6.12 Dissolution.........................................................................79
6.13 Amendments; Change Orders; Completion...............................................79
6.14 Compliance with Operative Documents.................................................81
6.15 Name and Location; Fiscal Year......................................................81
6.16 Use of Project Sites................................................................81
6.17 Assignment..........................................................................81
6.18 Abandonment of Project..............................................................81
6.19 Hazardous Substance.................................................................82
6.20 Additional Project Documents........................................................82
6.21 Project Budget Amendments...........................................................82
6.22 Loan Proceeds; Project Revenues.....................................................82
6.23 Acquisition of Real Property........................................................82
ARTICLE 7 APPLICATION OF FUNDS..............................................................83
7.1 Construction Account................................................................83
7.1.1 Establishment of Account........................................................83
7.1.2 Disbursements from Construction Account.........................................83
7.1.3 Rights of Administrative Agent..................................................84
7.2 Revenue Account.....................................................................84
7.2.1 Establishment of Account; Priority of Payments..................................84
7.2.2 O&M Costs.......................................................................85
7.2.3 Subordinated O&M Costs..........................................................86
7.2.4 Mandatory Prepayment............................................................86
7.3 Operating Account...................................................................87
7.3.1 Establishment of Account........................................................87
7.3.2 Funding.........................................................................87
7.3.3 Withdrawals.....................................................................87
7.3.4 Security Interest...............................................................87
7.4 Loss Proceeds Account...............................................................87
7.5 Application of Insurance Proceeds...................................................87
7.5.1 General.........................................................................87
7.5.2 Delay in Start Up and Business Interruption Insurance...........................88
7.5.3 Applications; Mandatory Prepayments.............................................88
7.5.4 Proceeds Less than $1,000,000...................................................89
7.5.5 Proceeds in Excess of $1,000,000, Not in Excess of $10,000,000..................89
7.5.6 Proceeds in Excess of $10,000,000...............................................90
7.5.7 Repair and Restoration Procedures...............................................90
7.5.8 Excess Insurance Proceeds.......................................................90
7.5.9 Events of Default...............................................................91
7.6 Application of Eminent Domain Proceeds..............................................91
</TABLE>
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<TABLE>
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7.7 Application of Certain Damages Payments; Mandatory Prepayments......................91
7.7.1 Contractor......................................................................91
7.7.2 Power Purchasers................................................................91
7.7.3 Other...........................................................................91
7.8 Working Capital Reserve Account.....................................................92
7.8.1 Establishment of Account........................................................92
7.8.2 Funding.........................................................................92
7.8.3 Withdrawals.....................................................................92
7.8.4 Earnings........................................................................92
7.9 Security Interest in Proceeds and Accounts..........................................92
7.10 Permitted Investments...............................................................93
7.11 Earnings on Accounts................................................................93
7.12 Dominion and Control................................................................93
7.13 Termination of Commitments..........................................................93
ARTICLE 8 EVENTS OF DEFAULT; REMEDIES.......................................................93
8.1 Events of Default...................................................................93
8.1.1 Failure to Make Payments........................................................93
8.1.2 Judgments.......................................................................94
8.1.3 Misstatements; Omissions........................................................94
8.1.4 Bankruptcy; Insolvency..........................................................94
8.1.5 Debt Cross Default..............................................................94
8.1.6 ERISA...........................................................................95
8.1.7 Breach of Terms of Agreement....................................................96
8.1.8 Loss of Qualifying Facility or Eligible Facility Status.........................96
8.1.9 Abandonment.....................................................................97
8.1.10 Security........................................................................97
8.1.11 Loss of Control.................................................................97
8.1.12 Loss of or Failure to Obtain Applicable Permits or Applicable Third Party
Permits......................................................................97
8.1.13 Loss of Collateral..............................................................98
8.1.14 Non-Fundamental Project Default.................................................98
8.1.15 Pledge of Borrower Ownership Interest...........................................98
8.2 Remedies............................................................................98
8.2.1 No Further Loans or Letters of Credit...........................................98
8.2.2 Cash Collateralization of Letters of Credit.....................................99
8.2.3 Prepayment of Loans.............................................................99
8.2.4 Cure by Administrative Agent....................................................99
8.2.5 Acceleration....................................................................99
8.2.6 Cash Collateral.................................................................99
8.2.7 Possession of Projects..........................................................99
8.2.8 Remedies Under Credit Documents................................................100
ARTICLE 9 SCOPE OF LIABILITY...............................................................100
</TABLE>
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ARTICLE 10 ADMINISTRATIVE AGENT; SUBSTITUTION; TECHNICAL COMMITTEE.........................101
10.1 Appointment, Powers and Immunities.................................................101
10.2 Reliance by Administrative Agent...................................................102
10.3 Non-Reliance.......................................................................102
10.4 Defaults...........................................................................102
10.5 Indemnification....................................................................103
10.6 Successor Administrative Agent.....................................................103
10.7 Authorization......................................................................104
10.8 Administrative Agent, Co-Arrangers and Co-Documentation Agent......................104
10.9 Amendments; Waivers................................................................104
10.10 Withholding Tax..................................................................105
10.11 General Provisions as to Payments................................................106
10.12 Substitution of Bank.............................................................106
10.13 Participation....................................................................106
10.14 Transfer of Commitment...........................................................107
10.15 Laws.............................................................................108
10.16 Assignability to Federal Reserve Bank............................................108
10.17 Technical Committee..............................................................108
10.18 Notices to Technical Committee and Banks.........................................109
ARTICLE 11 INDEPENDENT CONSULTANTS.........................................................109
11.1 Removal and Fees...................................................................109
11.2 Duties.............................................................................109
11.3 Independent Consultants' Certificates..............................................109
11.4 Certification of Dates.............................................................110
ARTICLE 12 MISCELLANEOUS...................................................................110
12.1 Addresses..........................................................................110
12.2 Additional Security; Right to Set-Off..............................................112
12.3 Delay and Waiver...................................................................112
12.4 Costs, Expenses and Attorneys' Fees; Syndication...................................113
12.5 Entire Agreement...................................................................113
12.6 Governing Law......................................................................114
12.7 Severability.......................................................................114
12.8 Headings...........................................................................114
12.9 Accounting Terms...................................................................114
12.10 Additional Financing.............................................................114
12.11 No Partnership, Etc..............................................................114
12.12 Deed of Trust/Collateral Documents...............................................114
12.13 Limitation on Liability..........................................................115
12.14 Waiver of Jury Trial.............................................................115
12.15 Consent to Jurisdiction..........................................................115
12.16 Usury............................................................................115
12.17 Knowledge and Attribution........................................................115
</TABLE>
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12.18 Successors and Assigns...........................................................116
12.19 Counterparts.....................................................................116
</TABLE>
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INDEX OF EXHIBITS
Exhibit A Definitions and Rules of Interpretation
NOTES
Exhibit B Form of Note
LOAN DISBURSEMENT PROCEDURES
Exhibit C-1 Form of Notice of Borrowing
Exhibit C-2 Form of Confirmation of Interest Period Selection
Exhibit C-3 Form of Notice of Conversion of Loan Type
Exhibit C-4 Form of Notice of LC Activity
Exhibit C-5 Form of Drawdown Certificate
Exhibit C-6 Form of Engineer's Certificate
Exhibit C-7 Form of Disbursement Requisition
Exhibit C-8 Form of Reserve Account Disbursement Requisition
EQUITY AND SECURITY-RELATED DOCUMENTS
Exhibit D-1 Form of Depositary Agreement
Exhibit D-2A Form of Affiliated Party Agreement Guaranty
Exhibit D-2B Form of Completion Guaranty
Exhibit D-3 Form of Deed of Trust
Exhibit D-4 Form of Security Agreement
Exhibit D-5 Form of Lien Subordination Agreement
Exhibit D-6 Schedule of Security Filings
Exhibit D-7 Form of Debt Subordination Agreement
Exhibit D-8 Form of Affiliated Party Subordination Agreement
CONSENTS
Exhibit E-1 Form of Consent for Contracting Party
Exhibit E-2 Schedule of Consents
CLOSING CERTIFICATES
Exhibit F-1 Form of Borrower's Closing Certificate
Exhibit F-2 Form of Insurance Consultant's Certificate
Exhibit F-3 Form of Independent Engineer's Certificate
Exhibit F-4 Form of Fuel Consultant's Certificate
Exhibit F-5 Form of Power Marketing Consultant's Certificate
PROJECT DESCRIPTION EXHIBITS
Exhibit G-1 Description of Projects
Appendix G-1A Description of Magic Valley Project
Appendix G-1B Description of South Point Project
Appendix G-1C Description of Westbrook Project
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Appendix G-1D Description of Sutter Project
Appendix G-1E Description of Ontelaunee Project
Appendix G-1F Description of Eastern Region Project 03
Appendix G-1G Description of Eastern Region Project 01
Appendix G-1H Description of Eastern Region Project 02
Appendix G-1I Description of Eastern Region Project 04
Appendix G-1J Description of Lost Pines Project
Appendix G-1K Description of Central Region Project 01
Appendix G-1L Description of Baytown Project
Appendix G-1M Description of Lyondell Citgo Project
Appendix G-1N Description of Central Region Project 02
Appendix G-1O Description of Los Medanos Project
Appendix G-1P Description of West Phoenix Project
Appendix G-1Q Description of Delta Project
Appendix G-1R Description of Metcalf Project
Appendix G-1S Description of Western Region Project 01
Exhibit G-2 Power Marketing Plans
Appendix G-2A Magic Valley Power Marketing Plan
Appendix G-2B South Point Power Marketing Plan
Appendix G-2C Westbrook Power Marketing Plan
Appendix G-2D Sutter Power Marketing Plan
Exhibit G-3 Schedule of Applicable Permits
Appendix G-3A Magic Valley Schedule of Applicable Permits
Appendix G-3B South Point Schedule of Applicable Permits
Appendix G-3C Westbrook Schedule of Applicable Permits
Appendix G-3D Sutter Schedule of Applicable Permits
Exhibit G-4 Project Budgets
Appendix G-4A Magic Valley Project Budget
Appendix G-4B South Point Project Budget
Appendix G-4C Westbrook Project Budget
Appendix G-4D Sutter Project Budget
Appendix G-4E Borrower Budget of Non-Allocated Costs
Exhibit G-5 Base Case Project Projections
Exhibit G-6 Project Schedules
Appendix G-6A Magic Valley Project Schedule
Appendix G-6B South Point Project Schedule
Appendix G-6C Westbrook Project Schedule
Exhibit G-7 Pending Litigation
Exhibit G-8 Hazardous Substances Disclosure
Exhibit G-9 Fuel Plans
Appendix G-9A Magic Valley Fuel Plan
Appendix G-9B South Point Fuel Plan
Appendix G-9C Westbrook Fuel Plan
Appendix G-9D Sutter Fuel Plan
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OTHER
Exhibit H Banks/Lending Offices
Exhibit I Annual Insurance Consultant's Certificate
Exhibit J-1 Form of Withholding Certificate (Treaty)
Exhibit J-2 Form of Withholding Certificate (Effectively Connected)
Exhibit K Insurance Requirements
Exhibit L Magic Valley Project Pre-Funding Requirements
Exhibit M South Point Project Pre-Funding Requirements
Exhibit N Sutter Project Pre-Funding Requirements
Exhibit O Westbrook Project Pre-Funding Requirements
Exhibit P Magic Valley Project Pre-Completion Requirements
Exhibit Q South Point Project Pre-Completion Requirements
Exhibit R Sutter Project Pre-Completion Requirements
Exhibit S Westbrook Project Pre-Completion Requirements
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THIS CREDIT AGREEMENT (this "Agreement") dated as of October 20,
1999, is entered into among CALPINE CONSTRUCTION FINANCE COMPANY, L.P., a
Delaware limited partnership, as Borrower, the financial institutions listed on
Exhibit H hereto (the "Banks"), CREDIT SUISSE FIRST BOSTON, as Lead Arranger,
Syndication Agent and Bookrunner, THE BANK OF NOVA SCOTIA, as Lead Arranger, LC
Bank and Administrative Agent, TD SECURITIES (USA) INC., as Co-Arranger and
Co-Documentation Agent, and CIBC WORLD MARKETS CORP., as Co-Arranger and
Co-Documentation Agent.
In consideration of the agreements herein and in the other Credit
Documents and in reliance upon the representations and warranties set forth
herein and therein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Except as otherwise expressly provided,
capitalized terms used in this Agreement and its exhibits shall have the
meanings given in Exhibit A.
1.2 Rules of Interpretation. Except as otherwise expressly
provided, the rules of interpretation set forth in Exhibit A shall apply to this
Agreement and the other Credit Documents.
ARTICLE 2
THE CREDIT FACILITIES
2.1 Loans.
2.1.1 Loan Facility.
(a) Availability. Subject to the terms and conditions set
forth in this Agreement, each Bank severally agrees to advance to Borrower from
time to time during the Loan Availability Period such loans as Borrower may
request under this Section 2.1.1 (individually, a "Loan" and collectively the
"Loans"), in an aggregate principal amount which, when added to such Bank's
Proportionate Share of the Aggregate LC Stated Amount and all outstanding
Reimbursement Obligations owed such Bank, does not exceed such Bank's Loan
Commitment. Subject to the terms hereof (including without limitation the
conditions to drawdowns set forth in Article 3), Borrower may borrow, repay and
reborrow the Loans from time to time during the Loan Availability Period.
(b) Notice of Borrowing. Borrower shall request Loans by
delivering to Administrative Agent a written notice in the form of Exhibit C-1,
appropriately completed (a "Notice of Borrowing"), which specifies, among other
things:
(i) The principal portion of the requested Borrowing
which will bear interest as provided in (1) Section 2.1.1(c)(i) (individually, a
"Base Rate Loan") and/or (2) Section 2.1.1(c)(ii) (individually, a "LIBOR
Loan");
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(ii) The amount of the requested Borrowing, which shall
be in the minimum amount of $1,000,000 or an integral multiple of $10,000 in
excess thereof;
(iii) The date of the requested Borrowing, which shall
be a Banking Day;
(iv) If the requested Borrowing is to consist of LIBOR
Loans, the initial Interest Periods selected by Borrower for such Loans; and
(v) The Project(s) to which such Borrowing relates.
Borrower shall give each Notice of Borrowing relating to Loans to
Administrative Agent so as to provide the Minimum Notice Period applicable to
Loans of the Type requested. Any Notice of Borrowing may be modified or revoked
by Borrower through the Banking Day prior to the Minimum Notice Period, and
shall thereafter be irrevocable.
(c) Loan Interest. Borrower shall pay interest on the unpaid
principal amount of each Loan from the date of such Loan until the maturity or
prepayment thereof at the following rates per annum:
(i) With respect to the principal portion of such Loan
which is, and during such periods as such Loan is, a Base Rate Loan, at a rate
per annum equal to the Base Rate plus the Applicable Margin, such rate to change
from time to time as the Base Rate shall change; and
(ii) With respect to the principal portion of such Loan
which is, and during such portion of such periods as such Loan is, a LIBOR Loan,
at a rate per annum, at all times during each Interest Period for such LIBOR
Loan, equal to the LIBO Rate for such Interest Period plus the Applicable
Margin.
(d) Loan Principal Payments. Borrower shall repay to
Administrative Agent, for the account of each Bank, in full on the Loan Maturity
Date the unpaid principal amount of all Loans made by such Bank.
2.1.2 Interest Provisions Relating to Loans.
(a) Interest Payment Dates. Borrower shall pay accrued
interest on the unpaid principal amount of each Loan (i) in the case of each
Base Rate Loan, on the last Banking Day of each calendar quarter, (ii) in the
case of each LIBOR Loan, on the last day of each Interest Period related to such
LIBOR Loan and, if such Interest Period is longer than three months, every three
months after the date of such LIBOR Loan and (iii) in all cases, upon prepayment
(to the extent thereof and including any optional prepayments or Mandatory
Prepayments), upon conversion from one Type of Loan to another Type, and on the
Loan Maturity Date.
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(b) LIBOR Loan Interest Periods.
(i) The initial and subsequent Interest Periods for
LIBOR Loans shall be a maximum of one month during the six month period
immediately following the Closing Date; provided that Administrative Agent may
otherwise approve, in its sole discretion, a longer Interest Period which is
requested by Borrower and otherwise complies with the following provisions of
this Section 2.1.2(b)(i). Thereafter, each subsequent Interest Period (including
any Interest Period referenced in the proviso of the first sentence of this
Section 2.1.2(b)) selected by Borrower for all LIBOR Loans shall be one, two,
three, six or, if made available by Administrative Agent, 12 months or such
other period as close to three months as is practicable to enable Borrower to
limit the number of LIBOR Loans as required by this Section 2.1.2(b)(i) or to
comply with clauses (C), (D) or (F) of the next sentence. Notwithstanding
anything to the contrary in either of the two preceding sentences, (A) any
Interest Period which would otherwise end on a day which is not a Banking Day
shall be extended to the next succeeding Banking Day unless such next Banking
Day falls in another calendar month, in which case such Interest Period shall
end on the immediately preceding Banking Day; (B) any Interest Period which
begins on the last Banking Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Banking Day of a calendar month; (C)
Borrower may not select Interest Periods which would leave a greater principal
amount of Loans subject to Interest Periods ending after a date upon which Loans
are or may be required to be repaid than principal amount of Loans scheduled to
be outstanding after such date; (D) any Interest Period for a Loan which would
otherwise end after the Loan Maturity Date shall end on the Loan Maturity Date;
(E) LIBOR Loans for each Interest Period shall be in the amount of at least
$100,000; and (F) Borrower may not at any time have outstanding more than twelve
different Interest Periods relating to LIBOR Loans.
(ii) Borrower may contact Administrative Agent at any
time prior to the end of an Interest Period, for a quotation of Interest Rates
in effect at such time for given Interest Periods and Administrative Agent shall
promptly provide such quotation. Borrower may select an Interest Period
telephonically within the time periods specified in Section 2.1.5, which
selection shall be irrevocable on and after the applicable Minimum Notice
Period. Borrower shall confirm such telephonic notice to Administrative Agent by
telecopy on the day such notice is given (in substantially the form of Exhibit
C-2, a "Confirmation of Interest Period Selection"). Borrower shall promptly
deliver to Administrative Agent the original of the Confirmation of Interest
Period Selection initially delivered by telecopy. If Borrower fails to notify
Administrative Agent of the next Interest Period for any LIBOR Loans in
accordance with this Section 2.1.2(b), such Loans shall automatically convert to
Base Rate Loans on the last day of the current Interest Period therefor.
Administrative Agent shall as soon as practicable (and, in any case, within two
Banking Days after delivery of the Confirmation of Interest Period Selection)
notify Borrower of each determination of the Interest Rate applicable to each
Loan.
(c) Interest Account and Interest Computations. Borrower
authorizes Administrative Agent to record in an account or accounts maintained
by Administrative Agent on its books (i) the interest rates applicable to all
Loans and the effective dates of all changes thereto, (ii) the Interest Period
for each LIBOR Loan, (iii) the date and amount of each principal and interest
payment on each Loan and (iv) such other information as Administrative Agent may
3
<PAGE> 18
determine is necessary for the computation of interest payable by Borrower
hereunder. Borrower agrees that all computations by Administrative Agent of
interest shall be conclusive in the absence of manifest error. All computations
of interest on Base Rate Loans shall be based upon a year of 365 or 366 days and
the actual days elapsed, and shall be adjusted in accordance with any changes in
the Base Rate to take effect on the beginning of the day of such change in the
Base Rate. All computations of interest on LIBOR Loans shall be based upon a
year of 360 days and the actual days elapsed.
2.1.3 Promissory Notes. The obligation of Borrower to repay the
Loans made by each Bank and to pay interest thereon at the rates provided herein
shall be evidenced by promissory notes in the form of Exhibit B (individually, a
"Note"), each payable to the order of such Bank and in the principal amount of
such Bank's Loan Commitment. Borrower authorizes each Bank to record on the
schedule annexed to such Bank's Note, the date and amount of each Loan made by
such Bank, and each payment or prepayment of principal thereunder and agrees
that all such notations shall constitute prima facie evidence of the matters
noted. Borrower further authorizes each Bank to attach to and make a part of
such Bank's Note continuations of the schedule attached thereto as necessary. No
failure to make any such notations, nor any errors in making any such notations,
shall affect the validity of Borrower's obligations to repay the full unpaid
principal amount of the Loans or the duties of Borrower hereunder or thereunder.
2.1.4 Loan Funding.
(a) Notice. Each Notice of Borrowing shall be delivered by
Borrower to Administrative Agent in accordance with Section 12.1. Administrative
Agent shall promptly notify each Bank of the contents of each Notice of
Borrowing.
(b) Pro Rata Loans. All Loans shall be made on a pro rata
basis by the Banks in accordance with their respective Proportionate Shares of
such Loans, with each Borrowing to consist of a Loan by each Bank equal to such
Bank's Proportionate Share of such Borrowing.
(c) Bank Funding. Each Bank shall, before 12:00 noon on the
date of each Borrowing, make available to Administrative Agent at its office
specified in Section 12.1, in same day funds, such Bank's Proportionate Share of
such Borrowing. The failure of any Bank to make the Loan to be made by it as
part of any Borrowing shall not relieve any other Bank of its obligation
hereunder to make its Loan on the date of such Borrowing. No Bank shall be
responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on the date of any Borrowing.
(d) Construction Account. No later than 2:00 p.m. on the date
specified in each Notice of Borrowing, if the applicable conditions precedent
listed in Article 3 have been satisfied and to the extent Administrative Agent
shall have received the appropriate funds from the Banks, Administrative Agent
will make available the Loans requested in such Notice of Borrowing (or so much
thereof as the Banks shall have approved pursuant to this Agreement) in Dollars
and in immediately available funds, at Administrative Agent's New York Branch,
and shall deposit such Loans into the Construction Account.
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<PAGE> 19
2.1.5 Conversion of Loans. Borrower may convert Loans from one
Type of Loans to another Type; provided, however, that (i) any conversion of
LIBOR Loans into Base Rate Loans shall be made on, and only on, the first day
after the last day of an Interest Period for such LIBOR Loans and (ii) Loans
shall be converted only in amounts of $100,000 or more. Borrower shall request
such a conversion by a written notice to Administrative Agent in the form of
Exhibit C-3, appropriately completed (a "Notice of Conversion of Loan Type"),
which specifies:
(a) The Loans, or portion thereof, which are to be converted;
(b) The Type into which such Loans, or portion thereof, are
to be converted;
(c) If such Loans are to be converted into LIBOR Loans, the
initial Interest Period selected by Borrower for such Loans in accordance with
Section 2.1.2(b); and
(d) The date of the requested conversion, which shall be a
Banking Day.
Borrower shall so deliver each Notice of Conversion of Loan Type so as to
provide at least the applicable Minimum Notice Period. Any Notice of Conversion
of Loan Type may be modified or revoked by Borrower through the Banking Day
prior to the Minimum Notice Period, and shall thereafter be irrevocable. Each
Notice of Conversion of Loan Type shall be delivered by first-class mail or
telecopy to Administrative Agent at the office or to the telecopy number and
during the hours specified in Section 12.1; provided, however, that Borrower
shall promptly deliver to Administrative Agent the original of any Notice of
Conversion of Loan Type initially delivered by telecopy. Administrative Agent
shall promptly notify each Bank of the contents of each Notice of Conversion of
Loan Type.
2.1.6 Prepayments.
(a) Terms of All Prepayments. Upon the prepayment of any Loan
(whether such prepayment is an optional prepayment under Section 2.1.6(b) or a
Mandatory Prepayment), Borrower shall pay to Administrative Agent for the
account of the Bank which made such Loan, as applicable, (i) all accrued
interest to the date of such prepayment on the amount prepaid, (ii) all accrued
fees to the date of such prepayment of the amount being prepaid, and (iii) if
such prepayment is the prepayment of a LIBOR Loan on a day other than the last
day of an Interest Period for such LIBOR Loan, all Liquidation Costs incurred by
such Bank as a result of such prepayment. Notwithstanding the foregoing,
Borrower shall have the right, by giving five Banking Days' notice to
Administrative Agent, in lieu of prepaying a LIBOR Loan on a day other than the
last day of an Interest Period for such LIBOR Loan, to deposit or cause
Administrative Agent to deposit, into an account to be held by Depositary Agent
(which account shall be subjected to the Lien of the Collateral Documents in a
manner satisfactory to Administrative Agent) an amount equal to the LIBOR Loans
to be prepaid. Such funds shall be held in such account until the expiration of
the Interest Period applicable to the LIBOR Loan to be prepaid at which time the
amount deposited in such account shall be used to prepay such
5
<PAGE> 20
LIBOR Loan and any interest accrued on such amount shall be deposited in the
Revenue Account. The deposit of amounts into such account shall not constitute a
prepayment of Loans and all Loans to be prepaid using the proceeds from such
account shall continue to accrue interest at the then applicable interest rate
for such Loans until actually prepaid. All amounts in such account shall only be
invested in Permitted Investments as directed by and at the expense and risk of
Borrower. Borrower may reborrow the principal amount of any Loan which is
prepaid.
(b) Optional Prepayments. Subject to Section 2.1.6(a), Borrower
may, at its option and without penalty, upon five Banking Days' notice to
Administrative Agent, prepay any Loans in whole or in part in minimum amounts of
$5,000,000 or an incremental multiple of $1,000,000 in excess thereof.
(c) Mandatory Prepayments. Borrower shall prepay (or cause to be
prepaid) Loans to the extent required by Section 7.2.1(9), 7.2.4, 7.5, 7.6, or
7.7 of this Agreement, or any other provision of this Agreement which requires
prepayment of Loans (such prepayment, "Mandatory Prepayment").
2.2 Letter of Credit Facilities.
2.2.1 Issuance of the Letters of Credit. Subject to the terms and
conditions set forth in this Agreement, LC Bank shall, during the Loan
Availability Period, on each Banking Day specified in a Notice of LC Activity
described in Section 2.2.3, issue, extend or increase the Stated Amount (as
applicable), for the account of Borrower, of the Letter(s) of Credit to which
such Notice of LC Activity relates, and deliver each such Letter of Credit (or a
notice of extension or increase in the Stated Amount thereof) to the applicable
LC Beneficiary. Subject to Section 2.2.6(b), LC Bank shall not modify the
conditions for draws or terms of availability for any Letter of Credit issued
and outstanding hereunder without Borrower's consent.
2.2.2 Availability. LC Bank shall, subject to the terms and
conditions of the Agreement, make Letter(s) of Credit available to Borrower
solely to enable Borrower to provide security for its obligations under Project
Documents. No Letter of Credit shall be issued, renewed, replaced or extended by
LC Bank until such time (or a reasonable period before such time) as required
under the Project Document pursuant to which such Letter of Credit is being
issued. The expiration date of each Letter of Credit shall be on or prior to the
scheduled Loan Maturity Date.
2.2.3 Notice of LC Activity. Borrower shall request the issuance,
extension or increase in the Stated Amount of any Letter of Credit by delivering
to Administrative Agent an irrevocable written notice in the form of Exhibit
C-4, appropriately completed (a "Notice of LC Activity"), which specifies, among
other things:
(a) The particulars of the Letter of Credit to be issued or
the specific Letter of Credit to be extended or the Stated Amount of which is to
be increased;
(b) The Project to which such Letter of Credit relates;
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(c) The issue date and expiration date of the Letter of
Credit to be issued or extended (neither of which shall in any event be later
than the scheduled Loan Maturity Date);
(d) The Stated Amount of such Letter of Credit which,
together with the Aggregate LC Stated Amount and all outstanding Reimbursement
Obligations, shall not exceed the lesser of (i) Total Letter of Credit
Commitment and (ii) an amount equal to the excess, if any, of (A) the amount of
the Total Loan Commitment at such time over (B) the aggregate principal amount
of all Loans then outstanding plus the Aggregate LC Stated Amount and all
outstanding Reimbursement Obligations; and
(e) The Available Construction Funds which, after taking into
effect the issuance of such Letter of Credit, will be equal to or exceed the
remaining Project Costs for the Initial Projects and the Funded Subsequent
Projects.
Borrower shall give the Notice of LC Activity to Administrative Agent and LC
Bank at least five Banking Days before the requested date of issuance of any
Letter of Credit, and at least five Banking Days before the requested date of
extension, or increase in the Stated Amount, thereof. Any Notice of LC Activity,
once given by Borrower, may not be modified or revoked without the prior consent
of the LC Bank.
2.2.4 Reimbursement. LC Bank shall notify Borrower of any Drawing
Payment under any Letter of Credit within one Banking Day after the date that
such Drawing Payment is made (the date such Drawing Payment is made, the
"Drawing Date"); provided, however, that LC Bank's failure to provide such
notification shall not relieve Borrower of its Reimbursement Obligation (it
being understood, however, that LC Bank shall not be excused from any liability
it may have to Borrower as a result of such failure to provide the required
notice). No later than 11:00 a.m. on the fifth Banking Day after the Drawing
Date, Borrower shall make or cause to be made to LC Bank a Reimbursement Payment
in an amount equal to the sum of (a) the full amount of such Drawing Payment and
(b) interest thereon for each day or portion thereof until such Reimbursement
Payment is made at a rate equal to (i) from the Drawing Date through the fifth
Banking Day following the Drawing Date, the LIBO Rate plus the Applicable Margin
then applicable to LIBOR Loans and (ii) thereafter, the Default Rate; provided,
however, that such Reimbursement Payment shall be for the benefit of each Bank
(in proportion to its Proportionate Share of the Total Letter of Credit
Commitment) to the extent that, prior to the time such Reimbursement Payment is
made, such Bank has, pursuant to Section 2.2.7, paid LC Bank its respective
Proportionate Share of the Drawing Payment made by LC Bank. If a Reimbursement
Payment is made in the full amount of such Drawing Payment by 3:00 p.m. on the
applicable Drawing Date, no interest shall be payable on such Drawing Payment.
2.2.5 Reimbursement Obligation Absolute. The Reimbursement
Obligation of Borrower for each Drawing Payment shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under and without regard to any circumstances, including, (a) any
lack of validity or enforceability of any of the Operative Documents, (b) any
amendment or waiver of or any consent to departure from all or any terms of any
of the Operative Documents, (c) the existence of any claim, setoff, defense or
other right
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which Borrower may have at any time against any LC Beneficiary or any transferee
of any Letter of Credit (or any Persons for whom any such LC Beneficiary or
transferee may be acting), LC Bank, Administrative Agent, any Bank or any other
Person, whether in connection with this Agreement, the transactions contemplated
herein or in the other Operative Documents, or in any unrelated transaction, (d)
any breach of contract or dispute among or between Borrower, LC Bank,
Administrative Agent, any Bank, or any other Person, (e) any demand, statement,
certificate, draft or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect, (f) payment by LC
Bank under any Letter of Credit against presentation of any demand, statement,
certificate, draft or other document which does not comply with the terms of
such Letter of Credit, (g) any non-application or misapplication by an LC
Beneficiary of the proceeds of any Drawing Payment under a Letter of Credit or
any other act or omission of an LC Beneficiary in connection with a Letter of
Credit, (h) any extension of time for or delay, renewal or compromise of or
other indulgence or modification to the Drawing Payment granted or agreed to by
LC Bank, Administrative Agent or any Bank, with or without notice to or approval
by Borrower, (i) any failure to preserve or protect any Collateral, any failure
to perfect or preserve the perfection of any Lien thereon, or the release of any
of the Collateral securing the performance or observance of the terms of this
Agreement or any of the other Operative Documents, or (j) any other
circumstances or happenings whatsoever relating to Borrower, such Reimbursement
Obligation or any Project, whether or not similar to any of the foregoing,
including the failure of Borrower to occupy or use any Project in the manner
contemplated by the Operative Documents or otherwise, any defect in title,
design, operation, merchantability, fitness or condition of any Project or in
the suitability of any Project for Borrower's purposes or needs, any failure of
consideration, destruction of or damage to any Project, any commercial
frustration of purpose, the taking by condemnation of title to or the use of all
or any part of any Project, any Regulatory Change, any failure of an LC
Beneficiary or any other Person to perform or observe any agreement, whether
express or implied, or any duty, liability or obligation arising out of or in
connection with the Operative Documents to which each is a party; provided,
however, that nothing in this Section 2.2.5 shall relieve LC Bank,
Administrative Agent or any Bank from liability for its gross negligence or
willful misconduct or breach of this Agreement.
2.2.6 Reduction and Reinstatement of Stated Amount.
(a) The Stated Amount of each Letter of Credit shall be
reduced by the amount of Drawing Payments made in respect thereof.
Notwithstanding anything to the contrary contained in this Section 2.2, once so
reduced, the Stated Amount of any Letter of Credit shall not be reinstated
except (i) upon the prior written consent of Administrative Agent, LC Bank and
the Required Banks or (ii) upon payment by Borrower of the Reimbursement
Obligation corresponding to such Drawing Payment and satisfaction of the
conditions for an increase in the Stated Amount of a Letter of Credit set forth
in Section 2.2.3 and Article 3.
(b) Upon the occurrence and during the continuation of an
Event of Default under Section 8.1.4 or at such time as, pursuant to the terms
hereof, Administrative Agent and the Banks have accelerated the Obligations,
Administrative Agent (acting at the direction of the LC Bank or the Required
Banks) shall be entitled to cancel all outstanding Letters of Credit any time at
least 15 days after delivery to the LC Beneficiary of each Letter of Credit that
will be
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canceled a written notice of such intent to cancel, whereupon the LC Beneficiary
shall be entitled to draw upon the applicable Letter of Credit in accordance
with its terms.
2.2.7 Bank Participation. Each Bank severally agrees to
participate with LC Bank in the extension of credit arising from the issuance of
the Letters of Credit in an amount equal to such Bank's Proportionate Share of
the Stated Amount of each Letter of Credit, and the issuance of a Letter of
Credit shall be deemed a confirmation to LC Bank of such participation in such
amount. LC Bank may request the Banks to pay to LC Bank their respective
Proportionate Shares of all or any portion of any Drawing Payment made or to be
made by LC Bank under any Letter of Credit by contacting each Bank and
Administrative Agent telephonically (promptly confirmed in writing) at any time
after LC Bank has received notice of or request for such Drawing Payment, and
specifying the amount of such Drawing Payment, such Bank's Proportionate Share
thereof, and the date on which such Drawing Payment is to be made or was made;
provided, however, that LC Bank shall not request the Banks to make any payment
under this Section 2.2.7 in connection with any portion of a Drawing Payment for
which LC Bank has been reimbursed through a Reimbursement Payment by Borrower
(unless such Reimbursement Payment has been thereafter recovered by Borrower).
Upon receipt of any such request for payment from LC Bank, each Bank shall pay
to LC Bank such Bank's Proportionate Share of the unreimbursed portion of such
Drawing Payment, together with interest thereon at a per annum rate equal to the
Federal Funds Rate, as in effect from time to time, from the date of such
Drawing Payment to the date on which such Bank makes payment. Each Bank's
obligation to make each such payment to LC Bank shall be absolute, unconditional
and irrevocable and shall not be affected by any circumstance whatsoever,
including the occurrence or continuance of any Inchoate Default or Event of
Default, or the failure of any other Bank to make any payment under this Section
2.2.7, and each Bank further agrees that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever. If any Reimbursement
Payment is made to Administrative Agent or LC Bank, Administrative Agent or LC
Bank, as applicable, shall pay to each Bank which has paid its Proportionate
Share of the Drawing Payment such Bank's Proportionate Share of the
Reimbursement Payment and shall, in the case of Administrative Agent, pay to LC
Bank and, in the case of LC Bank, retain, the balance of such Reimbursement
Payment.
2.2.8 Commercial Practices. Borrower assumes all risks of the
acts or omissions of any LC Beneficiary or transferee of any Letter of Credit
with respect to the use of such Letter of Credit. Borrower agrees that neither
LC Bank, Administrative Agent nor any Bank (nor any of their respective
directors, officers or employees) shall be liable or responsible for: (a) the
use which may be made of any Letter of Credit or for any acts or omissions of
any LC Beneficiary or transferee in connection therewith; (b) any reference
which may be made to this Agreement or to any Letter of Credit in any
agreements, instruments or other documents; (c) the validity, sufficiency or
genuineness of documents other than the Letters of Credit, or of any
endorsement(s) thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged or any statement
therein prove to be untrue or inaccurate in any respect whatsoever; (d) payment
by LC Bank against presentation of documents which do not strictly comply with
the terms of the applicable Letter of Credit, including failure of any documents
to bear any reference or adequate reference to such Letter of Credit; or (e) any
other circumstances whatsoever in making or failing to make payment under any
Letter of Credit,
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except only that LC Bank shall be liable to Borrower for acts or events
described in clauses (a) through (e) above, to the extent, but only to the
extent, of any direct damages, as opposed to indirect, special or consequential
damages, suffered by Borrower which Borrower proves were caused by (i) LC Bank's
willful misconduct or gross negligence in determining whether a drawing made
under the applicable Letter of Credit complies with the terms and conditions
therefor stated in such Letter of Credit or (ii) LC Bank's willful failure to
pay under any Letter of Credit after a drawing by the respective LC Beneficiary
strictly complying with the terms and conditions of the applicable Letter of
Credit. Without limiting the foregoing, LC Bank may accept any document that
appears on its face to be in order, without responsibility for further
investigation. Borrower hereby waives any right to object to any payment made
under a Letter of Credit with regard to a drawing that is in the form provided
in such Letter of Credit but which varies with respect to punctuation (except
punctuation with respect to any Dollar amount specified therein),
capitalization, spelling or similar matters of form.
2.2.9 Term of Letters of Credit. Unless terminated earlier in
accordance with its terms, or extended pursuant to Section 2.2.3, each Letter of
Credit shall terminate on the earlier to occur of (i) 12:01 a.m., on the
Expiration Date stated therein (which shall be no later than the earlier of one
year from the date such Letter of Credit is issued and 15 days following the
scheduled expiration of the letter of credit obligations under the Project
Document in connection with which such Letter of Credit is to be issued) and
(ii) cancellation of such Letter of Credit pursuant to Section 2.2.6(b);
provided, however, that no Letter of Credit shall expire after the Loan Maturity
Date.
2.3 Total Commitments.
2.3.1 Loan Commitment. The aggregate principal amount of all
Loans outstanding at any time or times shall not exceed $1,000,000,000 or, if
such amount is reduced by Borrower pursuant to Section 2.3.3, such lower amount
(such amount, so reduced from time to time, the "Total Loan Commitment"), minus
the sum of (i) the aggregate Stated Amount of all Letters of Credit then
outstanding plus (ii) the aggregate amount of all Reimbursement Obligations then
outstanding.
2.3.2 Letter of Credit Commitment. The aggregate Stated Amount of
all Letters of Credit from time to time outstanding and all outstanding
Reimbursement Obligations thereunder shall not exceed $50,000,000, or, if such
amount is reduced by Borrower pursuant to Section 2.3.3, such lower amount (such
amount, as so reduced from time to time, the "Total Letter of Credit
Commitment").
2.3.3 Reductions and Cancellations. Borrower may, from time to
time upon five Banking Days written notice to Administrative Agent, permanently
reduce, by an amount of $10,000,000 or an integral multiple of $1,000,000 in
excess thereof or cancel in its entirety the Total Loan Commitment and/or the
Total Letter of Credit Commitment. Notwithstanding the foregoing, Borrower may
not reduce or cancel the Total Loan Commitment and/or the Total Letter of Credit
Commitment if, after giving effect to such reduction or cancellation, (i) the
sum of the aggregate principal amount of all Loans then outstanding and the
Aggregate LC Stated Amount together with all outstanding Reimbursement
Obligations would exceed the Total Loan
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Commitment, (ii) the Available Construction Funds would not, in the reasonable
judgment of the Technical Committee and the Independent Engineer, be equal to or
exceed remaining Project Costs for all Initial Projects and Funded Subsequent
Projects, or (iii) such reduction or cancellation would cause a violation of any
other provision of this Agreement, the other Credit Documents, any Project
Documents or have a Material Adverse Effect. Borrower shall pay to
Administrative Agent any Commitment Fees then due upon any cancellation and,
from the effective date of any reduction, the Commitment Fees shall be computed
on the basis of the Available Loan Commitment, as so reduced. Once reduced or
canceled, none of the Total Loan Commitment may be increased or reinstated. Any
reductions in the Total Loan Commitment or the Total Letter of Credit Commitment
pursuant to this Section 2.3.3 shall be applied ratably to each Bank's
respective Commitments in accordance with Section 2.7.1.
2.4 Fees.
2.4.1 Fee Letter. Borrower shall pay to the Lead Arrangers, and
Administrative Agent solely for the Lead Arrangers' and Administrative Agent's
respective accounts the fees described in that certain letter from Borrower to
the Lead Arrangers and Administrative Agent dated the Closing Date.
2.4.2 Loan Commitment Fees. On the last Banking Day in each
calendar quarter (where all or any portion of such calendar quarter occurs on or
after the Closing Date and prior to the Loan Maturity Date) and on the Loan
Maturity Date (or, if the Total Loan Commitment is canceled prior to such date,
on the date of such cancellation), Borrower shall pay to Administrative Agent,
for the benefit of the Banks, accruing from the Closing Date or the first day of
such quarter, as the case may be, a commitment fee (the "Commitment Fee") for
such quarter (or portion thereof) then ending equal to the product of (i) 0.50%
times (ii) the daily average Available Loan Commitment for such quarter (or
portion thereof) times (iii) a fraction, the numerator of which is the number of
days in such quarter (or portion thereof) and the denominator of which is the
number of days in that calendar year (365 or 366, as the case may be).
2.4.3 Activation Fee. Concurrently with the first Borrowing in
respect of each Subsequent Project, Borrower shall pay to Administrative Agent,
for the benefit of the Banks, an activation fee (the "Activation Fee") equal to
the product of (a) 0.25% times (b) the total amount of Project Costs in respect
of such Subsequent Project less any Contributions by Calpine previously applied
to pay Project Costs for such Subsequent Project as reflected in such Subsequent
Project's Project Budget.
2.5 Letter of Credit Fees.
2.5.1 On the last Banking Day in each calendar quarter (or
portion thereof) commencing on or after the Closing Date and ending on the Loan
Maturity Date and on the Expiration Date of each Letter of Credit, Borrower
shall pay to Administrative Agent for the benefit of the Banks, accruing from
the date of issuance of such Letter of Credit, a Letter of Credit fee (the
"Letter of Credit Fee") for such quarter (or portion thereof) then ending at the
rates per annum described below and computed in the following manner: The Letter
of Credit
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Fee in respect of each Letter of Credit shall be equal to the product of (a) the
Applicable Margin with respect to LIBOR Loans applicable at such time, times (b)
the daily average Stated Amount of each such Letter of Credit for such quarter
(or portion thereof) times (c) a fraction, the numerator of which is the number
of days in such quarter (or portion thereof) and the denominator of which is
360.
2.5.2 Borrower shall pay to LC Bank solely for LC Bank's account
the issuing and paying fee and LC Bank's usual and customary charges for the
opening of any Letter of Credit, for the negotiation of any drafts paid pursuant
to any Letter of Credit and for any wire transfers described in that certain
letter from Borrower to LC Bank dated the Closing Date.
2.6 Other Payment Terms.
2.6.1 Place and Manner. Borrower shall make all payments due to
each Bank or Administrative Agent hereunder to Administrative Agent, for the
account of such Bank, to The Bank of Nova Scotia, Federal Reserve Bank of New
York ABA#026002532, for further credit to account #0610135-BNS San Francisco
Loan Servicing Account; Reference: Calpine Construction Finance Company, in
lawful money of the United States and in immediately available funds not later
than 12:00 noon on the date on which such payment is due. Any payment made after
such time on any day shall be deemed received on the Banking Day after such
payment is received. Administrative Agent shall disburse to each Bank each such
payment received by Administrative Agent for such Bank, such disbursement to
occur on the day such payment is received if received by 12:00 noon or if
otherwise reasonably possible, otherwise on the next Banking Day.
2.6.2 Date. Whenever any payment due hereunder shall fall due on
a day other than a Banking Day, such payment shall be made on the next
succeeding Banking Day (except in the case of any payment relating to a LIBOR
Loan where such next succeeding Banking Day is in the next calendar month, in
which case such payment shall be made on the next preceding Banking Day), and
such extension of time shall be included in the computation of interest or fees,
as the case may be.
2.6.3 Late Payments. If any amounts required to be paid by
Borrower under this Agreement or the other Credit Documents (including principal
or interest payable on any Loan, and any fees or other amounts otherwise payable
to Administrative Agent or any Bank) remain unpaid after such amounts are due,
Borrower shall pay interest on the aggregate, unpaid balance of such amounts
from the date due until those amounts are paid in full at a per annum rate equal
to the Default Rate.
2.6.4 Net of Taxes, Etc.
(a) Taxes. Subject to each Bank's compliance with Section
2.6.7, any and all payments to or for the benefit of Administrative Agent or any
Bank by Borrower hereunder or under any other Credit Document shall be made free
and clear of and without deduction, setoff or counterclaim of any kind
whatsoever and in such amounts as may be necessary in order that all such
payments, after deduction for or on account of any present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect
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thereto (excluding income and franchise taxes, which include taxes imposed on or
measured by the net income or capital of Administrative Agent or such Bank by
any jurisdiction or any political subdivision or taxing authority thereof or
therein solely as a result of a connection between such Bank and such
jurisdiction or political subdivision, other than a connection resulting solely
from executing, delivering or performing its obligations or receiving a payment
under, or enforcing, this Agreement or any Note) (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"), shall be equal to the amounts otherwise
specified to be paid under this Agreement and the other Credit Documents. If
Borrower shall be required by law to withhold or deduct any Taxes from or in
respect of any sum payable hereunder or under any other Credit Document to
Administrative Agent or any Bank, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.6.4, Administrative
Agent or such Bank receives an amount equal to the sum it would have received
had no such deductions been made, (ii) Borrower shall make such deductions and
(iii) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. If Borrower
shall make any payment under this Section 2.6.4 to or for the benefit of
Administrative Agent or any Bank with respect to Taxes and if Administrative
Agent or such Bank shall claim any credit or deduction for such Taxes against
any other taxes payable by Administrative Agent or such Bank to any taxing
jurisdiction then Administrative Agent or such Bank shall pay to Borrower an
amount equal to the amount by which such other taxes are actually reduced;
provided that the aggregate amount payable by Administrative Agent or such Bank
pursuant to this sentence shall not exceed the aggregate amount previously paid
by Borrower with respect to such Taxes. In addition, Borrower agrees to pay any
present or future stamp, recording or documentary taxes and any other excise or
property taxes, charges or similar levies (not including income or franchise
taxes) that arise under the laws of the United States of America, the State of
New York or any other state or jurisdiction where a Project is located from any
payment made hereunder or under any other Credit Document or from the execution
or delivery or otherwise with respect to this Agreement or any other Credit
Document (hereinafter referred to as "Other Taxes").
(b) Indemnity. Borrower shall indemnify each Bank for the
full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.6.4 paid by any
Bank, or any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted; provided that Borrower shall not be obligated to
indemnify any Bank for any penalties, interest or expenses relating to Taxes or
Other Taxes arising from the indemnitee's gross negligence or willful
misconduct. Each Bank agrees to give written notice to Borrower of the assertion
of any claim against such Bank relating to such Taxes or Other Taxes as promptly
as is practicable after being notified of such assertion, and in no event later
than 180 days after the principal officer of such Bank responsible for
administering this Agreement obtains knowledge thereof; provided that any Bank's
failure to notify Borrower of such assertion within such 180 days period shall
not relieve Borrower of its obligation under this Section 2.6.4 with respect to
Taxes or Other Taxes arising prior to the end of such period, but shall relieve
Borrower of its obligations under this Section 2.6.4 with respect to Taxes or
Other Taxes between the end of such period and such time as Borrower receives
notice from such Bank
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as provided herein. Payments by Borrower pursuant to this indemnification shall
be made within 30 days from the date such Bank makes written demand therefor
(submitted through Administrative Agent), which demand shall be accompanied by a
certificate describing in reasonable detail the basis thereof. Each Bank agrees
to repay to Borrower any refund (including that portion of any interest that was
included as part of such refund with respect to Taxes or Other Taxes paid by
Borrower pursuant to this Section 2.6.4) received by such Bank for Taxes or
Other Taxes that were paid by Borrower pursuant to this Section 2.6.4 and to
contest, with the approval and participation of and at the expense of Borrower,
any such Taxes or Other Taxes which such Bank or Borrower reasonably believes
not to have been properly assessed.
(c) Notice. Within 30 days after the date of any payment of
Taxes by Borrower, Borrower shall furnish to Administrative Agent, at its
address referred to in Section 12.1, the original or a certified copy of a
receipt evidencing payment thereof. Borrower shall compensate each Bank for all
reasonable losses and expenses sustained by such Bank as a result of any failure
by Borrower to so furnish such copy of such receipt.
(d) Survival of Obligations. The obligations of Borrower
under this Section 2.6.4 shall survive the termination of this Agreement and the
repayment of the Obligations.
2.6.5 Application of Payments. Payments made under this Agreement
or the other Credit Documents and other amounts received by Administrative Agent
and the Banks under this Agreement or the other Credit Documents shall first be
applied to any fees, costs, charges or expenses payable to Administrative Agent
or the other Banks hereunder or under the other Credit Documents, next to any
accrued but unpaid interest then due and owing, and then to outstanding
principal then due and owing or otherwise to be prepaid.
2.6.6 Failure to Pay Administrative Agent. Unless Administrative
Agent shall have received notice from Borrower at least two Banking Days prior
to the date on which any payment is due to the Banks hereunder that Borrower
will not make such payment in full, Administrative Agent may assume that
Borrower has made such payment in full to Administrative Agent on such date and
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent Borrower shall not have so made such payment in
full to Administrative Agent, such Bank shall repay to Administrative Agent
forthwith upon demand such amount distributed to such Bank, together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to Administrative Agent, at the
Federal Funds Rate for the first five days after such date, and subsequent
thereto at the Base Rate. A certificate of Administrative Agent submitted to any
Bank with respect to any amounts owing by such Bank under this Section 2.6.6
shall be conclusive in the absence of manifest error.
2.6.7 Withholding Exemption Certificates. Administrative Agent on
the Closing Date and each Bank upon becoming a Bank hereunder including any
entity to which any Bank grants a participation, or otherwise transfers its
interest in this Agreement, agree that they will deliver to Borrower and
Administrative Agent (and Administrative Agent agrees that it will deliver to
Borrower) either (a) a statement that it is formed under the laws of the United
States of
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America or a state thereof or (b) if it is not so formed, a letter in the form
of Exhibit J-1 or Exhibit J-2, as appropriate, or other documentation reasonably
acceptable to Borrower and Administrative Agent and two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, certifying in each case that such Bank is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes. Each Bank which delivers to Borrower and
Administrative Agent a Form 1001 or 4224 pursuant to the preceding sentence
further undertakes to deliver to Borrower and Administrative Agent further
copies of the said letter and Form 1001 or 4224, or successor applicable forms,
or other manner of certification or procedure, as the case may be, on or before
the date that any such letter or form expires or becomes obsolete or within a
reasonable time after gaining knowledge of the occurrence of any event requiring
a change in the most recent letter and forms previously delivered by it to
Borrower, and such extensions or renewals thereof as may reasonably be requested
by Borrower, certifying in the case of a Form 1001 or 4224 that such Bank is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, unless in any such cases
an event (including any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent a Bank from duly completing
and delivering any such letter or form with respect to it and such Bank advises
Borrower that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax, and in the case of Form W-8 or
W-9, establishing an exemption from United States backup withholding tax.
Borrower shall not be obligated, however, to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 2.6.4 (or make
an indemnification payment pursuant to Section 2.6.4) to any Bank (including any
entity to which any Bank sells, assigns, grants a participation in, or otherwise
transfers its rights under this Agreement) if the obligation to pay such
additional amounts (or such indemnification) would not have arisen but for a
failure of such Bank to comply with its obligations under this Section 2.6.7.
2.7 Pro Rata Treatment.
2.7.1 Borrowings, Commitment Reductions, Etc. Except as otherwise
provided herein, (a) each Borrowing and each reduction of the Total Loan
Commitment or the Total Letter of Credit Commitment shall be made or allocated
among the Banks pro rata according to their respective Proportionate Shares of
such Loans or Commitments, as the case may be, (b) each payment of principal of
and interest on Loans shall be made or shared among the Banks holding such Loans
pro rata according to the respective unpaid principal amounts of such Loans held
by such Banks and (c) each payment of Commitment Fees and Letter of Credit Fees
shall be shared among the Banks pro rata according to (i) their respective
Proportionate Shares of the Commitments to which such fees apply and (ii) in the
case of each Bank which becomes a Bank hereunder after the date hereof, the date
upon which such Bank so became a Bank.
2.7.2 Sharing of Payments, Etc. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of Loans owed to it, in excess of its ratable
share of payments on account of such Loans obtained by all Banks entitled to
such payments, such Bank shall forthwith purchase from the other Banks such
participation in the Loans, as the case may be, as shall be necessary to cause
such purchasing
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Bank to share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Bank, such purchase from such Bank shall be rescinded and each
other Bank shall repay to the purchasing Bank the purchase price to the extent
of such recovery together with an amount equal to such other Bank's ratable
share (according to the proportion of (a) the amount of such other Bank's
required repayment to (b) the total amount so recovered from the purchasing
Bank) of any interest or other amount paid or payable by the purchasing Bank in
respect of the total amount so recovered. Borrower agrees that any Bank so
purchasing a participation from another Bank pursuant to this Section 2.7.2 may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such participation as fully as
if such Bank were the direct creditor of Borrower in the amount of such
participation.
2.8 Change of Circumstances.
2.8.1 Inability to Determine Rates. If, on or before the first
day of any Interest Period for any LIBOR Loans, (a) Administrative Agent
determines that the LIBO Rate for such Interest Period cannot be adequately and
reasonably determined due to the unavailability of funds in or other
circumstances affecting the London interbank market, or (b) Banks holding
aggregate Proportionate Shares of 33-1/3% or more of the Total Loan Commitment
shall advise Administrative Agent that (i) the rates of interest for such LIBOR
Loans do not adequately and fairly reflect the cost to such Banks of making or
maintaining such Loans or (ii) deposits in Dollars in the London interbank
market are not available to such Banks (as conclusively certified by each such
Bank in good faith in writing to Administrative Agent and to Borrower) in the
ordinary course of business in sufficient amounts to make and/or maintain their
LIBOR Loans, Administrative Agent shall immediately give notice of such
condition to Borrower. After the giving of any such notice and until
Administrative Agent shall otherwise notify Borrower that the circumstances
giving rise to such condition no longer exist, Borrower's right to request the
making of or conversion to, and the Banks' obligations to make or convert to
LIBOR Loans shall be suspended. Any LIBOR Loans outstanding at the commencement
of any such suspension shall be converted at the end of the then current
Interest Period for such Loans into Base Rate Loans unless such suspension has
then ended.
2.8.2 Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule or the
application or requirements thereof (whether such change occurs in accordance
with the terms of such Governmental Rule as enacted, as a result of amendment,
or otherwise), any change in the interpretation or administration of any
Governmental Rule by any Governmental Authority, or compliance by any Bank or
Borrower with any request or directive (whether or not having the force of law)
of any Governmental Authority (a "Change of Law") shall make it unlawful or
impossible for any Bank to make or maintain any LIBOR Loan, such Bank shall
immediately notify Administrative Agent and Borrower of such Change of Law. Upon
receipt of such notice, (a) Borrower's right to request the making of or
conversion to, and the Bank's obligations to make or convert to, LIBOR Loans
shall be suspended for so long as such condition shall exist, and (b) Borrower
shall, at the request of such Bank, either (i) pursuant to Section 2.1.5,
convert any then outstanding LIBOR Loans into Base Rate Loans at the end of the
current Interest Periods for such Loans, or (ii) immediately repay pursuant to
Section 2.1.6 or convert LIBOR Loans of the affected Type
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into Base Rate Loans if such Bank shall notify Borrower that such Bank may not
lawfully continue to fund and maintain such Loans. Any conversion or prepayment
of LIBOR Loans made pursuant to the preceding sentence prior to the last day of
an Interest Period for such Loans shall be deemed a prepayment thereof for
purposes of Section 2.9.
2.8.3 Increased Costs. If, after the date of this Agreement, any
Change of Law:
(a) Shall subject any Bank to any tax, duty or other charge
with respect to any LIBOR Loan or Commitment, or shall change the basis of
taxation of payments by Borrower to any Bank on such a Loan or with respect to
any Commitment (except for Taxes, Other Taxes or changes in the rate of taxation
on the overall net income of any Bank); or
(b) Shall impose, modify or hold applicable any reserve,
special deposit or similar requirement (without duplication of any reserve
requirement included within the applicable Interest Rate through the definition
of "Reserve Requirement") against assets held by, deposits or other liabilities
in or for the account of, advances or loans by, or any other acquisition of
funds by any Bank for any LIBOR Loan; or
(c) Shall impose on any Bank any other condition directly
related to any LIBOR Loan or Commitment;
and the effect of any of the foregoing is to increase the cost to such Bank of
making, issuing, creating, renewing, participating in (subject to the
limitations in Section 10.13) or maintaining any such LIBOR Loan or Commitment
or to reduce any amount receivable by such Bank hereunder; then Borrower shall
from time to time, upon demand by such Bank, pay to such Bank additional amounts
sufficient to reimburse such Bank for such increased costs or to compensate such
Bank for such reduced amounts. A certificate setting forth in reasonable detail
the amount of such increased costs or reduced amounts and the basis for
determination of such amount, submitted by such Bank to Borrower, shall, in the
absence of manifest error, be conclusive and binding on Borrower for purposes of
this Agreement.
2.8.4 Capital Requirements. If any Bank determines that (a) any
Change of Law after the date of this Agreement increases the amount of capital
required or expected to be maintained by such Bank (or the Lending Office of
such Bank) or any Person controlling such Bank (a "Capital Adequacy
Requirement") and (b) the amount of capital maintained by such Bank or such
Person which is attributable to or based upon the Loans, the Commitments or this
Agreement must be increased as a result of such Capital Adequacy Requirement
(taking into account such Bank's or such Person's policies with respect to
capital adequacy), Borrower shall pay to Administrative Agent on behalf of such
Bank or such Person, upon demand of Administrative Agent on behalf of such Bank
or such Person, such amounts as such Bank or such Person shall reasonably
determine are necessary to compensate such Bank or such Person for the increased
costs to such Bank or such Person of such increased capital. A certificate of
such Bank or such Person, setting forth in reasonable detail the computation of
any such increased costs, delivered to Borrower by Administrative Agent on
behalf of such Bank or such Person shall, in the absence of manifest error, be
conclusive and binding on Borrower for purposes of this Agreement.
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2.8.5 Notice; Participating Banks' Rights. Each Bank will notify
Borrower of any event occurring after the date of this Agreement that will
entitle such Bank to compensation pursuant to this Section 2.8, as promptly as
practicable, and in no event later than 90 days after the principal officer of
such Bank responsible for administering this Agreement obtains knowledge
thereof; provided that any Bank's failure to notify Borrower within such 90 day
period shall not relieve Borrower of its obligation under this Section 2.8.5
with respect to claims arising prior to the end of such period, but shall
relieve Borrower of its obligations under this Section 2.8.5 with respect to the
time between the end of such period and such time as Borrower receives notice
from the indemnitee as provided herein. No Person purchasing from a Bank a
participation in any Commitment (as opposed to an assignment) shall be entitled
to any payment from or on behalf of Borrower pursuant to Section 2.8.3 or
Section 2.8.4 which would be in excess of the applicable proportionate amount
(based on the portion of the Commitment in which such Person is participating)
which would then be payable to such Bank if such Bank had not sold a
participation in that portion of the Commitment.
2.9 Funding Losses. If Borrower shall (a) repay or prepay any
LIBOR Loans on any day other than the last day of an Interest Period for such
Loans (whether an optional prepayment or a Mandatory Prepayment), (b) fail to
borrow any LIBOR Loans in accordance with a Notice of Borrowing delivered to
Administrative Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise), (c) fail to convert any Loans into LIBOR
Loans in accordance with a Notice of Conversion of Loan Type delivered to
Administrative Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise), or (d) fail to make any prepayment in
accordance with any notice of prepayment delivered to Administrative Agent;
Borrower shall, upon demand by any Bank, reimburse such Bank for all costs and
losses incurred by such Bank as a result of such repayment, prepayment or
failure ("Liquidation Costs"). Borrower understands that such costs and losses
may include losses incurred by a Bank as a result of funding and other contracts
entered into by such Bank to fund LIBOR Loans. Each Bank demanding payment under
this Section 2.9 shall deliver to Borrower a certificate setting forth in
reasonable detail the basis for and the amount of costs and losses for which
demand is made. Such a certificate so delivered to Borrower shall, in the
absence of manifest error, be conclusive and binding as to the amount of such
loss for purposes of this Agreement.
2.10 Alternate Office; Minimization of Costs.
2.10.1 To the extent reasonably possible, each Bank shall
designate an alternative Lending Office with respect to its LIBOR Loans and
otherwise take any reasonable actions to reduce any liability of Borrower to any
Bank under Section 2.6.4, 2.8.3 or 2.8.4, or to avoid the unavailability of any
Type of Loans under Section 2.8.2 so long as such Bank, in its sole discretion,
does not determine that such designation is disadvantageous to such Bank.
2.10.2 If and with respect to each occasion that a Bank either
makes a demand for compensation pursuant to Section 2.6.4, 2.6.7, 2.8.3 or 2.8.4
or is unable to fund LIBOR Loans pursuant to Section 2.8.2 or such Bank
wrongfully fails to fund a Loan, Borrower may, upon at least five Banking Days'
prior irrevocable written notice to each of such Bank and Administrative Agent,
in whole permanently replace the Commitment of such Bank; provided that Borrower
shall replace such Commitment with the Commitment of a commercial bank
reasonably satisfactory to
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the Lead Arrangers. Such replacement Bank shall upon the effective date of
replacement purchase the Obligations owed to such replaced Bank for the
aggregate amount thereof and shall thereupon for all purposes become a "Bank"
hereunder. Such notice from Borrower shall specify an effective date for the
replacement of such Bank's Commitment, which date shall not be later than the
tenth day after the day such notice is given. On the effective date of any
replacement of such Bank's Commitment pursuant to this Section 2.10.2, Borrower
shall pay to Administrative Agent for the account of such Bank (a) any fees due
to such Bank to the date of such replacement; (b) accrued interest on the
principal amount of outstanding Loans held by such Bank to the date of such
replacement, and (c) the amount or amounts requested by such Bank pursuant to
each of Sections 2.6.4, 2.6.7, 2.8.3 and 2.8.4, as applicable. Borrower will
remain liable to such replaced Bank for any Liquidation Costs that such Bank may
sustain or incur as a consequence of repayment of such Bank's Loans (unless such
Bank has defaulted on its obligation to fund a Loan hereunder). Upon the
effective date of repayment of any Bank's Loans and termination of such Bank's
Commitment pursuant to this Section 2.10.2, such Bank shall cease to be a Bank
hereunder. No such termination of any such Bank's Commitment and the purchase of
such Bank's Loans pursuant to this Section 2.10.2 shall affect (i) any liability
or obligation of Borrower or any other Bank to such terminated Bank which
accrued on or prior to the date of such termination or (ii) such terminated
Bank's rights hereunder in respect of any such liability or obligation.
2.10.3 Any Bank may designate a Lending Office other than that
set forth on Exhibit H and may assign all of its interests under the Credit
Documents, and its Notes, to such Lending Office; provided that such designation
and assignment do not at the time of such designation and assignment increase
the reasonably foreseeable liability of Borrower under Sections 2.6.4, 2.8.3, or
2.8.4 or make an Interest Rate option unavailable pursuant to Section 2.8.2.
2.11 Extension of Loan Maturity Date.
2.11.1 Borrower may, not earlier than 730 days and not later than
365 days prior to the initial Date Certain, request Administrative Agent to
request that the Banks agree to an extension of the initial Date Certain for an
additional period not to exceed one year from the date of the initial Date
Certain upon the terms and conditions of this Section 2.11.
2.11.2 Upon receipt of any such request from Borrower,
Administrative Agent shall promptly notify each Bank of such request. Each Bank
shall notify Administrative Agent not later than 45 days after receiving notice
of the extension request from Administrative Agent if, in its sole discretion,
it agrees to extend its Commitment (or any portion thereof) for such additional
requested period. Each such notice from a Bank which agrees to extend such
Commitment (each, a "Renewing Bank") shall specify (i) all or that portion of
its Commitment which it is willing to extend and (ii) the amount of any
additional Commitment it would be willing to assume (with respect to any
Renewing Bank, an "Additional Commitment"). Any Bank which fails to deliver such
notice to Administrative Agent shall be deemed to have declined to renew its
Commitment for such additional requested period. Each Commitment (or portion
thereof) which is not renewed is hereinafter referred to as a "Declined
Commitment" and collectively, the "Declined Commitments." After receipt of such
notices, Administrative Agent shall allocate the Declined
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Commitments (if any) among each Renewing Bank pro rata according to the
respective amounts of their Additional Commitments (provided that in no event
shall any such Renewing Bank be allocated an amount in excess of its Additional
Commitment). On the first Business Day after the 60th day following the notice
issued by Administrative Agent to the Banks of the extension request,
Administrative Agent shall advise Borrower in writing (a "Renewal Notice"), with
a copy to each of the Banks, of the affirmative responses which it has received
from the Renewing Banks and the respective amounts of the Commitments of each
Renewing Bank.
2.11.3 Subject to the following sentence, if the aggregate amount
of the Additional Commitments is less than 100% of the aggregate of the Declined
Commitments then in effect, the initial Date Certain shall only be extended if,
(i) on or before the initial Date Certain Borrower repays in accordance with
Section 2.1.6 (and subject to Section 2.3.3) the Loans outstanding comprising
Declined Commitments not being assumed pursuant to Section 2.11.4, if any, and
(ii) the Available Construction Funds, after giving effect to such repayment,
equal or exceed the remaining Project Costs of all Initial Projects and Funded
Subsequent Projects. Notwithstanding the foregoing, if the aggregate amount of
the Additional Commitments is less than 100% of the aggregate of the Declined
Commitments, Borrower may replace any Bank to the extent of such Bank's Declined
Commitment, with another commercial bank or banks reasonably satisfactory to the
Lead Arrangers and the LC Bank (a "Replacement Bank"). Borrower shall notify
Administrative Agent (who shall promptly forward such notice to the Banks), no
later than 180 days prior to the initial Loan Maturity Date, whether it will
prepay the Loans comprising the Declined Commitments in accordance with Section
2.1.6 and/or replace Banks to the extent of such Banks' Declined Commitments as
described in the preceding sentences. Each Bank whose outstanding Loans have
been repaid in full and who has been paid all other amounts due to it hereunder
shall cease to be a Bank hereunder and shall cancel and return to Borrower any
Notes held by such Bank.
2.11.4 If the aggregate amount of the Additional Commitments
(including the Commitments provided by any Replacement Banks) is equal to or
greater than 100% of the aggregate of the Commitments of all Banks then in
effect, the following shall occur:
(a) the initial Date Certain shall be extended as requested
by Borrower;
(b) Borrower shall repay any Loans (and all fees and other
Obligations due in respect of such Loans) it has elected to repay pursuant to
Section 2.11.3;
(c) the Banks (including the Replacement Banks, if any) shall
enter into such assignment and assumption agreements reasonably acceptable to
Administrative Agent as may be necessary to transfer any Banks' Declined
Commitments to Banks (and Replacement Banks) extending Additional Commitments,
such assignment and assumption agreements to become effective on the initial
Date Certain (before giving effect to any extension thereof);
(d) on the initial Date Certain (prior to giving effect to
any extension thereof) each Replacement Bank shall for all purposes become a
"Bank" hereunder;
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(e) Borrower shall, if applicable, execute and deliver to
each Bank a new Note to reflect such Bank's new Commitment (after giving effect
to such Bank's Additional Commitment or Declined Commitment) and each Bank
receiving such new Note shall cancel and return to Borrower the pre-existing
Note held by such Bank; and
(f) each Bank whose outstanding Loans have been repaid in
full and who has been paid all other amounts due to it hereunder shall cease to
be a Bank hereunder and shall cancel and return to Borrower any Notes held by
such Bank.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Conditions Precedent to the Closing Date. The occurrence of
the Closing Date is subject to the prior satisfaction of each of the following
conditions (unless waived in writing by Administrative Agent with the consent of
all Banks):
3.1.1 Resolutions. Delivery to the Lead Arrangers of a copy of
one or more resolutions or other authorizations of Borrower and each of the
Partners, Calpine and Affiliated Major Project Participants with respect to the
Initial Projects, certified by the appropriate officers of each such entity as
being in full force and effect on the Closing Date, authorizing, as applicable,
the Borrowings herein provided for and the execution, delivery and performance
of this Agreement and the other Operative Documents with respect to the Initial
Projects and any instruments or agreements required hereunder or thereunder to
which such entity is a party.
3.1.2 Incumbency. Delivery to the Lead Arrangers of a certificate
satisfactory in form and substance to the Lead Arrangers, from the Managing
Partner of Borrower and from each of the Partners, Calpine and Affiliated Major
Project Participants with respect to the Initial Projects, signed by the
appropriate authorized officer of each such entity and dated the Closing Date,
as to the incumbency of the natural persons authorized to execute and deliver
this Agreement and the other Operative Documents with respect to the Initial
Projects and any instruments or agreements required hereunder or thereunder to
which such entity is a party.
3.1.3 Formation Documents. Delivery to the Lead Arrangers of (a)
a copy of the Partnership Agreement, certified by the secretary or an assistant
secretary of the Managing Partner of Borrower as being true, current and
complete on the Closing Date, and any related agreements or certificates filed
in accordance with applicable state law, and (b) copies of the articles of
incorporation or certificate of incorporation or charter or other state
certified constituent documents of each Major Project Participant with respect
to the Initial Projects other than Borrower, certified, if requested by the Lead
Arrangers, by the secretary of state of the state of formation, and (c) copies
of the Bylaws or other comparable constituent documents of each of the Partners,
Calpine and Affiliated Major Project Participants with respect to the Initial
Projects, certified by its secretary or an assistant secretary.
3.1.4 Good Standing Certificates. With respect to each Major
Project Participant with respect to the Initial Projects, delivery to the Lead
Arrangers of certificates issued by the secretary of state of the state in which
the applicable Initial Project is located and, if other
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than such state, the state of formation of such Major Project Participant
certifying that such Major Project Participant is in good standing and is
qualified to do business in, and has paid all franchise taxes or similar taxes
due to, such states.
3.1.5 Satisfactory Proceedings. All corporate, partnership and
legal proceedings and all instruments in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Lead Arrangers, and the Lead Arrangers shall have received all information
and copies of all documents, including records of corporate or partnership or
limited liability company proceedings and copies of any approval by any
Governmental Authority required in connection with any transaction herein
contemplated (with respect to the Initial Projects), which the Lead Arrangers
may reasonably have requested in connection herewith, such documents where
appropriate to be certified by proper corporate or partnership officers or
Governmental Authorities.
3.1.6 Operative Documents.
(a) Delivery to the Lead Arrangers of executed originals of
each Credit Document, including the Completion Guaranty and all Collateral
Documents (except for Consents listed on Exhibit L, M, N or O or Consents
relating to any Subsequent Projects). All actions shall have been taken to
provide the Banks with a valid Lien on all Collateral and a valid and perfected
first priority Lien on the Collateral comprising the Initial Projects,
including, without limitation, the execution, delivery and recordation of Deeds
of Trust and fixture filings in the appropriate locations and the filing of
UCC-1 financing statements with appropriate secretaries of state and/or other
filing offices.
(b) Delivery to the Lead Arrangers of a certified list of and
true and correct copies of, each Project Document with respect to the Initial
Projects then in effect, and any supplements or amendments thereto.
(c) All Major Project Documents with respect to the Initial
Projects (other than Major Gas Supply Contracts (other than Affiliated Fuel
Supply Agreements), Major Gas Transportation Contracts and Major Power Purchase
Agreements) shall have been executed and delivered and shall be in full force
and effect.
(d) All the documents specified in clauses (a), (b) and (c)
above shall be in form and substance satisfactory to the Lead Arrangers, shall
have been duly authorized, executed and delivered by the parties thereto, and
all of which Project Documents shall be certified by a Responsible Officer of
Borrower as being true, complete and correct and in full force and effect on the
Closing Date pursuant to the certificates delivered as provided in the following
paragraph, which certificate shall state that neither Borrower nor, to
Borrower's knowledge, any other party to any such Project Document is or, but
for the passage of time or giving of notice or both will be, in breach of any
material obligation thereunder, and that all conditions precedent to the
performance of the parties under such Project Documents then required to have
been performed have been satisfied.
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3.1.7 Certificates of Borrower. The Lead Arrangers shall have
received a certificate, dated as of the Closing Date, signed by a Responsible
Officer of Borrower, in substantially the form of Exhibit F-1.
3.1.8 Legal Opinions. Delivery to the Lead Arrangers of legal
opinions of counsel to Borrower, its respective Affiliates that are party to any
Operative Agreements and each Major Project Participant and each counterparty to
a material water supply agreement with respect to the Initial Projects (other
than with respect to the matters referred to in Section 3.2.5), in form and
substance satisfactory to the Lead Arrangers.
3.1.9 Certificate of Insurance Consultant. Delivery to the Lead
Arrangers of the Insurance Consultant's certificate with respect to the Initial
Projects, in substantially the form of Exhibit F-2, with the Insurance
Consultant's report with respect to the Initial Projects, confirming the
adequacy of the insurance described on Exhibit K or otherwise in form and
substance satisfactory to the Lead Arrangers, attached thereto.
3.1.10 Insurance. Insurance with respect to the Initial Projects
complying with Exhibit K shall be in full force and effect and the Lead
Arrangers shall have received (a) a certificate from Borrower's insurance
broker(s), dated as of the Closing Date and identifying underwriters, type of
insurance, insurance limits and policy terms, listing the special provisions
required as set forth in Exhibit K, describing the insurance obtained and
stating that such insurance is in full force and effect and that all premiums
due thereon through the Loan Maturity Date have been paid and that, in the
opinion of such broker(s), such insurance complies with Exhibit K, and (b)
certified copies of all policies evidencing such insurance (or a binder,
commitment or certificates signed by the insurer or a broker authorized to bind
the insurer), in form and substance satisfactory to the Lead Arrangers.
3.1.11 Certificate of the Independent Engineer. Delivery to the
Lead Arrangers of the Independent Engineer's certificate with respect to the
Initial Projects, in substantially the form of Exhibit F-3, with the Independent
Engineer's report with respect to the Initial Projects attached thereto,
confirming, in form and substance satisfactory to the Lead Arrangers, that the
projected Project Costs, the projected Project Schedule, the projected O&M
Costs, the design and other technical aspects of each such Project, and the
projected performance (output, heat rate, environmental and Permit compliance
and availability) of the Initial Projects as reflected in the Base Case Project
Projections delivered to the Lead Arrangers in accordance with Section 3.1.24
hereof are reasonable and achievable in a manner consistent with the Project
Budgets and Project Schedules for the Initial Projects and that the revenue
assumptions approved by the Power Marketing Consultant in its report delivered
to the Lead Arrangers pursuant to Section 3.1.14 and the fuel price assumptions
approved by the Fuel Consultant in its report delivered to the Lead Arrangers
pursuant to Section 3.1.13 have been properly incorporated into the Base Case
Project Projections.
3.1.12 Reports of the Environmental Consultant. Delivery to the
Lead Arrangers of Borrower's Environmental Consultant's Phase I reports with
respect to each Initial Project and, if a Phase II environmental review is
warranted by any of such Phase I reports, delivery to the Lead Arrangers of
Phase II report(s), in each case, along with the corresponding reliance
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letter from such Environmental Consultant, in form and substance satisfactory to
the Lead Arrangers, either (i) confirming that no Hazardous Substances were
found in, on or under the Site or Easements of the Initial Projects or (ii)
disclosing matters that are otherwise satisfactory to the Lead Arrangers.
3.1.13 Certificate of the Fuel Consultant. Delivery to the Lead
Arrangers of the Fuel Consultant's certificate with respect to the Initial
Projects, in substantially the form of Exhibit F-4, with the Fuel Consultant's
report with respect to the Initial Projects attached thereto, confirming, in
form and substance satisfactory to the Lead Arrangers, that there is sufficient
fuel available to the Initial Projects to operate the Initial Projects in the
manner contemplated by and in accordance with the fuel price assumptions
incorporated in the Base Case Project Projections delivered to the Lead
Arrangers in accordance with Section 3.1.24 and that the Fuel Plans delivered to
the Lead Arrangers in accordance with Section 3.1.16 for the Initial Projects
constitute reasonable plans for the supply and transportation of fuel for the
Initial Projects under existing and expected market conditions affecting the
Initial Projects and consistent with the intended operation thereof.
3.1.14 Certificate of Power Marketing Consultant. Delivery to the
Lead Arrangers of the Power Marketing Consultants' certificate with respect to
the Initial Projects, in substantially the form of Exhibit F-5, with the Power
Marketing Consultants' report with respect to the Initial Projects attached
thereto, confirming, in form and substance satisfactory to the Lead Arrangers,
that the revenue assumptions incorporated in the Base Case Project Projections
delivered to the Lead Arrangers in accordance with Section 3.1.24 are reasonable
in light of existing and expected market conditions affecting the Initial
Projects.
3.1.15 Power Marketing Plan. Delivery to the Lead Arrangers of
plans with respect to power marketing for each Initial Project setting forth
Borrower's good faith assessment of the projected sales of power with respect to
each of the Initial Projects, which plans shall not in any way be construed to
modify or limit Borrower's rights and obligations set forth herein,
substantially in the form of Appendices G-2A through G-2D.
3.1.16 Fuel Plan. Delivery to the Lead Arrangers of plans with
respect to fuel for each Initial Project setting forth Borrower's good faith
assessment of each of the Initial Projects' projected fuel consumption needs and
fuel supply and transportation strategy, which plans shall not in any way be
construed to modify or limit Borrower's rights and obligations set forth herein,
substantially in the form of Appendices G-9A through G-9D.
3.1.17 No Change in Tax Laws. No change shall have occurred,
since the date upon which this Agreement was executed and delivered, in any law
or regulation or interpretation thereof that would subject any Bank to any
material unreimbursed Tax or Other Tax.
3.1.18 Absence of Litigation. (a) No action, suit, proceeding or
investigation shall have been instituted or threatened against Borrower and (b)
except for the applicability of the FPA solely by reason of Borrower being an
Exempt Wholesale Generator, no order, judgment or decree shall have been issued
or proposed to be issued by any Governmental Authority that, as a result of the
construction, ownership, leasing or operation of the Initial Projects, the sale
of
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electricity or steam therefrom or the entering into of any Operative Document or
any transaction contemplated hereby or thereby, would cause or deem the Banks,
Borrower or any Affiliate of any of them to be subject to, or not exempted from,
regulation under the FPA or PUHCA or under state laws and regulations respecting
the rates or the financial or organizational regulation of electric utilities.
3.1.19 Payment of Filing Fees. All amounts required to be paid to
or deposited with the Lead Arrangers, and all taxes, fees and other costs
payable in connection with the execution, delivery, recordation and filing of
the documents and instruments referred to in this Section 3.1, shall have been
paid in full or, as approved by the Lead Arrangers, provided for.
3.1.20 Financial Statements. The Lead Arrangers shall have
received the most recent annual financial statements (audited if available) or
Form 10-K and most recent quarterly financial statements or Form 10-Q from
Borrower and each other Major Project Participant with respect to the Initial
Projects (or their respective parent corporations), together (in the case of
Borrower and the Affiliated Major Project Participants with respect to the
Initial Projects) with certificates from the appropriate Responsible Officer
thereof, stating that no material adverse change in the consolidated assets,
liabilities, operations or financial condition of such Person has occurred from
those set forth in the most recent financial statements or the balance sheet, as
the case may be, provided to the Lead Arrangers.
3.1.21 UCC Reports. The Lead Arrangers shall have received a UCC
report of a date reasonably close to the Closing Date for each of the
jurisdictions in which the UCC-1 financing statements are intended to be filed
in respect of the Collateral with respect to the Initial Projects, showing that
upon due filing (assuming such filing or recordation occurred on the date of
such respective reports), the security interests created under the Collateral
Documents with respect to the Initial Projects will be prior to all other
financing statements, or other security documents wherein the security interest
is perfected by filing in respect of such Collateral.
3.1.22 Project Budgets. Borrower shall have furnished the Lead
Arrangers budgets in substantially the form of Appendices G-4A through G-4E for
all anticipated costs to be incurred in connection with the construction and
start-up of each of the Initial Projects, including in such budgets all
construction and non-construction costs, and including all interest, taxes and
other carrying costs, non-allocated costs of Borrower, and such other
information as the Lead Arrangers may require, together with a balanced
statement of sources (including an allocation between Loan proceeds and
Contributions) and uses of proceeds (and any other funds necessary to complete
each of the Initial Projects), broken down as to separate construction phases
and components, which project budgets shall be satisfactory to the Lead
Arrangers.
3.1.23 Project Schedules. Borrower shall have furnished a project
schedule for each Initial Project other than the Sutter Project in substantially
the form of Appendices G-6A through G-6C.
3.1.24 Base Case Project Projections. Borrower shall have
furnished to the Lead Arrangers the Base Case Project Projections of operating
expenses and cash flow for the Initial
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Projects in substantially the form of Exhibit G-5 and in form and substance
satisfactory to the Lead Arrangers.
3.1.25 No Material Adverse Change. Since May 28, 1999, in the
reasonable judgment of the Lead Arrangers, there shall not have occurred any
change in the Project Budgets, Project Schedules or Base Case Project
Projections with respect to the Initial Projects, in the economics or
feasibility of constructing and/or operating the Initial Projects, or in the
financial condition, business, prospects or property of any Major Project
Participants with respect to the Initial Projects, which could reasonably be
expected to have a Material Adverse Effect.
3.1.26 A.L.T.A. Surveys. The Lead Arrangers shall (a) be
satisfied that Borrower has obtained all real estate rights necessary for
construction and operation of the Initial Projects other than (i) such rights as
can be obtained through eminent domain proceedings, (ii) rights, the procurement
of which, in the Lead Arrangers' reasonable judgment, is not subject to the
discretion of any third party or (iii) rights which, in the Lead Arrangers'
reasonable opinion, Borrower will be able to obtain at a cost and in a time
frame consistent with the Project Budget and Project Schedule for such Project,
and in the case of clause (i), (ii) or (iii) above, the Lead Arrangers shall be
satisfied that, any rights which have not been obtained can be obtained without
material difficulty or delay by the time they are needed and (b) have received
A.L.T.A. surveys of the Sites and, unless not required by Lead Arrangers, the
Easements with respect to the Initial Projects in existence on the Closing Date,
satisfactory in form and substance to the Lead Arrangers and the Title Insurer,
reasonably current and certified to the Lead Arrangers by a licensed surveyor
satisfactory to the Lead Arrangers, showing (i) as to such Sites, the exact
location and dimensions thereof, including the location of all means of access
thereto and all easements relating thereto and showing the perimeter within
which all foundations are or are to be located; (ii) as to such Easements in
existence on the Closing Date, the exact location and dimensions thereof,
including the location of all means of access thereto, and all improvements or
other encroachments in or on such Easements in existence on the Closing Date;
(iii) the existing utility facilities servicing the Initial Projects (including
water, electricity, gas, telephone, sanitary sewer and storm water distribution
and detention facilities); (iv) that such existing improvements do not encroach
or interfere with adjacent property or existing easements or other rights
(whether on, above or below ground), and that there are no gaps, gores,
projections, protrusions or other survey defects; (v) whether such Sites or any
portion thereof is located in a special earthquake or flood hazard zone; and
(vi) that there are no other matters that could reasonably be expected to be
disclosed by a survey constituting a defect in title other than Permitted
Encumbrances with respect to the Initial Projects; provided, however, that the
matters described in clause (v) may be shown by separate maps, surveys, or other
information reasonably satisfactory to the Lead Arrangers.
3.1.27 Title Policies. With respect to each Initial Project,
Borrower shall have delivered to the Lead Arrangers a lender's A.L.T.A. policy
of title insurance, together with such endorsements as are required by the Lead
Arrangers, or commitment to issue such policy, dated as of the Closing Date in
an amount, for each such Initial Project, equal to 55% of the aggregate amount
of Project Costs set forth in the Project Budget for such Initial Project (or
such other amount as is reasonably acceptable to the Lead Arrangers) and with
such reinsurance as is
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satisfactory to the Lead Arrangers, issued by the Title Insurer in form and
substance satisfactory to the Lead Arrangers, insuring (or agreeing to insure)
that:
(a) Borrower has a good, marketable and insurable fee or
leasehold title to or right to control, occupy and use the Site and the
Easements with respect to each Initial Project in existence on the Closing Date,
free and clear of liens, encumbrances or other exceptions to title except those
exceptions satisfactory to the Lead Arrangers and specified on such policy; and
(b) the Deed of Trust with respect to such Initial Project is
(or will be when recorded) a valid first lien on the Mortgaged Property with
respect to such Initial Project, free and clear of all liens, encumbrances and
exceptions to title whatsoever, other than those encumbrances permitted pursuant
to Section 3.1.27(a).
3.1.28 Regulatory Status. Each of the Initial Projects shall (a)
have complied with the requirements of 18 C.F.R. Section 292.207 required to be
complied with as of the Closing Date and delivered to the Lead Arrangers, in
form and substance satisfactory to the Lead Arrangers, either (i) a certificate
of FERC certifying such Initial Project as a Qualifying Facility, or (ii)
documentation evidencing the self-certification of such Initial Project as a
Qualifying Facility and a legal opinion of counsel to Borrower with respect to
the effectiveness of such documentation to qualify such Initial Project as a
Qualifying Facility or (b) be or be capable of becoming an Eligible Facility,
and the Lead Arrangers shall have received a legal opinion of counsel to
Borrower in form and substance satisfactory to the Lead Arrangers to the effect
that there exists no reasonable basis for FERC to deny an application filed by
Borrower pursuant to Section 5.12.1 for Exempt Wholesale Generator status.
3.1.29 Establishment of Accounts. The Accounts required under
Article 7 shall have been established to the satisfaction of the Lead Arrangers.
3.1.30 Representations and Warranties of Partners, Calpine and
Borrower. Each representation and warranty of the Partners and Calpine under the
Credit Documents and each representation and warranty of Borrower under the
Operative Documents shall be true and correct in all material respects.
3.1.31 Utilities. The Lead Arrangers shall have received evidence
acceptable to the Lead Arrangers that all necessary gas and electrical
interconnections and utility services are either contracted for, or will be
readily available on reasonable economic terms, at the Initial Projects.
3.1.32 Mechanics' Lien Indemnity. Calpine shall have executed and
delivered an indemnity or indemnities in favor of the Banks with respect to
mechanics' liens which (a) could gain priority over the Deeds of Trust with
respect to the Initial Projects and (b) are not insured against in the title
policies delivered pursuant to Section 3.1.27.
3.1.33 Payment of Bank and Consultants Fees. Borrower shall have
paid all outstanding amounts due and owing to (i) the Banks under any fee
letters and (ii) the Banks'
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attorneys and consultants including, without limitation, the Independent
Consultants, for all services rendered and billed prior to the Closing Date.
3.2 Conditions Precedent to the Initial Funding of the Initial
Projects. The obligation of the Banks to make the initial Loans and/or issue the
initial Letter of Credit with respect to a particular Initial Project is subject
to the prior satisfaction of each of the following conditions:
3.2.1 Borrower Equity. Contributions required pursuant to
Sections 5.17.1 (including Section 5.17.1(b), if applicable) and 5.17.2 hereof
shall have been funded and applied in accordance with Section 5.1.
3.2.2 No Change in Tax Laws. No change shall have occurred, since
the Closing Date, in any law or regulation or interpretation thereof that would
subject any Bank to any material unreimbursed Tax or Other Tax.
3.2.3 Base Case Project Projections. Delivery of Base Case
Project Projections for the Initial Projects showing a projected Four-Quarter
Portfolio Interest Coverage Ratio that is not materially different than that
reflected in the Base Case Project Projections delivered pursuant to Section
3.1.24 over the same period.
3.2.4 Calpine Compliance. No "event of default" (as defined
therein) under any agreement or instrument documenting or evidencing any of
Calpine's Debt obligations shall have occurred and be continuing.
3.2.5 Schedule of Applicable Permits and Applicable Third Party
Permits. Delivery to the Lead Arrangers of Appendices G-3A through G-3D, as
applicable, the schedule(s) of Permits required to construct, own and operate
the Initial Project(s) for which Loans are requested, or required to be obtained
by any Person (other than Borrower) that is party to any Project Document with
respect to each such Initial Project in order to perform its obligations
thereunder, satisfactory in form and substance to the Lead Arrangers, together
with (i) copies of each Applicable Permit and Applicable Third Party Permit
listed on Parts I(A) and I(B) of Appendices G-3A through G-3D, as applicable,
each satisfactory in form and substance to the Lead Arrangers and (ii) legal
opinions of counsel to Borrower with respect to the matters described in the
next two sentences, in form and substance satisfactory to the Lead Arrangers.
Borrower shall have duly obtained or been assigned (or, in the case of Permits
not yet assigned to Borrower by an Affiliate of Calpine, shall have the right to
have assigned at a cost consistent with the applicable Project Budget without
material difficulty or delay as reasonably determined by Administrative Agent)
and there shall be (or will be upon assignment) in full force and effect in
Borrower's name, and, except as otherwise approved by the Lead Arrangers, not
subject to any current legal proceeding or to any unsatisfied condition that
could reasonably be expected to allow material modification or revocation of,
and, except as otherwise approved by the Lead Arrangers, all applicable appeal
periods shall have expired with respect to, the Applicable Permits set forth on
Parts I(A) and I(B) of Appendices G-3A through G-3D, respectively, constituting
in the Lead Arrangers' reasonable opinion all of the Applicable Permits as of
the Closing Date. Each Major Project Participant with respect to which
responsibility for an Applicable Third Party Permit is indicated in Part I(B) of
any such exhibit, shall have duly obtained or been assigned such
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Applicable Third Party Permit and there shall be in full force and effect in
such Person's name, and, except as otherwise approved by the Lead Arrangers, not
subject to any current legal proceeding or to any unsatisfied condition that
could reasonably be expected to allow material modification or revocation of,
and, except as otherwise approved by the Lead Arrangers, all applicable appeal
periods shall have expired with respect to, each Applicable Third Party Permit
set forth on Part I(B) of Appendices G-3A through G-3D, constituting in the Lead
Arrangers' reasonable opinion all of the Applicable Third Party Permits as of
the Closing Date. Part II(A) of the applicable appendix shall list all other
Permits required by Borrower to construct, own and operate such Initial Project
as contemplated by the Operative Documents. Part II(B) of each of Appendices
G-3A through G-3D shall list all other material Permits required by any other
Major Project Participant to perform its obligations under the Operative
Documents with respect to the Initial Projects to which it is a party. The
Permits listed in Parts II(A) and II(B) of the applicable Appendix G-3A through
G-3D shall, in the Lead Arrangers' reasonable opinion, be timely obtainable at a
cost consistent with the applicable Project Budget without material difficulty
or delay by Borrower or the applicable other Major Project Participant,
respectively. Except as disclosed in the applicable Appendix G-3A through G-3D,
the Permits listed in Part I(A) and I(B) of such appendix shall not be subject
to any restriction, condition, limitation or other provision that could
reasonably be expected to have a Material Adverse Effect on such Project or
result in any of the Initial Projects being operated in a manner not
substantially as assumed in the Base Cost Project Projections.
3.2.6 Calpine Corporation Credit Rating. Calpine shall be rated
at least Ba3 and BB or Ba2 and BB- by Moody's and S&P, respectively.
3.2.7 Notice to Proceed. Each Contractor with respect to the
Initial Project(s) for which the Loans are requested shall have been given an
unconditional notice to proceed or otherwise been unconditionally directed to
begin performance under the Construction Contracts to which it is a party, and
shall have acknowledged receipt thereof, on or prior to the Closing Date.
3.2.8 Real Estate Rights. The Lead Arrangers shall be satisfied
that Borrower has obtained all real estate rights necessary for construction and
operation of the Initial Project(s) for which the Loans are requested other than
(i) such rights as can be obtained through eminent domain proceedings or (ii)
rights, the procurement of which, in the Lead Arrangers' reasonable judgment, is
not subject to the discretion of any third party, and in the case of either
clause (i) or (ii) above, the Lead Arrangers shall be satisfied that, any rights
which have not been obtained can be obtained without material difficulty or
delay by the time they are needed.
3.2.9 Project Pre-Funding Requirements. All of the Pre-Funding
Requirements applicable to such Initial Project shall have been satisfied;
provided, however, that notwithstanding that one or more Initial Projects has
not satisfied its Pre-Funding Requirements, Borrower shall be entitled, at the
time of the initial funding of Loans for the first Initial Project, to obtain
reimbursement of closing costs and fees paid on the Closing Date.
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3.3 Conditions Precedent to the Initial Funding of the Subsequent
Projects. The obligation of the Banks to make the initial Loans with respect to
a particular Subsequent Project is subject to the prior satisfaction of each of
the following conditions:
3.3.1 Subsequent Project. In the case of a Subsequent Project
that is only partially owned by Borrower, (a) Administrative Agent on behalf of
the Banks shall have received all joint venture, joint tenancy or other
documents relating to the joint ownership or governance of such Subsequent
Project (collectively, the "Joint Venture Agreement"), in form and substance
satisfactory to the Technical Committee, including provisions (i) requiring all
parties to the Joint Venture Agreement (the "Joint Venturers") to fund their
respective obligations in connection with the development, construction and
operation of such Subsequent Project, providing reasonable remedies for a Joint
Venturer's failure to fund, and permitting Borrower to fund such obligations if
any of the Joint Venturers fail to do so, (ii) permitting Borrower to grant a
Lien (including the Liens granted on the Closing Date pursuant to the Collateral
Documents) on its interest in the Subsequent Project in favor of the Banks
pursuant to this Agreement, and (iii) prohibiting any of the other Joint
Venturers from granting a Lien on or otherwise encumbering Borrower's interest
in the Subsequent Project and (b) such Joint Venture Agreement (or a memorandum
thereof) shall have been recorded or filed, as applicable, in the appropriate
public records in order to give third parties notice of such Joint Venture
Agreement.
3.3.2 Resolutions. Delivery to Administrative Agent on behalf of
the Banks of a copy of one or more resolutions or other authorizations of
Borrower and each of the Partners, Calpine and Affiliated Major Project
Participants with respect to such Subsequent Project, certified by the
appropriate officers of each such entity as being in full force and effect on
the Funding Date, authorizing, as applicable, the Borrowings herein provided for
with respect to such Subsequent Project and the execution, delivery and
performance of the Operative Documents with respect to such Subsequent Project
and any instruments or agreements required hereunder or thereunder to which such
entity is a party.
3.3.3 Incumbency. Delivery to Administrative Agent on behalf of
the Banks of a certificate satisfactory in form and substance to the Technical
Committee, from the Managing Partner of Borrower and from each of the Partners,
Calpine and Affiliated Major Project Participants with respect to such
Subsequent Project, signed by the appropriate authorized officer of each such
entity and dated the Funding Date, as to the incumbency of the natural persons
authorized to execute and deliver the Operative Documents with respect to such
Subsequent Project and any instruments or agreements required hereunder or
thereunder to which such entity is a party.
3.3.4 Formation Documents. Delivery to Administrative Agent on
behalf of the Banks of (a) copies of the articles of incorporation or
certificate of incorporation or charter or other state certified constituent
documents of each Major Project Participant with respect to such Subsequent
Project other than Borrower, certified, if requested by the Technical Committee,
by the secretary of state of the state of formation, and (b) copies of the
Bylaws or other comparable constituent documents of the Affiliated Major Project
Participants with respect to such Subsequent Project, certified by its secretary
or an assistant secretary.
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3.3.5 Good Standing Certificates. For Borrower and each other
Major Project Participant with respect to such Subsequent Project, delivery to
Administrative Agent on behalf of the Banks of certificates issued by the
secretary of state of the state where such Subsequent Project is located and, if
other than such state, the state of formation of such Major Project Participant
certifying that such Major Project Participant is in good standing and is
qualified to do business in, and has paid all franchise taxes or similar taxes
due to, such states.
3.3.6 Satisfactory Proceedings. All corporate, partnership and
legal proceedings and all instruments in connection with the transactions
contemplated by this Agreement with respect to such Subsequent Project shall be
satisfactory in form and substance to the Technical Committee, and
Administrative Agent on behalf of the Banks shall have received all information
and copies of all documents, including records of corporate or partnership
proceedings and copies of any approval by any Governmental Authority required in
connection with any transaction herein contemplated, which the Technical
Committee may reasonably have requested in connection herewith, such documents
where appropriate to be certified by proper corporate or partnership officers or
Governmental Authorities.
3.3.7 Operative Documents.
(a) Delivery to Administrative Agent on behalf of the Banks
of executed originals of:
(i) amendments, supplements or modifications to each of
the Collateral Documents with respect to such Subsequent Project (or additional
Collateral Documents if reasonably requested by the Technical Committee)
considered necessary by the Technical Committee to ensure that all rights and
assets related to such Subsequent Project, including all real property (unless
such Subsequent Project is an Additional Subsequent Project) and personal
property comprising such Subsequent Project and all rights of Borrower under any
Joint Venture Agreement relating to such Subsequent Project, have been pledged
to Administrative Agent and the Banks.
(ii) Consents to assignment in substantially the form of
Exhibit E-1 or otherwise in form and substance reasonably satisfactory to the
Technical Committee from the counterparties to each Major Project Document
(Major Gas Supply Contracts and Major Power Purchase Agreements only to the
extent then in existence), electric transmission and interconnection agreements
and material water supply agreements in respect of such Subsequent Project.
(iii) Affiliated Subordination Agreements substantially
similar to the corresponding documents in respect of the Initial Projects with
conforming changes to address the specifics of such Subsequent Project or
otherwise in form and substance reasonably satisfactory to the Technical
Committee (or, if applicable, amendments to existing Affiliated Subordination
Agreements) executed by each Affiliate entering into Project Documents with
respect to such Subsequent Project considered necessary by the Technical
Committee to subordinate certain O&M Costs that Borrower may incur pursuant to
such Project Documents to the Obligations. Such O&M Costs shall only include
amounts payable to such Affiliate which do
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not represent reimbursement of costs payable to third parties not Affiliates of
Borrower and be subordinated to the Obligations to the same extent as O&M Costs
are subordinated to the Obligations in the corresponding documents in respect of
the Initial Projects or otherwise to the extent satisfactory to the Technical
Committee.
(b) All actions shall have been taken to provide the Banks
with a valid and perfected first priority Lien on the Collateral in respect of
such Subsequent Project (except as otherwise approved by the Technical
Committee, including all personal property comprising such Subsequent Project)
including, without limitation, to the extent necessary, the filing of UCC-2 or
UCC-3 financing statements, as applicable, with respect to the Collateral with
the Secretary of State and/or other appropriate filing office in the state in
which such Subsequent Project is located or in which Borrower's principal place
of business is located.
(c) Delivery to Administrative Agent on behalf of the Banks
of a certified list of and true and correct copies of, each Project Document
with respect to such Subsequent Project then in effect, and any supplements or
amendments thereto.
(d) All the Major Project Documents (other than Major Gas
Supply Contracts (other than Affiliated Fuel Supply Agreements) and Major Power
Purchase Agreements), electric transmission and interconnection agreements and
material water supply agreements shall be substantially similar to the
corresponding documents in respect of the Initial Projects (to the extent there
are such corresponding documents) with counterparties reasonably acceptable to
the Technical Committee and conforming changes to address the specifics of the
Subsequent Project or otherwise in form and substance reasonably satisfactory to
the Technical Committee, shall have been duly authorized, executed and delivered
by the parties thereto, and all of which Project Documents described in clause
(c) above shall be certified by a Responsible Officer of Borrower as being true,
complete and correct and in full force and effect on the Funding Date pursuant
to the certificates delivered as provided in the following paragraph, which
certificates shall state that neither Borrower nor, to Borrower's knowledge, any
other party to any such Project Document is or, but for the passage of time or
giving of notice or both will be, in breach of any material obligation
thereunder, and that all conditions precedent to the performance of the parties
under such Project Documents then required to have been performed have been
satisfied.
3.3.8 Certificate of Borrower. Administrative Agent on behalf of
the Banks shall have received a certificate, dated as of the Funding Date,
signed by a Responsible Officer of Borrower, in substantially the form of
Exhibit F-1.
3.3.9 Legal Opinions. Delivery to Administrative Agent on behalf
of the Banks of legal opinions of counsel to Borrower, its respective Affiliates
that are party to Operative Documents relating to such Subsequent Project and
each Major Project Participant and each counterparty to a material water supply
agreement with respect to such Subsequent Project, substantially similar to the
corresponding opinions in respect of the Initial Projects delivered pursuant to
Section 3.1.8 with conforming changes to address the specifics of such
Subsequent Project or otherwise in form and substance satisfactory to the
Technical Committee.
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3.3.10 Certificate of Insurance Consultant. Delivery to
Administrative Agent on behalf of the Banks of the Insurance Consultant's
certificate with respect to such Subsequent Project, in substantially the form
of Exhibit F-2, with the Insurance Consultant's report with respect to such
Subsequent Project, confirming the adequacy of the insurance described on
Exhibit K or otherwise in form and substance satisfactory to the Technical
Committee, attached thereto.
3.3.11 Insurance. Insurance with respect to such Subsequent
Project complying with Exhibit K (as the same may be modified to include such
Subsequent Project) shall be in full force and effect and Administrative Agent
on behalf of the Banks shall have received (a) a certificate from Borrower's
insurance broker(s), dated as of the Funding Date and identifying underwriters,
type of insurance, insurance limits and policy terms, listing the special
provisions required as set forth in Exhibit K, describing the insurance obtained
and stating that such insurance is in full force and effect and that all
premiums due thereon through the Loan Maturity Date have been paid and that, in
the opinion of such broker(s), such insurance complies with Exhibit K, and (b)
certified copies of all policies evidencing such insurance (or a binder,
commitment or certificates signed by the insurer or a broker authorized to bind
the insurer), in form and substance satisfactory to the Technical Committee.
3.3.12 Certificate of the Independent Engineer. Delivery to
Administrative Agent on behalf of the Banks of the Independent Engineer's
certificate with respect to such Subsequent Project, in substantially the form
of Exhibit F-3, with the Independent Engineer's report with respect to such
Subsequent Project attached thereto, confirming, in form and substance
satisfactory to the Technical Committee that the projected Project Costs, the
projected Project Schedule, the projected O&M Costs, the design and other
technical aspects of such Project, and the projected performance (output, heat
rate, environmental and Permit compliance, and availability) of such Subsequent
Project as reflected in the Base Case Project Projections delivered to
Administrative Agent on behalf of the Banks as contemplated in Section 3.3.26
hereof are reasonable and achievable in a manner consistent with the applicable
Project Budget and Project Schedule and that the revenue assumptions approved by
the Power Marketing Consultant in its report delivered to Administrative Agent
on behalf of the Banks pursuant to Section 3.3.15 and fuel price assumptions
approved by the Fuel Consultant in its report delivered to Administrative Agent
on behalf of the Banks pursuant to Section 3.3.14 have been properly
incorporated in to the Base Case Project Projections.
3.3.13 Reports of the Environmental Consultant. Delivery to
Administrative Agent on behalf of the Banks of Borrower's Environmental
Consultant's Phase I reports with respect to such Subsequent Project and, if a
Phase II environmental review is warranted by any of such Phase I reports, as
reasonably determined by the Technical Committee, delivery to Administrative
Agent on behalf of the Banks of a Phase II report, in each case, along with the
corresponding reliance letters from such Environmental Consultant, in form and
substance satisfactory to the Technical Committee, either (i) confirming that no
Hazardous Substances were found in, on or under the Site or Easements of such
Subsequent Project or (ii) disclosing matters that are otherwise satisfactory to
the Technical Committee.
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3.3.14 Certificate of the Fuel Consultant. Delivery to
Administrative Agent on behalf of the Banks of the Fuel Consultant's certificate
with respect to such Subsequent Project, in substantially the form of Exhibit
F-4, with the Fuel Consultant's report with respect to such Subsequent Project
attached thereto, confirming, in form and substance satisfactory to the
Technical Committee that there is sufficient fuel available to such Subsequent
Project to operate such Subsequent Project in the manner contemplated by, and in
accordance with the fuel price assumptions incorporated in the Base Case Project
Projections delivered to Administrative Agent on behalf of the Banks as
contemplated in Section 3.3.26 and that the Fuel Plan delivered to
Administrative Agent on behalf of the Banks as contemplated in Section 3.3.17
for such Subsequent Project constitutes a reasonable plan for the supply and
transportation of fuel for such Subsequent Project under existing and expected
market conditions affecting such Subsequent Project and consistent with the
intended operation thereof.
3.3.15 Certificate of Power Marketing Consultant. Delivery to
Administrative Agent on behalf of the Banks of a Power Marketing Consultant's
certificate with respect to such Subsequent Project, in substantially the form
of Exhibit F-5, with a Power Marketing Consultant's report with respect to such
Subsequent Project attached thereto, confirming, in form and substance
satisfactory to the Technical Committee, that the revenue assumptions
incorporated in the Base Case Project Projections delivered to Administrative
Agent on behalf of the Banks as contemplated in Section 3.3.26 are reasonable in
light of existing and expected market conditions affecting such Subsequent
Project.
3.3.16 Power Marketing Plan. Delivery to Administrative Agent on
behalf of the Banks of a plan with respect to power marketing setting forth
Borrower's good faith assessment of the projected sales of power with respect to
such Subsequent Project, which plan shall not in any way be construed to modify
or limit Borrower's rights and obligations set forth herein, substantially in
the form of the Power Marketing Plans delivered in accordance with Section
3.1.15 and with such additional changes satisfactory in form and substance to
the Technical Committee as may be appropriate under the circumstances.
3.3.17 Fuel Plan. Delivery to Administrative Agent on behalf of
the Banks of a plan with respect to fuel setting forth Borrower's good faith
assessment of such Subsequent Project's projected fuel consumption needs and
fuel supply and transportation strategy, which plan shall not in any way be
construed to modify or limit Borrower's rights and obligations set forth herein,
substantially in the form of the Fuel Plans delivered pursuant to Section 3.1.16
and with such additional changes satisfactory in form and substance to the
Technical Committee and the Fuel Consultant as may be appropriate under the
circumstances.
3.3.18 Schedule of Applicable Permits and Applicable Third Party
Permits. Delivery to Administrative Agent on behalf of the Banks of a
supplemental appendix to Exhibit G-3 showing the schedule of Permits required to
construct, own and operate such Subsequent Project or required to be obtained by
any Person that is party to any Project Document with respect to such Subsequent
Project in order to perform its obligations thereunder, satisfactory in form and
substance to the Technical Committee, together with copies of each Applicable
Permit and Applicable Third Party Permit listed on Parts I(A) and I(B) of such
supplemental appendix, each satisfactory in form and substance to the Technical
Committee.
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Borrower (or other Person responsible for constructing and operating such
Subsequent Project) shall have duly obtained or been assigned, either by itself
or jointly with its Joint Venturers (if applicable), and there shall be in full
force and effect in Borrower's (or other Person responsible for constructing and
operating such Subsequent Project's) name, either by itself or jointly with its
Joint Venturers (if applicable), and not subject to any current legal proceeding
or to any unsatisfied condition that could reasonably be expected to allow
material modification or revocation of, and all applicable appeal periods shall
have expired with respect to, the Applicable Permits for such Subsequent Project
set forth on Parts I(A) and I(B) of such supplemental appendix to Exhibit G-3,
constituting in the Technical Committee's reasonable opinion all of the
Applicable Permits for such Subsequent Project as of the Funding Date. Each
Major Project Participant with respect to such Subsequent Project with respect
to which responsibility for an Applicable Third Party Permit is indicated in
Part I(B) of such supplemental appendix, shall have duly obtained or been
assigned such Applicable Third Party Permit and there shall be in full force and
effect in such Person's name, and not subject to any current legal proceeding or
to any unsatisfied condition that could reasonably be expected to allow material
modification or revocation of, and all applicable appeal periods shall have
expired with respect to, each Applicable Third Party Permit for such Subsequent
Project set forth on Part I(B) of such supplemental appendix, constituting in
the Technical Committee's reasonable opinion all of the Applicable Third Party
Permits for such Subsequent Project as of the Funding Date. Part II(A) of such
supplemental appendix to Exhibit G-3 shall list all other Permits required by
Borrower (or Borrower and its Joint Venturers, if applicable) or other Person
responsible for constructing and operating such Subsequent Project to construct,
own and operate such Subsequent Project as contemplated by the Operative
Documents with respect to such Subsequent Project. Part II(B) of such
supplemental appendix to Exhibit G-3 shall list all other material Permits
required by any other Major Project Participant with respect to such Subsequent
Project to perform its obligations under the Operative Documents with respect to
such Subsequent Project to which it is a party. The Permits listed in Parts
II(A) and II(B) of such supplemental appendix to Exhibit G-3 in respect of such
Subsequent Project shall, in the Technical Committee's reasonable opinion, be
timely obtainable at a cost consistent with the applicable Project Budget
without material difficulty or delay by Borrower (or Borrower and its Joint
Venturers, if applicable) or the applicable other Major Project Participant,
respectively. Except as disclosed in such supplemental appendix the Permits
listed in Part I(A) and I(B) of such supplemental appendix shall not be subject
to any restriction, condition, limitation or other provision that could
reasonably be expected to have a Material Adverse Effect on such Subsequent
Project or result in such Subsequent Project being operated in a manner not
substantially as assumed in the Base Case Project Projections.
3.3.19 No Change in Tax Laws. No change shall have occurred,
since the date upon which this Agreement was executed and delivered, in any law
or regulation or interpretation thereof that would subject any Bank to any
material unreimbursed Tax or Other Tax.
3.3.20 Absence of Litigation. (a) No action, suit, proceeding or
investigation shall have been instituted or threatened against Borrower in
respect of such Subsequent Project and (b) except for the applicability of the
FPA solely by reason of Borrower being an Exempt Wholesale Generator, no order,
judgment or decree shall have been issued or proposed to be issued by any
Governmental Authority that, as a result of the construction, ownership, leasing
or
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operation of such Subsequent Project, the sale of electricity or steam therefrom
or the entering into of any Operative Document with respect to such Subsequent
Project or any transaction contemplated hereby or thereby, would cause or deem
the Banks, Borrower or any Affiliate of any of them to be subject to, or not
exempted from, regulation under the FPA or PUHCA or under state laws and
regulations respecting the rates or the financial or organizational regulation
of electric utilities.
3.3.21 Payment of Filing Fees. All amounts required to be paid to
or deposited with the Banks including the Activation Fee in respect of such
Subsequent Project, and all taxes, fees and other costs payable in connection
with the execution, delivery, recordation and filing of the documents and
instruments referred to in this Section 3.3, shall have been paid in full or, as
approved by the Technical Committee, provided for.
3.3.22 Financial Statements. Administrative Agent on behalf of
the Banks shall have received the most recent annual financial statements
(audited if available) or Form 10-K and most recent quarterly financial
statements or Form 10-Q from Borrower and each other Major Project Participant
with respect to such Subsequent Project (or, their respective parent
corporations), together (in the case of Borrower and the Affiliated Major
Project Participants with respect to such Subsequent Project) with certificates
from the appropriate Responsible Officer thereof, stating that no material
adverse change in the consolidated assets, liabilities, operations or financial
condition of such Person has occurred from those set forth in the most recent
financial statements or the balance sheet, as the case may be, provided to
Administrative Agent on behalf of the Banks.
3.3.23 UCC Reports. Administrative Agent on behalf of the Banks
shall have received a UCC report of a date reasonably close to the Funding Date
for each of the jurisdictions in which any UCC-1 financing statements or
amendments thereto are intended to be filed in respect of the Collateral with
respect to such Subsequent Project, showing that upon due filing (assuming such
filing or recordation occurred on the date of such respective reports), the
security interests created under the Collateral Documents with respect to such
Subsequent Project will be prior to all other financing statements or other
security documents wherein the security interest is perfected by filing in
respect of such Collateral.
3.3.24 Project Budgets. Borrower shall have furnished
Administrative Agent on behalf of the Banks a budget in substantially the form
of the Project Budgets delivered pursuant to Section 3.1.22 but with such
changes as are required to address the specifics of such Subsequent Project for
all anticipated costs to be incurred in connection with the construction and
start-up of such Subsequent Project, including in such budget all construction
and non-construction costs, and including all interest, taxes and other carrying
costs, and such other information as the Technical Committee may require,
together with a balanced statement of sources (including an allocation between
Loan proceeds and Contributions) and uses of proceeds (and any other funds
necessary to complete such Subsequent Project), broken down as to separate
construction phases and components, which project budget shall be in form and
substance satisfactory to the Technical Committee.
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3.3.25 Project Schedule. Borrower shall have furnished a project
schedule with respect to such Subsequent Project in substantially the form of
the Project Schedules delivered pursuant to Section 3.1.23 but with such changes
as are required to address the specifics of such Subsequent Project and showing
a guaranteed completion date for such Project that is on or before the Loan
Maturity Date and which is otherwise in form and substance satisfactory to the
Technical Committee and Independent Engineer.
3.3.26 Base Case Project Projections. Borrower shall have
furnished to Administrative Agent on behalf of the Banks the combined Base Case
Project Projections of operating expenses and cash flow for all the Projects
(including such Subsequent Project) showing a minimum projected annual
Four-Quarter Portfolio Interest Coverage Ratio of no less than [*] (which ratio
shall be supported by the projections set forth in the Independent Consultant's
reports delivered pursuant to Sections 3.3.12, 3.3.14 and 3.3.15) in
substantially the form (including the duration thereof) of those projections
delivered pursuant to Section 3.1.24 and in form and substance satisfactory to
the Technical Committee.
3.3.27 No Material Adverse Change. No event or circumstance
having a Material Adverse Effect with respect to Borrower or the Projects, taken
as a whole, has occurred since the Closing Date, and, with respect to the
relevant Subsequent Project, no event or circumstance having a Material Adverse
Effect with respect to such Subsequent Project shall have occurred.
3.3.28 A.L.T.A. Surveys. Administrative Agent on behalf of the
Banks shall (a) be satisfied that Borrower (or other Person who holds the direct
ownership interests in such Subsequent Project) shall have obtained all real
estate rights necessary for construction and operation of such Subsequent
Project other than (i) such rights as can be obtained through eminent domain
proceedings or (ii) rights, the procurement of which, in the Technical
Committee's reasonable judgment, is not subject to the discretion of any third
party, and in the case of either clause (i) or (ii) above, the Technical
Committee shall be satisfied that any rights which have not been obtained can be
obtained without material difficulty or delay by the time they are needed, and
(b) have received A.L.T.A. surveys of the Site and, unless not required by the
Technical Committee, the Easements with respect to such Subsequent Project in
existence on the Funding Date, satisfactory in form and substance to the
Technical Committee and the Title Insurer, reasonably current and certified to
the Technical Committee by a licensed surveyor satisfactory to the Technical
Committee, showing (i) as to such Site, the exact location and dimensions
thereof, including the location of all means of access thereto and all easements
relating thereto and showing the perimeter within which all foundations are or
are to be located; (ii) as to such Easements in existence on the Funding Date,
the exact location and dimensions thereof, including the location of all means
of access thereto, and all improvements or other encroachments in or on such
Easements in existence on the Funding Date; (iii) the existing utility
facilities servicing such Subsequent Project (including water, electricity, gas,
telephone, sanitary sewer and storm water distribution and detention
facilities); (iv) that such existing improvements do not encroach or interfere
with adjacent property or existing easements or other rights (whether on, above
or below ground), and that there are no gaps, gores, projections, protrusions or
other survey defects; (v) whether such Site or any portion thereof is located in
a special earthquake or flood hazard zone; and (vi) that there are no other
matters that could reasonably be expected to be disclosed by a survey
constituting a defect in title other than Permitted Encumbrances with
[*] Throughout this document, this symbol indicates that material has been
omitted pursuant to a request for confidential treatment. The request for
confidential treatment and the omitted material have been filed separately
with the Securities and Exchange Commission. Roughly 200 pages of material
have been omitted pursuant to the request for confidential treatment.
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respect to such Subsequent Project; provided, however, that the matters
described in clause (v) may be shown by separate maps, surveys or other
information reasonably satisfactory to the Technical Committee.
3.3.29 Title Policies. Except if such Subsequent Project is an
Additional Subsequent Project, Borrower shall have delivered to Administrative
Agent on behalf of the Banks a lender's A.L.T.A. policy of title insurance,
together with such endorsements as are required by the Technical Committee, or
commitment to issue such policy, dated as of the Funding Date (x) in an amount
equal to 50% of the aggregate amount of Project Costs set forth in the Project
Budget for such Subsequent Project (or such other amount as is reasonably
acceptable to the Technical Committee) and (y) with such reinsurance as is
satisfactory to the Technical Committee, issued by the Title Insurer in form and
substance satisfactory to the Technical Committee, insuring (or agreeing to
insure) that:
(a) Borrower has a good, marketable and insurable fee or
leasehold title to or right to control, occupy and use the Site and the
Easements with respect to such Subsequent Project, free and clear of liens,
encumbrances or other exceptions to title except those satisfactory to the
Technical Committee and specified on such policy; and
(b) the Deed of Trust with respect to such Subsequent Project
is (or will be when recorded) a valid first lien on the Mortgaged Property with
respect to such Subsequent Project, free and clear of all liens, encumbrances
and exceptions to title whatsoever, other than those encumbrances permitted
pursuant to Section 3.3.29(a).
3.3.30 Regulatory Status. Such Subsequent Project shall (a) have
complied with the requirements of 18 C.F.R. Section 292.207 required to be
complied with as of the Funding Date and delivered to Administrative Agent on
behalf of the Banks, in form and substance satisfactory to the Technical
Committee, either (i) a certificate of FERC certifying such Subsequent Project
as a Qualifying Facility, or (ii) documentation evidencing the
self-certification of such Subsequent Project as a Qualifying Facility and a
legal opinion of counsel to Borrower with respect to the effectiveness of such
documentation to qualify such Subsequent Project as a Qualifying Facility or (b)
be or be capable of becoming an Eligible Facility, and (x) if Borrower has
previously filed an application with FERC for a determination that Borrower is
an Exempt Wholesale Generator, Borrower shall have delivered to the Technical
Committee a copy of an additional or supplemental application regarding Exempt
Wholesale Generator with respect to such Supplemental Project filed by Borrower
with FERC and (y) the Technical Committee shall have received a legal opinion of
counsel to Borrower in form and substance satisfactory to the Technical
Committee to the effect that (i) if FERC has previously determined that Borrower
is an Exempt Wholesale Generator, such Subsequent Project will not adversely
impact Borrower's status as an Exempt Wholesale Generator or (ii) if FERC has
not yet determined that Borrower is an Exempt Wholesale Generator, there exists
no reasonable basis for FERC to deny an application filed by Borrower pursuant
to Section 5.12.1 for Exempt Wholesale Generator status.
3.3.31 Notice to Proceed. Each Contractor with respect to such
Subsequent Project shall have been given an unconditional notice to proceed or
otherwise been
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unconditionally directed to begin performance under the Construction Contract to
which it is a party, and shall have acknowledged receipt thereof, on or prior to
the Funding Date.
3.3.32 Representations and Warranties of Partners, Calpine and
Borrower. Each representation and warranty of the Partners and Calpine under the
Credit Documents and each representation and warranty of Borrower under the
Operative Documents shall be true and correct in all material respects as if
made on such date, unless such representation or warranty expressly relates
solely to another time.
3.3.33 Utilities. Administrative Agent on behalf of the Banks has
received evidence acceptable to the Technical Committee that all necessary gas
and electrical interconnections and utility services are either contracted for,
or will be readily available on reasonable economic terms, at such Subsequent
Project.
3.3.34 Mechanics' Lien Indemnity. Calpine shall have executed and
delivered an indemnity (in substantially similar form to the indemnity executed
pursuant to Section 3.1.32) in favor of the Banks with respect to mechanics'
liens which (a) could gain priority over the Deed of Trust with respect to such
Subsequent Project, if any, and (b) are not insured against in the title policy,
if any, delivered pursuant to Section 3.3.28.
3.3.35 Calpine Compliance. No "event of default" (as defined
therein) under any agreement or instrument documenting or evidencing any of
Calpine's Debt obligations shall have occurred and be continuing.
3.3.36 Calpine Guaranty. Calpine shall have executed (a) an
acknowledgment, in form and substance satisfactory to the Technical Committee,
that such Subsequent Project shall be included with the obligations undertaken
pursuant to the Completion Guaranty and (b) an Affiliated Party Agreement
Guaranty in respect of each Project Document entered into between Borrower and
an Affiliate of Borrower for such Project.
3.3.37 Debt to Capitalization Ratio. Borrower shall have paid
sufficient Project Costs for such Subsequent Project (which Project Costs are
consistent with the Project Budget delivered pursuant to Section 3.3.24) so that
Borrower's Debt to Capitalization Ratio (calculated without taking into account
the Contributions to Borrower with respect to Initial Projects which have not
satisfied their Pre-Funding Requirements) on the date of initial funding of
Loans for such Subsequent Project, and through the Loan Maturity Date (assuming
all further Project Costs for such Subsequent Project (and each other Subsequent
Project the initial funding of Loans for which has been made) are paid with the
proceeds of Loans), shall be no more than the Maximum Debt to Capitalization
Ratio.
3.3.38 Debt to Collateral Value Ratio. Borrower shall have paid
sufficient Project Costs for such Subsequent Project (which Project Costs are
consistent with the Project Budget delivered pursuant to Section 3.3.24) so that
Borrower's Debt to Collateral Value Ratio (calculated without taking into
account the Contributions to Borrower with respect to Initial Projects which
have not satisfied their Pre-Funding Requirements) on the date of initial
funding of Loans for such Subsequent Project, and through the Loan Maturity Date
(assuming all further
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Project Costs for such Subsequent Project (and each other Subsequent Project for
which the initial funding of Loans has been made) are paid with the proceeds of
Loans), shall be no more than [*] to 1.00.
3.3.39 Updated Exhibits. Borrower shall have delivered to
Administrative Agent supplements to (a) Exhibit G-8 (Hazardous Substances)
referencing the environmental reports in respect of such Subsequent Project that
were delivered to Administrative Agent on behalf of the Banks pursuant to
Section 3.3.13, (b) Exhibit D-6 reflecting the filings and recordings required
to be made to perfect security interests in the Collateral in respect of such
Subsequent Project, and (c) Exhibit K reflecting any additional or revised
insurance policies or coverages required by the Insurance Consultant to account
for such Subsequent Project, in each case, reasonably satisfactory to the
Technical Committee.
3.3.40 Diversification Requirements. Such Subsequent Project
satisfies the Diversification Requirements.
3.3.41 Calpine Corporation Credit Rating. Calpine shall be rated
at least Ba3 and BB or Ba2 and BB- by Moody's and S&P, respectively.
3.4 Conditions Precedent to Each Credit Event. The obligation of the
Banks to make each Loan (including the initial Loans for each Initial Project
and each of the Subsequent Projects) (a "Credit Event"), is subject to the prior
satisfaction of each of the following conditions:
3.4.1 Monthly Drawdown Frequency. Loans shall be made no more
frequently than two times per month.
3.4.2 Notice of Borrowing. Borrower shall have delivered a Notice
of Borrowing to Administrative Agent in accordance with the procedures specified
in Section 2.1.
3.4.3 Drawdown Certificate and Engineer's Certificate. (i) At
least 10 Banking Days prior to each Credit Event, Borrower shall have provided
Administrative Agent with a certificate, dated the date of the proposed
occurrence of such Credit Event and signed by Borrower, substantially in the
form of Exhibit C-5, in respect of each Project for which a disbursement of
funds are being requested and (ii) at least four Banking Days prior to each
Credit Event, the Independent Engineer shall have provided Administrative Agent
with a certificate of the Independent Engineer, substantially in the form of
Exhibit C-6. Such certificates shall certify, among other things, that (A) the
aggregate amount of Project Costs for each Project for which the disbursement of
funds is being requested will not exceed 110% of the anticipated aggregate
amount of Project Costs for such Project as set forth in such Project's Project
Budget and (B) the aggregate amount of Project Costs for all Initial Projects
and Funded Subsequent Projects then under construction will not exceed 105% of
the anticipated aggregate amount of Project Costs for all such Projects as set
forth in the respective Project Budgets; provided, however, that if the
condition described in clause (A) above is not satisfied with respect to a
particular Project for which funds are being requested but (x) the Independent
Engineer confirms that the cost overruns with respect to such Project are not
reasonably likely to exceed a specific amount and (y) the condition described in
clause (B) is satisfied and will continue to be satisfied after giving effect to
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any further anticipated overruns with respect to the Project experiencing such
overruns, then the Banks will not unreasonably withhold their consent to waive
the condition described in clause (A) above.
3.4.4 Amount. Loans shall be in such amounts as shall ensure that
uncommitted funds remaining in the Construction Account shall be disbursed to
the greatest extent possible, given the requirements of Section 2.1.1(b)(ii).
3.4.5 Title Policy Endorsement. Borrower shall provide, or
Administrative Agent shall be adequately assured that the Title Insurer is
committed at the time of each Credit Event to issue to Administrative Agent a
date-down endorsement of the relevant Title Policies, if any, to the date of
such Credit Event, insuring or otherwise establishing to the satisfaction of
Administrative Agent the continuing first priority of the relevant Deeds of
Trust (subject only to relevant Permitted Encumbrances and Permitted Liens
described in clause (a), (b) or (c) of the definition thereof) and otherwise in
form and substance reasonably satisfactory to Administrative Agent.
3.4.6 Lien Releases. If requested by Administrative Agent and
subject to Borrower's right to contest liens as described in the definition of
"Permitted Liens," Borrower shall have delivered to Administrative Agent duly
executed acknowledgments of payments and releases of mechanics' and
materialmen's liens, in form satisfactory to Administrative Agent, from each
relevant Major Contractor and Major Subcontractors thereof for all work,
services and materials, including equipment and fixtures of all kinds, done,
previously performed or furnished for the construction of the relevant Project,
and in respect of which Borrower has requested payment; provided, however, that
such releases may be conditioned upon receipt of payment with respect to work,
services and materials to be paid for with the proceeds of the requested Loan or
other Borrowing.
3.4.7 Applicable Permits. Except as disclosed in the Exhibit G-3
appendix applicable to the relevant Project, all Applicable Permits and
Applicable Third Party Permits with respect to the construction and operation of
the relevant Project required to have been obtained by Borrower (or Borrower and
its Joint Venturers, if applicable) or any other applicable Major Project
Participant by the date of such Credit Event from any Governmental Authority
shall have been issued and be in full force and effect and not subject to
current legal proceedings or to any unsatisfied conditions that could reasonably
be expect to allow material modification or revocation, and all applicable
appeal periods with respect thereto shall have expired. With respect to any of
such Permits not yet obtained and listed in Part II(A) or II(B) of the
applicable Exhibit G-3 appendix, no facts or circumstances exist which indicate
that any such Permit will not be timely obtainable at a cost consistent with the
applicable Project Budget without material difficulty or delay by Borrower (or
Borrower and its Joint Venturers, if applicable) or the applicable Major Project
Participant, respectively, prior to the time that it becomes an Applicable
Permit or Applicable Third Party Permit, as applicable. Except as disclosed in
the applicable Exhibit G-3 appendix, such Permits which have been obtained by
Borrower (or Borrower and its Joint Venturers, if applicable) or any applicable
Major Project Participant shall not be subject to any restriction, condition,
limitation or other provision that could reasonably be expected to have a
Material Adverse Effect with respect to Borrower or such Project.
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3.4.8 Equity Contributions. Borrower shall be in compliance with
Section 5.17.
3.4.9 Additional Documentation. With respect to Additional Major
Project Documents and Applicable Permits with respect to the relevant Project
entered into or obtained, transferred or required (whether because of the status
of the construction or operation of the relevant Project or otherwise) since the
date of the most recent Credit Event, there shall be redelivery of such matters
as are described in Sections 3.1.1 through 3.1.4 and 3.1.6 or Sections 3.3.2
through 3.3.5 and 3.3.7, as the case may be, to the extent applicable to such
Additional Project Documents or Applicable Permits and, if reasonably requested
by Administrative Agent, Sections 3.1.8 and 3.1.20 or Sections 3.3.9 and 3.3.22,
as the case may be, from the counterparty to such Additional Project Document.
3.4.10 Acceptable Work; No Liens. All work that has been done on
the relevant Project shall have been done in a good and workmanlike manner and
in accordance with the Construction Contracts and Prudent Utility Practices and
there shall not have been filed with or served upon Borrower with respect to
such Project or any part thereof notice of any Lien, claim of Lien or attachment
upon or claim affecting the right to receive payment of any of the monies
payable to any of the Persons named on such request which has not been released
by payment or bonding or otherwise or which will not be released with the
payment of such obligation out of such Loan or other Borrowing, other than
Permitted Liens.
3.4.11 Casualty. If at the time of any Credit Event, any Project
for which a disbursement of funds is being requested shall have been materially
injured or damaged by flood, fire or other casualty, Administrative Agent shall
have received insurance proceeds or money or other assurances sufficient in the
reasonable judgment of Administrative Agent and the Independent Engineer to
assure restoration and Completion of such Project prior to the Loan Maturity
Date and each of the conditions set forth in Section 7.5.3 has been satisfied.
3.4.12 Absence of Litigation. No action, suit, proceeding or
investigation shall have been instituted against Borrower, any Partner or the
relevant Project which could reasonably be expected to have a Material Adverse
Effect on Borrower or the Project with respect to which a Loan is being
requested, except as approved by Administrative Agent with the consent of the
Required Banks.
3.4.13 Insurance. Insurance complying with the requirements of
Section 5.18 shall be in effect, and upon the request of Administrative Agent
evidence thereof shall be provided to Administrative Agent.
3.4.14 Available Construction Funds. Available Construction Funds
shall not be less than the aggregate unpaid amount of Project Costs required to
cause the Completion Date of all Initial Projects and Funded Subsequent Projects
that have not achieved Completion to occur in accordance with all Legal
Requirements and the Construction Contracts prior to the guaranteed completion
date with respect to each such Project set therefor in such Project's Project
Schedule and to pay or provide for all anticipated non-construction Project
Costs as to each such Project, all as set forth in the Project Budgets.
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3.4.15 Representations and Warranties. Each representation and
warranty of the Partners and Calpine under the Credit Documents and each
representation and warranty of Borrower under the Operative Documents shall be
true and correct in all material respects as if made on such date, unless such
representation or warranty expressly relates solely to another time.
3.4.16 No Event of Default or Inchoate Default. No Event of
Default or Inchoate Default has occurred and is continuing or will result from
such Credit Event and no Non-Fundamental Project Default or Non-Fundamental
Project Inchoate Default in respect of the Project for which funds are being
requested has occurred and is continuing or will result from such Credit Event.
3.4.17 Operative Documents, Applicable Permits and Applicable
Third Party Permits in Effect. Each Credit Document, Major Project Document
(other than Major Gas Supply Contracts and Major Power Purchase Agreements),
electric transmission and interconnection agreement, material water supply
agreement, Additional Major Project Document, Applicable Permit and Applicable
Third Party Permit related to the Project for which Loans are then being
requested remains in full force and effect in accordance with its terms and no
material defaults have occurred thereunder.
3.4.18 No Material Adverse Effect. No event or circumstance
having a Material Adverse Effect with respect to Borrower or the Projects, taken
as a whole, has occurred since the Closing Date (except as is no longer
continuing), and no event or circumstance having a Material Adverse Effect with
respect to the Project for which a disbursement of funds is being requested has
occurred since the Closing Date (except as is no longer continuing).
3.4.19 Third Party Funding. For Projects which are not wholly
owned by Borrower, each Person (other than Borrower) who has an ownership
interest in such Project, has funded its pro rata share of all Project Costs
incurred through such date to such Project or any other Person (including
Borrower) has funded such costs on such Person's behalf.
3.4.20 Debt to Capitalization Ratio. Borrower's Debt to
Capitalization Ratio, calculated without taking into account the Contributions
to Borrower with respect to Initial Projects which have not satisfied all of
their Pre-Funding Requirements, shall be no more than the Maximum Debt to
Capitalization Ratio.
3.4.21 Debt to Collateral Value Ratio. Borrower's Debt to
Collateral Value Ratio, calculated without taking into account the Contributions
to Borrower with respect to Initial Projects which have not satisfied all of
their Pre-Funding Requirements, shall be no more than [*] to 1.00.
3.4.22 Interest Coverage Ratio. From and after the Final
Completion of the first Project to achieve Final Completion, Borrower's
Four-Quarter Portfolio Interest Coverage Ratio as of the most recent calendar
quarter shall equal or exceed [*] to 1.00.
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3.5 Conditions Precedent to Final Completion. Final Completion with
respect to a Project shall not occur until the following conditions shall have
been satisfied:
3.5.1 Notice of Completion. Delivery to Administrative Agent, in
form and substance satisfactory to Administrative Agent, of evidence that all
work with respect to such Project requiring inspection by municipal and other
Governmental Authorities having jurisdiction has been duly inspected and
approved by such authorities, that Borrower (or other Person that directly owns
such Project) has duly recorded a notice of completion for such Project, that
all parties performing such work have been or will be paid for such work, and
that no mechanics' and/or materialmen's liens or application therefor have been
filed and all applicable filing periods for any such mechanics' and/or
materialmen's liens have expired; provided, however, that in the event Borrower
delivers to Administrative Agent either (i) a policy of title insurance or
endorsement thereto, in form and substance satisfactory to Administrative Agent,
insuring against loss arising by reason of any mechanics' or materialmen's lien
gaining priority over the relevant Deed of Trust or (ii) a bond, in form and
substance satisfactory to Administrative Agent, in the amount of all payments
owed to any contractor, subcontractor or any other person as to whom the filing
periods for mechanics' and materialmen's liens have not expired, and covering
Borrower's liability to such contractors, subcontractors or other persons,
Administrative Agent shall waive the applicable filing periods referred to
herein.
3.5.2 Completion. Completion with respect to such Project shall
have occurred and Administrative Agent shall have received a certification by
Construction Manager for such Project and by Borrower and the Independent
Engineer to such effect.
3.5.3 Annual Budget. Administrative Agent shall have received the
Annual Operating Budget with respect to such Project as required under Section
5.15.2 for the calendar year containing the date of Final Completion. In the
event that such Annual Operating Budget does not, in Administrative Agent's
opinion, properly reflect the operation of such Project during such calendar
year as a result of the actual date of Final Completion being different from the
date anticipated therefor and set forth in such Annual Operating Budget,
Administrative Agent shall have received an amendment to such Annual Operating
Budget properly reflecting the actual date of Final Completion.
3.5.4 Insurance. Insurance complying with the requirements of
Section 5.18 shall be in effect, and upon the request of Administrative Agent,
evidence thereof shall be provided to Administrative Agent.
3.5.5 Applicable Permits and Applicable Third Party Permits.
Borrower shall have obtained or caused to be obtained and delivered to
Administrative Agent all Applicable Permits with respect to such Project,
satisfactory in form and substance to Administrative Agent, together with copies
of each such Applicable Permit and a certificate of an authorized officer of
Borrower certifying that all such Applicable Permits have been obtained. Each
Major Project Participant with respect to such Project shall have obtained or
caused to be obtained all Applicable Third Party Permits applicable to such
Person with respect to such Project, satisfactory in form and substance to
Borrower and Administrative Agent, and Borrower shall have delivered or cause to
be delivered to Administrative Agent copies or other evidence of each
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such Applicable Third Party Permit and a certificate of an authorized officer of
Borrower certifying that all such Applicable Third Party Permits have been
obtained. All such Applicable Permits and Applicable Third Party Permits shall
be in full force and effect, not subject to any then current legal proceeding or
to any unsatisfied condition that could reasonably be expected to allow material
modification or revocation, and all applicable appeal periods with respect
thereto shall have expired.
3.5.6 A.L.T.A. Surveys. Administrative Agent shall have received
as-built A.L.T.A. surveys of the Site and the Easements with respect to such
Project (or such other documentation acceptable to Administrative Agent),
reasonably satisfactory in form and substance to Administrative Agent and the
Title Insurer, certified to Administrative Agent as to completeness and accuracy
as of not more than four weeks prior to Final Completion by a licensed surveyor
reasonably satisfactory to Administrative Agent, showing (a) as to such Site,
the exact location and dimensions thereof, including the location of all means
of access thereto and all easements relating thereto and showing the perimeter
within which all foundations are located; (b) as to such Easements, the exact
location and dimensions thereof, including the location of all means of access
thereto, and all improvements or other encroachments in or on such Easements;
(c) the location and dimensions of all improvements, fences or encroachments
located in or on such Site or such Easements; (d) that the location of such
Project does not encroach on or interfere with adjacent property or existing
easements or other rights (whether on, above or below ground), and that there
are no gaps, gores, projections, protrusions or other survey defects; (e)
whether such Site or any portion thereof is located in a special earthquake or
flood hazard zone; and (f) that there are no other matters that could reasonably
be expected to be disclosed by a survey constituting a defect in title other
than relevant Permitted Encumbrances; provided, however, that the matters
described in clause (v) may be shown by separate maps, surveys or other
information reasonably satisfactory to Administrative Agent.
3.5.7 Title Policy. Except with respect to the Additional
Subsequent Projects, Administrative Agent shall have received (a) a lender's
A.L.T.A. policy of title insurance, together with such endorsements as are
reasonably required by Administrative Agent and are obtainable in the state
where such Project is located at reasonable costs, in the amount of an aggregate
principal amount reasonably satisfactory to Administrative Agent, not to exceed
the amount of the Title Policies delivered pursuant to Section 3.1.27 or Section
3.3.29, as applicable, with respect to such Project, issued by the Title
Insurer, in form and substance and with such reinsurance as is reasonably
satisfactory to Administrative Agent, and insuring Administrative Agent as to
all matters described in Section 3.1.27 or Section 3.3.29, as the case may be,
the continued first priority of the Lien on the relevant Mortgaged Property
evidenced by the relevant Deed of Trust (without a mechanics' and materialmen's
exception included in such title policy) and as to such other matters as
Administrative Agent may reasonably request, and containing only relevant
Permitted Encumbrances, such Permitted Liens as are junior and subordinate to
the relevant Deed of Trust and any other exceptions relating to the boundaries
of the relevant Site, encroachments and matters disclosed or discoverable by a
survey or inspection as are acceptable to Administrative Agent in its sole
discretion or (b) an endorsement to the A.L.T.A. Policy delivered to
Administrative Agent pursuant to Section 3.1.27 or Section 3.3.29, as the case
may be, reasonably satisfactory to Administrative Agent reflecting the items
referred to above.
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3.5.8 Project Pre-Completion Requirements. All of the
Pre-Completion Requirements applicable to such Project, if any, shall have been
satisfied.
3.5.9 Operating Plans. Borrower shall have provided to
Administrative Agent a plan setting forth such Project's procedures for
operating the Project, fuel procurement and power marketing in form and
substance reasonably satisfactory to Administrative Agent.
3.6 Conditions Precedent to the Issuance of Letters of Credit.
The obligation of the LC Bank to issue, extend or increase the Stated Amount of
any Letter of Credit is subject to the prior satisfaction of each of the
following conditions:
3.6.1 Representations and Warranties True and Correct. Each
representation and warranty of the Partners and Calpine under the Credit
Documents and each representation and warranty of Borrower under the Operative
Documents shall be true and correct in all material respects as if made on such
date, unless such representation or warranty expressly relates solely to another
time.
3.6.2 No Event of Default or Inchoate Default. No Event of
Default or Inchoate Default has occurred and is continuing or will result from
such Credit Event and no Non-Fundamental Project Default or Non-Fundamental
Project Inchoate Default in respect of the Project for which the issuance,
extension or increase in Stated Amount of a Letter of Credit is requested has
occurred and is continuing or will result from such Credit Event.
3.6.3 Operative Documents, Applicable Permits and Applicable
Third Party Permits in Effect. Each Credit Document, Project Document,
Additional Project Document, Applicable Permit and Applicable Third Party Permit
related to the Project for which Letters of Credit are then being requested
remains in full force and effect in accordance with its terms and no material
defaults have occurred thereunder.
3.6.4 No Material Adverse Effect. No event or circumstance having
a Material Adverse Effect with respect to Borrower or the Projects, taken as a
whole, has occurred since the Closing Date (except as is no longer continuing)
and no event or circumstance having a Material Adverse Effect with respect to
the Project in respect of which the LC Bank is being requested to issue, extend
or increase the stated Amount of a Letter of Credit has occurred since the
Closing Date (except as is no longer continuing).
3.6.5 Interest Coverage Ratio. From and after the Final
Completion of the first Project to achieve Final Completion, Borrower's
Four-Quarter Portfolio Interest Coverage Ratio as of the most recent calendar
quarter shall equal or exceed [*] to 1.00.
3.6.6 Project Pre-Funding Requirements. All of the Pre-Funding
Requirements applicable to such Project, if any, shall have been satisfied.
3.6.7 Debt to Collateral Value Ratio. Borrower's Debt to
Collateral Value Ratio, calculated without taking into account the Contributions
to Borrower with respect to Initial Projects which have not satisfied all of
their Pre-Funding Requirements, shall be no more than [*] to 1.00.
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3.6.8 Project Status. The Project with respect to which such
Letter of Credit is issued is an Initial Project or a Funded Subsequent Project.
3.7 Failure of Conditions Precedent to be Satisfied for a Particular
Project.
(a) In the event that Borrower requests a Borrowing with
respect to more than one Project, and the applicable conditions set forth in
this Article 3 for such Borrowing have not been satisfied for one or more of
such Projects, then such Borrowing shall be permitted to occur for the Projects
in respect of which all applicable conditions have been satisfied, unless (i)
the failure of any condition to be satisfied with respect to any Project has the
effect of causing an Event of Default or Inchoate Default to occur under this
Agreement, in which case the requested Borrowing shall not be permitted to occur
until such time as the Event of Default or Inchoate Default has been cured and
the applicable conditions have been satisfied, or (ii) a Non-Fundamental Project
Default or Non-Fundamental Project Inchoate Default has occurred and is
continuing with respect to any Project, in which case the provisions of Section
3.7(b) shall apply.
(b) In the event that a Non-Fundamental Project Default or
Non-Fundamental Project Inchoate Default has occurred and is continuing with
respect to a given Project but the conditions to the requested Borrowing in
respect of a different Project are otherwise satisfied, then:
(i) Borrower shall calculate the Four-Quarter Portfolio
Interest Coverage Ratio, the Debt to Capitalization Ratio and the Debt to
Collateral Value Ratio (A) without taking into account the EBITDA produced by
the Project or Borrower's Contributions with respect to the Project with respect
to which the Non-Fundamental Project Default or Non-Fundamental Project Inchoate
Default has occurred and (B) in the case of the Debt to Capitalization Ratio and
Debt to Collateral Value Ratio only, without taking into account Borrower's
Contributions with respect to any Initial Project which has not satisfied all of
its Pre-Funding Requirements.
(ii) In the event that (A) the Four-Quarter Portfolio
Interest Coverage Ratio calculated pursuant to clause (i) above yields a minimum
projected ratio of no less than [*] to 1.00 through the same term of the Base
Case Project Projections delivered pursuant to Section 3.1.24, (B) the Debt to
Capitalization Ratio calculated pursuant to clause (i) above yields a maximum
projected ratio that is no higher than the Maximum Debt to Capitalization Ratio
at any time through the Loan Maturity Date and (C) the Debt to Collateral Value
Ratio calculated pursuant to clause (i) above yields a maximum projected ratio
that is no higher than [*] to 1.00 at any time through the Loan Maturity Date,
then Borrower shall be permitted to obtain the requested Borrowing for a Project
with respect to which no Non-Fundamental Project Default or Non-Fundamental
Project Inchoate Default has occurred and is continuing and which otherwise
satisfied the required conditions of this Article 3.
(iii) In the event that (A) the Four-Quarter Portfolio
Interest Coverage Ratio calculated pursuant to clause (i) above yields a minimum
projected ratio of less than [*] to 1.00 through the same term of the Base Case
Project Projections delivered pursuant to Section 3.1.24, (B) the Debt to
Capitalization Ratio calculated pursuant to clause (i) above
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yields a maximum projected ratio that is higher than the Maximum Debt to
Capitalization Ratio at any time through the Construction Loan Maturity Date or
(C) the Debt to Collateral Value Ratio calculated pursuant to clause (i) above
yields a maximum projected ratio that is higher than [*] to 1.00 at any time
through the Loan Maturity Date, then Borrower shall not be permitted to obtain
the requested Borrowing with respect to any Project unless and until such time
as (x) the Four-Quarter Portfolio Interest Coverage Ratio, the Debt to
Capitalization Ratio and the Debt to Collateral Value Ratio calculated pursuant
to clause (i) above meet the thresholds specified above or (y) the
Non-Fundamental Project Default or Non-Fundamental Project Inchoate Default is
no longer continuing and, in each case, the applicable conditions in this
Article 3 have been satisfied.
3.8 Funding of Equity. (a) Notwithstanding any other provision of
this Agreement to the contrary, Borrower shall have the right to, at any time,
make a Contribution into the Construction Account or any sub-account therein and
have such funds applied to the payments of Project Costs in accordance with
Section 7.1.2 so long as (i) at least 10 Banking Days prior to the requested
disbursement of funds from the Construction Account, Borrower shall have
provided Administrative Agent with a certificate, dated the date of the proposed
disbursement and signed by Borrower, substantially in the form of Exhibit C-5,
in respect of the Project for which the disbursement is being requested and (ii)
at least 4 Banking Days prior to the date of the requested disbursement of funds
from the Construction Account, the Independent Engineer shall have provided
Administrative Agent with a certificate, substantially in the form of Exhibit
C-6, relating to such disbursement; provided, however, that such certificates
need not certify as to whether the amount of Project Costs incurred by the
Project for which the disbursement is being requested are in excess of the
amounts set forth in the corresponding Project Budget, and the funds deposited
by Borrower into the Construction Account shall be released regardless of
whether or not the requested disbursement is in excess of the amounts set forth
in the corresponding Project Budget; provided, further, that until the funding
of the initial Loans with respect to a given Project, funds deposited by
Borrower into the Construction Account with respect to such Project shall be
released notwithstanding failure to satisfy the conditions set forth in Sections
3.2, 3.3, 3.4.5, 3.4.7, 3.4.8, 3.4.9, 3.4.11, 3.4.12, 3.4.14, 3.4.15, 3.4.17,
3.4.18 (as it relates to such Project), 3.4.19, 3.4.20, 3.4.21 and 3.4.22 with
respect to such Project.
(b) In the event that Borrower makes a Contribution as
contemplated in paragraph (a) above or otherwise which is in excess of the Base
Equity and Additional Borrower Equity which Borrower is required to contribute
or cause to be contributed under this Agreement, then Borrower shall, at any
time (i) after all Initial Projects have satisfied all of their respective
Pre-Funding Requirements, (ii) prior to the Completion of the Project for which
such funds were contributed, (iii) when no Non-Fundamental Project Default,
Non-Fundamental Project Inchoate Default, Event of Default or Inchoate Default
has occurred and is continuing, (iv) so long as Borrower's Four-Quarter
Portfolio Interest Coverage Ratio as of the end of the most recent calendar
quarter equaled or exceeded [*] to 1.00 and (v) so long as Borrower's Debt to
Collateral Value Ratio as of the end of the most recent calendar quarter was no
more than [*] to 1.00, obtain reimbursement of or repayment of, as the case may
be, such Contributions described in paragraph (a) above by satisfying the
conditions set forth in Section 3.4 with respect to such Project; provided,
however, that the difference between (x) the aggregate amount of Contributions
by Borrower to the Projects less (y) the sum of the amount of the requested
reimbursement or repayment, as the case may be, plus the aggregate amount of all
prior
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reimbursements and repayments shall be no less than (z) [*] plus the
Contributions required pursuant to Section 5.17.1(b).
3.9 No Approval of Work. Neither the making of any Loan nor the
issuance of any Letter of Credit hereunder shall be deemed an approval or
acceptance by Administrative Agent or the Banks of any work, labor, supplies,
materials or equipment furnished or supplied with respect to any of the
Projects.
3.10 Waiver of Funding; Adjustment of Drawdown Requests.
Notwithstanding the foregoing, the Required Banks, without waiving any of the
Banks' rights hereunder, shall have the right to effect a Credit Event hereunder
without full compliance by Borrower with the conditions described in this
Article 3. In the event Administrative Agent determines that an item or items
listed in a Drawdown Certificate as a Project Cost is not properly included in
such Drawdown Certificate, Administrative Agent, in consultation with the
Independent Engineer, may in its reasonable discretion cause to be made a Loan
or Loans in the amount requested in such Drawdown Certificate less the amount of
such item or items or may reduce the amount of Loans made pursuant to any
subsequent Drawdown Certificate. In the event that Borrower prevails in any
dispute as to whether such Project Costs were properly included in such Drawdown
Certificate, Loans in the amount requested but not initially made shall
forthwith be made.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to
and in favor of the Lead Arrangers, Administrative Agent, LC Bank and the other
Banks as of the Closing Date and as of the date of each Credit Event and each
date on which a Letter of Credit is issued, extended or increased in Stated
Amount. All of these representations and warranties shall survive the Closing
Date, the issuance of any Letters of Credit and the making of the Loans:
4.1 Organization.
4.1.1 Borrower is a limited partnership duly constituted, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified, authorized to do business and in good standing in all of the
states where the Projects are located and in each other jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary. Borrower has all requisite power and authority to own
or hold under lease and operate the property it purports to own or hold under
lease and to carry on its business as now being conducted and as now proposed to
be conducted in respect of the Projects. On the Closing Date, Calpine CCFC GP,
Inc., a Delaware corporation, is the sole general partner of Borrower and the
limited partners of Borrower are the specific Persons identified by name under
the definition of "Limited Partners."
4.1.2 Calpine CCFC GP, Inc., a Delaware corporation (a) is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Delaware with all requisite corporate power and authority
under the laws of the State of Delaware to enter into the Partnership Agreement
and as the general partner of Borrower to perform its obligations
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thereunder and to consummate the transactions contemplated thereby, (b) is duly
qualified, authorized to do business and in good standing in each state where
the Projects are located and each other jurisdiction where the character of its
properties or the nature of its activities makes such qualification necessary,
(c) has the corporate power (i) to carry on its business as now being conducted
and as proposed to be conducted by it, (ii) to execute, deliver and perform each
Operative Document to which it is a party, in its individual capacity, and (iii)
to take all action as may be necessary to consummate the transactions
contemplated thereunder and (d) has the power and authority under the
Partnership Agreement to execute and deliver, on behalf of Borrower, each
Operative Document to which Borrower is a party.
4.2 Authorization; No Conflict. Borrower has duly authorized,
executed and delivered, or has been properly assigned, each Operative Document
to which Borrower is a party and neither Borrower's execution and delivery
thereof nor its consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (a) does or will contravene the constituent
documents or any other Legal Requirement applicable to or binding on Borrower or
any of its properties, (b) does or will contravene or result in any breach of or
constitute any default under, or result in or require the creation of any Lien
(other than Permitted Liens) upon any of its properties under, any agreement or
instrument to which Borrower is a party or by which it or any of its properties
may be bound or affected or (c) does or will require the consent or approval of
any Person which has not already been obtained.
4.3 Enforceability. Each of the Operative Documents to which Borrower
is a party is a legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights or by the effect of general equitable principles. None of the Operative
Documents to which Borrower is a party has been amended or modified except in
accordance with this Agreement.
4.4 Compliance with Law. There are no violations by Borrower, any
Partner or, to Borrower's knowledge, Calpine, of any Legal Requirement which
could reasonably be expected to have a Material Adverse Effect on Borrower or
any Initial Project or Funded Subsequent Project. Except as otherwise have been
delivered to Administrative Agent, no notices of violation of any Legal
Requirement relating to any Initial Project or Funded Subsequent Project or
related Site have been issued, entered or received by Borrower, any Partner or,
to Borrower's knowledge, Calpine.
4.5 Business, Debt, Contracts, Joint Ventures Etc.
4.5.1 Neither any Partner nor Borrower has conducted any business
other than the business contemplated by the Operative Documents, has any
outstanding Debt or other material liabilities other than pursuant to or allowed
by the Operative Documents. None of such Persons is party to or bound by any
material contract other than the Operative Documents to which it is a party.
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4.5.2 Borrower is not (a) a general partner or a limited partner
in any general or limited partnership or a member in any limited liability
company or (b) a joint venturer in any joint venture, except (i) with respect to
Subsequent Projects which are at least fifty percent (50%) owned by Borrower or
(ii) as permitted pursuant to Section 6.4.2 hereof in connection with the Magic
Valley Project.
4.5.3 Neither Borrower nor any Partner thereof has any
subsidiaries (other than Borrower in the case of the Partners).
4.6 Adverse Change. With respect to each Initial Project and Funded
Subsequent Project, to the best of Borrower's knowledge, there has occurred no
material adverse change in the Project Budget, Project Schedule or Base Case
Project Projections, in the economics or feasibility of constructing and/or
operating such Project, or in the financial condition, business or property of
any Major Project Participant, or any other event or circumstance which is
reasonably likely to have a Material Adverse Effect on Borrower or such Project
(a) as of the Closing Date, since May 28, 1999 and (b) after the Closing Date,
except as disclosed to Administrative Agent in writing at the time the
representation in this Section 4.6 is being made, since the Closing Date (or,
with respect to a Subsequent Project, since such Subsequent Project's Funding
Date).
4.7 Investment Company Act, Etc. Neither Borrower nor any Partner is
an investment company or a company controlled by an investment company, within
the meaning of the Investment Company Act of 1940, and neither Borrower nor any
Partner is or has been determined by the Securities and Exchange Commission or
any other Governmental Authority to be subject to, or not exempt from,
regulation under PUHCA or the FPA (other than as provided by PURPA or as an
Exempt Wholesale Generator).
4.8 ERISA. Either (a) there are no ERISA Plans for Borrower or any
member of the Controlled Group or (b) Borrower and each member of the Controlled
Group have fulfilled their obligations (if any) under the minimum funding
standards of ERISA and the Code for each ERISA Plan, each ERISA Plan is in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code and neither Borrower nor any Controlled Group member has
incurred any liability to the PBGC or any ERISA Plan under Title IV of ERISA
(other than liability for premiums due in the ordinary course). None of
Borrower's assets constitute assets of an employee benefit plan within the
meaning of 29 CFR Section 2510.3-101.
4.9 Permits. With respect to each Initial Project and Funded
Subsequent Project:
4.9.1 There are no Permits under existing law as such Project is
designed that are or will become Applicable Permits other than the Applicable
Permits described in the applicable appendix to Exhibit G-3 hereto. Except as
disclosed therein, each Applicable Permit listed in Part I(A) of the applicable
appendix to Exhibit G-3 is in full force and effect and is not subject to any
current legal proceeding or to any unsatisfied condition that could reasonably
be expected to have a Material Adverse Effect on such Project, and all
applicable appeal periods with respect thereto have expired. Each Permit listed
in Part II(A) of the applicable appendix to Exhibit G-3 is of a type that is
routinely granted upon application and that would not normally be obtained
before contemplated by Borrower. No fact or circumstance exists, to Borrower's
knowledge, which
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indicates that any Permit identified in Part II(A) of the applicable appendix to
Exhibit G-3 shall not be timely obtainable at a cost consistent with the
applicable Project Budget without material difficulty or delay by Borrower
before it becomes an Applicable Permit. Borrower is in compliance in all
material respects with all Applicable Permits.
4.9.2 There are no Permits under existing law as such Project is
designed that are or will become Applicable Third Party Permits other than the
Applicable Third Party Permits described in the applicable appendix to Exhibit
G-3 hereto (other than those, the failure of which to obtain could not
reasonably be expected to have a Material Adverse Effect on Borrower or such
Project). Except as disclosed therein, each Applicable Third Party Permit listed
in Part I(B) of the applicable appendix to Exhibit G-3 is in full force and
effect and is not subject to current legal proceeding or to any unsatisfied
condition that could reasonably be expected to have a Material Adverse Effect on
Borrower or such Project, and all applicable appeal periods with respect thereto
have expired. No fact or circumstance exists, to Borrower's knowledge, which
indicates that any Permit identified in Part II(B) of the applicable appendix to
Exhibit G-3 shall not be timely obtainable at a cost consistent with the
applicable Project Budget without material difficulty or delay by the applicable
Major Project Participant before it becomes an Applicable Third Party Permit. To
the best knowledge of Borrower, each Major Project Participant is in compliance
in all material respects with its respective Applicable Third Party Permits,
each other Major Project Participant possesses all licenses, franchises,
patents, copyrights, trademarks and trade names, or rights thereto necessary to
perform its duties under the Operative Documents to which it is a party, and
such Person is not in violation of any valid rights of others with respect to
any of the foregoing which could reasonably be expected to have a Material
Adverse Effect on Borrower or such Project.
4.10 Qualifying Facility/Exempt Wholesale Generator. Each
Project, upon Completion of such Project, will be a Qualifying Facility or an
Eligible Facility and, from and after the commencement of commercial operations
of the first Project, Borrower will be an Exempt Wholesale Generator.
4.11 Hazardous Substance.
4.11.1 Except as set forth in Exhibit G-8: (a) neither Borrower
nor any Partner nor Calpine (the "Subject Companies"), with respect to the
Sites, Improvements or other Mortgaged Properties owned or leased by Borrower,
is or has in the past been in violation of any Hazardous Substance Law which
violation could reasonably be expected to result in a material liability to any
of the Subject Companies or their respective properties and assets or in an
inability of Borrower to perform its obligations under the Operative Documents;
(b) none of the Subject Companies nor, to the best knowledge of the Partners and
Borrower, any third party has used, released, discharged, generated,
manufactured, produced, stored, or disposed of in, on, under, or about the
Sites, Improvements or other Mortgaged Properties owned or leased by Borrower,
or transported thereto or therefrom, any Hazardous Substances that could
reasonably be expected to subject the Banks to liability or the Subject
Companies to liability, under any Hazardous Substance Law; (c) there are no
underground tanks, whether operative or temporarily or permanently closed,
located on the Sites, Improvements or other Mortgaged Properties owned or leased
by Borrower; (d) there are no Hazardous Substances used, stored or present at,
on or, to
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the best knowledge of Borrower and the Partners, near the Sites, Improvements or
other Mortgaged Properties owned or leased by Borrower, except in compliance
with Hazardous Substance Laws and other Legal Requirements or as disclosed in
the Environmental Reports; and (e) to the best knowledge of Borrower and the
Partners, there neither is nor has been any condition, circumstance, action,
activity or event that could reasonably be expected to be a material violation
by the Subject Companies of any Hazardous Substance Law, or to result in
liability to the Banks or material liability to the Subject Companies under any
Hazardous Substance Law.
4.11.2 Except as set forth on Exhibit G-7 or Exhibit G-8, there
is no pending or, to the best knowledge of Borrower, threatened, action or
proceeding by any Governmental Authority (including, without limitation, the
U.S. Environmental Protection Agency) or any non-governmental third party with
respect to the presence or Release of Hazardous Substances in, on, from or to
the Sites, Improvements or other Mortgaged Properties owned or leased by
Borrower.
4.11.3 Neither Borrower nor any Partner nor Calpine has knowledge
of any past or existing violations of any Hazardous Substances Laws by any
Person relating in any way to the Sites, Improvements or other Mortgaged
Properties owned or leased by Borrower.
4.12 Litigation. Except as set forth on Exhibit G-7, there are no
pending or, to the best knowledge of Borrower, threatened actions or proceedings
of any kind, including actions or proceedings of or before any Governmental
Authority, to which Borrower, any Partner, Calpine, or, to the best knowledge of
Borrower, any other Major Project Participant or a Project is a party or is
subject, or by which any of them or any of their properties or a Project are
bound, which if adversely determined to or against Borrower, any other Major
Project Participant or a Project could reasonably be expected to have a Material
Adverse Effect on any Initial Project or Funded Subsequent Project or Borrower.
4.13 Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower, any Partner, Calpine, or, to the best knowledge of
Borrower, any other Major Project Participant are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), which could reasonably be expected to
have a Material Adverse Effect on any Initial Project or Funded Subsequent
Project or Borrower.
4.14 Project Documents.
4.14.1 Copies of all of the Project Documents in effect with
respect to the Initial Projects or the Funded Subsequent Projects as of such
date have been delivered to Administrative Agent by Borrower. Except as has been
previously disclosed in writing to Administrative Agent, as of the date of
delivery of such Project Documents relating to the Initial Projects and the
Funded Subsequent Projects none of the Project Documents has been amended,
modified or terminated.
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4.14.2 To Borrower's knowledge, the representations and
warranties of the Major Project Participants contained in the Operative
Documents relating to the Initial Projects and the Funded Subsequent Projects
other than this Agreement are true and correct.
4.15 Disclosure. Neither this Agreement nor any certificate or other
documentation furnished to Administrative Agent, or to any consultant submitting
a report to Administrative Agent, by or, to the knowledge of Borrower, on behalf
of Borrower in connection with the transactions contemplated by this Agreement,
the other Project Documents or the design, description, testing or operation of
a Project, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading under the circumstances in which they were made at the
time such statements are made. As of the Closing Date, there is no fact known to
Borrower which has had or could reasonably be expected to have a Material
Adverse Effect on Borrower or any Initial Project or Funded Subsequent Project
which has not been set forth in this Agreement or in the other documents,
certificates and written statements furnished to Administrative Agent and/or the
Independent Engineer, by or on behalf of Borrower in connection with the
transactions contemplated hereby. The documentation furnished to Administrative
Agent and to the Independent Engineer taken as a whole, including without
limitation written updated or supplemented information, is true and correct in
all material respects and all such documentation does not omit to state any fact
which would have a Material Adverse Effect on Borrower or any Initial Project or
Funded Subsequent Project.
4.16 Private Offering by Borrower. Assuming that the Banks are
acquiring the Notes for investment purposes only, and not for purposes of resale
or distribution thereof except for assignments or participations as provided in
Sections 10.13 and 10.14, no registration of the Notes under the Securities Act
of 1933, as amended, or under the securities laws of the State of New York,
Texas, California, Maine, Arizona, Delaware or any other state in which a
Project is located is required in connection with the offering, issuance and
sale of the Notes hereunder. Neither Borrower nor anyone acting on its behalf
has taken, or will take, any action which would subject the issuance or sale of
the Notes to Section 5 of the Securities Act of 1933, as amended.
4.17 Taxes. Borrower and each Partner has filed all federal, state
and local tax returns that it is required to file, has paid all taxes it is
required to pay to the extent due (other than those taxes that it is contesting
in good faith and by appropriate proceedings, with adequate, segregated reserves
or other security reasonably acceptable to Administrative Agent established for
such taxes) and, to the extent such taxes are not due, has established reserves
that are adequate for the payment thereof and are required by GAAP. For federal
income tax purposes, Borrower is a partnership and not an association taxed as a
corporation.
4.18 Governmental Regulation. Except to the extent that the FPA is
applicable solely by reason of Borrower being an Exempt Wholesale Generator or
the owner of a Qualifying Facility, none of Borrower, any Partner,
Administrative Agent, or the Banks, nor any Affiliate of any of them will,
solely as a result of the construction, ownership, leasing or operation of any
Project, the sale of electricity therefrom or the entering into any Operative
Document or any transaction contemplated hereby or thereby, be subject to, or
not exempt from, regulation under the FPA or PUHCA or under state laws and
regulations respecting the rates or the financial or organizational regulation
of electric utilities. Borrower is not subject to regulation under any
Governmental Rule as to securities, rates or financial or
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organizational matters that would preclude any Loans, or the incurrence by
Borrower of any of the Obligations or the execution, delivery and performance by
Borrower of the Operative Documents. Borrower will not be deemed by any
Governmental Authority having jurisdiction to be subject to financial,
organizational or rate regulation as an "electric utility," "electric
corporation," "electrical company," "public utility," "public utility holding
company" or any similar entity under any existing law, rule or regulation of any
Governmental Authority.
4.19 Regulation U, Etc. Borrower is not engaged principally, or as
one of its principal activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (as defined in Regulations T, U
or X of the Federal Reserve Board), and no part of the proceeds of the Loans or
the Project Revenues will be used by Borrower to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
4.20 Project Budgets; Projections. Borrower has prepared the Project
Budget and the Base Case Project Projections and are responsible for developing
the assumptions on which the Project Budget and the Base Case Project
Projections are based; and the Project Budget and the Base Case Project
Projections for the Initial Projects and the Funded Subsequent Projects (a) are
based on reasonable assumptions as to all legal and factual matters material to
the estimates set forth therein, (b) as of the date delivered are consistent
with the provisions of the Project Documents and (c) indicate that the estimated
Project Costs with respect to such Project will not exceed funds available to
pay Project Costs with respect to such Project. In the reasonable opinion of
Borrower, as of the date delivered the textual material accompanying the Base
Case Project Projections for the Initial Projects and the Funded Subsequent
Projects discloses all information reasonably necessary for an understanding of
the Base Case Project Projections, and does not contain any material
misstatements or omit any information which, in conjunction with other
information given, would be necessary to make such information not materially
misleading.
4.21 Financial Statements. The financial statements of Borrower, the
Partners, Calpine, and any Affiliated Major Project Participants delivered
pursuant to Sections 3.1.20, 3.3.22 and 5.5 are true, complete and correct and
fairly present the financial condition of each such Person as of the date
thereof. Such financial statements have been prepared in accordance with GAAP.
Neither Borrower, the Partners, Calpine or such Affiliated Major Project
Participants has any material liabilities, direct or contingent, except as has
been disclosed in such financial statements.
4.22 Existing Defaults. Borrower is not in default under any material
term of any Operative Document relating to the Initial Projects and the Funded
Subsequent Projects or any agreement relating to any obligation of Borrower for
or with respect to borrowed money, and to the best of Borrower's knowledge, no
other party to any Project Document is in default thereunder.
4.23 No Default. No Event of Default, Inchoate Default,
Non-Fundamental Project Default or Non-Fundamental Project Inchoate Default has
occurred or is existing.
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4.24 Offices, Location of Collateral.
4.24.1 The chief executive office or chief place of business (as
such term is used in Article 9 of the Uniform Commercial Code as in effect in
each state where the Projects are located and the State of California from time
to time) of Borrower is located in San Jose, California. Borrower's federal
employer identification number is 77-0520679.
4.24.2 With respect to each Project, all of the Collateral (other
than the Accounts and general intangibles), including the Mortgaged Properties
is, or when installed pursuant to the Project Documents will be, located on the
Site or the Easements or at the address set forth in Section 4.24.1.
4.24.3 Borrower's books of accounts and records are located at 50
West San Fernando Street, San Jose, California 95113.
4.25 Title and Liens. (a) With respect to each Initial Project and
Funded Subsequent Project (other than Projects in which Borrower holds a partial
undivided ownership interest), Borrower has good, marketable and insurable (as
to real property) title to such Project, and all of the Collateral relating to
such Project, and good, marketable and insurable (as to real property) title to,
or as applicable, a leasehold estate in, the Site and the Easements relating to
such Project in existence as of the date this representation is made (except
that title to certain of the Easements which are licenses may not be insurable),
in each case free and clear of all Liens, encumbrances or other exceptions to
title other than Permitted Liens.
(b) With respect to each Initial Project and Funded
Subsequent Project in which Borrower holds a partial undivided ownership
interest, Borrower has good, marketable and insurable (as to real property)
title to the applicable undivided portion of such Project, and all of the
Collateral relating to such Project, and good, marketable and insurable (as to
real property) title to, or as applicable, a leasehold estate in, the applicable
undivided portion of the Site and the Easements relating to such Project in
existence as of the date this representation is made (except that title to
certain of the Easements which are licenses may not be insurable), in each case
free and clear of all Liens, encumbrances or other exceptions to title other
than Permitted Liens.
(c) The Lien of the Collateral Documents constitutes a valid
lien on all Collateral relating to the Initial Projects and the Funded
Subsequent Projects. The Lien of the Collateral Documents constitutes a valid
and subsisting first priority Lien of record on all the Mortgaged Properties
relating to the Initial Projects and the Funded Subsequent Projects (other than
the Additional Subsequent Projects) described in the Deeds of Trust and, a first
priority perfected security interest in all the personal property relating to
the Initial Projects and the Funded Subsequent Projects described in the
Collateral Documents, subject to no Liens except Permitted Encumbrances and
Permitted Liens described in clauses (a), (b) and (c) of the definition thereof.
With respect to the Additional Subsequent Projects, no Lien exists on the real
property comprising such Projects, other than Permitted Liens.
4.26 Trademarks. Borrower owns or has the right to use all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
which are necessary for the
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operation of its business. Nothing has come to the attention of Borrower to the
effect that (a) any material product, process, method, substance, part or other
material presently contemplated to be sold by or employed by Borrower in
connection with its business will infringe any patent, trademark, service mark,
trade name, copyright, license or other right owned by any other Person, (b)
there is pending or threatened any claim or litigation against or affecting
Borrower contesting its right to sell or use any such product, process, method,
substance, part or other material or (c) there is, or there is pending or
proposed, any patent, invention, device, application or principle or any
statute, law, rule, regulation, standard or code relating to the use of
technology or intellectual property by Borrower which could reasonably have a
Material Adverse Effect on Borrower or such related Project.
4.27 Collateral. The security interests granted to Administrative
Agent pursuant to the Collateral Documents in the Collateral related to the
Initial Projects and Funded Subsequent Projects (a) constitute as to personal
property included in the Collateral and, with respect to subsequently acquired
personal property included in the Collateral, will constitute, a perfected
security interest under the UCC to the extent a security interest can be
perfected by filing or, in the case of the Accounts, by possession by or on
behalf of the secured party and (b) are, and, with respect to such subsequently
acquired personal property, will be, as to Collateral related to the Initial
Projects and Funded Subsequent Projects perfected under the UCC as aforesaid,
superior and prior to the rights of all third Persons now existing or hereafter
arising whether by way of mortgage, lien, security interests, encumbrance,
assignment or otherwise. Except to the extent possession of portions of such
Collateral is required for perfection, all such action as is necessary has been
taken to establish and perfect Administrative Agent's rights in and to such
Collateral to the extent Administrative Agent's security interest can be
perfected by filing, including any recording, filing, registration, giving of
notice or other similar action. No filing, recordation, re-filing or
re-recording other than those listed on Exhibit D-6 hereto is necessary to
perfect and maintain the perfection of the interest, title or Liens of the
Collateral Documents related to the Initial Project and Funded Subsequent
Projects, and all such filings or recordings will have been made to the extent
Administrative Agent's security interest can be perfected by filing. Borrower
has properly delivered or caused to be delivered to Administrative Agent all
such Collateral that requires perfection of the Lien and security interest
described above by possession.
4.28 Sufficiency of Project Documents.
4.28.1 With respect to each Initial Project and Funded Subsequent
Project, other than those that can be reasonably expected to be commercially
available when and as required, the services to be performed, the materials to
be supplied and the real property interests, the Easements and other rights
granted or to be granted pursuant to the Project Documents in effect as of such
date:
(a) comprise all of the property interests necessary to
secure any right material to the acquisition, leasing, development,
construction, installation, completion, operation and maintenance of such
Project in accordance with all Legal Requirements and in accordance with the
Project Schedule, all without reference to any proprietary information not owned
by Borrower;
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(b) are sufficient to enable such Project to be located,
constructed and operated on its respective Site and the Easements, respectively;
and
(c) provide adequate ingress and egress from the Site for
such Project for any reasonable purpose in connection with the construction and
operation of such Project.
4.28.2 With respect to each Initial Project and Funded Subsequent
Project, there are no services, materials or rights required for the
construction or operation of such Project in accordance with the Construction
Contracts and the Base Case Project Projections, respectively, other than those
that can reasonably be expected to be commercially available at the Site for
such Project on commercially reasonable terms consistent with the Project Budget
and the Base Case Project Projections, respectively.
4.29 Utilities. With respect to each Initial Project and Funded
Subsequent Project, all gas and electrical interconnection and utility services
necessary for the construction and the operation of such Project for its
intended purposes are available at such Project or will be so available as and
when required upon commercially reasonable terms consistent with the Project
Budget, Project Schedule and the Base Case Project Projections.
4.30 Roads/Transmission Line. With respect to each Initial Project
and Funded Subsequent Project, other than those that can be reasonably expected
to be commercially available when and as required:
4.30.1 All roads necessary for the construction and full
utilization of such Project for its intended purposes have either been completed
or the necessary rights of way therefor have been acquired.
4.30.2 All necessary easements, rights of way, licenses,
agreements and other rights for the construction, interconnection and
utilization of the interconnection facilities have been acquired.
4.31 Proper Subdivision. With respect to each Project, at such time
as Borrower obtains any title or leasehold interests therein, the Site for such
Project has been properly subdivided or entitled to exception therefrom, and for
all purposes such Site may be mortgaged, conveyed and otherwise dealt with as
separate legal lots or parcels.
4.32 Flood Zone Disclosure. With respect to each Project, none of the
Collateral in respect of such Project includes improved real property that is or
will be located in an area that has been identified by the Director of the
Federal Emergency Management Agency as an area having special flood hazards and
in which flood insurance has been made available under the National Flood
Insurance Act of 1968, as amended.
4.33 Year 2000 Compliance. With respect to Borrower and each Initial
Project and Funded Subsequent Project, all equipment, products, systems or
computer programs that are part of such Project will be able to, without manual
intervention or interruption (a) correctly handle and process date information
before, during and after January 1, 2000 accepting date input, providing date
output and performing calculations, including sorting and sequencing, on dates
or
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portions of dates; (b) function according to the documentation during and after
January 1, 2000, without changes in operation resulting from the advent of the
calendar year 2000; (c) where appropriate, respond to two-digit date input in a
way that resolves any ambiguity as to century in a disclosed, defined and
predetermined manner; and (d) store and provide input of date information in
ways that are unambiguous as to century.
4.34 Acquisition of Real Property. Borrower has not acquired or
leased any real property or other interest in real property (excluding the
acquisition (but not the exercise) of any options to acquire any such interests
in real property) except as otherwise permitted pursuant to Section 6.24.
ARTICLE 5
COVENANTS OF BORROWER
Borrower covenants and agrees that so long as this Agreement is in
effect, it will:
5.1 Use of Proceeds and Project Revenues.
5.1.1 Proceeds. With respect to each Initial Project and Funded
Subsequent Project, unless otherwise applied by Administrative Agent pursuant to
this Agreement, deposit the proceeds of the Loans advanced for such Project, the
Additional Borrower Equity and the other Contributions made pursuant to Section
3.8(a) in the relevant Construction Sub-Account, and except to the extent
permitted in Section 3.8(b), (a) hold such proceeds as a trust fund for the
payment of Project Costs of such Project, and (b) use them solely to pay Project
Costs of such Project.
5.1.2 Revenues. With respect to each Initial Project and Funded
Subsequent Project, unless otherwise applied by Administrative Agent pursuant to
Articles 7 and 8, (a) deposit all Project Revenues received or due Borrower
other than Insurance Proceeds, Eminent Domain Proceeds and damage payments
described in Section 7.7 received prior to Completion of such Project in the
relevant Construction Sub-Account for application toward Project Costs and
otherwise for application as set forth in Section 7.1, (b) deposit all Project
Revenues received or due Borrower other than Insurance Proceeds, Eminent Domain
Proceeds and damage payments described in Section 7.7 received after Completion
of such Project in the Revenue Account for application solely for the purposes
and in the order and manner provided in Section 7.2, and (c) deposit all
Insurance Proceeds, Eminent Domain, proceeds and damage payments described in
Section 7.7 received at any time in the Loss Proceeds Account for application
solely for the purposes, and in the order and manner, provided in Section 7.5.
5.2 Payment.
5.2.1 Credit Documents. Pay all sums due under this Agreement and
the other Credit Documents according to the terms hereof and thereof.
5.2.2 Project Documents. With respect to each Initial Project and
Funded Subsequent Project, pay all obligations due under the Project Documents,
howsoever arising, as and when due and payable, except (a) such as may be
contested in good faith or as to which a
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bona fide dispute may exist, provided that Administrative Agent is satisfied in
its reasonable discretion that non-payment of such obligation pending the
resolution of such contest or dispute will not in any way endanger or materially
adversely affect such Project, the Banks' Liens in the Collateral, Borrower or
that provision is made to the satisfaction of Administrative Agent in its
reasonable discretion for the posting of security (other than the Collateral)
for or the bonding of such obligations or the prompt payment thereof in the
event that such obligation is payable and (b) Borrower's trade payables which
shall be paid in the ordinary course of business.
5.3 Warranty of Title. Maintain (a) with respect to each Initial
Project and Funded Subsequent Project, good, marketable and insurable leasehold
or fee title, as the case may be, to the Site and related Easements (or the
applicable undivided portion thereof), subject only to Permitted Liens and (b)
good, marketable and insurable title to all of its other respective properties
and assets (other than properties and assets disposed of in the ordinary course
of business).
5.4 Notices. Promptly, upon acquiring notice or giving notice, as the
case may be, or obtaining knowledge thereof, give written notice (with copies of
any such underlying notices) to Administrative Agent of:
5.4.1 Any litigation pending or, to the knowledge of Borrower,
threatened against Borrower and involving claims against Borrower or any Initial
Project or Funded Subsequent Project in excess of $2,000,000 in the aggregate
per calendar year or involving any injunctive, declaratory or other equitable
relief, such notice to include, if requested by Administrative Agent, copies of
all papers filed in such litigation and to be given monthly if any such papers
have been filed since the last notice given;
5.4.2 Any dispute or disputes which may exist between Borrower
and any Governmental Authority and which involve (a) claims against Borrower
which exceed $2,000,000 individually or $5,000,000 in the aggregate per calendar
year, (b) injunctive or declaratory relief, (c) revocation, modification,
failure to renew or the like of any Applicable Permit or Applicable Third Party
Permit relating to an Initial Project or a Funded Subsequent Project or
imposition of additional material conditions with respect thereto, or (d) any
Liens relating to an Initial Project or a Funded Subsequent Project for taxes
due but not paid;
5.4.3 Any Event of Default, Inchoate Default, Non-Fundamental
Project Default or Non-Fundamental Project Inchoate Default;
5.4.4 Any casualty, damage or loss, whether or not insured,
through fire, theft, other hazard or casualty, or any act or omission of
Borrower, its employees, agents, contractors, consultants or representatives, or
of any other Person if such casualty, damage or loss affects Borrower or any
Initial Project or Funded Subsequent Project, in excess of $500,000 for any one
casualty or loss or $2,000,000 in the aggregate in any policy period;
5.4.5 Any cancellation or material change in the terms, coverage
or amounts of any insurance described in Exhibit K;
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5.4.6 Any matter which has had, or, in Borrower's reasonable
judgment, could reasonably be expected to have, a Material Adverse Effect on
Borrower or any Initial Project or Funded Subsequent Project, including any PUC
or FERC proceedings affecting any Initial Project or Funded Subsequent Project
which if adversely determined, reasonably could be expected to have a Material
Adverse Effect on such Project;
5.4.7 Any act by Borrower to become a surety, guarantor, endorser
or accommodation endorser for a third party other than endorsement of negotiable
instruments for collection purposes;
5.4.8 Any intentional withholding of compensation to any
Contractor, any engineer or Operator or any other Person under any Major
Construction Contract, any O&M Agreement, any Power Marketing Agreement or any
other construction or operating contract relating to any Initial Project or
Funded Subsequent Project, other than retention provided by the express terms of
any such contracts;
5.4.9 Any termination or material default or notice thereof
(including any notice of default) under any Project Document relating to an
Initial Project or a Funded Subsequent Project;
5.4.10 Any events of force majeure or change orders under any
Major Construction Contract or other Project Documents relating to any Initial
Project or Funded Subsequent Project and, to the extent requested by
Administrative Agent, copies of invoices or statements which are reasonably
available to Borrower under such Construction Contract, certified by an
authorized representative of Borrower, together with a copy of any supporting
documentation, schedule, data or affidavit delivered under such Construction
Contract or such other Project Document;
5.4.11 No later than the date upon which the Independent Engineer
is entitled to receive notice pursuant to any Major Construction Contract of the
proposed conduct of the initial Performance Tests under such Construction
Contract, promptly prior to the proposed conduct of any subsequent Performance
Tests pursuant to each such Construction Contract and promptly prior to the
conduct of any performance tests required under any other Project Document,
written notice of such proposed test;
5.4.12 Any (a) fact, circumstance, condition or occurrence at,
on, or arising from, any Site, Improvements, or other Mortgaged Property that
results in material noncompliance with any Hazardous Substance Law or any
Release of Hazardous Substances on or from such Site, Improvements or other
Mortgaged Property that has resulted or could reasonably be expected to result
in personal injury or material property damage or to have a Material Adverse
Effect on a Project, and (b) pending or, to Borrower's knowledge, threatened,
Environmental Claim against Borrower or to Borrower's knowledge any of its
Affiliates, contractors, lessees or any other Persons, arising in connection
with their occupying or conducting operations on or at any Project or any
related Site, Improvements or other Mortgaged Property;
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5.4.13 Promptly, but in no event later than 30 days if consent of
Administrative Agent or the Banks is required, and 15 days otherwise, prior to
the time any Person will become a partner of Borrower or the occurrence of any
other change in or transfer of ownership interests in Borrower or any Project,
notice thereof, which notice shall identify such partner and such partner's
interest in Borrower and shall describe, in reasonable detail, such other change
or transfer;
5.4.14 Any material notices delivered to or received from, the
parties to the Project Documents relating to an Initial Project or a Funded
Subsequent Project;
5.4.15 Initiation of any condemnation proceedings involving any
Initial Project or Funded Subsequent Project or the related Site or material
portion thereof;
5.4.16 Promptly, but in no event later than 15 days after
Borrower has knowledge of the execution and delivery thereof, a copy of each
Additional Project Document relating to an Initial Project or a Funded
Subsequent Project; and
5.4.17 Promptly, but in no event later than 30 days after the
receipt thereof by Borrower, copies of (a) all Applicable Permits relating to an
Initial Project or a Funded Subsequent Project obtained by Borrower or any
Partner after the Closing Date, (b) any amendment, supplement or other
modification to any Applicable Permits relating to an Initial Project or a
Funded Subsequent Project received by Borrower after the Closing Date and (c)
all material notices relating to any Initial Project or Funded Subsequent
Project received by Borrower from any Governmental Authority.
5.5 Financial Statements.
5.5.1 Unless Administrative Agent otherwise consents, deliver or
cause to be delivered to Administrative Agent, in form and detail reasonably
satisfactory to Administrative Agent:
(a) As soon as practicable and in any event within 45 days
after the end of the first, second and third quarterly accounting periods of its
fiscal year (commencing with the quarter ending March 31, 1999), an unaudited
balance sheet of Borrower, the Partners, Calpine and each other Affiliated Major
Project Participant as of the last day of such quarterly period and the related
statements of income, cash flows, and partners' capital (where applicable) for
such quarterly period and (in the case of second and third quarterly periods)
for the portion of the fiscal year ending with the last day of such quarterly
period, setting forth in each case in comparative form corresponding unaudited
figures from the preceding fiscal year (such requirement may be satisfied with
respect to any party by delivery of the appropriate Form 10-Q filed with the
Securities and Exchange Commission); and
(b) As soon as available but no later than 120 days after the
close of each applicable fiscal year, audited (or, if not available with respect
to Persons who are not Calpine Affiliates, unaudited) financial statements of
Borrower, the Partners, Calpine, each other Affiliated Major Project
Participant, each Major Fuel Supplier and each Major Power Purchaser
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relating to an Initial Project or a Funded Subsequent Project, including a
statement of equity, a balance sheet as of the close of such year, an income and
expense statement, reconciliation of capital accounts and a statement of sources
and uses of funds, all prepared in accordance with GAAP and in the case of
audited financial statements, certified by an independent certified public
accountant selected by the Person whose financial statements are being prepared
and satisfactory to Administrative Agent. Such certificate for Borrower, each
Partner, Calpine and each Affiliated Major Project Participant shall not be
qualified or limited because of restricted or limited examination by such
accountant of any material portion of the records of the applicable Person. Such
requirement may be satisfied with respect to any party by delivery of the
appropriate Form 10-K filed with the Securities and Exchange Commission.
5.5.2 Each time the financial statements are delivered under
Section 5.5.1(a) above for Borrower, the Partners, Calpine and each Affiliated
Major Project Participant, deliver or cause to be delivered, along with such
financial statements, a certificate signed by a Responsible Officer of such
Person, certifying that such officer has made or caused to be made a review of
the transactions and financial condition of such Person during the relevant
fiscal period and that such review has not, to the best of such Responsible
Officer's knowledge, disclosed the existence of any event or condition which
constitutes an Event of Default or Inchoate Default (or, in the case of
Borrower, a Non-Fundamental Project Default or Non-Fundamental Project Inchoate
Default), or if any such event or condition existed or exists, the nature
thereof and the corrective actions that such Person has taken or proposes to
take with respect thereto, and also certifying that such Person is in compliance
with all applicable material provisions of each Credit Document to which such
Person is a party or, if such is not the case, stating the nature of such
non-compliance and the corrective actions which such Person has taken or
proposes to take with respect thereto.
5.6 Books, Records, Access. Maintain or cause to be maintained
adequate books, accounts and records and prepare all financial statements
required hereunder in accordance with GAAP and in compliance with the
regulations of any Governmental Authority having jurisdiction thereof, and,
subject to requirements of Governmental Rules and safety requirements, after
pre-scheduling with the relevant Operator, permit employees or agents of
Administrative Agent and Independent Engineer at any reasonable times and upon
reasonable prior notice to inspect all of its properties, including the Sites,
to examine or audit all of its books, accounts and records and make copies and
memoranda thereof and to witness all Performance Tests.
5.7 Compliance with Laws, Instruments, Etc. Promptly comply, or cause
compliance, in all material respects, with all Legal Requirements relating to
Borrower, the Initial Projects or the Subsequent Projects, including Legal
Requirements relating to pollution control, environmental protection, equal
employment opportunity or employee benefit plans, ERISA Plans and employee
safety, with respect to Borrower and each such Project, and make such
alterations to such Projects and Sites as may be required for such compliance.
5.8 Reports. With respect to each Initial Project and Funded
Subsequent Project:
5.8.1 Deliver to Administrative Agent on the last Banking Day of
each month (if any) prior to Final Completion of such Project in which no Loan
is made to such Project a
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certificate of an authorized officer of Borrower as to the matters required by
Section 3.2.4 in respect of such Project, substantially in the form of the
Drawdown Certificate.
5.8.2 Until Final Completion of such Project, deliver to
Administrative Agent at such times as Administrative Agent may reasonably
request (but not more frequently than monthly) a report describing in reasonable
detail the progress of the construction of such Project since the last prior
report hereunder.
5.8.3 Within 30 days following the completion of the major
foundations for such Project, provide to Administrative Agent a foundation
survey showing (a) the exact location and dimensions of such foundations, (b)
that such foundations comply with all applicable building and zoning codes and
set-back lines, and (c) that such foundations do not encroach or interfere with
existing property rights.
5.8.4 From and after the commercial operation date of such
Project, deliver to Administrative Agent within 30 days of the end of each
month, a summary operating report with respect to such Project which shall
include, with respect to the month most recently ended, (a) a monthly and
year-to-date numerical and narrative assessment of (i) such Project's compliance
with each material category in the Annual Operating Budget for such Project,
(ii) electrical production and delivery, (iii) fuel deliveries and use,
including heat rate, (iv) plant and unit availability, including trips and
scheduled and unscheduled outages, (v) cash receipts and disbursements and cash
balances, including distributions to the Partners, debt service payments and
balances in the Accounts, (vi) maintenance activity, (vii) staffing changes with
respect to project or construction managers, (viii) casualty losses of value in
excess of $500,000, (ix) replacement of equipment of value in excess of $500,000
and (x) material disputes with contractors, materialmen, suppliers or others and
any related claims against Borrower; (b) statistical data and reasonably
detailed commentary thereon; and (c) a comparison of year-to-date figures to
corresponding figures provided in the prior year.
5.8.5 Deliver to Administrative Agent within 60 days of the end
of each year after the Closing Date, a report setting forth a narrative summary
describing and assessing such Project's compliance with all Applicable Permits
and Legal Requirements.
5.8.6 Provide to Administrative Agent promptly upon request such
reports, statements, lists of property, accounts, budgets, forecasts and other
information concerning such Project and, to the extent reasonably available, the
Major Project Participants and at such times as Administrative Agent shall
reasonably require, including such reports and information as are reasonably
required by the Independent Consultants.
5.8.7 Provide to Administrative Agent promptly upon receipt by
Borrower any material notices, information or reports provided by (a) Power
Marketer under any Power Marketing Project Document, (b) any Fuel Supplier under
a Gas Contract or (c) any other purchaser under a Power Purchase Document.
5.8.8 Within 30 days of the end of each fiscal year after the
Closing Date, deliver to Administrative Agent a certificate, substantially in
the Form of Exhibit I hereto, and otherwise
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in form and substance satisfactory to Administrative Agent in consultation with
the Insurance Consultant, certifying that the insurance requirements of Exhibit
K have been implemented and are being complied with in all material respects.
5.9 Existence, Conduct of Business, Properties, Etc. Except as
otherwise expressly permitted under this Agreement, (a) maintain and preserve
its existence as a limited partnership formed under the laws of the state of
Delaware and all material rights, privileges and franchises necessary or
desirable in normal conduct of its business, (b) perform (to the extent not
excused by force majeure events or the nonperformance of another party and not
subject to a good faith dispute) all of its contractual obligations under the
Project Documents to which it is party or by which it is bound, (c) maintain all
necessary Permits and licenses, including all Applicable Permits, with respect
to its business and each Initial Project and Funded Subsequent Project and cause
all Major Project Participants to maintain all Applicable Third-Party Permits
with respect to each such Project, (d) at or before the time that any Permit
becomes an Applicable Permit with respect to any Initial Project or Funded
Subsequent Project, obtain such Permit, (e) at or before the time that any
Permit required to be obtained by a Major Project Participant becomes an
Applicable Third-Party Permit with respect to any Initial Project or Funded
Subsequent Project, cause the relevant third party to obtain such Permit, (f)
engage only in the business contemplated by the Operative Documents and (g)
perform all of its contractual obligations under the Credit Documents.
5.10 Four-Quarter Portfolio Interest Coverage Ratio; Maximum Debt to
Capitalization Ratio.
(a) As promptly as practicable, but in no event later than 45
days after (a) the last Banking Day of each calendar quarter, calculate and
deliver to Administrative Agent the Four-Quarter Portfolio Interest Coverage
Ratio. Administrative Agent shall notify Borrower in writing of any suggested
corrections, changes or adjustments which should be made to such Four-Quarter
Portfolio Interest Coverage Ratio calculations within 20 days after receipt.
Borrower shall incorporate all such corrections, changes or adjustment as
Administrative Agent reasonably deems appropriate.
(b) (i) As promptly as practicable, but in no event later
than two Banking Days after delivery by Borrower of the financial statements of
Borrower required to be delivered pursuant to Section 5.5.1, calculate and
deliver to Administrative Agent the Debt to Capitalization Ratio based on the
financial statements so delivered. Administrative Agent shall notify Borrower in
writing of any suggested corrections, changes or adjustments which should be
made to such Debt to Capitalization Ratio calculation within five days after
receipt. Borrower shall incorporate all such corrections, changes or adjustments
as Administrative Agent reasonably deems appropriate.
(ii) Borrower shall maintain, as of the end of each
calendar quarter, a Debt to Capitalization Ratio of no more than the Maximum
Debt to Capitalization Ratio.
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5.11 Indemnification.
5.11.1 Indemnify, defend and hold harmless Administrative Agent
and each Bank, and in their capacities as such, their respective officers,
directors, shareholders, controlling persons, employees, agents and servants
(collectively, the "Indemnitees") from and against and reimburse the Indemnitees
for:
(a) any and all claims, obligations, liabilities, losses,
damages, injuries (to person, property, or natural resources), penalties, stamp
or other similar taxes, actions, suits, judgments, costs and expenses (including
reasonable attorney's fees) of whatever kind or nature, whether or not well
founded, meritorious or unmeritorious, demanded, asserted or claimed against any
such Indemnitee (collectively, "Subject Claims") in any way relating to, or
arising out of or in connection with this Agreement, the other Operative
Documents, or any Project, except for claims by Borrower against an Indemnitee;
(b) any and all Subject Claims arising in connection with the
release or presence of any Hazardous Substances at any Project, whether
foreseeable or unforeseeable, including all costs of removal and disposal of
such Hazardous Substances, all reasonable costs required to be incurred in (i)
determining whether any Project is in compliance and (ii) causing each Project
to be in compliance, with all applicable Legal Requirements, all reasonable
costs associated with claims for damages to persons or property, and reasonable
attorneys' and consultants' fees and court costs; and
(c) any and all Subject Claims in any way relating to, or
arising out of or in connection with any claims, suits, liabilities against
Borrower, any Partner or any of their Affiliates.
5.11.2 The foregoing indemnities shall not apply with respect to
an Indemnitee, to the extent arising as a result of the gross negligence or
willful misconduct of such Indemnitee, but shall continue to apply to other
Indemnitees.
5.11.3 The provisions of this Section 5.11 shall survive
foreclosure of the Collateral Documents and satisfaction or discharge of
Borrower's obligations hereunder and under the other Credit Documents, and shall
be in addition to any other rights and remedies of the Banks.
5.11.4 In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall notify Borrower of the
commencement thereof, and Borrower shall be entitled, at its expense, acting
through counsel reasonably acceptable to such Indemnitee, to participate in,
and, to the extent that Borrower desires, to assume and control the defense
thereof. Such Indemnitee shall be entitled, at its expense, to participate in
any action, suit or proceeding the defense of which has been assumed by
Borrower. Notwithstanding the foregoing, Borrower shall not be entitled to
assume and control the defenses of any such action, suit or proceedings if and
to the extent that, in the reasonable opinion of such Indemnitee and its
counsel, such action, suit or proceeding involves the potential imposition of
criminal liability upon such Indemnitee or a conflict of interest between such
Indemnitee and Borrower or between such
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Indemnitee and another Indemnitee (unless such conflict of interest is waived in
writing by the affected Indemnitees), and in such event (other than with respect
to disputes between such Indemnitee and another Indemnitee) Borrower shall pay
the reasonable expenses of such Indemnitee in such defense.
5.11.5 Borrower shall report to such Indemnitee on the status of
such action, suit or proceeding as material developments shall occur and from
time to time as requested by such Indemnitee (but not more frequently than every
60 days). Borrower shall deliver to such Indemnitee a copy of each document
filed or served on any party in such action, suit or proceeding, and each
material document which Borrower possesses relating to such action, suit or
proceeding.
5.11.6 (a) Notwithstanding Borrower's rights hereunder to control
certain actions, suits or proceedings, if any Indemnitee reasonably determines
that failure to compromise or settle any Subject Claim made against such
Indemnitee is reasonably likely to have an imminent and Material Adverse Effect
on such Indemnitee, such Indemnitee shall be entitled to compromise or settle
such Subject Claim.
(b) Notwithstanding Borrower's rights hereunder to control
certain actions, suits or proceedings, if the Required Banks reasonably
determine that failure to compromise or settle any Subject Claim made against
such Indemnitee is reasonably likely to have an imminent and Material Adverse
Effect on Borrower or any Project, such Indemnitee or the Required Banks, as the
case may be, shall provide Borrower with written notice of a proposed compromise
or settlement of such claim specifying in detail the nature and amount of such
proposed settlement or compromise. Borrower shall be deemed to have approved
such proposed compromise or settlement unless, within 30 days after the date
Borrower receives such notice of intended compromise or settlement, Borrower
provides such Indemnitee or the Required Banks, as the case may be, with (i) a
written legal analysis from counsel reasonably acceptable to such Indemnitee or
Required Banks, as the case may be, reasonably concluding that, based on the
magnitude of the Subject Claim, the legal basis for such Subject Claim, and/or
the cost of defending such Subject Claim, the amount of such proposed settlement
or compromise is not within a reasonable range of settlements or compromises for
such Subject Claim, and indicating, based on such factors, such counsel's view
as to the appropriate amount of a reasonable settlement or compromise for such
Subject Claim (the "Settlement Amount"). If the Indemnitee or the Required
Banks, as the case may be, receives such legal analysis required by this Section
within such 30-day period, the Indemnitee or the Required Banks, as the case may
be, may elect to settle or compromise such Subject Claim and Borrower shall be
responsible for the payment of all amounts of such compromise or settlement up
to 125% of the Settlement Amount, such Indemnitee shall be responsible for
payment of all amounts of such compromise or settlement in excess of such 125%
limit and such compromise or settlement shall be binding upon Borrower. If
Borrower does not provide such legal analysis within such period, or if such
legal analysis is not reasonable, in the reasonable determination of such
Indemnitee or the Required Banks, as the case may be, such Indemnitee may settle
or compromise such Subject Claim and shall be fully indemnified by Borrower
therefor. Such Indemnitee or the Required Banks, as the case may be, shall not
otherwise settle or compromise any such Subject Claim other than at its own
expense.
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5.11.7 Upon payment of any Subject Claim by Borrower pursuant to
this Section 5.11 or other similar indemnity provisions contained herein to or
on behalf of an Indemnitee, Borrower, without any further action, shall be
subrogated to any and all claims that such Indemnitee may have relating thereto,
and such Indemnitee shall cooperate with Borrower and give such further
assurances as are necessary or advisable to enable Borrower vigorously to pursue
such claims.
5.11.8 Any amounts payable by Borrower pursuant to this Section
5.11 shall be regularly payable within 30 days after Borrower receives an
invoice for such amounts from any applicable Indemnitee, and if not paid within
such 30-day period shall bear interest at the Default Rate.
5.11.9 Notwithstanding anything to the contrary set forth herein,
Borrower shall not, in connection with any one legal proceeding or claim, or
separate but related proceedings or claims arising out of the same general
allegations or circumstances, in which the interests of the Indemnitees do not
materially differ, be liable to the Indemnitees (or any of them) under any of
the provisions set forth in this Section 5.11 for the fees and expenses of more
than one separate firm of attorneys (which firm shall be selected by the
affected Indemnitees, or upon failure to so select, by Administrative Agent).
5.11.10 If, for any reason whatsoever, the indemnification
provided under this Section 5.11 is unavailable to any Indemnitee or is
insufficient to hold it harmless to the extent provided in this Section 5.11,
then provided such payment is not prohibited by or contrary to any applicable
Governmental Rule, Legal Requirement or public policy, Borrower shall contribute
to the amount paid or payable by such Indemnitee as a result of the Subject
Claim in such proportion as is appropriate to reflect the relative economic
interests of Borrower and its Affiliates on the one hand, and such Indemnitee on
the other hand, in the matters contemplated by this Agreement as well as the
relative fault of Borrower (and its Affiliates) and such Indemnitee with respect
to such Subject Claim, and any other relevant equitable considerations.
5.12 Qualifying Facility/Exempt Wholesale Generator.
5.12.1 On or before the earlier of: (x) 75 days prior to the
anticipated commencement of commercial operations of the first Project to
commence commercial operations and (y) January 4, 2001, file, in good faith, an
application with FERC requesting that FERC certify Borrower as an Exempt
Wholesale Generator.
5.12.2 With respect to each Project, take or cause to be taken
all necessary or appropriate actions (a) so that such Project will, from and
after commercial operations of the first Project to commence commercial
operations, either be a Qualifying Facility engaged exclusively in the
generation of electric energy exclusively for sale at wholesale or an Eligible
Facility until all Obligations due the Banks under the Credit Documents have
been paid in full unless such Project's failure to be a Qualifying Facility or
Eligible Facility, as the case may be, could not reasonably be expected to have
a Material Adverse Effect on such Project, and (b) except to the extent that the
FPA is applicable solely by reason of Borrower being the owner of a Qualifying
Facility or an Exempt Wholesale Generator, to maintain Borrower's and such
Project's
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exemptions from regulation under the FPA (unless failure to so maintain such
exemptions could not reasonably be expected to have a Material Adverse Effect on
Borrower or such Project) and PUHCA (except regulations specifically applicable
to an Exempt Wholesale Generator or a Qualifying Facility) or, if Calpine or its
successor becomes a registered holding company under PUHCA, as a subsidiary of
such registered holding company.
5.13 Construction of Each Project. With respect to each Initial
Project and Funded Subsequent Project, cause such Project to be constructed and
equipped substantially in accordance with the Plans and Specifications,
Construction Contracts, other Project Documents, Project Budget and the Project
Schedule for such Project as the same may be amended from time to time pursuant
to Section 6.13.
5.14 Completion. With respect to each Initial Project and Funded
Subsequent Project, achieve Completion and Final Completion of such Project in a
timely and diligent manner in accordance with the Project Schedule, Project
Budget, Construction Contracts and Plans and Specifications of such Project as
the same may be extended and, in the case of Completion, in no event later than
the guaranteed completion date set therefor in such Project's Project Schedule
(which shall be extended as the result of the occurrence of events of force
majeure for additional periods up to an aggregate of 180 days).
5.15 Operation of Projects and Annual Operating Budget. With respect
to each Initial Project and Funded Subsequent Project:
5.15.1 (a) Keep such Project, after Completion thereof, or cause
the same to be kept, in good operating condition consistent with Prudent Utility
Practices, all Applicable Permits (and, if applicable, Applicable Third Party
Permits), Legal Requirements and the Operative Documents, and make or cause to
be made all repairs (structural and non-structural, extraordinary or ordinary)
necessary to keep such Project in such condition; and (b) operate such Project,
after Completion thereof, or cause the same to be operated, in a manner
consistent with Prudent Utility Practices and in compliance with the terms of
the Power Purchase Documents so as to assure, to the extent reasonably possible,
the maximum generation of net revenue for such Project consistent with the Power
Purchase Documents.
5.15.2 On or before 90 days prior to the beginning of each
calendar year, beginning with the calendar year in which Completion of such
Project occurs or is anticipated to occur, adopt an operating plan and a budget,
detailed by month for such Project, of anticipated revenues and anticipated
expenditures, such budget to include debt service (if applicable), proposed
distributions, maintenance, repair and operation expenses (including reasonable
allowance for contingencies), Major Maintenance, reserves and all other
anticipated O&M Costs for such Project for the ensuing calendar year and, in the
case of Major Maintenance in accordance with Section 5.15.3, to the conclusion
of the second full calendar year thereafter (each such annual operating plan and
budget with respect to each Project and for all the Projects as a whole, an
"Annual Operating Budget"). Each Annual Operating Budget shall be subject to the
reasonable approval of Administrative Agent and the Independent Engineer. Copies
of each draft Annual
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Operating Budget shall be promptly furnished to Administrative Agent for its
review and reasonable approval. Failure by Administrative Agent to approve or
disapprove such draft Annual Operating Budget within 45 days after receipt
thereof shall be deemed to be an approval by Administrative Agent of such draft.
Borrower shall incorporate Administrative Agent's suggestions into a final
Annual Operating Budget, which, subject to the provisions of the last sentence
of this Section 5.15.2, shall be prepared no less than 45 days in advance of
each fiscal year. The O&M Costs in each Annual Operating Budget which are
subject to escalation limitations in the Project Documents shall not, absent
extraordinary circumstances, be increased by more than the amounts provided in
such Project Documents. Borrower shall continue to operate and maintain such
Project, or cause such Project to be operated and maintained, within amounts not
to exceed 115% of the aggregate amounts set forth in the applicable Annual
Operating Budget; provided, however, the costs for fuel shall not be limited by
the Annual Operating Budget. Pending approval of any Annual Operating Budget in
accordance with the terms of this Section 5.15.2, Borrower shall continue to
operate and maintain such Project, or cause such Project to be operated and
maintained, within the Annual Operating Budget for such Project then in effect;
provided that the amounts specified therein shall be increased by the amounts
specified in the Project Documents.
5.15.3 Replace the Operator of such Project if such Operator is
not operating such Project in accordance with the provisions hereof or the
applicable O&M Agreement, Power Purchase Documents or any other agreement or
instrument under which Borrower holds title, an easement or a leasehold to the
applicable Site, the Easements or the Collateral, and such failure could
reasonably be expected to have a Material Adverse Effect on such Project, upon
receipt of notice from Administrative Agent (after consultation with Borrower)
to the effect that, in the opinion of the Required Banks and the Independent
Engineer, said Operator has failed to perform any material obligations set forth
above; provided, however, that the Operator may have 30 days from Borrower's
receipt of notice to cure said failure (or to establish to the satisfaction of
the Required Banks that a failure does not exist); provided, further, that if
such failure cannot be corrected within such 30 days, the Required Banks will
not unreasonably withhold their consent to an extension of such time if
corrective action is promptly instituted by such Operator within the 30-day
period and thereafter diligently pursued until the failure is corrected and such
extension shall not have a Material Adverse Effect on such Project.
5.16 Preservation of Rights; Further Assurances.
5.16.1 Preserve, protect and defend the rights of Borrower under
each and every material Project Document relating to the Initial Projects and
the Funded Subsequent Projects, including prosecution of suits to enforce any
right of Borrower thereunder and enforcement of any claims with respect thereto;
provided, however, that upon the occurrence and during the continuance of an
Event of Default if Administrative Agent requests that certain actions be taken
and Borrower fails to take the requested actions within five Banking Days and
such failure reasonably could be expected to have a Material Adverse Effect on
Borrower or any Project, Administrative Agent may enforce in its own name or in
Borrower's name, such rights of Borrower.
5.16.2 From time to time, execute, acknowledge, record, register,
deliver and/or file all such notices, statements, instruments and other
documents (including any memorandum of lease or other agreement, financing
statement, continuation statement, certificate of title or
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estoppel certificate), relating to the Loans stating the interest and charges
then due and any known defaults, and take such other steps as may be necessary
or advisable to render fully valid and enforceable under all applicable laws the
rights, liens and priorities of the Banks with respect to all Collateral and
other security from time to time furnished under this Agreement and the other
Credit Documents or intended to be so furnished, including (x) granting Liens,
subject to no other Liens other than Permitted Liens, in favor of Administrative
Agent, in any Project or portion thereof not part of the Collateral and (y)
causing its shareholders to grant a first priority Lien to Administrative Agent
in all the ownership interests in Borrower, in each case to the extent
permitted, without any waivers, and consistently with the characterization of
the Debt incurred and Liens granted hereunder and under the other Credit
Documents, under the Calpine Indenture, in each case in such form and at such
times as shall be satisfactory to Administrative Agent, and pay all fees and
expenses (including reasonable attorneys' fees) incident to compliance with this
Section 5.16.2.
5.16.3 Subject to Section 6.23, and to the extent permitted
without any waivers under the Calpine Indenture, if Borrower shall at any time
acquire any real property or leasehold or other interest in real property
related to an Initial Project or a Funded Subsequent Project not covered by the
Deeds of Trust, promptly upon such acquisition (or on the Closing Date if such
acquisition occurred prior thereto) execute, deliver and record a supplement to
the applicable Deed of Trust or execute, deliver and record a new Deed of Trust,
satisfactory in form and substance to Administrative Agent, subjecting the real
property or leasehold or other interests so acquired to a lien and security
interest in favor of Administrative Agent and the Banks, subject only to
Permitted Liens and other exceptions to title approved by Administrative Agent.
If requested by Administrative Agent, Borrower shall obtain an appropriate
endorsement or supplement to the applicable Title Policy or procure a new Title
Policy insuring the Lien of the Banks in such additional property, subject only
to Permitted Liens and other exceptions to title approved by Administrative
Agent, and shall obtain subordination and nondisturbance agreements from
applicable third parties to the extent reasonably requested by Administrative
Agent.
5.16.4 Perform, upon the request of Administrative Agent, such
reasonable acts as may be necessary to carry out the intent of this Agreement
and the other Credit Documents.
5.17 Project Equity.
5.17.1 (a) On or prior to the initial advance of Loans hereunder,
make or cause to be made, from time to time as and when needed to pay Project
Costs for a particular Project, Contributions in an aggregate amount equal to
[*] (including Contributions used to pay Project Costs incurred or paid prior to
the date upon which initial Loans are made pursuant to Section 3.2 and approved
as valid by the Independent Engineer), (b) in addition, in the event that
Calpine shall, at the time of funding of the initial Loans hereunder, not be
rated at least Ba2 by Moody's and BB by S&P, then on or prior to such initial
funding of Loans, make or cause to be made Contributions in an amount equal to
the difference between (i) [*] of the aggregate amount of Project Costs set
forth in the Project Budgets for the Initial Projects (after giving effect to
the amendment to the Project Budgets contemplated in Section 6.21(a)), less (ii)
[*] (all Contributions pursuant to clauses (a) and (b) above, the "Base
Equity"). Borrower may deposit some or all of the Base Equity with
Administrative Agent as provided in
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Section 3.8. In such event, Administrative Agent shall deposit the Base Equity
into the relevant Construction Sub-Accounts at Administrative Agent's New York
office pursuant to the Depositary Agreement. From time to time following the
deposits of such amounts, Borrower shall have the right to request that
Administrative Agent transfer amounts from the relevant Construction
Sub-Accounts to pay Project Costs upon the satisfaction of the requirements set
forth in Section 3.8(a).
5.17.2 At such time, if ever, as the Available Construction Funds
are less than the remaining Project Costs to be incurred or paid to achieve
Final Completion of the Initial Projects and the Funded Subsequent Projects,
then promptly thereafter deposit or cause to be deposited with Administrative
Agent, Contributions in an amount equal to all such further Project Costs, such
Contributions to be made on or before the date such Project Costs are due to be
paid ("Additional Borrower Equity"). All such Additional Borrower Equity
proceeds shall be deposited in the relevant Construction Sub-Accounts
established pursuant to Section 7.1 hereof and applied, after satisfaction of
the requirements set forth in Section 3.8(a), to pay Project Costs.
5.18 Maintenance of Insurance. With respect to each Initial Project
and Funded Subsequent Project, without cost to the Banks, maintain or cause to
be maintained on its behalf in effect at all times the types of insurance
required pursuant to Exhibit K, in the amounts and on the terms and conditions
specified therein, with insurance companies rated "A-" or better, with a minimum
size rating of "VIII," by Best's Insurance Guide and Key Ratings, (or an
equivalent rating by another nationally recognized insurance rating agency of
similar standing if Best's Insurance Guide and Key Ratings shall no longer be
published) or other insurance companies of recognized responsibility
satisfactory to Administrative Agent.
5.19 Taxes and Other Government Charges. With respect to each Initial
Project and Funded Subsequent Project, pay, or cause to be paid, as and when due
and prior to delinquency, all taxes, assessments and governmental charges of any
kind that may at any time be lawfully assessed or levied against or with respect
to Borrower or such Project, including sales and use taxes and real estate
taxes, all other charges incurred in the operation, maintenance, use, occupancy
and upkeep of such Project other than utility charges, and all assessments and
charges lawfully made by any Governmental Authority for public improvements that
may be secured by a lien on such Project. In furtherance of the foregoing,
Borrower shall engage a qualified Person or Persons to confirm Borrower's
compliance with all tax laws and regulations and to implement any required
programs and procedures to ensure continued compliance with the same. Borrower
may contest in good faith any such taxes, assessments and other charges and, in
such event, may permit the taxes, assessments or other charges so contested to
remain unpaid during any period, including appeals, when Borrower is in good
faith contesting the same, so long as (a) reserves reasonably satisfactory to
Administrative Agent have been established in an amount sufficient to pay any
such taxes, assessments or other charges, accrued interest thereon and potential
penalties or other costs relating thereto, or other adequate provision for the
payment thereof shall have been made, (b) enforcement of the contested tax,
assessment or other charge is effectively stayed for the entire duration of such
contest, and (c) any tax, assessment or other charge determined to be due,
together with any interest or penalties thereon, is immediately paid after
resolution of such contest.
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5.20 Event of Eminent Domain. With respect to each Project, if an
Event of Eminent Domain shall occur with respect to any Collateral, (a) promptly
upon discovery or receipt of notice of any such occurrence, provide written
notice of the same to Administrative Agent, (b) diligently pursue all its rights
to compensation against the relevant Governmental Authority in respect of such
Event of Eminent Domain, (c) not, without the written consent of Administrative
Agent and the Required Banks, which consent shall not be unreasonably withheld,
compromise or settle any claim against such Governmental Authority, (d) pay or
apply all Eminent Domain Proceeds in accordance with Section 7.10. Borrower
consents to the participation of Administrative Agent in any eminent domain
proceedings, and Borrower shall from time to time deliver to Administrative
Agent all documents and instruments requested by it to permit such
participation.
5.21 Power Marketing Plan; Fuel Plan. With respect to each Initial
Project and Funded Subsequent Project, comply in all material respects with the
provisions of the Power Marketing Plan and Fuel Plan delivered to and approved
by Administrative Agent and/or the Technical Committee as contemplated in
Article 3.
5.22 Utility Charges. With respect to each Initial Project and Funded
Subsequent Project, pay, or cause to be paid, as and when due and prior to
delinquency, all utility charges of any kind that may at any time be lawfully
assessed or levied against or with respect to Borrower or such Project.
5.23 Project Document Scope of Liability. Use good faith reasonable
efforts to include, or cause to be included, in each Major Project Document
entered into after the date hereof, provisions to the effect that the
counterparty's recourse against Borrower under such Project Document will be
limited to the Project, or Borrower's interest in the Project, to which such
Project Document relates.
5.24 Funded Subsequent Projects. Cause, within 24 months after the
Closing Date, not less than two wholly owned Subsequent Projects or three wholly
or partially owned Subsequent Projects to become Funded Subsequent Projects in
accordance with this Agreement. Of such Funded Subsequent Projects, (i) at least
two Funded Subsequent Projects (whether wholly owned or partially owned) may not
be Additional Subsequent Projects and (ii) the first Subsequent Project (whether
wholly owned or partially owned) to become a Funded Subsequent Project may not
be an Additional Subsequent Project.
ARTICLE 6
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as this Agreement is
in effect, it will not:
6.1 Contingent Liabilities. Except as provided in this Agreement,
become liable as a surety, guarantor, accommodation endorser or otherwise, for
or upon the obligation of any other Person; provided, however, that this Section
6.1 shall not be deemed to prohibit (a) the acquisition of goods, supplies or
merchandise in the normal course of business or normal trade
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credit; (b) the endorsement of negotiable instruments received in the normal
course of its business; (c) contingent liabilities required under any Applicable
Permit or Operative Document; or (d) joint liabilities incurred with respect to
any partially owned Project or pursuant to a Joint Venture Agreement.
6.2 Limitations on Liens. Create, assume or suffer to exist any Lien,
securing a charge or obligation on any Initial Project or Funded Subsequent
Project or on any related Collateral, real or personal, whether now owned or
hereafter acquired, except Permitted Liens.
6.3 Indebtedness. Incur, create, assume or permit to exist any Debt
except Permitted Debt.
6.4 Sale or Lease of Assets.
6.4.1 Except as permitted in Section 6.4.2 below, sell, lease,
assign, transfer or otherwise dispose of assets, whether now owned or hereafter
acquired except (a) in the ordinary course of its business as contemplated by
the Operative Documents, or (b) to the extent that such property is worn out or
no longer useful or usable in connection with the operation of a relevant
Project, and in each case at fair market value.
6.4.2 (a) Borrower shall be permitted to implement the
sale-leaseback financing contemplated in the South Point Lease on the conditions
that (i) at the time of the closing of such sale-leaseback financing, all the
Initial Projects shall have satisfied all of their Pre-Funding Requirements,
(ii) at least two wholly owned or three partially or wholly owned Subsequent
Projects have become Funded Subsequent Projects, (iii) concurrently with the
closing of such sale-leaseback financing Borrower use all of the net proceeds of
such financing and, to the extent necessary, make additional Contributions to
prepay the Loans in an amount equal to the greater of (A) the book value of the
South Point Project calculated in accordance with GAAP and (B) the net proceeds
of such sale-leaseback, (iv) no Inchoate Default or Event of Default has
occurred and is continuing and (v) Borrower's Four-Quarter Portfolio Interest
Coverage Ratio as of the most recent calendar quarter shall equal or exceed [*]
to 1.00. Upon satisfaction of each of the foregoing conditions Administrative
Agent shall execute and deliver to Borrower such documents and instruments,
including UCC-3 termination statements, as reasonably may be necessary to
release the Liens on the South Point Project Collateral granted to the Banks
pursuant to the South Point Deed of Trust and the other Collateral Documents.
(b) [*]
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(c)[*]
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[*]
(d) Borrower shall have the right in its sole discretion to
have any of the Designated Subsequent Projects released from the Liens of the
Collateral Documents and to transfer ownership of such Projects to another
Person at any time prior to such Project becoming a Funded Subsequent Project,
and the Banks shall promptly release any or all of the Designated Subsequent
Projects and shall consent to their transfer to another Person or Persons
without payment of additional consideration or any mandatory prepayment of
Loans, upon written notice to Administrative Agent from Borrower,
notwithstanding the existence of an Event of Default or Inchoate Default or any
other circumstance or condition whatsoever. Upon receipt of such notice
requesting the release of any or all of such Projects, Administrative Agent
shall promptly execute and deliver to Borrower such documents and instruments as
may be reasonably necessary to release such Projects from the Liens of the
Collateral Documents and to permit such transfer of ownership.
(e) Borrower shall have the right in its sole discretion to
have any Subsequent Project that is a Qualifying Facility where selling electric
capacity or energy on a wholesale basis is not economically advantageous to
Borrower or is not permitted by any Project Document and, as a consequence,
whose development or operation on a retail basis is reasonably likely to become
an Event of Default under Section 8.1.8 released from the Liens of the
Collateral
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Documents and to transfer ownership of such Project to another Person at any
time prior to Commercial Operation of such Project, and the Banks shall consent
to such release and transfer, notwithstanding the existence of any other Event
of Default or Inchoate Default, except that, if such Project is a Funded
Subsequent Project, Borrower shall prepay Loans in a amount equal to the greater
of (i) the book value of such Project or (ii) the aggregate principal amount of
all Loans made hereunder to pay Project Costs related to such Project. Upon
satisfaction of such condition, Administrative Agent shall execute and deliver
to Borrower such documents and instruments as may be reasonably necessary to
release such Project from the Liens of the Collateral Documents and to permit
such transfer of ownership.
(f) In the event that Borrower is unable, after using
commercially reasonable efforts, (i) to obtain any consents, agreements or
undertakings with respect to an Unfunded Subsequent Project (A) from one or more
Joint Venturers with respect to a partially owned Unfunded Subsequent Project or
(B) from a steam or other thermal host, ground lessor or other Person with the
right, power or ability to compel or prevent construction of such Subsequent
Project, that in either case are necessary to satisfy the conditions precedent
for initial funding of such Subsequent Project under Section 3.3, or (ii) to
satisfy the conditions precedent for initial funding of a Subsequent Project
under Section 3.3 with respect to any Subsequent Project, and in the case of
either clause (i) or (ii) above the failure to satisfy the conditions precedent
for initial funding of such Subsequent Project is not otherwise waived in
accordance with this Agreement, Borrower shall have the right in its discretion
to have such Subsequent Project released from the Liens of the Collateral
Documents and to transfer ownership of such Subsequent Project to another Person
or Persons at any time prior to such Project becoming a Funded Subsequent
Project, and the Banks shall promptly release such Project and consent to its
transfer to another Person or Persons without payment of additional
consideration or any mandatory prepayment of Loans, upon written notice to
Administrative Agent, notwithstanding the existence of an Event of Default or
Inchoate Default or any other circumstance or condition whatsoever. Upon receipt
of such notice requesting the release of any such Project, Administrative Agent
shall promptly execute and deliver to Borrower such documents and instruments as
may be reasonably necessary to release such Subsequent Project from the Liens of
the Collateral Documents and to permit such transfer of ownership.
(g) Borrower shall have the right in its sole discretion
without payment of additional consideration or any mandatory prepayment of Loans
to have any Unfunded Subsequent Project released from the Liens of the
Collateral Documents and to transfer such Project to another Person, and the
Banks shall promptly release such Project and consent to the transfer of such
Project, on the conditions that (i) at the time of such release, all of the
Initial Projects have satisfied all of their Pre-Funding Requirements, (ii) no
Inchoate Default or Event of Default has occurred and is continuing, (iii)
Borrower's Four-Quarter Portfolio Interest Coverage Ratio as of the most recent
calendar quarter shall equal or exceed [*] to 1.00 and (iv) the Debt to
Collateral Value Ratio as of the most recent calendar quarter shall be no more
than [*] to 1.00. Upon satisfaction of the foregoing conditions, Administrative
Agent shall execute and deliver to Borrower such documents ad instruments as may
be reasonably necessary to release such Project from the Liens of the Collateral
Documents and to permit such transfer of ownership.
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6.5 Changes. Change the nature of its business or expand its business
beyond the business contemplated in the Operative Documents, including without
limitation purchasing gas with the intention of reselling such gas.
6.6 Distributions. Directly or indirectly, make or declare any
distribution (in cash, property or obligation) on, repay any subordinated
indebtedness or make any other payment on account of, any interest in Borrower
(including any transfers of any tax benefits) unless:
(a) no Event of Default or Inchoate Default has occurred and
is continuing and such payment or distribution will not result in an Inchoate
Default or Event of Default;
(b) no Non-Fundamental Project Default or Non-Fundamental
Project Inchoate Default has occurred and is continuing with respect to the
Project to which the funds to be distributed are attributable, such payment or
distribution will not result in such Non-Fundamental Project Default or
Non-Fundamental Project Inchoate Default and such Project shall have achieved
Final Completion;
(c) such distribution is made at Waterfall Level 8;
(d) no Material Adverse Effect with respect to Borrower has
occurred and is continuing;
(e) the proceeds of such payment or distribution are in an
amount that is not greater than the Deemed Interest due, from time to time, on
the amount of Contributions to Borrower in excess of the sum of (x) [*] plus (y)
any Contributions required to be contributed to Borrower pursuant to Sections
5.17.1(b) and 5.17.2 plus (z) Contributions in connection with the release of
Collateral pursuant to Section 6.4.2;
(f) at the time of such proposed distribution or payment, all
the Initial Projects shall have satisfied all of their respective Pre-Funding
Requirements; and
(g) Borrower's Four-Quarter Portfolio Interest Coverage Ratio
as of the most recent calendar quarter shall equal or exceed [*] to 1.00.
6.7 Investments. Make any investments (whether by purchase of stocks,
bonds, notes or other securities, loan, extension of credit, advance or
otherwise) other than Permitted Investments.
6.8 Transactions With Affiliates. Except for (a) the Equity
Documents, the Project Documents in effect on the Closing Date or substantially
similar Additional Project Documents for Subsequent Projects and the
transactions permitted thereby, (b) arms-length transactions in the ordinary
course of business, and (c) as otherwise expressly permitted by this Agreement
and the other Credit Documents, directly or indirectly enter into any
transaction or series of transactions relating to an Initial Project or a Funded
Subsequent Project with or for the benefit of an Affiliate without the prior
written approval of Administrative Agent; provided, Borrower shall, subject to
Sections 3.1 and 3.3, cause (i) any Affiliate entering into a Project Document
with Borrower for
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the supply of goods or services to any such Project to deliver to Administrative
Agent a duly executed Affiliated Subordination Agreement substantially similar
to the corresponding documents in respect of the Initial Projects with
conforming changes to address the specifics of such Project or otherwise in form
and substance reasonably satisfactory to Administrative Agent (or, if
applicable, amend an existing Affiliated Subordination Agreement) in order to
subordinate O&M Costs, to the same extent as O&M Costs are subordinated in the
corresponding documents in respect of the Initial Project or otherwise to the
extent satisfactory to Administrative Agent, that Borrower may incur pursuant to
such Project Document to the Obligations and (ii) Calpine to deliver to
Administrative Agent a duly executed Affiliated Party Agreement Guaranty (or, if
applicable, amend an existing Affiliated Party Agreement Guaranty) in order to
evidence Calpine's guaranty of such Affiliate's performance under such Project
Document in favor of Borrower.
6.9 Regulations. Directly or indirectly apply any part of the
proceeds of any Loan or other revenues to the purchasing or carrying of any
margin stock within the meaning of Regulations T, U or X of the Federal Reserve
Board, or any regulations, interpretations or rulings thereunder.
6.10 ERISA. Establish, maintain, contribute to or become obligated to
contribute to any ERISA Plan or suffer or permit any member of the Controlled
Group to do so.
6.11 Partnerships, etc. Become a general or limited partner in any
partnership, a member in any limited liability company or create and hold stock
in any subsidiary or, except as otherwise expressly permitted by this Agreement,
become a joint venturer in any joint venture.
6.12 Dissolution. Except as otherwise expressly permitted by this
Agreement, liquidate or dissolve, or sell or lease or otherwise transfer or
dispose of all or any substantial part of its property, assets or business or
combine, merge or consolidate with or into any other entity, or change its legal
form, or purchase or otherwise acquire all or substantially all of the assets of
any Person.
6.13 Amendments; Change Orders; Completion.
6.13.1 Directly or indirectly, amend, modify, supplement or
waive, or permit or consent to the amendment, modification, supplement or waiver
(including any waiver (or refund) of liquidated damages payable by any Major
Contractor under any Major Construction Contract) of, any of the provisions of,
or give any consent under, (a) any of the Major Project Documents (other than
Major Gas Supply Contracts, Major Gas Transportation Agreements and Major Power
Purchase Agreements) relating to an Initial Project or a Funded Subsequent
Project without first submitting to Administrative Agent a copy of such proposed
amendment, modification, supplement or waiver and if, in the reasonable judgment
of Administrative Agent, the amendment, modification, supplement or waiver could
reasonably be expected to have a Material Adverse Effect on Borrower or any
Initial Project or Funded Subsequent Project, obtaining the prior written
consent of the Required Banks thereto, which consent shall not be unreasonably
withheld or delayed or (b) any Project Document between Borrower and an
Affiliate thereof relating to an Initial Project or a Funded Subsequent Project
(but not including the amendment, modification, supplement or waiver of any
"Transactions" under any Power
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Marketing Agreement or Gas Supply Contract between Borrower and such Affiliate)
without obtaining the prior written consent of the Required Banks thereto.
6.13.2 Without the prior written consent of Administrative Agent
direct or consent to any change order under any of the Major Construction
Contracts relating to an Initial Project or a Funded Subsequent Project if such
change order:
(a) will, individually or together with all previous change
orders, increase or decrease the Project Costs of a particular Initial Project
or Funded Subsequent Project by more than $1,000,000 in the aggregate (exclusive
of increases reimbursed by insurance awards, condemnation awards or contractual
damage awards);
(b) is reasonably likely to delay Completion of any Project
beyond the Loan Maturity Date;
(c) is reasonably likely to permit or result in any adverse
modification or impair the enforceability of any warranty under any Major
Construction Contract, any Maintenance Contract or any O&M Agreement relating to
an Initial Project or a Funded Subsequent Project if such modification or
impairment could reasonably be expected to have a Material Adverse Effect on
such Project;
(d) is reasonably likely, in the opinion of the Independent
Engineer, to impair or reduce the maximum capacity, value, efficiency, utility,
output, performance, reliability, durability or availability of any Initial
Project or Funded Subsequent Project, or increase O&M Costs associated with any
Initial Project or Funded Subsequent Project, or decrease Project Revenues from
any Initial Project or Funded Subsequent Project, in each case after accounting
for other favorable or unfavorable circumstances which may have affected such
Project;
(e) is not permitted by any Major Project Document relating
to an Initial Project or a Funded Subsequent Project or would (i) materially
diminish any obligation of any Major Project Participant or (ii) materially
increase any obligation of Borrower thereunder;
(f) is likely, in the reasonable opinion of Administrative
Agent, to present a significant risk of the revocation or material modification
of any Applicable Permit or Third Party Permit relating to an Initial Project or
a Funded Subsequent Project or jeopardize any Project's status as a Qualifying
Facility or an Eligible Facility, as the case may be;
(g) may cause any Initial Project or Funded Subsequent
Project not to comply or lessen any such Project's ability to comply with Legal
Requirements; or
(h) relates to a Major Construction Contract between Borrower
and an Affiliate of Borrower.
6.13.3 Declare "Completion", "Final Construction Completion",
"Final Project Completion" or "Mechanical Completion" (as such terms are defined
in the Construction Contracts) under the Construction Contracts relating to an
Initial Project or a Funded Subsequent Project or declare that the "Acceptance
Date" has occurred or approve the successful completion
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of the "Acceptance Tests" relating to an Initial Project or a Funded Subsequent
Project (as such terms are defined in the Construction Contracts) without the
written approval of Administrative Agent acting in consultation with the
Independent Engineer, which approval shall not be unreasonably withheld or
delayed.
6.13.4 Consent, without Administrative Agent's prior approval, to
(a) any action taken by any Contractor to conform the equipment or services
provided by such Contractor to the intellectual property rights of others if
such action could reasonably be expected to materially and adversely affect
Borrower's continued use of any Initial Project or Funded Subsequent Project or
(b) to the settlement by any Contractor of any claim or proceeding which could
reasonably be expected to materially adversely affect Borrower's rights relating
to an Initial Project or a Funded Subsequent Project.
6.13.5 Direct any Major Contractor to suspend the work being
performed under any Construction Contract relating to an Initial Project or a
Funded Subsequent Project without Administrative Agent's prior consent.
Wherever Administrative Agent is required to approve or consent to any change
order under this Section 6.13, Administrative Agent shall use good faith efforts
to respond to each change order request as soon as possible and in all events
within 20 days. No change order shall be deemed approved by Administrative Agent
until expressly approved.
6.14 Compliance with Operative Documents. Do or permit (to the extent
within its control) to be done in, upon or about any Project or any part
thereof, or do or permit (to the extent within its control) to be done any act
under the Operative Documents, or omit or refrain from any act under the
Operative Documents, where such act done or permitted to be done, or such
omission of or refraining from action, could reasonably be expected to have a
Material Adverse Effect on Borrower or an Initial Project or a Funded Subsequent
Project.
6.15 Name and Location; Fiscal Year. Unless waived in writing by
Administrative Agent, change its name, the location of its principal place of
business or its federal employer identification number without notice to
Administrative Agent at least 45 days prior to such change, or change its fiscal
year without Administrative Agent's consent.
6.16 Use of Project Sites. Use, or permit to be used, any Site owned
or leased by Borrower for any purpose other than for the construction, operation
and maintenance of the Project situated thereon as contemplated by the Operative
Documents, without the prior written approval of Administrative Agent.
6.17 Assignment. Assign its rights hereunder or under any of the
other Credit Documents, or under any of the Project Documents relating to an
Initial Project or a Funded Subsequent Project, to any Person except as
permitted under this Agreement and the other Credit Documents.
6.18 Abandonment of Project. Voluntarily cease or abandon the
development, construction or operation of any Initial Project or Funded
Subsequent Project.
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6.19 Hazardous Substance. Release, emit or discharge into the
environment any Hazardous Substances in violation of any Hazardous Substance
Laws, Legal Requirements or Applicable Permits.
6.20 Additional Project Documents. Except as contemplated under the
Power Marketing Plans and Fuel Plans, enter into or become a party to any
Project Document relating to an Initial Project or a Funded Subsequent Project
not in existence or specifically contemplated pursuant to this Agreement (with
the form of such contemplated agreement approved by Administrative Agent) on the
Closing Date (with respect to the Initial Projects) or the Funding Date (with
respect to Subsequent Projects), except (a) with the prior written consent of
Administrative Agent acting at the direction of the Required Banks, and (b) if
required by Administrative Agent, upon delivery to Administrative Agent of a
Consent from such third party in substantially the form of Exhibit E-1; provided
that the consent of Administrative Agent and the Required Banks shall not be
required for Borrower to enter into Additional Project Documents (i) with
Persons other than Affiliates of Borrower and (ii) pursuant to which Borrower
will incur obligations or liabilities with a value of not more than $1,000,000
individually, or $2,000,000 in the aggregate, per year. In the event that the
consent of Administrative Agent is required in connection with a proposed
Project Document pursuant to this Section 6.20, Administrative Agent shall have
20 days from the time at which it received such proposed Project Document to
approve or disapprove such proposed Project Document. No proposed Project
Document shall be deemed approved by Administrative Agent until expressly
approved.
6.21 Project Budget Amendments. Directly or indirectly, amend,
modify, allocate, re-allocate or supplement or permit or consent to the
amendment, modification, allocation, re-allocation or supplement of, any of the
provisions of any Project Budget relating to an Initial Project or a Funded
Subsequent Project, except that in the event that Calpine shall, at the time of
funding of the initial Loans hereunder, not be rated at least Ba2 by Moody's and
BB by S&P, then prior to such initial funding of Loans Borrower shall revise the
Project Budgets to increase the "contingency" Line Items thereof so that it
equals or exceeds 5% of the Project Costs with respect to the relevant Project.
6.22 Loan Proceeds; Project Revenues. Use, pay, transfer, distribute
or dispose of any Loan proceeds in any manner or for any purposes except as
provided in Section 5.1.1 or of any Project Revenues in any manner or for any
purposes except as provided in Sections 5.1.2, 7.1 and 7.2.
6.23 Acquisition of Real Property. Acquire or lease any real property
or other interest in real property (excluding the acquisition (but not the
exercise) of any options to acquire any such interests in real property) unless
Borrower shall have delivered to Administrative Agent on behalf of the Banks
Environmental Consultant's Phase I environmental report with respect to such
real property and, if Phase II environmental review is warranted, as reasonably
determined by the Technical Committee, by such Phase I report, delivered to
Administrative Agent on behalf of the Banks a Phase II environmental report, in
each case, along with a corresponding reliance letter from Environmental
Consultant, confirming, in form and substance satisfactory to Administrative
Agent, either (i) that no Hazardous Substances were found in, on or under such
real property or (ii) matters otherwise satisfactory to Administrative Agent.
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ARTICLE 7
APPLICATION OF FUNDS
7.1 Construction Account.
7.1.1 Establishment of Account. On or prior to the Closing Date,
Borrower and Administrative Agent shall establish the Construction Account at
the Depositary Agent's New York office and within the Construction Account, a
sub-account for each Project. On or prior to the initial funding of Loans in
respect of a Subsequent Project, Borrower, and Administrative Agent shall
establish a sub-account within the Construction Account for such Subsequent
Project (each sub-account established pursuant to the two preceding sentences
being referred to as a "Construction Sub-Account"). There shall be deposited
into each Construction Sub-Account the proceeds of all Loans made hereunder in
respect of the corresponding Project and all amounts required to be deposited in
such Construction Sub-Account pursuant to Sections 3.8(a), 5.1.2 and 5.17.
7.1.2 Disbursements from Construction Account. Amounts shall be
disbursed from each Construction Sub-Account from time to time subject to the
satisfaction (or waiver) of the applicable provisions of Article 3 in respect of
the applicable Project and this Section 7.1. Borrower shall have the right to
cause Administrative Agent to disburse amounts from the Construction Sub-Account
of the corresponding Project to the accounts of each of the Contractors
performing work on such Project for amounts due and owing to such Contractors
under the Construction Contracts, or to any other materialmen, subcontractors,
Administrative Agent or any other Person performing work on such Project in
payment of amounts due and owing to such parties in respect of such Project in
accordance with a duly completed Drawdown Certificate. Borrower agrees that
Administrative Agent may transfer any or all of a Loan and other sums in the
applicable Construction Sub-Account directly into the account of any Contractor
for amounts due and owing to such Contractor under the relevant Construction
Contract, or any other materialmen or subcontractors in payment of amounts due
and owing to such parties in respect of the applicable Project without further
authorization from Borrower; provided, however, that if Borrower has notified
Administrative Agent that it is contesting a claim for payment by a Contractor
or a subcontractor or materialmen in accordance with the requirements of this
Agreement and the definition of "Permitted Liens," Administrative Agent will
not, except as described in the proviso to the next sentence, be entitled to pay
any amount being contested. Borrower hereby constitutes and appoints
Administrative Agent its true and lawful attorney-in-fact to make such direct
payments and this power of attorney shall be deemed to be a power coupled with
an interest and shall be irrevocable; provided that, except upon the occurrence
and continuation of an Event of Default or a Non-Fundamental Project Default
with respect to the relevant Project, Administrative Agent shall not exercise
its rights under this power of attorney except to make payments (a) as directed
by Borrower or (b) which Administrative Agent reasonably believes, if not
promptly made, are reasonably likely to have a Material Adverse Effect on the
applicable Project. No further direction or authorization from Borrower shall be
necessary to warrant or permit Administrative Agent to make such direct Loans in
accordance with the foregoing sentence, and all such direct Loans shall satisfy
pro tanto the obligations of Administrative Agent and the Banks hereunder, and
shall be secured by the Collateral Documents as fully as if made directly to
Borrower, regardless of the disposition thereof by any Contractor,
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or any other subcontractors, materialmen, laborers or other parties. Upon
Completion of a Project, any amounts remaining in the applicable Construction
Sub-Account in excess of amounts necessary to pay for "punchlist" items for such
Project shall, at Borrower's option, (i) be transferred to the Construction
Sub-Account for another Project, (ii) be transferred to the Revenue Account,
and/or (iii) be applied to prepay Loans. Upon Final Completion of a Project, any
amounts remaining in the Construction Sub-Account for such Project shall be
transferred to the Revenue Account.
7.1.3 Rights of Administrative Agent. Administrative Agent will
have the right, but not the obligation, to (a) supply any missing endorsements
of Borrower, refuse any item for deposit except as required by the terms of this
Agreement, and pay and charge items payable by Administrative Agent pursuant to
Section 7.1.2 in any order convenient to Administrative Agent; (b) refuse to
honor any check drawn on the Construction Account or any sub-account therein
which is not consistent with this Agreement, or which has been improperly filled
out or endorsed; (c) create and charge to the Construction Account or the
applicable Construction Sub-Account overdrafts and all applicable charges; (d)
remit copies of checks and other items with statements instead of the originals
which may be retained by Administrative Agent; and (e) pay fees, interest and
other charges owing by Borrower.
7.2 Revenue Account.
7.2.1 Establishment of Account; Priority of Payments. On or prior
to the Closing Date, Borrower and Administrative Agent shall establish the
Revenue Account at the Depositary Agent's New York office and within the Revenue
Account, a sub-account for each Project. There shall be deposited into the
Revenue Account the amounts specified in Section 5.1.2 and the applicable
portion of withdrawals from time to time from the Working Capital Reserve
Account pursuant to Section 7.8.3. So long as no Event of Default has occurred
and is continuing, or will occur upon giving effect to the application described
below, funds in the Revenue Account shall be applied at the following times and
in the following order of priority by disbursement or internal account transfer
by the Depositary Agent, (a) on Administrative Agent's volition with respect to
Waterfall Levels 1 through 6 and 8 or if Administrative Agent reasonably
believes that failure to make any such payment could reasonably be expected to
have a Material Adverse Effect with respect to Borrower or a Project, or (b)
pursuant to a disbursement requisition executed by Borrower, directly to the
Person entitled thereto, in each case at the following times, commencing on the
date funds are first deposited in the Revenue Account, and in the following
order of priority (each, a "Waterfall Level"):
(1) from time to time, provided that Administrative Agent has
timely received and approved a Disbursement Requisition delivered pursuant to
Section 7.2.2, amounts in the Revenue Account shall be transferred to a
Project's Operating Account for payment of Senior O&M Costs incurred with
respect to such Project in an amount determined pursuant to Section 7.2.2 below;
(2) as and when due under the terms of this Agreement, from
the Revenue Account to the payment of all fees, costs, charges and any other
amounts due and
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payable to Administrative Agent, LC Bank and the Banks in connection with this
Agreement and the other Credit Documents;
(3) as and when due, on a pro rata basis among the Banks,
from the Revenue Account to the payment of interest on the Loans and on
Reimbursement Obligations;
(4) as and when due, from the Revenue Account, to repayment
of the Reimbursement Obligations incurred in connection with Letters of Credit;
(5) on the last Banking Day of each calendar quarter, as and
to the extent requested by Borrower, from the Revenue Account to the Working
Capital Reserve Account as required by Section 7.8;
(6) on the last Banking Day of each calendar quarter, in the
event that the conditions to distributions set forth in Section 6.6 have been
satisfied, provided that Administrative Agent has timely received and approved a
Disbursement Requisition delivered pursuant to Section 7.2.2, and as and to the
extent requested by Borrower from the Revenue Account to the payment of
Subordinated O&M Costs in an amount determined pursuant to Section 7.2.4 below;
(7) on the last Banking Day of each calendar quarter, in the
event that the conditions to distributions set forth in Section 6.6 have been
satisfied, for payment of obligations owed to Persons that are not Affiliates of
Borrower and which obligations have been approved by the Technical Committee in
its sole discretion;
(8) on the last Banking Day of each calendar quarter, in the
event that the conditions to distributions set forth in Section 6.6 have been
satisfied, for payment to Borrower or distribution by Borrower in amounts
described in and for application in accordance with Section 6.6;
(9) on the last Banking Day of each calendar quarter, on a
pro rata basis among the Banks, to the prepayment of principal amounts of the
Loans outstanding; and
(10) on the last Banking Day of each calendar quarter,
provided no Loans are then outstanding, to Borrower.
7.2.2 O&M Costs. Sums shall be transferred to the Operating
Accounts for the payment of Senior O&M Costs as provided in this Section 7.2.2.
On or before the fifth Banking Day prior to the last Banking Day of each month
during which Borrower desires to transfer sums to the Operating Account for the
corresponding Project for the payment of Senior O&M Costs incurred in respect of
the corresponding Project, Borrower shall submit to Administrative Agent a
certificate in the form of Exhibit C-6 detailing the amounts to be so
transferred ("Disbursement Requisition"), which amounts shall not exceed the
Senior O&M Costs incurred in respect of the corresponding Project which have
become, or are anticipated to become, due and payable during such month.
Administrative Agent shall review such Disbursement Requisition within five
Banking Days following receipt thereof, and shall transfer the amounts specified
therein to the applicable Operating Account for application in accordance with
Waterfall Level 1 to the extent
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that such expenditures are in accordance with the terms of the applicable Annual
Operating Budget and this Agreement, as such budget may be exceeded pursuant to
the terms hereof. Notwithstanding anything in this Section 7.2.2 to the
contrary, the transfers to, and expenditures from, the Revenue Account or a
sub-account therein for Senior O&M Costs (other than O&M Costs incurred in an
emergency and fuel costs) payable pursuant to Waterfall Level 1 shall not,
without Administrative Agent's consent, exceed 115% of the aggregate amounts
specified in such Annual Operating Budget. Notwithstanding anything to the
contrary in this Agreement, in no event shall the "Annual Base Fee" (as defined
in the O&M Agreements) be greater than the amount specified therefor in the
then-applicable Annual Operating Budget. Borrower shall promptly pay or cause to
be paid all Senior O&M Costs in excess of the amounts permitted under the
preceding sentence by Contributions of additional funds; provided, however, that
if Administrative Agent subsequently approves a variation in such Annual
Operating Budget which would have allowed the payment of such excess Senior O&M
Costs, Borrower shall be entitled to recover any such Senior O&M Costs
previously paid by Contributions of additional funds at Waterfall Level 1. Each
Disbursement Requisition shall reflect a reduction in the Senior O&M Costs for
which Borrower requests that funds be transferred to the Operating Account
during such month for any amounts which remain, or are expected to remain, in
the applicable Operating Account at the end of any month as a result of a
previous Disbursement Requisition.
7.2.3 Subordinated O&M Costs. On or before the fifth Banking Day
prior to the end of each calendar quarter on which Borrower desires to make
payments of Subordinated O&M Costs, Borrower shall include in the Disbursement
Requisition submitted pursuant to Section 7.2.2 on such date the amounts to be
so paid, which amounts shall not exceed the Subordinated O&M Costs which have
become due and payable. Administrative Agent shall review such Disbursement
Requisition within five Banking Days following receipt thereof, and, to the
extent funds exist in the Revenue Account after application of amounts in such
account to Waterfall Levels 1 through 5, make payment of the Subordinated O&M
Costs specified therein in accordance with Section 7.2.1 to the designated payee
thereof to the extent that such expenditures are in accordance with the terms of
the relevant Annual Operating Budget.
7.2.4 Mandatory Prepayment.
(a) If on the last Banking Day of any calendar quarter, an
Event of Default shall exist, Borrower shall use all amounts, if any, in the
Revenue Account and all sub-accounts thereof at such time after application of
amounts in such account to Waterfall Levels 1 through 5 (i) to prepay the Loans
(and the Reimbursement Obligations, pro rata), and (ii) upon repayment in full
of the Loans and the Reimbursement Obligations, to repay all other Obligations
of Borrower to the Banks, as designated by Administrative Agent and the Required
Banks.
(b) Nothing in this Section 7.2.4 shall limit in any manner
the rights and remedies of Administrative Agent and the Banks upon and during
the continuation of an Event of Default under this Agreement.
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7.3 Operating Account.
7.3.1 Establishment of Account. On or prior to the Completion
Date for a Project, Borrower and Administrative Agent shall establish at a
mutually acceptable financial institution an account entitled "[Relevant]
Project -- Operating Account" (each, an "Operating Account" and collectively,
the "Operating Accounts").
7.3.2 Funding. From time to time, in accordance with the
provisions of the Waterfall Levels, Borrower shall cause to be transferred to
the Operating Accounts the amounts specified in Sections 7.2.1 and 7.2.2.
7.3.3 Withdrawals. Borrower shall be entitled to withdraw amounts
from an Operating Account to pay Senior O&M Costs for the corresponding Project
which have become due and payable in respect of such Project in accordance with
the Disbursement Requisition in which such Senior O&M Costs were described.
Amounts transferred to an Operating Account which are not, for any reason,
applied to payment of Senior O&M Costs in accordance with the Disbursement
Requisition pursuant to which such amounts were transferred, shall be retained
in such Operating Account for application to the following month's Senior O&M
Costs in accordance with Section 7.2.2.
7.3.4 Security Interest. Each Operating Account shall be
established in a state in which the Uniform Commercial Code as adopted in such
state governs the creation, perfection and priority of security interests in
"Deposit Accounts" (as defined in such Uniform Commercial Code), and each
Operating Account shall be maintained as a "Deposit Account" in accordance with
such Uniform Commercial Code. Borrower shall execute and deliver such documents
and instruments as Administrative Agent shall reasonably request in order to
grant Administrative Agent a perfected first priority Lien in each Operating
Account.
7.4 Loss Proceeds Account. On or prior to the Closing Date, Borrower
and Administrative Agent shall establish at the Depositary Agent's New York
Office the Loss Proceeds Account. All Insurance Proceeds, Eminent Domain
Proceeds and damage payments described in Section 7.7 shall be deposited in the
Loss Proceeds Account and applied (a) as specified in Sections 7.5 through 7.7
and (b) if no such application is specified, to the prepayment of the Loans, and
thereafter to payment of all other Obligations of Borrower.
7.5 Application of Insurance Proceeds.
7.5.1 General. Borrower shall notify Administrative Agent of
casualties as provided in Section 5.4.4 and any other casualty as to which
Insurance Proceeds have been made available. Borrower shall keep Administrative
Agent timely apprised of insurance claim proceedings. All amounts and proceeds
(including instruments) in respect of the proceeds of any insurance policy
required to be maintained by Borrower hereunder ("Insurance Proceeds") shall be
applied as provided in this Section 7.5. All Insurance Proceeds (or, in the case
of a Project that is not wholly owned by Borrower, Borrower's share of such
Insurance Proceeds) shall be paid by the insurers directly to Administrative
Agent (as loss payee or additional insured as provided in Exhibit K). If any
Insurance Proceeds required to be paid to Administrative Agent
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pursuant to the preceding sentence are paid directly to Borrower, Calpine or any
other Person with respect to any Project by any insurer, such Insurance Proceeds
shall be received only in trust for Administrative Agent, shall be segregated
from other funds of Borrower, Calpine or such other Person, as the case may be,
and Borrower shall cause such amounts to be forthwith paid over to
Administrative Agent in the same form as received (with any necessary
endorsement). To the fullest extent that it effectively may do so under
applicable law, Administrative Agent shall apply all such Insurance Proceeds in
accordance with the provisions of this Section 7.5.
7.5.2 Delay in Start Up and Business Interruption Insurance. Any
delay in start up Insurance Proceeds received by Administrative Agent or
Borrower (i) prior to Completion of the Project to which such Insurance Proceeds
relate shall be deposited into the Construction Sub-Account for such Project for
application in accordance with Section 7.1 and (ii) on or after Completion of
the Project to which such Insurance Proceeds relate shall be deposited into the
Revenue Account for application in accordance with Section 7.2.
7.5.3 Applications; Mandatory Prepayments. All Insurance Proceeds
(other than those described in Sections 7.5.2 and 7.5.4) and all Eminent Domain
Proceeds shall be applied (a) to the prepayment of Loans and Reimbursement
Obligations, pro rata, and (b) to the payment of all other Obligations of
Borrower, unless each of the following conditions are satisfied or waived by
Administrative Agent, or the Required Banks, as required pursuant to Section
7.5.5 or 7.5.6, in which event such amounts shall be applied to the repair or
restoration of the Project to which such Insurance Proceeds or Eminent Domain
Proceeds relate in accordance with the terms of such subsections:
(a) such damage or destruction does not constitute the
destruction of all or substantially all of the man-made portion of the Project
to which such Insurance Proceeds or Eminent Domain Proceeds relate;
(b) neither a Non-Fundamental Project Default or a
Non-Fundamental Project Inchoate Default with respect to the damaged or
destroyed Project nor an Inchoate Default or an Event of Default has occurred
and is continuing and after giving effect to any proposed repair and
restoration, such damage or destruction or proposed repair and restoration will
not result in a Non-Fundamental Project Default or Non-Fundamental Project
Inchoate Default with respect to such Project or an Event of Default or an
Inchoate Default;
(c) Borrower and the Independent Engineer certify, and
Administrative Agent (with, if applicable, the consent of the Required Banks)
determines in its reasonable judgment, that repair or restoration of the Project
to which such Insurance Proceeds or Eminent Domain Proceeds relate is
technically and economically feasible within a twelve-month period and that a
sufficient amount of funds is or will be available to Borrower and, if
applicable, the Joint Venturer to make repairs and restorations; provided,
however, that if such Project is not wholly owned by Borrower, then the Joint
Venture Agreement shall require the other Persons owning an interest in such
Project to use their share of Insurance Proceeds or Eminent Domain Proceeds for
the repair or restoration of such Project;
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(d) Borrower and the Independent Engineer certify, and
Administrative Agent (with, if applicable, the consent of the Required Banks)
determines in its reasonable judgment, that a sufficient amount of funds is or
will be available to Borrower to make all payments of Debt Service which will
become due during, if any, and following repair period and to maintain the
Four-Quarter Portfolio Interest Coverage Ratios set forth in the Base Case
Project Projections, unless the Required Banks agree otherwise;
(e) if such damage or destruction occurs prior to the
Completion of a Project, such repair or restoration will not adversely affect,
in the reasonable judgment of Administrative Agent in consultation with the
Independent Engineer, achievement of Completion in accordance with the terms and
conditions of this Agreement and the other Credit Documents;
(f) no Permit is necessary to proceed with the repair and
restoration of the Project to which such Insurance Proceeds or Eminent Domain
Proceeds relate and no material amendment to the Project Documents, or, except
with the consent of the Required Banks, this Agreement or any of the Credit
Documents, and no other instrument is necessary for the purpose of effecting the
repairs or restorations of the Project to which such Insurance Proceeds or
Eminent Domain Proceeds relate or subjecting the repairs or restorations to the
Liens of the applicable Collateral Documents and maintaining the priority of
such Liens or, if any of the above is necessary, Borrower will be able to obtain
the same as and when required;
(g) Administrative Agent shall receive an opinion of counsel
acceptable to Administrative Agent opining as to the Permits described in
paragraph (f) above, and an opinion to the effect that such repairs or
restoration (to the extent constituting Collateral) will be subject to the Liens
of the applicable Collateral Documents at the same level of priority as the
other Collateral; and
(h) Administrative Agent shall receive such additional title
insurance, title insurance endorsements, mechanic's lien waivers, certificates,
opinions or other matters as it may reasonably request as necessary or
appropriate in connection with such repairs or restoration of the Project to
which such Insurance Proceeds or Eminent Domain Proceeds relate or to preserve
or protect the Banks' interests hereunder and in the applicable Collateral.
7.5.4 Proceeds Less than $1,000,000. If there shall occur any
damage or destruction of a Project with respect to which Insurance Proceeds
received by Borrower for any single loss not in excess of $1,000,000 are
payable, such Insurance Proceeds received by Borrower shall be held by
Administrative Agent in the Loss Proceeds Account and released by Administrative
Agent to Borrower in accordance with Section 7.5.7.
7.5.5 Proceeds in Excess of $1,000,000, Not in Excess of
$10,000,000. Provided that the conditions set forth in Section 7.5.3 have been
waived by Administrative Agent and the Independent Engineer, or have been
acknowledged by such Persons as having been satisfied, if there shall occur any
damage or destruction of a Project with respect to which Insurance Proceeds
received by Borrower for any single loss in excess of $1,000,000, but not in
excess of $10,000,000, are payable, such Insurance Proceeds shall be held by
Administrative
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Agent in the Loss Proceeds Account and released by Administrative Agent to
Borrower in accordance with Section 7.5.7.
7.5.6 Proceeds in Excess of $10,000,000. Provided that the
conditions set forth in Section 7.5.3 have been waived by Administrative Agent,
the Required Banks and the Independent Engineer, or have been acknowledged by
such Persons as having been satisfied, if there shall occur any damage or
destruction of a Project with respect to which Insurance Proceeds for any single
loss in excess of $10,000,000 are payable, such Insurance Proceeds shall be held
by Administrative Agent in the Loss Proceeds Account and released by
Administrative Agent to Borrower in accordance with Section 7.5.7.
7.5.7 Repair and Restoration Procedures. Amounts which are to be
applied to repair or restoration of a Project pursuant to this Section 7.5 shall
be disbursed by Administrative Agent from the Loss Proceeds Account in
accordance with the following procedures:
(a) Borrower shall cause any repairs or restoration to be
commenced and completed promptly and diligently either using Insurance Proceeds
as contemplated in paragraph (b) below or, to the extent such proceeds are not,
or have not yet been made, available, using Borrower's funds;
(b) From time to time (after Administrative Agent or the
Required Banks, if applicable, shall have duly approved the making of such
repairs or restoration), Administrative Agent's authorization of release of
Insurance Proceeds for application toward such repairs or restoration shall be
conditioned upon Borrower's written request and the presentation to
Administrative Agent of all documents, certificates and information with respect
to such Insurance Proceeds which would be required in order to obtain a Loan
under this Agreement, including a certificate from Borrower (i) describing in
reasonable detail the nature of the repairs or restoration to be effected with
such release, (ii) stating the cost of such repairs or restoration and the
specific amount requested to be paid over to or upon the order of Borrower and
that such amount is requested to pay the cost thereof, (iii) stating that the
aggregate amount requested by Borrower in respect of such repairs or restoration
(when added to any other Insurance Proceeds received by Borrower or otherwise
made available to a Project in respect of such damage or destruction) does not
exceed the cost of such repairs or restoration and that a sufficient amount of
funds is or will be available to Borrower to complete the applicable Project,
and (iv) stating that neither a Non-Fundamental Project Inchoate Default with
respect to the damaged or destroyed Project nor an Inchoate Default has occurred
and is continuing other than a Non-Fundamental Project Default with respect to
such Project or an Event of Default resulting solely from such damage or
destruction.
7.5.8 Excess Insurance Proceeds. If, after Insurance Proceeds
have been applied to the repair or restoration of a Project as provided in
Sections 7.5.4, 7.5.5 or 7.5.6, the Banks in consultation with the Independent
Consultants determine that such Project will be able to operate at a level
enabling Borrower to satisfy its obligations hereunder as well as before the
damage or destruction, any excess Insurance Proceeds shall be paid into the
Revenue Account. In the event that the Banks in consultation with the
Independent Engineer determine otherwise, such excess
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Insurance Proceeds shall be applied (a) to the prepayment of Loans and
Reimbursement Obligations, pro rata, and (b) to the payment of all other
Obligations of Borrower.
7.5.9 Events of Default. If a Non-Fundamental Project Default
with respect to the damaged or destroyed Project or an Event of Default shall
have occurred and be continuing, then any provisions of this Sections 7.5 to the
contrary notwithstanding, the Insurance Proceeds (including any Permitted
Investments made with such proceeds, which shall be liquidated in such manner as
the Banks shall deem reasonable and prudent under the circumstances) may be
applied by Administrative Agent (a) to curing such Non-Fundamental Project
Default or Event of Default, and any Insurance Proceeds remaining thereafter
shall be applied as provided in this Section 7.5 or (b) if such Non-Fundamental
Project Default or Event of Default cannot be cured, toward payment of all other
Obligations of Borrower, in connection with exercise of the Banks' remedies
pursuant to Article 8.
7.6 Application of Eminent Domain Proceeds. All amounts and proceeds
(including instruments) received in respect of any Event of Eminent Domain
("Eminent Domain Proceeds") shall be subject to the same treatment as Insurance
Proceeds as provided in Section 7.5.
7.7 Application of Certain Damages Payments; Mandatory Prepayments.
7.7.1 Contractor. All delay related liquidated damages (or, in
the case of a Project that is not wholly owned by Borrower, Borrower's share of
such liquidated damages) shall (a) if received prior to Completion of the
Project in respect of which they were received, be deposited in the Construction
Account and applied pursuant to Section 7.1 or (b) if received after Completion
of such Project, be deposited in the Revenue Account and applied pursuant to
Section 7.2.1. All performance related liquidated damages (or, in the case of a
Project that is not wholly owned by Borrower, Borrower's share of such
liquidated damages), including all payments in lieu of performance related
liquidated damages payable by Calpine pursuant to clause (vii) of the definition
of "Completion", shall be applied be applied first to the prepayment of Loans
and Reimbursement Obligations, pro rata, in accordance with Section 2.1.6 and
thereafter to all other Obligations of Borrower.
7.7.2 Power Purchasers. All damage payments made by Power
Marketer or any other purchaser of the power generated by a Project in
satisfaction of such party's obligations under its purchase agreement (or, in
the case of a Project that is not wholly owned by Borrower, Borrower's share of
such damage payments,) shall (a) to the extent such damages are intended to
replace lost revenues, be deposited in the Revenue Account for application as
provided in Section 7.2, and (b) otherwise, applied to (i) the prepayment of
Loans and the Reimbursement Obligations, pro rata, and (ii) to the extent that
all such Loans and Reimbursement Obligations, as applicable, have been prepaid,
applied to the other Obligations of Borrower.
7.7.3 Other. Except as otherwise expressly permitted under this
Agreement, including this Section 7.7, Borrower shall apply the proceeds of any
other surety, performance or similar bonds and any other liquidated or other
damages paid in respect of damage payments or performance payments by any
contractors or subcontractors or other Persons involved in the construction and
operation of a Project (or in the case of a Project that is not wholly owned by
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Borrower, Borrower's share of such proceeds), to the prepayment of the Loans and
Reimbursement Obligations, pro rata, and thereafter to the Obligations of
Borrower or, with the prior written consent of Administrative Agent acting in
consultation with the Independent Engineer, to such other application in
relation to a Project as Borrower may request.
7.8 Working Capital Reserve Account.
7.8.1 Establishment of Account. On or prior to the Closing Date,
Borrower and Administrative Agent shall establish the Working Capital Reserve
Account at the Depositary Agent's New York office.
7.8.2 Funding. On the last Banking Day of each calendar quarter,
Borrower shall cause such portion as Borrower may direct of the amounts then in
the Revenue Account in excess of the amounts applied through Waterfall Level 4
to be deposited into the Working Capital Reserve Account, until the amounts
deposited therein equal the Working Capital Reserve Requirement.
7.8.3 Withdrawals. Borrower shall be entitled to submit a duly
executed Reserve Account Disbursement Requisition in substantially the form of
Exhibit C-8 (a "Reserve Account Disbursement Requisition") in order to withdraw
amounts from the Working Capital Reserve Account, including for deposit into the
Revenue Account, to pay all Senior O&M Costs (a) that have become due and
payable for any Initial Project or Funded Subsequent Project, (b) for which
insufficient amounts are available in the Revenue Account or applicable
Operating Account and (c) which, unless Administrative Agent consents, do not,
together with all Senior O&M Costs previously paid during the same calendar year
with respect to such Project, exceed 115% of the amounts of Senior O&M Costs
(other than fuel costs) specified for such Project in the applicable Annual
Operating Budget for such calendar year, or as otherwise approved by
Administrative Agent and the Independent Engineer.
7.8.4 Earnings. All earnings on monies in the Working Capital
Reserve Account shall accrue to the Working Capital Reserve Account up to the
Working Capital Reserve Requirement and shall thereafter be deposited in the
Revenue Account.
7.9 Security Interest in Proceeds and Accounts. Borrower hereby
pledges, assigns and transfers to Administrative Agent on behalf of the Banks
and grants to Depositary Agent on behalf of the Banks a security interest in and
to all of its right, title and interest in and to all Insurance Proceeds and
Eminent Domain Proceeds (to the extent permitted under the Calpine Indenture)
(collectively, "Proceeds"), Accounts, Sub-Accounts and contents of Accounts and
Sub-Accounts, as security for the Loans and the full and faithful performance of
all of Borrower's obligations hereunder and under the other Credit Documents.
Borrower shall not have any rights or powers with respect to any Account except
to have funds on deposit therein applied or distributed in accordance with this
Agreement. Administrative Agent is hereby authorized to reduce to cash any
Permitted Investment (without regard to maturity) in order to make any
application required by any section of this Article 7 or otherwise pursuant to
the Credit Documents. Upon the occurrence and during the continuance of an Event
of Default, Administrative Agent shall have all rights and powers with respect
to Proceeds, the Accounts and
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the contents of the Accounts as it has with respect to any other Collateral and
may apply such amounts to the payment of interest, principal, fees, costs,
charges or other amounts due or payable to Administrative Agent or the Banks
with respect to the Loans in such order as the Required Banks may elect in their
sole discretion. If such Event of Default occurs and is continuing, until such
time as the Required Banks so elect to exercise such rights and powers, amounts
in the Revenue Account shall continue to be applied by Administrative Agent to
the payment categories specified in Waterfall Levels 1 (to the extent of actual
Senior O&M Costs payable to third parties that are not Affiliates of Borrower)
and 2 through 5 and Level 9, and, to the extent that Administrative Agent, as
directed by the Required Banks acting in their sole discretion, so elects
Waterfall Levels 6, 7, 8 and 10. Borrower shall not have any rights or powers
with respect to such amounts except as expressly provided in this Article 7.
7.10 Permitted Investments. All amounts held by Borrower and/or
Administrative Agent in the Accounts or as Insurance Proceeds or Eminent Domain
Proceeds shall only be invested in Permitted Investments as provided in the
Depositary Agreement. Borrower shall not hold funds in any accounts other than
the Accounts; provided that Borrower shall be permitted to maintain the
Operating Accounts in accordance with Section 7.3.
7.11 Earnings on Accounts. Except as otherwise expressly provided
herein, including with respect to the Revenue Account and the Operating
Accounts, all earnings on funds in any Account maintained hereunder shall, on
the last day of each calendar quarter, be deposited in the Revenue Account.
7.12 Dominion and Control. Each of the Accounts and the amounts held
thereunder (including Permitted Investments therein) shall at all times be under
the exclusive dominion and control of the Depositary Agent.
7.13 Termination of Commitments. Upon repayment in full of all
Obligations and expiration or irrevocable termination of all Commitments,
Administrative Agent shall disburse any amounts on deposit in the Accounts to
Borrower, or, if applicable, as directed by a court of competent jurisdiction.
ARTICLE 8
EVENTS OF DEFAULT; REMEDIES
8.1 Events of Default. The occurrence of any of the following events
shall constitute an event of default ("Events of Default") hereunder:
8.1.1 Failure to Make Payments. Borrower shall fail to pay, in
accordance with the terms of this Agreement, (a) any principal on any Loan, or
any Reimbursement Obligation, on the date that such sum is due, (b) any interest
on any Loan or on any Reimbursement Obligation or any scheduled fee, cost,
charge or sum due hereunder or under the other Credit Documents, within three
days after the date that such sum is due, or (c) any other fee, cost, charge or
other sum due under this Agreement within five days after written notice that
such sum is due and has not been paid.
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8.1.2 Judgments. A final judgment or judgments shall be entered
against (i) Calpine in the amount of $10,000,000 or more individually or in the
aggregate or (ii) Borrower or any Partner in the amount of $1,000,000 or more
individually or in the aggregate (other than, in the case of both clauses (i)
and (ii) above, (a) a judgment which is fully covered by insurance or discharged
within 30 days after its entry, or (b) a judgment, the execution of which is
effectively stayed within 30 days after its entry but only for 30 days after the
date on which such stay is terminated or expires) or, in the case of both
clauses (i) and (ii) above, which if left unstayed could reasonably be expected
to have a Material Adverse Effect on Borrower or the Projects, taken as a whole.
8.1.3 Misstatements; Omissions. Any financial statement,
representation, warranty or certificate made or prepared by, under the control
of or on behalf of Borrower and furnished to Administrative Agent, the Lead
Arrangers, the Technical Committee or any Bank pursuant to this Agreement, or in
any separate statement or document to be delivered to Administrative Agent or
any Bank hereunder or under any other Credit Document, shall contain an untrue
or misleading statement of a material fact or shall fail to state a material
fact necessary to make the statements therein not misleading as of the date
made, in either case, which could reasonably be expected to result in a Material
Adverse Effect on Borrower or the Projects, taken as a whole.
8.1.4 Bankruptcy; Insolvency. Any of Borrower, the Partners,
Calpine, any Construction Manager (so long as such Construction Manager has
outstanding or unperformed obligations under any Construction Management
Agreement), any Operator, any Project Manager, any Joint Venturer, Power
Marketer or any other purchaser of capacity or energy from a Project (so long as
Power Marketer or such other purchaser, as the case may be, has outstanding or
unperformed obligations under the Power Purchase Documents to which it is party
and such party's Bankruptcy Event could reasonably be expected to have a
Material Adverse Effect on Borrower or the Projects, taken as a whole), any Fuel
Supplier (so long as such party's Bankruptcy Event could reasonably be expected
to have a Material Adverse Effect on Borrower or the Projects, taken as a whole)
or any Major Contractor, Major Gas Transporter or counterparty to any electrical
transmission or interconnection agreement or material water supply agreement (so
long as such Major Contractor, Major Gas Transporter or counterparty has
outstanding or unperformed obligations under the Major Construction Contract,
Major Gas Transportation Agreement or other agreement to which it is a party and
such party's Bankruptcy Event could reasonably be expected to have a Material
Adverse Effect on Borrower or the Projects, taken as a whole) shall become
subject to a Bankruptcy Event; provided that, solely with respect to a
Bankruptcy Event affecting any entity other than Borrower, the Partners, and
Calpine, no Event of Default shall occur as a result of such Bankruptcy Event if
Borrower obtains a Replacement Obligor (or, in the case of the occurrence of a
Bankruptcy Event with respect to a Joint Venturer, if Borrower or another Person
acquired such Person's interest in such Project) for the affected party within
90 days thereafter and such Bankruptcy Event has not had and does not have prior
to so obtaining such Replacement Obligor (or purchaser of the Joint Venturer's
interest), a Material Adverse Effect on Borrower or the Projects, taken as a
whole.
8.1.5 Debt Cross Default. Borrower, Calpine or any other Calpine
Affiliate other than a Calpine Sole Purpose Entity shall default for a period
beyond any applicable grace
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period (a) in the payment of any principal, interest or other amount due under
any agreement involving the borrowing of money or the advance of credit and the
outstanding amount or amounts payable under all such agreements equals or
exceeds $1,000,000 in the aggregate (or, in the case of Calpine only,
$10,000,000 in the aggregate), or (b) in the payment of any amount or
performance of any obligation due under any guarantee or other agreement if in
either case, pursuant to such default, the holder of the obligation concerned
has the right to accelerate the maturity of an indebtedness evidenced thereby
which equals or exceeds $1,000,000 (or, in the case of Calpine only, $10,000,000
in the aggregate). For purposes of this Section, the term "Calpine Sole Purpose
Entity" shall mean a Calpine Affiliate (i) whose sole purpose is the ownership
and maintenance of a power project (other than a Project) that has been financed
on a non-recourse basis and (ii) that is not directly connected to a Project or
responsible for actions materially and directly affecting a Project.
8.1.6 ERISA. If Borrower or any member of the Controlled Group
should establish, maintain, contribute to or become obligated to contribute to
any ERISA Plan and (a) a reportable event (under Section 4043(b) or (c) of ERISA
for which notice to the PBGC is not waived) shall have occurred with respect to
any ERISA Plan and, within 30 days after the reporting of such reportable event
to Administrative Agent by Borrower (or Administrative Agent otherwise obtaining
knowledge of such event) and the furnishing of such information as
Administrative Agent may reasonably request with respect thereto, Administrative
Agent shall have notified Borrower in writing that (i) Administrative Agent has
made a determination that, on the basis of such reportable event, there are
reasonable grounds for the termination of such ERISA Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such ERISA Plan and (ii) as a result thereof, an Event of Default
exists hereunder; or (b) a trustee shall be appointed by a United States
District Court to administer any ERISA Plan; or (c) the PBGC shall institute
proceedings to terminate any ERISA Plan; or (d) a complete or partial withdrawal
by Borrower or any member of the Controlled Group from any Multiemployer Plan
shall have occurred, or any Multiemployer Plan shall enter reorganization
status, become insolvent, or terminate (or notify Borrower or any member of the
Controlled Group of its intent to terminate) under Section 4041A of ERISA and,
within 30 days after the reporting of any such occurrence to Administrative
Agent by Borrower (or Administrative Agent otherwise obtaining knowledge of such
event) and the furnishing of such information as Administrative Agent may
reasonably request with respect thereto, Administrative Agent shall have
notified Borrower in writing that Administrative Agent has made a determination
that, on the basis of such occurrence, an Event of Default exists hereunder;
provided that any of the events described in this Section 8.1.6 shall involve
(A) one or more ERISA Plans that are single-employer plans (as defined in
Section 4001(a)(15) of ERISA) and under which the aggregate gross amount of
unfunded benefit liabilities (as defined in Section 4001(a)(16) of ERISA),
including vested unfunded liabilities which arise or might arise as the result
of the termination of such ERISA Plans, and/or (B) one or more Multiemployer
Plans to which the aggregate liabilities of Borrower and all members of the
Controlled Group, shall exceed $500,000.
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8.1.7 Breach of Terms of Agreement.
(a) Borrower shall fail to perform or observe any of the
covenants set forth in Section 5.1, 5.9(a), 5.9(f), 5.10, 5.11, 5.17, 5.18, or
Article 6 (other than Section 6.7, 6.8, 6.14, 6.15 or 6.20).
(b) Borrower shall fail to perform or observe any of the
covenants set forth in Section 5.4 (unless the event with respect to which
notice is required to be given relates to one or more specific Projects), 5.5
(unless the party whose financial statements were not properly delivered is not
a Calpine Affiliate), 5.6 (unless the books, accounts or records in question
specifically relate to one or more Projects), 5.7 (unless the failure to comply
with the Legal Requirement in question specifically relates to one or more
Projects), 5.12, 5.16.2, 5.16.4, 5.19, 5.20, 5.24, 6.7, 6.8, 6.15, 6.19, or any
other covenant to be observed or performed by it hereunder or any other Credit
Document not otherwise specifically provided for in Section 8.1.7(a), elsewhere
in this Article 8 or in the definition of the term "Non-Fundamental Project
Default," and such failure shall continue unremedied for a period of 30 days
after Borrower becomes aware thereof or receives written notice thereof from
Administrative Agent provided, however, that, if (i) such failure cannot be
cured within such 30 day period, (ii) such failure is susceptible of cure, (iii)
Borrower is proceeding with diligence and in good faith to cure such failure,
(iv) the existence of such failure has not had and cannot after considering the
nature of the cure be reasonably expected to have a Material Adverse Effect on
Borrower or the Projects, taken as a whole and (v) Administrative Agent shall
have received an officer's certificate signed by a Responsible Officer of
Borrower to the effect of clauses (i), (ii), (iii) and (iv) above and stating
what action Borrower is taking to cure such failure, then such 30 day cure
period shall be extended to such date, not to exceed a total of 90 days, as
shall be necessary for Borrower diligently to cure such failure.
(c) Calpine shall be in breach of, or in default under, the
Completion Guarantee.
8.1.8 Loss of Qualifying Facility or Eligible Facility Status.
(a) If loss of Qualifying Facility or Eligible Facility
status of a Project could reasonably be expected to have a Material Adverse
Effect on Borrower or the Projects, taken as a whole (i) FERC shall have issued
an order determining that any Project has ceased to be a Qualifying Facility or
Eligible Facility, as the case may be, or (ii) any Project shall have failed to
meet the criteria for a Qualifying Facility or Eligible Facility, as the case
may be, and, subject to cure rights equivalent to those set forth in clause
(a)(i) of the definition of "Non-Fundamental Project Default", shall have failed
to obtain a waiver from FERC on account thereof within six months after the end
of any calendar year in which Borrower knows or should reasonably have known
that it has failed to meet such criteria.
(b) Borrower or any Partner shall lose the exemption from
regulation under PUHCA.
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8.1.9 Abandonment.
(a) At any time prior to the Completion of any Initial
Project or Funded Subsequent Project, Borrower shall announce that it is
abandoning such Project or such Project shall be abandoned or work thereon shall
cease for a period of more than 30 consecutive days for any reason (which period
(i) shall be measured from the first occurrence of a work stoppage and
continuing until work of a substantial nature is resumed and thereafter
diligently continued, and (ii) shall not include delays caused by any event of
"force majeure" (as defined in the relevant Project Document) or default by a
Major Project Participant (other than Borrower or its Affiliates) under the
Construction Contracts) or any Project shall not be constructed substantially in
accordance with the Plans and Specifications (except as to changes therein
approved by Administrative Agent).
(b) At any time following the Completion of any Initial
Project or Funded Subsequent Project, Borrower shall announce that it is
abandoning such Project or such Project shall be abandoned or operation thereof
shall cease for a period of more than 30 consecutive days for any reason (other
than force majeure).
8.1.10 Security. Any of the Collateral Documents, once executed
and delivered, shall, except as the result of the acts or omissions of
Administrative Agent or the Banks, fail to provide the Banks the Liens, first
priority security interest, rights, titles, interest, remedies permitted by law,
powers or privileges intended to be created thereby or cease to be in full force
and effect with respect to Collateral relating to the Initial Projects and the
Funded Subsequent Projects, or the first priority or validity thereof or the
applicability thereof to the Loans, the Notes, the Reimbursement Obligations or
any other obligations purported to be secured or guaranteed thereby or any part
thereof shall be disaffirmed by or on behalf of Borrower.
8.1.11 Loss of Control. (a) Calpine shall cease to own directly
or indirectly 100% of the partnership interests in Borrower or (b) except for
(x) Subsequent Projects approved pursuant to Section 3.3 which are at least
fifty percent (50%) owned by Borrower, (y) Unfunded Subsequent Projects or (z)
as permitted in Section 6.4.2, Borrower shall cease to own 100% of any Project.
8.1.12 Loss of or Failure to Obtain Applicable Permits or
Applicable Third Party Permits.
(a) Borrower shall fail to obtain any Permit on or before the
date that such Permit becomes an Applicable Permit with respect to an Initial
Project or a Funded Subsequent Project, or any Major Project Participant shall
fail to obtain any Permit on or before the date that such Permit becomes an
Applicable Third Party Permit with respect to an Initial Project or a Funded
Subsequent Project, and such failure could reasonably be expected to have a
Material Adverse Effect on Borrower or the Projects, taken as a whole.
(b) Any Applicable Permit necessary for operation of any
Initial Project or Funded Subsequent Project shall be materially modified (other
than modifications requested by Borrower and approved in writing in advance of
such modification by Administrative Agent
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acting at the direction of the Required Banks which approval shall not be
unreasonably withheld), revoked, canceled or not renewed by the issuing agency
or other Governmental Authority having jurisdiction and within 30 days
thereafter Borrower is not able to demonstrate to the reasonable satisfaction of
the Required Banks that such modification or loss of such Permit reasonably
could not be expected to have a Material Adverse Effect on Borrower and the
Projects, taken as a whole.
(c) Any Third Party Permit necessary for performance by the
applicable Major Project Participant with respect to an Initial Project or a
Funded Subsequent Project, shall be materially modified, revoked, canceled or
not renewed by the issuing agency or other Governmental Authority having
jurisdiction and within 90 days thereafter Borrower is not able to (i)
demonstrate to the reasonable satisfaction of the Required Banks that such
modification or loss of such Third Party Permit will not have a Material Adverse
Effect on Borrower or the Projects, taken as a whole, or (ii) obtain a
Replacement Obligor for such Major Project Participant, where prior to Borrower
obtaining such Replacement Obligor such breach or default has not had and could
not reasonably be expected to have, a Material Adverse Effect on Borrower or the
Projects, taken as a whole.
8.1.13 Loss of Collateral. Any substantial portion of Borrower's
property relating to an Initial Project or Funded Subsequent Project is damaged,
seized or appropriated without fair value being paid therefor so as to allow
replacement of such property and/or prepayment of Loans and to allow Borrower in
Administrative Agent's reasonable judgment to continue satisfying its
obligations hereunder and under the other Operative Documents.
8.1.14 Non-Fundamental Project Default. A Non-Fundamental Project
Default has occurred, is continuing, and could reasonably be expected to have a
Material Adverse Effect with respect to Borrower and the Projects, taken as a
whole.
8.1.15 Pledge of Borrower Ownership Interest. Any Lien in favor
of any Person other than Administrative Agent encumbers any direct ownership
interests in Borrower.
8.2 Remedies.
Upon the occurrence and during the continuation of an Event of
Default, but subject to Section 1(a) of the Completion Guaranty, Administrative
Agent, LC Bank and the Banks may, at the election of the Required Banks, without
further notice of default, presentment or demand for payment, protest or notice
of non-payment or dishonor, or other notices or demands of any kind, all such
notices and demands being waived, exercise any or all of the following rights
and remedies, in any combination or order that the Required Banks may elect, in
addition to such other rights or remedies as the Banks may have hereunder, under
the Collateral Documents or at law or in equity:
8.2.1 No Further Loans or Letters of Credit. Cancel all
commitments, refuse, and Administrative Agent, LC Bank and the Banks shall not
be obligated, to continue any Loans, make any additional Loans, issue, renew,
extend or increase the Stated Amount of any Letter of Credit, or make any
payments, or permit the making of payments, from any Account or any
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Proceeds or other funds held by Administrative Agent under the Credit Documents
or on behalf of Borrower.
8.2.2 Cash Collateralization of Letters of Credit. Maintain in
the Accounts for payment of any Reimbursement Obligations or interest thereon
arising in connection with any outstanding Letter of Credit an amount of cash
equal to the Stated Amount of each such Letter of Credit (plus accrued interest
on the amounts in such Accounts).
8.2.3 Prepayment of Loans. Prepay Loans as set forth in Section
7.2.4.
8.2.4 Cure by Administrative Agent. Without any obligation to do
so, make disbursements or Loans to or on behalf of Borrower to cure any Event of
Default hereunder and to cure any default and render any performance under any
Project Documents as the Required Banks in their sole discretion may consider
necessary or appropriate, whether to preserve and protect the Collateral or the
Banks' interests therein or for any other reason, and all sums so expended,
together with interest on such total amount at the Default Rate (but in no event
shall the rate exceed the maximum lawful rate), shall be repaid by Borrower to
Administrative Agent on demand and shall be secured by the Credit Documents,
notwithstanding that such expenditures may, together with amounts advanced under
this Agreement, exceed the aggregate amount of the Total Loan Commitment and
Total Letter of Credit Commitment.
8.2.5 Acceleration. Declare and make all sums of accrued and
outstanding principal and accrued but unpaid interest remaining under this
Agreement together with all unpaid fees, costs (including Liquidation Costs and
charges due hereunder or under any other Credit Document, immediately due and
payable and require Borrower immediately, without presentment, demand, protest
or other notice of any kind, all of which Borrower hereby expressly waives, to
pay Administrative Agent or the Banks an amount in immediately available funds
equal to the aggregate amount of any outstanding Reimbursement Obligations,
provided that in the event of an Event of Default occurring under Section 8.1.4
with respect to Borrower, all such amounts shall become immediately due and
payable without further act of Administrative Agent or the Banks.
8.2.6 Cash Collateral. Apply or execute upon any amounts on
deposit in any Account or any Proceeds or any other monies of Borrower on
deposit with Administrative Agent or any Bank in the manner provided in the
Uniform Commercial Code and other relevant statutes and decisions and
interpretations thereunder with respect to cash collateral.
8.2.7 Possession of Projects. Enter into possession of any
Project and perform any and all work and labor necessary to complete such
Project substantially according to the Plans and Specifications or to operate
and maintain such Project, and all sums expended by Administrative Agent in so
doing, together with interest on such total amount at the Default Rate, shall be
repaid by Borrower to Administrative Agent upon demand and shall be secured by
the Credit Documents, notwithstanding that such expenditures may, together with
amounts advanced under this Agreement, exceed the aggregate amount of the Total
Loan Commitment and Total Letter of Credit Commitment.
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8.2.8 Remedies Under Credit Documents. Exercise any and all
rights and remedies available to it under any of the Credit Documents, including
judicial or non-judicial foreclosure or public or private sale of any of the
Collateral pursuant to the Collateral Documents.
ARTICLE 9
SCOPE OF LIABILITY
Except as set forth in this Article 9, notwithstanding anything
in the Credit Agreement or the other Credit Documents to the contrary, the Banks
shall have no claims with respect to the transactions contemplated by the
Operative Documents against any Partners, Calpine or any of their respective
Affiliates (other than Borrower), shareholders, officers, directors or employees
(collectively the "Nonrecourse Persons"), and the Banks' recourse against
Borrower shall be limited to the Collateral, the Projects (and all portions
thereof and rights or appurtenances thereto), all Project Revenues, all
Proceeds, and all income or revenues of the foregoing; provided that (a) the
foregoing provision of this Article 9 shall not constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms, covenants,
conditions, or provisions of this Agreement, any other Security Document or
Credit Document and the same shall continue (but without personal liability to
the Nonrecourse Person or to Borrower except as provided herein and therein)
until fully paid, discharged, observed, or performed; (b) the foregoing
provision of this Article 9 shall not limit or restrict the right of
Administrative Agent and/or the Banks (or any assignee, beneficiary or successor
to any of them) to name Borrower or any other Person as a defendant in any
action or suit for a judicial foreclosure or for the exercise of any other
remedy under or with respect to this Agreement or any other Security Document or
Credit Document, or for injunction or specific performance, so long as no
judgment in the nature of a deficiency judgment shall be enforced against any
Nonrecourse Person, and recourse to Borrower shall be limited as provided above,
except as set forth in this Article 9, (c) the foregoing provision of this
Article 9 shall not in any way limit or restrict any right or remedy of
Administrative Agent and/or the Banks (or any assignee or beneficiary thereof or
successor thereto) with respect to, and each of the Nonrecourse Persons and
Borrower shall remain fully liable to the extent that it would otherwise be
liable for its own actions with respect to, any fraud (which shall not include
innocent or negligent misrepresentation), willful misrepresentation, or
misappropriation of Project Revenues, Proceeds or any other earnings, revenues,
rents, issues, profits or proceeds from or of the Collateral that should or
would have been paid as provided herein or paid or delivered to Administrative
Agent or any Bank (or any assignee or beneficiary thereof or successor thereto)
towards any payment required under this Agreement or any other Credit Document;
(d) the foregoing provision of this Article 9 shall not affect or diminish or
constitute a waiver, release or discharge of any specific written obligation,
covenant, or agreement in respect of any Project made by any of the Nonrecourse
Persons or any security granted by the Nonrecourse Persons in support of the
obligations of such persons under any Equity Document or as security for the
obligations of Borrower; and (e) nothing contained herein shall limit the
liability of (i) any Person who is a party to any Project Document or has issued
any certificate or other statement in connection therewith with respect to such
liability as may arise by reason of the terms and conditions of such Project
Document (but subject to any limitation of liability in such Project Document),
certificate or statement, or (ii) any Person rendering a legal opinion pursuant
to this Agreement, in each case under this clause (e) relating solely to such
liability of such Person as may arise under such referenced agreement,
instrument or opinion. The
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limitations on recourse set forth in this Article 9 shall survive the
termination of this Agreement and the full payment and performance of the
Obligations hereunder and under the other Operative Documents.
ARTICLE 10
ADMINISTRATIVE AGENT; SUBSTITUTION; TECHNICAL COMMITTEE
10.1 Appointment, Powers and Immunities.
10.1.1 Each Bank hereby appoints and authorizes Administrative
Agent to act as its agent hereunder and under the other Credit Documents with
such powers as are expressly delegated to Administrative Agent by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Administrative Agent shall not have any
duties or responsibilities except those expressly set forth in this Agreement or
in any other Credit Document, or be a trustee for any Bank. Notwithstanding
anything to the contrary contained herein Administrative Agent shall not be
required to take any action which is contrary to this Agreement or any other
Credit Documents or any Legal Requirement or exposes Administrative Agent to any
liability. Each of Administrative Agent, the Banks and any of their respective
Affiliates shall not be responsible to any other Bank for any recitals,
statements, representations or warranties made by Borrower, its Affiliates or
Partners contained in this Agreement or in any certificate or other document
referred to or provided for in, or received by Administrative Agent, or any Bank
under this Agreement, for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, the Notes or any other document
referred to or provided for herein or for any failure by Borrower, its
Affiliates or its Partners to perform their respective obligations hereunder or
thereunder. Administrative Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
10.1.2 Administrative Agent and its respective directors,
officers, employees or agents shall not be responsible for any action taken or
omitted to be taken by it or them hereunder or under any other Credit Document
or in connection herewith or therewith, except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, Administrative Agent (a) may treat the payee of any Note as the
holder thereof until Administrative Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form satisfactory to
Administrative Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by them in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Bank for any statements, warranties or representations
made in or in connection with any Project Document or Credit Document; (d) shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of any Operative Document on the
part of any party thereto or to inspect the property (including the books and
records) of Borrower or any other Person; and (e) shall not be responsible to
any Bank for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Operative Document or any other instrument or
document furnished pursuant hereto. Except as otherwise provided under this
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Agreement, Administrative Agent shall take such action with respect to the
Credit Documents as shall be directed by the Required Banks.
10.2 Reliance by Administrative Agent. Administrative Agent shall be
entitled to rely upon any certificate, notice or other document (including any
cable, telegram, telecopy or telex) believed by it to be genuine and correct and
to have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by Administrative Agent. As to any other matters not expressly
provided for by this Agreement, Administrative Agent shall not be required to
take any action or exercise any discretion, but shall be required to act or to
refrain from acting upon instructions of the Required Banks or, where expressly
provided, the Required Banks (except that Administrative Agent shall not be
required to take any action which exposes Administrative Agent to personal
liability or which is contrary to this Agreement, any other Credit Document or
any Legal Requirement) and shall in all cases be fully protected in acting, or
in refraining from acting, hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks (or, where so expressly
stated, the Required Banks), and such instructions of the Required Banks (or
Required Banks, where applicable) and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
10.3 Non-Reliance. Each Bank represents that it has, independently
and without reliance on Administrative Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of the financial condition and affairs of Borrower and decision to
enter into this Agreement and agrees that it will, independently and without
reliance upon Administrative Agent, or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own appraisals and decisions in taking or not taking action under this
Agreement. Each of Administrative Agent and any Bank shall not be required to
keep informed as to the performance or observance by Borrower, its Affiliates or
Partners under this Agreement or any other document referred to or provided for
herein or to make inquiry of, or to inspect the properties or books of Borrower,
its Affiliates or Partners.
10.4 Defaults. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Inchoate Default, Event of Default,
Non-Fundamental Project Default or Non-Fundamental Project Inchoate Default
unless Administrative Agent has received a notice from a Bank or Borrower,
referring to this Agreement, describing such Inchoate Default, Event of Default,
Non-Fundamental Project Default or Non-Fundamental Project Inchoate Default and
indicating that such notice is a notice of default. If Administrative Agent
receives such a notice of the occurrence of an Inchoate Default, Event of
Default, Non-Fundamental Project Default or Non-Fundamental Project Inchoate
Default, Administrative Agent shall give notice thereof to the Banks and
Borrower. Administrative Agent shall take such action with respect to any
Inchoate Default or Event of Default as is provided in Article 8 or if not
provided for in Article 8, as Administrative Agent shall be reasonably directed
by the Required Banks; provided, however, unless and until Administrative Agent
shall have received such directions, Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Inchoate Default or Event of Default as it shall deem advisable in the
best interest of the Banks.
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10.5 Indemnification. Without limiting the Obligations of Borrower
hereunder, each Bank agrees to indemnify Administrative Agent, ratably in
accordance with their Proportionate Shares for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
be imposed on, incurred by or asserted against Administrative Agent in any way
relating to or arising out of this Agreement or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or the enforcement of any of the terms hereof or thereof or of any such other
documents; provided, however, that no Bank shall be liable for any of the
foregoing to the extent they arise from Administrative Agent's gross negligence
or willful misconduct. Administrative Agent shall be fully justified in refusing
to take or to continue to take any action hereunder unless it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Without limitation of the foregoing, each Bank agrees to
reimburse Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by Administrative Agent
in connection with the preparation, execution, administration or enforcement of,
or legal advice in respect of rights or responsibilities under, the Operative
Documents, to the extent that Administrative Agent is not reimbursed for such
expenses by Borrower.
10.6 Successor Administrative Agent. Administrative Agent
acknowledges that its current intention is to remain Administrative Agent
hereunder. Nevertheless, Administrative Agent may resign at any time by giving
written notice thereof to the Banks and Borrower. Administrative Agent may be
removed involuntarily only for a material breach of its duties and obligations
hereunder or under the other Credit Documents or for gross negligence or willful
misconduct in connection with the performance of its duties hereunder or under
the other Credit Documents and then only upon the affirmative vote of the
Required Banks (excluding Administrative Agent from such vote and Administrative
Agent's Proportionate Share of the Commitment from the amounts used to determine
the portion of the Commitment necessary to constitute the required Proportionate
Share of the remaining Banks). Upon any such resignation or removal, the
Required Banks shall have the right, with the consent of Borrower (such consent
not to be unreasonably withheld or delayed) to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the Banks' removal of the retiring Administrative Agent, the
retiring Administrative Agent may, on behalf of the Banks, with the consent of
Borrower (such consent not to be unreasonably withheld or delayed), appoint a
successor Administrative Agent, which shall be a Bank, if any Bank shall be
willing to serve, and otherwise shall be a commercial bank having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent under the Operative Documents by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations as Administrative Agent only
under the Credit Documents. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
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Article 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under the Operative Documents.
10.7 Authorization. Administrative Agent is hereby authorized by the
Banks to execute, deliver and perform each of the Credit Documents to which
Administrative Agent is or is intended to be a party and each Bank agrees to be
bound by all of the agreements of Administrative Agent contained in the Credit
Documents. Administrative Agent is further authorized by the Banks to release
liens on property that Borrower is permitted to sell or transfer pursuant to the
terms of this Agreement, the other Credit Documents or the Operative Documents,
and to enter into agreements supplemental hereto for the purpose of curing any
formal defect, inconsistency, omission or ambiguity in this Agreement or any
Credit Document to which it is a party.
10.8 Administrative Agent, Co-Arrangers and Co-Documentation Agents.
With respect to its Commitment, the Loans made by it and any Note issued to it,
the financial institution acting as Administrative Agent shall have the same
rights and powers under the Operative Documents as any other Bank and may
exercise the same as though it were not Administrative Agent. The term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Administrative
Agent in its individual capacity. The financial institution acting as
Administrative Agent and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of business
with Borrower or any other Person, without any duty to account therefor to the
Banks. The parties acknowledge and agree that the Co-Arrangers and the
Co-Documentation Agents shall not, in such capacities (but not in their
capacities as Banks), have any obligations or liability hereunder.
10.9 Amendments; Waivers. Subject to the provisions of this Section
10.9, unless otherwise specified in this Agreement or another Credit Document,
the Required Banks (or Administrative Agent with the consent in writing of the
Required Banks) and Borrower may enter into agreements supplemental hereto for
the purpose of adding, modifying or waiving any provisions to the Credit
Documents or changing in any manner the rights of the Banks or Borrower
hereunder or waiving any Inchoate Default or Event of Default; provided,
however, that no such supplemental agreement shall, without the consent of all
of the Banks:
(i) Modify Section 2.1.1(d), 2.7, 2.8, 2.9, 5.1, 5.17,
6.17, 6.22, 7.1 through 7.13, 8.1.10, 10.1, 10.13, 10.14 or 10.17; or
(ii) Increase the amount of the Commitment of any Bank
hereunder; or
(iii) Reduce the percentage specified in the definition
of Required Banks; or
(iv) Permit Borrower to assign its rights under this
Agreement except as provided in Section 6.17, or permit a transfer of ownership
of Borrower or a Project except as provided in Section 8.1.11, or
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(v) Amend this Section 10.9; or
(vi) Release any Collateral from the Lien of any of the
Collateral Documents, except as permitted in Section 6.4, or allow release of
any funds from any Account otherwise than in accordance with the terms hereof;
or
(vii) Extend the maturity of any Loan or any of the
Notes or reduce the principal amount thereof, or reduce the rate or change the
time of payment of interest due on any Loan or any Notes; or
(viii) Extend the Loan Maturity Date; or
(ix) Reduce the amount or extend the payment date for
any amount due under Article 2, whether principal, interest, fees or other
amounts; or
(x) Reduce or change the time of payment of any fee due
or payable hereunder;
(xi) Terminate the Completion Guaranty except in
accordance with its terms; or
(xii) Subordinate the Loans to any other Indebtedness.
10.10 Withholding Tax.
10.10.1 Administrative Agent may withhold from any interest
payment to any Bank an amount equivalent to any applicable withholding tax. If
the forms or other documentation required by Section 2.6 are not delivered to
Administrative Agent, then Administrative Agent may withhold from any interest
payment to any Bank not providing such forms or other documentation, an amount
equivalent to the applicable withholding tax.
10.10.2 If the Internal Revenue Service or any authority of the
United States or other jurisdiction asserts a claim that Administrative Agent
did not properly withhold tax from amounts paid to or for the account of any
Bank (because the appropriate form was not delivered, was not properly executed,
or because such Bank failed to notify Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify
Administrative Agent fully for all amounts paid, directly or indirectly, by
Administrative Agent as tax or otherwise, including penalties and interest,
together with all expenses incurred, including legal expenses, allocated staff
costs, and any out of pocket expenses.
10.10.3 If any Bank sells, assigns, grants participation in, or
otherwise transfers its rights under this Agreement, the purchaser, assignee,
participant or transferee, as applicable, shall comply and be bound by the terms
of Sections 2.6.7, 10.10.1 and 10.10.2 as though it were such Bank.
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10.11 General Provisions as to Payments. Administrative Agent shall
promptly distribute to each Bank, subject to the terms of the assignment and
assumption agreement between Administrative Agent and such Bank, its pro rata
share of each payment of principal and interest payable to the Banks on the
Loans and of fees hereunder received by Administrative Agent for the account of
the Banks and of any other amounts owing under the Loans. The payments made for
the account of each Bank shall be made, and distributed to it, for the account
of (a) its domestic lending office in the case of payments of principal of, and
interest on, its Base Rate Loans, (b) its domestic or foreign lending office, as
each Bank may designate in writing to Administrative Agent, in the case of LIBOR
Loans, and (c) its domestic lending office, or such other lending office as it
may designate for the purpose from time to time, in the case of payments of fees
and other amounts payable hereunder. Banks shall have the right to alter
designated domestic lending offices upon notice to Administrative Agent and
Borrower.
10.12 Substitution of Bank. Should any Bank fail to make a Loan in
violation of its obligations under this Agreement (a "Non-Advancing Bank"),
Administrative Agent shall (a) in its sole discretion fund the Loan on behalf of
the Non-Advancing Bank or (b) cooperate with Borrower or any other Bank to find
another Person that shall be acceptable to Administrative Agent and that shall
be willing to assume the Non-Advancing Bank's obligations under this Agreement
(including the obligation to make the Loan which the Non-Advancing Bank failed
to make but without assuming any liability for damages for failing to have made
such Loan or any previously required Loan). Subject to the provisions of the
next following sentence, such Person shall be substituted for the Non-Advancing
Bank hereunder upon execution and delivery to Administrative Agent of an
agreement acceptable to Administrative Agent by such Person assuming the
Non-Advancing Bank's obligations under this Agreement, and all interest and fees
which would otherwise have been payable to the Non-Advancing Bank shall
thereafter be payable to such Person. Nothing in (and no action taken pursuant
to) this Section 10.12 shall relieve the Non-Advancing Bank from any liability
it might have to Borrower or to the other Banks as a result of its failure to
make any Loan.
10.13 Participation.
10.13.1 Nothing herein provided shall prevent any Bank from
selling a participation in one or more of its Commitments (and Loans made and
Letters of Credit issued thereunder); provided that (a) no such sale of a
participation shall alter such Bank's or Borrower's obligations hereunder, (b)
any agreement pursuant to which any Bank may grant a participation in its rights
with respect to its Commitment (Letters of Credit and Loans) shall provide that,
with respect to such Commitment (Letters of Credit and Loans), subject to the
following proviso, such Bank shall retain the sole right and responsibility to
exercise the rights of such Bank, and enforce the obligations of Borrower
relating to such Commitment (Letters of Credit and Loans), including the right
to approve any amendment, modification or waiver of any provision of this
Agreement or any other Bank Document and the right to take action to have the
Notes declared due and payable pursuant to Article 8; provided, however, that
such agreement may provide that the participant may have rights to approve or
disapprove decreases in Commitments, interest rates or fees, lengthening of
maturity of any Loans, extend the payment date for any amount due under Article
2 hereof or release of any material Collateral. No recipient of a participation
in any Commitment or Loans of any Bank shall have any rights under this
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Agreement or shall be entitled to any reimbursement for Taxes, Other Taxes
increased costs or reserve requirements under Sections 2.6 or 2.8 or any other
indemnity or payment rights against Borrower (but shall be permitted to receive
from the Bank granting such participation a proportionate amount which would
have been payable to the Bank from whom such Person acquired its participation).
10.13.2 Notwithstanding anything to the contrary contained
herein, any Bank (a "Granting Bank") may grant to a special purpose funding
vehicle (a "SPC"), identified as such in writing from time to time by the
Granting Bank to Administrative Agent and Borrower, the option to provide to
Borrower all or any part of any Loan that such Granting Bank would otherwise be
obligated to make to Borrower pursuant to this Agreement; provided that (i)
nothing herein shall constitute a commitment by any SPC to make any Loan, (ii)
if an SPC elects not to exercise such option or otherwise fails to provide all
or any part of such Loan, the Granting Bank shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Bank to the same extent, and as if, such
Loan were made by such Granting Bank. Each party hereto hereby agrees that no
SPC shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Bank). In
furtherance of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the payment in full of all outstanding commercial
paper or other senior indebtedness of any SPC, it will not institute against, or
join any other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under the
laws of the United States or any state thereof. In addition, notwithstanding
anything to the contrary contained in this Section 10.13, any SPC may (i) with
notice to, but without the prior written consent of, Borrower and Administrative
Agent and without paying any processing fee therefor, assign all or a portion of
its interests in any Loans to the Granting Bank or to any financial institutions
(consented to by Borrower and Administrative Agent) providing liquidity and/or
credit support to or for the account of such SPC to support the funding or
maintenance of Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC. This section may not be amended without the written consent of the SPC.
10.14 Transfer of Commitment. Notwithstanding anything else herein to
the contrary, any Bank, after receiving Borrower's prior written consent as to
the identity of the assignee, which consent shall not be unreasonably withheld
or delayed, may from time to time, at its option, sell, assign, transfer,
negotiate or otherwise dispose of a portion of one or more of its Commitments
(and Loans made and Letters of Credit issued thereunder) (including the Bank's
interest in this Agreement and the other Credit Documents) to any bank or other
lending institution which in such assigning Bank's judgment is reasonably
capable of performing the obligations of a Bank hereunder and reasonably
experienced in project financing; provided, however, that no Bank (including any
assignee of any Bank) may assign any portion of its Commitment (including Loans
and Letters of Credit) of less than $10,000,000 (unless to another Bank) and
provided, further, that assignments of any rights or obligations under any
Letter of Credit shall require the consent of the LC Bank; provided, further,
that any Bank may assign all or any portion of its Commitments to an Affiliate
of such Bank. In the event of any such assignment,
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(a) the assigning Bank's Proportionate Share shall be reduced and its
obligations hereunder released by the amount of the Proportionate Share assigned
to the new lender, (b) the parties to such assignment shall execute and deliver
an appropriate agreement evidencing such sale, assignment, transfer or other
disposition, (c) at the assigning Bank's option, Borrower shall execute and
deliver to such new lender new Notes in the forms attached hereto as Exhibit B
in a principal amount equal to such new lender's Commitment, and Borrower shall
execute and exchange with the assigning Bank a replacement note for any Note in
an amount equal to the Commitment retained by the Bank, if any and (d)
Administrative Agent may amend Exhibit H attached hereto to reflect the
Proportionate Shares of the Banks following such assignment. Thereafter, such
new lender shall be deemed to be a Bank and shall have all of the rights and
duties of a Bank (except as otherwise provided in this Article 10), in
accordance with its Proportionate Share, under each of the Credit Documents.
10.15 Laws. Notwithstanding the foregoing provisions of this Article
10, no sale, assignment, transfer, negotiation or other disposition of the
interests of any Bank hereunder or under the other Credit Documents shall be
allowed if it would require registration under the federal Securities Act of
1933, as then amended, any other federal securities laws or regulations or the
securities laws or regulations of any applicable jurisdiction. Borrower shall,
from time to time at the request and expense of Administrative Agent, execute
and deliver to Administrative Agent, or to such party or parties as
Administrative Agent may designate, any and all further instruments as may in
the opinion of Administrative Agent be reasonably necessary or advisable to give
full force and effect to such disposition.
10.16 Assignability to Federal Reserve Bank. Notwithstanding any
other provision contained in this Agreement or any other Credit Document to the
contrary, any Bank may assign all or any portion of the Loans or Notes held by
it to any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such assigned Loans or Notes made by
Borrower to or for the account of the assigning and/or pledging Bank in
accordance with the terms of this Agreement shall satisfy Borrower's obligations
hereunder in respect of such assigned Loans or Notes to the extent of such
payment. No such assignment shall release the assigning Bank from its
obligations hereunder.
10.17 Technical Committee. Each Bank hereby appoints and authorizes
each of the Lead Arrangers and each of the Co-Documentation Agents to act as its
technical committee hereunder and under the other Credit Documents (the
"Technical Committee") with such powers as are expressly delegated to the
Technical Committee by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
The Technical Committee shall not have any duties or responsibilities except
those expressly set forth in this Agreement or in any other Credit Document, or
be a trustee for any Bank. Notwithstanding anything to the contrary contained
herein the Technical Committee shall not be required to take any action which is
contrary to this Agreement or any other Credit Documents or any Legal
Requirement or exposes the Technical Committee to any liability. All decisions
and determinations to be made by the Technical Committee hereunder and under the
other Credit Documents shall be made by unanimous consent of its members.
Borrower and each Bank hereby
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agrees that the protective provisions set forth in Sections 10.1 through 10.5
shall apply to and protect, mutatis mutandis, each member of the Technical
Committee and all determinations, decisions, actions or inactions taken or
omitted to be taken by the Technical Committee. In the event that any member of
the Technical Committee at any time reduces its Commitment to less than
$10,000,000 ceases to be a Bank hereunder or otherwise resigns from the
Technical Committee, the remaining members of the Technical Committee shall
appoint a Bank as a successor member to the Technical Committee; provided (i)
such Bank shall be a Bank with one of the five largest Commitments at such time
among the Banks who are not then members of the Technical Committee and (ii)
Borrower does not reasonably disapprove of such Bank within two Banking Days of
receipt of notice of such Bank's appointment to the Technical Committee.
10.18 Notices to Technical Committee and Banks. Administrative Agent
promptly shall deliver all documents, instruments and notices that it receives
hereunder and under the other Operative Documents to the Technical Committee and
to each Bank that is not a member of the Technical Committee.
ARTICLE 11
INDEPENDENT CONSULTANTS
11.1 Removal and Fees. Administrative Agent, in its reasonable
discretion, may remove from time to time, any one or more of the Independent
Consultants and, after consulting with Borrower as to an appropriate Person,
appoint replacements as Administrative Agent may choose. Notice of any
replacement Independent Consultant shall be given by Administrative Agent to
Borrower, the Banks and to the Independent Consultant being replaced. All
reasonable fees and expenses of the Independent Consultants (whether the
original ones or replacements) shall be paid by Borrower.
11.2 Duties. Each Independent Consultant shall be contractually
obligated to Administrative Agent to carry out the activities required of it in
this Agreement and as otherwise requested by Administrative Agent and shall be
responsible solely to Administrative Agent. Borrower acknowledges that it will
not have any cause of action or claim against any Independent Consultant
resulting from any decision made or not made, any action taken or not taken or
any advice given by such Independent Consultant in the due performance in good
faith of its duties to Administrative Agent, except to the extent arising from
such Independent Consultant's gross negligence or willful misconduct.
11.3 Independent Consultants' Certificates.
11.3.1 Until the receipt by Administrative Agent of certificates
satisfactory to Administrative Agent from each Independent Consultant whom
Administrative Agent considers necessary or appropriate certifying Final
Completion, Borrower shall provide such documents and information to the
Independent Consultants as any of the Independent Consultants may reasonably
consider necessary in order for the Independent Consultants to deliver to
Administrative Agent the following certificates:
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(a) certificates of the Insurance Consultant, Independent
Engineer, Fuel Consultant and Power Marketing Consultant delivered on and dated
as of the Closing Date as described in Section 3.1, respectively, and containing
the matters set out therein;
(b) after the Closing Date, all certificates to be delivered
pursuant to Sections 3.2, 3.3, 3.4, 3.5 and 3.6, if any, or, if no Loan has
taken place in any month, certificates delivered at the end of the month as to
the matters required by Exhibit C-8; and
(c) monthly after the Closing Date, a full report and status
of the progress of each Project to that date, a complete assessment of Project
Costs to Final Completion of such Project and such other information and
certification as Administrative Agent may reasonably require from time to time.
11.3.2 Following Final Completion, Borrower shall provide such
documents and information to the Independent Consultants (subject to the
execution by such Independent Consultants of confidentiality agreements
reasonably acceptable to Administrative Agent and Borrower) as they may
reasonably consider necessary in order for the Independent Consultants to
deliver annually to Administrative Agent a certificate setting forth a full
report on the status of each Project and such other information and
certification as Administrative Agent may reasonably require from time to time.
11.4 Certification of Dates. Administrative Agent will request that
the Independent Consultants act diligently in the issuance of all certificates
required to be delivered by the Independent Consultants hereunder, if their
issuance is appropriate. Borrower shall provide the Independent Consultants with
reasonable notice of the expected occurrence of any such dates or events.
ARTICLE 12
MISCELLANEOUS
12.1 Addresses. Any communications between the parties hereto or
notices provided herein to be given may be given to the following addresses:
If to Administrative Agent: The Bank of Nova Scotia
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308
Attn: Michael Silveira
Telephone No.: (404) 877-1522
Telecopy No.: (404) 888-8998
If to Borrower: Calpine Construction Finance Company, L.P.
50 West San Fernando Street
San Jose, California 95113
Attn: General Counsel
Telephone No.: (408) 995-5115
Telecopy No.: (408) 995-0505
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and 6700 Koll Center Parkway, Suite 200
Pleasanton, California 94566
Attn: Corporate Asset Management
Telephone No.: (925) 600-2000
Telecopy No.: (925) 600-8926
If to the Technical Committee: The Bank of Nova Scotia
580 California Street, Suite 2100
San Francisco, California 94104
Attn: Jon Burckin
Telephone No.: (415) 986-1100
Telecopy No.: (415) 397-0791
The Bank of Nova Scotia
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308
Attn: Michael Silveira
Telephone No.: (404) 877-1522
Telecopy No.: (404) 888-8998
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Attn: Portfolio Management
Telephone No.(212) 325-9126
Telecopy No.: (212) 325-8321
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attn: Eric Klaussmann
Telephone: (212) 856-3828
Telecopy: (212) 885-4911
TD Securities (USA) Inc.
31 West 52nd Street
New York, New York 10019
Attn: Deborah Gravinese
Telephone: (212) 827-7777
Telecopy: (212) 827-7778
All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be considered as properly given
(a) if delivered in person, (b) if sent by overnight delivery service (including
Federal Express, UPS, ETA, Emery, DHL, AirBorne and
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other similar overnight delivery services), (c) in the event overnight delivery
services are not readily available, if mailed by first class United States Mail,
postage prepaid, registered or certified with return receipt requested or (d) if
sent by prepaid telegram, or by telecopy confirmed by telephone. Notice so given
shall be effective upon receipt by the addressee, except that communication or
notice so transmitted by telecopy or other direct written electronic means shall
be deemed to have been validly and effectively given on the day (if a Banking
Day and, if not, on the next following Banking Day) on which it is transmitted
if transmitted before 4:00 p.m., recipient's time, and if transmitted after that
time, on the next following Banking Day; provided, however, that if any notice
is tendered to an addressee and the delivery thereof is refused by such
addressee, such notice shall be effective upon such tender. Any party shall have
the right to change its address for notice hereunder to any other location
within the continental United States by giving of 30 days' notice to the other
parties in the manner set forth hereinabove.
12.2 Additional Security; Right to Set-Off. Any deposits or other
sums at any time credited or due from Banks and any Project Revenues, securities
or other property of Borrower in the possession of Administrative Agent may at
all times be treated as collateral security for the payment of the Loans and the
Notes and all other obligations of Borrower to Banks under this Agreement and
the other Credit Documents, and Borrower hereby pledges to Administrative Agent
for the benefit of the Banks and grants Administrative Agent a security interest
in and to all such deposits, sums, securities or other property. Regardless of
the adequacy of any other collateral, Administrative Agent and only
Administrative Agent, may execute or realize on the Banks' security interest in
any such deposits or other sums credited by or due from Banks to Borrower, may
apply any such deposits or other sums to or set them off against Borrower's
obligations to Banks under the Notes and this Agreement at any time after the
occurrence and during the continuance of any Event of Default.
12.3 Delay and Waiver. No delay or omission to exercise any right,
power or remedy accruing to the Banks upon the occurrence of any Event of
Default or Inchoate Default or any breach or default of Borrower under this
Agreement or any other Credit Document shall impair any such right, power or
remedy of the Banks, nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring, nor shall any waiver of any single Event of
Default, Inchoate Default or other breach or default be deemed a waiver of any
other Event of Default, Inchoate Default or other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of Administrative Agent and/or the Banks of any Event of
Default, Inchoate Default or other breach or default under this Agreement or any
other Credit Document, or any waiver on the part of Administrative Agent and/or
the Banks of any provision or condition of this Agreement or any other Credit
Document, must be in writing and shall be effective only to the extent in such
writing specifically set forth. All remedies, either under this Agreement or any
other Credit Document or by law or otherwise afforded to Administrative Agent,
LC Bank and the Banks, shall be cumulative and not alternative.
12.4 Costs, Expenses and Attorneys' Fees; Syndication.
12.4.1 Borrower will pay to Administrative Agent all of its
reasonable costs and expenses in connection with the preparation, negotiation,
closing and administering this
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Agreement and the documents contemplated hereby and any participation or
syndication of the Loans or this Agreement, including the reasonable fees,
expenses and disbursements of Latham & Watkins and other attorneys retained by
Administrative Agent in connection with the preparation of such documents and
any amendments hereof or thereof, or the preparation, negotiation, closing,
administration, enforcement, participation or syndication of the Loans or this
Agreement, the reasonable fees, expenses and disbursements of the Independent
Consultants and any other engineering, insurance and construction consultants to
Administrative Agent incurred in connection with this Agreement or the Loans
subsequent to the Closing Date, and the travel and out-of-pocket costs incurred
by Administrative Agent following the Closing Date, and Borrower further agrees
to pay Administrative Agent the out-of-pocket costs and travel costs incurred by
Administrative Agent in connection with syndication of the Loans or this
Agreement; provided, however, Borrower shall not be required to pay advertising
costs of any of the Banks or the fees of the Banks' (other than Administrative
Agent's) attorneys. Borrower will reimburse Administrative Agent for all costs
and expenses, including reasonable attorneys' fees, expended or incurred by
Administrative Agent in enforcing this Agreement or the other Credit Documents
in connection with an Event of Default or Inchoate Default, in actions for
declaratory relief in any way related to this Agreement or in collecting any sum
which becomes due Administrative Agent on the Notes or under the Credit
Documents.
12.4.2 In connection with syndication of the Loans and
Commitments, an information package containing certain relevant information
concerning Borrower, the Projects and the other Project participants has been
provided to potential Banks and participants. Borrower agrees to cooperate and
to cause the Partners and Calpine to cooperate in the syndication of the Loans
and Commitments in all respects reasonably requested by Administrative Agent,
including participation in bank meetings held in connection with such
syndication, and to provide, for inclusion in any additional package, all
information which Administrative Agent may request from it or which
Administrative Agent or Borrower may consider material to a lender or
participant, or necessary or appropriate for accurate and complete disclosure.
Upon request of Administrative Agent, Borrower shall represent to Administrative
Agent, and indemnify Administrative Agent for claims relating to, the accuracy
and completeness of such disclosure, upon terms acceptable to Administrative
Agent.
12.5 Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referred to herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior writings in respect to the subject matter hereof. In the
event of any conflict between the terms, conditions and provisions of this
Agreement and any such agreement, document or instrument, the terms, conditions
and provisions of this Agreement shall prevail. This Agreement and the other
Credit Documents may only be amended or modified by an instrument in writing
signed by Borrower, Administrative Agent and any other parties to such
agreements.
12.6 Governing Law. This Agreement, and any instrument or agreement
required hereunder (to the extent not otherwise expressly provided for therein),
shall be governed by, and construed under, the laws of the State of New York,
without reference to conflicts of laws (other than Section 5-1401 of the New
York General Obligations Law).
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12.7 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
12.8 Headings. Paragraph headings have been inserted in this
Agreement as a matter of convenience for reference only and it is agreed that
such paragraph headings are not a part of this Agreement and shall not be used
in the interpretation of any provision of this Agreement.
12.9 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and practices consistent with
those applied in the preparation of the financial statements submitted by
Borrower to Administrative Agent, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles and
practices.
12.10 Additional Financing. The parties hereto acknowledge that the
Banks have made no agreement or commitment to provide any financing except as
set forth herein.
12.11 No Partnership, Etc. The Banks and Borrower intend that the
relationship between them shall be solely that of creditor and debtor. Nothing
contained in this Agreement, the Notes or in any of the other Credit Documents
shall be deemed or construed to create a partnership, tenancy-in-common, joint
tenancy, joint venture or co-ownership by or between the Banks, Borrower or any
other Person. The Banks shall not be in any way responsible or liable for the
debts, losses, obligations or duties of Borrower or any other Person with
respect to any Project or otherwise. All obligations to pay real property or
other taxes, assessments, insurance premiums, and all other fees and charges
arising from the ownership, operation or occupancy of any Project and to perform
all obligations and other agreements and contracts relating to any Project shall
be the sole responsibility of Borrower.
12.12 Deed of Trust/Collateral Documents. The Loans are secured in
part by the Deeds of Trust encumbering certain properties in the States of
Alabama Arizona, California, Connecticut, Florida, Maine, Mississippi, New York,
Pennsylvania and Texas. Reference is hereby made to the Deeds of Trust and the
other Collateral Documents for the provisions, among others, relating to the
nature and extent of the security provided thereunder, the rights, duties and
obligations of Borrower and the rights of Administrative Agent and the Banks
with respect to such security.
12.13 Limitation on Liability. No claim shall be made by Borrower,
any Partner or any of their Affiliates against the Banks or any of their
Affiliates, directors, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any breach or wrongful conduct
(whether or not the claim therefor is based on contract, tort or duty imposed by
law), in connection with, arising out of or in any way related to the
transactions contemplated by this Agreement or the other Operative Documents or
any act or omission or event occurring in connection therewith except to the
extent that any such claims are caused by the willful misconduct of the Banks;
and Borrower hereby waives, releases and agrees not to sue upon any such claim
for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
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12.14 Waiver of Jury Trial. THE BANKS AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS
OF THE BANKS OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANKS
TO ENTER INTO THIS AGREEMENT.
12.15 Consent to Jurisdiction. The Banks and Borrower agree that any
legal action or proceeding by or against Borrower or with respect to or arising
out of this Agreement, the Notes, or any other Credit Document may be brought in
or removed to the courts of the State of New York, in and for the County of New
York, or of the United States of America for the Southern District of New York,
as Administrative Agent may elect. By execution and delivery of the Agreement,
the Banks and Borrower accept, for themselves and in respect of their property,
generally and unconditionally, the jurisdiction of the aforesaid courts. The
Banks and Borrower irrevocably consent to the service of process out of any of
the aforementioned courts in any manner permitted by law. Nothing herein shall
affect the right of Administrative Agent to bring legal action or proceedings in
any other competent jurisdiction, including judicial or non-judicial foreclosure
of the Deed of Trust. Notwithstanding the foregoing, service of process shall
not be deemed served or mailed to Administrative Agent or the Banks until a copy
of all matters to be served have be mailed to Latham & Watkins, 701 B Street,
Suite 2100, San Diego, California 92101, Attn: Sony Ben-Moshe or such other
Person as Administrative Agent or the Banks may hereafter designate by notice
given pursuant to Section 12.1. The Banks and Borrower further agree that the
aforesaid courts of the State of New York and of the United States of America
shall have exclusive jurisdiction with respect to any claim or counterclaim of
Borrower based upon the assertion that the rate of interest charged by the Banks
on or under this Agreement, the Loans and/or the other Credit Documents is
usurious. The Banks and Borrower hereby waive any right to stay or dismiss any
action or proceeding under or in connection with any or all of any Project, this
Agreement or any other Credit Document brought before the foregoing courts on
the basis of forum non-conveniens.
12.16 Usury. Nothing contained in this Agreement or the Notes shall
be deemed to require the payment of interest or other charges by Borrower or any
other Person in excess of the amount which the holders of the Notes may lawfully
charge under any applicable usury laws. In the event that the holders of the
Notes shall collect moneys which are deemed to constitute interest which would
increase the effective interest rate to a rate in excess of that permitted to be
charged by applicable law, all such sums deemed to constitute interest in excess
of the legal rate shall, upon such determination, at the option of the holder of
the Notes, be returned to Borrower or credited against the principal balance of
the Notes then outstanding.
12.17 Knowledge and Attribution. References in this Agreement and the
other Credit Documents to the "knowledge," "best knowledge" or facts and
circumstances "known to" Borrower, and all like references, mean facts or
circumstances of which a Responsible Officer of Borrower or a Partner has actual
knowledge after due inquiry.
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12.18 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Borrower may not assign or otherwise transfer
any of its rights under this Agreement except as provided in Section 6.17, and
the Banks may not assign or otherwise transfer any of their rights under this
Agreement except as provided in Article 10.
12.19 Counterparts. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the parties listed below shall
constitute a single binding agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Credit Agreement
to be duly executed by their officers or partners thereunto duly authorized as
of the day and year first above written.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: Calpine CCFC GP, Inc.,
a Delaware corporation, its General
Partner
By: /s/ ROHN CRABTREE
----------------------------------------
Name: ROHN CRABTREE
Title: VICE-PRESIDENT
CREDIT SUISSE FIRST BOSTON,
as Lead Arranger, Syndication Agent,
Bookrunner and Bank
By:
--------------------------------------------
Name:
Title:
By:
--------------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
as Lead Arranger, LC Bank, Administrative
Agent and Bank
By: /s/ JOHN BURCKIN
--------------------------------------------
Name: JOHN BURCKIN
Title: RELATIONSHIP MANAGER
CREDIT AGREEMENT S-1
<PAGE> 132
IN WITNESS WHEREOF, the parties have caused this Credit Agreement to be
duly executed by their officers or partners thereunto duly authorized as of the
day and year first above written.
CALPINE CONSTRUCTION FINANCE
COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation, its General
Partner
By:
---------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as Lead Arranger, Syndication Agent,
Bookrunner and Bank
By: /s/ LOUIS D. IACONETTI
-------------------------------------
Name: Louis D. Iaconetti
Title: Vice President
By: /s/ SANTINO BASILE
-------------------------------------
Name: Santino Basile
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Lead Arranger, LC Bank,
Administrative Agent and Bank
By:
-------------------------------------
Name:
Title:
CREDIT AGREEMENT S-1
<PAGE> 133
CIBC WORLD MARKETS CORP.
as Co-Arranger and Co-Documentation
Agent
By: /s/ DENIS P. O'MEARA
-------------------------------------
Name: Denis P. O'Meara
Title: Executive Director
CIBC World Markets Corp. As
Agent
CREDIT AGREEMENT
<PAGE> 134
TD SECURITIES (USA) INC.
as Co-Arranger and Co-Documentation
Agent
By: /s/ DEBORAH GRAVINESE
-------------------------------------
Name: Deborah Gravinese
Title: Managing Director
CREDIT AGREEMENT
<PAGE> 135
BANK OF MONTREAL
/s/ CAHAL B. CARMODY
By: ________________________________________
Name: Cahal B. Carmody
Title: Director
CREDIT AGREEMENT S-1
<PAGE> 136
BANQUE NATIONALE DE PARIS
By: /s/ JAMES P. CULHANE
----------------------------------
Name: James P. Culhane, CFA
Title: Assistant Vice President
By: /s/ GORDON R. COOK
----------------------------------
Name: Gordon R. Cook
Title: Vice President
CREDIT AGREEMENT S-2
<PAGE> 137
BAYERISCHE LANDESBANK
CAYMAN ISLANDS BRANCH
By: /s/ CHRISTOPHER STOLARSKI
-------------------------------------
Name: Christopher Stolarski
Title: Vice President
By: /s/ DIETMAR RIEG
-------------------------------------
Name: Dietmar Rieg
Title: First Vice President
CREDIT AGREEMENT S-3
<PAGE> 138
CIBC INC.
By: /s/ DENIS P. O'MEARA
-------------------------------------
Name: Denis P. O'Meara
Title: Executive Director
CIBC World Markets Corp.
As Agent
By:
-------------------------------------
Name:
Title:
CREDIT AGREEMENT S-4
<PAGE> 139
CoBank, ACB
By: /s/ GAIL NOFSINGER
-------------------------------------
Name: Gail Nofsinger
Title: Vice President
CREDIT AGREEMENT S-5
<PAGE> 140
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ MARTIN C. LIVINGSTON
-------------------------------------
Name: Martin C. Livingston
Title: Vice President
CREDIT AGREEMENT S-6
<PAGE> 141
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG,
CAYMAN ISLAND BRANCH
By: /s/ RICHARD L. HAGEMANN
-------------------------------------
Name: Richard L. Hagemann
Title: Vice President
By: /s/ ROBERT SULLIVAN
-------------------------------------
Name: Robert Sullivan
Title: Assistant Vice President
CREDIT AGREEMENT S-7
<PAGE> 142
DRESDNER BANK AG NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ FREDERIC O. LAHNER
-------------------------------------
Name: Frederic O. Lahner
Title: Assistant Vice President
By: /s/ KWON-KYUN CHUNG
-------------------------------------
Name: Kwon-Kyun Chung
Title: Assistant Treasurer
CREDIT AGREEMENT S-8
<PAGE> 143
EXPORT DEVELOPMENT CORPORATION
By: /s/ JONATHAN ROBINSON
-------------------------------------
Name: Jonathan Robinson
Title: Project Finance
By: /s/ FRANK KELLY
-------------------------------------
Name: Frank Kelly
Title: Mining & Power
CREDIT AGREEMENT S-9
<PAGE> 144
BAYERISCHE HYPO-UND VEREINSBANK AG
--NEW YORK BRANCH
By: /s/ ANDREW G. MATHEWS
-------------------------------------
Name: Andrew G. Mathews
Title: Managing Director
By: /s/ PAUL J. COLATRELLA
-------------------------------------
Name: Paul J. Colatrella
Title: Director
CREDIT AGREEMENT S-10
<PAGE> 145
CITICORP USA, INC.
By: /s/ DALE R. GONCHER
-------------------------------------
Name: Dale R. Goncher
Title: Attorney-In-Fact
CREDIT AGREEMENT S-11
<PAGE> 146
ING (U.S.) CAPITAL LLC
By: /s/ ERWIN THOMET
-------------------------------------
Name: Erwin Thomet
Title: Managing Director
By: /s/ DIEDERIK VAN DEN BERG
-------------------------------------
Name: Diederik Van Den Berg
Title: Vice President
CREDIT AGREEMENT S-12
<PAGE> 147
LANDESBANK HESSEN-THURINGEN
GIROZENTRALE
By: /s/ DOROTHY A. LACHER
-------------------------------------
Name: Dorothy A. Lacher
Title: Senior Vice President
By: /s/ MARTIN STEINEBACH
-------------------------------------
Name: Martin Steinebach
Title: Assistant Vice President
CREDIT AGREEMENT S-13
<PAGE> 148
MEESPIERSON CAPITAL CORP.
By: /s/ JOHN C. PRENETA
-------------------------------------
Name: John C. Preneta
Title: Executive Vice President
By: /s/ JOHN T. CONNORS
-------------------------------------
Name: John T. Connors
Title: President and
Chief Operating Officer
CREDIT AGREEMENT S-14
<PAGE> 149
NEWCOURT CAPITAL USA INC.
By: /s/ DANIEL M. MORASH
-------------------------------------
Name: Daniel M. Morash
Title: Managing Director
By: /s/ GUY A. PIAZZA
-------------------------------------
Name: Guy A. Piazza
Title: Senior Director
CREDIT AGREEMENT S-15
<PAGE> 150
TORONTO DOMINION (TEXAS) INC.
By: /s/ LYNN CHASIN
-------------------------------------
Name: Lynn Chasin
Title: Vice President
By:
-------------------------------------
Name:
Title:
CREDIT AGREEMENT S-16
<PAGE> 151
UNION BANK OF CALIFORNIA, N.A.
By: /s/ HENRY S. PARK
-------------------------------------
Name: Henry S. Park
Title: Senior Vice President
By: /s/ ALLAN MAJOTRA
-------------------------------------
Name: Allan Majotra
Title: Vice President
CREDIT AGREEMENT S-17
<PAGE> 152
EXHIBIT A
to Credit Agreement
DEFINITIONS
"Accounts" means the Construction Account, the Revenue Account, the
Operating Accounts, the Working Capital Reserve Account and the Loss Proceeds
Account, including any sub-accounts within such accounts.
"Activation Fee" has the meaning given in Section 2.4.3 of the Credit
Agreement.
"Additional Borrower Equity" has the meaning given in Section 5.17.2 of
the Credit Agreement.
"Additional Commitment" has the meaning given in Section 2.11.2 of the
Credit Agreement.
"Additional Major Project Document" means an Additional Project Document
that is a Major Project Document.
"Additional Project Documents" means any material contracts or agreements
related to the construction, testing, maintenance, repair, operation or use of
one or more of the Projects entered into by Borrower and any other Person, or
assigned to Borrower, subsequent to the Closing Date. Without in any way
limiting the foregoing, all such contracts and agreements providing for the
payment by Borrower of $1,000,000 or more, or the provision to Borrower of
$1,000,000 in value of goods or services, shall be deemed to constitute an
Additional Project Document, provided, however, that no agreement with respect
to a Subsequent Project that has been approved by the Technical Committee in
accordance with Section 3.3 of the Credit Agreement shall be deemed to be an
Additional Project Document.
"Additional Subsequent Projects" means, collectively, the Subsequent
Projects described on Appendices G-1E, G-1K, G-1L, G-1M and G-1N of the Credit
Agreement.
"Administrative Agent" means The Bank of Nova Scotia, acting in its
capacity as administrative agent for the Banks under the Credit Agreement, or
its successor appointed pursuant to the terms of the Credit Agreement.
"Affiliate" of a specified Person means any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with the Person specified, or who holds or beneficially
owns 10% or more of the equity interest in the Person specified or 10% or more
of any class of voting securities of the Person specified. When used with
respect to Borrower, "Affiliate" shall include each Partner, Calpine and any
Affiliate of any Partner or Calpine (other than Borrower).
"Affiliated Fuel Supplier" means any wholly owned Subsidiary of Calpine
approved by the Lead Arrangers or the Technical Committee in accordance with
Section 3.1 or
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<PAGE> 153
3.3, as the case may be, of the Credit Agreement in its capacity as fuel
supplier under an Affiliated Fuel Supply Agreement.
"Affiliated Fuel Supply Agreement" means, collectively, for each Project,
the contract or agreement approved by the Lead Arrangers or the Technical
Committee in accordance with Section 3.1 or Section 3.3, as the case may be, of
the Credit Agreement entered into by, or on behalf of, Borrower with an
Affiliated Fuel Supplier for the provision or supply of fuel for any Project,
including (a) the Magic Valley Gas Supply Agreement, (b) the South Point Gas
Supply Agreement, (c) the Sutter Gas Supply Agreement, and (d) the Westbrook Gas
Supply Agreement.
"Affiliated Fuel Supplier Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8A to the Credit Agreement between Administrative Agent and
Affiliated Fuel Supplier.
"Affiliated Major Project Participant" means Calpine and each Major
Project Participant (other than Borrower) that is an Affiliate of Calpine.
"Affiliated Party Agreement Guaranty" means, collectively, for each
Project, the contract or agreement approved by the Lead Arrangers or the
Technical Committee in accordance with Section 3.1 or 3.3, as the case may be,
of the Credit Agreement or as otherwise required thereby entered into by Calpine
in favor of Borrower guarantying the obligations of Affiliates pursuant to
Project Documents to which such Affiliates are party, including (a) the Magic
Valley Affiliated Party Agreement Guaranty, (b) the South Point Affiliated Party
Agreement Guaranty, (c) the Sutter Affiliated Party Agreement Guaranty and (d)
the Westbrook Affiliated Party Agreement Guaranty.
"Affiliated Subordination Agreement" means, collectively, for each
Affiliate of Borrower providing goods or services to a Project, the contract or
agreement approved by the Lead Arrangers or the Technical Committee in
accordance with Section 3.1 or 3.3, as the case may be, of the Credit Agreement
or as otherwise required thereby entered into by such Affiliate in favor of
Administrative Agent for the subordination of O&M Costs as provided therein,
including (a) the Calpine Eastern Corporation Subordination Agreement, (b) the
Calpine Central Subordination Agreement, (c) the Calpine Corporation
Subordination Agreement, (d) the CPSC Subordination Agreement, (e) the CPN
Central Fuels Subordination Agreement, (f) the CPN East Fuels Subordination
Agreement and (g) the CPN Gas Marketing Company Subordination Agreement.
"Aggregate LC Stated Amount" means, as of any time, the aggregate Stated
Amount of all Letters of Credit issued and outstanding under the Credit
Agreement.
"Annual Operating Budget" has the meaning given in Section 5.15.2 of the
Credit Agreement.
"Applicable Margin" shall mean, for all Loans, the amount set forth below
for the applicable Type of Loan (with (lambda) being Borrower's Debt to
Capitalization Ratio then in effect
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<PAGE> 154
without taking into account Contributions of Borrower with respect to Projects
which have not satisfied their Pre-Funding Requirements):
<TABLE>
<CAPTION>
DEBT TO BASE RATE, LIBO RATE
LEVEL CAPITALIZATION RATIO (% P.A.) (% P.A.)
<S> <C> <C> <C>
I (lambda)<50% 0.75% 1.50%
-
II 50%<(lambda)<60% 1.00% 1.75%
-
III 60%<(lambda) 1.375% 2.125%
</TABLE>
"Applicable Permit" means any Permit, including any zoning, environmental
protection, pollution (including air, water or noise), sanitation, FERC, PUC,
import, export, safety, siting or building Permit (a) that is necessary to be
obtained by or on behalf of Borrower at any given time in light of the stage of
development, construction or operation of a Project (to the extent required by
Legal Requirements or the Operative Documents) to construct, test, operate,
maintain, repair, own or use a Project as contemplated by the Operative
Documents, to sell electricity and steam therefrom, for Borrower to enter into
any Operative Document or to consummate any transaction contemplated thereby, in
each case in accordance with all applicable Legal Requirements, (b) that is
necessary so that none of Borrower, Administrative Agent, Lead Arrangers,
Technical Committee or the Banks nor any Affiliate of any of them may be deemed
by any Governmental Authority to be subject to regulation under the FPA or PUHCA
or under any state laws or regulations respecting the rates of, or the financial
or organizational regulation of, electric utilities as a result of the
construction or operation of a Project or the sale of electricity or steam
therefrom, or (c) that is listed on Part I(A) of the Schedule of Applicable
Permits and Applicable Third Party Permits attached to the Credit Agreement as
Exhibit G-3 or any of its appendices.
"Applicable Third Party Permit" means any Permit, including any zoning,
environmental protection, pollution, sanitation, FERC, PUC, import, export,
safety, siting or building Permit (a) that is necessary to be obtained by any
Person (other than Borrower) that is a party to a Project Document, a Credit
Document or an Additional Project Document in order to perform such Person's
obligations under and as contemplated by the Operative Documents to which such
Person is a party, or in order to consummate any transaction contemplated
thereby, in each case in accordance with all applicable Legal Requirements or
(b) that is listed on Part I(B) of the Schedule of Applicable Permits and
Applicable Third Party Permits attached to the Credit Agreement as Exhibit G-3
or any of its appendices.
"Available Construction Funds" means, at any time and without duplication,
the sum of (a) amounts in the Construction Account and all subaccounts
thereunder (provided, however, that amounts in any given Construction
Sub-Account shall only be taken into account to the extent of the Project Costs
remaining to be paid in respect of the Project to which such Construction
Sub-Account relates), (b) the Available Loan Commitment, if any, (c) undisbursed
Insurance Proceeds which are available for payment of Project Costs, (d) any
delay liquidated
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<PAGE> 155
damages which Borrower has received under any Construction Contract, (e) any
other liquidated damages which Borrower has received under the other Project
Documents and which, by the terms of the Credit Agreement, are available for the
payment of Project Costs, and (f) any undisbursed amounts on deposit with
Administrative Agent or Depositary Agent constituting Base Equity or Additional
Borrower Equity or amounts deposited pursuant to Section 3.8(a) of the Credit
Agreement.
"Available Loan Commitment" means at any time and from time to time during
the Loan Availability Period, the Total Loan Commitment at such time minus the
sum of (a) the aggregate principal amount of all Loans outstanding at such time
plus (b) the aggregate Stated Amount of all Letters of Credit and outstanding
Reimbursement Obligations thereunder at such time.
"Bank" or "Banks" means the banks and other financial institutions that
are or become parties to the Credit Agreement and their successors and assigns
including each LC Bank.
"Banking Day" means any day other than a Saturday, Sunday or other day on
which banks are or Administrative Agent is authorized to be closed in the State
of New York or the State of California and, where such term is used in any
respect relating to a LIBOR Loan, which is also a day on which dealings in
Dollar deposits are carried out in the London interbank market.
"Bankruptcy Event" shall be deemed to occur, with respect to any Person,
if that Person shall institute a voluntary case seeking liquidation or
reorganization under the Bankruptcy Law, or shall consent to the institution of
an involuntary case thereunder against it; or such Person shall file a petition
or consent or shall otherwise institute any similar proceeding under any other
applicable Federal or state law, or shall consent thereto; or such Person shall
apply for, or by consent or acquiescence there shall be an appointment, of a
receiver, liquidator, sequestrator, trustee or other officer with similar powers
for itself or any substantial part of its assets; or such Person shall make an
assignment for the benefit of its creditors; or such Person shall admit in
writing its inability to pay its debts generally as they become due; or if an
involuntary case shall be commenced seeking liquidation or reorganization of
such Person under the Bankruptcy Law or any similar proceedings shall be
commenced against such Person under any other applicable Federal or state law
and (i) the petition commencing the involuntary case is not timely controverted,
(ii) the petition commencing the involuntary case is not dismissed within 60
days of its filing, (iii) an interim trustee is appointed to take possession of
all or a portion of the property, and/or to operate all or any part of the
business of such Person and such appointment is not vacated within 60 days, or
(iv) an order for relief shall have been issued or entered therein; or a decree
or order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee or other officer having similar
powers, of such Person or all or a part of its property shall have been entered;
or any other similar relief shall be granted against such Person under any
applicable Federal or state law.
"Bankruptcy Law" means Title 11, United States Code, and any other state
or federal insolvency, reorganization, moratorium or similar law for the relief
of debtors, or any successor statute.
4
<PAGE> 156
"Base Case Project Projections" means a projection of operating results
for the Projects over a period ending no sooner than the Loan Maturity Date,
showing at a minimum Borrower's reasonable good faith estimates, as of the
Closing Date, of revenue, operating expenses, Four-Quarter Portfolio Interest
Coverage Ratios (on an annual basis), Debt to Capitalization Ratios projected to
exist from time to time and sources and uses of revenues over the forecast
period, which projections are attached as Exhibit G-5 to the Credit Agreement.
"Base Equity" has the meaning given in Section 5.17.1 of the Credit
Agreement.
"Base Rate" means the greater of (a) the prime commercial lending rate
announced by The Bank of Nova Scotia at its New York office or (b) the Federal
Funds Rate plus 0.50%.
"Base Rate Loan" has the meaning given in Section 2.1.1(b)(i) of the
Credit Agreement.
"Baytown Project" means the approximately 780 MW gas-fired combined cycle
cogeneration facility to be located in Baytown, Chambers County, Texas.
"Beneficiary" has the meaning given in the granting clause of the Deed of
Trust.
"Borrower" means Calpine Construction Finance Company, L.P., a Delaware
limited partnership.
"Borrower's Environmental Consultant" means with respect to any Project,
the Person providing environmental consulting services and site assessment
report(s) to the Borrower and who provides a reliance letter in form and
substance reasonably acceptable to Administrative Agent.
"Borrowing" means a borrowing by Borrower of any Loan or the issuance,
renewal, extension or increase in the Stated Amount of any Letter of Credit.
"Calpine" means Calpine Corporation, a Delaware corporation.
"Calpine Central" means Calpine Central L.P., a Delaware limited
partnership.
"Calpine Central Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8A to the Credit Agreement between Administrative Agent and Calpine
Central.
"Calpine Corporation Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8B to the Credit Agreement between Administrative Agent and
Calpine.
"Calpine Eastern Corporation" means Calpine Eastern Corporation, a
Delaware corporation.
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<PAGE> 157
"Calpine Eastern Corporation Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8C to the Credit Agreement between Administrative Agent and Calpine
Eastern Corporation.
"Calpine Indenture" means, collectively, (a) that certain Indenture dated
February 17, 1994 relating to the principal amount of $105,000,000 9 1/4% Senior
Notes Due 2004 by and between Calpine and Shawmut Bank Connecticut, as trustee;
(b) that certain Indenture dated as of April 16, 1996 relating to the issuance
of the principal amount of $180,000,000 of 10 1/2% Senior Notes due 2006, by and
between Calpine and Fleet National Bank, as trustee; (c) that certain Indenture
dated as of July 8, 1997 relating to the issuance of a principal amount of
$275,000,000, 8 3/4% Senior Notes Due 2007, by and between Calpine and The Bank
of New York, as trustee, as supplemented by that certain First Supplemental
Indenture dated as of September 10, 1997, by and between Calpine and The Bank of
New York, a trustee; (d) that certain Indenture dated as of March 31, 1998
relating to the issuance of a principal amount of $400,000,000, 7 7/8% Senior
Notes Due 2008, by and between Calpine and the Bank of New York, as trustee, as
supplemented by that certain First Supplemental Indenture dated as of July 24,
1998, by and between Calpine Corporation and the Bank of New York, as trustee;
(e) that certain Indenture, dated as of March 26, 1999, relating to the issuance
of a principal amount of $250,000,000, 7 5/8% Senior Notes Due 2006 and the
issuance of a principal amount of $350,000,000, 7 3/4% Senior Notes Due 2009 by
and between Calpine and The Bank of New York as trustee; and (f) such additional
indentures relating to senior notes of Calpine issued after the date hereof.
"Capital Adequacy Requirement" has the meaning given in Section 2.8.4 of
the Credit Agreement.
"Capitalization" means, at any time, the sum of (x) the aggregate Debt of
Borrower at such time and (y) the Net Worth of Borrower at such time. The Debt
and Net Worth of Borrower with respect to partially owned Projects shall be
determined in accordance with GAAP.
"Change of Law" has the meaning given in Section 2.8.2 of the Credit
Agreement.
"Closing Date" means the date when each of the conditions precedent listed
in Section 3.1 of the Credit Agreement has been satisfied (or waived in
accordance with the terms of the Credit Agreement).
"COD" means, with respect to a Project, the date on which such Project has
achieved Commercial Operation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all real and personal property which is subject or is
intended to become subject to the security interests or liens granted by any of
the Collateral Documents; provided, however, that, with respect to the
Additional Subsequent Projects the "Collateral" shall
6
<PAGE> 158
not include any interest in real property (whether fee or leasehold) relating to
such Additional Subsequent Project.
"Collateral Documents" means the Deeds of Trust, the Depositary Agreement,
the Credit Agreement, the Security Agreement, the Consents, the Equity
Documents, the Affiliated Subordination Agreements, the Debt Subordination
Agreements, the Magic Valley Subordination Agreement, any security agreements
granting security interests in the Operating Accounts and any financing
statements, notices and the like filed, recorded or delivered in connection with
the foregoing.
"Collateral Value" means, as of any date, the aggregate Project Costs
incurred and paid to such date minus the aggregate Project Costs incurred and
paid to such date for assets which are not the subject of a security interest in
favor of the Banks.
"Commercial Operation" means, with respect to a Project, that such Project
is able to operate and produce electrical energy for commercial sale in
accordance with the Prudent Utility Practices and applicable laws.
"Commitment Fee" has the meaning given in Section 2.4.2 of the Credit
Agreement.
"Commitments" means, with respect to each Bank, such Bank's Loan
Commitment and Letter of Credit Commitment, and with respect to all Banks, the
Total Loan Commitment and the Total Letter of Credit Commitment.
"Completion" means, with respect to each Project, that (i) all work under
the applicable Major Construction Contracts (other than "punchlist" items and
work which is to be done after the Project has passed its "acceptance tests" or
"performance tests") has been completed substantially in accordance with the
applicable Plans and Specifications and the requirements of all Applicable
Permits, (ii) all necessary facilities for the transportation of natural gas to
such Project have been completed, (iii) all necessary electrical interconnection
facilities sufficient to transmit all power generated by such Project have been
completed, (iv) all necessary facilities for the procurement, transportation and
discharge of water to or from such Project have been completed, (v) with respect
to each Initial Project, all Pre-Completion Requirements applicable to such
Project have been satisfied, (vi) the "acceptance tests" or "performance tests"
(however defined) under the applicable Prime Construction Contract and the
applicable Power Island Supply Contract have been performed and the Project has
achieved the minimum levels specified in such contracts for such "acceptance
tests" or "performance tests," (vii) such "acceptance tests" or "performance
tests" either (A) have been successfully completed as provided in the Prime
Construction Contract and the Power Island Supply Contract, or (B) performance
liquidated damages as provided in such contracts have been paid by the
applicable Contractor under the applicable Major Construction Contract and/or by
Calpine under the Completion Guaranty in an amount which, in the aggregate, is
equal to the lesser of (1) the amount of performance liquidated damages required
to be paid in order to be deemed to have successfully completed such "acceptance
tests" or "performance tests" under the applicable Major Construction Contracts,
without regard to any limitations of liability in such contracts, or (2) the
7
<PAGE> 159
EPC Equivalent Damages for such Project, and (viii) all real estate rights
necessary for the completion of the foregoing and the continued operation of
such Project shall have been obtained, all as satisfactorily certified by the
Independent Engineer to Administrative Agent in its reasonable discretion.
"Completion Date" means, with respect to a Project, the date on which
Completion of such Project occurs.
"Completion Guaranty" means the Completion Guaranty dated as of October
20, 1999 on substantially the form of Exhibit D-2E to the Credit Agreement
executed by Calpine in favor of Administrative Agent, on behalf of the Banks.
"Confirmation of Interest Period Selection" has the meaning given in
Section 2.1.2(b)(ii) of the Credit Agreement.
"Consents" means the consents specified on Exhibit E-2 to the Credit
Agreement and any other third party consents to the assignments contemplated by
the Credit Documents.
"Construction Account" has the meaning given in Section 1.1 of the
Depositary Agreement.
"Construction Contracts" means, collectively, for each Project, the Prime
Construction Contract, the Construction Management Agreement, the Power Island
Supply Contract and the Engineering Contract for such Project and any other
contract or agreement approved by the Lead Arrangers or the Technical Committee
in accordance with Section 3.1 or Section 3.3, as the case may be, of the Credit
Agreement entered into by, or on behalf of, Borrower with a Contractor for the
construction of all or any portion of any Project, or the supply or provision of
any goods or services relating to the construction of any Project, including (a)
the Magic Valley Construction Contracts, (b) the South Point Construction
Contracts, (c) the Sutter Construction Contracts, and (d) the Westbrook
Construction Contracts.
"Construction Management Agreement" means, collectively, for each Project,
the contract or agreement approved by the Lead Arrangers or the Technical
Committee in accordance with Section 3.1 or Section 3.3, as the case may be, of
the Credit Agreement entered into by, or on behalf of, Borrower with a
Construction Manager for the provision of construction management services for
any Project, including (a) the Magic Valley Construction Management Agreement,
(b) the South Point Construction Management Agreement, (c) the Sutter
Construction Management Agreement, and (d) the Westbrook Construction Management
Agreement.
"Construction Manager" means any wholly owned Subsidiary of Calpine
approved by the lead Arrangers or the Technical Committee in accordance with
Section 3.1 or 3.3, as the case may be, of the Credit Agreement in its capacity
as construction manager under a Construction Management Agreement.
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<PAGE> 160
"Construction Period" means, with respect to any Project, the period from
the commencement of construction of such Project through the Completion Date of
such Project.
"Construction Sub-Account" has the meaning given in Section 7.1.1 of the
Credit Agreement.
"Contractors" means, collectively, each Construction Manager, each Prime
Contractor, each Project Engineer, and any other Person who is providing goods
or services to a Project pursuant to a Construction Contract.
"Contribution" means either (i) a cash equity contribution or (ii) a
subordinated loan made pursuant to a Debt Subordination Agreement, or a
combination thereof, including, for purposes of Section 6.6 of the Credit
Agreement only, amounts considered to be Contributions pursuant to the
definition of Deemed Interest, in each case as permitted pursuant to the Credit
Agreement.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with Borrower, are treated as a single employer under Sections
414(b), (c), (m) or (o) of the Code.
"CPN Central Fuels" means CPN Central Fuels, L.P., a Delaware limited
partnership.
"CPN Central Fuels Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8D to the Credit Agreement between Administrative Agent and CPN
Central Fuels.
"CPN East Fuels" means CPN East Fuels, LLC, a Delaware limited liability
company.
"CPN East Fuels Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8D to the Credit Agreement between Administrative Agent and CPN
East Fuels.
"CPN Gas Marketing Company" means CPN Gas Marketing Company, a Delaware
corporation.
"CPN Gas Marketing Company Subordination Agreement" means the Affiliated
Subordination Agreement dated as of October 20, 1999 in substantially the form
of Exhibit D-8D to the Credit Agreement between Administrative Agent and CPN Gas
Marketing Company.
"CPSC" means Calpine Power Services Company, a California corporation.
"CPSC Subordination Agreement" means the Affiliated Subordination
Agreement dated as of October 20, 1999 in substantially the form of Exhibit D-8G
to the Credit Agreement between Administrative Agent and CPSC, a California
corporation.
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<PAGE> 161
"Credit Agreement" means the Credit Agreement dated as of October 20, 1999
by and among Borrower, Administrative Agent, Lead Arrangers, LC Bank,
Co-Documentation Agents, Syndication Agent, Bookrunner and the Banks.
"Credit Documents" means the Credit Agreement, the Notes, the Collateral
Documents, the Letters of Credit and any other loan or security agreements or
letter agreement or similar document, entered into by Administrative Agent and
one or more Major Project Participants in connection with the transactions
contemplated by the Credit Documents.
"Credit Event" has the meaning given in Section 3.4 of the Credit
Agreement.
"Date Certain" means the fourth anniversary of the Closing Date, provided,
however, that the Date Certain may be extended up to the fifth anniversary of
the Closing Date in accordance with Section 2.11 of the Credit Agreement.
"Debt" of any Person at any date means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (d) all obligations of such Person under leases which are or should
be, in accordance with GAAP, recorded as capital leases in respect of which such
Person is liable, (e) all obligations of such Person to purchase securities (or
other property) which arise out of or in connection with the sale of the same or
substantially similar securities (or property), (f) all deferred obligations of
such Person to reimburse any bank or other Person in respect of amounts paid or
advanced under a letter of credit or other instrument, (g) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, (h) all Debt (or other obligations) of others guaranteed
directly or indirectly by such Person or as to which such Person has an
obligation substantially the economic equivalent of a guaranty and (i)
obligations in respect of Hedge Transactions.
"Debt Service" means all fees of Administrative Agent and the Banks,
interest (including all interest accrued during the subject period) and
principal, Reimbursement Obligations and interest thereon and any other payments
due in connection with Letters of Credit, Liquidation Costs, Hedge Breaking
Fees, and net payments pursuant to Hedge Transactions.
"Debt to Capitalization Ratio" means the aggregate outstanding principal
amount of Debt of Borrower (except Debt consisting of Contributions made in the
form of subordinated loans) at a given time divided by the Capitalization of
Borrower at such time.
"Debt to Collateral Value Ratio" means the aggregate outstanding principal
amount of Debt of Borrower (except Debt consisting of Contributions made in the
form of subordinated loans) at a given time divided by the Collateral Value of
Borrower at such time.
"Debt Subordination Agreement" means a Subordination Agreement executed by
a Partner or Calpine, Borrower and Administrative Agent in substantially the
form of Exhibit D-7 to the Credit Agreement and otherwise in form and substance
satisfactory to Administrative Agent.
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"Deeds of Trust" means, collectively, for each Project, other than each
Additional Subsequent Project, the deed of trust or mortgage encumbering any one
or more of the Sites and/or Easements as security for the Obligations, including
(a) the Magic Valley Deed of Trust, (b) the South Point Deed of Trust, (c) the
Sutter Deed of Trust, and (d) the Westbrook Deed of Trust.
"Deemed Interest" means interest accruing at an interest rate equal to 9%
per annum; provided, however, that with respect to Contributions made for a
Project prior to Completion thereof, Deemed Interest thereon shall accrue but
not be payable until Completion of such Project, at which time such accrued
interest shall be added to, and be considered part of, the principal amount of
such Contribution.
"Default Rate" means the interest rate per annum equal to the interest
rate then applicable plus two percent. Interest computed with reference to the
Default Rate shall be adjusted and calculated in the same manner as interest
computed with reference to the Base Rate.
"Depositary Agent" means The Bank of Nova Scotia, in its capacity as
depositary agent under the Depositary Agreement.
"Depositary Agreement" means the Depositary Agreement dated as of October
20, 1999 in substantially the form of Exhibit D-1 to the Credit Agreement among
Borrower, Administrative Agent and Depositary Agent.
"Designated Subsequent Projects" means, collectively, the Subsequent
Projects described in Appendices G-1E, G-1Q, G-1R and G-1S to the Credit
Agreement.
"Disbursement Requisition" means a request for disbursement of funds
submitted by Borrower to Administrative Agent in the form of Exhibit C-6 to the
Credit Agreement.
"Diversification Requirements" means, with respect to any Subsequent
Project, that the fraction determined by dividing (A) the projected net capacity
of such Subsequent Project plus the net capacity of all other Initial Projects
and Funded Subsequent Projects located within the same NERC Region as such
Subsequent Project by (B) the aggregate net capacity of all Initial Projects and
Funded Subsequent Projects (including such Subsequent Project) is less than .50.
"Dollars" and "$" means United States dollars or such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public and private debts in the United States of America.
"Drawdown Certificate" means a certificate delivered to Administrative
Agent substantially in the form of Exhibit C-5 to the Credit Agreement.
"Drawing Date" has the meaning given in Section 2.2.4 of the Credit
Agreement.
"Drawing Payment" means any payment by LC Bank honoring a drawing under a
Letter of Credit.
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"Easements" means the easements appurtenant, easements in gross, license
agreements and other rights running in favor of Borrower and/or appurtenant to
any Site, including without limitation those certain easements and licenses
described in the Title Policies.
"EBITDA" means, for any period, Project Operating Revenues for such period
minus Senior O&M Costs for such period.
"Eligible Facility" means an eligible facility within the meaning of
PUHCA.
"Eminent Domain Proceeds" has the meaning given in Section 7.6 of the
Credit Agreement.
"Engineering Contracts" means, for each Project, the contract or agreement
approved by the Lead Arrangers or the Technical Committee in accordance with
Section 3.1 or Section 3.3, as the case may be, of the Credit Agreement entered
into by, or on behalf of, Borrower for the supply of engineering or design
services for a Project, including the Magic Valley Engineering Contract.
"Environmental Claim" means any and all liabilities, losses,
administrative, regulatory or judicial actions, suits, demands, decrees, claims,
liens, judgments, warning notices, notices of noncompliance or violation,
investigations, proceedings, removal or remedial actions or orders, or damages
(foreseeable and unforeseeable, including consequential and punitive damages),
penalties, fees, out-of-pocket costs, expenses, disbursements, attorneys' or
consultants' fees, relating in any way to any Hazardous Substance Law or any
Permit issued under any such Hazardous Substance Law (hereafter "Claims"),
including (a) any and all Claims by Governmental Authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Hazardous Substance Law, and (b) any and all Claims by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Substances or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Reports" means, for each Project, the environmental reports
delivered to Administrative Agent on behalf of the Banks with respect to such
Project, including (a) the Magic Valley Environmental Reports, (b) the South
Point Environmental Reports, (c) the Sutter Environmental Reports, and (d) the
Westbrook Environmental Reports.
"EPC Equivalent Damages" means, with respect to each Project, an amount
equal to [*] of the aggregate contract price under the Prime Construction
Contract, the Power Island Supply Contract and the Engineering Contract for such
Project.
"Equipment" has the meaning given in the granting clause of the Deeds of
Trust.
"Equity Documents" means the Completion Guaranty and any other guaranty
executed from time to time by an Affiliate of Borrower in favor of
Administrative Agent and the Banks.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" means any employee benefit plan (a) maintained by Borrower or
any member of the Controlled Group, or to which any of them contributes or is
obligated to contribute, for its employees and (b) covered by Title IV of ERISA
or to which Section 412 of the Code applies.
"Event of Default" has the meaning given in Article 8 of the Credit
Agreement.
"Event of Eminent Domain" means any compulsory transfer or taking by
condemnation, eminent domain or exercise of a similar power, or transfer under
threat of such compulsory transfer or taking, of any part of the Collateral or
any of the real property interests subject to the Deeds of Trust, by any agency,
department, authority, commission, board, instrumentality or political
subdivision of any state, the United States or another Governmental Authority
having jurisdiction.
"Exempt Wholesale Generator" means an exempt wholesale generator within
the meaning of PUHCA.
"Expiration Date" has the meaning given in each Letter of Credit.
"Federal Funds Rate" means, for any day, the weighted average of the per
annum rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers as published by the
Federal Reserve Bank of New York for such day (or, if such rate is not so
published for any day, the average rate charged by Administrative Agent on such
day on such transactions as determined by Administrative Agent).
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"FERC" means the Federal Energy Regulatory Commission and its successors.
"Final Completion" means, with respect to any Project, that all conditions
to "Final Completion" shall have been satisfied as provided in Section 3.5 of
the Credit Agreement.
"Final Project Cost" means, with respect to any Project, the actual total
Project Costs through Final Completion of such Project, as determined by
Administrative Agent in consultation with Independent Engineer and Borrower.
"Four-Quarter Portfolio Interest Coverage Ratio" means, as of the last day
of each calendar quarter, the ratio of (a) EBITDA for the 12-month period ending
on such day for the Projects that have achieved (or, in the case of a projected
ratio calculation, are projected to achieve) Commercial Operation before such
day to (b) Borrower's interest expense allocated to such Projects in accordance
with GAAP for such 12-month period. In the event that a given Project achieved
(or, in the case of a projected ratio calculation, is projected to achieve)
Commercial Operation at any time during such 12-month period, such Project's
EBITDA and
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allocated interest expense shall be calculated beginning on the date Commercial
Operation was achieved (or projected to be achieved).
"FPA" means the Federal Power Act, excluding Sections 1-18, 21-30, 202(c),
210, 211, 212, 305(c) and any necessary enforcement provision of Part III of the
Act with regard to the foregoing sections.
"Fuel Consultant" means, for each Project, the Person providing fuel
consulting services to the Banks with respect to such Project, including (i)
with respect to the Magic Valley, South Point, and Sutter Projects, Navigant
Consulting, Inc. and (ii) with respect to the Westbrook Project, CC Pace, or
their respective successors appointed pursuant to the Credit Agreement.
"Fuel Manager" means any wholly owned Subsidiary of Calpine approved by
the Lead Arrangers or the Technical Committee in accordance with Section 3.1 or
3.3, as the case may be, of the Credit Agreement in its capacity as fuel manager
under a Fuel Management Agreement.
"Fuel Manager Subordination Agreement" means the Affiliated Subordination
Agreement dated as of October 20, 1999 in substantially the form of Exhibit D-8F
to the Credit Agreement between Administrative Agent and Fuel Manager.
"Fuel Management Agreement" means, for each Project, the fuel management
agreement approved by the Lead Arrangers or the Technical Committee in
accordance with Section 3.1 or Section 3.3, as the case may be, of the Credit
Agreement and entered into by Borrower, including (a) the Magic Valley Fuel
Management Agreement, (b) the South Point Fuel Management Agreement, (c) the
Sutter Fuel Management Agreement, and (d) the Westbrook Fuel Management
Agreement.
"Fuel Plans" means, collectively, the fuel plans delivered by Borrower
pursuant to Sections 3.1.16 and 3.3.17 of the Credit Agreement.
"Fuel Supplier" means any Person who is supplying fuel and/or related
services to a Project pursuant to a Gas Supply Contract.
"Funded Subsequent Project" means a Subsequent Project that has qualified
for initial funding pursuant to Section 3.3 of the Credit Agreement.
"Funding Date" means each date of an initial funding of Loans for a
Subsequent Project pursuant to Section 3.3 of the Credit Agreement.
"GAAP" means generally accepted accounting principles in the United States
consistently applied.
"Gas Supply Contracts" means the contracts or agreements entered into in
accordance with the Credit Agreement by, or on behalf of, Borrower with a Fuel
Supplier for the supply of fuel and/or related services for a Project, including
(a) the Magic Valley Gas Supply
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Contracts, (b) the South Point Gas Supply Contracts, (c), the Sutter Gas Supply
Contracts, and (d) the Westbrook Gas Supply Contracts.
"Gas Transportation Agreements" means the contracts or agreements entered
into in accordance with the Credit Agreement by, or on behalf of, Borrower with
a Gas Transporter for the supply of fuel transportation services for a Project,
including (a) the Magic Valley Gas Transportation Agreements, (b) the South
Point Gas Transportation Agreements, (c) the Sutter Gas Transportation
Agreements, and (d) the Westbrook Gas Transportation Agreements.
"Gas Transporter" means any Person that owns gathering systems and/or
transportation systems that are able to move fuel from its source of supply to a
point of interconnection that provides such services to a Project pursuant to a
Gas Transportation Agreement.
"General Partner" means any Person who is a general partner in the
Borrower.
"Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity, (including any zoning authority,
FERC, the PUC, the FDIC, the Comptroller of the Currency or the Federal Reserve
Board, any central bank or any comparable authority) or any arbitrator with
authority to bind a party at law.
"Governmental Rule" means any law, rule, regulation, ordinance, order,
code interpretation, treaty, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Granting Bank" has the meaning given in Section 10.13.2 of the Credit
Agreement.
"Hazardous Substances" means (statutory acronyms and abbreviations having
the meaning given them in the definition of "Hazardous Substances Laws")
substances defined as "hazardous substances," "pollutants" or "contaminants" in
Section 101 of the CERCLA; those substances defined as "hazardous waste,"
"hazardous materials" or "regulated substances" by the RCRA; those substances
designated as a "hazardous substance" pursuant to Section 311 of the CWA; those
substances defined as "hazardous materials" in Section 103 of the HMTA; those
substances regulated as a hazardous chemical substance or mixture or as an
imminently hazardous chemical substance or mixture pursuant to Sections 6 or 7
of the TSCA; those substances defined as "contaminants" by Section 1401 of the
SDWA, if present in excess of permissible levels; those substances regulated by
the Oil Pollution Act; those substances defined as a pesticide pursuant to
Section 2(u) of the FIFRA; those substances defined as a source, special nuclear
or by-product material by Section 11 of the AEA; those substances defined as
"residual radioactive material" by Section 101 of the UMTRCA; those substances
defined as "toxic materials" or "harmful physical agents" pursuant to Section 6
of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part
261.3; those substances defined as hazardous waste constituents in 40 C.F.R.
Part 260.10, specifically including Appendix VII and VIII of Subpart D of 40
C.F.R. Part 261; those
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substances designated as hazardous substances in 40 C.F.R. Parts 116.4 and
302.4; those substances defined as hazardous substances or hazardous materials
in 49 C.F.R. Part 171.8; those substances regulated as hazardous materials,
hazardous substances, or toxic substances in 40 C.F.R. Part 1910; in any other
Hazardous Substances Laws; and in the regulations adopted and publications
promulgated pursuant to said laws, whether or not such regulations or
publications are specifically referenced herein.
"Hazardous Substances Law" means any of:
(i) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA");
(ii) the Federal Water Pollution Control Act (33 U.S.C. Section 1251
et seq.) ("Clean Water Act" or "CWA");
(iii) the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.) ("RCRA");
(iv) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.)
("AEA");
(v) the Clean Air Act (42 U.S.C. Section 7401 et seq.) ("CAA");
(vi) the Emergency Planning and Community Right to Know Act (42
U.S.C. Section 11001 et seq.) ("EPCRA");
(vii) the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.) ("FIFRA");
(viii) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
(ix) the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.)
("SDWA");
(x) the Surface Mining Control and Reclamation Act of 1974
(30 U.S.C. Sections 1201 et seq.) ("SMCRA");
(xi) the Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.) ("TSCA");
(xii) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 et seq.) ("HMTA");
(xiii) the Uranium Mill Tailings Radiation Control Act of 1978
(42 U.S.C. Section 7901 et seq.) ("UMTRCA");
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(xiv) the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.) ("OSHA");
(xv) all other Federal Governmental Rules which govern Hazardous
Substances; and
(xxi) and all state and local Governmental Rules which govern
Hazardous Substances in any state or local jurisdiction in which a Project is
located, and the regulations adopted and publications promulgated pursuant to
all such foregoing laws.
"Hedge Breaking Fees" means all reasonable costs, fees and expenses
incurred by Borrower in connection with any unwinding, breach or termination of
the Hedge Transactions, all to the extent provided in and calculated pursuant to
the applicable Interest Rate Agreements.
"Hedge Transaction" means any "Transaction" (such as swaps, caps, collars
or floors) entered into under an Interest Rate Agreement.
"Improvements" has the meaning given in the granting clause in the Deeds
of Trust.
"Inchoate Default" means any occurrence, circumstance or event, or any
combination thereof, which, with the lapse of time and/or the giving of notice,
would constitute an Event of Default.
"Independent Consultants" means, collectively, the Insurance Consultant,
the Fuel Consultant, the Independent Engineer, the Power Marketing Consultant or
their successors appointed pursuant to the Credit Agreement.
"Independent Engineer" means R.W. Beck, Inc., or its successor appointed
pursuant to the Credit Agreement.
"Information Memorandum" means the descriptive Information Memorandum with
respect to the Projects and Credit Agreement prepared by Lead Arrangers in
consultation with Borrower for use in connection with the syndication of the
Commitments.
"Initial Projects" means, collectively, the Magic Valley Project, the
South Point Project, Sutter Project and the Westbrook Project; each
individually, an "Initial Project."
"Insurance Consultant" means Sedgwick James or its successor appointed
pursuant to the Credit Agreement.
"Insurance Proceeds" has the meaning given in Section 7.5.1 of the Credit
Agreement.
"Interest Period" means, with respect to any LIBOR Loan, the time period
selected by Borrower which commences on the first day of such Loan or the
effective date of any
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conversion (as the case may be) and ends on the last day of such time period,
provided that no single day shall be deemed to be a part of two Interest
Periods.
"Interest Rate" means the Base Rate or the LIBO Rate, as the case may be.
"Interest Rate Agreements" means any ISDA Master Agreement and the
schedules thereto between Borrower and the counterparty(ies) thereto and the
transaction confirmations thereunder.
"Inventory" means "inventory," as defined in the UCC, of Borrower.
"Joint Venture Agreement" has the meaning given in Section 3.3.1 of the
Credit Agreement.
"Joint Venturers" has the meaning given in Section 3.3.1 of the Credit
Agreement.
"LC Bank" means The Bank of Nova Scotia or, from time to time, the Bank
approved by such Bank, Borrower and Administrative Agent that issues the Letters
of Credit, in its capacity as such issuer.
"LC Beneficiary" means the account beneficiary under a Letter of Credit,
or any assignee or transferee of such beneficiary with respect to the rights of
such beneficiary under such Letter of Credit.
"Lead Arrangers" means each of Credit Suisse First Boston and The Bank of
Nova Scotia as the lead arrangers of the Commitments.
"Leases" mean all contracts or agreements approved by the Lead Arrangers
or the Technical Committee in accordance with Section 3.1 or Section 3.3, as the
case may be, of the Credit Agreement entered into by or on behalf of Borrower
for the leasing of a Site for a Project, including the South Point Lease.
"Legal Requirements" means, as to any Person, the articles of
incorporation, bylaws or other organizational or governing documents of such
Person, and any requirement under a Permit, and any Governmental Rule in each
case applicable to or binding upon such Person or any of its properties or to
which such Person or any of its property is subject.
"Lending Office" means, with respect to any Bank, the office designated as
such beneath the name of such Bank on Exhibit H of the Credit Agreement or such
other office of such Bank as such Bank may specify from time to time to
Administrative Agent and Borrower.
"Letter of Credit" means a letter of credit issued by LC Bank pursuant to
Section 2.2 of the Credit Agreement in substantially the format of letters of
credit generally issued by LC Bank.
"Letter of Credit Commitment" means, at any time with respect to each
Bank, such Bank's Proportionate Share of the Total Letter of Credit Commitment
at such time.
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"Letter of Credit Fee" has the meaning given in Section 2.5.1 of the
Credit Agreement.
"LIBO Rate" means, for any LIBOR Loan, a rate per annum (rounded upwards
if necessary, to the nearest 1/16th of 1%) determined by Administrative Agent
(which determination shall, absent manifest error, be conclusive) to be equal to
(a)(i) the offered rate for deposits in Dollars (in the approximate amount and
having approximately the same maturity as the LIBOR Loan to be made) in the
London Interbank Market at approximately 11:00 a.m. (London time), which appears
on the Telerate Screen, or, (ii) if such rate does not appear on the Telerate
Screen, such rate as determined in good faith by Administrative Agent, two
Banking Days prior to the first day of the Interest Period for such LIBOR Loan,
divided by (b) 100% minus (c) the Reserve Requirement (expressed as a
percentage) for such LIBOR Loan for such Interest Period.
"LIBOR Loan" has the meaning given in Section 2.1.1(b)(i) of the Credit
Agreement.
"Lien" on any asset means any mortgage, deed of trust, lien, pledge,
charge, security interest, or easement or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected or effective
under applicable law, as well as the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Limited Partners" means (i) Calpine CCFC LP, Inc., a Delaware
corporation, (ii) Calpine Magic Valley Generation, Inc., a Delaware corporation,
(iii) Calpine MVG, Inc., a Delaware corporation, (iv) CPN Westbrook I, Inc., a
Delaware corporation, (v) Calpine Westbrook, Inc., a Delaware corporation, (vi)
Calpine Sutter, Inc., a Delaware corporation, (vii) Calpine South Point, Inc., a
Delaware corporation, and (viii) any other entity that becomes a limited partner
in Borrower in accordance with the Credit Agreement.
"Liquidation Costs" has the meaning given in Section 2.9 of the Credit
Agreement.
"Loan" has the meaning given in Section 2.1.1(a) of the Credit Agreement.
"Loan Availability Period" means the period from the Closing Date to the
Loan Maturity Date.
"Loan Commitment" means, at any time with respect to each Bank, such
Bank's Proportionate Share of the Total Loan Commitment at such time.
"Loan Maturity Date" means the date that is the earliest to occur of (a)
the acceleration of the Obligations upon and during the occurrence and
continuance of an Event of Default and (b) the Date Certain.
"Loss Proceeds Account" has the meaning given in Section 1.1 of the
Depositary Agreement.
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"Magic Valley Affiliated Party Agreement Guaranty" means the Affiliated
Party Agreement Guaranty dated as of October 20, 1999 in substantially the form
of Exhibit D-2A to the Credit Agreement executed by Calpine in favor of
Borrower.
"Magic Valley Construction Contracts" means, collectively, (a) the Magic
Valley Construction Management Agreement, (b) the Magic Valley Prime
Construction Contract for Construction Services, (c) the Magic Valley
Engineering Contract, (d) the Magic Valley Power Island Supply Contract, and (e)
any other contract or agreement entered into by, or on behalf of Borrower for
the construction of all or any portion of the Magic Valley Project, or the
supply or provision of any goods or services relating to the construction of the
Magic Valley Project.
"Magic Valley Construction Management Agreement" means that certain Magic
Valley Construction Management Agreement, dated as of October 20, 1999 between
Borrower and Calpine Central.
"Magic Valley Deed of Trust" means the Deed of Trust, Assignment of Rents
and Security Agreement dated as of October 20, 1999 in substantially the form of
Exhibit D-3 to the Credit Agreement executed by Borrower, as trustor, to Stewart
Title Company, as trustee, in favor of Administrative Agent, as beneficiary.
"Magic Valley Engineering Contract" means the Contract for Professional
Services dated as of December 8, 1998 between Borrower and Sargent & Lundy,
L.L.C.
"Magic Valley Environmental Report" means (a) the Phase I Environmental
Site Assessment at the proposed Magic Valley combined-cycle facility located at
Hidalgo County, Texas, dated April 1999, prepared by Environmental Consulting
Technology.
"Magic Valley Electric Interconnection Documents" means, collectively, (a)
the Electric Interconnection Agreement dated as of February 25, 1999 between
Central Power and Light Company and Borrower, (b) the Letter of Authorization to
Proceed with Engineering and Construction of Transmission Line Relocation dated
December 17, 1998 between Central and South West Services, Inc. and Borrower,
(c) the Letter of Authorization to Proceed with Engineering and Procurement and
Construction of Interconnection Facilities Dated February 25, 1999 between
Central and South West Services, Inc. and Borrower and (d) any other contract or
agreement entered into by, or on behalf of, Borrower for electrical
interconnection services to the Magic Valley Project.
"Magic Valley Fuel Management Agreement" means the Magic Valley Fuel
Management Agreement dated as of October 20, 1999, between Borrower and CPN
Central Fuels.
"Magic Valley Gas Supply Agreement" means that certain Magic Valley Gas
Supply Agreement, dated as of October 20, 1999 between Borrower and CPN Central
Fuels.
"Magic Valley Gas Supply Contracts" means, collectively, (a) the Magic
Valley Gas Supply Agreement, (b) the Fuel Management Services Agreement, dated
as of May 1, 1998
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between CCNG, Inc. and Borrower and (c) and any other agreement or document
entered into by or on behalf of Borrower for the supply of fuel to the Magic
Valley Project.
"Magic Valley Gas Transportation Agreements" means any agreement or
document entered into by or on behalf of Borrower for the supply of fuel
transportation services to the Magic Valley Project.
"Magic Valley Maintenance Contract" means the Maintenance Contract dated
as of June 30, 1998, between Borrower and Westinghouse Power Generation, a
division of CBS Corporation, a Pennsylvania corporation.
"Magic Valley Operating and Maintenance Agreement" means the Magic Valley
Operation and Maintenance Agreement dated as of October 20, 1999 between
Borrower and Calpine Central.
"Magic Valley Power Island Supply Contract" means the Purchase Contract
dated as of June 30, 1998 between Borrower and Westinghouse Power Generation, a
division of CBS Corporation, a Pennsylvania corporation.
"Magic Valley Power Marketing Agreement" means the Magic Valley Power
Marketing Agreement dated as of October 20, 1999, between Borrower and CPSC.
"Magic Valley Power Purchase Agreement" means the Power Purchase and Sale
Agreement, dated as of May 22, 1998 between Borrower and Magic Valley Electric
Cooperative, Inc., a Texas corporation.
"Magic Valley Power Purchase Documents" means (a) the Magic Valley Power
Purchase Agreement, and (b) any other contracts or agreements entered into by
Borrower for the sale of electric energy and/or capacity from the Magic Valley
Project.
"Magic Valley Prime Construction Contract" means the Contract for
Construction dated as of March 26, 1999 between Borrower and Zachry Construction
Corporation.
"Magic Valley Project" means, the approximately 700 MW (gross) combined
cycle facility located on the Magic Valley Site, all as further described in
Appendix G-1A to the Credit Agreement, together with all buildings, structures
or improvements erected on the Magic Valley Site and the Easements with respect
to the Magic Valley Site, all alterations thereto or replacements thereof, all
fixtures, attachments, appliances, equipment, machinery and other articles
attached thereto or used in connection therewith and all Parts which may from
time to time be incorporated or installed in or attached thereto, all contracts
and agreements for the purchase or sale of commodities or other personal
property related thereto, all leases of real or personal property related
thereto, and all other real and tangible and intangible personal property owned
by Borrower and placed upon or used in connection with the electric and steam
generation plant located upon the Magic Valley Site and the Easements with
respect to the Magic Valley Site.
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"Magic Valley Project Documents" means, collectively, the Magic Valley
Construction Contracts, the Magic Valley Gas Supply Contracts, the Magic Valley
Power Purchase Documents, the Magic Valley Operating and Maintenance Agreement,
the Magic Valley Project Management Agreement, the Magic Valley Maintenance
Contract, the Magic Valley Power Marketing Agreement, the Magic Valley Gas
Transportation Agreements, the Magic Valley Fuel Management Agreement, the Magic
Valley Affiliated Party Agreement Guaranty, the Magic Valley Water Documents,
the Magic Valley Electric Interconnection Documents, the Franchise Agreement,
dated as of May 14, 1999, by and between the City of Edinburg, Texas and the
Borrower and any other agreement or document relating to the development,
construction or operation of the Magic Valley Project to which Borrower is a
party.
"Magic Valley Project Management Agreement" means that certain Magic
Valley Project Management Agreement dated as of October 20, 1999 between the
Borrower and Calpine Central.
"Magic Valley Site" has the meaning given in the Magic Valley Deed of
Trust (as it may be amended from time to time).
"Magic Valley Subordination Agreement" means that certain Lien
Subordination Agreement, dated as of October 20, 1999, between Administrative
Agent and Magic Valley Electric Cooperative, Inc.
"Magic Valley Water Contracts" means, collectively, (a) the Agreement for
Purchase of Treated Effluent Water, dated as of April 21, 1998 between the City
of Edinburg, Texas and Borrower, (b) the Water Delivery Contract dated as of
July 19, 1999 between the Hildalgo County Irrigation District No. 1 and
Borrower, (c) the Agreement to Purchase Water dated as of June 17, 1999 between
the Hildalgo County Irrigation District No. 2 and Borrower, (d) the Earnest
Money Contract dated as of August 4, 1999 between Bayview Irrigation District
No. 11 and Borrower and (e) any other contract or agreement entered into by, or
on behalf of, Borrower for the supply or transportation of water to the Magic
Valley Project.
"Maintenance Contracts" means, collectively, the contracts or agreements
approved by the Lead Arrangers or the Technical Committee in accordance with
Section 3.1 or Section 3.3, as the case may be, of the Credit Agreement entered
into by, or on behalf of, Borrower for the supply of maintenance services for a
Project, including (a) the Magic Valley Maintenance Contract, (b) the South
Point Maintenance Contract, (c) the Sutter Maintenance Contract, and (d) the
Westbrook Maintenance Contract.
"Maintenance Provider" means any entity approved by the Lead Arrangers or
the Technical Committee in accordance with Section 3.1 or 3.3, as the case may
be, of the Credit Agreement in its capacity as maintenance provider under a
Maintenance Contract.
"Major Construction Contracts" means, collectively, the Construction
Management Agreement, the Prime Construction Contract, the Engineering Contract
and the Power Island Supply Contract for the Project to which it relates.
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"Major Contractors" means, collectively, with respect to a given Project,
the Construction Manager, the Prime Contractor, the Project Engineer and the
Power Island Supplier, if any, for such Project.
"Major Fuel Supplier" means the Fuel Supplier under a Major Gas Supply
Contract.
"Major Gas Supply Contract" means, collectively, (i) one or more Gas
Supply Contracts, with the same Fuel Supplier for the same Project, for more
than 17,000 MMBtu/day in the aggregate (calculated on a yearly average basis)
for a given Project with a term of more than two years or (ii) any Gas Supply
Contract with an Affiliate of Borrower.
"Major Gas Transportation Agreement" means, collectively, (i) one or more
Gas Transportation Agreements, with the same Fuel Transporter for the same
Project, for more than 17,000 MMBtu/day in the aggregate (calculated on a yearly
average basis) for a given Project with a term of more than two years and (ii)
any Gas Transportation Agreement with an Affiliate of Borrower.
"Major Gas Transporter" means the Gas Transporter under a Major Gas
Transportation Agreement.
"Major Maintenance" means labor, materials and other direct expenses for
any overhaul of, or major maintenance procedure for, the Projects which requires
significant disassembly or shutdown of any of the Projects pursuant to
manufacturers' guidelines or recommendations, engineering or operating
considerations or the requirements of any applicable Legal Requirement,
including, without limitation, fees payable under the Maintenance Contracts.
"Major Power Purchase Agreement" means one or more Power Purchase
Documents, with the same power purchaser for the same Project, for more than 100
MW in the aggregate (calculated on a yearly average basis) of capacity and/or
firm energy from a given Project with a term of more than two years.
"Major Power Purchaser" means the Power Purchaser under a Major Power
Purchase Agreement.
"Major Project Documents" means, collectively, with respect to a given
Project, the Major Construction Contracts, the Project Management Agreement, the
Power Marketing Agreement, the Fuel Management Agreement, the Maintenance
Contract, any Major Gas Supply Contracts, the Affiliated Party Agreement
Guaranty, any Major Gas Transportation Agreements, any Major Power Purchase
Agreements, the Lease, if any, of the applicable Site, the O&M Agreement and any
Joint Venture Agreement, if any, for such Project.
"Major Project Participants" means Borrower, each General Partner,
Calpine, and, with respect to each Project, the Operator, the Project Manager,
the Power Marketer, the Fuel Manager, the Maintenance Provider, the lessor under
the Lease, if any, of the applicable Site, each
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Major Contractor, each Major Power Purchaser, each Major Fuel Supplier, each
Major Gas Transporter and each Joint Venturer, if any, for such Project.
"Major Subcontractor" means any subcontractor party to a subcontract with
a Major Contractor providing for the payment to such subcontractor of $100,000
or more.
"Managing Partner" has the meaning given the term "Managing General
Partner" in the Partnership Agreement.
"Mandatory Prepayment" has the meaning specified in Section 2.1.6 of the
Credit Agreement.
"Material Adverse Effect" means
(a) a material adverse change (i) with respect to Borrower, in the
business, property, results of operation or financial condition of
Borrower, the Projects taken as a whole, or Calpine and (ii) with
respect to an individual Initial Project or Funded Subsequent
Project, in the business, property, results of operating or
financial condition of such Project; provided that a change in any
Bank's or the Power Marketing Consultant's or Fuel Consultant's view
of future price of electricity or gas is not a Material Adverse
Effect; or
(b) any event or occurrence of whatever nature (but specifically
excluding a change in any Bank's or the Power Marketing Consultant's
or the Fuel Consultant's view of the future price of electricity or
gas) which could reasonably be expected to materially and adversely
affect:
(i) Borrower's ability to perform its obligations under the Credit
Documents or, with respect to an individual Initial Project or
Funded Subsequent Project, the ability of such Project or a
Major Project Participant to perform its obligations under a
Project Document where such inability to perform will have a
material and adverse effect on the completion of the
construction or operation of such Project, or
(ii) the Banks' security interests in the Collateral.
"Maturity" or "maturity" means, with respect to any Loan, Borrowing,
interest, fee or other amount payable by Borrower under the Credit Agreement or
the other Credit Documents, the date such Loan, Borrowing, interest, fee or
other amount becomes due, whether upon the stated maturity or due date, upon
acceleration or otherwise.
"Maximum Debt to Capitalization Ratio" means a Debt to Capitalization
Ratio of no more than [*] to 1.00; provided, however, that if immediately prior
to the initial funding of Loans for the Initial Projects pursuant to Section 3.2
of the Credit Agreement, Calpine is not
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rated at least Ba2 by Moody's and BB by S&P, then for so long as such ratings
are not increased to Ba2 and BB, respectively, the Maximum Debt to
Capitalization Ratio shall be a Debt to Capitalization Ratio of no more than
[*] to 1.00.
"Minimum Notice Period" means at least three Banking Days before the date
of any Borrowing or conversion of Type of Loan resulting in whole or in part of
LIBOR Loans and at least one Banking Day before any Borrowing or conversion of
Type of Loan resulting in whole of Base Rate Loans.
"Moody's" means Moody's Investors Service, Inc.
"Mortgaged Properties" has the meaning given in the granting clauses of
the Deeds of Trust.
"Multiemployer Plan" means any multiemployer plan (as defined in Section
3(37) of ERISA).
"NERC Region" means one of the ten geographic areas within the United
States, Canada and a portion of Baja California Norte designated as a "region"
by the North American Electric Reliability Counsel.
"Net Worth" means, at any time, the net equity of Borrower set forth in
the balance sheet of Borrower, prepared in accordance with GAAP.
"Non-Advancing Bank" has the meaning given in Section 10.12 of the Credit
Agreement.
"Non-Fundamental Project Default" with respect to any Initial Project or
Funded Subsequent Project means the occurrence of any of the following events
with respect to such Project:
(a) Breach of Project Documents.
(i) Borrower. Borrower shall be in breach of any term, condition,
provision, covenant, representation, warranty or obligation, or in default,
under a Project Document relating to an Initial Project or a Funded Subsequent
Project, and such breach or default shall not be remediable or, if remediable,
shall continue unremedied for a period of 30 days; provided that, except with
respect to a breach or default under the South Point Lease, if (A) such breach
cannot be cured within such 30 day period, (B) such breach is susceptible of
cure within 90 days, (C) Borrower is proceeding with diligence and in good faith
to cure such breach, (D) the existence of such breach has not had and could not
after considering the nature of the cure, be reasonably expected to give rise to
termination by the counterparty to the Project Document which is subject to
breach or to otherwise have a Material Adverse Effect on such Project and (E)
Administrative Agent shall have received an officer's certificate signed by a
Responsible Officer of Borrower to the effect of clauses (A), (B), (C) and (D)
above and stating what action Borrower is taking to cure such breach, then such
30 day cure period shall be
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extended to such date, not to exceed a total of 90 days, as shall be necessary
for Borrower diligently to cure such breach.
(ii) Third Party. A party other than Borrower shall be in breach
of, or in default under, a Project Document relating to an Initial Project or a
Funded Subsequent Project or any Consent, or any Equity Document (other than the
Equity Contribution and Completion Guarantee), such breach could reasonably be
expected to have a Material Adverse Effect on such Project, and such breach or
default shall not be remediable or, if remediable, shall continue unremedied for
a period of 30 days; provided that if (A) such breach cannot be cured within
such 30 day period, (B) such breach is susceptible of cure within 90 days, (C)
the breaching party is proceeding with diligence and in good faith to cure such
breach, and (D) the existence of such breach has not had and could not after
considering the nature of the cure, be reasonably expected to have a Material
Adverse Effect on such Project then, such 30 day cure period shall be extended
to such date, not to exceed a total of 90 days, as shall be necessary for such
third party diligently to cure such breach; provided further that, no Event of
Default shall be declared as a result of any such action if Borrower obtains a
Replacement Obligor for the affected party within the 90 day cure period
referred to in this paragraph (or within the 30 day cure period, if no extension
is given) and such action has not had and does not have prior to so obtaining
such Replacement Obligor a Material Adverse Effect on such Project.
(iii) Termination. Any material provision in any Project Document
relating to an Initial Project or a Funded Subsequent Project shall for any
reason cease to be valid and binding on any party thereto (other than Borrower)
except upon fulfillment of such party's obligations thereunder (or any such
party shall so state in writing), or shall be declared null and void, or the
validity or enforceability thereof shall be contested by any party thereto
(other than Administrative Agent and the Banks) or any Governmental Authority,
or any such party shall deny that it has any liability or obligation thereunder,
except upon fulfillment of its obligations thereunder, and such occurrence could
reasonably be expected to have a Material Adverse Effect on such Project;
provided that no Event of Default shall occur as a result of such breach or
default if Borrower obtains a Replacement Obligor for the affected party within
90 days thereafter and, such breach or default has not had and does not have
prior to so obtaining such Replacement Obligor, a Material Adverse Effect on
such Project.
(b) Breach of Covenants. Borrower shall fail to perform or observe any
of the covenants set forth in Section 5.2.2, 5.3, 5.4 (if the event with respect
to which notice is required to be given relates to an Initial Project or a
Funded Subsequent Project), 5.5 (if the party whose financial statements were
not properly delivered is not a Calpine Affiliate), 5.6 (with respect to books,
records and accounts of an Initial Project or a Funded Subsequent Project), 5.7
(if the failure to comply with the Legal Requirement relates to an Initial
Project or a Funded Subsequent Project), 5.8, 5.9(b), (c), (d) or (e) 5.13,
5.14, 5.15, 5.16.1, 5.16.3, 5.21, 5.22, 5.23, 6.14 or 6.20 and such failure
shall continue unremedied for a period of 30 days after Borrower becomes aware
thereof or receives written notice thereof from Administrative Agent provided,
however, that, if (i) such failure cannot be cured within such 30 day period,
(ii) such failure is susceptible of cure, (iii) Borrower is proceeding with
diligence and in good faith to cure such failure, (iv) the existence of such
failure has not had and cannot after considering the nature of the cure be
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reasonably expected to have a Material Adverse Effect on a Project and (v)
Administrative Agent shall have received an officer's certificate signed by a
Responsible Officer of Borrower to the effect of clauses (i), (ii), (iii) and
(iv) above and stating what action Borrower is taking to cure such failure, then
such 30 day cure period shall be extended to such date, not to exceed a total of
90 days, as shall be necessary for Borrower diligently to cure such failure.
(c) Material Adverse Effect. The occurrence of any event or circumstance
having a Material Adverse Effect on an Initial Project or a Funded Subsequent
Project.
(d) Omissions. Any financial statement, representation, warranty or
certificate made or prepared by, under the control of or on behalf of Borrower
and furnished to Administrative Agent, the Lead Arrangers, the Technical
Committee or any Bank pursuant to this Agreement, or in any separate statement
or document to be delivered to Administrative Agent or any Bank hereunder or
under any other Credit Document, shall contain an untrue or misleading statement
of a material fact or shall fail to state a material fact necessary to make the
statements therein not misleading as of the date made, in either case, which
could reasonably be expected to result in a Material Adverse Effect on an
Initial Project or a Funded Subsequent Project.
"Non-Fundamental Project Inchoate Default" means, with respect to any
Initial Project or Funded Subsequent Project, any occurrence, circumstance or
event, or any combination thereof, which, with the lapse of time or giving of
notice, would constitute a Non-Fundamental Project Default with respect to such
Project.
"Nonrecourse Persons" has the meaning given in Article 9 of the Credit
Agreement.
"Note" has the meaning given in Section 2.1.3 of the Credit Agreement.
"Notice of Borrowing" has the meaning given in Section 2.1.1(b) of the
Credit Agreement.
"Notice of Conversion of Loan Type" has the meaning given in Section 2.1.5
of the Credit Agreement.
"Notice of LC Activity" has the meaning given in Section 2.2.3 of the
Credit Agreement.
"O&M Agreement" means the contracts or agreements approved by the Lead
Arrangers or the Technical Committee in accordance with Section 3.1 or Section
3.3, as the case may be, of the Credit Agreement entered into by, or on behalf
of, Borrower for the operation or maintenance of any Project, including (a) the
Magic Valley Operation and Maintenance Agreement, (b) the South Point Operation
and Maintenance Agreement, (c) the Sutter Operation and Maintenance Agreement,
and (d) the Westbrook Operation and Maintenance Agreement.
"O&M Costs" means all actual cash maintenance and operation costs incurred
and paid for any Project in any particular calendar or fiscal year or period to
which said term is
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applicable, including payments for fuel, additives or chemicals and
transportation costs related thereto, replacement energy, capacity and other
products or services required to be obtained by Borrower under any Power
Purchase Agreement, Major Maintenance costs, local, sales and real estate taxes,
insurance, consumables, payments made in connection with the requirements of any
Permit or Legal Requirement, payments under any lease, payments pursuant to the
agreements for the management, operation and maintenance of the applicable
Project, payments for goods or services, including project management, power
marketer and fuel management services, provided or rendered to the owner of such
Project, legal, accounting and consulting fees and expenses paid by the owner of
such Project in connection with the management, maintenance or operation of
Project, fees paid in connection with obtaining, transferring, maintaining or
amending any Permits and reasonable general and administrative expenses, but
exclusive in all cases of non-cash charges, including depreciation or
obsolescence charges or reserves therefor, amortization of intangibles or other
bookkeeping entries of a similar nature, and also exclusive of all interest
charges and charges for the payment or amortization of principal of indebtedness
of the owner of the applicable Project. O&M Costs shall not include (a)
distributions of any kind (as opposed to payments for goods or services) to
Borrower or its Affiliates, (b) depreciation, (c) capital expenditures other
than those incurred in an emergency included in and approved as part of an
Annual Operating Budget or (d) payments for restoration or repair of such
Project from the Loss Proceeds Account in accordance with the terms of the
Credit Agreement. In the case of Projects that are not wholly owned by Borrower,
O&M Costs shall consist of a pro rata portion (based on Borrower's ownership
percentage in such Project) of the amounts of costs described above.
"Obligations" means and includes, with respect to any Person, all loans,
advances, debts, liabilities, and obligations, howsoever arising, owed by such
Person to Administrative Agent, LC Bank, Lead Arrangers, Technical Committee or
the Banks of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
pursuant to the terms of the Credit Agreement or any of the other Credit
Documents, including all interest, fees, charges, expenses, attorneys' fees and
accountants fees chargeable to such Person and payable by such Person hereunder
or thereunder.
"Operating Account" has the meaning given in Section 7.3.1 of the Credit
Agreement.
"Operative Documents" means the Credit Documents, the Project Documents
and any Additional Project Documents.
"Operator" means any wholly owned Subsidiary of Calpine approved by the
Lead Arrangers or the Technical Committee in accordance with Section 3.1 or 3.3,
as the case may be, of the Credit Agreement in its capacity as operator under an
O&M Agreement.
"Other Taxes" has the meaning given in Section 2.6.4(a) of the Credit
Agreement.
"Outstanding Committed Credit" means, as of a given date, the total of the
aggregate principal amount of all Loans then outstanding.
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"Partners" means the General Partner and the Limited Partners, and any
other partner of Borrower permitted by the Credit Agreement.
"Partnership Agreement" means the Limited Partnership Agreement dated as
of August 23, 1999 and amended as of September 9, 1999 for Calpine Construction
Finance Company, L.P.
"Parts" means any part, appliance, instrument, appurtenance, accessory or
other property of any nature necessary or useful to the operation, maintenance,
service or repair of a Project.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under Title IV of ERISA.
"Performance Tests" means, for any Project, the "acceptance tests" or
"performance tests" (however defined) under the Major Construction Contracts for
such Project.
"Permit" means any action, approval, consent, waiver, exemption, variance,
franchise, order, permit, authorization, right or license of or from a
Governmental Authority.
"Permitted Debt" means: (a) indebtedness incurred under the Credit
Documents, (b) indebtedness to any party pursuant to the terms of an Operative
Document, not more than 90 days past due or being contested in good faith and by
appropriate proceedings, (c) trade or other similar indebtedness incurred in the
ordinary course of business (but not for borrowed money) (i) not more than 90
days past due, or (ii) being contested in good faith and by appropriate
proceedings, (d) contingent liabilities permitted pursuant to Section 6.1 of the
Credit Agreement, (e) indebtedness incurred pursuant to a Contribution, (f)
Interest Rate Agreements with an aggregate notional amount not to exceed at any
time the Outstanding Committed Credit, and (g) Contributions in the form of
subordinated debt.
"Permitted Encumbrances" means (a) with respect to the Initial Projects
and the Funded Subsequent Projects, those liens, encumbrances or other
exceptions to title satisfactory to Lead Arrangers or Technical Committee, as
the case may be, and specified on a Title Policy pursuant to Sections 3.1.27(a)
and 3.3.29(a) of the Credit Agreement, and (ii) with respect to the Unfunded
Subsequent Projects, those liens, encumbrances, or other exceptions to title
which do not result in a Material Adverse Effect on Borrower or the Projects
taken as a whole.
"Permitted Investments" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having a maturity not exceeding
one year from the date of issuance, (ii) time deposits and certificates of
deposit of any Bank or any domestic commercial bank rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's
having capital and surplus in excess of $500,000,000, (iii) commercial paper of
any domestic corporation rated at least A-1 or the equivalent thereof by S&P or
at least P-1 or the equivalent thereof by Moody's and, in each case, having a
maturity not exceeding 90 days from the date of acquisition, (iv) fully secured
repurchase
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obligations with a term of not more than seven (7) days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications established in clause (ii) above and (v) money market
mutual funds.
"Permitted Liens" means (a) the rights and interests of the Banks as
provided in the Credit Documents, (b) Liens for any tax, assessment or other
governmental charge, either secured by a bond or other security reasonably
acceptable to Administrative Agent or not yet due or being contested in good
faith and by appropriate proceedings, so long as (i) such proceedings shall not
involve any substantial danger of the sale, forfeiture or loss of an Initial
Project or a Funded Subsequent Project, or the related Site or any related
Easements, as the case may be, title thereto or any interest therein and shall
not interfere in any material respect with the use or disposition of such
Project, Site or any Easements, or (ii) a bond or other security reasonably
acceptable to Administrative Agent has been posted or provided in such manner
and amount as to assure Administrative Agent that any taxes, assessments or
other charges determined to be due will be promptly paid in full when such
contest is determined, (c) materialmen's, mechanics', workers', repairmen's,
employees' or other like Liens, junior in right of payment to the Lien of the
Collateral Documents or for which the Banks are otherwise indemnified, arising
in the ordinary course of business or in connection with the construction of an
Initial Project or a Funded Subsequent Project, either for amounts not yet due
or for amounts being contested in good faith and by appropriate proceedings, so
long as (i) such proceedings shall not involve any substantial danger of the
sale, forfeiture or loss of such Project or the related Site or any related
Easements, as the case may be, title thereto or any interest therein and shall
not interfere in any material respect with the use or disposition of such
Project, Site or any Easements, or (ii) a bond or other security reasonably
acceptable to Administrative Agent has been posted or provided in such manner
and amount as to assure Administrative Agent that any amounts determined to be
due will be promptly paid in full when such contest is determined, (d) Liens
arising out of judgments or awards so long as an appeal or proceeding for review
is being prosecuted in good faith and for the payment of which adequate
reserves, bonds or other security reasonably acceptable to Administrative Agent
have been provided or are fully covered by insurance, (e) Permitted
Encumbrances, (f) Liens, deposits or pledges to secure statutory obligations or
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or for purposes of like general nature in the
ordinary course of its business, not to exceed $2,000,000 in the aggregate at
any time, and with any such Lien to be released as promptly as practicable, (g)
other Liens incident to the ordinary course of business that are not incurred in
connection with the obtaining of any loan, advance or credit and that do not in
the aggregate materially impair the use of the property or assets of Borrower or
the value of such property or assets for the purposes of such business, (h)
involuntary Liens as contemplated by the Operative Documents (including a lien
of an attachment, judgment or execution) securing a charge or obligation, on
Borrower's property, either real or personal, whether now or hereafter owned in
the aggregate sum of less than $1,000,000, (i) the Lien granted by Borrower to
Magic Valley Electric Cooperative, Inc. pursuant to the Magic Valley Power
Purchase Agreement, which shall be subordinated to the Lien of the Collateral
Documents pursuant to the Magic Valley Subordination Agreement and (j) provided
there exists at least one Funded Subsequent Project, the Lien in favor of Bayer
Chemical Corporation or its Affiliates requiring any subsequent owner
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of the Baytown Project to assume the energy services agreement and related
agreements between Borrower and Bayer Chemical Corporation or such Affiliates.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, Governmental Authority or any other entity
whether acting in an individual, fiduciary or other capacity.
"Plans and Specifications" means, collectively, the plans and
specifications for the construction and design of the Projects, including any
document describing the scope of work performed by the Contractors under the
Construction Contracts or any other contract for the construction of the
Projects and any transmission or other interconnection facilities, all work
drawings, engineering and construction schedules, project schedules, project
monitoring systems, specifications status lists, material and procurement
ledgers, drawings and drawing lists, manpower allocation documents, management
and project procedures documents, project design criteria, and any other
document referred to in the Construction Contracts or any of the documents
referred to in this definition.
"Power Island Supplier" means any entity approved by the Lead Arrangers or
the Technical Committee in accordance with Section 3.1 or 3.3, as the case may
be, of the Credit Agreement in its capacity as power island supplier under a
Power Island Supply Contract.
"Power Island Supply Contract" means, collectively, the contracts or
agreements for the purchase or supply of the "power island" (combustion
turbines, steam turbine, HRSGs, etc.) for a Project between Borrower and the
Power Island Supplier for such Project and approved by the Lead Arrangers or the
Technical Committee pursuant to Section 3.1 or Section 3.3, as the case may be,
of the Credit Agreement, including (a) the Magic Valley Power Island Supply
Contract, (b) the South Point Power Island Supply Contract and (c) the Sutter
Power Island Supply Contract.
"Power Marketer" means any wholly owned Subsidiary of Calpine approved by
the Lead Arrangers or the Technical Committee in accordance with Section 3.1 or
3.3, as the case may be, of the Credit Agreement in its capacity as power
marketer under a Power Marketing Agreement.
"Power Marketing Agreement" means, collectively, for each Project, the
power marketing agreement approved by the Lead Arrangers or the Technical
Committee in accordance with Section 3.1 or Section 3.3, as the case may be, of
the Credit Agreement and entered into by Borrower, including (a) the Magic
Valley Power Marketing Agreement, (b) the South Point Power Marketing
Agreement, (c) the Sutter Power Marketing Agreement, and (d) the Westbrook
Power Marketing Agreement.
"Power Marketing Consultants" means for each Project, the nationally
recognized independent power marketing consultants providing power marketing
consulting services with respect to such Project to the Banks or their
representatives.
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"Power Marketing Plan" means, collectively, the power marketing plans
delivered by Borrower pursuant to Sections 3.1.15 and 3.3.16 of the Credit
Agreement.
"Power Purchase Documents" means, collectively, for each Project,
contracts or agreements entered into by, or on behalf of, Borrower in accordance
with the Credit Agreement for the sale of electrical and/or steam energy or
capacity or any ancillary or other related services, including transmission
services, from any Project, including (a) the Magic Valley Power Purchase
Documents, (b) the South Point Power Purchase Documents, (c) the Sutter Power
Purchase Documents, and (d) the Westbrook Power Purchase Documents.
"Power Purchaser" means any Person who is purchasing electrical and/or
steam energy or capacity or ancillary or other related services pursuant to any
Power Purchase Document.
"Pre-Completion Requirements" means, (a) with respect to the Magic Valley
Project, each of the items set forth in Exhibit P to the Credit Agreement, (b)
with respect to the South Point Project, each of the items set forth in Exhibit
Q to the Credit Agreement, (c) with respect to the Sutter Project, each of the
items set forth in Exhibit R to the Credit Agreement, and (d) with respect to
the Westbrook Project, each of the items set forth in Exhibit S to the Credit
Agreement,
"Pre-Funding Requirements" means, (a) with respect to the Magic Valley
Project, each of the items set forth in Exhibit L to the Credit Agreement, (b)
with respect to the South Point Project, each of the items set forth in Exhibit
M to the Credit Agreement, (c) with respect to the Sutter Project, each of the
items set forth in Exhibit N to the Credit Agreement, and (d) with respect to
the Westbrook Project, each of the items set forth in Exhibit O to the Credit
Agreement.
"Prime Construction Contract" means, collectively, for each Project, the
construction contract with the Prime Contractor for such Project for either (i)
the design and construction of the entire Project on a "turnkey" basis or (ii)
the construction of that portion of the Project not included within the scope of
the Power Island Supply Contract pursuant to plans or designs prepared by the
Project Engineer for such Project, including (a) the Magic Valley Prime
Construction Contract, (b) the South Point Prime Construction Contract, (c) the
Sutter Prime Construction Contract and (d) the Westbrook Turnkey Contract.
"Prime Contractor" means any entity approved by the Lead Arrangers or the
Technical Committee in accordance with Section 3.1 or 3.3, as the case may be,
of the Credit Agreement in its capacity as prime contractor under a Prime
Construction Contract.
"Proceeds" has the meaning given in Section 7.9 of the Credit Agreement.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code which is not exempt under Section 408 of ERISA
or Section 4975 of the Code.
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"Project Budget" means, collectively, the project budgets delivered by
Borrower pursuant to Sections 3.1.22 and 3.3.24 of the Credit Agreement.
"Project Costs" means, with respect to any Project, the cost of the
development, design, engineering, acquisition, equipping, construction,
assembly, inspection, testing, completion, and start-up of such Project,
including: (a) all amounts payable under the Construction Contracts, any
contractor bonuses, site acquisition and preparation costs, any interconnection
and transmission upgrade costs payable by Borrower pursuant to the Power
Purchase Documents, all steam and water interconnection costs, all costs related
to water clarification facilities and/or water treatment facilities and all
costs of acquisition and construction of natural gas fuel handling and
processing equipment (if any) and interconnection expenses payable pursuant to
the Gas Supply Contracts and the Gas Transportation Agreements after the Closing
Date; (b) financing, advisory, legal and other fees; (c) all other costs,
including fuel-related costs and prepaid fuel costs, management services fees
and expenses and expenses to complete the acquisition, construction and
financing of such Project; (d) interest and fees payable on or in respect of any
Note or Loan Commitments pursuant to the Credit Agreement prior to Final
Completion of such Project; and (e) payments and fees under the Interest Rate
Agreements; provided, however, that "Project Costs" shall not include any
contingency. Except as otherwise set forth in Section 3.3.1 of the Credit
Agreement, in the case of Projects that are not wholly owned by Borrower,
Project Costs shall consist of a pro rata portion (based on Borrower's ownership
percentage in such Project) of the amounts of costs described above.
"Project Documents" means, collectively, agreements or documents relating
to the development, construction or operation of any Project entered into by
Borrower and approved by the Lead Arrangers or the Technical Committee in
accordance with and to the extent required under Section 3.1 or Section 3.3, as
the case may be, of the Credit Agreement, including (a) the Magic Valley Project
Documents, (b) the South Point Project Documents, (c) the Sutter Project
Documents, and (d) the Westbrook Project Documents.
"Project Engineer" means any entity approved by the Lead Arrangers or the
Technical Committee in accordance with Section 3.1 or 3.3, as the case may be,
of the Credit Agreement in its capacity as project engineer under an Engineering
Contract.
"Project Management Agreement" means, collectively, each agreement or
document relating to the provision of management services to a Project, entered
into by Borrower and approved by the Lead Arrangers or the Technical Committee
in accordance with Section 3.1 or Section 3.3, as the case may be, of the Credit
Agreement, including (a) the Magic Valley Project Management Agreement, (b) the
South Point Project Management Agreement, (c) the Sutter Project Management
Agreement, and (d) the Westbrook Project Management Agreement.
"Project Manager" means any wholly owned Subsidiary of Calpine approved by
the Lead Arrangers or the Technical Committee in accordance with Section 3.1 or
3.3, as the case may be, of the Credit Agreement in its capacity as project
manager under a Project Management Agreement.
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"Project Operating Revenues" means all payments received by Borrower under
the Power Purchase Documents (excluding damages, liquidated damages and certain
other payments described in Section 7.7 of the Credit Agreement to the extent
deposited in the Loss Proceeds Account), proceeds of any business interruption
insurance, income derived from the sale or use of electric or thermal capacity
or energy transmitted or distributed by any Project, payments for remarketing of
fuel or transportation rights relating thereto, and net payments, if any,
received by Borrower under Hedge Transactions, all as determined in conformity
with cash accounting principles, and the investment income on amounts in the
Accounts (but solely to the extent deposited in the Revenue Account).
"Project Revenues" means all income and receipts of Borrower derived from
the ownership or operation of the Projects, including payments received by
Borrower under the Power Purchase Documents, Construction Contracts and O&M
Agreements (including damages, liquidated damages and certain other payments
described in Section 7.7 of the Credit Agreement), proceeds of any delay in
start up or business interruption or other insurance, income derived from the
sale or use of electric or thermal capacity or energy transmitted or distributed
by any Project, payments for remarketing of fuel or transportation rights
relating thereto, and net payments, if any, received by Borrower under Hedge
Transactions, together with any receipts derived from the sale of any property
pertaining to any Project or incidental to the operation of any Project, all as
determined in conformity with cash accounting principles, the investment income
on amounts in the Accounts (but solely to the extent deposited in the Revenue
Account), the proceeds of any condemnation awards relating to any Project and
proceeds from the Collateral Documents.
"Projects" means, collectively, the Initial Projects and the Subsequent
Projects; each individually a "Project".
"Project Schedules" means, collectively, the project schedules delivered
by Borrower pursuant to Sections 3.1.23 and 3.3.25 of the Credit Agreement.
"Proportionate Share" means, with respect to each Bank, the percentage
participation of such Bank in the Total Loan Commitment or the Total Letter of
Credit Commitment, respectively, as set forth on Exhibit H to the Credit
Agreement. Upon any transfer by a Bank of all or part of its Commitments,
Administrative Agent may revise Exhibit H to reflect the Banks' Proportionate
Shares after giving effect to such transfer.
"Prudent Utility Practices" means those practices, methods, equipment,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by gas fired electric generation
stations in the state where a Project is located, as applicable, of a type and
size similar to the applicable Project as good, safe and prudent engineering
practices in connection with the design, construction, operation, maintenance,
repair and use of electrical and other equipment, facilities and improvements of
such electrical station, with commensurate standards of safety, performance,
dependability, efficiency and economy. Prudent Utility Practices does not
necessarily mean one particular practice, method, equipment specification or
standard in all cases, but is instead intended to encompass a broad range of
acceptable practices, methods, equipment specifications and standards.
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"PUC" means, with respect to a Project, the Public Utility Commission,
Public Service Commission, or equivalent Government Authority in the state where
a Project is located.
"PUHCA" means the Public Utility Holding Company Act of 1935 and all rules
and regulations adopted thereunder.
"PURPA" means the Public Utility Regulatory Policies Act of 1978 and all
rules and regulations adopted thereunder.
"Qualifying Facility" means a qualifying facility within the meaning of
PURPA.
"Receivables" means "accounts" and "general intangibles", as such terms
are defined in Section 9-106 of the UCC, of Borrower and any chattel paper,
document or instrument relating to any such account or general intangible and
any security agreement, lease or other contract securing any of the foregoing.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System (or any successor).
"Regulatory Change" means any change after the date of the Credit
Agreement in federal, state, local or foreign laws, regulations, Legal
Requirements or requirements under Applicable Permits, or the adoption or making
after such date of any interpretations, directives or requests of or under any
federal, state, local or foreign laws, regulations, Legal Requirements or
requirements under Applicable Permits (whether or not having the force of law)
by any Governmental Authority charged with the interpretation or administration
thereof.
"Reimbursement Obligation" means Borrower's obligation to repay Drawing
Payments under any of the Letters of Credit as provided in Sections 2.2.4 and
2.2.5 of the Credit Agreement.
"Reimbursement Payment" means a payment made by or on behalf of Borrower
in partial or complete satisfaction of a Reimbursement Obligation, including any
interest payment obligation in connection therewith.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, pumping, pouring, emitting, escaping, emptying, seeping,
placing and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Renewal Notice" has the meaning given in Section 2.11.2 of the Credit
Agreement.
"Renewing Bank" has the meaning given in Section 2.11.2 of the Credit
Agreement.
"Replacement Bank" has the meaning given in Section 2.11.3 of the Credit
Agreement.
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"Replacement Obligor" means, with respect to any Person party to a Project
Document, any Person satisfactory to the Required Banks and having credit, or
acceptable credit support, equal to or greater than that of the replaced Person
on the date that the applicable Project Document was entered into (or otherwise
acceptable to the Required Banks) who, pursuant to any definitive agreement,
definitive guaranty or definitive backup arrangement, in each case reasonably
satisfactory to the Required Banks, assumes the obligation of providing the
services and/or products on terms and conditions no less favorable to Borrower
than those which such Person is obligated to provide pursuant to the applicable
Project Document.
"Required Banks" means, at any time, Banks having Proportionate Shares
which in the aggregate exceed 66.67%.
"Reserve Requirement" means, for LIBOR Loans, the maximum rate (expressed
as a percentage) at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during the Interest Period
therefor under Regulation D by member banks of the Federal Reserve System in New
York City with deposits exceeding $1,000,000,000 against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which the LIBO Rate or LIBOR Loans is to be determined, (ii) any
category of liabilities or extensions of credit or other assets which include
LIBOR Loans or (iii) any category of liabilities or extensions of credit which
are considered irrevocable commitments to lend.
"Responsible Officer" means, as to any Person, its president, chief
executive officer, any vice president, treasurer, or secretary or any managing
general partner (or any of the preceding with regard to such managing general
partner).
"Revenue Account" has the meaning given in Section 1.1 of the Depositary
Agreement.
"S&P" means Standard & Poor's Corporation.
"Secured Obligations" has the meaning given in the granting clause of the
Deed of Trust.
"Security Agreement" means the Security Agreement executed by Borrower in
favor of Administrative Agent and the Banks in the form of Exhibit D-4 to the
Credit Agreement.
"Senior O&M Costs" means all O&M Costs except Subordinated O&M Costs.
"Settlement Amount" has the meaning given in Section 5.11.6 of the Credit
Agreement.
"Site" means, as applicable, (a) the Magic Valley Site, (b) the South
Point Site, (c) the Sutter Site, (d) the Westbrook Site and (e) the site of any
Subsequent Project.
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"South Point Affiliated Party Agreement Guaranty" means the Affiliated
Party Agreement Guaranty dated as of October 20, 1999 in substantially the form
of Exhibit D-2B to the Credit Agreement executed by Calpine in favor of
Borrower.
"South Point Construction Contracts" means, collectively, (a) the South
Point Construction Management Agreement, (b) the South Point Prime Construction
Contract, (c) the South Point Power Island Supply Contract and (d) any other
contract or agreement entered into by, or on behalf of, Borrower for the
construction of all or any portion of the South Point Project, or the supply or
provision of any goods or services relating to the construction of the South
Point Project.
"South Point Construction Management Agreement" means that certain South
Point Construction Management Agreement, dated as of October 20, 1999 between
the Borrower and Calpine.
"South Point Deed of Trust" means the Deed of Trust, Assignment of Rents
and Security Agreement dated as of October 20, 1999 in substantially the form of
Exhibit D-3 to the Credit Agreement executed by Borrower, as trustor, to First
American Title Company, as trustee, in favor of Administrative Agent, as
beneficiary.
"South Point Electric Interconnection Documents" means, collectively, (a)
Topock Substation Construction and Interconnection Agreement, dated as of July
14, 1999, by and between Arizona Electric Power Cooperative, Inc. and Borrower,
(b) Contract No. 99-DSR-11008 for the Construction of the South Point
Transmission Project, dated as of June 25, 1999, by and between United States
Department of Energy Western Area Power Administration and Borrower, (c)
Contract for Design, Construction and Maintenance Services, dated as of May 17,
1999, by and between Aha Macav Power Service and Borrower, (d) Contract No.
99-DSR-11050 for Long-Term Firm Point-To-Point Transmission Service, dated
August 5, 1999, by and between United States Department of Energy Western Area
Power Administration and Borrower, (e) Contract No. 99-DSR-11049 for Service
Agreement for Non-Firm-Point-To-Point Transmission Service, by and between
United States Department of Energy Western Area Power Administration and
Borrower, (f) Integration of the Proposed South Point Generation to Desert
Southwest Region Transmission System Facility Study, dated as of May 6, 1999,
and prepared by Department of Energy Western Area Power Administration and (g)
any other contract or agreement entered into by, or on behalf of, Borrower for
electrical interconnection services to the South Point Project.
"South Point Environmental Report" means (a) the Phase I Environmental
Site Assessment at the proposed South Point combined-cycle facility located at
Mojave County, Arizona, dated August 13, 1999, prepared by Hallock & Gross.
"South Point Fuel Management Agreement" means the South Point Fuel
Management Agreement dated as of October 20, 1999, between Borrower and CPN Gas
Marketing Company.
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"South Point Gas Supply Agreement" means that certain South Point Gas
Supply Agreement, dated as of October 20, 1999 between Borrower and CPN Gas
Marketing Company.
"South Point Gas Supply Contracts" means, collectively, (a) the South
Point Gas Supply Agreement and (b) any other agreement or document entered into
by or on behalf of Borrower for the supply of fuel to the South Point Project.
"South Point Gas Transportation Agreements" means, collectively, (a) the
Letter Agreement for the Construction, Operation and Connection of the South
Point Delivery Point, dated as of July 12, 1999, by and between El Paso Natural
Gas and Borrower, (b) Delivery Point Construction and Operating Agreement, dated
as of July 16, 1999, by and between Transwetern Pipeline Company and Borrower
and (c) any other agreement or document entered into by or on behalf of Borrower
for the supply of fuel transportation services to the South Point Project.
"South Point Lease" means that certain Amended and Restated Ground Lease
Agreement, executed as of August 4, 1999 and approved as BIA Lease B1778-FM on
August 19, 1999 between the Fort Mojave Indian Tribe, a federally recognized
Indian Tribe, and Borrower.
"South Point Maintenance Contract" means the Maintenance Contract dated as
of March 19, 1999 between Borrower and Siemens Westinghouse Power Corporation, a
Delaware corporation.
"South Point Operating and Maintenance Agreement" means the South Point
Operation and Maintenance Agreement dated as of October 20, 1999 between
Borrower and Calpine.
"South Point Power Island Supply Contract" means the Purchase Contract for
Power Island Equipment dated as of March 15, 1998 between Borrower and Siemens
Westinghouse Power Corporation, a Delaware corporation.
"South Point Power Marketing Agreement" means the South Point Power
Marketing Agreement dated as of October 20, 1999 between Borrower and CPSC.
"South Point Power Purchase Documents" means any contracts or agreements
entered into by Borrower for the sale of electric energy and/or capacity from
the South Point Project.
"South Point Prime Construction Contract" means the Contract for
Engineering, Procurement and Construction dated as of October 20, 1999 between
Borrower and the South Point Joint Venture, a general partnership by and between
TIC-The Industrial Company, a Delaware corporation, and Utility Engineering
Corporation, a Texas corporation.
"South Point Project" means, the approximately 500 MW (gross) combined
cycle facility located on the South Point Site, all as further described in
Appendix G-1B to the Credit Agreement, together with all buildings, structures
or improvements erected on the South Point Site and the Easements with respect
to the South Point Site, all alterations thereto or
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replacements thereof, all fixtures, attachments, appliances, equipment,
machinery and other articles attached thereto or used in connection therewith
and all Parts which may from time to time be incorporated or installed in or
attached thereto, all contracts and agreements for the purchase or sale of
commodities or other personal property related thereto, all leases of real or
personal property related thereto, and all other real and tangible and
intangible personal property owned by Borrower and placed upon or used in
connection with the electric and steam generation plant located upon the South
Point Site and the Easements with respect to the South Point Site.
"South Point Project Documents" means, collectively, the South Point
Construction Contracts, the South Point Gas Supply Contracts, the South Point
Power Purchase Documents, the South Point Operating and Maintenance Agreement,
the South Point Project Management Agreement, the South Point Maintenance
Contract, the South Point Power Marketing Agreement, the South Point Gas
Transportation Agreements, the South Point Fuel Management Agreement, the South
Point Affiliated Party Agreement Guaranty, the South Point Lease, the South
Point Water Documents, the South Point Electric Interconnection Documents, the
Guaranty dated March 25, 1999, by Siemens Corporation in favor of Borrower and
any other agreement or document relating to the development, construction or
operation of the South Point Project to which Borrower is a party.
"South Point Project Management Agreement" means that certain South Point
Project Management Agreement dated as of October 20, 1999 between Borrower and
Calpine.
"South Point Site" has the meaning given in the South Point Deed of Trust
(as it may be amended from time to time).
"South Point Water Contracts" means any contract or agreement entered into
by, or on behalf of, Borrower for the supply or transportation of water to the
South Point Project.
"SPC" has the meaning given in Section 10.13.2 of the Credit Agreement.
"Stated Amount" means with respect to each Letter of Credit, the total
amount available to be drawn thereunder at the time in question in accordance
with the terms of such Letter of Credit.
"Subject Companies" has the meaning given in Section 4.11 of the Credit
Agreement.
"Subordinated O&M Costs" means all of the O&M Costs that are payable to
Affiliates of Borrower to the extent such amounts are subordinated pursuant to
the applicable Affiliate Subordination Agreements.
"Subsequent Projects" means, collectively, the combined-cycle power
generating facilities (or other generating facilities approved by the Required
Banks) described in Appendices G- 1E through G-1S to the Credit Agreement owned
or partially owned by Borrower and which use modern, commercially accepted
gas-fired technology, together with all buildings, structures or improvements
and Easements with respect thereto, all alterations thereto or replacements
thereof,
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all fixtures, attachments, appliances, equipment, machinery and other articles
attached thereto or used in connection therewith and all parts which may from
time to time be incorporated or installed in or attached thereto, all contracts
and agreements for the purchase or sale of commodities or other personal
property related thereto, all leases of real or personal property related
thereto, and all other real and tangible and intangible personal property; each
individually, a "Subsequent Project."
"Subsidiary" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person of a combination thereof and (ii) any partnership or
limited liability company of which more than 50% of the partnership's or limited
liability company's, as the case may be, capital accounts, distribution rights
or general or limited partnership interests or limited liability company
membership interests, as the case may be, are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Sutter Affiliated Party Agreement Guaranty" means the Affiliated Party
Agreement Guaranty dated as of October 20, 1999 in substantially the form of
Exhibit D-2C to the Credit Agreement executed by Calpine in favor of Borrower.
"Sutter Construction Contracts" means, collectively, (a) the Sutter
Construction Management Agreement, (b) the Sutter Prime Construction Contract,
(c) the Sutter Power Island Supply Contract and (d) any other contract or
agreement entered into by, or on behalf of, Borrower for the construction of all
or any portion of the Sutter Project, or the supply or provision of any goods or
services relating to the construction of the Sutter Project.
"Sutter Construction Management Agreement" means that certain Sutter
Construction Management Agreement, dated as of October 20, 1999 between Borrower
and Calpine.
"Sutter Deed of Trust" means the Deed of Trust, Assignment of Rents and
Security Agreement dated as of October 20, 1999 in substantially the form of
Exhibit D-3 to the Credit Agreement executed by Borrower, as trustor, to Stewart
Title Company, as trustee, in favor of Administrative Agent, as beneficiary.
"Sutter Electric Interconnection Documents" means, collectively, (a) the
Design and Engineering Services for the Calpine Corporation, dated as of August
2, 1999 between United States Department of Energy Western Area Power
Administration Central Valley Project, the State of California and Borrower, (b)
Contract No. 99-SNR-00210 for Service Agreement for Long-Term Firm
Point-To-Point Transmission Service, dated as of August 30, 1999 between United
States Department of Energy Western Area Power Administration and Borrower, (c)
Sutter Powerplant - Western Area Power Administration Interconnection
Feasibility Study, dated as of July 29, prepared by Western Area Power
Administration, Sierra Nevada Region and
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(d) any other contract or agreement entered into by, or on behalf of, Borrower
for electrical interconnection services to the Sutter Project.
"Sutter Environmental Report" means (a) the Phase I Environmental Site
Assessment at the proposed Sutter combined-cycle facility located at Sutter
County, California, dated August 1999, prepared by Foster Wheeler.
"Sutter Fuel Management Agreement" means the Sutter Fuel Management
Agreement dated as of October 20, 1999, between Borrower and CPN Marketing
Company.
"Sutter Gas Supply Agreement" means that certain Sutter Gas Supply
Agreement, dated as of October 20, 1999 between Borrower and CPN Marketing
Company.
"Sutter Gas Supply Contracts" means, collectively, (a) the Sutter Gas
Supply Agreement and (b) and any other agreement or document entered into by or
on behalf of Borrower for the supply of fuel to the Sutter Project.
"Sutter Gas Transportation Agreements" means any agreement or document
entered into by or on behalf of Borrower for the supply of fuel transportation
services to the Sutter Project.
"Sutter Maintenance Contract" means the Maintenance Contract dated as of
December 12, 1998 between Borrower and Siemens Westinghouse Power Corporation, a
Delaware corporation.
"Sutter Operating and Maintenance Agreement" means the Sutter Operation
and Maintenance Agreement dated as of October 20, 1999 between Borrower and
Calpine.
"Sutter Power Island Supply Contract" means the Purchase Contract dated as
of December 16, 1998 between Borrower and Siemens Westinghouse Power
Corporation, a Delaware corporation.
"Sutter Power Marketing Agreement" means the Sutter Power Marketing
Brokering and Services Agreement dated as of October 20, 1999 between Borrower
and CPSC.
"Sutter Power Purchase Documents" means any contracts or agreements
entered into by Borrower for the sale of electric energy and/or capacity from
the Sutter Project.
"Sutter Prime Construction Contract" means the Contract for Engineering,
Procurement and Construction dated as of June 1, 1999 between Borrower and
Bechtel Power Corporation, a Nevada corporation.
"Sutter Project" means, the approximately 500 MW (gross) combined cycle
facility located on the Sutter Site, all as further described in Appendix G-1D
to the Credit Agreement, together with all buildings, structures or improvements
erected on the Sutter Site and the Easements with respect to the Sutter Site,
all alterations thereto or replacements thereof, all fixtures, attachments,
appliances, equipment, machinery and other articles attached thereto or
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<PAGE> 193
used in connection therewith and all Parts which may from time to time be
incorporated or installed in or attached thereto, all contracts and agreements
for the purchase or sale of commodities or other personal property related
thereto, all leases of real or personal property related thereto, and all other
real and tangible and intangible personal property owned by Borrower and placed
upon or used in connection with the electric and steam generation plant located
upon the Sutter Site and the Easements with respect to the Sutter Site.
"Sutter Project Documents" means, collectively, the Sutter Construction
Contracts, the Sutter Gas Supply Contracts, the Sutter Power Purchase Documents,
the Sutter Operating and Maintenance Agreement, the Sutter Project Management
Agreement, the Sutter Maintenance Contract, the Sutter Power Marketing
Agreement, the Sutter Gas Transportation Agreements, the Sutter Fuel Management
Agreement, the Sutter Affiliated Party Agreement Guaranty, the Sutter Water
Documents, the Sutter Electric Interconnection Documents, the Memorandum of
Understanding, dated as of March 30, 1999 between the County of Sutter, the
State of California and Borrower, the Letter of Agreement No. 99-SNR-00184,
dated as of June 4, 1999 between United States Department of Energy Western Area
Power Administration and Borrower and any other agreement or document relating
to the development, construction or operation of the Sutter Project to which
Borrower is a party.
"Sutter Project Management Agreement" means that certain Sutter Project
Management Agreement dated as of October 20, 1999 between Borrower and Calpine.
"Sutter Site" has the meaning given in the Sutter Deed of Trust (as it may
be amended from time to time).
"Sutter Water Contracts" means any contract or agreement entered into by,
or on behalf of, Borrower for the supply or transportation of water to the
Sutter Project.
"Taxes" has the meaning given in Section 2.6.4(a) of the Credit Agreement.
"Technical Committee" has the meaning given in Section 10.17 of the Credit
Agreement.
"Telerate Screen" means the display designated as Page 3750 on the Dow
Jones Market Screen (or such page as may replace such page for the purpose of
displaying London Interbank offered rates of major banks, or, if discontinued,
any replacement service designated by Administrative Agent).
"Title Insurer" means, with respect to a Project, the title company
issuing a Title Policy pursuant to Section 3.1.27 or Section 3.3.29 of the
Credit Agreement.
"Title Policy" means, collectively, the title policies delivered by
Borrower pursuant to Sections 3.1.27 and 3.3.29 of the Credit Agreement.
"Total Letter of Credit Commitment" has the meaning given in Section 2.3.2
of the Credit Agreement.
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"Total Loan Commitment" has the meaning given in Section 2.3.1 of the
Credit Agreement.
"Type" means the type of Loan, whether a Base Rate Loan or LIBOR Loan.
"UCC" means the Uniform Commercial Code of the jurisdiction the law of
which governs the document in which such term is used.
"Unfunded Subsequent Project" means a Subsequent Project other than a
Funded Subsequent Project.
"Waterfall Level" has the meaning given in Section 7.2.1 of the Credit
Agreement.
"Westbrook Affiliated Party Agreement Guaranty" means the Affiliated Party
Agreement Guaranty dated as of October 20, 1999 in substantially the form of
Exhibit D-2D to the Credit Agreement executed by Calpine in favor of Borrower.
"Westbrook Construction Contracts" means, collectively, (a) the Westbrook
Turnkey Contract, (b) the Westbrook Construction Management Agreement and (c)
any other contract or agreement entered into by, or on behalf of, Borrower for
the construction of all or any portion of the Westbrook Project, or the supply
or provision of any goods or services relating to the construction of the
Westbrook Project.
"Westbrook Construction Management Agreement" means that certain Westbrook
Construction Management Agreement, dated as of October 20, 1999 between Borrower
and Calpine Eastern Corporation.
"Westbrook Deed of Trust" means the Deed of Trust, Assignment of Rents and
Security Agreement dated as of October 20, 1999 in substantially the form of
Exhibit D-3 to the Credit Agreement executed by Borrower, as trustor, to Land
America, as trustee, in favor of Administrative Agent, as beneficiary.
"Westbrook Electric Interconnection Documents" means, collectively, (a)
Contract for Professional Services dated as of September 22, 1999 between E-PRO
Engineering & Environmental Consulting L.L.C. and Borrower and (b) any other
contract or agreement entered into by, or on behalf of, Borrower for electrical
interconnection services to the Westbrook Project.
"Westbrook Environmental Report" means (a) the Phase I Environmental Site
Assessment at the proposed Westbrook combined-cycle facility located at
Cumberland County, Maine, dated June 1999, and (b) if one is prepared, the Phase
II Environmental Site Assessment at the proposed Westbrook combined-cycle
facility located at Cumberland County, Maine, dated April 1999, prepared by
Hoffman Engineering.
"Westbrook Fuel Management Agreement" means the Westbrook Fuel Management
Agreement dated as of October 20, 1999 between Borrower and CPN East Fuels.
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<PAGE> 195
"Westbrook Gas Supply Agreement" means that certain Westbrook Gas Supply
Agreement, dated as of October 20, 1999 between Borrower and CPN East Fuels.
"Westbrook Gas Supply Contracts" means, collectively, (a) the Westbrook
Gas Supply Agreement and (b) any other agreement or document entered into by or
on behalf of Borrower for the supply of fuel to the Westbrook Project.
"Westbrook Gas Transportation Agreements" means, collectively, (a) the
Negotiated Service Agreement for Natural Gas Transportation Service, dated as of
July 9, 1999 between CMP Natural Gas, L.L.C. and Borrower and (b) any agreement
or document entered into by or on behalf of Borrower for the supply of fuel
transportation services to the Westbrook Project.
"Westbrook Maintenance Contract" means the Long Term Parts and Long Term
Service Contract dated as of February 5, 1999 between Borrower and General
Electric International.
"Westbrook Operating and Maintenance Agreement" means the Westbrook
Operation and Maintenance Agreement dated as of October 20, 1999 between
Borrower and Calpine Eastern Corporation.
"Westbrook Power Marketing Agreement" means the Westbrook Power Marketing
Agreement dated as of October 20, 1999 between Borrower and CPSC.
"Westbrook Power Purchase Documents" means any contracts or agreements
entered into by Borrower for the sale of electric energy and/or capacity from
the Westbrook Project.
"Westbrook Project" means, the approximately 540 MW (gross) combined cycle
facility located on the Westbrook Site, all as further described in Appendix
G-1C to the Credit Agreement, together with all buildings, structures or
improvements erected on the Westbrook Site and the Easements with respect to the
Westbrook Site, all alterations thereto or replacements thereof, all fixtures,
attachments, appliances, equipment, machinery and other articles attached
thereto or used in connection therewith and all Parts which may from time to
time be incorporated or installed in or attached thereto, all contracts and
agreements for the purchase or sale of commodities or other personal property
related thereto, all leases of real or personal property related thereto, and
all other real and tangible and intangible personal property owned by Borrower
and placed upon or used in connection with the electric and steam generation
plant located upon the Westbrook Site and the Easements with respect to the
Westbrook Site.
"Westbrook Project Documents" means, collectively, the Westbrook
Construction Contracts, the Westbrook Gas Supply Contracts, the Westbrook Power
Purchase Documents, the Westbrook Operating and Maintenance Agreement, the
Westbrook Project Management Agreement, the Westbrook Maintenance Contract, the
Westbrook Power Marketing Agreement, the Westbrook Gas Transportation
Agreements, the Westbrook Fuel Management Agreement, the Westbrook Affiliated
Party Agreement Guaranty, the Westbrook Water Documents, the
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<PAGE> 196
Westbrook Electric Interconnection Documents, the Joint Development Agreement,
dated as of December 29, 1997 between the City of Westbrook, the State of Maine
and Borrower, the Credit Enhancement Agreement, dated as of June 28, 1999
between the City of Westbrook, the State of Maine and Borrower and any other
agreement or document relating to the development, construction or operation of
the project to which Borrower is a party.
"Westbrook Project Management Agreement" means that certain Westbrook
Project Management Agreement dated as of October 20, 1999 between Borrower and
Calpine Eastern Corporation.
"Westbrook Site" has the meaning given in the Westbrook Deed of Trust (as
it may be amended from time to time).
"Westbrook Water Contracts" means, collectively, (a) the Agreement (Sewage
Treatment), dated as of February 2, 1999 between the City of Westbrook and
Borrower, (b) the Agreement (Water Supply), dated as of February 25, 1999, by
and between the Portland Water Authority and Borrower and (c) any other contract
or agreement entered into by, or on behalf of, Borrower for the supply or
transportation of water to the Westbrook Project.
"Westbrook Turnkey Contract" means that certain Contract Agreement, dated
as of February 5, 1999 between General Electric Company, a New York corporation
and Borrower.
"Working Capital Reserve Account" has the meaning given in Section 1.1 of
the Depositary Agreement.
"Working Capital Reserve Requirement" means an amount equal to the
anticipated O&M Costs (including fuel costs) for all Initial Projects and Funded
Subsequent Projects then in operation for a 45-day period.
45
<PAGE> 197
RULES OF INTERPRETATION
1. The singular includes the plural and the plural includes the singular.
2. "or" is not exclusive.
3. A reference to a Governmental Rule includes any amendment or
modification to such Governmental Rule, and all regulations, rulings and other
Governmental Rules promulgated under such Governmental Rule.
4. A reference to a Person includes its permitted successors and permitted
assigns.
5. Accounting terms have the meanings assigned to them by GAAP, as applied
by the accounting entity to which they refer.
6. The words "include," "includes" and "including" are not limiting.
7. A reference in a document to an Article, Section, Exhibit, Schedule,
Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex or
Appendix of such document unless otherwise indicated. Exhibits, Schedules,
Annexes or Appendices to any document shall be deemed incorporated by reference
in such document. In the event of any conflict between the provisions of the
Credit Agreement (exclusive of the Exhibits, Schedules, Annexes and Appendices
thereto) and any Exhibit, Schedule or Annex thereto, the provisions of this
Credit Agreement shall control. A reference to any Exhibit, Schedule, Annex or
Appendix of the Credit Agreement shall mean such Exhibit, Schedule, Annex or
Appendix as, amended, modified or supplemented from time to time in accordance
with the Credit Agreement; provided, that no Exhibit, Schedule, Annex or
Appendix may be amended, modified or supplemented by Borrower except to the
extent specifically permitted in the Credit Agreement.
8. References to any document, instrument or agreement (a) shall include
all exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time.
9. The words "hereof," "herein" and "hereunder" and words of similar
import when used in any document shall refer to such document as a whole and not
to any particular provision of such document.
10. References to "days" shall mean calendar days, unless the term
"Banking Days" shall be used. References to a time of day shall mean such time
in New York, New York, unless otherwise specified.
11. The Credit Documents are the result of negotiations between, and have
been reviewed by Borrower, Administrative Agent, the Lead Arrangers,
Co-Documentation Agents, LC Bank, Syndication Agent, Bookrunner each Bank and
their respective counsel.
46
<PAGE> 198
Accordingly, the Credit Documents shall be deemed to be the product of all
parties thereto, and no ambiguity shall be construed in favor of or against
Borrower, Administrative Agent, the Lead Arrangers, Co-Arrangers,
Co-Documentation Agents, LC Bank, Syndication Agent, Bookrunner or any Bank
solely as a result of any such party having drafted or proposed the ambiguous
provision.
47
<PAGE> 199
EXHIBIT B
to Credit Agreement
Note No. __
FORM OF NOTE
$______________ New York, New York
---------------
For value received, the undersigned CALPINE CONSTRUCTION FINANCE
COMPANY, L.P., a Delaware limited partnership ("Borrower"), promises to pay to
___________________ (the "Bank"), or order, at the office of _______ located at
______________________, Attn: ___________________, in lawful money of the United
States of America and in immediately available funds, the principal amount of
______________________ DOLLARS ($______________), or if less, the aggregate
unpaid and outstanding principal amount of Loans advanced by the Bank to
Borrower pursuant to that certain Credit Agreement, dated as of October 20, 1999
(the "Credit Agreement"), by and among Borrower, the financial institutions
listed on Exhibit H thereto, Credit Suisse First Boston, as Lead Arranger,
Syndication Agent and Bookrunner and The Bank of Nova Scotia, as Lead Arranger,
LC Bank and Administrative Agent, as the same may be amended from time to time,
and all other amounts owed by Borrower to the Bank hereunder.
This is one of the Notes referred to in the Credit Agreement and is
entitled to the benefits thereof and is subject to all terms, provisions and
conditions thereof. Capitalized terms used and not defined herein shall have the
meanings set forth in the Credit Agreement.
This Note is made in connection with and is secured by, among other
instruments, the provisions of the Collateral Documents. Reference is hereby
made to the Credit Agreement and the Collateral Documents for the provisions,
among others, with respect to the custody and application of the Collateral, the
nature and extent of the security provided thereunder, the rights, duties and
obligations of Borrower and the rights of the holder of this Note.
The principal amount hereof is payable in accordance with the Credit
Agreement, and such principal amount may be prepaid solely in accordance with
the Credit Agreement, including without limitation any prepayment fees and
premiums provided for therein.
Borrower further agrees to pay, in lawful money of the United States of
America and in immediately available funds, interest from the date hereof on the
unpaid and outstanding principal amount hereof until such unpaid and outstanding
principal amount shall become due and payable (whether at stated maturity, by
acceleration or otherwise) at the rates of interest and at the times set forth
in the Credit Agreement and Borrower agrees to pay other fees and costs as
stated in the Credit Agreement.
If any payment on this Note becomes due and payable on a date which is
not a Banking Day, such payment shall be made on the first succeeding, or next
preceding, Banking Day, in accordance with the terms of the Credit Agreement.
All Loans made by the Bank pursuant to the Credit Agreement and other
Credit Documents, and all payments and prepayments made on account of the
principal balance hereof shall be recorded by the Bank on the grid attached
hereto, provided that failure to make such a notation shall not affect or
diminish Borrower's obligation to repay all amounts due on this Note, as and
when due.
<PAGE> 200
Upon the occurrence of any one or more Events of Default, all amounts
then remaining unpaid on this Note may become or be declared to be immediately
due and payable as provided in the Credit Agreement and other Credit Documents,
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or notices or demands of any kind, all of which are
expressly waived by Borrower.
Recourse under this Note shall be limited as provided in Article 9 of
the Credit Agreement.
Borrower agrees to pay costs and expenses, including without limitation
attorneys' fees, incurred in connection with the interpretation or enforcement
of this Note, in accordance with the Credit Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 201
This Note has been executed and delivered in and shall be construed and
interpreted in accordance with and governed by the laws of the State of New
York, without reference to conflicts of laws (other than Section 5-1401 of the
New York General Obligations Law).
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
-----------------------------------
Name:
Title:
<PAGE> 202
<TABLE>
<CAPTION>
Prepayment or Outstanding
Date Advance Repayment Balance
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 203
EXHIBIT C-1
to Credit Agreement
FORM OF NOTICE OF BORROWING
---------------------------
(Delivered pursuant to Section 2.1.1(b)
of the Credit Agreement)
[Date]
Bank of Nova Scotia,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: CALPINE CONSTRUCTION FINANCE COMPANY PROJECTS
This Notice of Borrowing is delivered to you pursuant to Section
2.1.1(b) of the Credit Agreement dated as of October 20, 1999 ("Credit
Agreement"), among Calpine Construction Finance Company, L.P., a Delaware
limited partnership, as Borrower ("Borrower"), the financial institutions listed
on Exhibit H thereto (the "Banks"), Credit Suisse First Boston, as Lead
Arranger, Syndication Agent and Bookrunner and The Bank of Nova Scotia, as Lead
Arranger, LC Bank and Administrative Agent ("Administrative Agent"). All
capitalized terms used herein shall have the respective meanings specified in
Exhibit A to the Credit Agreement unless otherwise defined herein or unless the
context requires otherwise.
This Notice of Borrowing constitutes a request for a Borrowing of Loans
as set out below:
1. The requested date of the Borrowing is __________, ______, which
is a Banking Day.
2. The total amount of the requested Loans is $____________.
3. Borrower requests the following funding options:
a. Base Rate Loans amount: $_______________.
b. LIBOR Loans:
<TABLE>
<CAPTION>
Amount Requested Initial Interest Period
<S> <C> <C>
$______ ________ months
$______ ________ months
$______ ________ months
</TABLE>
<PAGE> 204
The undersigned further confirms and certifies to Administrative Agent
and each Bank that (i) the requested Loans, when aggregated with all Loans and
Reimbursement Obligations then outstanding and the current Aggregated LC Stated
Amount, will not exceed the Total Loan Commitment, and (ii) the conditions set
forth in Article 3 of the Credit Agreement have been satisfied or waived in
accordance with the terms thereof.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
----------------------------------
Name:
Title:
2
<PAGE> 205
EXHIBIT C-2
to Credit Agreement
FORM OF CONFIRMATION OF INTEREST PERIOD SELECTION
-------------------------------------------------
(Delivered pursuant to Section 2.1.2(b)(ii)
of the Credit Agreement)
[Date]
The Bank of Nova Scotia
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: Calpine Construction Finance Company Projects
This Confirmation of Interest Period Selection is delivered to you
pursuant to Section 2.1.2(b)(ii) of the Credit Agreement dated as of October 20,
1999 ("Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower ("Borrower"), the financial
institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent ("Administrative
Agent"). All capitalized terms used herein shall have the respective meanings
specified in Exhibit A to the Credit Agreement unless otherwise defined herein
or unless the context requires otherwise.
This Confirmation of Interest Period Selection relates to $ __________
of the LIBOR Loans with an Interest Period ending on ________. This Confirmation
of Interest Period Selection constitutes a confirmation that effective
__________, (which shall be the last day of an Interest Period):
1. The requested Interest Period for ___________ of such LIBOR
Loans shall be __ months.
This notice shall be effective only if delivered to Administrative Agent
as a Confirmation of Interest Period Selection made pursuant to Section
2.1.2(b)(ii) of the Credit Agreement.
<PAGE> 206
The undersigned confirms and certifies to each Bank that as of the date
of this Confirmation of Interest Period Selection, no Event of Default or
Inchoate Default exists under the Credit Agreement.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
---------------------------------
Name:
Title:
The undersigned acknowledges receipt of a copy of this
Confirmation of Interest Period Selection:
THE BANK OF NOVA SCOTIA, Date: __________, _____
as Administrative Agent for the Banks
By:
-------------------------------------------
Name:
Title:
<PAGE> 207
EXHIBIT C-3
to Credit Agreement
FORM OF NOTICE OF CONVERSION OF LOAN TYPE
-----------------------------------------
(Delivered pursuant to Section 2.1.5
of the Credit Agreement)
[Date]
The Bank of Nova Scotia,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: Calpine Construction Finance Company Projects
1. Reference is hereby made to that certain Credit Agreement dated
as of October 20, 1999 ("Credit Agreement"), among Calpine Construction Finance
Company, L.P., a Delaware limited partnership, as Borrower ("Borrower"), the
financial institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse
First Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of
Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent ("Administrative
Agent"). All capitalized terms used herein shall have the respective meanings
specified in Exhibit A to the Credit Agreement unless otherwise defined herein
or unless the context requires otherwise.
2. Pursuant to Section 2.1.5 of the Credit Agreement, Borrower
hereby notifies Administrative Agent:
(a) the conversion of $_______________ of such Loans from a
[BASE RATE/LIBOR] Loan to a [LIBOR/BASE RATE] Loan;
(b) that the effective date of the conversion shall be
___________, which is a Banking Day and which shall be the first day
after the last day of an Interest Period if converting from LIBOR Loans;
(c) if converting to LIBOR Loans, the following Interest
Periods are selected:
<TABLE>
<CAPTION>
Amount Requested Initial Interest Period
<S> <C>
$_________ ________ months
$_________ ________ months
$_________ ________ months
</TABLE>
<PAGE> 208
IN WITNESS WHEREOF, Borrower has executed this Notice of Conversion of
Loan Type on the date set forth above.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
----------------------------------
Name:
Title:
The undersigned acknowledges receipt of a copy of this Notice of
Conversion of Loan Type:
THE BANK OF NOVA SCOTIA, Date: __________, _____
as Administrative Agent for the Banks
By:
----------------------------------------
Name:
Title:
<PAGE> 209
EXHIBIT C-4
to Credit Agreement
FORM OF NOTICE OF LC ACTIVITY
-----------------------------
(Delivered pursuant to Section 2.2.3
of the Credit Agreement)
[Date]
Bank of Nova Scotia,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: Calpine Construction Finance Company Projects
This Notice of LC Activity is delivered to you pursuant to Section 2.2.3
of the Credit Agreement dated as of October 20, 1999 ("Credit Agreement"), among
Calpine Construction Finance Company, L.P., a Delaware limited partnership, as
Borrower ("Borrower"), the financial institutions listed on Exhibit H thereto
(the "Banks"), Credit Suisse First Boston, as Lead Arranger, Syndication Agent
and Bookrunner and The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent ("Administrative Agent"). All capitalized terms used herein
shall have the respective meanings specified in Exhibit A to the Credit
Agreement unless otherwise defined herein or unless the context requires
otherwise.
1. We request that a/the [SPECIFY LETTER OF CREDIT] be [ISSUED]
[EXTENDED] [INCREASED] as provided below.
2. The Letter of Credit relates to the _______ Project.
3. The issue date of the Letter of Credit is __________________,
and the [EXTENDED] Expiration Date of the Letter of Credit is ________________,
neither of which is later than the Loan Maturity Date.
4. [THE STATED AMOUNT OF THE LETTER OF CREDIT IS $_____________] or
[WE REQUEST THAT THE STATED AMOUNT OF THE LETTER OF CREDIT BE INCREASED FROM
$________ TO $_________] which, together with the Aggregate LC Stated Amount and
all outstanding Reimbursement Obligations thereunder, does not exceed the lesser
of (i) the Total Letter of Credit Commitment and (ii) an amount equal to the
excess, if any, of (a) the amount of the Total Loan Commitment at such time over
(b) the aggregate principal amount of all Loans then outstanding plus the
Aggregate LC Stated Amount and all outstanding Reimbursement Obligations.
<PAGE> 210
5. The Available Construction Funds, after taking into effect the
issuance of the Letter of Credit requested hereby, will be equal to or exceed
the remaining Project Costs of all Initial Projects and Funded Subsequent
Projects then under construction.
6. Administrative Agent is instructed to deliver the [LETTER OF
CREDIT] [NOTICE OF EXTENSION] [NOTICE OF INCREASE IN STATED AMOUNT] to ________,
[THE LC BENEFICIARY] [BORROWER], at [ADDRESS].
The undersigned further confirms and certifies to Administrative Agent
and each Bank that the Letter of Credit requested hereby shall only be used in
the manner and for the purposes specified and permitted by the Credit Agreement,
and that, as of the date of the issuance of such Letter of Credit, the
conditions set forth in Section 3.6 of the Credit Agreement have all been
satisfied or waived in accordance with the terms thereof.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
-----------------------------------
Name:
Title:
<PAGE> 211
EXHIBIT C-5
to Credit Agreement
FORM OF DRAWDOWN CERTIFICATE
(Delivered pursuant to Section 3.4.3
of the Credit Agreement)
Date: [__________, ____]
Drawdown Date: [__________, ____]
The Bank of Nova Scotia,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Ladies and Gentlemen:
1. This Drawdown Certificate is delivered to you pursuant to
Section 3.4.3 of that certain Credit Agreement dated as of October 20, 1999
("Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower ("Borrower"), the financial
institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent ("Administrative
Agent"). Unless otherwise defined herein, all capitalized terms used herein
shall have the respective meanings specified in Exhibit A to the Credit
Agreement.
2. We have read the provisions of the Credit Agreement which are
relevant to the furnishing of this Drawdown Certificate. To the extent that this
Drawdown Certificate evidences, attests or confirms compliance with any
covenants or conditions precedent provided for in the Credit Agreement, we have
made such examination or investigation as was, in our opinion, necessary to
enable us to express an informed opinion as to whether such covenants or
conditions have been complied with. This Drawdown Certificate relates to a
Borrowing or other disbursement to take place on the Drawdown Date.
3. This Drawdown Certificate relates to the
________________________ Project (the "Project").
4. BORROWER HEREBY CERTIFIES THAT, as of the date hereof:
4.1 The Project Costs for the Project incurred through the
immediately preceding Drawdown Date by or on behalf of Borrower and for which a
Drawdown Certificate has previously been submitted by Borrower are $__________,
segregated by major categories as described in Column A of Appendix I hereto.
<PAGE> 212
4.2 The Project Costs for the Project to be paid with the
funds requested by this Drawdown Certificate for the current month are
$___________, segregated by major categories as described in Column B of
Appendix I hereto. Of such Project Costs, $__________ will be paid through the
application of Contributions pursuant to Section 3.8 of the Credit Agreement,
$__________ will be paid through the application of Contributions pursuant to
Section 5.17.1 of the Credit Agreement, $___________ will be paid through the
application of Additional Borrower Equity and $_________ will be paid through
the application of Loans. All items shown in Column B represent work that has
been satisfactorily performed in a good and workmanlike manner and in
conformance with the Project's Construction Contracts or materials that have
been supplied and delivered to the Project's Site prior to the date of this
Certificate, or Borrower's best estimate of fuel and other O&M Costs related to
startup and testing of the Project which will become due and payable on the
Drawdown Date or within thirty (30) days thereafter.
4.3 The estimated dates of Completion and Final Completion
for the Project are set forth on Appendix II hereto.
4.4 The estimated Project Costs to Final Completion for the
Project are _________, segregated by major categories and described in Column N
of Appendix I hereto. The aggregate amount of Project Costs for the Project will
not exceed 110% of the anticipated aggregate amount of such Project Costs for
the Project as set forth in the Project's Project Budget. The aggregate amount
of Project Costs for all Initial Projects and Funded Subsequent Projects under
construction as of the date hereof will not exceed 105% of the anticipated
aggregate amount of Project Costs for such Projects as set forth in such
Projects' Project Budgets. [MODIFY THIS CERTIFICATION IF NECESSARY IN ACCORDANCE
WITH THE LAST CLAUSE OF SECTION 3.4.3 OF THE CREDIT AGREEMENT.]
4.5 A detailed description of the variances from the
estimated Project Costs for the Project as of the date of the Credit Agreement
is summarized in Appendix III hereto.
4.6 The Available Construction Funds are sufficient to pay
all remaining Project Costs for all Initial Projects and Funded Subsequent
Projects under construction as of the date hereof (after giving effect to any
other Drawdown Certificates delivered as of the date hereof).
4.7 There has not occurred any development which materially
adversely affects the likelihood of the Project achieving Completion on or
before the Loan Maturity Date.
4.8 No Event of Default or Inchoate Default or, with respect
to the Project, Non-Fundamental Project Default or Non-Fundamental Project
Inchoate Default has occurred and is continuing.
4.9 All proceeds of all Loans and other amounts deposited
into the Project's Construction Sub-Account on or prior to the date hereof,
except for $_________ remaining in the Project's Construction Sub-Account since
the date of the last Drawdown Certificate, have been expended and have been
applied to Project Costs for the Project in accordance with the applicable
Construction Contracts, the applicable Project Documents or the Credit
Agreement.
4.10 All insurance required under the Credit Agreement is in
place, in good standing and in full force and effect and all premiums due
thereon have been paid.
2
<PAGE> 213
4.11 Except for the Permits detailed in Part II(A) or II(B)
of Exhibit G-3_________ to the Credit Agreement, and Permits identified in any
previous Drawdown Certificates, no other Permits on the part of Borrower or any
Major Project Participant are presently required in connection with the
construction and operation of the Project (other than any which have been
obtained).
4.12 Except as set forth in Exhibit G-3__, each Applicable
Permit and Applicable Third Party Permit with respect to the Project has been
issued, is in full force and effect and is not subject to any current legal
proceedings, or to any unsatisfied condition that could allow modification or
revocation and all applicable appeal periods have expired with respect thereto.
4.13 With respect to any of the Permits not yet obtained and
listed in Part II(A) or II(B) of Exhibit G-3________, to Borrower's knowledge,
no facts or circumstances exist which indicate that any such Permit will not be
timely obtainable at a cost consistent with the Project's Project Budget without
material difficulty or delay by Borrower or the applicable Major Project
Participant, respectively, prior to the time that it becomes an Applicable
Permit or an Applicable Third Party Permit, as applicable.
4.14 All of the Operative Documents executed and delivered
with respect to the Project on or prior to the date of the Borrowing requested
by this Drawdown Certificate are in full force and effect without change or
amendment since the respective dates of their execution and delivery in a form
which was approved by Administrative Agent, except as consented to in writing by
Administrative Agent to the extent required under the Credit Agreement or as
otherwise permitted by the Credit Agreement. Borrower is not in default under
any term of any Project Document with respect to the Project and, to the best of
Borrower's knowledge, no other party to such a Project Document is in default
thereunder except, in either case, where such default could not reasonably be
expected to have a Material Adverse Effect on the Project.
4.15 The Project has not been abandoned or terminated.
4.16 Borrower has not incurred or permitted to exist any
Liens (other than Permitted Liens) on the Project or the Mortgaged Property with
respect to the Project or any part thereof or on any other assets of Borrower,
except as permitted under the Credit Agreement. No Liens, claims of Lien,
attachments or similar claims (including without limitation mechanic's and
materialman's liens) have been recorded or filed with respect to the Project or
the Mortgaged Property with respect to the Project or any part thereof, except
Permitted Liens or Permitted Encumbrances, as the case may be, and such Liens,
claims of Lien, attachments or similar claims as will be released, removed and
discharged from the funds requested by this Drawdown Certificate and the
corresponding Notice of Borrowing.
4.17 There are no pending or, to the best knowledge of
Borrower, threatened actions or proceedings of any kind, including actions or
proceedings of or before any Governmental Authority, to which Borrower, any
Partner, Calpine, Construction Manager, Project Manager or Operator or, to the
best knowledge of Borrower, any other Major Project Participant with respect to
the Project, or by which any of them or any of their properties or the Project
are bound, which if adversely determined to or against Borrower, any Partner,
Calpine, any other such Major Project Participant or the Project could
reasonably be expected to have a Material Adverse Effect on Borrower or the
Project, except as permitted pursuant to the terms of the Credit Agreement.
3
<PAGE> 214
4.18 Borrower has not waived performance or released from
liability any party to any Operative Document with respect to the Project except
with the consent of Administrative Agent or as otherwise permitted by the Credit
Agreement.
4.19 Attached to this Drawdown Certificate as Appendix IV are
complete and accurate listings of all material contracts entered into by
Borrower from the last day of the month preceding the date of the last Drawdown
Certificate to the last day of the month preceding the date hereof with respect
to the Project.
4.20 Borrower has obtained and is delivering to
Administrative Agent concurrently herewith a datedown endorsement to the Title
Policy with respect to the Project to the date the Loans requested hereby are to
be made, extending the coverage of Title Policy to such date, including all
Borrowings and extensions of credit made to and including such date, insuring
that the Lien of the Deed of Trust with respect to the Project on the Mortgaged
Property with respect to the Project is prior to any liens, encumbrances or
other matters except Permitted Encumbrances and Permitted Liens described in
clauses (a), (b) or (c) of the definition thereof.
4.21 All property, rights and assets acquired for the Project
are free and clear of all encumbrances except for Permitted Liens or as
otherwise permitted by the Credit Agreement.
4.22 All of the representations of Borrower contained in the
Credit Agreement are true and correct to the extent provided therein on and as
of the Drawdown Date with the same effect as if given on the date hereof (except
to the extent such representations and warranties relate to a prior date).
4.23 A list of all approved, pending and proposed change
orders to the Construction Contracts since the previous Drawdown Certificate
pertaining to the Project, together with copies of all such change orders not
previously delivered to the Administrative Agent, is attached hereto as Appendix
V.
4.24 Attached hereto (if funds are being requested with
respect to any Construction Contract) as Attachment A and delivered herewith is
a duly executed and completed Contractor's Certificate and a copy of the
information delivered to Borrower pursuant to [INSERT PROVISIONS OF APPLICABLE
CONSTRUCTION CONTRACT], including the Monthly Progress Report prepared
thereunder for the month to which this Drawdown Certificate relates.
4.25 The conditions set forth in Section 3.4 of the Credit
Agreement are satisfied or have been waived in writing by Administrative Agent
as of the date hereof and as of the date of the requested draw.
4
<PAGE> 215
IN WITNESS WHEREOF, Borrower has executed this Drawdown
Certificate as of the date hereof.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
----------------------------------
Name:
Title:
<PAGE> 216
Appendix I
to Exhibit C-5
(Millions $)
<TABLE>
<CAPTION>
Current
Bank
Prior This Cum. Scheduled Closing Approved
Req. Req. Req. Req. Variance Budget Budget
--- ---- ---- --- -------- ------ ------
A B C=(A+B) D E=(C-D) F G
<S> <C> <C> <C> <C> <C> <C> <C>
[Example Only - Actuals to
Conform to Operating
Budget]
SYSTEM COSTS
Interest on Draw
Sales Tax
Subtotal
--------------------------------------------------------------------------------
OWNER COSTS
Financing & Legal
Engineering
Administration
Working Capital
Total Owner Costs
--------------------------------------------------------------------------------
OTHER OWNER COSTS
Insurance
Interconnection Costs
Start-Up Cost &
Inventory
Taxes
Other Costs
Interest During
Construction
Bonuses
Contingency
Total Other Owner Costs
TOTAL FACILITY COSTS
LETTERS OF CREDIT
TOTAL
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Current
Estimated Expected
Prior Equity Scheduled Total Balance
Equity This Cum. Equity Equity Project to
Req. Month Equity Req. Var. Cost Completion
--- ----- ------ ---- ---- ---- ----------
H I J K L=(J-K) M N=M-(J+C)
<S> <C> <C> <C> <C> <C> <C> <C>
[Example Only - Actuals to
Conform to Operating
Budget]
SYSTEM COSTS
Interest on Draw
Sales Tax
Subtotal
--------------------------------------------------------------------------------
OWNER COSTS
Financing & Legal
Engineering
Administration
Working Capital
Total Owner Costs
--------------------------------------------------------------------------------
OTHER OWNER COSTS
Insurance
Interconnection Costs
Start-Up Cost &
Inventory
Taxes
Other Costs
Interest During
Construction
Bonuses
Contingency
Total Other Owner Costs
TOTAL FACILITY COSTS
LETTERS OF CREDIT
TOTAL
--------------------------------------------------------------------------------
</TABLE>
I-1
<PAGE> 217
Appendix II
to Exhibit C-5
Estimated Dates of Completion and Final Completion
Completion: _________
Final Completion: _________
II-1
<PAGE> 218
Appendix III
to Exhibit C-5
Summary description of variances from estimated Project Costs.
<TABLE>
<CAPTION>
Variation Amount
--------- ------
<S> <C>
0 0
TOTAL $0
</TABLE>
III-1
<PAGE> 219
Appendix IV
to Exhibit C-5
Material Contracts entered into by Borrower and property,
rights and assets acquired from date of previous Drawdown Certificate to the
date hereof.
IV-1
<PAGE> 220
Appendix V
to Exhibit C-5
List of Change Orders
V-1
<PAGE> 221
ATTACHMENT A TO
BORROWER'S DRAWDOWN CERTIFICATE
CONTRACTOR'S CERTIFICATE
Pursuant to Section ____ of that certain ________________________
Contract (the "Contract") by and between Calpine Construction Finance Company,
L.P., a Delaware limited partnership, and ______________________ ("Contractor"),
Contractor hereby certifies, to the Contractor's knowledge as of the date
hereof, that (all capitalized terms have the meanings ascribed in the Contract
unless otherwise indicated):
1. This attachment refers to the __________________________ Project
(the "Project").
2. The Work performed to date has, unless otherwise stated by
Contractor, been performed in accordance with the Contract and
the schedule in effect on the date hereof as referenced in
Article ____ of the Contract. Invoices submitted, including the
current invoice, are in accordance with Section ___ and Exhibit
____ of the Contract.
3. To the Contractor's knowledge, no event currently exists with
respect to the Contract which reasonably could be expected to
delay the [MECHANICAL COMPLETION DATE BEYOND THE SCHEDULED
MECHANICAL COMPLETION DATE].
4. To the Contractor's knowledge, all insurance required from
Contractor under the Contract has been bound and is in place and
is in full force and effect.
5. Schedule I hereto is a list of each first tier
Subcontractor/Supplier engaged or employed by Contractor in
connection with the construction of the Project whose contract
or contracts with the Contractor require payments totaling at
least $______________.
6. Contractor has been paid all amounts due to it under the
Contract and all Subcontractor/Suppliers engaged or employed by
Contractor have been paid to the extent that such amounts are
due or such payment (or a portion thereof) is subject to a good
faith contest which is being diligently pursued by the
Contractor (in each case, other than amounts to be paid with the
proceeds of the drawdown related to this certificate).
7. There is no material adverse change in the condition of the
Contractor which in the reasonable judgment of the Contractor
would be likely to materially adversely affect the Contractor's
ability to perform the Work.
8. To the Contractor's knowledge, the Project has not been
abandoned or terminated.
By furnishing this Contractor's Certificate, Contractor assumes no
independent liability to recipients of the same. Any liability of the
undersigned arising from this Contractor's Certificate shall be governed
exclusively by the terms of the Contract including any limitations of liability
and exclusive remedy provisions therein.
A-1
<PAGE> 222
IN WITNESS WHEREOF, the undersigned have executed this Contractor's
Certificate as of the ___ of _______________, 199__.
-----------------------------------
By:
--------------------------------
Name:
Its:
Attachments:
Schedule I -- List of Subcontractor/Suppliers
A-2
<PAGE> 223
EXHIBIT C-6
to Credit Agreement
FORM OF ENGINEER'S CERTIFICATE
[LETTERHEAD OF R.W. BECK, INC.]
(Delivered pursuant to Section 3.4.3)
The Bank of Nova Scotia, Date: _____________________
as Administrative Agent for the Banks Drawdown Date: _________________
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: Calpine Construction Finance Company Projects
Ladies and Gentlemen:
R.W. Beck, Inc. ("Independent Engineer"), pursuant to Section 3.4.3 of
the Credit Agreement dated as of October 20, 1999 ("Credit Agreement"), among
Calpine Construction Finance Company, L.P., a Delaware limited partnership, as
Borrower ("Borrower"), the financial institutions listed on Exhibit H thereto
(the "Banks"), Credit Suisse First Boston, as Lead Arranger, Syndication Agent
and Bookrunner and The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent ("Administrative Agent"), hereby makes the following
statements, with respect to the _______ Project (the "Project") as of
___________________.
1. We have read the provisions of Section 3.4.3 of the Credit
Agreement as it identifies the responsibilities of the Independent
Engineer related to providing this Independent Engineer's
Certificate.
2. All defined terms set forth in this Independent Engineer's
Certificate shall have respective meanings specified in Exhibit A
to the Credit Agreement unless otherwise defined herein.
3. We have reviewed the material and data made available to us by the
Contractors with respect to the Project and Borrower since the
date of the last Drawdown Certificate with respect to the Project,
consisting of: the Drawdown Certificate with respect to the
Project, dated ________________, and the Appendices and other
items attached thereto; drawings and specifications prepared by
________________ and ________________; and work progress documents
consisting of ________________. We have also observed the status
of construction progress and startup activities at the Project's
Site (the "Site"). Our review and observations were performed in
accordance with generally accepted consulting practices consisting
of a walk-through of such Site conducted on ____________, _____,
observation of installed equipment and material, observation of
work procedures, review of ["QA"] and ["QC"] reports as made
available by the Contractors with respect to the Project and
attendance of the construction monthly progress review meeting
with respect to the Project. We have reviewed paragraphs 4.1
through 4.7, 4.9, 4.11 through 4.13 and 4.15 of the Drawdown
Certificate with respect
<PAGE> 224
to the Project (the "Current Drawdown Certificate"), dated
________________ (the "Drawdown Date"), and we have previously
reviewed the corresponding paragraphs of all previous Drawdown
Certificates with respect to the Project. We have also reviewed
the materials attached to the Current Drawdown Certificate as
Attachment A, including each monthly progress report submitted
pursuant to each Construction Contract with respect to the Project
(the "Current Contractor Certificates"), and we have reviewed the
contractor certificates submitted with all previous Drawdown
Certificates with respect to the Project. We have also reviewed
the following additional material:___________________.
4. To the extent practical, we have periodically reviewed the
progress of engineering, procurement and construction for the
Project and in the course of this review we have not discovered
any errors or omissions in the claims for materials that have been
procured and work performed under this and all previous
Borrowings.
5. Based on our review of the aforementioned information, and of data
provided to us by others which we have not independently verified,
we are of the opinion that, as of Drawdown Date:
a. The estimated Project Costs to Final Completion [are/are
not] as set forth in the Current Drawdown Certificate. [IF
NOT, CONTINUE AS FOLLOWS: IN OUR OPINION, THE ESTIMATED
PROJECT COSTS TO FINAL COMPLETION VARY FROM THE ESTIMATED
PROJECT COSTS SET FORTH IN THE CURRENT DRAWDOWN CERTIFICATE
BECAUSE: [(STATE REASONS)];
b. THE AGGREGATE AMOUNT OF PROJECT COSTS FOR THE PROJECT WILL
NOT EXCEED 110% OF THE ANTICIPATED AGGREGATE AMOUNT OF SUCH
PROJECT COSTS FOR THE PROJECT AS SET FORTH IN THE PROJECT'S
PROJECT BUDGET.
c. THE AGGREGATE AMOUNT OF PROJECT COSTS FOR ALL INITIAL
PROJECTS AND FUNDED SUBSEQUENT PROJECTS UNDER CONSTRUCTION
AS OF THE DATE HEREOF WILL NOT EXCEED 105% OF THE
ANTICIPATED AGGREGATE AMOUNT OF PROJECT COSTS FOR ALL SUCH
PROJECTS AS SET FORTH IN SUCH PROJECTS' PROJECT BUDGETS.
[IF THE AGGREGATE AMOUNT OF PROJECT COSTS FOR THE PROJECT
EXCEEDS 110% OF THE ANTICIPATED AGGREGATE AMOUNT OF SUCH
PROJECT COSTS, THEN CONTINUE AS FOLLOWS:]
[__. WE CONFIRM THAT THE COST OVERRUNS WITH RESPECT TO THE
PROJECT ARE NOT REASONABLY LIKELY TO EXCEED $______.]
[__. THE AGGREGATE AMOUNT OF PROJECT COSTS FOR ALL INITIAL
PROJECTS AND FUNDED SUBSEQUENT PROJECTS UNDER CONSTRUCTION
AS OF THE DATE HEREOF, AFTER GIVING EFFECT TO ANY FURTHER
CONTEMPLATED OVERRUNS WITH RESPECT TO THE PROJECT, WILL NOT
EXCEED 105% OF THE ANTICIPATED AGGREGATE AMOUNT OF PROJECT
COSTS FOR ALL SUCH PROJECTS AS SET FORTH IN SUCH PROJECTS'
PROJECT BUDGETS.]
d. Completion with respect to the Project will occur on or
before the Date Certain.
2
<PAGE> 225
e. Our scope of review [has/has not] brought to our actual
attention any errors in the information contained in the
paragraphs of the Current Drawdown Certificate or in the
Current Contractor Certificate referred to in paragraph 3
of this Independent Engineer's Certificate. [SPECIFY ALL
PARAGRAPHS CONSIDERED CORRECT. IF ANY PARAGRAPH IN THE
CURRENT DRAWDOWN CERTIFICATE OR INFORMATION IN THE CURRENT
CONTRACTOR CERTIFICATE IS INCORRECT, LIST AND SPECIFY
REASONS.]
f. Except for the Applicable Permits detailed in Exhibit
G-3_____, to our knowledge, no other Permits or
governmental authorizations are required in connection with
the construction and operation of the Project;
g. The quality of construction performed with respect to the
Project during the period covered by this Independent
Engineer's Certificate is [SATISFACTORY/UNSATISFACTORY] and
[APPEARS TO HAVE BEEN/DOES NOT APPEAR TO HAVE BEEN]
performed in a good and workmanlike manner and in
conformance with the Construction Contracts with respect to
the Project; [IF UNSATISFACTORY, SPECIFY REASONS.]
h. The work accomplished with respect to the Project during
the period covered by this Independent Engineer's
Certificate [IS/IS NOT] in accordance with the Project's
Project Schedule; and [IF NOT IN ACCORDANCE WITH SCHEDULE,
SPECIFY REASONS.]
i. After giving effect to the Borrowings requested by the
Current Drawdown Certificate, we estimate Available
Construction Funds to be sufficient to pay remaining
Project Costs for all Initial Projects and Funded
Subsequent Projects under construction as of the date
hereof (after giving effect to any other Drawdown
Certificates delivered to Administrative Agent as of the
date hereof).
6. To the best of our knowledge, there are no approved or material
proposed change orders which are not listed on Appendix V to the
Current Drawdown Certificate or that have not been listed in a
previous Drawdown Certificate.
7. Without having specifically reviewed the matter, the undersigned
does not know of any pending or proposed changes in any codes or
regulations affecting the design, construction or use of the
Project which would affect completion of the Project or the
ability to obtain any certificates or permits necessary for the
use and operation of the Project.
Except as specified above, the undersigned has not discovered any error
in the matters set forth in the Current Drawdown Certificate or Current
Contractor Certificate that are within its scope of work.
3
<PAGE> 226
The information contained herein is for the benefit of Administrative
Agent and the Banks and may be relied upon for the purposes of making Loans
pursuant to the Credit Agreement.
R.W. BECK, INC.,
a Washington corporation
By:
---------------------------------
Name:
Title:
<PAGE> 227
EXHIBIT C-7
to Credit Agreement
FORM OF DISBURSEMENT REQUISITION
(Delivered pursuant to Section 7.2.2 [AND SECTION 7.2.3]
of the Credit Agreement)
[Date]
The Bank of Nova Scotia
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: Calpine Construction Finance Company Projects
This Disbursement Requisition is delivered to you pursuant to Section
7.2.2 [AND SECTION 7.2.3] of the Credit Agreement dated as of October 20, 1999
("Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower ("Borrower"), the financial
institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent ("Administrative
Agent"). All capitalized terms used herein shall have the respective meanings
specified in Exhibit A to the Credit Agreement unless otherwise defined herein
or unless the context requires otherwise.
This Disbursement Requisition constitutes, with respect to the _______
Project (the "Project"), [(a)] a request for a transfer of Senior O&M Costs from
the Revenue Account to the Operating Account as described in Section 7.2.2 of
the Credit Agreement [AND (b) A REQUEST FOR PAYMENT OF SUBORDINATED O&M COSTS AS
DESCRIBED IN SECTION 7.2.3 OF THE CREDIT AGREEMENT], [EACH] as further described
below:
1. DISBURSEMENT DATE
1.1 [IF THE DISBURSEMENT REQUISITION IS FOR SENIOR O&M COSTS ONLY,
INSERT: THE DISBURSEMENT DATE IS [LAST BANKING DAY OF EACH MONTH].]
[IF THE DISBURSEMENT REQUISITION INCLUDES PAYMENT OF
SUBORDINATED O&M COSTS, INSERT: [THE DISBURSEMENT DATE IS THE LAST DAY OF A
CALENDAR QUARTER].]
2. AMOUNT
2.1 Amount of Senior O&M Costs to be transferred to the Project's
Operating Sub-Account: $___________.
2.2 [AMOUNT OF SUBORDINATED O&M COSTS: $___________.]
<PAGE> 228
3. BORROWER HEREBY CONFIRMS AND CERTIFIES THAT, as of the date hereof:
3.1 The O&M Costs with respect to the Project incurred during
the present fiscal year of the Borrower through the
immediately preceding date of disbursement from the Revenue
Account pursuant to Sections 7.2.2 and 7.2.3 of the Credit
Agreement by or on behalf of Borrower are $___________,
segregated by major categories as described in Column 1 on
Appendix I hereto.
3.2 The O&M Costs with respect to the Project expected to be
paid with this disbursement are $__________, segregated by
major categories as described in Column 5 on Appendix I
hereto. All items shown in Column 5 represent Borrower's
best estimate of O&M Costs with respect to the Project
which have become, or are anticipated to become, due and
payable during the calendar month to which this
Disbursement Requisition relates. [OF THE AMOUNTS SHOWN IN
COLUMN 5, ALL REPRESENT WORK OR AMOUNTS INCLUDED IN THE
PROJECT'S ANNUAL OPERATING BUDGET/$___________ REPRESENT
WORK OR AMOUNTS NOT INCLUDED IN THE PROJECT'S ANNUAL
OPERATING BUDGET].
3.3 No Event of Default or Inchoate Default or, with respect to
the Project, Non-Fundamental Project Default or
Non-Fundamental Project Inchoate Default has occurred and
is continuing or will occur upon giving effect to the
application of the disbursement requested hereby.
3.4 Except as specified below, all proceeds of all
disbursements from the Project's Revenue Sub-Account made
prior to the date hereof for O&M Costs with respect to the
Project have been expended and have been applied to O&M
Costs with respect to the Project in accordance with the
Credit Agreement. [LIST ANY EXCEPTIONS]
3.5 Attached to this Disbursement Requisition as Appendix II
are true, complete and correct listings of all Additional
Project Documents with respect to the Project and all
material property, rights and assets acquired by Borrower
with respect to the Project since the date of the last
Disbursement Requisition with respect to the Project to the
date hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 229
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Disbursement Requisition on the date shown above.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
-----------------------------------
Name:
Title:
<PAGE> 230
APPENDIX I
To Exhibit C-7
CALPINE CONSTRUCTION FINANCE COMPANY, L.P., a Delaware limited partnership
Disbursement Request for the month of _____________, 19__
with respect to the _______ Project
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
[Example Only - the lesser of (5) + (1) (2 + 4) (7)-(8)
Actuals to CURRENT 4 or 5-3
Conform to EXPENDITURES DISBURSEMENTS O&M BUDGET MONTH'S (<= (4))*
Categories Set TO LAST TO LAST REMAINING AMOUNT FOR EXPENDITURES NET TOTAL O&M TOTAL O&M OVER %
Forth in DISBURSEMENT DISBURSEMENT RESIDUAL/ CURRENT DUE AND DISBURSEMENT COSTS O&M (UNDER) OVER/
Operating Budget] DATE DATE (SHORTFALL) MONTH PAYABLE REQUEST TO DATE BUDGET RUN (UNDER)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
O&M Labor
Fuel
Water
Supplies
General &
Administrative
Management Fee
Routine
Maintenance
Ground Lease
Payments
[ ]
[ ]
[ ] Facility
Operating Expense
Facility Expense
Insurance
Property Taxes
Sales Tax
Parcel Tax
Contingency
[CONFORM ABOVE TO
OPERATING
BUDGET LINE ITEMS]
---- ---- ---- ----- ---- ---- ---- ---- ----
TOTAL
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- ----------
* Subject to variation as permitted under Section 5.15.2 of the Credit
Agreement.
I-1
<PAGE> 231
APPENDIX II
to Exhibit C-7
CALPINE CONSTRUCTION FINANCE COMPANY L.P., a Delaware limited partnership
Additional Project Documents with respect to the _______ Project to be
executed from date of previous disbursement request to the date hereof.
<TABLE>
<CAPTION>
Item Cost
---- ----
<S> <C>
TOTAL $[____________]
</TABLE>
II-1
<PAGE> 232
EXHIBIT C-8
to Credit Agreement
FORM OF RESERVE ACCOUNT DISBURSEMENT REQUISITION
(Delivered pursuant to Section 7.8.3 of the Credit Agreement)
[Date]
The Bank of Nova Scotia,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Re: Calpine Construction Finance Company Projects
This Reserve Account Disbursement Requisition is delivered to you
pursuant to Section 7.8.3 of the Credit Agreement dated as of October 20, 1999
("Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower ("Borrower"), the financial
institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent ("Administrative
Agent"). All capitalized terms used herein shall have the respective meanings
specified in Exhibit A to the Credit Agreement unless otherwise defined herein
or unless the context requires otherwise.
This Reserve Account Disbursement Requisition relates to the
__________________ Project (the "Project").
Borrower hereby requests a withdrawal from the Working Capital Reserve
Account in the amount of $____________ for the payment of Senior O&M Costs that
have become due and payable for the Project as described and to the Persons
specified on Schedule 1 attached hereto.
Borrower hereby confirms and certifies that, as of the date hereof:
(a) Insufficient amounts are available in the Revenue Account and the
Project's Operating Account for the payment of Senior O&M Costs
with respect to the Project;
[CHOOSE ONE ALTERNATIVE (b) BELOW, AS APPLICABLE]
[(b) THE AMOUNT REQUESTED DOES NOT, TOGETHER WITH ALL SENIOR O&M COSTS
WITH RESPECT TO THE PROJECT PREVIOUSLY PAID DURING THE SAME CALENDAR YEAR
AS THE DATE OF THIS REQUISITION, EXCEED 115% OF THE AMOUNTS OF SENIOR O&M
COSTS SPECIFIED FOR THE PROJECT IN THE PROJECT'S ANNUAL OPERATING BUDGET
FOR SUCH CALENDAR YEAR.]
<PAGE> 233
[(b) ADMINISTRATIVE AGENT, AS EVIDENCED BY ITS SIGNATURE BELOW, CONSENTS
TO SUCH WITHDRAWAL.]
(c) No Event of Default or Inchoate Default or, with respect to the
Project, Non-Fundamental Project Default or Non-Fundamental Project Inchoate
Default has occurred and is continuing or will occur upon giving effect to the
application of the withdrawal requested hereby; and
(d) Except as specified below, all proceeds of all withdrawals from the
Working Capital Reserve Account made prior to the date hereof have been expended
and have been applied in accordance with the Credit Agreement. [LIST ANY
EXCEPTIONS].
The undersigned hereby certifies that the undersigned is an officer of
Borrower and, as such, is authorized to execute this Reserve Account
Disbursement Requisition on behalf of Borrower.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Reserve Account Disbursement Requisition on the date shown above.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
---------------------------------
Name:
Title:
The undersigned acknowledges receipt of a copy of this Reserve Account
Disbursement Requisition:
THE BANK OF NOVA SCOTIA, Date: __________, _____
as Administrative Agent for the Banks
By:
----------------------------------
Name:
Title:
<PAGE> 234
Schedule 1
To Exhibit C-8
Description of Payees and Uses of Funds Withdrawn
From the Working Capital Reserve Account
I-1
<PAGE> 235
EXHIBIT D-1
to the Credit Agreement
- --------------------------------------------------------------------------------
FORM OF DEPOSITARY AGREEMENT
dated as of ______, 1999
among
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership,
as Borrower,
THE BANK OF NOVA SCOTIA,
as Administrative Agent for the Banks,
and
THE BANK OF NOVA SCOTIA,
as Depositary Agent
- --------------------------------------------------------------------------------
<PAGE> 236
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 Definitions; Rules of Interpretation ....................... 1
Section 1.1 Definitions ........................................ 1
Section 1.2 Rules of Interpretation ............................ 2
ARTICLE 2 Appointment of Depositary Agent; Establishment of Accounts . 3
Section 2.1 Appointment of Depositary Agent .................... 3
Section 2.2 Security Interest; Control ......................... 3
Section 2.3 Accounts Maintained as UCC "Securities Accounts" ... 3
Section 2.4 Borrower's Rights .................................. 4
Section 2.5 Creation of Accounts ............................... 4
ARTICLE 3 Deposits into Accounts ..................................... 5
Section 3.1 Deposits ........................................... 5
ARTICLE 4 Payments from Accounts ..................................... 5
Section 4.1 Withdrawals by Administrative Agent ................ 5
Section 4.2 Withdrawals from Construction Account .............. 6
Section 4.3 Withdrawals from the Revenue Account ............... 6
Section 4.4 Withdrawals from the Loss Proceeds Account ......... 6
Section 4.5 Withdrawals from the Working Capital Reserve
Account .......................................... 6
ARTICLE 5 Investment ................................................. 7
Section 5.1 Permitted Investments .............................. 7
ARTICLE 6 Depositary Agent ........................................... 7
Section 6.1 Rights, Duties, etc ................................ 7
Section 6.2 Resignation or Removal ............................. 8
ARTICLE 7 Determinations ............................................. 9
Section 7.1 Sales of Permitted Investments ..................... 9
Section 7.2 Available Cash ..................................... 9
ARTICLE 8 Miscellaneous .............................................. 9
Section 8.1 Fees and Indemnification of Depositary Agent ....... 9
Section 8.2 Waiver of Right of Set-Off ......................... 9
Section 8.3 Termination ........................................ 10
Section 8.4 Severability ....................................... 10
Section 8.5 Counterparts ....................................... 10
Section 8.6 Amendments ......................................... 10
Section 8.7 Applicable Law ..................................... 10
Section 8.8 Notices, etc ....................................... 10
</TABLE>
i
<PAGE> 237
<TABLE>
<S> <C>
Section 8.9 Further Information ................................ 11
Section 8.10 Benefit of Agreement .............................. 12
</TABLE>
ii
<PAGE> 238
THIS DEPOSITARY AGREEMENT (this "Agreement"), dated as of _____, 1999, is
among CALPINE CONSTRUCTION FINANCE COMPANY, L.P., a Delaware limited partnership
("Borrower"), THE BANK OF NOVA SCOTIA, acting in its capacity as Administrative
Agent ("Administrative Agent") for the Banks under the Credit Agreement (as
defined below), and THE BANK OF NOVA SCOTIA, acting in its capacity as
Depositary Agent (the "Depositary Agent").
RECITALS
A. Borrower has entered into that certain Credit Agreement, dated as of
October 20, 1999 (as the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among Borrower, the financial
institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent, whereby the Banks
have agreed to advance to Borrower certain loans to finance the construction and
operation by Borrower of the Projects.
B. In order to give effect to (a) the security interest in the Accounts
(as defined herein) granted by Borrower to Administrative Agent and (b) the
deposit of funds into the Accounts and the application of funds in connection
with the construction and operation of the Projects, each as contemplated in the
Credit Agreement, the parties have agreed that all amounts to be paid over to
Administrative Agent for deposit into, and disbursement from, the Accounts under
of the Credit Agreement shall be paid to Depositary Agent, as agent for
Administrative Agent, to be held by Depositary Agent in pledge as collateral
security for Borrower's obligations under the Credit Agreement and distributed
by Depositary Agent as provided herein.
C. Depositary Agent has agreed to act as depositary agent for
Administrative Agent pursuant to the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Agreement and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1
Definitions; Rules of Interpretation
Section 1.1 Definitions. Capitalized terms used but not defined herein
shall have the respective meanings given them in Exhibit A to the Credit
Agreement. The following terms when used herein shall have the following
meanings:
"Accounts" shall mean the collective reference to the Construction
Account, the Revenue Account, the Loss Proceeds Account, the Working Capital
Reserve Account and any
1
<PAGE> 239
and all other accounts hereinafter established under the Credit Agreement and/or
this Agreement, including any sub-accounts within such accounts.
"Account Withdrawal Certificate" shall mean a certificate of an
Authorized Representative of Borrower countersigned by Administrative Agent
substantially in the form of Exhibit A hereto, stating (i) the specific amount
requested to be withdrawn from a specific Account and transferred, applied or
paid over to another Account or Person, (ii) the purpose for which such payment
shall be made, (iii) that no Event of Default and, with respect to withdrawals
from the Construction Account or the Loss Proceeds Account of the Project to
which such withdrawal relates, no Non-Fundamental Project Default shall have
occurred and be continuing or will occur after giving effect to the withdrawal
of funds so requested and (iv) that all other conditions to distributions from
such account set forth in the Credit Agreement have been satisfied.
"Construction Account" shall mean, collectivley, the special account
designated by that name established by the Depositary Agent pursuant to Section
2.5, the Construction Sub-Accounts and all sub-accounts therein.
"Disbursement Instruction" shall mean a notice from Administrative Agent,
substantially in the form of Exhibit B hereto, instructing Depositary Agent to
transfer a specific amount of funds from any of the Accounts to such other
account or recipient identified by Administrative Agent in accordance therewith.
"Loss Proceeds Account" shall mean the special account designated by that
name established by Depositary Agent pursuant to Section 2.5.
"Revenue Account" shall mean the special account designated by that name
established by the Depositary Agent pursuant to Section 2.5.
"UCC" shall mean the Uniform Commercial Code as adopted in the State of
New York.
"Working Capital Reserve Account" shall mean the special account
designated by that name established by the Depositary Agent pursuant to Section
2.5.
Section 1.2 Rules of Interpretation. The rules of interpretation set
forth in Exhibit A to the Credit Agreement shall apply to this Agreement.
ARTICLE 2
Appointment of Depositary Agent;
Establishment of Accounts
Section 2.1 Appointment of Depositary Agent. Depositary Agent is hereby
appointed by Borrower and by Administrative Agent as depositary agent hereunder,
and Depositary Agent hereby agrees to act as such and to accept all cash,
payments, other amounts
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and Permitted Investments to be delivered to or held by Depositary Agent
pursuant to the terms of this Agreement. Depositary Agent shall hold and
safeguard the Accounts (and the cash, instruments and securities on deposit
therein) during the term of this Agreement and shall treat the cash,
instruments, and securities in the Accounts as funds, instruments and securities
pledged by Borrower to Administrative Agent for the ratable benefit of the
Banks, to be held by Depositary Agent, as agent of Administrative Agent, in
trust in accordance with the provisions hereof.
Section 2.2 Security Interest; Control. In order to secure the
performance by Borrower of all of its covenants, agreements and obligations
under the Credit Agreement and the other Credit Documents and the payment and
performance by Borrower of all Obligations, this Agreement is intended to
create, and Borrower hereby pledges to and creates in favor of Administrative
Agent, for the benefit of the Banks, a security interest in and to, the
Accounts, all cash, cash equivalents, instruments, investments and other
securities at any time on deposit in the Accounts, and all proceeds of any of
the foregoing (collectively, the "Collateral"). All moneys, cash equivalents,
instruments, investments and securities at any time on deposit in any of the
Accounts shall constitute collateral security for the payment and performance by
Borrower of the Obligations, and shall at all times be subject to the control of
Administrative Agent, acting through Depositary Agent in respect of the Accounts
and shall be held in the custody of Depositary Agent in trust for the purposes
of, and on the terms set forth in, this Agreement.
Section 2.3 Accounts Maintained as UCC "Securities Accounts." Depositary
Agent hereby agrees and confirms that it has established the Accounts as set
forth and defined in this Agreement. Each of Depositary Agent and Borrower
agrees that (i) Depositary Agent is acting as "securities intermediary" (within
the meaning of Section 8-102(14) of the UCC) with respect to the Accounts and
the "financial assets" (within the meaning of Section 8-102(a)(9) of the UCC,
the "Financial Assets") credited to the Accounts; (ii) each such Account
established by Depositary Agent is and will be maintained as a "securities
account" (within the meaning of Section 8-501 of the UCC); (iii) Borrower is an
"entitlement holder" (within the meaning of Section 8-102(a)(7) of the UCC) in
respect of the Financial Assets credited to such Accounts and with respect to
such Accounts and Depositary Agent shall so note in its records pertaining to
such Financial Assets and Accounts; and (iv) all Financial Assets in registered
form or payable to or to order of and credited to any such Account shall be
registered in the name of, payable to or to the order of, or specially endorsed
to, Depositary Agent or in blank, or credited to another securities account
maintained in the name of Depositary Agent, and in no case will any Financial
Asset credited to any such Account be registered in the name of, payable to or
to the order of, or endorsed to, Borrower except to the extent the foregoing
have been subsequently endorsed by Borrower to Depositary Agent or in blank.
Each item of property (including a security, security entitlement, investment
property, instrument or obligation, share, participation, interest or other
property whatsoever) credited to any Account shall be treated as a Financial
Asset. Until this Agreement shall terminate in accordance with the terms hereof,
Administrative Agent shall have "control" (within the meaning of Section
8-106(d)(2) of the UCC) of Borrower's "security entitlements" (within the
meaning of Section 8-102(a)(17) of the UCC, "Security Entitlements") with
respect to the Accounts and the Financial Assets credited to the Accounts. All
property delivered to Depositary Agent pursuant to this Agreement will be
promptly credited to the
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Accounts and shall be treated as Financial Assets. If at any time Depositary
Agent shall receive from Administrative Agent any "entitlement order" (within
the meaning of Section 8-102(8) of the UCC, an "Entitlement Order") relating to
the Accounts or Financial Assets credited to the Accounts, Depositary Agent
shall comply with such Entitlement Order without further consent by Borrower or
any other Person. In the event that Depositary Agent receives conflicting
Entitlement Orders relating to the Accounts or Financial Assets credited to the
Accounts from Administrative Agent and any other Person (including, without
limitation, Borrower), Depositary Agent shall comply with the Entitlement Orders
originated by Administrative Agent. Each of Borrower and Depositary Agent agrees
that it has not and will not execute and deliver, or otherwise become bound by,
any agreement under which it agrees with any Person other than Administrative
Agent to comply with Entitlement Orders originated by such Person relating to
the Accounts or Financial Assets credited to the Accounts. Except for the claims
and interests of Administrative Agent and Borrower in the Accounts and the
Financial Assets credited to the Accounts, neither Depositary Agent nor Borrower
knows of any claim to, or interest in, any Account or Financial Assets credited
to the Accounts. If either Depositary Agent or Borrower obtains knowledge that
any Person has asserted a lien, encumbrance or adverse claim against any or the
Accounts or Financial Assets credited to the Accounts, such party will promptly
notify Administrative Agent thereof. In the event that the Depositary Agent has
or subsequently obtains by agreement, operation of law or otherwise a Lien or
security interest in any Account, any Security Entitlement carried therein or
credited thereto or any Financial Asset that is the subject of any such Security
Entitlement, Depositary Agent agrees that such Lien or security interest shall
be subordinate to the Lien and security interest of the Administrative Agent.
The Financial Assets standing to the credit of the Accounts will not be subject
to deduction, set-off, banker's lien or any other right, and Depositary Agent
shall not grant, permit or consent to any other right or interest in such
Financial Assets, in favor of any Person (including the Depositary Agent) other
than Administrative Agent.
Section 2.4 Borrower's Rights. Borrower shall not have any rights or
powers with respect to any amounts in the Accounts or any part thereof except
(i) as provided in Article 5 hereof and (ii) the right to have such amounts
applied in accordance with the provisions hereof and of the Credit Agreement.
Section 2.5 Creation of Accounts. Depositary Agent hereby establishes at
its office located in New York, New York, the following four special, segregated
and irrevocable money collateral accounts and sub-accounts within such accounts
which shall be maintained at all times until the termination of this Agreement,
unless earlier termination is otherwise provided for herein or in the Credit
Agreement:
(1) The Construction Account (Acc. # 2480-10);
(2) The Construction Sub-Account (Magic Valley) (Acc. # 2481-18);
(3) The Construction Sub-Account (South Point) (Acc. # 2483-12);
(4) The Construction Sub-Account (Sutter) (Acc. # 2485-17);
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(5) The Construction Sub-Account (Westbrook) (Acc. # 2486-14);
(6) The Revenue Account (Acc. # 2487-11);
(7) The Loss Proceeds Account (Acc. # 2488-19); and
(8) The Working Capital Reserve Account (Acc. # 2490-17).
All moneys, investments and securities at any time on deposit in any of the
Accounts shall constitute trust funds to be held in the custody of Depositary
Agent for the purposes and on the terms set forth in this Agreement.
ARTICLE 3
Deposits into Accounts
Section 3.1 Deposits. Each of Borrower and Administrative Agent covenants
and agrees that all amounts required by the Credit Agreement or the other Credit
Documents to be delivered or deposited in any of the Accounts, shall be paid
over to Depositary Agent directly for deposit into the appropriate Account. Any
deposit made to any Account under this Agreement shall be irrevocable and the
amount of such deposit and any instrument or security held in such Account and
all income or gain earned on such deposits shall be held in trust by Depositary
Agent and applied solely as provided in this Agreement.
ARTICLE 4
Payments from Accounts
Section 4.1 Withdrawals by Administrative Agent. As soon as practicable,
and in all events within three Banking Days after receipt of a Disbursement
Instruction, executed by Administrative Agent, Depositary Agent shall distribute
or apply monies on deposit in the Accounts specified in such notice, in the
manner, in the amount and to the Person or Account specified in such
Disbursement Instruction. Notwithstanding anything to the contrary in this
Agreement, from and after Depositary Agent's receipt of notice from
Administrative Agent or Borrower that an Event of Default exists until such time
as Depositary Agent receives notice from Administrative Agent that such Event of
Default no longer exists, Depositary Agent shall only withdraw or transfer
amounts in the Construction Account or the Loss Process Account at the direction
of Administrative Agent. Notwithstanding anything to the contrary in this
Agreement, from and after Depositary Agent's receipt of notice from
Administrative Agent or Borrower that a Non-Fundamental Project Default exists
until such time as Depositary Agent receives notice from Administrative Agent
that such Non-Fundamental Project Default no longer exists, Depositary Agent
shall only withdraw or transfer amounts in the Construction Account or the Loss
Proceeds Account for the Project to which such Non-Fundamental Project Default
relates at the direction of Administrative Agent. In the event that funds on
deposit in any Account exceed the amounts required to be deposited therein, and
such excess funds are required to be transferred to the Revenue Account pursuant
to the Credit Agreement, Administrative
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Agent shall, as soon as practicable, deliver a Disbursement Instruction to the
Depositary Agent requesting that such excess funds be transferred to the Revenue
Account.
Section 4.2 Withdrawals from Construction Account. On the same Banking
Day on which Depositary Agent receives an Account Withdrawal Certificate from
Borrower, duly executed by Borrower and acknowledged and agreed to by
Administrative Agent, requesting that funds be withdrawn and/or transferred from
the Construction Account, Depositary Agent shall distribute or apply monies on
deposit in the Construction Account in the manner, in the amount and to the
Person or Account specified in such Account Withdrawal Certificate; provided,
however, that in the event that Depositary Agent receives such Account
Withdrawal Certificate after 12:00 p.m. eastern standard time of any Banking
Day, then Depositary Agent may take the actions specified therein on the next
Banking Day.
Section 4.3 Withdrawals from the Revenue Account. As soon as practicable
and in all events within three Banking Days after receipt of an Account
Withdrawal Certificate from Borrower, duly executed by Borrower and acknowledged
and agreed to by Administrative Agent, requesting that funds be withdrawn and/or
transferred from the Revenue Account, Depositary Agent shall distribute or apply
monies on deposit in the Revenue Account in the manner, in the amount and to the
Person or Account specified in such Account Withdrawal Certificate.
Section 4.4 Withdrawals from the Loss Proceeds Account. As soon as
practicable, and in all events within three Banking Days after receipt of an
Account Withdrawal Certificate from Borrower, duly executed by Borrower and
acknowledged and agreed to by Administrative Agent, requesting that funds be
withdrawn and/or transferred from the Loss Proceeds Account, Depositary Agent
shall distribute or apply monies on deposit in the Loss Proceeds Account in the
manner, in the amount and to the Person or Account specified in such Account
Withdrawal Certificate.
Section 4.5 Withdrawals from the Working Capital Reserve Account. As soon
as practicable, and in all events within three Banking Days after receipt of an
Account Withdrawal Certificate from Borrower, duly executed by Borrower and
acknowledged and agreed to by Administrative Agent, requesting that funds be
withdrawn and/or transferred from the Working Capital Reserve Account,
Depositary Agent shall distribute or apply monies on deposit in the Working
Capital Reserve Account in the manner, in the amount and to the Person or
Account specified in such Account Withdrawal Certificate.
ARTICLE 5
Investment
Section 5.1 Permitted Investments. Depositary Agent shall invest any
money held in any Account in such Permitted Investments as directed in writing
by Borrower from time to time (or, if Administrative Agent shall have notified
Depositary Agent that Administrative Agent is exercising its power of attorney
to direct investments, by and at the discretion of Administrative Agent). In the
event that Depositary Agent has not received any such written
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directions, Depositary Agent shall be under no obligation to invest any such
money. Any income or gain realized as a result of any such investment shall be
held as part of the applicable Account and reinvested as provided in this
Agreement until released in compliance with Article 4. Any income tax payable on
account of any such income or gain shall be paid by Borrower. Depositary Agent
shall have no liability for any loss resulting from any such investment other
than solely by reason of its willful misconduct or gross negligence or bad faith
or from failure to exercise such care in the custody of any such investments as
it does for accounts held by other customers or in the custody of its own
investments. Any such investment may be sold (without regard to maturity date)
by Depositary Agent whenever necessary to make any distribution required by this
Agreement. In addition, if an Event of Default has occurred and is continuing,
any investment shall be liquidated and sold by Depositary Agent if so directed
by Administrative Agent.
ARTICLE 6
Depositary Agent
Section 6.1 Rights, Duties, etc. The acceptance by Depositary Agent of
its duties under this Agreement is subject to the following terms and conditions
which the parties to this Agreement hereby agree shall govern and control with
respect to Depositary Agent's rights, duties, liabilities and immunities:
(a) Depositary Agent shall act as an agent only and shall not be
responsible or liable in any manner for soliciting any funds or for the
sufficiency, correctness, genuineness or validity of any funds or securities
deposited with or held by it, except as set forth in Section 6.1(c) hereof;
(b) Depositary Agent shall be protected in acting or refraining from
acting upon any written notice, certificate, instruction, request or other paper
or document, as to the due execution thereof and the validity and effectiveness
of the provisions thereof and as to the truth of any information contained
therein, which Depositary Agent in good faith believes to be genuine;
(c) Depositary Agent shall not be liable for any error of judgment or
for any act done or step taken or omitted except in the case of its gross
negligence, willful misconduct or bad faith;
(d) Depositary Agent may consult with and obtain advice from counsel
in the event of any dispute or question as to the construction of any provision
of this Agreement;
(e) Depositary Agent shall have no duties as Depositary Agent except
those which are expressly set forth in this Agreement and in any modification or
amendment hereof; provided, however, that no such modification or amendment
shall affect Depositary Agent's duties unless Depositary Agent shall have given
its prior written consent to such modification or amendment;
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(f) Depositary Agent may execute or perform any duties under this
Agreement either directly or through agents or attorneys;
(g) Depositary Agent may engage or be interested in any financial or
other transactions with any party to this Agreement and may act on, or as
depositary, trustee or agent for, any committee or body of holders of
obligations of such Persons as freely as if it were not Depositary Agent
hereunder; and
(h) Depositary Agent shall not be obligated to take any action which
in its reasonable judgment would involve it in expense or liability unless it
has been furnished with reasonable indemnity.
Section 6.2 Resignation or Removal.
(a) Depositary Agent may at any time resign by giving notice to each
other party to this Agreement, such resignation to be effective upon the
appointment of a successor Depositary Agent as provided below.
(b) Administrative Agent may remove Depositary Agent at any time by
giving notice to each other party to this Agreement, such removal to be
effective upon the appointment of successor Depositary Agent as provided below.
(c) In the event of any resignation or removal of Depositary Agent, a
successor Depositary Agent, which shall be a bank or trust company organized
under the laws of the United States America or of the State of New York, having
a corporate trust office in New York and a capital and surplus of not less than
$50,000,000, shall be appointed by Administrative Agent after consultation with
Borrower. If a successor Depositary Agent shall not have been appointed and
accepted its appointment as Depositary Agent within 45 days after such notice of
resignation of Depositary Agent or such notice of removal of Depositary Agent,
Depositary Agent, Administrative Agent or Borrower may apply to any court of
competent jurisdiction to appoint a successor Depositary Agent to act until such
time, if any, as a successor Depositary Agent shall have accepted its
appointment as provided above. A successor Depositary Agent so appointed by such
court shall immediately and without further act be superseded by any successor
Depositary Agent appointed by Administrative Agent as provided above. Any such
successor Depositary Agent shall be capable of acting as a "securities
intermediary" (within the meaning of Section 8-102(14) of the UCC) and shall
deliver to each party to this Agreement a written instrument accepting such
appointment and thereupon such successor Depositary Agent shall succeed to all
the rights and duties of Depositary Agent under this Agreement and shall be
entitled to receive the Accounts from the predecessor Depositary Agent.
ARTICLE 7
Determinations
Section 7.1 Sales of Permitted Investments. Depositary Agent will use its
best efforts to sell Permitted Investments so that actual money is available, on
each date on which a
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distribution is to be made pursuant to this Agreement, for Depositary Agent to
make such distribution in money on such date.
Section 7.2 Available Cash. In determining the amount of deposit or
available money in any Account at any time, in addition to any money then on
deposit in such Account, Depositary Agent shall treat as on deposit or as
available money the net amount which, in the reasonable opinion of Depositary
Agent, would have been received by Depositary Agent on such day if Depositary
Agent had liquidated all the Permitted Investments (at then prevailing market
prices) then on deposit in such Account.
ARTICLE 8
Miscellaneous
Section 8.1 Fees and Indemnification of Depositary Agent. Borrower agrees
to pay the fees of Depositary Agent as compensation for its services under this
Agreement. In addition, Borrower assumes liability for, and agrees to indemnify,
protect, save and keep harmless Depositary Agent, Administrative Agent, each
Bank and their respective successors, assigns, agents and servants from and
against any and all claims, liabilities, obligations, losses, damages,
penalties, costs and expenses, including, without limitation, all reasonable
fees and expenses of counsel to Depositary Agent, Administrative Agent or any
Bank, that may be imposed on, incurred by, or asserted against, at any time,
Depositary Agent, Administrative Agent or any Bank, and in any way relating to
or arising out of the execution and delivery of this Agreement, the
establishment of the Accounts, the acceptance of deposits, the purchase or sale
of Permitted Investments, the retention of money and Permitted Investments or
the proceeds thereof and any payment, transfer or other application of money or
Permitted Investments by Depositary Agent, Administrative Agent or any Bank in
accordance with the provisions of this Agreement, or as may arise by reason of
any act, omission or error of Depositary Agent made in good faith in the conduct
of its duties. Borrower shall not, however, be required to indemnify, protect,
save and keep harmless Depositary Agent, Administrative Agent or any Bank
against its own gross negligence or willful misconduct. The indemnities
contained in this Section 8.1 shall survive the termination of this Agreement.
All payments made by Borrower hereunder shall be made without setoff or
counterclaim.
Section 8.2 Waiver of Right of Set-Off. Depositary Agent waives, with
respect to all of its existing and future claims against Borrower or any
Affiliate thereof, all existing and future rights of set-off and banker's liens
against the Accounts and all items (and proceeds thereof) that come into its
possession in connection with the Accounts.
Section 8.3 Termination. Subject to Section 8.1, the provisions of this
Agreement shall terminate on the date on which all Obligations shall have been
paid in full and the Credit Documents have terminated in accordance with their
terms. The termination of this Agreement shall have been deemed to have occurred
upon receipt by Depositary Agent of a certificate to such effect executed by
Administrative Agent. Promptly after receipt of such certificate by Depositary
Agent, Depositary Agent shall distribute all amounts contained in the Accounts
to the Borrower and shall be discharged of all obligations hereunder.
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Section 8.4 Severability. If any one or more of the covenants or
agreements provided in this Agreement on the part of the parties to this
Agreement to be performed should be determined by a court of competent
jurisdiction to be contrary to law, such covenant or agreement shall be deemed
and construed to be severable from the remaining covenants and agreements of
this Agreement and shall in no way affect the validity of the remaining
provisions.
Section 8.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which taken together
shall constitute but one and the same instrument.
Section 8.6 Amendments This Agreement may not be modified or amended
without the prior written consent of each of the parties to this Agreement.
Section 8.7 Applicable Law. This Agreement and any instrument or
agreement required hereunder (to the extent not expressly provided for therein)
shall be governed by, and construed in accordance with, the laws of the State of
New York, without reference to conflicts of laws (other than Section 5-1401 of
the New York General Obligations Law).
Section 8.8 Notices, etc.. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered, or mailed by first-class mail, postage prepaid,
to the following addresses:
(a) If to Administrative Agent:
The Bank of Nova Scotia
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30306
Attention: Michael Silveira
Telephone Number: (404) 877-1522
Telecopier Number: (404) 888-8998
(b) If to Borrower:
Calpine Construction Finance Company, L.P.
c/o Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: General Counsel
Telephone No.: (408) 995-5115
Telecopy No.: (408) 995-0505
and
6700 Knoll Center Parkway, Suite 200
Pleasanton, California 94566
Attention: Corporate Asset Management
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Telephone Number: (925) 600-2000
Telecopier Number: (925) 600-8926
(c) If to Depositary Agent:
The Bank of Nova Scotia
One Liberty Plaza, 26th Floor
165 Broadway
New York, New York 10006
Attention: Dorothy Jennings
Telephone Number: (212) 225-5000
Telecopier Number: (212) 225-5172
All notices or other communications required or permitted to be delivered
hereunder, shall be in writing and shall be considered as properly delivered (a)
if delivered in person, (b) if sent by overnight delivery service (including
Federal Express, Emery, DHL, Air Borne and other similar overnight delivery
services), (c) in the event overnight delivery services are not readily
available, if mailed by first class United States Mail, postage prepaid,
registered or certified with return receipt requested or (d) if sent by prepaid
telegram, or by telecopy confirmed by telephone. Notice so delivered shall be
effective upon receipt by the addressee, except that communication or notice so
transmitted by telecopy or other direct written electronic means shall be deemed
to have been validly and effectively delivered on the day (if a Banking Day and,
if not, on the next following Banking Day) on which it is transmitted if
transmitted before 4:00 p.m., recipient's time, and if transmitted after that
time, on the next following Banking Day; provided, however, that if any notice
is tendered to an addressee and the delivery thereof is refused by such
addressee, such notice shall be effective upon such tender. Any party shall have
the right to change its address for notice hereunder to any other location
within the continental United States by giving of 30 days' notice to the other
parties in the manner set forth hereinabove.
Section 8.9 Further Information. Depositary Agent shall promptly provide
Administrative Agent and Borrower with any information reasonably requested by
Administrative Agent or Borrower concerning balances in the Accounts and
payments from such Accounts.
Section 8.10 Benefit of Agreement. This Agreement shall inure to the
benefit of, and be enforceable by, the parties to this Agreement and their
respective successors and permitted assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have each caused this Depositary
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By CALPINE CCFC GP, INC., a Delaware
corporation, its General Partner
By:
---------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent for the Banks
By:
----------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Depositary Agent
By:
----------------------------------------
Name:
Title:
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Exhibit A
Form of Account Withdrawal Certificate
[LETTERHEAD OF [BORROWER] [AUTHORIZED REPRESENTATIVE OF BORROWER]]
[Date]
[The language in brackets represents alternative drawing events and the
certificate presented should recite only the applicable alternative.]
Dear Sirs:
Reference is made to that certain Depositary Agreement (the "Depositary
Agreement") dated as of October 20, 1999, among Calpine Construction Finance
Company, L.P., a Delaware limited partnership ("Borrower"), The Bank of Nova
Scotia, as Depositary Agent ("Depositary Agent"), and The Bank of Nova Scotia,
as Administrative Agent ("Administrative Agent") for the Banks named in that
certain Credit Agreement dated as of October 20, 1999, among Borrower, the
financial institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse
First Boston, as Lead Arranger, Syndication Agent and Bookrunner, The Bank of
Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent, TD Securities
(USA) Inc., as Co-Arranger and Co-Documentation Agent and CIBC Inc., as
Co-Arranger and Co-Documentation Agent. Capitalized terms used herein without
definition shall have the respective meanings specified in the Depositary
Agreement.
Please liquidate investments held in the [Name of Account] under the
Depositary Agreement in an amount sufficient to yield proceeds of
$_____________, to be used for the payment of [________ costs] as set forth in
the [Drawdown Certificate] [Disbursement Requisition] [specify any other
purposes for the withdrawal], attached hereto as Schedule 1. Please [pay]
[transfer] such amounts [by [official bank check] [wire transfer]] to [the
________ Account(s)] [the Person(s) specified on Schedule 2 attached hereto at
the addresses set forth therein].
The undersigned hereby certifies that:
(a) the undersigned is an officer of the [Borrower] [Authorized
Representative of Borrower] and, as such, is authorized to execute this Account
Withdrawal Certificate on behalf of [Borrower] [Authorized Representative of
Borrower];
(b) the amounts paid or applied pursuant to this Account Withdrawal
Certificate shall be used for the purpose(s) set forth on Schedule 1 attached
hereto;
(c) no Event of Default and, with respect to withdrawls from the
Construction Account or the Loss Proceeds Account for the Project to which such
withdrawal relates, no Non-Fundamental Project Default (as such terms are
defined in the Credit Agreement) has occurred and is continuing or will occur
after giving effect to the withdrawal of funds requested by this Account
Withdrawal Certificate; and
Exhibit A
<PAGE> 251
(d) all other conditions to distributions from the [Name of Account] set
forth in the Credit Agreement have been satisfied.
Very truly yours,
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By CALPINE CCFC GP, INC., a Delaware
corporation, its General Partner
By:
---------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
THE BANK OF NOVA SCOTIA,
as Administrative Agent for the Banks
By:
----------------------------------------
Name:
Title:
Exhibit A
<PAGE> 252
Schedule 1 to Account Withdrawal Certificate
Use of Proceeds of Withdrawal from [Name of Account]
Exhibit A - Schedule 1
<PAGE> 253
Schedule 2 to Account Withdrawal Certificate
Payees of Proceeds of Withdrawal from [Name of Account]
Exhibit A - Schedule 2
<PAGE> 254
Exhibit B
Form of Disbursement Instruction
[LETTERHEAD OF ADMINISTRATIVE AGENT]
[Date]
[The language in brackets represents alternative drawing events and the
certificate presented should recite only the applicable alternative.]
Dear Sirs:
Reference is made to that certain Depositary Agreement (the "Depositary
Agreement") dated as of October 20, 1999, among Calpine Construction Finance
Company, L.P., a Delaware limited partnership ("Borrower"), The Bank of Nova
Scotia, as Depositary Agent ("Depositary Agent"), and The Bank of Nova Scotia,
as Administrative Agent ("Administrative Agent") for the Banks named in that
certain Credit Agreement dated as of October 20, 1999, among Borrower, the
financial institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse
First Boston, as Lead Arranger, Syndication Agent and Bookrunner, The Bank of
Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent, TD Securities
(USA) Inc., as Co-Arranger and Co-Documentation Agent and CIBC Inc., as
Co-Arranger and Co-Documentation Agent. Capitalized terms used herein without
definition shall have the respective meanings specified in the Depositary
Agreement.
Please liquidate investments held in the [Name of Account] under the
Depositary Agreement in an amount sufficient to yield proceeds of
$_____________. Please [pay] [transfer] such amounts [by [official bank check]
[wire transfer]] to [the _________ Account(s)] [the Person(s) specified on
Schedule 1 attached hereto at the addresses set forth therein].
The undersigned hereby certifies that the undersigned is an officer of
the Administrative Agent and, as such, is authorized to execute this
Disbursement Instruction on behalf of Administrative Agent. Very truly yours,
THE BANK OF NOVA SCOTIA,
as Administrative Agent for the
Banks
By:
---------------------------------
Name:
Title:
Exhibit B
<PAGE> 255
Schedule 1 to Disbursement Instruction
Payees of Proceeds of Withdrawal from [Name of Account]
Exhibit B -- Schedule 1
<PAGE> 256
EXHIBIT D2-A
to the Credit Agreement
AFFILIATED PARTY AGREEMENT GUARANTY
This AFFILIATED PARTY AGREEMENT GUARANTY (this "Guaranty") dated
as of __________, 1999 is made by CALPINE CORPORATION, a Delaware corporation
("Guarantor"), in favor of Calpine Construction Finance Company, L.P., a
Delaware limited partnership ("CCFC").
RECITALS
A. _____________, a _____________ ("______"), and CCFC are
parties to that certain ______________ dated as of ____________, 1999 (the
"______"), that certain _______________ dated as of ___________, 1999 (the " ")
and that certain _________ dated as of ______________, 1999 (the "_____").
_____________, a _____________ ("______"), and CCFC are parties to that certain
______________ dated as of ____________, 1999 (the "_____"), that certain
_______________ dated as of ___________, 1999 (the "______") and that certain
_________ dated as of ______________, 1999 (the "_____"). Collectively, the
______, the ______, the _______, and the _________ are referred to as the
"Relevant Documents". Collectively, ______, ______ and ______ are referred to as
the "Affiliated Parties". [RELEVANT DOCUMENTS TO INCLUDE CONSTRUCTION MANAGEMENT
AGREEMENT, PROJECT MANAGEMENT AGREEMENT, O&M AGREEMENT, FUEL MANAGEMENT
AGREEMENT, FUEL SUPPLY AGREEMENT AND POWER MARKETING AGREEMENT]
B. Guarantor owns, either directly or indirectly, all the
outstanding capital stock or other equity interests of each of the Affiliated
Parties; and
C. CCFC has agreed to enter into the Relevant Documents on the
condition that Guarantor guarantee certain of the Affiliated Parties'
obligations thereunder as provided herein; and
D. Guarantor acknowledges that it will benefit, directly and
indirectly, if CCFC enters into the Relevant Documents; and
E. The obligations of Guarantor hereunder are being incurred
concurrently with the obligations of the Affiliated Parties under the Relevant
Documents; and
F. Capitalized terms used but not defined herein shall have the
respective meanings given them in Exhibit A to that certain Credit Agreement
dated as of October 20, 1999 among CCFC, as Borrower, the financial institutions
listed on Exhibit H thereto, Credit Suisse First
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Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent. The Rules of
Interpretations contained in said Exhibit A shall apply hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and as an inducement to CCFC to enter into the Relevant
Documents with the Affiliated Parties, Guarantor hereby consents and agrees as
follows:
1. Guaranty.
(a) The undersigned Guarantor, as primary obligor and not
merely as surety, unconditionally and irrevocably guarantees to CCFC payment and
performance when due, whether by acceleration or otherwise, of any and all
obligations and liabilities of each of the Affiliated Parties under the Relevant
Documents, together with all expenses incurred by CCFC in enforcing any of such
obligations and liabilities or the terms hereof, including, without limitation,
reasonable fees and expenses of legal counsel (collectively, the "Obligations"),
and agrees that if for any reason any of the Affiliated Parties shall fail to
pay or perform when due any of such Obligations, Guarantor will pay or perform
the same forthwith (it being understood that Guarantor's liability hereunder
shall be subject to the same limitations of liability as the Affiliated Parties'
liability under the Relevant Documents). Guarantor waives notice of acceptance
of this Guaranty and of any obligation to which it applies or may apply under
the terms hereof, and waives diligence, presentment, demand of payment, notice
of dishonor or non-payment, protest, notice of protest, of any such obligations,
suit or taking other action by CCFC against, and giving any notice of default or
other notice to, or making any demand on, any party liable thereon (including
Guarantor).
(b) This Guaranty is a primary obligation of the Guarantor
and is an absolute, unconditional, continuing and irrevocable guaranty of
payment and performance and not of collectibility and is in no way conditioned
on or contingent upon any attempt to enforce in whole or in part any of the
Affiliated Parties' liabilities and obligations to CCFC. If any of the
Affiliated Parties shall fail to pay or perform any of the Obligations to CCFC
as and when they are due, Guarantor shall forthwith pay or perform, as
applicable, such Obligations. Any and all payments by Guarantor hereunder shall
be in immediately available funds. Each failure by any of the Affiliated Parties
to pay or perform any Obligations shall give rise to a separate cause of action
herewith, and separate suits may be brought hereunder as each cause of action
arises.
(c) CCFC may, at any time and from time to time (whether or
not after revocation or termination of this Guaranty) without the consent of or
notice to Guarantor, except such notice as may be required by the Relevant
Documents or applicable law which cannot be waived, without incurring
responsibility to Guarantor, without impairing or releasing the obligations of
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part, (i) change the manner, place and terms of payment or performance or change
or extend the
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time of payment of, renew, or alter any Obligation, or any obligations and
liabilities (including any of those hereunder) incurred directly or indirectly
in respect thereof or hereof or in any manner modify, amend or supplement the
terms of the Relevant Documents, any documents, instruments or agreements
executed in connection therewith, in each case with the consent of the relevant
Affiliated Parties, if required by the Relevant Documents, and the guaranty
herein made shall apply to the Obligations, changed, extended, renewed,
modified, amended, supplemented or altered in any manner; (ii) exercise or
refrain from exercising any rights against any of the Affiliated Parties or
others (including Guarantor) or otherwise act or refrain from acting; (iii) add
or release any other guarantor from its obligations without affecting or
impairing the obligations of Guarantor hereunder; (iv) settle or compromise any
Obligations and/or any obligations and liabilities (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
obligations and liabilities which may be due to CCFC or others; (v) sell,
exchange, release, surrender, realize upon or otherwise deal with in any manner
or in any order any property by whomsoever pledged or mortgaged to secure or
howsoever securing the Obligations or any liabilities or obligations (including
any of those hereunder) incurred directly or indirectly in respect thereof or
hereof and/or any offset thereagainst; (vi) apply any sums by whomsoever paid or
howsoever realized to any obligations and liabilities of any of the Affiliated
Parties to CCFC under the Relevant Documents in the manner provided therein
regardless of what obligations and liabilities remain unpaid; (vii) consent to
or waive any breach of, or any act, omission or default under, the Relevant
Documents or otherwise amend, modify or supplement (with the consent of the
relevant Affiliated Parties, if required by the Relevant Documents) the Relevant
Documents or any of such other instruments or agreements; and/or (viii) act or
fail to act in any manner referred to in this Guaranty which may deprive
Guarantor of its right to subrogation against any of the Affiliated Parties to
recover full indemnity for any payments made pursuant to this Guaranty or of its
right of contribution against any other party.
(d) No invalidity, irregularity or unenforceability of the
obligations or liabilities hereby guaranteed shall affect, impair, or be a
defense to this Guaranty, which is a primary obligation of Guarantor.
(e) This is a continuing Guaranty and all obligations to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. In the event that,
notwithstanding the provisions of Section 1(a) hereof, this Guaranty shall be
deemed revocable in accordance with applicable law, then any such revocation
shall become effective only upon receipt by CCFC of written notice of revocation
signed by Guarantor. No revocation or termination hereof shall affect in any
manner rights arising under this Guaranty with respect to Obligations (i)
arising prior to receipt by CCFC of written notice of such revocation or
termination and the sole effect of revocation and termination hereof shall be to
exclude from this Guaranty Obligations thereafter arising which are unconnected
with Obligations theretofore arising or transactions theretofore entered into or
(ii) arising as a result of a default under the Relevant Documents occurring by
reason of the revocation or termination of this Guaranty.
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(f) (i) Except as otherwise required by law, each payment
required to be made by Guarantor to CCFC hereunder shall be made without
deduction or withholding for or on account of Taxes. If such deduction or
withholding is so required, Guarantor shall, upon notice thereof from CCFC, (A)
pay the amount required to be deducted or withheld to the appropriate
authorities before penalties attach thereto or interest accrues thereon, (B) on
or before the 60th day after payment of such amount, forward to CCFC an official
receipt evidencing such payment (or a certified copy thereof), and (C) in the
case of any such deduction or withholding, forthwith pay to CCFC such additional
amount as may be necessary to ensure that the net amount actually received by
CCFC is free and clear of such Taxes, including any Taxes on such additional
amount, is equal to the amount that CCFC would have received had there been no
such deduction or withholding.
(ii) As used herein, the term "Tax" means any present or
future tax, levy, impost, duty, charge, assessment or fee of any nature
(including interest, penalties and additions thereto) that is imposed by any
government or other taxing authority in respect of any payment under this
Guaranty other than any income, franchise or similar tax imposed upon the gross
or net income of CCFC by the United States or any State or any jurisdiction
where CCFC is organized and/or the jurisdiction in which is located.
2. Representations and Warranties. Guarantor makes the
representations and warranties set forth below to CCFC as of the date hereof:
(a) Guarantor is duly formed, validly existing and in good
standing under the laws of the State of Delaware and has the power and authority
to execute and deliver this Guaranty and to perform its obligations hereunder.
(b) Guarantor has taken all necessary corporate action to
authorize the execution and delivery of this Guaranty and the performance of its
obligations hereunder.
(c) All governmental authorizations and actions necessary in
connection with the execution and delivery by Guarantor of this Guaranty and the
performance of its obligations hereunder have been obtained or performed and
remain valid and in full force and effect.
(d) This Guaranty has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with the terms of this Guaranty,
subject to applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
(e) The execution, delivery and performance of this Guaranty
(i) do not and will not contravene any provisions of Guarantor's certificate of
incorporation or bylaws, or any law, rule, regulation, order, judgment or decree
applicable to or binding on Guarantor or any of its Affiliates or properties;
(ii) do not and will not contravene, or result in any breach of or constitute
any default under, any agreement or instrument to which Guarantor is a party or
by which Guarantor or any of its properties may be bound or affected; and (iii)
do not and will not
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require the consent of any Person under any existing law or agreement which has
not already been obtained.
(f) There is no pending or, to the best of Guarantor's
knowledge, threatened action or proceeding affecting Guarantor before any court,
governmental agency or arbitrator, which might reasonably be expected to
materially and adversely affect the financial condition, results of operations,
business or prospects of Guarantor or the ability of Guarantor to perform its
obligations under this Guaranty.
(g) Guarantor possesses all franchises, certificates,
licenses, permits and other governmental authorizations and approvals necessary
for it to own its properties, conduct its businesses and perform its obligations
under this Guaranty.
(h) Guarantor is not an investment company or a company
controlled by an investment company, within the meaning of the Investment
Company Act of 1940, and is not subject to, or is exempt from, regulation under
the Public Utility Holding Company Act of 1935 and the Federal Power Act.
(i) Guarantor has established adequate means of obtaining
financial and other information pertaining to the businesses, operations and
condition (financial and otherwise) of each of the Affiliated Parties and their
respective properties on a continuing basis, and Guarantor now is and hereafter
will be completely familiar with the businesses, operations and condition
(financial and otherwise) of each of the Affiliated Parties and their respective
properties.
(j) (i) Guarantor is not, and will not as a result of the
execution and delivery of this Guaranty, be rendered insolvent, (ii) Guarantor
does not intend to incur, or believe it is incurring, obligations beyond its
ability to pay and (iii) Guarantor's property remaining after the delivery and
performance of this Guaranty will not constitute unreasonably small capital.
3. Covenants. So long as any Obligations are outstanding,
Guarantor agrees that:
(a) It will maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by it with
respect to this Guaranty and will obtain any that may become necessary in the
future;
(b) It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Guaranty;
(c) Promptly, and in any event within 30 Banking Days after
the General Counsel of Guarantor obtains knowledge thereof, Guarantor will give
to CCFC notice of the occurrence of any event or of any litigation or
governmental proceeding pending (i) against
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Guarantor or any of its Affiliates which could affect the business, operations,
property, assets or condition (financial or otherwise) of Guarantor so as to
materially and adversely affect the ability of Guarantor to perform its
obligations hereunder or (ii) with respect to this Guaranty, which event or
pending proceeding is likely to materially and adversely affect the business,
operations, property, assets or condition (financial or otherwise) of Guarantor
and its Affiliates taken as a whole;
(d) It will deliver such other documents and other
information reasonably requested by CCFC; and
(e) It will comply in all material respects with its
certificate of incorporation.
4. Waiver. Guarantor hereby waives and relinquishes all rights
and remedies accorded by applicable law to sureties or guarantors and agrees not
to assert or take advantage of any such rights or remedies, including without
limitation (a) any right to require CCFC to proceed against any of the
Affiliated Parties or any other person or to proceed against or exhaust any
security held by CCFC at any time or to pursue any other remedy in CCFC's power
before proceeding against Guarantor, (b) any defense that may arise by reason of
the incapacity, lack of power or authority, death, dissolution, merger,
termination or disability of any of the Affiliated Parties or any other Person
or the failure of CCFC to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any of the Affiliated
Parties or any other Person, (c) demand, presentment, protest and notice of any
kind, including without limitation notice of the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of any of the Affiliated Parties, CCFC, any endorser
or creditor of any of the Affiliated Parties or Guarantor or on the part of any
other person under this or any other instrument in connection with any
obligation or evidence of indebtedness held by CCFC as collateral or in
connection with any Obligations, (d) any defense based upon an election of
remedies by CCFC, including without limitation an election to proceed by
non-judicial rather than judicial foreclosure, which destroys or otherwise
impairs the subrogation rights of Guarantor, the right of Guarantor to proceed
against any of the Affiliated Parties for reimbursement, or both, (e) any
defense based on any offset against any amounts which may be owed by any Person
to Guarantor for any reason whatsoever, (f) any defense based on any act,
failure to act, delay or omission whatsoever on the part of any of the
Affiliated Parties or the failure by any of the Affiliated Parties to do any act
or thing or to observe or perform any covenant, condition or agreement to be
observed or performed by it under the Relevant Documents, (g) any defense based
upon any statute or rule of law which provides that the obligation of a surety
must be neither larger in amount nor in other respects more burdensome than that
of the principal provided, that, upon payment in full of the Obligations, this
Guaranty shall no longer be of any force or effect, (h) any defense, setoff or
counterclaim which may at any time be available to or asserted by any of the
Affiliated Parties against CCFC or any other Person under the Relevant
Documents, (i) any duty on the part of CCFC to disclose to Guarantor any facts
CCFC may now or hereafter know about any of the Affiliated Parties, regardless
of whether CCFC have reason to believe that any such facts materially increase
the risk beyond that which Guarantor intends to assume, or have reason to
believe that such facts are unknown to Guarantor,
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or have a reasonable opportunity to communicate such facts to Guarantor, since
Guarantor acknowledges that Guarantor is fully responsible for being and keeping
informed of the financial condition of any of the Affiliated Parties and of all
circumstances bearing on the risk of non-payment of any obligations and
liabilities hereby guaranteed, (j) the fact that Guarantor may at any time in
the future dispose of all or part of its direct or indirect interest in any of
the Affiliated Parties, (k) any defense based on any change in the time, manner
or place of any payment under, or in any other term of, the Relevant Documents
or any other amendment, renewal, extension, acceleration, compromise or waiver
of or any consent or departure from the terms of the Relevant Documents, (l) any
defense arising because of CCFC's election, in any proceeding instituted under
the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the
Federal Bankruptcy Code, and (m) any defense based upon any borrowing or grant
of a security interest under Section 364 of the Federal Bankruptcy Code.
5. Subordination. Except as otherwise specifically provided in
this Guaranty, all existing and future indebtedness of any of the Affiliated
Parties to Guarantor (except to the extent such indebtedness is incurred in the
ordinary course of business and relates to costs of materials or services
provided pursuant to or consistent with the Relevant Documents) and the right of
Guarantor to withdraw any capital invested by Guarantor in any of the Affiliated
Parties, is hereby subordinated to all obligations and liabilities hereby
guaranteed. Without the prior written consent of CCFC or Administrative Agent,
such subordinated indebtedness shall not be paid or withdrawn in whole or in
part, nor shall Guarantor accept any payment of or on account of any such
indebtedness or as a withdrawal of capital while this Guaranty is in effect. Any
payment by any of the Affiliated Parties in violation of this Guaranty shall be
received by Guarantor in trust for CCFC, and Guarantor shall cause the same to
be paid to CCFC immediately upon demand by CCFC on account of the relevant
Affiliated Parties' obligations and liabilities hereby guaranteed. Guarantor
shall not assign all or any portion of such indebtedness while this Guaranty
remains in effect except upon prior written notice to CCFC by which the assignee
of any such indebtedness agrees that the assignment is made subject to the terms
of this Guaranty, and that any attempted assignment of such indebtedness in
violation of the provisions hereof shall be void.
6. Subrogation. Until the Obligations have been paid in full, (a)
Guarantor shall not have any right of subrogation and waives all rights to
enforce any remedy which CCFC now have or may hereafter have against any of the
Affiliated Parties, and waives the benefit of, and all rights to participate in,
any security now or hereafter held by CCFC from any of the Affiliated Parties
and (b) Guarantor waives any claim, right or remedy which Guarantor may now have
or hereafter acquire against any of the Affiliated Parties that arises hereunder
and/or from the performance by the Guarantor hereunder including, without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim, right
or remedy of CCFC against any of the Affiliated Parties, or any security which
CCFC now have or hereafter acquire, whether or not such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise.
7. Bankruptcy.
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(a) So long as any of the Obligations are owed to CCFC,
Guarantor shall not, without the prior written consent of CCFC, commence, or
join with any other Person in commencing, any bankruptcy, reorganization, or
insolvency proceeding against any of the Affiliated Parties. The obligations of
Guarantor under this Guaranty shall not be altered, limited or affected by any
proceeding, voluntary or involuntary, involving the bankruptcy, reorganization,
insolvency, receivership, liquidation or arrangement of any of the Affiliated
Parties, or by any defense which any of the Affiliated Parties may have by
reason of any order, decree or decision of any court or administrative body
resulting from any such proceeding.
(b) So long as any Obligations are owed to CCFC, to the
extent of such Obligations, Guarantor shall file, in any bankruptcy or other
proceeding in which the filing of claims is required or permitted by law, all
claims which Guarantor may have against any of the Affiliated Parties relating
to any indebtedness of any of the Affiliated Parties to Guarantor, and hereby
assigns to CCFC all rights of Guarantor thereunder. If Guarantor does not file
any such claim, CCFC, is hereby authorized to do so in the name of Guarantor or,
in CCFC's discretion, to assign the claim to a nominee and to cause proofs of
claim to be filed in the name of CCFC's nominee. The foregoing power of attorney
is coupled with an interest and cannot be revoked. CCFC or its nominee shall
have the sole right to accept or reject any plan proposed in any such proceeding
and to take any other action which a party filing a claim is entitled to take.
In all such cases, whether in administration, bankruptcy or otherwise, the
person authorized to pay such a claim shall pay the same to CCFC to the extent
of any Obligations which then remain unpaid, and, to the full extent necessary
for that purpose, Guarantor hereby assigns to CCFC all of Guarantor's rights to
all such payments or distributions to which Guarantor would otherwise be
entitled; provided, however, that Guarantor's obligations hereunder shall not be
satisfied except to the extent that CCFC receives cash by reason of any such
payment or distribution. If CCFC receives anything hereunder other than cash,
the same shall be held as collateral for amounts due under this Guaranty.
8. Successions or Assignments.
(a) This Guaranty shall inure to the benefit of the
successors or assigns of CCFC who shall have, to the extent of their interest,
the rights of CCFC hereunder.
(b) This Guaranty is binding upon Guarantor and its
successors and assigns. Guarantor is not entitled to assign its obligations
hereunder to any other person without the written consent of CCFC and
Administrative Agent, and any purported assignment in violation of this
provision shall be void.
9. Waivers.
(a) No delay on the part of CCFC in exercising any of their
rights (including those hereunder) and no partial or single exercise thereof and
no action or non-action by CCFC, with or without notice to Guarantor or anyone
else, shall constitute a waiver of any rights or shall affect or impair this
Guaranty.
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(b) GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY OR RELATING
TO THE SUBJECT MATTER OF THIS GUARANTY AND THE RELATIONSHIP BETWEEN GUARANTOR
AND CCFC THAT IS BEING ESTABLISHED. GUARANTOR ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT CCFC HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS GUARANTY, AND THAT CCFC WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. GUARANTOR FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
10. Interpretation. The section headings in this Guaranty are for
the convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
11. Notices. All notices in connection with this Guaranty shall
be given by telex or cable or by notice in writing hand-delivered or sent by
facsimile transmission or by certified mail return-receipt requested (airmail,
if overseas), postage prepaid. All such notices shall be sent to the appropriate
telex or telecopier number or address, as the case may be, set forth in Section
15 below or to such other number or address as shall have been subsequently
specified by written notice to the other party, and shall be sent with copies,
if any, as indicated below. All such notices shall be effective upon receipt,
and confirmation by answerback of any such notice so sent by telex shall be
sufficient evidence of receipt thereof.
12. Amendments. This Guaranty may be amended only with the
written consent of the parties hereto.
13. Jurisdiction; Governing Law.
(a) Any action or proceeding relating in any way to this
Guaranty may be brought and enforced in the courts of the State of New York or
of the United States for the Southern District of New York. Any such process or
summons in connection with any such action or proceeding may be served by
mailing a copy thereof by certified or registered mail, or any substantially
similar form of mail, addressed to Guarantor as provided for notices hereunder.
(b) This Guaranty and the rights and obligations of CCFC and
of the Guarantor shall be governed by and construed in accordance with the law
of the State of New York without reference to principles of conflicts of laws
(other than Section 5-1401 of the New York General Obligations Law).
14. Integration of Terms. This Guaranty contains the entire
agreement between the Guarantor and CCFC relating to the subject matter hereof
and supersedes all oral statements and prior writing with respect hereto.
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15. Addresses.
(a) The address of Guarantor for notices is:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Asset Management and General Counsel
Telephone Number: (408) 995-5115
Telecopier Number: (408) 995-0505
and
6700 Koll Center Parkway, Suite 200
Pleasanton, California 94566
Attn: Corporate Asset Management
Telephone No.: (925) 600-2000
Telecopy No.: (925) 600-8926
(b) The address of CCFC for notices is:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: Asset Management and General Counsel
Telephone Number: (408) 995-5115
Telecopy Number: (408) 995-0505
and
6700 Koll Center Parkway, Suite 200
Pleasanton, California 94566
Attn: Corporate Asset Management
Telephone No.: (925) 600-2000
Telecopy No.: (925) 600-8926
(c) The address of Administrative Agent for notices is:
The Bank of Nova Scotia
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308
Attention: Michael Silveira
Telephone Number: (404) 877-1522
Telecopy Number: (404) 888-8998
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16. Interest; Collection Expenses. Any amount required to be paid
by Guarantor pursuant to the terms hereof shall bear interest at the Default
Rate or the maximum rate permitted by law, whichever is less, from the date due
until paid in full. If CCFC are required to pursue any remedy against Guarantor
hereunder, Guarantor shall pay to CCFC, as the case may be, upon demand, all
reasonable attorneys' fees and expenses all other costs and expenses incurred by
CCFC in enforcing this Guaranty.
17. Reinstatement of Guaranty. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment to or
on behalf of any of the Affiliated Parties or to CCFC by any of the Affiliated
Parties under the Relevant Documents or by Guarantor hereunder is rescinded or
must otherwise be returned by CCFC upon the insolvency, bankruptcy,
reorganization, dissolution or liquidation of any of the Affiliated Parties or
otherwise, all as though such payment had not been made.
18. Counterparts. The Guaranty may be executed in one or more
duplicate counterparts, and when executed and delivered by all of the parties
listed below shall constitute a single binding agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
duly executed and delivered in San Jose, California as of the day and year first
written above.
CALPINE CORPORATION,
a Delaware corporation
By:
---------------------------------------------
Name:
Title:
Agreed and accepted.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
----------------------------------
Name:
Title:
<PAGE> 268
EXHIBIT D2-B
to the Credit Agreement
COMPLETION GUARANTY
THIS COMPLETION GUARANTY (this "Guaranty") dated as of , 1999 is made by
CALPINE CORPORATION, a Delaware corporation ("Guarantor"), in favor of THE BANK
OF NOVA SCOTIA, as Administrative Agent ("Administrative Agent") for the Banks
under that certain Credit Agreement (the "Credit Agreement") dated as of October
20, 1999, among Calpine Construction Finance Company, L.P., a Delaware limited
partnership, as Borrower ("Borrower"), the financial institutions listed on
Exhibit H thereto, (the "Banks"), Credit Suisse First Boston, as Lead Arranger,
Syndication Agent and Bookrunner and The Bank of Nova Scotia, as Lead Arranger,
LC Bank and Administrative Agent.
RECITALS
A. Guarantor owns all the outstanding stock of each of Calpine CCFC
GP, Inc., a Delaware corporation, the sole general partner of Borrower, and each
of the limited partners of Borrower.
B. Administrative Agent and the Banks have agreed to enter into the
Credit Agreement with Borrower on the condition that Guarantor guarantee certain
of Borrower's obligations thereunder as provided herein.
C. Guarantor acknowledges that it will benefit, directly and
indirectly, if Administrative Agent and the Banks enter into the Credit
Agreement.
D. The obligations of Guarantor hereunder are being incurred
concurrently with the obligations of Borrower under the Credit Agreement.
E. Capitalized terms used but not defined herein shall have the
respective meanings given them in Exhibit A to the Credit Agreement and the
Rules of Interpretations contained in said Exhibit A shall apply hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and as an inducement to Administrative Agent and the Banks
to enter into the Credit Agreement with Borrower, Guarantor hereby consents and
agrees as follows:
1. Guaranty.
(a) The undersigned Guarantor, as primary obligor and not
merely as surety, unconditionally and irrevocably guarantees to the Banks (i)
the performance, when due, of the obligations of Borrower under Section 5.14 of
the Credit Agreement to achieve Completion of each of the Initial Projects and
the Funded Subsequent Projects (including with respect to any partially owned
Projects), (ii) the payment, when due, of the obligations of Borrower under
Section 5.17.2 of the Credit Agreement and (iii) if Borrower is unable to obtain
a disbursement of Loan proceeds under the Credit
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Agreement for any Project for which the requirements of Section 5.14 of the
Credit Agreement have not been waived in accordance with the terms of the Credit
Agreement for a period of 60 consecutive days after a request for the same
pursuant to a Drawdown Certificate delivered pursuant to Section 3.4 of the
Credit Agreement, the prompt payment, when due, of the Project Costs for which
funds were requested in such Drawdown Certificate, in each case together with
the payment of all expenses incurred by Administrative Agent or the Banks in
enforcing any of such obligations and liabilities or the terms hereof,
including, without limitation, reasonable fees and expenses of legal counsel
(collectively, the "Obligations"), and agrees that if for any reason Borrower
shall fail to pay or perform, as the case may be, when due any of such
Obligations, Guarantor will pay or perform, as the case may be, the same
forthwith; provided, however, if the default giving rise to the potential
exercise of remedies is susceptible of cure and the failure to so exercise
remedies could not reasonably be expected to have a Material Adverse Effect,
Administrative Agent and the Banks shall not exercise any remedies in the nature
of foreclosure on or sale of any Collateral, appointment of a receiver, entry
into possession of any Project or other remedies under the Credit Documents
intended to or having the effect of depriving Borrower of the use, possession or
enjoyment of any of the Projects as a result of an Event of Default thereunder
for 90 days so long as Guarantor is diligently pursuing performance of the
Obligations and/or diligently attempting to refinance all outstanding Loans
under the Credit Agreement. Guarantor waives notice of acceptance of this
Guaranty and of any obligation to which it applies or may apply under the terms
hereof, and waives diligence, presentment, demand of payment or performance,
notice of dishonor or non-payment or non-performance, protest, notice of
protest, of any such obligations, suit or taking other action by the Banks
against, and giving any notice of default or other notice to, or making any
demand on, any party liable thereon (including Guarantor).
(b) This Guaranty is a primary obligation of Guarantor and is
an absolute, unconditional, continuing and irrevocable guaranty of payment and
performance, as the case may be, of the Obligations and not of collectibility,
and is in no way conditioned on or contingent upon any attempt to enforce in
whole or in part Borrower's liabilities and obligations to the Banks. If
Borrower shall fail to pay or perform, as the case may be, any of the
Obligations to the Banks as and when they are due, Guarantor shall forthwith pay
or perform, as the case may be, such Obligations immediately (in the case of
payment obligations, in immediately available funds). Each failure by Borrower
to pay or perform, as the case may be, any Obligations shall give rise to a
separate cause of action herewith, and separate suits may be brought hereunder
as each cause of action arises.
(c) The Banks may, at any time and from time to time (whether
or not after revocation or termination of this Guaranty) without the consent of
or notice to Guarantor, except such notice as may be required by the Credit
Agreement or applicable law which cannot be waived, without incurring
responsibility to Guarantor, without impairing or releasing the obligations of
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part, (i) change the manner, place and terms of payment or performance or change
or extend the time of payment or performance of, or renew or alter, any
Obligation, or any obligations and liabilities (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof or in
any manner modify, amend or supplement the terms of the Credit Agreement
(including provisions with respect to the Completion of the Projects), any
documents, instruments or agreements executed in connection therewith, in each
case with the consent of Borrower, if required by the Credit Agreement, and the
guaranty herein made shall apply to the Obligations changed, extended, renewed,
modified, amended, supplemented or altered in any manner; (ii) exercise or
refrain from exercising any rights against Borrower or others (including
Guarantor) or otherwise act or refrain from acting; (iii) add or release any
other guarantor from its obligations without affecting or impairing the
obligations of Guarantor hereunder; (iv) settle or compromise any Obligations
and/or any obligations and liabilities (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment or performance of all or any part thereof to the payment
or performance of any obligations and liabilities which may be due to the Banks
or others;
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(v) sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner or in any order any property by whomsoever pledged or mortgaged to
secure or howsoever securing the Obligations or any liabilities or obligations
(including any of those hereunder) incurred directly or indirectly in respect
thereof or hereof and/or any offset thereagainst; (vi) apply any sums by
whomsoever paid or howsoever realized to any obligations and liabilities of
Borrower to the Banks under the Credit Agreement or the other Credit Documents
in the manner provided therein regardless of what obligations and liabilities
remain unpaid; (vii) consent to or waive any breach of, or any act, omission or
default under, the Credit Agreement (including provisions with respect to the
Completion of the Projects) or otherwise amend, modify or supplement (with the
consent of Borrower, if required by the Credit Agreement) the Credit Agreement
(including provisions with respect to the Completion of the Projects) or any of
such other instruments or agreements; and/or (viii) act or fail to act in any
manner referred to in this Guaranty which may deprive Guarantor of its right to
subrogation against Borrower to recover full indemnity for any payments or
performances made pursuant to this Guaranty or of its right of contribution
against any other party.
(d) No invalidity, irregularity or unenforceability of the
obligations or liabilities hereby guaranteed shall affect, impair or be a
defense to this Guaranty, which is a primary obligation of Guarantor.
(e) This is a continuing Guaranty and all obligations to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. In the event that, notwithstanding the
provisions of Section 1(a) hereof, this Guaranty shall be deemed revocable in
accordance with applicable law, then any such revocation shall become effective
only upon receipt by Administrative Agent of written notice of revocation signed
by Guarantor. No revocation or termination hereof shall affect in any manner
rights arising under this Guaranty with respect to Obligations arising prior to
receipt by Administrative Agent of written notice of such revocation or
termination.
(f) (i) Except as otherwise required by law, each payment
required to be made by Guarantor to the Banks hereunder shall be made without
deduction or withholding for or on account of Taxes. If such deduction or
withholding is so required, Guarantor shall, upon notice thereof from
Administrative Agent, (A) pay the amount required to be deducted or withheld to
the appropriate authorities before penalties attach thereto or interest accrues
thereon, (B) on or before the 60th day after payment of such amount, forward to
the Banks an official receipt evidencing such payment (or a certified copy
thereof), and (C) in the case of any such deduction or withholding, forthwith
pay to Administrative Agent for the account of the Banks such additional amount
as may be necessary to ensure that the net amount actually received by the Banks
is free and clear of such Taxes, including any Taxes on such additional amount,
is equal to the amount that the Banks would have received had there been no such
deduction or withholding.
(ii) As used herein, the term "Tax" means any present or
future tax, levy, impost, duty, charge, assessment or fee of any nature
(including interest, penalties and additions thereto) that is imposed by any
government or other taxing authority in respect of any payment under this
Guaranty other than (A) any income, franchise or similar tax imposed upon the
gross or net income of Administrative Agent or any Bank by the United States,
New York State, any jurisdiction where Administrative Agent or any Bank is
organized and/or the jurisdiction in which is located any office from or at
which Administrative Agent or any Bank is making or maintaining any Loans or
receiving any payments under any of the Credit Documents and (B) any stamp,
registration, documentation or similar tax.
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(g) In fulfilling its obligations hereunder with respect to
the Obligations set forth in Section 1(a)(i) hereof, Guarantor hereby
irrevocably and unconditionally guarantees, promises and agrees to perform and
comply with Section 5.14 of the Credit Agreement. The words "perform and comply
with" are used in their most comprehensive sense and include without limitation
(i) the payment of all costs and expenses with respect to the construction of
the Initial Projects and the Funded Subsequent Projects and the construction of
such Projects within the time and in the manner set forth in Section 5.14 of the
Credit Agreement, (ii) the payment, satisfaction or discharge of all Liens
(other than Permitted Liens other than the Liens described in clause (c) of the
definition of "Permitted Liens") arising out of or relating to the construction
and Completion of, and that are or may be imposed upon or asserted against, the
Initial Projects and the Funded Subsequent Projects and (iii) the defense and
indemnification of the Banks against all such Liens, whether arising from the
furnishing of labor, materials, supplies or equipment, from taxes, assessments,
fees or other charges, from injuries or damage to persons or property, or
otherwise. Without limiting the generality of the foregoing, Guarantor agrees
(A) to cause any and all costs of achieving Completion of each of the Initial
Projects and the Funded Subsequent Projects, including without limitation the
costs of all labor, materials, supplies and equipment related thereto and any
and all costs and cost overruns prior to such Completion, to be funded, paid and
satisfied from Guarantor's own resources as the same shall become due and (B) to
cause the Completion of each of the Initial Projects and the Funded Subsequent
Projects, using Guarantor's own resources, in a timely, good and workmanlike
manner, in accordance with the terms of the Credit Documents; provided, however,
that Guarantor shall not be required to pay any performance and/or other
liquidated damages due and owing from a Contractor (other than a Contractor that
is an Affiliate of Guarantor) under a Construction Contract; provided, further,
Guarantor's liability with respect to such liquidated damages shall be limited
to the amount specified in clause (vii)(B) of the definition of "Completion"
less the amount of any such liquidated damages determined to be due and owing
from any applicable Contractors.
2. Representations and Warranties. Guarantor makes the
representations and warranties set forth below to Administrative Agent and the
Banks as of the date hereof:
(a) Guarantor is duly formed, validly existing and in good
standing under the laws of the State of Delaware and has the power and authority
to execute and deliver this Guaranty and to perform its obligations hereunder.
(b) Guarantor has taken all necessary corporate action to
authorize the execution and delivery of this Guaranty and the performance of its
obligations hereunder.
(c) All governmental authorizations and actions necessary in
connection with the execution and delivery by Guarantor of this Guaranty and the
performance of its obligations hereunder have been obtained or performed and
remain valid and in full force and effect.
(d) This Guaranty has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with the terms of this Guaranty,
subject to applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
(e) The execution, delivery and performance of this Guaranty
(i) do not and will not contravene any provisions of Guarantor's certificate of
incorporation or bylaws, or any law, rule, regulation, order, judgment or decree
applicable to or binding on Guarantor or any of its Affiliates or properties;
(ii) do not and will not contravene, or result in any breach of or constitute
any default under, any agreement or instrument to which Guarantor is a party or
by which Guarantor or any of its properties
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may be bound or affected; and (iii) do not and will not require the consent of
any Person under any existing law or agreement which has not already been
obtained.
(f) There is no pending or, to the best of Guarantor's
knowledge, threatened action or proceeding affecting Guarantor before any court,
governmental agency or arbitrator, which might reasonably be expected to
materially and adversely affect the financial condition, results of operations,
business or prospects of Guarantor or the ability of Guarantor to perform its
obligations under this Guaranty.
(g) All quarterly and annual financial statements heretofore
delivered by Guarantor to Administrative Agent are true, correct and complete,
do not fail to disclose any material liabilities, whether direct or contingent,
fairly present the financial condition of Guarantor as of the date delivered and
are prepared in accordance with generally accepted accounting principles
consistently applied.
(h) Guarantor possesses all franchises, certificates,
licenses, permits and other governmental authorizations and approvals necessary
for it to own its properties, conduct its businesses and perform its obligations
under this Guaranty.
(i) Guarantor is not an investment company or a company
controlled by an investment company, within the meaning of the Investment
Company Act of 1940, and is not subject to, or is exempt from, regulation under
the Public Utility Holding Company Act of 1935 and the Federal Power Act.
(j) Guarantor has established adequate means of obtaining
financial and other information pertaining to the businesses, operations and
condition (financial and otherwise) of Borrower and its properties on a
continuing basis, and Guarantor now is and hereafter will be completely familiar
with the businesses, operations and condition (financial and otherwise) of
Borrower and its properties.
(k) (i) Guarantor is not, and will not as a result of the
execution and delivery of this Guaranty, be rendered insolvent, (ii) Guarantor
does not intend to incur, or believe it is incurring, obligations beyond its
ability to pay or perform and (iii) Guarantor's property remaining after the
delivery and performance of this Guaranty will not constitute unreasonably small
capital.
(l) Guarantor is not in default under any material agreement
relating to the incurrence of debt to which it is a party.
3. Covenants. So long as any Obligations are outstanding, Guarantor
agrees that:
(a) It will maintain in full force and effect all consents of
any governmental or other authority that are required to be obtained by it with
respect to this Guaranty and will obtain any that may become necessary in the
future;
(b) It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Guaranty;
(c) Promptly, and in any event within 30 Banking Days after
the General Counsel of Guarantor obtains knowledge thereof, Guarantor will give
to Administrative Agent notice of the occurrence of any event or of any
litigation or governmental proceeding pending (i) against Guarantor
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or any of its Affiliates which could affect the business, operations, property,
assets or condition (financial or otherwise) of Guarantor so as to materially
and adversely affect the ability of Guarantor to perform its obligations
hereunder or (ii) with respect to this Guaranty, which event or pending
proceeding is likely to materially and adversely affect the business,
operations, property, assets or condition (financial or otherwise) of Guarantor
and its Affiliates taken as a whole;
(d) It will deliver such other documents and other information
reasonably requested by Administrative Agent;
(e) It will comply in all material respects with its
certificate of incorporation;
(f) Guarantor will not permit its:
(i) Tangible Net Worth to be less than (A) $415,000,000
plus (B) 50% of the consolidated net income of Guarantor and its Subsidiaries
(without giving effect to any losses) for each Fiscal Quarter ending on or after
June 30, 1999 plus (C) 100% of the Net Equity Proceeds from any equity offering
by Guarantor after June 30, 1999;
(ii) Leverage Ratio to be greater than .85 to 1.00 as of
the end of any Fiscal Quarter;
(iii) Interest Coverage Ratio as of the end of any Fiscal
Quarter to be less than 1.75 to 1.00 for the 12 month period comprising the four
previous Fiscal Quarters; or
(iv) Interest Coverage Ratio (Parent Only) as of the end
of any Fiscal Quarter to be less than 1.60 to 1.00 for the 12 month period
comprising the four previous Fiscal Quarters.
Guarantor shall furnish, or shall cause to be furnished, to Administrative Agent
as soon as possible and in any event within 60 days after the end of each of the
first three Fiscal Quarters of each Fiscal Year and within 120 days after the
end of each Fiscal Year, a certificate, executed by a Responsible Officer of
Guarantor, showing (in reasonable detail and with appropriate calculations and
computations in all respects reasonably satisfactory to Administrative Agent)
compliance with the covenants set forth in this Section 3(f).
Capitalized terms used in this Section 3(f) and defined in Appendix A attached
hereto shall have the meanings given therein.
4. Waiver. Guarantor hereby waives and relinquishes all rights and
remedies accorded by applicable law to sureties or guarantors and agrees not to
assert or take advantage of any such rights or remedies, including without
limitation (a) any right to require Administrative Agent or the Banks to proceed
against Borrower or any other person or to proceed against or exhaust any
security held by Administrative Agent or the Banks at any time or to pursue any
other remedy in Administrative Agent's or the Banks' power before proceeding
against Guarantor, (b) any defense that may arise by reason of the incapacity,
lack of power or authority, death, dissolution, merger, termination or
disability of Borrower or any other Person or the failure of Administrative
Agent or the Banks to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of Borrower or any other
Person, (c) demand, presentment, protest and notice of any kind except as
provided herein, including without limitation notice of the existence, creation
or incurring of any new or additional indebtedness or obligation or of any
action or non-action on the part of Borrower, Administrative Agent, the Banks,
any endorser or creditor of Borrower or Guarantor or on the part of any other
person under this or any other
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instrument in connection with any obligation or evidence of indebtedness held by
Administrative Agent or the Banks as collateral or in connection with any
Obligations, (d) any defense based upon an election of remedies by
Administrative Agent or the Banks, including without limitation an election to
proceed by non-judicial rather than judicial foreclosure, which destroys or
otherwise impairs the subrogation rights of Guarantor, the right of Guarantor to
proceed against Borrower for reimbursement, or both, (e) any defense based on
any offset against any amounts which may be owed by any Person to Guarantor for
any reason whatsoever, (f) any defense based on any act, failure to act, delay
or omission whatsoever on the part of Borrower of the failure by Borrower to do
any act or thing or to observe or perform any covenant, condition or agreement
to be observed or performed by it under the Credit Documents, (g) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal provided, that, upon payment or performance in full
of the Obligations, this Guaranty shall no longer be of any force or effect, (h)
any defense, setoff or counterclaim which may at any time be available to or
asserted by Borrower against Administrative Agent, the Banks or any other Person
under the Credit Agreement, (i) any duty on the part of Administrative Agent or
the Banks to disclose to Guarantor any facts Administrative Agent or the Banks
may now or hereafter know about Borrower, regardless of whether Administrative
Agent or the Banks have reason to believe that any such facts materially
increase the risk beyond that which Guarantor intends to assume, or have reason
to believe that such facts are unknown to Guarantor, or have a reasonable
opportunity to communicate such facts to Guarantor, since Guarantor acknowledges
that Guarantor is fully responsible for being and keeping informed of the
financial condition of Borrower and of all circumstances bearing on the risk of
non-payment or non-performance of any obligations and liabilities hereby
guaranteed, (j) the fact that Guarantor may at any time in the future dispose of
all or part of its direct or indirect interest in Borrower, (k) any defense
based on any change in the time, manner or place of any payment or performance
under, or in any other term of, the Credit Agreement (including provisions with
respect to the Completion of the Projects) or any other amendment, renewal,
extension, acceleration, compromise or waiver of or any consent or departure
from the terms of the Credit Agreement (including provisions with respect to the
Completion of the Projects), (l) any defense arising because of Administrative
Agent's or the Banks' election, in any proceeding instituted under the Federal
Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal
Bankruptcy Code, and (m) any defense based upon any borrowing or grant of a
security interest under Section 364 of the Federal Bankruptcy Code.
5. Subordination. Except as otherwise specifically provided in this
Guaranty, all existing and future indebtedness of Borrower to Guarantor (except
to the extent such indebtedness consists of approved operating expenses or other
O&M Costs with respect to materials or services provided consistent with an
applicable Annual Operating Budget) and the right of Guarantor to withdraw any
capital invested by Guarantor in Borrower, is hereby subordinated to all
obligations and liabilities hereby guaranteed. Without the prior written consent
of Administrative Agent, such subordinated indebtedness shall not be paid or
withdrawn in whole or in part, nor shall Guarantor accept any payment of or on
account of any such indebtedness or as a withdrawal of capital while the Credit
Agreement is in effect except from distributions permitted under Waterfall Level
8 and 10 of Section 7.2 of the Credit Agreement or as permitted under Section
3.8(b) of the Credit Agreement. Any payment by Borrower in violation of this
Guaranty shall be received by Guarantor in trust for Administrative Agent and
the Banks, and Guarantor shall cause the same to be paid to Administrative Agent
for the benefit of the Banks immediately upon demand by Administrative Agent on
account of Borrower's obligations and liabilities hereby guaranteed. Guarantor
shall not assign all or any portion of such indebtedness while the Credit
Agreement remains in effect except upon prior written notice to Administrative
Agent by which the assignee of any such indebtedness agrees that the assignment
is made subject to the terms of this Guaranty, and that any attempted assignment
of such indebtedness in violation of the provisions hereof shall be void.
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6. Subrogation. So long as the Credit Agreement remains in effect,
(a) Guarantor shall not have any right of subrogation and waives all rights to
enforce any remedy which the Banks now have or may hereafter have against
Borrower, and waives the benefit of, and all rights to participate in, any
security now or hereafter held by Administrative Agent or the Banks from
Borrower and (b) Guarantor waives any claim, right or remedy which Guarantor may
now have or hereafter acquire against Borrower that arises hereunder and/or from
the performance by Guarantor hereunder including, without limitation, any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of the Banks
against Borrower, or any security which the Banks now have or hereafter acquire,
whether or not such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise.
7. Bankruptcy.
(a) So long as the Credit Agreement remains in effect,
Guarantor shall not, without the prior written consent of Administrative Agent,
commence, or join with any other Person in commencing, any bankruptcy,
reorganization, or insolvency proceeding against Borrower. The obligations of
Guarantor under this Guaranty shall not be altered, limited or affected by any
proceeding, voluntary or involuntary, involving the bankruptcy, reorganization,
insolvency, receivership, liquidation or arrangement of Borrower, or by any
defense which Borrower may have by reason of any order, decree or decision of
any court or administrative body resulting from any such proceeding.
(b) So long as the Credit Agreement remains in effect, to the
extent of any Obligations, Guarantor shall file, in any bankruptcy or other
proceeding in which the filing of claims is required or permitted by law, all
claims which Guarantor may have against Borrower relating to any indebtedness of
Borrower to Guarantor, and hereby assigns to Administrative Agent on behalf of
the Banks all rights of Guarantor thereunder. If Guarantor does not file any
such claim, Administrative Agent, as attorney-in-fact for Guarantor, is hereby
authorized to do so in the name of Guarantor or, in Administrative Agent's
discretion, to assign the claim to a nominee and to cause proofs of claim to be
filed in the name of Administrative Agent's nominee. The foregoing power of
attorney is coupled with an interest and cannot be revoked. Administrative Agent
or its nominee shall have the sole right to accept or reject any plan proposed
in any such proceeding and to take any other action which a party filing a claim
is entitled to take. In all such cases, whether in administration, bankruptcy or
otherwise, the person authorized to pay such a claim shall pay the same to
Administrative Agent to the extent of any Obligations which then remain unpaid,
and, to the full extent necessary for that purpose, Guarantor hereby assigns to
Administrative Agent all of Guarantor's rights to all such payments or
distributions to which Guarantor would otherwise be entitled; provided, however,
that Guarantor's obligations hereunder shall not be satisfied except to the
extent that Administrative Agent receives cash by reason of any such payment or
distribution. If Administrative Agent receives anything hereunder other than
cash, the same shall be held as collateral for amounts due under this Guaranty.
8. Successions or Assignments.
(a) This Guaranty shall inure to the benefit of the successors
or assigns of the Banks who shall have, to the extent of their interest, the
rights of the Banks hereunder; provided, however, that the rights of the Banks
hereunder, if any be retained by them, shall have priority over and be senior to
the rights of its successors or assigns unless Administrative Agent shall
otherwise elect.
(b) This Guaranty is binding upon Guarantor and its successors
and assigns. Guarantor is not entitled to assign its obligations hereunder to
any other person without the written consent of Administrative Agent, and any
purported assignment in violation of this provision shall be void.
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9. Waivers.
(a) No delay on the part of Administrative Agent or the Banks
in exercising any of their rights (including those hereunder) and no partial or
single exercise thereof and no action or non-action by Administrative Agent or
the Banks, with or without notice to Guarantor or anyone else, shall constitute
a waiver of any rights or shall affect or impair this Guaranty.
(b) GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY OR RELATING
TO THE SUBJECT MATTER OF THIS GUARANTY AND THE RELATIONSHIP BETWEEN GUARANTOR
AND ADMINISTRATIVE AGENT THAT IS BEING ESTABLISHED. GUARANTOR ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
ADMINISTRATIVE AGENT HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
GUARANTY, AND THAT ADMINISTRATIVE AGENT WILL CONTINUE TO RELY ON THE WAIVER IN
THEIR RELATED FUTURE DEALINGS. GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT IT
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
10. Interpretation. The section headings in this Guaranty are for the
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.
11. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be considered as
properly given (a) if delivered in person, (b) if sent by overnight delivery
service by the addressee, except that communication or notice so transmitted by
telecopy or other direct written electronic means shall be deemed to have been
validly and effectively given on the day (if a Bank Day and, if not, on the next
following Banking Day) on which it is transmitted if transmitted before 4:00
p.m., recipient's time, and if transmitted after that time, on the next
following Banking Day; provided, however, that if any notice is tendered to an
addressee and the delivery thereof is refused by such addressee, such notice
shall be effective upon such tender. Any party shall have the right to change
its address for notice hereunder to any other location within the continental
United States by giving of 30 days' notice to the other parties in the manner
set forth hereinabove.
12. Amendments. This Guaranty may be amended only with the written
consent of the parties hereto.
13. Jurisdiction; Governing Law.
(a) Any action or proceeding relating in any way to this
Guaranty may be brought and enforced in the courts of the State of New York or
of the United States for the Southern District of New York. Any such process or
summons in connection with any such action or proceeding may be served by
mailing a copy thereof by certified or registered mail, or any substantially
similar form of mail, addressed to Guarantor as provided for notices hereunder.
(b) This Guaranty and the rights and obligations of
Administrative Agent and of Guarantor shall be governed by and construed in
accordance with the law of the State of New York without reference to principles
of conflicts of laws (other than Section 5-1401 of the New York General
Obligations Law).
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14. Integration of Terms. This Guaranty contains the entire agreement
between Guarantor and the Banks relating to the subject matter hereof and
supersedes all oral statements and prior writing with respect hereto.
15. Addresses.
(a) The address of Guarantor for notices is:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: General Counsel
Telephone Number: (408) 995-5115
Telecopier Number: (408) 995-0505
(b) The address of Administrative Agent for notices is:
The Bank of Nova Scotia
600 Peachtree Street, N.W., Suite 2700
Atlanta, Georgia 30308
Attention: Michael Silveira
Telephone Number: (404) 877-1522
Telecopier Number: (404) 888-8998
16. Interest; Collection Expenses. Any amount required to be paid by
Guarantor pursuant to the terms hereof shall bear interest at the Default Rate
or the maximum rate permitted by law, whichever is less, from the date due until
paid in full. If Administrative Agent or the Banks are required to pursue any
remedy against Guarantor hereunder, Guarantor shall pay to Administrative Agent
or the Banks, as the case may be, upon demand, all reasonable attorneys' fees
and expenses all other costs and expenses incurred by Administrative Agent or
the Banks in enforcing this Guaranty.
17. Termination; Reinstatement of Guaranty. Upon the indefeasible
payment in full of all Obligations owing under the Credit Agreement, this
Guaranty shall terminate in its entirety. Notwithstanding the foregoing, this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment to or on behalf of Borrower or to Administrative Agent
by Borrower in respect of the Obligations (as such term is defined in the Credit
Agreement) or by Guarantor hereunder is rescinded or must otherwise be returned
by Administrative Agent upon the insolvency, bankruptcy, reorganization,
dissolution or liquidation of Borrower or otherwise, all as though such payment
had not been made.
18. Counterparts. The Guaranty may be executed in one or more
duplicate counterparts, and when executed and delivered by all of the parties
listed below shall constitute a single binding agreement.
19. No Benefit to Borrower. This Guaranty is for the benefit of only
Administrative Agent and is not for the benefit of Borrower. Notwithstanding
that, pursuant to the Credit Agreement, Guarantor may treat any amounts actually
paid hereunder as a loan to Borrower, the Guaranty shall not be deemed to be a
contract to make a loan, or extend other debt financing or financial
accommodation, for the benefit of Borrower, in each case within the meaning of
Section 365(e) of the Federal Bankruptcy Code.
10
<PAGE> 278
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered in San Jose, California as of the day and year first
written above.
CALPINE CORPORATION,
a Delaware corporation
By: ___________________________________
Name:
Title:
Agreed and accepted.
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: _______________________________
Name:
Title:
<PAGE> 279
APPENDIX A TO COMPLETION GUARANTY
"Asset Sale" means any sale, transfer, lease or other disposition pursuant to
which (a) Guarantor or a Subsidiary receives consideration at the time of such
sale, transfer, lease contribution or conveyance at least equal to the fair
market value of assets being sold, transferred, leased, contributed or conveyed,
(b) at least 60% of the consideration received by Guarantor or such Subsidiary
is in the form of cash or cash equivalents and (c) an amount equal to 100% of
Net Available Cash is either (x) reinvested in additional assets within 365 days
of such asset sale or (y) used by Guarantor to prepay the loans and to
permanently reduce the commitments under that certain First Amended and Restated
Credit Agreement (the "Guarantor Credit Agreement") dated as of May 15, 1998
among Guarantor, certain commercial lending instructions party thereto (the
"Guarantor Lenders") and The Bank of Nova Scotia, as agent for the Guarantor
Lenders or, if the Guarantor Credit Agreement has been terminated, any
replacement thereof.
"Capital Expenditures" means for any period, the aggregate amount of all
expenditures of Guarantor and its Subsidiaries for fixed or capital assets made
during such period which, in accordance with GAAP, would be classified as
capital expenditures.
"Consolidated EBITDA" means, for any period, as applied to Guarantor, 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
Guarantor has any Subsidiary that is not a Wholly Owned Subsidiary, Consolidated
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 Guarantor or any Wholly
Owned Subsidiary divided by (2) the total number of shares of outstanding common
stock of such Subsidiary on the last day of such period.
"Capitalized Lease Liabilities" means all rental obligations of Guarantor or any
of its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as capitalized leases, and, the amount
of such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP, and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Consolidated Income Tax Expense" means, for any period, as applied to
Guarantor, 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 Guarantor,
the sum of (a) the total interest expense of Guarantor and its consolidated
Subsidiaries for such period as determined in accordance with GAAP, plus (b) all
but the principal component of rentals in respect of Capitalized Lease
Liabilities paid, accrued, or scheduled to be paid or accrued by Guarantor or
its consolidated Subsidiaries, plus (c) one-third of all operating lease
obligations paid, accrued, and/or scheduled to be paid by Guarantor and its
consolidated Subsidiaries, plus (d) capitalized interest, plus (e) dividends
paid in respect of preferred stock of Guarantor or any Subsidiary held by
Persons other than Guarantor 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
<PAGE> 280
Person (other than Guarantor or a Subsidiary) in connection with loans incurred
by such employee stock ownership plan to purchase capital stock of Guarantor.
"Consolidated Net Income (Loss)" means, for any period, as applied to Guarantor,
the Consolidated Net Income (Loss) of Guarantor and its consolidated
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 incorporated or organized in the
United States, a state thereof or the District of Columbia, except that (A)
Guarantor'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 Guarantor or a
Subsidiary incorporated or organized in the United States, a state thereof or
the District of Columbia, as a dividend or other distribution and (B) the equity
of Guarantor or a 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 Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such 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 Subsidiary or its
stockholders; (iv) any net income (or loss) of any Person combined with
Guarantor or any of its 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 Guarantor or its 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 Guarantor or any 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
Guarantor to the extent of payments made to such parent by Guarantor pursuant to
any tax sharing agreement or other arrangement for such period.
"Contingent Liability" means any agreement, undertaking or arrangement by which
any Person guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the indebtedness, obligation or any
other liability of any other Person (other than by endorsements of instruments
in the course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Contingent Liability shall be calculated on a net basis
(i.e., after taking into effect agreements, undertakings and other arrangements
between the Person whose obligations are being guaranteed and the counterparty
to such Person's obligations) and shall (subject to any limitation set forth
therein) be deemed to be the outstanding net principal amount (or maximum net
principal amount, if larger) of the debt, obligation or other liability
guaranteed thereby, or, if the principal amount is not stated or determinable,
the maximum reasonably anticipated net liability in respect thereof as
determined by the Person in good faith, provided that (y) the amount of any
Contingent Liability arising out of (i) any indebtedness, obligation or
liability other than the items described in clauses (a), (b) and (c) of the
definition of "Indebtedness" (as defined in this Section 3(f)) or (ii) that
certain Tranche D Letter of Credit related to the Gilroy Project and issued by
Banque Nationale de Paris, Los Angeles Branch ("BNP") pursuant to that certain
Credit Agreement dated as of August 29, 1996 by and among Calpine Gilroy Cogen,
L.P., BNP and certain other financial institutions shall be deemed to be zero
unless and until Guarantor's independent auditors have quantified the amount of
the exposure thereunder (and thereafter shall be deemed to be the amount so
quantified from time to time) and (z) the amount of any Contingent Liability
consisting of a "keep-well," "make well" or other similar arrangement shall be
deemed to be zero unless and until Guarantor is required to make any payment
with respect thereto (and shall thereafter be deemed to be the amount required
to be paid).
<PAGE> 281
"Debt" means the outstanding principal amount of all Indebtedness of Guarantor
and its consolidated Subsidiaries of the nature referred to in clauses (a), (b),
(c) and (f) of the definition of "Indebtedness" (as defined in this Section
3(f)), and (without duplication) all Contingent Liabilities in respect of any of
the foregoing.
"Facility" means a power generation facility or energy producing facility,
including any related fuel reserve.
"Fiscal Quarter" means any period of three consecutive months ending on March
31, June 30, September 30 or December 31 of any year.
"Fiscal Year" means any period of twelve consecutive calendar months ending on
December 31.
"Gilroy Project" means the approximately 120 MW natural gas fired cogeneration
facility located in Gilroy, California and owned by Calpine Gilroy Cogen, L.P.
"Guarantor EBITDA" means, for any period, the Consolidated EBITDA of Guarantor
and its Subsidiaries, minus that portion of Consolidated Interest Expense
payable by the consolidating Subsidiaries, minus the principal payments of the
consolidating Subsidiaries, minus the consolidated non-discretionary Capital
Expenditures (i.e., Capital Expenditures which are expressly required to be made
under any agreement, contract, instrument, permit, license, law, regulation,
judgment or other arrangement (other than those arrangements and contracts that
relate to the performance of the work for which the Capital Expenditure is being
made) binding on Guarantor or any Subsidiary) of Guarantor and its Subsidiaries,
plus, without duplication, cash and Permitted Investments of Guarantor's Wholly
Owned Subsidiaries that are legally and contractually available to each such
Subsidiary for the payment of dividends, but only to the extent the source of
such cash and Permitted Investments is from that portion of Consolidated EBITDA
attributable to such Subsidiary or from repayments to such Subsidiary of loans
made by such Subsidiary.
"Guarantor Interest Expense" means, for any period, as applied to Guarantor, the
sum of (a) the total interest expense of Guarantor for such period as determined
in accordance with GAAP, plus (b) all but the principal component of rentals in
respect of Capitalized Lease Liabilities paid, accrued, or scheduled to be paid
or accrued by Guarantor, plus (c) one-third of all operating lease obligations
paid, accrued and/or scheduled to be paid by Guarantor, plus (d) capitalized
interest plus (e) dividends paid in respect of preferred stock of Guarantor held
by Persons other than Guarantor, 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
Guarantor) in connection with loans incurred by such employee stock ownership
plan to purchase capital stock of Guarantor.
"Hedging Obligations" means, with respect to any Person, the net liabilities of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, foreign exchange contracts,
currency swap agreements and all other agreements or arrangements designed to
protect such Person against fluctuations in interest rates or currency exchange
rates and (b) commodity or power swap or exchange agreements.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
<PAGE> 282
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit (excluding for purposes of this clause (b)
that certain Tranche D Letter of Credit related to the Gilroy Project and issued
by Banque Nationale de Paris, Los Angeles Branch ("BNP") pursuant to that
certain Credit Agreement dated as of August 29, 1996 by and among Calpine Gilroy
Cogen, L.P., BNP and certain other financial institutions until the events
described in clause (y) of the definition of Contingent Liability" (as defined
in this Section 3(f)) have occurred with respect to the Tranche D Letter of
Credit), whether or not drawn, and banker's acceptances issued for the account
of such Person;
(c) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as Capitalized
Lease Liabilities;
(d) all other items other than deferred taxes, deferred
revenue and deferred leases which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person as of the
date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) whether or not so included as liabilities in accordance
with GAAP, all net obligations of such Person to pay the deferred purchase price
of property or services (excluding accounts payable incurred in the ordinary
course of business), and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title retention
agreements), whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, unless the indebtedness of such partnership
or joint venture is expressly nonrecourse to such Person.
"Interest Coverage Ratio" means, for any period of four Fiscal Quarters, the
ratio of (x) the Consolidated EBITDA of Guarantor and its Subsidiaries during
such period to (y) the Consolidated Interest Expense of Guarantor and its
Subsidiaries (excluding from Consolidated Interest Expense for purposes of this
clause (y) interest capitalized in connection with the construction of a new
Facility which interest is capitalized during the construction of such Facility)
incurred during such period.
"Interest Coverage Ratio (Parent Only)" means, for any period of four Fiscal
Quarters, the ratio of (x) the Guarantor EBITDA during such period to (y)
Guarantor Interest Expense (excluding from Guarantor Interest Expense for
purposes of this clause (y) interest capitalized in connection with the
construction of a new Facility which interest is capitalized during the
construction of such Facility) during such period.
"Leverage Ratio" means the ratio of (a) Debt to (b) Debt plus Tangible Net
Worth.
"Net Available Cash" means, with respect to any Asset Sale, the case or cash
equivalent payments received by Guarantor 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 Guarantor or any of its Subsidiaries as a
consequence of such Asset Sale, (iii)
<PAGE> 283
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 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 Equity Proceeds" means, with respect to any issuance by Guarantor of any
equity securities, the gross consideration received by or for the account of
Guarantor minus underwriting and brokerage commissions, discounts and fees
relating to such issuance that are payable by Guarantor.
"Subsidiary" means, with respect to any Person, any corporation, partnership or
other Person of which more than 50% of the outstanding capital stock or other
comparable ownership interest having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency) is at the time
directly or indirectly owned by such Person, by such Person and on or more other
Subsidiaries of such Person, or by one or more other Subsidiaries of such
Person. Unless otherwise specified, all references to "Subsidiary" contained in
this Section 3(f) shall mean a Subsidiary of Guarantor.
"Tangible Net Worth" means the consolidated net worth of Guarantor and its
Subsidiaries after subtracting therefrom the aggregate amount of any intangible
assets of Guarantor and its Subsidiaries, including goodwill, franchises,
licenses, patents, trademarks, trade names, copyrights, service marks and brand
names.
"Wholly Owned Subsidiary" means a Subsidiary all the capital stock (or other
comparable ownership interests) of which (other than directors' qualifying
shares) is owned by Guarantor or another Wholly Owned Subsidiary.
<PAGE> 284
EXHIBIT D-3
to the Credit Agreement
RECORDING REQUESTED BY AND
WHEN RECORDED, RETURN TO:
Gwyn Goodson Timms
LATHAM & WATKINS
701 "B" STREET, SUITE 2100
SAN DIEGO, CALIFORNIA 92101
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
DATED AS OF ____________, 1999
BY
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
AS TRUSTOR
TO
TITLE COMPANY,
AS TRUSTEE
FOR THE BENEFIT OF
THE BANK OF NOVA SCOTIA, AS ADMINISTRATIVE AGENT FOR THE BANKS,
AS BENEFICIARY
- --------------------------------------------------------------------------------
<PAGE> 285
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE 1 - DEFINITIONS.....................................................................3
1.1 DEFINED TERMS......................................................................3
1.2 ACCOUNTING TERMS...................................................................4
1.3 THE RULES OF INTERPRETATION........................................................4
ARTICLE 2 - GENERAL COVENANTS AND PROVISIONS................................................4
2.1 TRUSTOR PERFORMANCE OF CREDIT DOCUMENTS............................................4
2.2 GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES..................................5
2.3 COMPLIANCE WITH LEGAL REQUIREMENTS.................................................5
2.4 INSURANCE; APPLICATION OF INSURANCE PROCEEDS; APPLICATION OF
EMINENT DOMAIN PROCEEDS............................................................5
2.5 REJECTION OF GROUND LEASE BY LESSOR................................................5
2.6 EXPENSES...........................................................................6
2.7 BENEFICIARY ASSUMES NO SECURED OBLIGATIONS.........................................6
2.8 FURTHER ASSURANCES.................................................................6
2.9 ACTS OF TRUSTOR....................................................................6
2.10 AFTER-ACQUIRED PROPERTY............................................................7
2.11 SITE...............................................................................7
2.12 POWER OF ATTORNEY.................................................................10
2.13 COVENANT TO PAY...................................................................10
2.14 SECURITY AGREEMENT................................................................10
ARTICLE 3 - REMEDIES.......................................................................11
3.1 ACCELERATION OF MATURITY..........................................................11
3.2 PROTECTIVE ADVANCES...............................................................11
3.3 INSTITUTION OF EQUITY PROCEEDINGS.................................................11
3.4 BENEFICIARY'S POWER OF ENFORCEMENT................................................12
3.5 BENEFICIARY'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE AND APPLY INCOME........13
3.6 SEPARATE SALES....................................................................14
3.7 WAIVER OF APPRAISEMENT, VALUATION, STAY, EXTENSION AND REDEMPTION LAWS............14
3.8 RECEIVER..........................................................................14
3.9 SUITS TO PROTECT THE TRUST ESTATE.................................................15
3.10 PROOFS OF CLAIM...................................................................15
3.11 TRUSTOR TO PAY THE NOTES ON ANY DEFAULT IN PAYMENT; APPLICATION OF
MONIES BY BENEFICIARY.............................................................15
3.12 DELAY OR OMISSION; NO WAIVER......................................................16
3.13 NO WAIVER OF ONE DEFAULT TO AFFECT ANOTHER........................................16
3.14 DISCONTINUANCE OF PROCEEDINGS; POSITION OF PARTIES RESTORED.......................17
3.15 REMEDIES CUMULATIVE...............................................................17
3.16 INTEREST AFTER EVENT OF DEFAULT...................................................17
3.17 FORECLOSURE; EXPENSES OF LITIGATION...............................................17
3.18 DEFICIENCY JUDGMENTS..............................................................18
3.19 WAIVER OF JURY TRIAL..............................................................18
3.20 EXCULPATION OF BENEFICIARY........................................................18
ARTICLE 4 - RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER PROVISIONS RELATING TO TRUSTEE...18
4.1 EXERCISE OF REMEDIES BY TRUSTEE...................................................18
</TABLE>
1
<PAGE> 286
<TABLE>
<S> <C> <C>
4.2 RIGHTS AND PRIVILEGES OF TRUSTEE..................................................19
4.3 RESIGNATION OR REPLACEMENT OF TRUSTEE.............................................19
4.4 AUTHORITY OF BENEFICIARY..........................................................19
4.5 EFFECT OF APPOINTMENT OF SUCCESSOR TRUSTEE........................................20
4.6 CONFIRMATION OF TRANSFER AND SUCCESSION...........................................20
4.7 EXCULPATION.......................................................................20
4.8 ENDORSEMENT AND EXECUTION OF DOCUMENTS............................................20
4.9 MULTIPLE TRUSTEES.................................................................20
4.10 NO REQUIRED ACTION................................................................20
4.11 TERMS OF TRUSTEE'S ACCEPTANCE.....................................................21
ARTICLE 5 - GENERAL........................................................................21
5.1 DISCHARGE.........................................................................21
5.2 NO WAIVER.........................................................................21
5.3 EXTENSION, REARRANGEMENT OR RENEWAL OF SECURED OBLIGATIONS........................22
5.4 FORCIBLE DETAINER.................................................................22
5.5 WAIVER OF STAY OR EXTENSION.......................................................22
5.6 NOTICES...........................................................................22
5.7 SEVERABILITY......................................................................23
5.8 APPLICATION OF PAYMENTS...........................................................23
5.9 GOVERNING LAW.....................................................................23
5.10 ENTIRE AGREEMENT..................................................................23
5.11 AMENDMENTS........................................................................23
5.12 SUCCESSORS AND ASSIGNS............................................................23
5.13 RENEWAL, ETC......................................................................24
5.14 FUTURE ADVANCES...................................................................24
5.15 LIABILITY.........................................................................24
5.16 SUBJECT TO GROUND LEASE...........................................................24
5.17 RELEASE OF COLLATERAL.............................................................24
5.18 FIXTURE FILING UNDER UNIFORM COMMERCIAL CODE......................................24
5.19 CREDIT AGREEMENT CONTROLS.........................................................25
</TABLE>
2
<PAGE> 287
FORM OF DEED OF TRUST
This DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT, dated as
of ___________, 1999 (this "Deed of Trust") BY CALPINE CONSTRUCTION FINANCE
COMPANY, a Delaware limited partnership ("Trustor"), whose address is
___________________________, to TITLE COMPANY, as trustee ("Trustee"), whose
address is TC ADDRESS, for the benefit of THE BANK OF NOVA SCOTIA, as
Administrative Agent for the Banks (as defined below) (together with its
successors and assigns, "Beneficiary"), whose address is 600 Peachtree Street,
N.E., Suite 2700, Atlanta, Georgia 30308.
Recitals
A. Trustor, The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent, Credit Suisse First Boston, as Lead Arranger, Syndication
Agent and Bookrunner, and the financial institutions named therein (together
with their respective successors and assigns, the "Banks") have entered into a
Credit Agreement, dated as of October 20, 1999 (as modified, supplemented or
amended from time to time, the "Credit Agreement"), pursuant to which the Banks
have agreed to lend to Borrower One Billion Dollars ($1,000,000,000) for the
purpose of purchasing, constructing, owning and operating various power
projects. [DISCUSSION OF COLLATERAL PROPERTY] Capitalized terms used in this
Deed of Trust and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
B. The Banks are willing to make the Loans and make other financial
accommodations in accordance with the Credit Agreement, but in each case only
upon the condition, among others, that Trustor secure the loans with various
items of real and personal property owned by Trustor.
C. As set forth more fully below, Trustor intends to secure the payment and
performance of the Loans with the Trust Estate (as defined below), along with
various other items of personal and real property owned by Trustor.
Agreement
NOW, THEREFORE, to secure the prompt and complete payment when and as
due and payable of all of the obligations and liabilities of Trustor to
Beneficiary and the Banks, by acceleration or otherwise, arising out of or in
connection with the Credit Agreement, the promissory notes executed or to be
executed by Trustor in favor of Beneficiary, the other Credit Documents and the
obligations of Trustor set forth herein, including, without limitation, Section
2.8 hereof (collectively, the "Secured Obligations"), and in consideration of
the covenants herein contained and in the Credit Agreement, Trustor, intending
to be legally bound, does hereby grant, bargain, sell, convey, warrant, assign,
transfer, mortgage, pledge, set over and confirm unto Trustee in trust for
Beneficiary as set forth in this Deed of Trust, for the benefit of Beneficiary
and the Banks, all of Trustor's estate, right, title, interest, property, claim
and demand, now or hereafter arising, in and to the following property and
rights (herein collectively called the "Trust Estate"):
<PAGE> 288
(a) Trustor's interest in and to the lands and premises described
herein (the "Premises") including without limitation, any interests
under a lease of the Premises whereby Trustor leases the Premises (the
"Ground Lease") and the leasehold estate and all other rights of Trustor
under the Ground Lease, if any, together with all and singular the
tenements, hereditaments and appurtenances thereto, and also Trustor's
rights in and to (i) any land lying within the right-of-way of any
streets, open or proposed, adjoining the same, (ii) any easements,
natural gas pipelines, rights-of-way and rights used in connection
therewith or as a means of access thereto, including, without
limitation, the easements described in Exhibit B hereto, all easements
for ingress and egress and easements for water and sewage pipelines,
running in favor of Trustor, or appurtenant to the Site, or arising
under the Ground Lease (collectively, the "Easements"), (iii) any and
all sidewalks, alleys, strips and gores of land adjacent thereto or used
in connection therewith (the Premises and all of the foregoing being
hereinafter collectively called the "Site"), and (iv) all rights of
Trustor to exercise any election or option to make any determination or
to give any notice, consent, waiver or approval or to take any other
action under the Ground Lease;
(b) all buildings, structures, fixtures and other improvements
now or hereafter erected on the Site owned by Trustor, including the
Project, as defined in the Credit Agreement (collectively, the
"Improvements");
(c) all machinery, apparatus, equipment, fittings, fixtures,
boilers, turbines and other articles of personal property, including all
goods and all goods which become fixtures, now owned or hereafter
acquired by Trustor and now or hereafter located on, attached to or used
in the operation of or in connection with the Site and/or the
Improvements, and all replacements thereof, additions thereto and
substitutions therefor, to the fullest extent permitted by applicable
law (all of the foregoing being hereinafter collectively called the
"Equipment");
(d) all raw materials, work in process and other materials used
or consumed in the construction of, or now or hereafter located on or
used in connection with, the Site, the Improvements and the Equipment,
(including, without limitation, fuel and fuel deposits, now or hereafter
located on the Site or elsewhere or otherwise owned by Trustor) (the
above items, together with the Equipment, being hereinafter collectively
called the "Tangible Collateral");
(e) all rights, powers, privileges and other benefits of Trustor
(to the extent assignable) now or hereafter obtained by Trustor from any
Governmental Authority, including, without limitation, Permits,
governmental actions relating to the ownership, operation, management
and use of the Site, the development and financing of the Project, the
Improvements and the Equipment, and any improvements, modifications or
additions thereto;
(f) all the lands and interests in lands, tenements and
hereditaments hereafter acquired by Trustor in connection with or
appurtenant to the Site, including (without limitation) all interests of
Trustor, whether as lessor or lessee, in any leases of land hereafter
made and all rights of Trustor thereunder;
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(g) any and all other property in connection with or appurtenant
to the Site that may from time to time, by delivery or by writing of any
kind, be subjected to the lien hereof by Trustor or by anyone on its
behalf or with its consent, or which may come into the possession or be
subject to the control of Trustee or Beneficiary pursuant to this Deed
of Trust, being hereby collaterally assigned to Beneficiary and
subjected or added to the lien or estate created by this Deed of Trust
forthwith upon the acquisition thereof by Trustor, as fully as if such
property were now owned by Trustor and were specifically described in
this Deed of Trust and subjected to the lien and security interest
hereof; and Trustee and Beneficiary is hereby authorized to receive any
and all such property as and for additional security hereunder; and
(h) all the remainder or remainders, reversion or reversions,
rents, revenues, issues, profits, royalties, income and other benefits
derived from any of the foregoing, all of which are hereby assigned to
Beneficiary, who is hereby authorized to collect and receive the same,
to give proper receipts and acquittances therefor and to apply the same
in accordance with the provisions of this Deed of Trust.
[ADD PARTICULAR ITEMS OF COLLATERAL RELATING TO FACILITY IN QUESTION]
TO HAVE AND TO HOLD the said Trust Estate, whether now owned or held or
hereafter acquired, unto Beneficiary, its successors and assigns, pursuant to
the provisions of this Deed of Trust.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security
interest or estate created by this Deed of Trust to secure the payment of the
Secured Obligations, both present and future, shall be first, prior and superior
to any Lien, security interest, reservation of title or other interest
heretofore, contemporaneously or subsequently suffered or granted by Trustor,
its legal representatives, successors or assigns, except only those, if any,
expressly hereinafter referred to and that the Trust Estate is to be held, dealt
with and disposed of by Beneficiary, upon and subject to the terms, covenants,
conditions, uses and agreements set forth in this Deed of Trust.
PROVIDED ALWAYS, that upon payment in full of the Secured Obligations in
accordance with the terms and provisions hereof and of the Credit Agreement and
the observance and performance by Trustor of its covenants and agreements set
forth herein and therein, then this Deed of Trust and the estate hereby and
therein granted shall cease and be void and shall be reconveyed as provided
herein below.
ARTICLE 1 - DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this Deed of Trust and
not otherwise defined herein shall have the meanings assigned to them in the
Credit Agreement. Any term defined by reference to an agreement, instrument or
other document shall have the meaning so assigned to it whether or not such
document is in effect. In addition, for purposes of this Deed of Trust, the
following definitions shall apply:
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"Credit Agreement" has the meaning ascribed to it in Recital A
hereof.
"Easements " has the meaning ascribed to it in the Granting
Clauses.
"Equipment" has the meaning ascribed to it in the Granting
Clauses.
"Ground Lease" has the meaning ascribed to it in the Granting
Clauses.
"Improvements" has the meaning ascribed to it in the Granting
Clauses.
"Premises" has the meaning ascribed to it in the Granting
Clauses.
"Proceeds" has the meaning assigned to it under the UCC and, in
any event, shall include, without limitation, (i) any and all proceeds of any
insurance (including, without limitation, property casualty and title
insurance), indemnity, warranty or guaranty payable from time to time with
respect to any of the Premises; (ii) any and all proceeds in the form of
accounts (as such term is defined in the UCC), security deposits, tax escrows
(if any), down payments (to the extent the same may be pledged under applicable
law), collections, contract rights, documents, instruments, chattel paper, liens
and security instruments, guaranties or general intangibles relating in whole or
in part to the Premises and all rights and remedies of whatever kind or nature
Trustor may hold or acquire for the purpose of securing or enforcing any
obligation due Trustor thereunder.
"Secured Obligations" has the meaning ascribed to it in the
Granting Clauses.
"Site" has the meaning ascribed to it in the Granting Clauses.
"Tangible Collateral" has the meaning ascribed to it in the
Granting Clauses.
"Trust Estate" has the meaning ascribed to it in the Granting
Clauses.
1.2 Accounting Terms. As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not defined herein
shall have the respective meanings given to them under GAAP.
1.3 The Rules of Interpretation. The rules of interpretation as set
forth in the Credit Agreement shall govern the terms, conditions and provisions
hereof. In the event of any conflict between those set forth in this Deed of
Trust and the Credit Agreement, the latter shall be deemed controlling and shall
preempt the former.
ARTICLE 2 - GENERAL COVENANTS AND PROVISIONS
2.1 Trustor Performance of Credit Documents. Trustor shall perform,
observe and comply with each and every provision hereof, and with each and every
provision contained in the Credit Documents and shall promptly pay to
Beneficiary, when payment shall become due, the
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principal with interest thereon and all other sums required to be paid by
Trustor under this Deed of Trust and the other Credit Documents at the time and
in the manner provided in the Credit Agreement.
2.2 General Representations, Covenants and Warranties. Trustor, to
the best of its knowledge, represents, covenants and warrants that as of the
date hereof: (a) Trustor has good and marketable title to the Ground Lease and
the leasehold estate created thereby, free and clear of all encumbrances except
the title exceptions set forth on Exhibit C hereto and that it has the right to
hold, occupy and enjoy its interest in the Premises on and subject to the terms
and conditions of the Ground Lease, and has good right, full power and lawful
authority to mortgage and pledge the same as provided herein and Beneficiary may
at all times peaceably and quietly enter upon, hold, occupy and enjoy the entire
Premises in accordance with the terms hereof; (b) all costs arising from
construction of any improvements, the performance of any labor and the purchase
of all Tangible Collateral and Improvements have been or shall be paid when due;
(c) the Site has access for ingress and egress to dedicated street(s); and (d)
no material part of the Premises has been damaged, destroyed, condemned or
abandoned.
2.3 Compliance with Legal Requirements. Trustor shall promptly,
fully, and faithfully comply with all Legal Requirements relating to its use and
occupancy of the Premises, whether or not such compliance requires work or
remedial measures that are ordinary or extraordinary, foreseen or unforeseen,
structural or nonstructural, or that interfere with the use or enjoyment of the
Premises.
2.4 Insurance; Application of Insurance Proceeds; Application of
Eminent Domain Proceeds.
2.4.1 Trustor shall at its sole expense obtain for, deliver to,
assign and maintain for the benefit of Beneficiary, during the term of this Deed
of Trust, insurance policies insuring the Site and liability insurance policies,
all in accordance with the requirements of Section 5.18 of the Credit Agreement.
Trustor shall pay promptly when due any premiums on such insurance policies and
on any renewals thereof. In the event of the foreclosure of this Deed of Trust
or any other transfer of the Ground Lease in extinguishment of the indebtedness
and other sums secured hereby, all right, title and interest of Trustor in and
to all casualty insurance policies, and renewals thereof then in force, shall
pass to the purchaser or grantee in connection therewith; provided that
Trustor's Obligations shall be reduced accordingly.
2.4.2 All insurance proceeds and all Eminent Domain Proceeds
shall be paid and/or shall be applied in accordance with the provisions of the
Credit Agreement, including, without limitation, Sections 7.5 and 7.6 of the
Credit Agreement.
2.5 Rejection of Ground Lease by Lessor. To the extent applicable, if
the lessor under the Ground Lease rejects or disaffirms the Ground Lease or
purports or seeks to disaffirm the Ground Lease pursuant to any Bankruptcy Law,
then:
2.5.1 To the extent permitted by law or Governmental Rule,
Trustor shall remain in possession of the Premises demised under the Ground
Lease and shall perform all acts reasonably necessary for Trustor to remain in
such possession for the unexpired term of such
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Ground Lease (including all renewals), whether the then existing terms and
provisions of such Ground Lease require such acts or otherwise; and
2.5.2 All the terms and provisions of this Deed of Trust and the
lien created by this Deed of Trust shall remain in full force and effect and
shall extend automatically to all of Trustor's rights and remedies arising at
any time under, or pursuant to, Section 365(h) of the Bankruptcy Code, including
all of Trustor's rights to remain in possession of the Premises.
2.6 Expenses.
2.6.1 Trustor shall pay when due and payable all costs provided
for in Section 12.4 of the Credit Agreement; and
2.6.2 Trustor shall indemnify Beneficiary with respect to any
transaction or matter in any way connected with any portion of the Site, or
Trustor's use, occupancy, or operation of the Site as specifically provided in
Section 5.11 of the Credit Agreement.
2.7 Beneficiary Assumes No Secured Obligations. It is expressly
agreed that, anything herein contained to the contrary notwithstanding, Trustor
shall remain obligated under all agreements which are included in the definition
of "Trust Estate" and shall perform all of its obligations thereunder in
accordance with the provisions thereof, and neither Beneficiary nor any of the
Banks shall have any obligation or liability with respect to such obligations of
Trustor, nor shall Beneficiary or any of the Banks be required or obligated in
any manner to perform or fulfill any obligations or duties of Trustor under such
agreements, or to make any payment or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or
take any action to collect or enforce the payment of any amounts which have been
assigned to Beneficiary hereunder or to which Beneficiary or the Banks may be
entitled at any time or times.
2.8 Further Assurances. Trustor shall, from time to time, at its
expense, promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or that Trustee or Beneficiary
may reasonably request, in order to perfect and continue the lien and security
interest granted hereby and to enable Beneficiary to obtain the full benefits of
the lien and security interest granted or intended to be granted hereby. Trustor
shall keep the Trust Estate free and clear of all Liens, other than Permitted
Liens. Without limiting the generality of the foregoing, Trustor shall execute
and record or file this Deed of Trust and each amendment hereto, and such
financing or continuation statements, or amendments thereto, and such other
instruments, endorsements or notices, as may be necessary, or as Beneficiary or
Trustee may reasonably request, in order to perfect and preserve the lien and
security interest granted or purported to be granted hereby. Trustor hereby
authorizes Beneficiary to file one or more financing statements or continuation
statements, and amendments thereto, relative to all or any part of the Trust
Estate necessary to preserve or protect the lien and security interest granted
hereby without the signature of Trustor where permitted by law.
2.9 Acts of Trustor. Except as provided in or permitted by the Credit
Agreement, Trustor hereby represents and warrants that it has not mortgaged,
hypothecated, assigned or pledged and hereby covenants that it will not
mortgage, hypothecate, assign or pledge, so long as this Deed
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of Trust shall remain in effect, any of its right, title or interest in and to
the Trust Estate or any part thereof, to anyone other than Beneficiary.
2.10 After-Acquired Property. Any and all of the Trust Estate which
is hereafter acquired shall immediately, without any further conveyance,
assignment or act on the part of Trustor or Beneficiary, become and be subject
to the lien and security interest of this Deed of Trust as fully and completely
as though specifically described herein, but nothing contained in this Section
2.10 shall be deemed to modify or change the obligations of Trustor under
Section 2.8 hereof. If and whenever from time to time Trustor shall hereafter
acquire any real property or interest therein which constitutes or is intended
to constitute part of the Trust Estate hereunder, Trustor shall promptly give
notice thereof to Beneficiary and Trustor shall forthwith execute, acknowledge
and deliver to Beneficiary a supplement to this Deed of Trust in form and
substance reasonably satisfactory to Beneficiary subjecting the property so
acquired to the lien of this Deed of Trust. At the same time, if Beneficiary so
requests, Trustor shall deliver to Beneficiary an endorsement to the lender's
policy of title insurance issued to Beneficiary insuring the lien of this Deed
of Trust which shall insure to Beneficiary in form and substance satisfactory to
Beneficiary that the lien of this Deed of Trust as insured under such title
insurance policy encumber such later acquired property and that Trustor's title
to such property meets all of the applicable requirements of the Credit
Documents with respect to title to Trustor's real property.
2.11 Site.
2.11.1 To the extent applicable, Trustor shall pay or cause to be
paid all rent and other charges required under the Ground Lease as and when the
same are due and shall promptly and faithfully perform or cause to be performed
all other material terms, obligations, covenants, conditions, agreements,
indemnities and liabilities of Trustor under the Ground Lease. Trustor shall
observe all applicable covenants, easements and other restrictions of record
with respect to the Site, the Easements or to any other part of the Trust
Estate, in all material respects.
2.11.2 To the extent applicable, Trustor shall do, or cause to be
done, all things necessary to preserve and keep unimpaired all rights of Trustor
as lessee under the Ground Lease, and to prevent any default under the Ground
Lease, or any termination, surrender, cancellation, forfeiture, subordination or
impairment thereof. Trustor does hereby authorize and irrevocably appoint and
constitute Beneficiary as its true and lawful attorney-in-fact, which
appointment is coupled with an interest, in its name, place and stead, to take
any and all actions deemed necessary or desirable by Beneficiary to perform and
comply with all the obligations of Trustor under the Ground Lease, and to do and
take upon the occurrence and during construction of an Event of Default (as such
term is defined in the Credit Agreement), but without any obligation so to do or
take, any action which Beneficiary deems reasonably necessary to prevent or cure
any default by Trustor under the Ground Lease, to enter into and upon the Site
or any part thereof as provided in the Credit Agreement in order to prevent or
cure any default of Trustor pursuant thereto, to the end that the rights of
Trustor in and to the leasehold estate created by the Ground Lease shall be kept
free from default.
2.11.3 To the extent applicable, Trustor shall use all reasonable
efforts to enforce the obligations of the lessor under the Ground Lease in a
commercially reasonable manner.
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2.11.4 To the extent applicable, Trustor shall not voluntarily
surrender its leasehold estate and interest under the Ground Lease or modify,
change, supplement, alter or amend the Ground Lease or affirmatively waive any
provisions thereof, either orally or in writing, except as permitted in the
Credit Agreement, and any attempt on the part of Trustor to do any of the
foregoing without the written consent of Beneficiary shall be null and void.
2.11.5 To the extent applicable, if any action or proceeding
shall be instituted to evict Trustor or to recover possession of the Site or any
part thereof or interest therein from Trustor or any action or proceeding
otherwise affecting the Site or this Deed of Trust shall be instituted, then
Trustor shall, immediately after receipt, deliver to Beneficiary a true and
complete copy of each petition, summons, complaint, notice of motion, order to
show cause and all other pleadings and papers, however designated, served in any
such action or proceeding.
2.11.6 To the extent applicable, Trustor covenants and agrees
that the fee title to the Site and the leasehold estate created under the Ground
Lease shall not merge but shall always remain separate and distinct,
notwithstanding the union of said estates either in Trustor or a third party by
purchase or otherwise and, in case Trustor acquires the fee title or any other
estate, title or interest in and to the Site, the lien of this Deed of Trust
shall, without further conveyance, simultaneously with such acquisition, be
spread to cover and attach to such acquired estate and as so spread and attached
shall be prior to the lien of any mortgage placed on the acquired estate after
the date of this Deed of Trust.
2.11.7 To the extent applicable, no release or forbearance of any
of Trustor's obligations under the Ground Lease by the lessor thereunder, shall
release Trustor from any of its obligations under this Deed of Trust.
2.11.8 To the extent applicable, Trustor shall, within ten days
after written demand from Beneficiary, deliver to Beneficiary proof of payment
of all items that are required to be paid by Trustor under the Ground Lease,
including, without limitation, rent, taxes, operating expenses and other
charges.
2.11.9 To the extent applicable, the lien of this Deed of Trust
shall attach to all of Trustor's rights and remedies at any time arising under
or pursuant to Section 365(h) of the Bankruptcy Law, including, without
limitation, all of Trustor's rights to remain in possession of the Site. Trustor
shall not elect to treat the Ground Lease as terminated under Section 365(h)(1)
of the Bankruptcy Law, and any such election shall be void.
2.11.9.1 To the extent applicable, if pursuant to Section
365(h)(2) of the Bankruptcy Law, Trustor shall seek to offset against
the rent reserved in the Ground Lease the amount of any damages caused
by the nonperformance by the lessor or any other party of any of their
respective obligations thereunder after the rejection by the lessor or
such other party of the Ground Lease under the Bankruptcy Law, then
Trustor shall, prior to effecting such offset, notify Beneficiary of its
intent to do so, setting forth the amount proposed to be so offset and
the basis therefor. Beneficiary shall have the right to object to all or
any part of such offset that, in the reasonable judgment of Beneficiary,
would constitute a breach of the Ground Lease, and in the event of such
objection, Trustor shall not effect any offset of the amounts found
objectionable by Beneficiary. Neither
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Beneficiary's failure to object as aforesaid nor any objection relating
to such offset shall constitute an approval of any such offset by
Beneficiary.
2.11.9.2 To the extent applicable, if any action,
proceeding, motion or notice shall be commenced or filed in respect of
the lessor under the Ground Lease or any other party or in respect of
the Ground Lease in connection with any case under the Bankruptcy Law,
then Beneficiary shall have the option to intervene in any such
litigation with counsel of Beneficiary's choice. Beneficiary may proceed
in its own name in connection with any such litigation, and Trustor
agrees to execute any and all powers, authorizations, consents or other
documents required by Beneficiary in connection therewith.
2.11.9.3 To the extent applicable, Trustor shall, after
obtaining knowledge thereof, promptly notify Beneficiary of any filing
by or against the lessor or other party with an interest in the Site of
a petition under the Bankruptcy Law. Trustor shall promptly deliver to
Beneficiary, following receipt, copies of any and all notices,
summonses, pleadings, applications and other documents received by
Trustor in connection with any such petition and any proceedings
relating thereto.
2.11.9.4 To the extent applicable, if there shall be
filed by or against Trustor a petition under the Bankruptcy Law, and
Trustor, as lessee under the Ground Lease, shall determine to reject the
Ground Lease pursuant to Section 365(a) of the Bankruptcy Law, then
Trustor shall give Beneficiary such notice as may be required by law of
the date on which Trustor shall apply to the bankruptcy court for
authority to reject the Ground Lease. Beneficiary shall have the right,
but not the obligation, to serve upon Trustor within such twenty day
period a notice stating that Beneficiary demands that Trustor assume and
assign the Ground Lease to Beneficiary pursuant to Section 365 of the
Bankruptcy Law. If Beneficiary shall serve upon Trustor the notice
described in the preceding sentence, to the extent permitted by law or
Governmental Rule Trustor shall not seek to reject the Ground Lease and
shall comply with the demand provided for in the preceding sentence. In
addition, effective upon the entry of an order for relief with respect
to Trustor under the Bankruptcy Law, Trustor hereby assigns and
transfers to Beneficiary a non-exclusive right to apply to the
bankruptcy court under Section 365(d)(4) of the Bankruptcy Law for an
order extending the period during which the Ground Lease may be rejected
or assumed; and shall (a) promptly notify Beneficiary of any default by
Trustor in the performance or observance of any of the terms, covenants
or conditions on the part of Trustor to be performed or observed under
the Ground Lease and of the giving of any written notice by the lessor
thereunder to Trustor of any such default, and (b) promptly cause a copy
of each written notice given to Trustor by the lessor under the Ground
Lease to be delivered to Beneficiary. Beneficiary may rely on any notice
received by it from any such lessor of any default by Trustor under the
Ground Lease and may take such action as may be permitted by law or
Governmental Rule to cure such default even though the existence of such
default or the nature thereof shall be questioned or denied by Trustor
or by any Person on its behalf.
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2.12 Power of Attorney. Trustor does hereby irrevocably constitute and
appoint Beneficiary, its true and lawful attorney (which appointment is coupled
with an interest), with full power of substitution, for Trustor and in the name,
place and stead of Trustor or in Beneficiary's own name, for so long as any of
the Secured Obligations are outstanding, to ask, demand, collect, receive,
receipt for and sue for any and all rents, income and other sums which are
assigned hereunder with full power to endorse the name of Trustor on all
instruments given in payment or in part payment thereof, to settle, adjust or
compromise any claims thereunder as fully as Trustor itself could do and in its
discretion file any claim or take any action or proceeding, either in its own
name or in the name of Trustor or otherwise, which Beneficiary may deem
necessary or appropriate to protect and preserve the right, title and interest
of Beneficiary in and to such rents, income and other sums and the security
intended to be afforded hereby; provided that Beneficiary shall not exercise
such rights unless an Event of Default has occurred and is continuing.
2.13 Covenant to Pay. If an Event of Default has occurred and is
continuing and such Event of Default could reasonably be expected to materially
and adversely affect Beneficiary's interest hereunder in the Trust Estate or
result in personal injury, then Beneficiary, among its other rights and
remedies, shall have the right, but not the obligation, to pay, observe or
perform the same, in whole or in part, and with such modifications as
Beneficiary reasonably shall deem advisable. To the extent provided in the
Credit Agreement, all sums, including, without limitation, reasonable attorneys
fees, so expended or incurred by Beneficiary by reason of the default of
Trustor, or by reason of the bankruptcy or insolvency of Trustor, as well as,
without limitation, sums expended or incurred to sustain the lien or estate of
this Deed of Trust or its priority, or to protect or enforce any rights of
Beneficiary hereunder, or to recover any of the Secured Obligations, or to
complete construction of the Project for which the Credit Agreement are intended
as financing, or for repairs, maintenance, alterations, replacements or
improvements thereto or for the protection thereof, or for real estate taxes or
other governmental assessments or charges against any part of the Trust Estate,
or premiums for insurance of the Trust Estate, shall be entitled to the benefit
of the lien on the Trust Estate as of the date of the recording of this Deed of
Trust, shall be deemed to be added to and be part of the Secured Obligations
secured hereby, whether or not the result thereof causes the total amount of the
Secured Obligations to exceed the stated amount set forth in the second
introductory paragraph of this Deed of Trust, and shall be repaid by Trustor as
provided in the Credit Agreement.
2.14 Security Agreement.
2.14.1 This Deed of Trust shall also be a security agreement
between Trustor and Beneficiary covering the Deed of Trust Property constituting
personal property or fixtures (hereinafter collectively called "UCC Collateral")
governed by the [INSERT RELEVANT STATE] Uniform Commercial Code ("UCC") as the
same may be more specifically set forth in any financing statement delivered in
connection with this Deed of Trust, and as further security for the payment and
performance of the Secured Obligations, Trustor hereby grants to Beneficiary a
security interest in such portion of the Site to the full extent that the Site
may be subject to the UCC. In addition to Beneficiary's other rights hereunder,
Beneficiary shall have all rights of a secured party under the UCC. Trustor
shall execute and deliver to Beneficiary all financing statements and such
further assurances that may be reasonably required by Beneficiary to establish,
create, perfect (to the extent the same can be achieved by the filing of a
financing statement) and
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maintain the validity and priority of Beneficiary's security interests, and
Trustor shall bear all reasonable costs thereof, including all UCC searches.
Except as otherwise provided in the Credit Agreement, if Beneficiary should
dispose of any of the Site comprising the UCC Collateral pursuant to the UCC,
ten (10) days' prior written notice by Beneficiary to Trustor shall be deemed to
be reasonable notice; provided, however, Beneficiary may dispose of such
property in accordance with the foreclosure procedures of this Deed of Trust in
lieu of proceeding under the UCC. Beneficiary may from time to time execute and
deliver at Trustor's expense, all continuation statements, termination
statements, amendments, partial releases, or other instruments relating to all
financing statements by and between Trustor and Beneficiary. Except as otherwise
provided in the Credit Agreement, if an Event of Default shall occur and is
continuing, (a) Beneficiary, in addition to any other rights and remedies which
it may have, may exercise immediately and without demand to the extent permitted
by law, any and all rights and remedies granted to a secured party under the UCC
including, without limiting the generality of the foregoing, the right to take
possession of the UCC Collateral or any part thereof, and to take such other
measures as Beneficiary may deem necessary for the care, protection and
preservation of such collateral and (b) upon request or demand of Beneficiary,
Trustor shall at its expense, assemble the UCC Collateral and make it available
to Beneficiary at a convenient place acceptable to Beneficiary. Trustor shall
pay to Beneficiary on demand, any and all expenses, including reasonable
attorneys' fees and disbursements incurred or paid by Beneficiary in protecting
the interest in the UCC Collateral and in enforcing the rights hereunder with
respect to such UCC Collateral.
2.14.2 Trustor and the Beneficiary agree, to the extent permitted
by law, that: (i) this Deed of Trust upon recording or registration in the real
estate records of the proper office shall constitute a financing statement filed
as a "fixture filing" within the meaning of [SECTIONS 9-313 AND 9-402 OF THE
UCC]; (ii) all or a part of the Trust Estate are or are to become fixtures; and
(iii) the addresses of Trustor and Beneficiary are as set forth on the first
page of this Deed of Trust.
ARTICLE 3 - REMEDIES
3.1 Acceleration of Maturity. If an Event of Default occurs and is
continuing, Beneficiary may (except that such acceleration shall be automatic if
the Event of Default is caused by a Bankruptcy Event of Trustor), declare the
Secured Obligations to be due and payable immediately, and upon such declaration
such principal and interest and other sums shall immediately become due and
payable without demand, presentment, notice or other requirements of any kind
(all of which Trustor waives).
3.2 Protective Advances If an Event of Default shall have occurred
and is continuing, then without thereby limiting Beneficiary's other rights or
remedies, waiving or releasing any of Trustor's obligations, or imposing any
obligation on Beneficiary, Beneficiary may either advance any amount owing or
perform any or all actions that Beneficiary considers necessary or appropriate
to cure such default. All such advances shall constitute "Protective Advances."
No sums advanced or performance rendered by Beneficiary shall cure, or be deemed
a waiver of any Event of Default.
3.3 Institution of Equity Proceedings. If an Event of Default occurs
and is continuing, Beneficiary may institute an action, suit or proceeding in
equity for specific performance of this
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Deed of Trust, the Notes or any Credit Document, all of which shall be
specifically enforceable by injunction or other equitable remedy.
3.4 Beneficiary's Power of Enforcement.
(a) If an Event of Default occurs, Beneficiary shall be
entitled, at its option and in its sole and absolute discretion, to prepare and
record on its own behalf, or to deliver to Trustee for recording, if
appropriate, written declaration of default and demand for sale and written
Notice of Breach and Election to Sell (or other statutory notice) to cause the
Trust Estate to be sold to satisfy the obligations hereof, and in the case of
delivery to Trustee, Trustee shall cause said notice to be filed for record.
(b) After the lapse of such time as may then be required by
law following the recordation of said Notice of Breach and Election to Sell, and
notice of sale having been given as then required by law, Trustee without demand
on Trustor, shall sell the Trust Estate or any portion thereof at the time and
place fixed by it in said notice, either as a whole or in separate parcels, and
in such order as it may determine, at public auction to the highest bidder, of
cash in lawful money of the United States payable at the time of sale. Trustee
may, for any cause it deems expedient, postpone the sale of all or any portion
of said property until it shall be completed and, in every case, notice of
postponement shall be given by public announcement thereof at the time and place
last appointed for the sale and from time to time thereafter Trustee may
postpone such sale by public announcement at the time fixed by the preceding
postponement; provided that Trustee shall give Trustor notice of such
postponement to the extent required by law. Trustee shall execute and deliver to
the purchaser its Deed, Bill of Sale, or other instrument conveying said
property so sold, but without any covenant or warranty, express or implied. The
recitals in such instrument of conveyance of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Beneficiary,
may bid at the sale.
(c) After deducting all costs, fees and expenses of Trustee
and of this Deed of Trust, including, without limitation, costs of evidence of
title and reasonable attorneys' fees of Trustee or Beneficiary in connection
with a sale, Trustee shall apply the proceeds of such sale to payment of all
sums expended under the terms hereof not then repaid, with accrued interest at
the interest rate on the Notes then to the payment of all other sums then
secured hereby and the remainder, if any, to the person or persons legally
entitled thereto.
(d) If any Event of Default occurs, Beneficiary may, either
with or without entry or taking possession of the Trust Estate, and without
regard to whether or not the indebtedness and other sums secured hereby shall be
due and without prejudice to the right of Beneficiary thereafter to bring an
action or proceeding to foreclose or any other action for any default existing
at the time such earlier action was commenced, proceed by any appropriate action
or proceeding: (1) to enforce payment of the Secured Obligations, to the extent
permitted by law, or the performance of any term hereof or any other right; (2)
to foreclose this Deed of Trust in any manner provided by law for the
foreclosure of mortgages or deeds of trust on real property and to sell, as an
entirety or in separate lots or parcels, the Trust Estate or any portion thereof
pursuant to the laws of the [RELEVANT STATE] or under the judgment or decree of
a court or courts of
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competent jurisdiction, and Beneficiary shall be entitled to recover in any such
proceeding all costs and expenses incident thereto, including reasonable
attorneys' fees in such amount as shall be awarded by the court; (3) to exercise
any or all of the rights and remedies available to it under the Credit
Documents; and (4) to pursue any other remedy available to it. Beneficiary shall
take action either by such proceedings or by the exercise of its powers with
respect to entry or taking possession, or both, as Beneficiary may determine.
(e) The remedies described in this Section 3.4 may be
exercised with respect to all or any portion of the Tangible Collateral, either
simultaneously with the sale of any real property encumbered hereby or
independent thereof. Beneficiary shall at any time be permitted to proceed with
respect to all or any portion of the Tangible Collateral in any manner permitted
by the UCC. Trustor agrees that Beneficiary's inclusion of all or any portion of
the Tangible Collateral in a sale or other remedy exercised with respect to the
real property encumbered hereby, as permitted by the UCC, is a commercially
reasonable disposition of such property.
3.5 Beneficiary's Right to Enter and Take Possession, Operate and
Apply Income.
(a) If an Event of Default occurs, Trustor, upon demand of
Beneficiary, shall forthwith surrender to Beneficiary the actual possession and,
if and to the extent permitted by law, Beneficiary itself, or by such officers
or agents as it may appoint, may enter and take possession of all the Trust
Estate including the Tangible Collateral, without liability for trespass,
damages or otherwise, and may exclude Trustor and its agents and employees
wholly therefrom and may have joint access with Trustor to the books, papers and
accounts of Trustor.
(b) If an Event of Default has occurred and is continuing and
Trustor shall for any reason fail to surrender or deliver the Trust Estate, the
Tangible Collateral or any part thereof after Beneficiary's demand, Beneficiary
may obtain a judgment or decree conferring on Beneficiary or Trustee the right
to immediate possession or requiring Trustor to deliver immediate possession of
all or part of such property to Beneficiary or Trustee and Trustor hereby
specifically consents to the entry of such judgment or decree. Trustor shall pay
to Beneficiary or Trustee, upon demand, all costs and expenses of obtaining such
judgment or decree and reasonable compensation to Beneficiary or Trustee, their
attorneys and agents, and all such costs, expenses and compensation shall, until
paid, be secured by the lien of this Deed of Trust.
(c) Upon every such entering upon or taking of possession,
Beneficiary or Trustee may hold, store, use, operate, manage and control the
Trust Estate and conduct the business thereof, and, from time to time in its
sole and absolute discretion and without being under any duty to so act:
(1) make all necessary and proper maintenance, repairs,
renewals and replacements thereto and thereon, and all necessary additions,
betterments and improvements thereto and thereon and purchase or otherwise
acquire fixtures, personalty and other property in connection therewith;
(2) insure or keep the Trust Estate insured;
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(3) manage and operate the Trust Estate and exercise
all the rights and powers of Trustor in their name or otherwise with respect to
the same;
(4) enter into agreements with others to exercise the
powers herein granted Beneficiary or Trustee, all as Beneficiary or Trustee from
time to time may determine; and shall apply the monies so received by
Beneficiary or Trustee in such priority as provided by the Credit Agreement to
(1) the payment of interest and principal due and payable on the Beneficiary,
(2) the deposits for taxes and assessments and insurance premiums due, (3) the
cost of insurance, taxes, assessments and other proper charges upon the Trust
Estate or any part thereof; (4) the compensation, expenses and disbursements of
the agents, attorneys and other representatives of Beneficiary or Trustee as
allowed under this Deed of Trust; and (5) any other charges or costs required to
be paid by Trustor under the terms of the Credit Agreement.
(5) rent or sublet the Trust Estate or any portion
thereof for any purpose permitted by this Deed of Trust.
Beneficiary or Trustee shall surrender possession of the Trust
Estate and the Tangible Collateral to Trustor (i) as may be required by law or
court order, or (ii) when all amounts under any of the terms of the Credit
Agreement or this Deed of Trust, shall have been paid current and all Events of
Default have been cured or waived. The same right of taking possession, however,
shall exist if any subsequent Event of Default shall occur and be continuing.
3.6 Separate Sales. To the extent permitted by law or Governmental
Rule, the Trust Estate may be sold in one or more parcels and in such manner and
order as Trustee, in his sole discretion, may elect, it being expressly
understood and agreed that the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.
3.7 Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws. Trustor agrees to the full extent permitted by law that if an Event of
Default occurs and is continuing, neither Trustor nor anyone claiming through or
under it shall or will set up, claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption laws now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this Deed
of Trust or the absolute sale of the Trust Estate or any portion thereof or the
final and absolute putting into possession thereof, immediately after such sale,
of the purchasers thereof, and Trustor for itself and all who may at any time
claim through or under it, hereby waives, to the full extent that it may
lawfully so do, the benefit of all such laws, and any and all right to have the
assets comprising the Trust Estate marshalled upon any foreclosure of the lien
hereof and agrees that Trustee or any court having jurisdiction to foreclose
such lien may sell the Trust Estate in part or as an entirety.
3.8 Receiver. If an Event of Default occurs, Beneficiary, to the
extent permitted by law, and without regard to the value, adequacy or occupancy
of the security for the indebtedness and other sums secured hereby, shall be
entitled as a matter of right if it so elects to the appointment of a receiver
to enter upon and take possession of the Trust Estate and to collect all
earnings, revenues and receipts and apply the same as the court may direct, and
such receiver may be appointed by any court of competent jurisdiction upon
application by Beneficiary. To the extent permitted by law or Governmental Rule,
Beneficiary may have a receiver appointed without notice to Trustor or any
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third party, and Beneficiary may waive any requirement that the receiver post a
bond. To the extent permitted by law or Governmental Rule, Beneficiary shall
have the power to designate and select the Person who shall serve as the
receiver and to negotiate all terms and conditions under which such receiver
shall serve. To the extent permitted by law or Governmental Rule, any receiver
appointed on Beneficiary's behalf may be an Affiliate of Beneficiary. The
reasonable expenses, including receiver's fees, reasonable attorneys' fees,
costs and agent's compensation, incurred pursuant to the powers herein contained
shall be secured by this Deed of Trust. The right to enter and take possession
of and to manage and operate the Trust Estate and to collect all earnings,
revenues and receipts, whether by a receiver or otherwise, shall be cumulative
to any other right or remedy available to Beneficiary under this Deed of Trust,
the Credit Agreement or otherwise available to Beneficiary and may be exercised
concurrently therewith or independently thereof, but such rights shall be
exercised in a manner which is otherwise in accordance with and consistent with
the Credit Agreement. Beneficiary shall be liable to account only for such
earnings, revenues and receipts (including, without limitation, security
deposits) actually received by Beneficiary, whether received pursuant to this
section or any other provision hereof. Notwithstanding the appointment of any
receiver or other custodian, Beneficiary shall be entitled as pledgee to the
possession and control of any cash, deposits, or instruments at the time held
by, or payable or deliverable under the terms of this Deed of Trust to,
Beneficiary.
3.9 Suits to Protect the Trust Estate. Beneficiary shall have the
power and authority to institute and maintain any suits and proceedings as
Beneficiary, in its sole and absolute discretion, may deem advisable (a) to
prevent any impairment of the Trust Estate by any acts which may be unlawful or
in violation of this Deed of Trust, (b) to preserve or protect its interest in
the Trust Estate, or (c) to restrain the enforcement of or compliance with any
legislation or other Legal Requirement that may be unconstitutional or otherwise
invalid, if the enforcement of or compliance with such enactment, rule or order
might impair the security hereunder or be prejudicial to Beneficiary's interest
3.10 Proofs of Claim. In the case of any receivership, insolvency,
Bankruptcy Event, reorganization, arrangement, adjustment, composition or other
judicial proceedings affecting Trustor, any Affiliate or any guarantor, co-maker
or endorser of any of Trustor's obligations, its creditors or its property,
Beneficiary, to the extent permitted by law, shall be entitled to file such
proofs of claim or other documents as it may deem be necessary or advisable in
order to have its claims allowed in such proceedings for the entire amount due
and payable by Trustor under the Credit Agreement or any other Credit Document,
at the date of the institution of such proceedings, and for any additional
amounts which may become due and payable by Trustor after such date.
3.11 Trustor to Pay the Notes on Any Default in Payment; Application
of Monies by Beneficiary.
(a) In case of a foreclosure sale of all or any part of the
Trust Estate and of the application of the proceeds of sale to the payment of
the sums secured hereby, to the extent permitted by law, Beneficiary shall be
entitled to enforce payment from Trustor of any additional amounts then
remaining due and unpaid and to recover judgment against Trustor for any portion
thereof remaining unpaid, with interest at the interest rate on the Notes.
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(b) Trustor hereby agrees to the extent permitted by law, that
no recovery of any such judgment by Beneficiary or other action by Beneficiary
and no attachment or levy of any execution upon any of the Trust Estate or any
other property shall in any way affect the Lien and security interest of this
Deed of Trust upon the Trust Estate or any part thereof or any Lien, rights,
powers or remedies of Beneficiary hereunder, but such Lien, rights, powers and
remedies shall continue unimpaired as before.
(c) Any monies collected or received by Beneficiary under this
Section 3.11 shall be first applied to the payment of compensation, expenses and
disbursements of the agents, attorneys and other representatives of Beneficiary,
and the balance remaining shall be applied to the payment of amounts due and
unpaid under the Credit Agreement.
3.12 Delay or Omission; No Waiver. No delay or omission of Beneficiary
or the Banks to exercise any right, power or remedy upon any Event of Default
shall exhaust or impair any such right, power or remedy or shall be construed to
waive any such Event of Default or to constitute acquiescence therein. Every
right, power and remedy given to Beneficiary whether contained herein or in the
Credit Agreement or otherwise available to Beneficiary may be exercised from
time to time and as often as may be deemed expedient by Beneficiary.
3.13 No Waiver of One Default to Affect Another. No waiver of any
Event of Default hereunder shall extend to or affect any subsequent or any other
Event of Default then existing, or impair any rights, powers or remedies
consequent thereon. If Beneficiary (a) grants forbearance or an extension of
time for the payment of any sums secured hereby; (b) takes other or additional
security for the payment thereof; (c) waives or does not exercise any right
granted in the Credit Agreement, this Deed of Trust or any other Credit
Document; (d) releases any part of the Trust Estate from the lien or security
interest of this Deed of Trust or any other instrument securing the Secured
Obligations; (e) consents to the filing of any map, plat or replat of the
Premises; (f) consents to the granting of any easement on the Premises; or (g)
makes or consents to any agreement changing the terms of this Deed of Trust or
any Credit Document subordinating the lien or any charge hereof, no such act or
omission shall release, discharge, modify, change or affect the liability under
the Credit Agreement, this Deed of Trust or any other Credit Document or
otherwise of Trustor, or any subsequent purchaser of the Trust Estate or any
part thereof or any maker, co-signer, surety or guarantor with respect to any
other matters not addressed by such act or omission. No such act or omission
shall preclude Beneficiary from exercising any right, power or privilege herein
granted or intended to be granted in case of any Event of Default then existing
or of any subsequent Event of Default, nor, except as otherwise expressly
provided in an instrument or instruments executed by Beneficiary, shall the lien
or security interest of this Deed of Trust be altered thereby, except to the
extent expressly provided in such acts or omissions. In the event of the sale or
transfer by operation of law or otherwise of all or any part of the Trust
Estate, Beneficiary, without notice to any person, firm or corporation, is
hereby authorized and empowered to deal with any such vendee or transferee with
reference to the Trust Estate or the indebtedness secured hereby, or with
reference to any of the terms or conditions hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any of the liabilities or undertakings hereunder, or
waiving its right to declare such sale or transfer an Event of Default as
provided herein. Notwithstanding anything to the contrary contained in this Deed
of Trust or any Credit Document, (i) in the case of any non-monetary Event
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of Default, Beneficiary may continue to accept payments due hereunder without
thereby waiving the existence of such or any other Event of Default and (ii) in
the case of any monetary Event of Default, Beneficiary may accept partial
payments of any sums due hereunder without thereby waiving the existence of such
Event of Default if the partial payment is not sufficient to completely cure
such Event of Default.
3.14 Discontinuance of Proceedings; Position of Parties Restored. If
Beneficiary shall have proceeded to enforce any right or remedy under this Deed
of Trust by foreclosure, entry of judgement or otherwise and such proceedings
shall have been discontinued or abandoned for any reason, or such proceedings
shall have resulted in a final determination adverse to Beneficiary, then and in
every such case Trustor and Beneficiary shall be restored to their former
positions and rights hereunder, and all rights, powers and remedies of
Beneficiary shall continue as if no such proceedings had occurred or had been
taken.
3.15 Remedies Cumulative. Subject to the provisions of Section 5.15
hereof, no right, power or remedy, including without limitation remedies with
respect to any security for the Secured Obligations, conferred upon or reserved
to Beneficiary by the Credit Agreement, this Deed of Trust or any other Credit
Document is exclusive of any other right, power or remedy, but each and every
such right, power and remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder or under any
Credit Document, now or hereafter existing at law, in equity or by statute, and
Beneficiary shall be entitled to resort to such rights, powers, remedies or
security as Beneficiary shall in its sole and absolute discretion deem
advisable.
3.16 Interest After Event of Default. If an Event of Default shall
have occurred and is continuing, all sums outstanding and unpaid under the
Credit Documents and this Deed of Trust shall, at Beneficiary's option, bear
interest at the interest rate on the Notes until such Event of Default has been
cured. Trustor's obligation to pay such interest shall be secured by this Deed
of Trust.
3.17 Foreclosure; Expenses of Litigation. If Trustee forecloses,
reasonable attorneys' fees for services in the supervision of said foreclosure
proceeding shall be allowed to the Trustee and Beneficiary as part of the
foreclosure costs. In the event of foreclosure of the lien hereof, there shall
be allowed and included as additional indebtedness all reasonable expenditures
and expenses which may be paid or incurred by or on behalf of Beneficiary for
attorneys' fees, appraiser's fees, outlays for documentary and expert evidence,
stenographers' charges, publication costs, and costs (which may be estimated as
to items to be expended after foreclosure sale or entry of the decree) of
procuring all such abstracts of title, title searches and examinations, title
insurance policies and guarantees, and similar data and assurances with respect
to title as Beneficiary may deem reasonably necessary either to prosecute such
suit or to evidence to a bidder at any sale which may be had pursuant to such
decree the true condition of the title to or the value of the Trust Estate or
any portion thereof. All expenditures and expenses of the nature in this section
mentioned, and such expenses and fees as may be incurred in the protection of
the Trust Estate and the maintenance of the lien and security interest of this
Deed of Trust, including the reasonable fees of any attorney employed by
Beneficiary in any litigation or proceeding affecting this Deed of Trust or any
Credit Document, the Trust Estate or any portion thereof, including, without
limitation, civil, probate, appellate and bankruptcy proceedings, or in
preparation for the commencement or defense of any proceeding or threatened suit
or proceeding, shall be immediately due and payable by Trustor, with
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interest thereon at the interest rate on the Notes, and shall be secured by this
Deed of Trust. Trustee waives its right to any statutory fee in connection with
any judicial or nonjudicial foreclosure of the lien hereof and agrees to accept
a reasonable fee for such services.
3.18 Deficiency Judgments Subject to Article 9 of the Credit
Agreement, if after foreclosure of this Deed of Trust or Trustee's sale
hereunder, there shall remain any deficiency with respect to any amounts payable
under the Credit Documents or hereunder or any amounts secured hereby, and
Beneficiary shall institute any proceedings to recover such deficiency or
deficiencies, all such amounts shall continue to bear interest at the interest
rate on the Notes. Subject to Article 9 of the Credit Agreement, Trustor waives
any defense to Beneficiary's recovery against Trustor of any deficiency after
any foreclosure sale of the Trust Estate. Subject to Article 9 of the Credit
Agreement, to the extent permitted by law, Trustor expressly waives any defense
or benefits that may be derived from any statute granting Trustor any defense to
any such recovery by Beneficiary. Subject to Article 9 of the Credit Agreement,
in addition, Beneficiary and Trustee shall be entitled to recovery of all of
their reasonable costs and expenditures (including without limitation any court
imposed costs) in connection with such proceedings, including their reasonable
attorneys' fees, appraisal fees and the other costs, fees and expenditures
referred to in Section 3.17 above. This provision shall survive any foreclosure
or sale of the Trust Estate, any portion thereof and/or the extinguishment of
the lien hereof.
3.19 Waiver of Jury Trial. Beneficiary and Trustor each waive any
right to have a jury participate in resolving any dispute whether sounding in
contract, tort or otherwise arising out of, connected with, related to or
incidental to the relationship established between them in connection with the
Notes, this Deed of Trust or any other Credit Document. Any such disputes shall
be resolved in a bench trial without a jury.
3.20 Exculpation of Beneficiary. The acceptance by Beneficiary of the
assignment contained herein with all of the rights, powers, privileges and
authority created hereby shall not, prior to entry upon and taking possession of
the Trust Estate by Beneficiary, be deemed or construed to make Beneficiary a
"mortgagee in possession"; nor thereafter or at any time or in any event
obligate Beneficiary to appear in or defend any action or proceeding relating to
the Trust Estate, nor shall Beneficiary, prior to such entry and taking, be
liable in any way for any injury or damage to person or property sustained by
any Person in or about the Trust Estate.
ARTICLE 4 - RIGHTS AND RESPONSIBILITIES OF TRUSTEE;
OTHER PROVISIONS RELATING TO TRUSTEE
Notwithstanding anything to the contrary in this Deed of Trust, Trustor
and Beneficiary agree as follows.
4.1 Exercise of Remedies by Trustee To the extent that this Deed of
Trust or applicable law authorizes or empowers Beneficiary to exercise any
remedies set forth in Article Three hereof or otherwise, or perform any acts in
connection therewith, Trustee (but not to the exclusion of Beneficiary unless so
required under the law of the State of [RELEVANT STATE]) shall have the power to
exercise any or all such remedies, and to perform any acts provided for in this
Deed of Trust in connection therewith, all for the benefit of Beneficiary and on
Beneficiary's behalf
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in accordance with applicable law of the State of [RELEVANT STATE]. In
connection therewith, Trustee: (a) shall not exercise, or waive the exercise of,
any Beneficiary's Remedies (other than any rights or Trustee to any indemnity or
reimbursement), except at Beneficiary's request, and (b) shall exercise, or
waive the exercise of, any or all of Beneficiary's remedies at Beneficiary's
request, and in accordance with Beneficiary's directions as to the manner of
such exercise or waiver. Trustee may, however, decline to follow Beneficiary's
request or direction if Trustee shall be advised by counsel that the action or
proceeding, or manner thereof, so directed may not lawfully be taken or waived.
4.2 Rights and Privileges of Trustee. To the extent that this Deed of
Trust requires Trustor to reimburse Beneficiary for any expenditures Beneficiary
may incur, Trustee shall be entitled to the same rights to reimbursement of
expenses as Beneficiary, subject to such limitations and conditions as would
apply in the case of Beneficiary. To the extent that this Deed of Trust negates
or limits Beneficiary's liability as to any matter, Trustee shall be entitled to
the same negation or limitation of liability. To the extent that Trustor,
pursuant to this Deed of Trust, appoints Beneficiary as Trustor's attorney in
fact for any purpose, Beneficiary or (when so instructed by Beneficiary) Trustee
shall be entitled to act on Trustor's behalf without joinder or confirmation by
the other.
4.3 Resignation or Replacement of Trustee Trustee may resign by an
instrument in writing addressed to Beneficiary, and Trustee may be removed at
any time with or without cause (i.e., in Beneficiary's sole and absolute
discretion) by an instrument in writing executed by Beneficiary. In case of the
death, resignation, removal or disqualification of Trustee or if for any reason
Beneficiary shall deem it desirable to appoint a substitute, successor or
replacement Trustee to act instead of Trustee originally named (or in place of
any substitute, successor or replacement Trustee), then Beneficiary shall have
the right and is hereby authorized and empowered to appoint a successor,
substitute or replacement Trustee, and, if preferred, several substitute
trustees in succession, without any formality other than appointment and
designation in writing executed by Beneficiary, which instrument shall be
recorded if required by the law of the State of [RELEVANT STATE]. The law of the
State of [RELEVANT STATE] shall govern the qualifications of any Trustee. The
authority conferred upon Trustee by this Deed of Trust shall automatically
extend to any and all other successor, substitute and replacement Trustee(s)
successively until the Secured Obligations have been paid in full or the Trust
Estate has been sold hereunder or released in accordance with the provisions of
the Credit Documents. Beneficiary's written appointment and designation of any
Trustee shall be full evidence of Beneficiary's right and authority to make the
same and of all facts therein recited. No confirmation, authorization, approval
or other action by Trustor shall be required in connection with any resignation
or other replacement of Trustee.
4.4 Authority of Beneficiary. If Beneficiary is a banking
corporation, state banking corporation or a national banking association and the
instrument of appointment of any successor or replacement Trustee is executed on
Beneficiary's behalf by an officer of such corporation, state banking
corporation or national banking association, then such appointment may be
executed by any authorized officer or agent of Beneficiary and such appointment
shall be conclusively presumed to be executed with authority and shall be valid
and sufficient without proof of any action by the board of directors or any
superior officer of Beneficiary.
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4.5 Effect of Appointment of Successor Trustee. Upon the appointment
and designation of any successor, substitute or replacement Trustee, Trustee's
entire estate and title in the Trust Estate shall vest in the designated
successor, substitute or replacement Trustee. Such successor, substitute or
replacement Trustee shall thereupon succeed to and shall hold, possess and
execute all the rights, powers, privileges, immunities and duties herein
conferred upon Trustee. All references herein to Trustee shall be deemed to
refer to Trustee (including any successor or substitute appointed and designated
as herein provided) from time to time acting hereunder.
4.6 Confirmation of Transfer and Succession. Any new Trustee
appointed pursuant to any of the provisions hereof shall, without any further
act, deed or conveyance, become vested with all the estates, properties, rights,
powers and trusts of his predecessor in the rights hereunder with like effect as
if originally named as Trustee herein; but nevertheless, upon the written
request of Beneficiary or of any successor, substitute or replacement Trustee,
any former Trustee ceasing to act shall execute and deliver an instrument
transferring to such successor, substitute or replacement Trustee all of the
right, title, estate and interest in the Trust Estate of Trustee so ceasing to
act, together with all the rights, powers, privileges, immunities and duties
herein conferred upon Trustee, and shall duly assign, transfer and deliver all
properties and moneys held by said Trustee hereunder to said successor,
substitute or replacement Trustee.
4.7 Exculpation. Trustee shall not be liable for any error of
judgment or act done by Trustee in good faith, or otherwise be responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence, willful misconduct or knowing violation of law. Trustee shall not be
personally liable in case of entry by him, or anyone entering by virtue of the
powers herein granted him, upon the Trust Estate for debts contracted or
liability or damages incurred in the management or operation of the Trust
Estate. Trustee shall have the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by
it hereunder, believed by it in good faith to be genuine. All moneys received by
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by law). Trustee
shall be under no liability for interest on any moneys received by it hereunder.
4.8 Endorsement and Execution of Documents. Upon Beneficiary's
written request, Trustee shall, without liability or notice to Trustor, execute,
consent to, or join in any instrument or agreement in connection with or
necessary to effectuate the purposes of the Credit Documents. Trustor hereby
irrevocably designates Trustee as its attorney in fact to execute, acknowledge
and deliver, on Trustor's behalf and in Trustor's name, all instruments or
agreements necessary to implement any provision(s) of this Deed of Trust or to
further perfect the lien created by this Deed of Trust on the Trust Estate. This
power of attorney shall be deemed to be coupled with an interest and shall
survive any disability of Trustor.
4.9 Multiple Trustees. If Beneficiary appoints multiple trustees,
then any Trustee, individually, may exercise all powers granted to Trustee under
this instrument, without the need for action by any other Trustee(s).
4.10 No Required Action. Trustee shall not be required to take any
action under this Deed of Trust or to institute, appear in or defend any action,
suit or other proceeding in connection
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therewith where in his opinion such action will be likely to involve him in
expense or liability, unless requested so to do by a written instrument signed
by Beneficiary and, if Trustee so requests, unless Trustee is tendered security
and indemnity satisfactory to him against any and all costs, expense and
liabilities arising therefrom. Trustee shall not be responsible for the
execution, acknowledgment or validity of the Credit Documents, or for the proper
authorization thereof, or for the sufficiency of the lien and security interest
purported to be created hereby, and makes no representation in respect thereof
or in respect of the rights, remedies and recourses of Beneficiary.
4.11 Terms of Trustee's Acceptance. Trustee accepts the trust created
by this Deed of Trust upon the following terms and conditions:
(a) DELEGATION. Trustee may exercise any of its powers through
appointment of attorney(s) in fact or agents.
(b) SECURITY. Trustee shall be under no obligation to take any
action upon any Event of Default unless furnished security or indemnity, in form
satisfactory to Trustee, against costs, expenses, and liabilities that Trustee
may incur.
(c) COSTS AND EXPENSES. Trustor shall reimburse Trustee, as
part of the Secured Obligations secured hereunder, for all reasonable
disbursements and expenses (including reasonable legal fees and expenses)
incurred by reason of or arising from an Event of Default and as provided for in
this Deed of Trust, including any of the foregoing incurred in Trustee's
administering and executing the trust created by this Deed of Trust and
performing Trustee's duties and exercising Trustee's powers under this Deed of
Trust.
(d) RELEASE. Upon payment of the Secured Obligations secured
hereunder, Beneficiary shall request Trustee to release this Deed of Trust and
shall surrender all the Secured Obligations secured hereunder to Trustee.
Trustee shall release this Deed of Trust without charge to Trustor. Trustor
shall pay all costs of recordation, if any.
ARTICLE 5 - GENERAL
5.1 Discharge. When all of the Secured Obligations shall have been
paid in full, then this Deed of Trust and the lien and security interest created
hereby shall be of no further force and effect, Trustor shall be released from
the covenants, agreements and obligations of Trustor contained in this Deed of
Trust and all right, title and interest in and to the Trust Estate shall revert
to Trustor. Beneficiary and Trustee, at the request and the expense of Trustor,
shall promptly execute a deed of reconveyance and such other documents as may be
reasonably requested by Trustor to evidence the discharge and satisfaction of
this Deed of Trust and the release of Trustor from its obligations hereunder.
5.2 No Waiver. The exercise of the privileges granted in this Deed of
Trust to perform Trustor's obligations under the agreements which constitute the
Trust Estate shall in no event be considered or constitute a waiver of any right
which Beneficiary may have at any time, after an Event of Default shall have
occurred and be continuing, to declare the Secured Obligations to be immediately
due and payable. No delay or omission to exercise any right, remedy or power
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accruing upon any default shall impair any such right, remedy or power or shall
be construed to be a waiver of any such default or acquiescence therein; and
every such right, remedy and power may be exercised from time to time and as
often as may be deemed expedient.
5.3 Extension, Rearrangement or Renewal of Secured Obligations. It is
expressly agreed that any of the Secured Obligations at any time secured hereby
may be from time to time extended for any period, or with the consent of Trustor
rearranged or renewed, and that any part of the security herein described, or
any other security for the Secured Obligations, may be waived or released,
without altering, varying or diminishing the force, effect or lien or security
interest of this Deed of Trust; and the lien and security interest granted by
this Deed of Trust shall continue as a prior lien and security interest on all
of the Trust Estate not expressly so released, until the Secured Obligations are
fully paid and this Deed of Trust is terminated in accordance with the
provisions hereof; and no other security now existing or hereafter taken to
secure the payment of the Secured Obligations or any part thereof or the
performance of any obligation or liability of Trustor whatever shall in any
manner impair or affect the security given by this Deed of Trust; and all
security for the payment of the Secured Obligations or any part thereof and the
performance of any obligation or liability shall be taken, considered and held
as cumulative.
5.4 Forcible Detainer. Trustor agrees for itself and all Persons
claiming by, through or under it, that subsequent to foreclosure hereunder in
accordance with this Deed of Trust and applicable law if Trustor shall hold
possession of the Trust Estate or any part thereof, Trustor or the Persons so
holding possession shall be guilty of trespass; and any such tenant failing or
refusing to surrender possession upon demand shall be guilty of forcible
detainer and shall be liable to such purchasers for reasonable rental on said
premises, and shall be subject to eviction and removal in accordance with law.
5.5 Waiver of Stay or Extension. To the extent permitted to be waived
by law, Trustor shall not at any time insist upon or plead or in any manner
whatever claim the benefit or advantage of any stay, extension or moratorium law
now or at any time hereafter in force in any locality where the Trust Estate or
any part thereof may or shall be situated, nor shall Trustor claim any benefit
or advantage from any law now or hereafter in force providing for the valuation
or appraisement of the Trust Estate or any part thereof prior to any sale
thereof to be made pursuant to any provision of this Deed of Trust or to a
decree of any court of competent jurisdiction, nor after any such sale shall
Trustor claim or exercise any right conferred by any law now or at any time
hereafter in force to redeem the Trust Estate so sold or any part thereof; and
Trustor hereby expressly waives all benefit or advantage of any such law or laws
and the appraisement of the Trust Estate or any part thereof, and covenants that
Trustor shall not hinder or delay the execution of any power herein granted and
delegated to Beneficiary but that Trustor shall permit the execution of every
such power as though no such law had been made.
5.6 Notices. Except where certified or registered mail notice is
required by applicable law, any notice to Trustor or Beneficiary required or
permitted hereunder shall be deemed to be given when given in the manner
prescribed in Section 12.1 of the Credit Agreement. All notices to Trustee
required or permitted hereunder shall be deemed given when given in the manner
prescribed in Section 12.1 of the Credit Agreement to the following address:
[TRUSTEE ADDRESS]
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5.7 Severability. All rights, powers and remedies provided herein may
be exercised only to the extent that the exercise thereof does not violate any
applicable law, and are intended to be limited to the extent necessary so that
they will not render this Deed of Trust invalid, unenforceable or not entitled
to be recorded, registered or filed under any applicable law. In the event any
term or provision contained in this Deed of Trust is in conflict, or may
hereafter be held to be in conflict, with the laws of RELEVANT STATE or of the
United States of America, this Deed of Trust shall be affected only as to such
particular term or provision, and shall in all other respects remain in full
force and effect.
5.8 Application of Payments. In the event that any part of the
Secured Obligations cannot lawfully be secured hereby, or in the event that the
lien and security interest hereof cannot be lawfully enforced to pay any part of
the Secured Obligations, or in the event that the lien or security interest
created by this Deed of Trust shall be invalid or unenforceable as to any part
of the Secured Obligations, then all payments on the Secured Obligations shall
be deemed to have been first applied to the complete payment and liquidation of
that part of the Secured Obligations which is not secured by this Deed of Trust
and the unsecured portion of the Secured Obligations shall be completely paid
and liquidated prior to the payment and liquidation of the remaining secured
portion of the Secured Obligations.
5.9 Governing Law
THIS DEED OF TRUST IS GOVERNED BY AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF RELEVANT STATE.
5.10 Entire Agreement. THIS WRITTEN AGREEMENT, THE CREDIT AGREEMENT,
THE NOTES AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
AS OF THE DATE HEREOF, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
___________________________ ___________________________
TRUSTOR BENEFICIARY
5.11 Amendments. This Deed of Trust may be amended, supplemented or
otherwise modified only by an instrument in writing signed by Trustor and
Beneficiary.
5.12 Successors and Assigns. All terms of this Deed of Trust shall run
with the land and bind each of Trustor and Beneficiary and their respective
successors and assigns, and all Persons claiming under or through Trustor or
Beneficiary, as the case may be, or any such successor or assign, and shall
inure to the benefit of Beneficiary and Trustor, and their respective successors
and assigns.
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5.13 Renewal, Etc. Beneficiary may at any time and from time to time
renew or extend this Deed of Trust, or alter or modify the same in any way, or
waive any of the terms, covenants or conditions hereof in whole or in part and
may release any portion of the Trust Estate or any other security, and grant
such extensions and indulgences in relation to the Secured Obligations as
Beneficiary may determine, without the consent of any junior lienor or
encumbrancer and without any obligation to give notice of any kind thereto and
without in any manner affecting the priority of the lien and security interest
hereof on any part of the Trust Estate; provided that nothing in this Section
5.13 shall grant Beneficiary the right to alter or modify the Deed of Trust
without the consent of the Trustor unless otherwise specifically permitted in
this Deed of Trust.
5.14 Future Advances. This Deed of Trust is executed and delivered to
secure, among other things, future advances. It is understood and agreed that
this Deed of Trust secures present and future advances made for the benefit of
Trustor and that the lien of such future advances shall relate to the date of
this Deed of Trust. The advances are being used by Trustor to pay for all or
part of the cost of completing erection, acquisition, construction, alteration
or repair of any part of the Project, the financing of which, in whole or in
part, this Deed of Trust was given to secure.
5.15 Liability. Notwithstanding any provision in this Deed of Trust to
the contrary, Recourse against the Trustor, Partners, Members, Shareholders and
their respective Affiliates (all as defined in the Credit Agreement),
stockholders, officers, directors and employees under this Deed of Trust shall
be limited to the extent provided in Article 9 of the Credit Agreement.
5.16 Subject to Ground Lease. The Trustor, the Beneficiary and the
Trustee acknowledge and agree that this Deed of Trust is subject to the terms
and conditions of the Ground Lease. In the event of a conflict between the terms
of this Deed of Trust and the Ground Lease, the terms of the Ground Lease shall
supersede and control.
5.17 Release of Collateral.
(a) The Trust Property shall be released from the security
interest created by this Deed of Trust at any time or from time to time upon the
request of the Trustor; provided that the requirements of the Credit Agreement
have been satisfied. Upon satisfaction of such requirements, a Responsible
Officer of the Beneficiary shall instruct the Trustee to promptly execute,
deliver and acknowledge any necessary or proper instruments of termination,
satisfaction or release to evidence the release of any Trust Property permitted
to be released pursuant to this Deed of Trust.
(b) The Beneficiary may instruct the Trustee to release Trust
Property from the security interest created hereunder upon the sale or
disposition of such Trust Property pursuant to the Beneficiary's powers, rights
and duties with respect to remedies provided herein.
5.18 Fixture Filing Under Uniform Commercial CodeTrustor and the
Beneficiary agree, to the extent permitted by law, that: (i) this Deed of Trust
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of [SECTIONS 9-313 AND 9-402] of the UCC; and (ii) the addresses of
Trustor and Beneficiary are as set forth on the last page of this Deed of Trust.
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5.19 Credit Agreement Controls. In the event of any conflict between
any terms and provisions set forth in this Deed of Trust and those set forth in
the Credit Agreement, the terms and provisions of the Credit Agreement shall
supersede and control the terms and provisions of this Deed of Trust
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be duly
executed and delivered as of the day and year first above written.
CALPINE CONSTRUCTION FINANCE COMPANY L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC., its General Partner
By: ______________________________________
Name:
Title:
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<PAGE> 313
THE STATE OF ss.
ss.
COUNTY OF ss.
This instrument was acknowledged before me on _______________, 1999, by
_______________________________, ____________________________ President of _____
____________________________________, a ______________ corporation, on behalf of
such corporation.
________________________________________
Notary Public, State of ________________
My Commission Expires: _________________
________________________________________
Printed Name of Notary
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EXHIBIT A
DESCRIPTION OF SITE
<PAGE> 315
EXHIBIT B
DESCRIPTION OF EASEMENTS
<PAGE> 316
EXHIBIT C
PERMITTED ENCUMBRANCES
<PAGE> 317
EXHIBIT D-4
to the Credit Agreement
SECURITY AGREEMENT
Dated as of __________, 1999
between
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
and
THE BANK OF NOVA SCOTIA
as Administrative Agent
<PAGE> 318
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions............................................................ 1
2. Assignment, Pledge and Grant of Security Interest...................... 2
3. Obligations Secured.................................................... 7
4. Representations and Warranties of Borrower............................. 7
5. Covenants of Borrower. Borrower covenants as follows:................. 7
6. Events of Default...................................................... 8
7. Remedies Upon Event of Default......................................... 8
8. Remedies Cumulative; Delay Not Waiver.................................. 9
9. Application of Proceeds................................................ 10
10. Attorney-In-Fact...................................................... 10
11. Administrative Agent May Perform...................................... 11
12. Perfection; Further Assurances........................................ 11
13. Place of Business; Location of Records................................ 11
14. Continuing Assignment and Security Interest; Transfer of Notes........ 11
15. Termination of Security Interest...................................... 12
16. Attorneys' Fees....................................................... 12
17. Liability............................................................. 12
18. Amendments; Waivers; Consents......................................... 12
19. Notices............................................................... 12
20. Governing Law......................................................... 13
21. Reinstatement......................................................... 13
22. Severability.......................................................... 13
23. Survival of Provisions................................................ 13
24. Headings Descriptive.................................................. 13
25. Entire Agreement...................................................... 13
26. Time.................................................................. 13
27. Counterparts.......................................................... 14
28. Waiver of Jury Trial.................................................. 14
</TABLE>
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SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement"), dated as of _______, 1999, is
entered into by and between CALPINE CONSTRUCTION FINANCE COMPANY, L.P., a
Delaware limited partnership ("Borrower"), and THE BANK OF NOVA SCOTIA, as
Administrative Agent ("Administrative Agent") for the Banks (as defined below).
PREFACE
A. Borrower intends to construct and own and operate the Projects.
B. Borrower, the financial institutions listed on Exhibit H to the Credit
Agreement (the "Banks"), Credit Suisse First Boston, as Lead Arranger,
Syndication Agent and Bookrunner and The Bank of Nova Scotia, as Lead Arranger,
LC Bank and Administrative Agent, have entered into that certain Credit
Agreement, dated as of October 20, 1999 (as modified, supplemented or amended
from time to time, the "Credit Agreement"), pursuant to which the Banks agreed
to make certain advances of credit to Borrower in the amounts specified and on
the terms and subject to the conditions set forth therein. For purposes of this
Agreement, the term "Banks" shall include the Administrative Agent, the Lead
Arrangers, the Syndication Agent, the Bookrunner, the Co-Documentation Agents
and the Banks (as such terms are defined in the Credit Agreement).
C. As a condition precedent to the Banks' making the advances of credit
contemplated by the Credit Agreement, the Banks require that Borrower shall have
executed this Agreement.
AGREEMENT
In consideration of the promises contained herein, and in order to induce
the Banks to enter into the Credit Agreement and to make the advances of credit
pursuant to the terms thereof, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, Borrower hereby
agrees with Administrative Agent for the benefit of Administrative Agent and the
Banks as follows:
1 DEFINITIONS.
1.1 "UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of New York or, with respect to the
Operating Accounts only, the State of California; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York or, if applicable, the State of California, the term
"UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the
<PAGE> 320
provisions hereof relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
1.2 All capitalized terms used, but not otherwise defined herein,
shall have the meanings provided in the Credit Agreement. The rules of
interpretation contained in Exhibit A to the Credit Agreement shall apply to
this Agreement.
2 ASSIGNMENT, PLEDGE AND GRANT OF SECURITY INTEREST.
2.1 To secure the timely payment and performance of the
Obligations (as defined in Section 3 hereof), except as provided in Section 2.5,
Borrower does hereby assign, grant and pledge to, and subject to a security
interest in favor of, Administrative Agent, on behalf of and for the benefit of
Administrative Agent and the Banks, all the estate, right, title and interest of
Borrower, whether now owned or hereafter acquired, in, to and under:
2.1.1 The following agreements and documents, as amended
from time to time (individually, an "Assigned Agreement," and collectively, the
"Assigned Agreements") and all of Borrower's rights thereunder:
(a) The Prime Construction Contracts, including (i)
Contract for Construction between Borrower, as successor in interest to Magic
Valley Generation, L.P., and Zachry Construction Corporation, dated March 26,
1999, (ii) Contract for Engineering, Procurement, and Construction between
Borrower, as successor in interest to CPN South Point, LLC, and The South Point
Joint Venture, dated April 12, 1999, (iii) Contract for Engineering,
Procurement, and Construction between Borrower, as successor in interest to
Calpine Sutter, LLC, and Bechtel Power Corporation, dated as of June 1, 1999,
and (iv) Contract Agreement between General Electric Company and Borrower, as
successor in interest to Westbrook, LLC, for the Westbrook Power Project
Combined Cycle Power Plant Westbrook, Maine, dated as of February 5, 1999;
(b) The Power Island Supply Contracts, including (i)
Purchase Contract between Westinghouse Power Generation and Borrower, as
successor in interest to Calpine Corporation, dated as of June 30, 1998, (ii)
Purchase Contract for Power Island Equipment between Siemens Westinghouse Power
Corporation and Borrower, as successor in interest to CPN South Point, LLC,
dated as of March 15, 1999, and (iii) Purchase Contract for Power Island
Equipment between Siemens Westinghouse Power Corporation and Borrower, as
successor in interest to Calpine Sutter, Inc., dated as of December 16, 1998;
(c) The Engineering Contracts, including Contract for
Professional Services between Sargent & Lundy, L.L.C., and Borrower, as
successor in interest to Magic Valley Generation, L.P., dated as of December 8,
1998;
(d) The Maintenance Contracts, including (i) Maintenance
Contract between Westinghouse Power Generation and Borrower, as successor in
interest to Calpine Corporation, dated as of June 30, 1998, (ii) Maintenance
Contract between Siemens Westinghouse Power Corporation and Borrower, as
successor in interest to Calpine Corporation,
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dated as of March 19, 1999, (iii) Maintenance Contract between Siemens
Westinghouse Power Corporation and Borrower, as successor in interest to Calpine
Corporation, dated as of December 18, 1998, and (iv) Long Term Parts & Long Term
Service Contract between Borrower, as successor in interest to Westbrook Power,
LLC, and General Electric International, dated as of February 5, 1999;
(e) The Construction Management Agreements;
(f) The Project Documents related to the delivery of water
to the Projects; including (i) Agreement for Purchase of Treated Effluent Water,
between the City of Edinburg and Borrower, as successor in interest to Calpine
Corporation dated April 21, 1998; First Amendment to Agreement for Purchase of
Treated Effluent Water by and between the City of Edinburg and Borrower, as
successor in interest to Magic Valley Generation, L.P. dated August 4, 1999,
(ii) Master Agreement for Purchase and Sale of Water by and between Hidalgo
County Irrigation District No. Two and Borrower, as successor in interest to
Magic Valley Generation, L.P., dated June 17, 1999, (iii) Water Delivery
Contract by and between Hidalgo County Irrigation District No. One and Borrower,
as successor in interest to Magic Valley Generation, L.P., dated July 19, 1999,
(iv) Earnest Money Contract between Bayview Irrigation District No. 11 and
Borrower, as successor in interest to Magic Valley Generation, L.P., dated July
27, 1999; and (v) Agreement by and between Borrower, as successor in interest to
Westbrook Power, LLC, and Portland Water District, dated as of February 25,
1999;
(g) The Leases, including (i) Amended and Restated Ground
Lease Agreement, executed as of August 4, 1999 and approved as BIA Lease
B1778-FM on August 19, 1999 between the Fort Mojave Indian Tribe, a federal
recognized Indian Tribe and Borrower;
(h) the O&M Agreements;
(i) the Project Management Agreements;
(j) the Gas Supply Contracts;
(k) the Gas Transportation Agreements;
(l) the Fuel Management Agreements;
(m) the Power Purchase Agreements, including Power Purchase
and Sale Agreement between Borrower, as successor in interest to Calpine Power
Services Company and Magic Valley Electric Cooperative, Inc., dated as of May
22, 1998;
(n) the Power Marketing Agreements;
(o) (i) that certain Option Contract dated as of September
3, 1999, by and between, on the one hand, Ralph E. Williamson and Daphine P.
Williamson and, on the other hand, Calpine Eastern Corporation, a Delaware
corporation ("Calpine Eastern"), whose interest has been assigned to Borrower,
(ii) that certain Option Contract dated as of September 3, 1999, by and between,
on the one hand, Leslie Williamson, James Williamson, Bonnie
3
<PAGE> 322
Williamson Morris and Judy Williamson Dunaway and, on the other hand, Calpine
Eastern, whose interest has been assigned to Borrower, (iii) that certain Option
Contract dated as of September 3, 1999, by and between Albert R. "Shorty" Glenn
and Calpine Eastern, whose interest has been assigned to Borrower, (iv) that
certain Option Agreement dated as of March 10, 1998 by and between, on the one
hand, Tulare Hills Corporation, a California corporation as to an undivided
63.687% interest, Phillip Pon, an unmarried man and Michael Pon, an unmarried
man as joint tenants, as to an undivided 12.1% interest and Danville Realty
Corporation, as to an undivided 24.213% interest and, on the other hand, Calpine
Corporation, a Delaware corporation ("Calpine"), whose interest has been
assigned to Borrower, (v) that certain Option Contract dated as of September 3,
1999, by and between, on the one hand, Thomas Walters and Peggy Walters and, on
the other hand, Calpine Eastern, whose interest has been assigned to Borrower,
(vi) that certain Option Agreement dated as of April 9, 1999 by and among, on
the one hand, Marie A. Passantino, as Trustee of the Passantino Family Trust
dated October 23, 1991, as amended and restated April 17, 1997 (as to an
undivided 97% interest), Mark Passantino (as to an undivided 1% interest),
Raeanne M. Frank (as to an undivided 1% interest) and Suzanne L. Downer (as to
an undivided 1% interest) and, on the other hand, Calpine and Bechtel
Enterprises, Inc., a Delaware corporation, Calpine's interest in which has been
assigned to Borrower, (vii) that certain Option Agreement, dated as of October
20, 1999, by and between Pittsburg District Energy Facility, LLC, a Delaware
limited liability company and Borrower, (viii) that certain Option Contract
dated as of June 25, 1999, by and between John C. Blythe and Calpine Eastern,
whose interest has been assigned to Borrower, (ix) that certain Option Agreement
dated as of July 21, 1998, by and between The Dow Chemical Company, a Delaware
corporation and Calpine Pittsburg, Inc., a Delaware corporation, a 50% undivided
interest in which has been assigned to Borrower, (x) that certain Option
Agreement for Purchase of Real Property dated as of August 20, 1999, by and
between Donald Gene Haag and Calpine Eastern, whose interest has been assigned
to Borrower, (xi) that certain Option Agreement for Purchase of Real Property
dated as of July 30, 1999, by and between Donald E. Hemphill and Robert J.
Karow, Esq., whose interest has been assigned to Borrower, and (xii) that
certain Lease Agreement by and between The City of Alexander City, a
municipality located in the County of Tallapoosa in the State of Alabama and
Calpine Eastern, whose interest has been assigned to Borrower.
(p) all other Project Documents not listed above to which
Borrower is or may become a party from time to time;
(q) the insurance policies maintained or required to be
maintained by Borrower or any other Person under the Credit Agreement,
including, without limitation, any such policies insuring against loss of
revenues by reason of interruption of the operation of a Project and all loss
proceeds and other amounts payable to Borrower thereunder, and all eminent
domain proceeds relating to any Project;
(r) to the extent assignable, all other agreements,
including vendor warranties, running to Borrower or assigned to Borrower,
relating to the construction, maintenance, improvement, operation or acquisition
of a Project or any part thereof, or transport of material, equipment and other
parts of a Project or any part thereof;
4
<PAGE> 323
(s) any other lease or sublease agreements or easement
agreements relating to a Project or any part thereof or any ancillary facilities
to which Borrower is or becomes a party;
(t) each Additional Project Document, and, to the extent
assignable, any other agreements to which Borrower may be or become a party to
relating to the construction or operation of a Project or any part thereof;
(u) all amendments, supplements, substitutions and renewals
to any of the aforesaid agreements; and
(v) all Permits, including those described on Exhibit G-3
to the Credit Agreement or any Appendix thereto, but excluding any of the
Permits which by their terms or by operation of law prohibit or do not allow
assignment or which would become void solely by virtue of a security interest
being granted therein;
2.1.2 all rents, profits, income, royalties and revenues
derived in any other manner by Borrower from its ownership of a Project or any
part thereof and the operation of a Project or any part thereof, including,
without limitation, all Project Revenues and all revenues from the sale of
electricity, steam, heat, goods or services, but excluding amounts distributed
to Borrower under Waterfall Level 8 and 10 of Section 7.2.1 of the Credit
Agreement;
2.1.3 all other personal property and fixtures of Borrower
relating to any Project, whether now owned or existing or hereafter acquired or
arising, or in which Borrower may have an interest, and wheresoever located,
whether or not of a type which may be subject to a security interest under the
UCC, including all machinery, tools, engines, turbines (including combustion
turbines and steam turbine generators), boilers, fuel storage tanks, control
equipment, appliances, mechanical and electrical systems, elevators, lighting,
alarm systems, fire control systems, furnishings, furniture, service equipment,
motor vehicles, building or maintenance equipment, building or maintenance
materials, pipes and pipelines supplies, goods and property covered by any
warehouse receipts or bills of lading or other such documents, spare parts,
maps, plans, specifications, architectural, engineering, construction or shop
drawings, manuals or similar documents, copyrights, trademarks and trade names,
and any replacements, renewals or substitutions for any of the foregoing or
additional tangible or intangible personal property hereafter acquired by
Borrower;
2.1.4 all goods, money, instruments, investment securities,
accounts, contract rights, documents, deposit accounts, chattel paper, general
intangibles, and inventory relating to any Project;
2.1.5 all Accounts, including without limitation, the
Construction Accounts, the Revenue Accounts, the Operating Accounts, the Loss
Proceeds Account and the Working Capital Reserve Accounts, including any
sub-accounts within such accounts; and
2.1.6 the proceeds of all of the foregoing (all of the
collateral described in clauses 2.1.1 through 2.1.6, but excluding the property
described in Section 2.5, being herein
5
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collectively referred to as the "Collateral"), including without limitation, (a)
all rights of Borrower to receive moneys due and to become due under or pursuant
to the Collateral; (b) all rights of Borrower to receive the return of any
premiums for, or proceeds of, any insurance, indemnity, warranty or guaranty
with respect to the Collateral or to receive any condemnation proceeds; (c) all
claims of Borrower for damages arising out of, or for breach of or default
under, the Assigned Agreements or any other Collateral; (d) all rights of
Borrower to terminate, amend, supplement, modify or waive performance under the
Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder; and (e) to the extent not included
in the foregoing, all proceeds receivable or received when any and all of the
foregoing Collateral is sold, collected, exchanged or otherwise disposed of,
whether voluntarily or involuntarily.
2.2 In order to effectuate the foregoing, Borrower has heretofore
delivered, or concurrently with the delivery hereof, is delivering to
Administrative Agent an executed counterpart or certified copy of each of the
Assigned Agreements. Borrower will likewise deliver to Administrative Agent an
executed counterpart of each future lease, construction agreement, operation
agreement and other agreement relating to the Project or any part thereof, and
amendments and supplements to the foregoing, included in the Collateral, as they
are entered into by Borrower promptly upon the execution thereof.
Notwithstanding anything to the contrary contained herein, no such future lease,
construction agreement, operation agreement or other material agreement relating
to a Project or any part thereof may be entered into by Borrower except as
permitted under the Credit Agreement.
2.3 Notwithstanding anything to the contrary contained herein,
Borrower shall remain liable under each of the Assigned Agreements to perform
all of the obligations undertaken by it thereunder, all in accordance with and
pursuant to the terms and provisions thereof, and Administrative Agent shall
have no obligation or liability under any of such Assigned Agreements by reason
of or arising out of this Agreement, nor shall Administrative Agent be required
or obligated in any manner to perform or fulfill any obligations of Borrower
thereunder or to make any payment or inquiry as to the nature or sufficiency of
any payment received by it, or present or file any claim or take any action to
collect or enforce the payment of any amounts which may have been assigned to it
or to which it may be entitled at any time.
2.4 If any default by Borrower under any of the Assigned
Agreements shall occur and be continuing, then Administrative Agent shall, at
its option and after the expiration of the applicable cure periods under Section
8.1.7 of the Credit Agreement, be permitted (but shall not be obligated) to
remedy any such default by giving written notice of such intent to Borrower and
to the parties to the Assigned Agreement or Assigned Agreements for which
Administrative Agent intends to remedy the default. After giving such notice of
its intent to cure such default and upon the commencement thereof,
Administrative Agent will proceed diligently to cure such default. Any cure by
Administrative Agent of Borrower's default under any of the Assigned Agreements
shall not be construed as an assumption by Administrative Agent or any of the
Banks of any obligations, covenants or agreements of Borrower under such
Assigned Agreement, and neither Administrative Agent nor any of the Banks shall
be liable to Borrower or any other Person as a result of any actions undertaken
by Administrative Agent in curing or attempting to cure any such default, except
as set forth in Section 12.13 of the Credit Agreement. This
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Agreement shall not be deemed to release or to affect in any way the obligations
of Borrower under the Assigned Agreements.
2.5 Notwithstanding anything to the contrary herein contained, the
Collateral described in Section 2.1 shall not include, and the Lien granted
hereunder shall not extend to, any such Collateral relating to the Project
described on Appendix G-1S to the Credit Agreement and that West Phoenix
Project.
3 OBLIGATIONS SECURED. Without limiting the generality of the foregoing,
this Agreement and all of the Collateral secure the payment and performance when
due of all Obligations (as defined in the Credit Agreement) of Borrower to the
Administrative Agent and the Banks (the "Obligations").
4 REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants as of the date hereof as follows:
4.1 Borrower has not assigned any of its rights under the Assigned
Agreements except as provided in the Credit Documents.
4.2 Borrower has not executed and is not aware of any effective
financing statement, security agreement or other instrument similar in effect
covering all or any part of the Collateral, except such as may have been filed
pursuant to this Agreement and the other Credit Documents or pursuant to the
documents evidencing Permitted Liens.
4.3 Except as permitted by the Credit Agreement, Borrower is
lawfully possessed of ownership of the Collateral and has full right, title and
interest in and to all rights purported to be granted to it under the Assigned
Agreements, not subject to any mortgages, liens, charges, or encumbrances except
Permitted Liens. Borrower has full power and lawful authority to grant and
assign the Collateral hereunder.
5 COVENANTS OF BORROWER. Borrower covenants as follows:
5.1 Any action or proceeding to enforce this Agreement or any
Assigned Agreement may be taken by Administrative Agent either in Borrower's
name or in Administrative Agent's name, as Administrative Agent may deem
necessary.
5.2 Borrower will, so long as any Obligations shall be
outstanding, warrant and defend its title to the Collateral and the interest of
Administrative Agent in the Collateral against any claim or demand of any
persons (other than Permitted Liens) which could reasonably be expected to
materially adversely affect Borrower's title to, or Administrative Agent's right
or interest in, such Collateral.
5.3 Borrower will at all times keep accurate and complete records
of the Collateral. Borrower shall permit representatives of Administrative Agent
upon reasonable prior notice, and in accordance with Section 5.6 of the Credit
Agreement, at any time during normal business hours of Borrower to inspect and
make abstracts from Borrower's books and records pertaining to the Collateral.
Upon the occurrence and during the continuation of any Event of
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Default, at Administrative Agent's request, Borrower shall promptly deliver
copies of any and all such records to Administrative Agent.
5.4 Unless waived in writing by Administrative Agent, Borrower
shall give Administrative Agent at least 45 days' notice before it changes the
location of its principal place of business and chief executive office and shall
at the expense of Borrower execute and deliver such instruments and documents as
may reasonably be required by Administrative Agent to maintain a prior perfected
security interest in the Collateral.
6 EVENTS OF DEFAULT. The occurrence of an Event of Default under the
Credit Agreement, whatever the reason therefor and whether it shall be voluntary
or involuntary or be effected by operation of law, or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall constitute an event of default
hereunder (an "Event of Default").
7 REMEDIES UPON EVENT OF DEFAULT.
7.1 If any Event of Default has occurred and is continuing,
Administrative Agent may (1) declare any amounts payable by Borrower under the
Credit Agreement to be due and payable immediately and thereupon the same shall
become immediately due and payable (provided that if such Event of Default
occurs under Section 8.1.4 of the Credit Agreement with respect to Borrower, all
such amounts shall become automatically due and payable); (2) proceed to protect
and enforce the rights vested in it by this Agreement, including but not limited
to, the right to cause all revenues pledged hereby as security and all other
moneys pledged hereunder to be paid directly to it, and to enforce its rights
hereunder to such payments and all other rights hereunder by such appropriate
judicial proceedings as it shall deem most effective to protect and enforce any
of such rights, either at law or in equity or otherwise, whether for specific
enforcement of any covenant or agreement contained in any of the Assigned
Agreements, or in aid of the exercise of any power therein or herein granted, or
for any foreclosure hereunder and sale under a judgment or decree in any
judicial proceeding, or to enforce any other legal or equitable right vested in
it by this Agreement or by law; (3) cause any action at law or suit in equity or
other proceeding to be instituted and prosecuted to collect or enforce any
Obligations or rights hereunder or included in the Collateral, or to foreclose
or enforce any other agreement or other instrument by or under or pursuant to
which such Obligations are issued or secured, subject in each case to the
provisions and requirements thereof; (4) sell or otherwise dispose of any or all
of the Collateral or cause the Collateral to be sold or otherwise disposed of in
one or more sales or transactions, at such prices and in such manner as
Administrative Agent may deem commercially reasonable, and for cash or on credit
or for future delivery, without assumption of any credit risk at any broker's
board or at public or private sale, without demand of performance or notice of
intention to sell or of time or place of sale (except such notice as is required
by applicable statute and cannot be waived), it being agreed that Administrative
Agent may be a purchaser on behalf of the Banks or on its own behalf at any such
sale and that Administrative Agent, any Bank, or any other Person who may be a
bona fide purchaser for value and without notice of any claims of any or all of
the Collateral so sold shall thereafter hold the same absolutely free from any
claim or right of whatsoever kind, including any equity of redemption, of
Borrower, any such demand, notice or right and equity being hereby expressly
waived and
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released to the extent permitted by law; (5) incur reasonable expenses,
including reasonable attorneys' fees, reasonable consultants' fees, and other
costs appropriate to the exercise of any right or power under this Agreement;
(6) perform any obligation of Borrower hereunder or under any other Credit
Document, and make payments, purchase, contest or compromise any encumbrance,
charge or lien, and pay taxes and expenses without, however, any obligation to
do so; (7) in connection with any acceleration and foreclosure, take possession
of the Collateral and render it usable and repair and renovate the same without,
however, any obligation to do so, and enter upon any Site or any other location
where the same may be located for that purpose, control, manage, operate, rent
and lease the Collateral, either separately or in conjunction with any Project,
collect all rents and income from the Collateral and apply the same to reimburse
the Banks for any cost or expenses incurred hereunder or under any of the Credit
Documents and to the payment or performance of Borrower's obligations hereunder
or under any of the Credit Documents, and apply the balance to the Loans of
Borrower as provided for in the Credit Agreement and any remaining excess
balance to whomsoever is legally entitled thereto; (8) secure the appointment of
a receiver of any Project or any part thereof and/or the Collateral or any part
thereof; or (9) exercise any other or additional rights or remedies granted to a
secured party under the UCC. If pursuant to applicable law prior notice of any
such action is required to be given to Borrower, Borrower hereby acknowledges
that the minimum time required by such applicable law, or if no minimum time is
specified, 10 Banking Days, shall be deemed a reasonable notice period.
7.2 All reasonable costs and expenses (including reasonable
attorneys' fees and expenses) incurred by Administrative Agent in connection
with any such suit or proceeding or in connection with the performance by
Administrative Agent of any of Borrower's agreements contained in any of the
Assigned Agreements or any exercise of its rights or remedies hereunder,
pursuant to the terms of this Agreement, together with interest thereon (to the
extent permitted by law) computed at a rate per annum equal to the Default Rate
from the date on which such costs or expenses are incurred to the date of
payment thereof, shall constitute additional indebtedness secured by this
Agreement and shall be paid by Borrower to Administrative Agent on behalf of the
Banks on demand.
8 REMEDIES CUMULATIVE; DELAY NOT WAIVER.
8.1 No right, power or remedy herein conferred upon or reserved to
Administrative Agent is intended to be exclusive of any other right, power or
remedy and every such right, power and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right, power and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder or otherwise shall not
prevent the concurrent assertion or employment of any other appropriate right or
remedy. Resort to any or all security now or hereafter held by Administrative
Agent may be taken concurrently or successively and in one or several
consolidated or independent judicial actions or lawfully taken nonjudicial
proceedings, or both.
8.2 No delay or omission of Administrative Agent to exercise any
right or power accruing upon the occurrence and during the continuance of any
Event of Default as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such
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Event of Default or an acquiescence therein; and every power and remedy given by
this Agreement may be exercised from time to time, and as often as shall be
deemed expedient, by Administrative Agent.
9 APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuation of an Event of Default, the proceeds of any sale of or other
realization upon, all or any part of the Collateral shall be applied: first, to
all fees, costs and expenses incurred by and due and owing to Administrative
Agent and the Banks under the Credit Agreement, the other Credit Documents or
the Collateral Documents; second, to accrued and unpaid interest on the
Obligations (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts); third, to the principal
amounts of the Obligations outstanding; fourth, to any other Obligations of
Borrower owing to Administrative Agent or the Banks; and fifth, to, or as
directed by, Borrower.
10 ATTORNEY-IN-FACT. Borrower hereby constitutes and appoints
Administrative Agent, acting for and on behalf of itself and the Banks and each
successor or assign of Administrative Agent and the Banks, the true and lawful
attorney-in-fact of Borrower, with full power and authority in the place and
stead of Borrower and in the name of Borrower, Administrative Agent or otherwise
to enforce all rights, interests and remedies of Borrower with respect to the
Collateral, including, without limitation, the right:
10.1 to ask, require, demand, receive and give acquittance for any
and all moneys and claims for moneys due and to become due under or arising out
of the Assigned Agreements or any of the other Collateral, including without
limitation, any insurance policies with respect to any Project;
10.2 to elect remedies thereunder and to endorse any checks or
other instruments or orders in connection therewith;
10.3 to file any claims or take any action or institute any
proceedings in connection therewith which Administrative Agent may reasonably
deem to be necessary or advisable;
10.4 to pay, settle or compromise all bills and claims which may
be or become liens or security interests against any or all of the Collateral,
or any part thereof, unless a bond or other security satisfactory to
Administrative Agent has been provided; and
10.5 upon foreclosure and to the extent provided in the Consents,
to do any and every act which Borrower may do on its behalf with respect to the
Collateral or any part thereof and to exercise any or all of Borrower's rights
and remedies under any or all of the Assigned Agreements;
provided, however, that Administrative Agent shall not exercise any such rights
except upon the occurrence and continuation of an Event of Default. This power
of attorney is a power coupled with an interest and shall be irrevocable.
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11 ADMINISTRATIVE AGENT MAY PERFORM. Upon the occurrence and during the
continuance of an Event of Default, if Borrower fails to perform any agreement
contained herein, Administrative Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of Administrative Agent incurred
in connection therewith shall be part of the Obligations.
12 PERFECTION; FURTHER ASSURANCES.
12.1 Borrower agrees that from time to time, at the expense of
Borrower, Borrower shall promptly execute and deliver all instruments and
documents, and take all action, that may be reasonably necessary, or that
Administrative Agent may reasonably request, in order to perfect and protect the
assignment and security interest granted or intended to be granted hereby or to
enable Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, Borrower shall (i) if any Collateral shall be evidenced by a
promissory note or other instrument in excess of $5,000, deliver and pledge to
Administrative Agent for the benefit of the Banks such note duly endorsed
without recourse, and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Administrative Agent; and
(ii) execute and deliver to Administrative Agent such financing or continuation
statements, or amendments thereto, and such other instruments, endorsements or
notices, as may be reasonably necessary or desirable or as Administrative Agent
may reasonably request, in order to perfect and preserve the assignments and
security interests granted or purported to be granted hereby.
12.2 Borrower hereby authorizes Administrative Agent to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of Borrower where
permitted by law.
12.3 Borrower shall pay all filing, registration and recording
fees and all refiling, re-registration and re-recording fees, and all reasonable
expenses incident to the execution and acknowledgment of this Agreement, any
assurance, and all federal, state, county and municipal stamp taxes and other
taxes, duties, imports, assessments and charges arising out of or in connection
with the execution and delivery of this Agreement, any agreement supplemental
hereto, any financing statements, and any instruments of further assurance.
12.4 Borrower shall, promptly upon request, provide to
Administrative Agent all information and evidence it may reasonably request
concerning the Collateral to enable Administrative Agent to enforce the
provisions of this Agreement.
13 PLACE OF BUSINESS; LOCATION OF RECORDS. Unless Administrative Agent is
otherwise notified under Section 5.4, the place of business and chief executive
office of Borrower is, and all records of Borrower concerning the Collateral are
and will be, located at the address set forth in Section 12.1 of the Credit
Agreement.
14 CONTINUING ASSIGNMENT AND SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing assignment of, and security interest in, the
Collateral and shall (a) remain in full force and effect until payment in full
of the Obligations, (b) be binding
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upon Borrower, its successors and assigns; provided, however, that the
obligations of Borrower, its successors and assigns hereunder may not be
assigned without the prior written consent of Administrative Agent; and (c)
inure, together with the rights and remedies of Administrative Agent, to the
benefit of Administrative Agent, the Banks and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing but
subject to the terms of the Credit Agreement, Administrative Agent or any of the
Banks may assign or otherwise transfer all or any part of or interest in the
Notes and the other Credit Documents or other evidence of indebtedness held by
them to any other Person to the extent permitted by and in accordance with the
Credit Agreement, and such other Person shall thereupon become vested with all
or an appropriate part of the benefits in respect thereof granted to the Banks
herein or otherwise. The release of the security interest in any or all of the
Collateral, the taking or acceptance of additional security, or the resort by
Administrative Agent to any security it may have in any order it may deem
appropriate, shall not affect the liability of any person on the indebtedness
secured hereby. If this Agreement shall be terminated or revoked by operation of
law, Borrower will indemnify and save Administrative Agent and the Banks
harmless from any loss which may be suffered or incurred by Administrative Agent
and the Banks in acting hereunder prior to the receipt by Administrative Agent,
its successors, transferees, or assigns of notice of such termination or
revocation.
15 TERMINATION OF SECURITY INTEREST. Upon the indefeasible payment in
full of the Obligations, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to Borrower. Upon any such
termination, Administrative Agent will, at Borrower's expense, execute and,
subject to Section 21 hereof, deliver to Borrower such documents (including,
without limitation, UCC-3 termination statements) as Borrower shall reasonably
request to evidence such termination.
16 ATTORNEYS' FEES. In the event any legal action or proceeding
(including, without limitation, any of the remedies provided for herein or at
law) is commenced to enforce or interpret this Agreement or any provision
thereof, unless Borrower is the prevailing party, Borrower shall indemnify each
of Administrative Agent and the Banks for their reasonable attorneys' fees and
other costs and expenses incurred therein, and if a judgment or award is entered
in any such action or proceeding, such reasonable attorneys' fees and other
costs and expenses may be made a part of such judgment or award.
17 LIABILITY. Recourse against the Borrower, Partners, Shareholders and
their respective Affiliates, stockholders, officers, directors and employees
under this Agreement shall be limited to the extent provided in Article 9 of the
Credit Agreement.
18 AMENDMENTS; WAIVERS; CONSENTS. No amendment, modification, termination
or waiver of any provision of this Agreement, or consent to any departure by
Borrower therefrom, shall in any event be effective without the written
concurrence of Administrative Agent and the Borrower.
19 NOTICES. All notices required or permitted under the terms and
provisions hereof shall be in writing and any such notice shall be effective if
given in accordance with the
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provisions of Section 12.1 of the Credit Agreement. Notices to Borrower may be
given at the address of Borrower set forth in such Section 12.1.
20 GOVERNING LAW. This Agreement, including all matters of construction,
validity, performance and the creation, validity, enforcement or priority of the
lien of, and security interests created by, this Agreement in or upon the
Collateral shall be governed by the laws of the state of New York, without
reference to conflicts of law (other than Section 5-1401 of the New York General
Obligations Law), except as required by mandatory provisions of law and except
to the extent that the validity or perfection of the lien and security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the state of New York.
Notwithstanding the foregoing, the validity, perfection and priority of the lien
and security interest created hereunder in respect to the Operating Accounts is
governed by the laws of the State of California.
21 REINSTATEMENT. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by
Administrative Agent in respect of the Obligations is rescinded or must
otherwise be restored or returned by Administrative Agent upon the insolvency,
bankruptcy, reorganization, liquidation of Borrower or any general partner of
Borrower or upon the dissolution of, or appointment of any intervenor or
conservator of, or trustee or similar official for, Borrower or any general
partner of Borrower or any substantial part of Borrower's or any of its general
partners' assets, or otherwise, all as though such payments had not been made.
22 SEVERABILITY. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
23 SURVIVAL OF PROVISIONS. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement and the
Credit Agreement and the making of the Loans and extensions of credit
thereunder. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements, representations and warranties of Borrower set forth
herein shall terminate only upon payment of the Obligations, and the termination
of all Commitments and other obligations of the Banks under the Credit
Documents.
24 HEADINGS DESCRIPTIVE. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
25 ENTIRE AGREEMENT. This Agreement, together with any other agreement
executed in connection herewith, is intended by the parties as a final
expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
26 TIME. Time is of the essence of this Agreement.
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27 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same agreement.
28 WAIVER OF JURY TRIAL. BORROWER AND ADMINISTRATIVE AGENT HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP AMONG BORROWER AND
ADMINISTRATIVE AGENT THAT IS BEING ESTABLISHED. BORROWER AND ADMINISTRATIVE
AGENT ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. BORROWER AND ADMINISTRATIVE AGENT FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the undersigned has caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
CALPINE CONSTRUCTION FINANCE
COMPANY, L.P.,
a Delaware limited partnership
By: Calpine CCFC GP, Inc.,
a Delaware corporation,
its General Partner
By:
------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:
---------------------------------
Name:
Title:
<PAGE> 334
EXHIBIT D-5
to Credit Agreement
FORM
OF
LIEN SUBORDINATION AGREEMENT
between
________________________________,
and
THE BANK OF NOVA SCOTIA,
as Administrative Agent
<PAGE> 335
LIEN SUBORDINATION AGREEMENT
This LIEN SUBORDINATION AGREEMENT (this "Agreement") dated as of
____________, _____ is made by and among ___________________, ("Subordinated
Creditor"), THE BANK OF NOVA SCOTIA, as Administrative Agent ("Administrative
Agent") under the Credit Agreement described below, and CALPINE CONSTRUCTION
FINANCE COMPANY, L.P., a Delaware limited partnership ("Pledgor").
A. Administrative Agent and the Banks party thereto (such
parties, acting through the Administrative Agent, being collectively referred to
herein as the "Senior Lenders") and Borrower have entered into that certain
Credit Agreement (the "Credit Agreement"), dated as of October 20, 1999 among
Borrower the financial institutions listed on Exhibit H thereto, (the "Banks"),
Credit Suisse First Boston, as Lead Arranger, Syndication Agent and Bookrunner
and The Bank of Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent.
Capitalized terms used and not defined herein shall be given the meanings
ascribed to them in the Credit Agreement.
B. In order to induce the Senior Lenders to enter into the Credit
Agreement, Pledgor has entered into the Security Agreement dated as of October
20, 1999 (the "Security Agreement") pursuant to which Pledgor granted a security
interest to the Senior Lenders in the Collateral (as defined in the Security
Agreement). The security interest of the Senior Lenders in the Collateral
pursuant to the terms of the Security Agreement shall be referred to herein as
the "Senior Liens."
C. Subordinated Creditor desires to place a lien, subordinated
according to the terms of this Agreement, on a portion of the Collateral (such
portion of the Collateral, the "Subject Collateral") pursuant to
___________________, collectively referred to herein as the "Subordinated
Documents"). The security interest of Subordinated Creditor in the Subject
Collateral arising in favor of Subordinated Creditor pursuant to the provisions
of the Subordinated Documents shall be referred to herein as the "Junior Liens."
D. The Senior Lenders have agreed that Pledgor may subject the
Subject Collateral to the Junior Liens only if Subordinated Creditor executes
this Subordination Agreement and subordinates, to the extent and in the manner
hereinafter set forth, the obligations of Pledgor to Subordinated Creditor under
the Subordinated Documents (collectively referred to herein as the "Subordinated
Debt") to all indebtedness or other obligations of Pledgor to the Senior
Lenders, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising (herein called the "Senior Lender Debt") to the
extent set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and as an
inducement to the Senior Lenders to grant financial accommodations to Pledgor,
and in consideration of the granting thereof, the parties hereby agree as
follows:
1. Subordinated Creditor hereby consents to and acknowledges the
grant to the Senior Lenders of the Senior Liens in the Subject Collateral.
<PAGE> 336
2. Until all Senior Lender Debt then due shall have been paid or
performed in full:
(a) Subordinated Creditor shall not demand, sue for, or
accept from Pledgor or any other person any such payment or collateral
in respect of the Subordinated Debt other than amounts distributed to
Pledgor in accordance with the Credit Agreement, nor, except as provided
in this Section 2(a) or in Section 4 below, take any other action to
enforce or collect upon any such payment or to enforce its rights in
respect of the Subordinated Debt, nor cancel, set off or otherwise
discharge any part of the Subordinated Debt; provided, however, that
nothing herein shall limit the right or ability of Subordinated Creditor
(i) to receive payments from Pledgor in respect of the Subordinated Debt
as provided herein so long as no Event of Default or, to the extent
payments are to be made from the Construction Account or Loss Proceeds
Account, Non-Fundamental Project Default with respect to the _______
Project under the Credit Agreement has occurred and is continuing, or
(ii) to accelerate the maturity of the Subordinated Debt at any time
after the Loans under the Credit Agreement have been accelerated; and
provided further that in the event that the Senior Lenders rescind the
acceleration of the Loans under the Credit Agreement and provide written
notice to Subordinated Creditor thereof, or the Subordinated Creditor
otherwise becomes aware of such rescission, Subordinated Creditor shall
rescind the acceleration of the Subordinated Debt.
(b) Neither Pledgor nor Subordinated Creditor shall take
any action prejudicial to or inconsistent with the Senior Lenders'
priority position over Subordinated Creditor created by this Agreement.
Subordinated Creditor will not take or cause to be taken, any action,
the purpose or effect of which is or could be to give Subordinated
Creditor any preference or priority over Senior Lenders, with respect to
the Subject Collateral or any part thereof. Subordinated Creditor shall
not take any action to enforce its rights with respect to the Subject
Collateral and shall have no right to direct the Senior Lenders to
exercise any right, remedy or power with respect to the Subject
Collateral. Subordinated Creditor will not institute any suit or assert
in any suit, bankruptcy, insolvency or other proceeding any claim
against the Senior Lenders seeking damages from any of them or other
relief, by way of specific performance, injunction or otherwise, with
respect to any action with respect to the Collateral taken or omitted by
the Senior Lenders in accordance with this Agreement. Subordinated
Creditor will execute and deliver to the Administrative Agent any other
instrument reasonably requested by Administrative Agent to further
assure the subordinated status, in accordance with this Agreement, of
the lien of Subordinated Creditor with respect to the Subject
Collateral; and
(c) The Junior Liens are hereby made subordinate, junior
and inferior and postponed in priority, operation and effect to the
priority, operation and effect of the Senior Liens, notwithstanding the
perfection, order of perfection or failure by Senior Lenders to perfect
any such Senior Liens and other liens or the filing or recording, order
of filing or recording of, or failure to file or record any instrument
or other document in any filing or recording office in any jurisdiction.
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3. Neither any change in the manner, place or terms of payment
of, nor any change or extension of the time of payment of, nor any renewal or
alteration of the interest on, any of the obligations secured by the Senior
Liens, nor any amendment or supplement to the Security Agreement or the other
Credit Documents nor any exercising or refraining from exercising of any rights
under the Security Agreement or the other Credit Documents, including, without
limitation, the right to waive any default, shall require notice to or consent
of Subordinated Creditor, and none of the foregoing shall in any manner
whatsoever impair the priority of the Senior Liens.
4. Subordinated Creditor will not commence or join with any other
creditor or creditors of Pledgor in commencing any bankruptcy, reorganization or
insolvency proceedings against Pledgor. At any general meeting of creditors of
Pledgor or in the event of any proceeding, voluntary or involuntary, for the
distribution, division or application of all or part of the assets of Pledgor or
the proceeds thereof, whether such proceeding be for the liquidation,
dissolution or winding up of Pledgor or its business, receivership, insolvency
or bankruptcy proceeding, an assignment for the benefit of creditors or
proceeding by or against Pledgor for position or extension or otherwise, if all
Senior Lender Debt has not been paid in full at the time, Administrative Agent
is hereby irrevocably authorized at any such meeting or in any such proceeding:
(a) To enforce claims comprising Subordinated Debt in the
name of Subordinated Creditor, by proof of debt, proof of claim, suit or
otherwise;
(b) To collect any assets of Pledgor distributed, divided
or applied by way of dividend or payment, or such securities issued, on
account of Subordinated Debt and apply the same, or the proceeds of any
realization upon the same that Administrative Agent in its discretion
elects to effect, to the Senior Lender Debt until all Senior Lender Debt
shall have been paid in full (Administrative Agent hereby agreeing to
render any surplus to Subordinated Creditor); provided, however, that
Subordinated Creditor shall be entitled to receive any securities of
Pledgor (or of any other company, trust, partnership, corporation or
other entity provided for by any plan of reorganization or
readjustment), the payment of which is junior or otherwise subordinate,
to the extent provided herein with respect to the Subordinated Debt, to
the payment of all Senior Lender Debt then outstanding and to the
payment of all securities issued in exchange for Senior Lender Debt then
outstanding; and
(c) To take generally any action in connection with any
such meeting or proceeding which Subordinated Creditor might otherwise
take; provided, however, that Subordinated Creditor shall retain, to the
exclusion of Senior Lenders and Administrative Agent, the right to vote
claims comprising or arising out of the Subordinated Debt in any such
proceeding, including the right to vote to accept or reject any plan of
partial or complete liquidation, reorganization, readjustment,
arrangement, composition or extension.
After the commencement of any such bankruptcy, insolvency or
reorganization proceeding, Subordinated Creditor may inquire of Administrative
Agent in writing whether Administrative Agent intends to exercise the foregoing
rights with respect to the Subordinated
3
<PAGE> 338
Debt. Should Administrative Agent fail, at least 20 days before the deadline
therefor, either to file a proof of claim with respect to the Subordinated Debt
and to furnish a copy thereof to Subordinated Creditor, or to inform
Subordinated Creditor in writing that Administrative Agent intends to exercise
its rights to assert the Subordinated Debt in the manner hereinabove provided,
Subordinated Creditor may, but shall not be required to, proceed to file a proof
of claim with respect to the Subordinated Debt and take such further steps with
respect thereto, not inconsistent with this Agreement, as Subordinated Creditor
may deem proper.
Subject to and from and after the payment in full of all Senior
Lender Debt, Subordinated Creditor shall be subrogated to the rights of the
Senior Lenders to receive payments or distributions of cash, property or
securities of Pledgor applicable to the Senior Lender Debt until all amounts
owing on the Subordinated Debt shall be paid in full. For purposes of such
subrogation, no payments or distribution to the Senior Lenders to which
Subordinated Creditor would have been entitled but for the provisions of this
Agreement, and no payments paid over by Subordinated Creditor to Senior Lenders
pursuant to this Agreement, shall, as among Pledgor, its creditors other than
Senior Lenders, and Subordinated Creditor, be deemed to be a payment or
distribution on account of the Subordinated Debt, it being understood that the
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of Subordinated Creditor and the Senior Lenders.
Nothing contained in this Agreement is intended to or shall impair, as between
Pledgor, its creditors other than the Senior Lenders and Subordinated Creditor,
the obligation of Pledgor, which is absolute and unconditional, to pay to
Subordinated Creditor the principal of and the premium, if any, and the interest
on the Subordinated Debt as and when the same shall become due and payable in
accordance with its terms, or to affect the relative rights of Subordinated
Creditor and creditors of Pledgor other than the Senior Lenders.
5. Should any collateral with respect to the Subordinated Debt be
received by Subordinated Creditor in violation of this Agreement, such payment
or collateral shall be delivered forthwith to Administrative Agent by the
recipient for application to Senior Lender Debt, in the form received.
Administrative Agent is irrevocably authorized to supply any required
endorsement or assignment which may have been omitted. Until so delivered, any
such payment or collateral shall be held by Subordinated Creditor in trust for
the Senior Lenders and shall not be commingled with other funds or property of
Subordinated Creditor.
6. Subordinated Creditor is the lawful owner of the Subordinated
Debt and no part thereof has been assigned to or subordinated or subjected to
any other security interest in favor of anyone other than the Senior Lenders.
Subordinated Creditor may not assign all or any portion of the Subordinated Debt
without the prior written consent of the Senior Lenders, which consent shall not
be unreasonably withheld or delayed, and only upon the execution and delivery to
the Senior Lenders of an agreement by any such assignee to be bound by the terms
of this Agreement (including provisions relating to assignment), in form and
substance satisfactory to the Senior Lenders.
7. Upon the occurrence of an Event of Default under the Security
Agreement the Administrative Agent shall be permitted and hereby is authorized
to take any and all actions and to exercise any and all rights, remedies and
options which the Senior Lenders may have
4
<PAGE> 339
under the Security Agreement and at law or in equity, including to (i) cause
Pledgor's obligations to be performed and (ii) sell or otherwise realize upon
the Subject Collateral.
8. Administrative Agent is hereby authorized to demand specific
performance of this Agreement, whether or not Pledgor shall have complied with
the provisions hereof applicable to it, at any time when Subordinated Creditor
shall have failed to comply with any provision hereof applicable to it.
Subordinated Creditor hereby irrevocably waives any defense based on the
adequacy of a remedy at law which might be asserted as a bar to the remedy of
specific performance hereof in any action brought therefor by Administrative
Agent. Subordinated Creditor further waives presentment, notice and protest in
connection with all negotiable instruments evidencing Senior Lender Debt or
Subordinated Debt to which Subordinated Creditor may be a party, notice of the
acceptance of this Agreement by Administrative Agent, notice of any loan made,
extension granted or other action taken in reliance hereon, and all demands and
notices of every kind in connection with this Agreement, Senior Lender Debt or
time of payment of Senior Lender Debt or Subordinated Debt. Subordinated
Creditor hereby assents to any renewal, extension or postponement of the time of
payment of Senior Lender Debt or any other indulgence with respect thereto, to
any increase in the amount of the Senior Lender Debt, to any substitution,
exchange or release of collateral therefor and to the addition or release of any
person primarily or secondarily liable thereon and assents to the provisions of
any instrument, security or other writing evidencing Senior Lender Debt.
9. Pledgor and Subordinated Creditor shall execute and deliver to
Administrative Agent such further instruments and shall take such further action
as Administrative Agent may at any time or times reasonably request in order to
carry out the provisions and intent of this Agreement.
10. The rights granted to the Senior Lenders hereunder are solely
for their protection and nothing herein contained shall impose on Administrative
Agent or the Senior Lenders any duties with respect to any property of Pledgor
or Subordinated Creditor received hereunder. Neither Administrative Agent nor
the Senior Lenders shall have any duty to preserve rights against prior parties
in any property of any kind received hereunder.
11. Notwithstanding any provision to the contrary herein, the
parties acknowledge and agree that all of the covenants, representations,
waivers and other provisions by or relating to Subordinated Creditor hereunder
shall apply and be effective to and in respect of the Subordinated Debt only,
and shall not apply or be effective to or in respect of any other obligations,
due or to become due, now existing or hereafter arising, by Pledgor to
Subordinated Creditor.
12. This Agreement may be executed in any number of counterparts.
but all such counterparts shall together constitute but one agreement. In making
proof of this Agreement, it shall not be necessary to produce or account for
more than one counterpart signed by each of the parties hereto.
13. This Agreement shall be binding upon Pledgor, Subordinated
Creditor, and their respective executors, administrators, other legal
representatives, successors and assigns,
5
<PAGE> 340
and shall inure to the benefit of the Senior Lenders, their respective
successors and assigns and shall be governed by the laws of the State of New
York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 341
IN WITNESS WHEREOF, the parties hereto have caused this
Subordination Agreement to be duly executed as of the date first above written.
[_____________________],
a [__________] corporation,
as Subordinated Creditor
By:
----------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:
----------------------------------------
Name:
Title:
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership,
as Pledgor
By: CALPINE CCFC GP, INC.
a Delaware corporation,
its General Partner
By:
--------------------------------
Name:
Title:
7
<PAGE> 342
EXHIBIT D-7
to Credit Agreement
FORM OF SUBORDINATION AGREEMENT
between
------------------------------
and
THE BANK OF NOVA SCOTIA,
as Administrative Agent
<PAGE> 343
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Definitions......................................................................1
2. Certain Subordination Terms......................................................2
3. Credit Agreement and Credit Documents............................................4
4. Time of Filing...................................................................4
5. Wrongful Collections.............................................................5
6. Ownership of Subordinated Debt; Amendment of Subordinated Debt Documents.........5
7. Waivers..........................................................................5
8. Subrogation; No Impairment of Borrower's Obligations.............................5
9. Reinstatement....................................................................6
10. Bankruptcy.......................................................................6
11. Further Assurances...............................................................6
12. Successors and Assigns...........................................................6
13. Counterparts.....................................................................6
14. Governing Law....................................................................7
</TABLE>
<PAGE> 344
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT ("Agreement"), dated as of
________________, is made by and between ___________________________, a
__________________ ("Junior Claimant"), and The Bank of Nova Scotia, as
Administrative Agent (the "Administrative Agent") for the Senior Claimants (as
defined below).
PREFACE
A. Calpine Construction Finance Company, L.P., a Delaware limited
partnership ("Borrower"), has entered into that certain Credit Agreement
("Credit Agreement"), dated as of October 20, 1999, by and among Borrower, The
Bank of Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent, the
financial institutions listed on Exhibit H thereto (the "Banks" and, together
with Administrative Agent, Lead Arrangers, Syndication Agent, Bookrunner, LC
Bank, and all financial institutions parties to the Credit Agreement, the
"Senior Claimants") and Credit Suisse First Boston, as Lead Arranger,
Syndication Agent and Bookrunner, pursuant to which the Senior Claimants will,
subject to the terms and conditions contained therein and in the other Credit
Documents, provide credit facilities to Borrower in connection with Borrower's
development, construction and ownership of the Projects.
B. Borrower and Junior Claimant have and/or will enter into one
or more promissory notes and/or other documents and instruments (collectively,
the "Subordinated Agreement") pursuant to which, subject to the terms and
conditions contained therein and herein, Junior Claimant has and/or will lend to
Borrower funds in a principal amount up to the amount of Contributions required
or permitted to be made by Borrower under the Credit Agreement (the "Junior
Claimant Loan").
C. The Senior Claimants have agreed that Borrower may incur such
indebtedness to Junior Claimant under the Subordinated Agreement only if Junior
Claimant shall join in this Agreement and Junior Claimant shall subordinate, to
the extent and in the manner hereinafter set forth, all claims and rights in
respect of the Subordinated Debt (as defined below) to all Senior Claims (as
defined below) to the extent set forth in this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises and as an
inducement to the Senior Claimants to grant financial accommodations to
Borrower, and in consideration of the granting thereof, the parties hereby agree
as follows:
1. DEFINITIONS. All capitalized terms used herein and not
otherwise defined herein shall have the meaning given in the Credit Agreement as
in effect on the date hereof. As used in this Agreement, the following terms
shall have the following respective meanings:
"Proceeding" means any (a) insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding of or against
<PAGE> 345
Borrower, its property or its creditors as such, (b) proceeding for any
liquidation, dissolution or other winding-up of Borrower, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings, (c)
general assignment for the benefit of creditors of Borrower or (d) other
marshalling of the assets of Borrower.
"Senior Claims" means, subject in each case to Sections 3
and 8 hereof, (a) the principal of, and premium, if any, and interest on, the
Loans under the Credit Agreement (including, without limitation, any interest
accruing thereon at the legal rate after the commencement of any Proceeding and
any additional interest that would have accrued thereon but for the commencement
of such Proceeding); and (b) all other Obligations of Borrower to any Senior
Claimants, whether now existing or hereafter incurred or created, under or with
respect to the Credit Documents or any replacement, supplement to, or
refinancing of the Loans and other Obligations of the Borrower to any Senior
Claimants permitted under Section 3 hereof.
"Subordinated Debt" means all indebtedness owing to Junior
Claimant arising under or in respect of the Subordinated Debt Documents.
"Subordinated Debt Documents" means the Subordinated
Agreement, any promissory note or other instrument relating thereto and any
other documents or instruments directly relating to the foregoing (including any
amendments, replacements or substitutions thereof).
2. CERTAIN SUBORDINATION TERMS. Until all Senior Claims shall
have been paid in full and the Senior Claimants' commitments irrevocably
terminated under the Credit Documents, and notwithstanding anything in the
Subordinated Debt Documents to the contrary:
2.1 Except as permitted under the Credit Agreement
(including Section 3.8(b) thereof), Borrower shall not, directly or indirectly,
make any payment of principal, interest or otherwise on or in respect of the
Subordinated Debt.
2.2 Except for the right to demand and accept payments
permitted under the Credit Agreement or as provided in Section 2.1 or 2.5.2 of
this Agreement, Junior Claimant shall not demand, sue for, or accept from
Borrower or any other Person any such payment or collateral, nor take any other
action to enforce or collect upon any such payment or to enforce its rights to
receive any such payment, in either case in respect of the Subordinated Debt,
provided, however, that nothing herein shall limit the right or ability of
Junior Claimant (i) to receive payments from Borrower in respect of the
Subordinated Debt as provided in Section 2.1 so long as no Event of Default
under the Credit Agreement has occurred and is continuing, or (ii) to accelerate
the maturity of the Subordinated Debt at any time after the Loans under the
Credit Agreement have been accelerated; and provided further that in the event
that the Senior Claimants rescind the acceleration of the Loans and provide
written notice to Junior Claimant thereof, or the Junior Claimant otherwise
becomes aware of such rescission, Junior Claimant shall rescind the acceleration
of the Subordinated Debt.
2
<PAGE> 346
2.3 Neither Borrower nor the Junior Claimant shall take
any action prejudicial to or inconsistent with the Senior Claimants' priority
position over Junior Claimant created by this Agreement, including, without
limitation, any action which will hinder, delay or otherwise prevent the Senior
Claimants from taking any action they deem necessary to enforce rights with
respect to the Senior Claims or the Lien of the Collateral Documents. Junior
Claimant shall not take any action or otherwise act to contest on account of the
Subordinated Debt (i) the validity or priority of any Liens or security
interests granted to, or for the benefit of, the Senior Claimants, (ii) the
relevant rights and duties of the Senior Claimants with respect to the Junior
Claimant on account of any Subordinated Debt as established in this Agreement or
(iii) Senior Claimants' exercise of remedies in accordance with the Credit
Agreement and the other Credit Documents.
2.4 Each document or instrument evidencing Subordinated
Debt shall bear a legend providing that payment of the Subordinated Debt
thereunder has been subordinated to prior payment of the Senior Claims in the
manner and to the extent set forth in this Agreement.
2.5 Without the prior written consent of the
Administrative Agent, acting in its sole discretion, Junior Claimant shall not
commence or join with any other creditor or creditors of Borrower in commencing
any Proceeding against Borrower or any general partner of Borrower, but may join
in any Proceeding after it has commenced. At any general meeting of creditors of
Borrower or any general partner thereof, or in the event of any Proceeding, if
all Senior Claims have not been paid in full at such time, Administrative Agent
on behalf of the Senior Claimants is hereby irrevocably authorized at any such
meeting or in any such Proceeding:
2.5.1 to enforce claims comprising Subordinated
Debt in the name of Junior Claimant, by proof of debt, proof of claim, suit or
otherwise;
2.5.2 to collect any assets of Borrower
distributed, divided or applied by way of dividend or payment as a result of a
Proceeding, or such securities issued, on account of Subordinated Debt as a
result thereof and apply the same, or the proceeds of any realization upon the
same that the Senior Claimants in their discretion elect to effect, to Senior
Claims until all Senior Claims shall have been paid in full (the Senior
Claimants hereby agreeing to render any surplus to Junior Claimant and/or other
subordinated creditors, as their interests appear, or to interplead such surplus
with a court of competent jurisdiction); and
2.5.3 to take generally any action in connection
with any such meeting or proceeding which Junior Claimant might otherwise take
in respect of the Subordinated Debt and claims relating thereto; provided,
however, that Junior Claimant shall retain, to the exclusion of Senior Claimants
and Administrative Agent, the right to vote claims comprising or arising out of
the Subordinated Debt in any Proceeding, including the right to vote to accept
or reject any plan of partial or complete liquidation, reorganization,
readjustment, arrangement, composition or extension.
3
<PAGE> 347
After the commencement of any such Proceeding, Junior
Claimant may inquire in writing of Administrative Agent on behalf of the Senior
Claimants whether the Senior Claimants intend to exercise the foregoing rights
with respect to the Subordinated Debt. Should the Senior Claimants fail, at
least 20 days before the deadline therefor, either to file a proof of claim with
respect to the Subordinated Debt and to furnish a copy thereof to the Junior
Claimant, or to inform such Junior Claimant in writing that the Senior Claimants
intend to exercise their rights to assert the Subordinated Debt in the manner
hereinabove provided, Junior Claimant may, but shall not be required to, proceed
to file a proof of claim with respect to the Subordinated Debt and take such
further steps with respect thereto, not inconsistent with this Agreement, as
Junior Claimant may deem proper.
2.6 Upon the occurrence and during the continuation of an
Event of Default, Junior Creditor may, but shall have no obligation to, upon not
less than 10 days prior written notice to Administrative Agent, purchase all of
the outstanding Loans and other Obligations of Borrower owing to the Senior
Claimants by irrevocably tendering, in immediately available funds, full payment
of the Purchase Price (as defined below) to Senior Claimants:
2.6.1 The Purchase Price shall be equal to the
total amount of Senior Claims at the time of acceleration (assuming such
obligations have been accelerated);
2.6.2 Any such purchase by Junior Claimant shall be
without warranty by, or recourse to, the Senior Claimants, except with respect
to the legal and beneficial ownership by the Senior Claimants of the Obligations
so purchased, free and clear of all Liens and rights of others; and
2.6.3 Concurrently with any such purchase the
Senior Claimants shall forthwith sell, assign, transfer and convey to Junior
Claimant all of their right, title and interest in and to the Credit Documents
and all Liens and other security interests in favor of the Senior Claimants
securing the obligations of Borrower in connection therewith.
3. CREDIT AGREEMENT AND CREDIT DOCUMENTS. Junior Claimant
acknowledges that it has been provided with a copy of the Credit Agreement and
has read and is familiar with the provisions of the Credit Agreement, including
without limitation Article 7 thereof. Junior Claimant hereby consents to the
application of Project Revenues in accordance with the Credit Agreement,
including without limitation Article 7 thereof, notwithstanding anything in the
Subordinated Debt Documents to the contrary.
4. TIME OF FILING. Notwithstanding the time of filing, attachment
or recording of any document or other instrument, it is agreed by Junior
Claimant that any liens arising under or pursuant to the Collateral Documents
(as defined in the Credit Documents) shall be senior to any liens arising in
favor of Junior Claimant as part of or relating to the Subordinated Debt
Documents; provided, however, that nothing herein shall be deemed to permit
Junior Claimant to obtain any such liens.
4
<PAGE> 348
5. WRONGFUL COLLECTIONS. Should any payment on account of, or any
collateral for any part of, the Subordinated Debt be received by Junior Claimant
in violation of this Agreement, such payment or collateral shall be delivered
forthwith to Administrative Agent on behalf of the Senior Claimants by the
recipient for application to Senior Claims, in the form received. Administrative
Agent is irrevocably authorized to supply any required endorsement or assignment
which may have been omitted. Until so delivered, any such payment or collateral
shall be held by the recipient in trust for the Senior Claimants and shall not
be commingled with other funds or property of the recipient.
6. OWNERSHIP OF SUBORDINATED DEBT; AMENDMENT OF SUBORDINATED DEBT
DOCUMENTS.
6.1 Junior Claimant represents and warrants that it is the
lawful owner of the Subordinated Debt and no part thereof has been assigned to
or subordinated or subjected to any other security interest in favor of anyone
other than the Senior Claimants. Junior Claimant agrees that it may not assign
all or any portion of the Subordinated Debt or any of its rights or remedies
under the Subordinated Debt Documents except upon the execution and delivery to
Administrative Agent of an agreement by any such assignee to be bound by the
terms of this Agreement (including provisions relating to assignment), in form
and substance the same as this Agreement, or otherwise as may be reasonably
satisfactory to Administrative Agent.
6.2 Without the prior written consent of Administrative
Agent and the Required Banks, the Subordinated Debt Documents may not be amended
so as to have an adverse effect upon the Senior Claims or Borrower's ability to
pay the Senior Claims at any time.
7. WAIVERS. Administrative Agent and the Senior Claimants are
hereby authorized to demand specific performance of this Agreement, whether or
not Borrower shall have complied with the provisions hereof applicable to it, at
any time when Junior Claimant shall have failed to comply with any provision
hereof applicable to it. Junior Claimant hereby irrevocably waives any defense
based on the adequacy of a remedy at law which might be asserted as a bar to the
remedy of specific performance hereof in any action brought therefor by the
Senior Claimants. Junior Claimant (a) further waives presentment, notice and
protest in connection with all negotiable instruments evidencing Senior Claims
or Subordinated Debt to which Junior Claimant may be a party, notice of the
acceptance of this Agreement by the Senior Claimants, notice of any loan made,
extension granted or other action taken in reliance hereon, and all demands and
notices of every kind in connection with this Agreement, Senior Claims or time
of payment of Senior Claims or Subordinated Debt and (b) hereby assents to any
renewal, extension or postponement of the time of payment of Senior Claims or
any other indulgence with respect thereto, to any increase in the amount of
Senior Claims, to any substitution, exchange or release of collateral therefor
and to the addition or release of any person primarily or secondarily liable
thereon and assents to the provisions of any instrument, security or other
writing evidencing Senior Claims.
8. SUBROGATION; NO IMPAIRMENT OF BORROWER'S OBLIGATIONS. Subject
to and from and after the payment in full of all Senior Claims and the
irrevocable termination of
5
<PAGE> 349
Senior Claimants' commitments under the Credit Documents, Junior Claimant shall
be subrogated to the rights of the Senior Claimants to receive payments or
distributions of cash, property or securities of Borrower applicable to the
Senior Claims until all amounts owing on the Subordinated Debt shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
Senior Claimants to which Junior Claimant would be entitled but for the
provisions of this Agreement, and no payments paid over by Junior Claimant to
Senior Claimants pursuant to this Agreement shall, as among the Borrower, its
creditors other than the Senior Claimants, and Junior Claimant, be deemed to be
a payment or distribution on account of the Subordinated Debt, it being
understood that the provisions of this Agreement are intended solely for the
purpose of defining the relative rights of Junior Claimant and the Senior
Claimants. Nothing contained in this Agreement is intended to or shall impair,
as between Borrower and Junior Claimant, the obligation of Borrower, which is
absolute and unconditional, to pay to Junior Claimant the principal of and the
premium, if any, and the interest on the Subordinated Debt, and all other
amounts payable by Borrower under the Subordinated Debt Documents, as and when
the same shall become due and payable, or to affect the relative rights of
Junior Claimant and creditors of Borrower other than the Senior Claimants.
9. REINSTATEMENT. The obligations of Junior Claimant under this
Agreement shall continue to be effective, or be reinstated, as the case may be,
if at any time any payment in respect of any Senior Claim, or any other payment
to any holder of any Senior Claim in its capacity as such, is rescinded or must
otherwise be restored or returned by the holder of such Senior Claims upon the
occurrence of any Proceeding, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
Borrower or any substantial part of its property, or otherwise, all as though
such payment had not been made.
10 BANKRUPTCY. This Agreement shall remain in full force and
effect as between the Junior Claimant and Senior Claimant notwithstanding the
occurrence of any Proceeding affecting Borrower.
11. FURTHER ASSURANCES. Borrower and Junior Claimant shall
execute and deliver to the Senior Claimants such further instruments and shall
take such further action as the Senior Claimants may at any time or times
reasonably request in order to carry out the provisions and intent of this
Agreement.
12. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither the Junior Claimant nor the Senior
Claimants shall have a duty to preserve rights against prior parties in any
property of any kind received hereunder. Nothing contained herein shall impose
on the Senior Claimants any duties with respect to any property of Borrower or
Junior Claimant received hereunder.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
agreement. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one counterpart signed by each of the parties
hereto.
6
<PAGE> 350
14. GOVERNING LAW. This Agreement is intended to take effect as a
sealed instrument, shall be binding upon the parties hereto and their respective
executors, administrators, other legal representatives, successors and assigns,
and shall inure to the benefit of the Senior Claimants, their respective
successors and assigns and shall be governed by the laws of the State of New
York without reference to principles of conflict of laws (other than Section
5-1401 of the New York General Obligations Law). The parties hereto intend and
agree that this Agreement shall remain binding on such parties (other than
Borrower) notwithstanding the termination (except upon the payment in full of
Senior Claims) or unenforceability of this Agreement as against Borrower.
[REMINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE> 351
IN WITNESS WHEREOF, the parties hereto have caused this
Subordination Agreement to be duly executed as of the date first above written.
[JUNIOR CLAIMANT]
______________________________
a ____________________________
By:
------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:
------------------------------
Name:
Title:
Acknowledged and Agreed:
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, Inc.,
a Delaware corporation,
its General Partner
By:
-----------------------
Name:
Title:
8
<PAGE> 352
EXHIBIT D-8
to Credit Agreement
[AFFILIATE CONTRACT]
SUBORDINATION AGREEMENT
Dated as of _________, 1999
between
_________________,
a _______________,
and
THE BANK OF NOVA SCOTIA,
as Administrative Agent
<PAGE> 353
SUBORDINATION AGREEMENT
This [AFFILIATE CONTRACT] SUBORDINATION AGREEMENT (this
"Agreement") dated as of __________, 1999 is entered into by and between
_______________, a ______________ (the "Junior Claimant"), and THE BANK OF NOVA
SCOTIA, as Administrative Agent ("Administrative Agent") for the Senior
Claimants (as defined below).
PREFACE
A. Calpine Construction Finance Company, L.P., a Delaware limited
partnership ("Borrower"), the financial institutions listed on Exhibit H thereto
(the "Banks"), Credit Suisse First Boston, as Lead Arranger, Syndication Agent
and Bookrunner and The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent (the Banks, Administrative Agent, the Lead Arrangers, the
Syndication Agent, the Bookrunner and all financial institutions parties to the
Credit Agreement, the "Senior Claimants"), have entered into that certain Credit
Agreement dated as of October 20, 1999 ("Credit Agreement"), pursuant to which
the Senior Claimants will, subject to the terms and conditions contained
therein, provide credit facilities to Borrower in connection with Borrower's
development, construction and ownership of the Projects (as defined below).
B. Borrower and Junior Claimant have entered into (i) that
certain __________ (the "______________") and (ii) that certain ____________
(the "_________" and together with the ____________, the "Subordinated
Contracts") pursuant to which, subject to the terms and conditions contained
therein and herein, Borrower has agreed to pay certain fees for the [operation,
maintenance and management] of the Project by Junior Claimant (the "O&M Costs").
That portion of the O&M Costs which are designated in Section ___ of the
_______, Section ___ of the _____ or Section _______ of the _________ is
referred to herein as the "Subordinated O&M Costs."
C. The Senior Claimants have agreed that Borrower may enter into
each of the Subordinated Contracts only if Junior Claimant shall join in this
Agreement and Junior Claimant shall subordinate, to the extent and in the manner
hereinafter set forth, all claims and rights in respect of the Subordinated O&M
Costs to all Senior Claims (as defined below) to the extent set forth in this
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises and as an
inducement to the Senior Claimants to grant financial accommodations to
Borrower, and in consideration of the granting thereof, the parties hereby agree
as follows:
<PAGE> 354
1. DEFINITIONS. All capitalized terms used herein and not
otherwise defined herein shall have the meaning given in the Credit Agreement.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Proceeding" means any (a) insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to Borrower, its property or its creditors as such,
(b) proceeding for any liquidation, dissolution or other winding-up of Borrower,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (c) assignment for the benefit of creditors of Borrower or (d)
other marshaling of the assets of Borrower.
"Senior Claims" means (a) the principal of, and premium,
if any, and interest on the Loans under the Credit Agreement (including, without
limitation, any interest accruing thereon at the legal rate after the
commencement of any Proceeding and any additional interest that would have
accrued thereon but for the commencement of such Proceeding); and (b) all other
Obligations of Borrower to any Senior Claimants, whether now existing or
hereafter incurred or created, under or with respect to the Credit Documents and
any related documents.
2. CERTAIN SUBORDINATION TERMS. Until all Senior Claims shall
have been paid in full and the Senior Claimants' commitments irrevocably
terminated under the Credit Documents, and notwithstanding anything in
[either/any] of the Subordinated Contracts to the contrary:
2.1 Junior Claimant acknowledges that, notwithstanding
anything in [either/any] of the Subordinated Contracts to the contrary, Borrower
may pay to Junior Claimant Subordinated O&M Costs due to Junior Claimant under
Waterfall Level 6 of Section 7.2 of the Credit Agreement only if and to the
extent monies are sufficient for the payment thereof pursuant to such Section
7.2. Except as provided in this Section 2.1, Borrower shall not, directly or
indirectly, make any payment on or in respect of the Subordinated O&M Costs, and
Borrower shall not in any event transfer any collateral for any part of, the
Subordinated O&M Costs.
2.2 Except for the right to demand and accept payments set
forth in Section 2.1 hereof, Junior Claimant shall not demand, sue for, or
accept from Borrower any such payment or collateral, nor take any other action
to enforce or collect upon any such payment or to enforce its rights, in either
case in respect of the Subordinated O&M Costs, nor set off against obligations
owed to Borrower under [either/any] of the Subordinated Contracts or otherwise
against any part of the Subordinated O&M Costs. Notwithstanding anything in
[either/any] of the Subordinated Contracts to the contrary, the failure by
Borrower to pay any Subordinated O&M Costs shall not under any circumstances,
except where the funds are available therefor and payment is permitted under
Section 2.1 hereof, constitute a breach or default under [either/any] of the
Subordinated Contracts.
2.3 Neither Borrower nor Junior Claimant shall otherwise
take any action prejudicial to or inconsistent with the Senior Claimants'
priority position over Junior Claimant created by this Agreement.
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<PAGE> 355
2.4 Each negotiable instrument or promissory note
evidencing a Subordinated O&M Cost or a lien, if any, in respect thereof shall
bear a legend (or otherwise include provisions satisfactory to Administrative
Agent) providing that payment of the Subordinated O&M Costs thereunder and the
priority of any such lien have been subordinated to prior payment of the Senior
Claims and the liens in respect thereof in the manner and to the extent set
forth in this Agreement.
2.5 Junior Claimant shall not commence or voluntarily
permit Borrower to commence or join with any other creditor or creditors of
Borrower in commencing any Proceeding against Borrower or any partner of
Borrower; provided that Junior Claimant shall not be so restricted with respect
to claims arising directly out of Borrower's failure to perform its obligations
or make any payments of O&M Costs under [either/any] of the Subordinated
Contracts other than the Subordinated O&M Costs. At any general meeting of
creditors of Borrower or in the event of any Proceeding, if all Senior Claims
have not been paid in full at such time, Administrative Agent on behalf of the
Senior Claimants is hereby irrevocably authorized at any such meeting or in any
such Proceeding:
2.5.1 to enforce claims comprising the Subordinated
O&M Costs in the name of Junior Claimant, by proof of debt, proof of claim, suit
or otherwise;
2.5.2 to collect any assets of Borrower
distributed, divided or applied by way of dividend or payment as a result of a
Proceeding, or such securities issued, on account of the Subordinated O&M Costs
as a result thereof and apply the same, or the proceeds of any realization upon
the same that the Senior Claimants in their discretion elect to effect, to
Senior Claims until all Senior Claims shall have been paid in full (the Senior
Claimants hereby agreeing to render any surplus as a court of competent
jurisdiction may direct);
2.5.3 other than voting claims comprising the
Subordinated O&M Costs, to take generally any action in connection with any such
meeting or proceeding which Junior Claimant might otherwise take in respect of
the Subordinated O&M Costs and claims relating thereto.
After the commencement of any such Proceeding, Junior Claimant
may inquire of Administrative Agent in writing whether Administrative Agent
intends to exercise the foregoing rights with respect to the Subordinated O&M
Costs. Should Administrative Agent fail, within a reasonable time after receipt
of such inquiry, either to file a proof of claim with respect to the
Subordinated O&M Costs and to furnish a copy thereof to Junior Claimant, or to
inform Junior Claimant in writing that the Senior Claimants intend to exercise
their rights to assert the Subordinated O&M Costs in the manner hereinabove
provided, Junior Claimant may, but shall not be required to, proceed to file a
proof of claim with respect to the Subordinated O&M Costs and take such further
steps with respect thereto, not inconsistent with this Agreement, as Junior
Claimant may deem proper.
2.6 In the event that (a) the Senior Claimants foreclose
on any or all of their liens on all or a substantial portion of the assets
constituting one or more of the Projects (or succeed to such assets by way of a
transfer in lieu of foreclosure), and (b) Senior Claimants assume [either/any]
of the Subordinated Contracts in accordance with the terms of the Consent
3
<PAGE> 356
and Agreement dated as of ___________, 1999 among Junior Claimant,
Administrative Agent and Borrower (the "Consent") (or enter into a new agreement
pursuant to Section 1(d) of the Consent), then notwithstanding anything in
[either/any] of the Subordinated Contracts to the contrary, (i) Borrower (or any
successor or assign) shall not be obligated to pay the Subordinated O&M Costs,
if any, then due, except as set forth in Section 2.6.1 or 2.6.2, as applicable,
(ii) each of the Subordinated Contracts shall remain in full force and effect
notwithstanding any such foreclosure (but subject to the terms and conditions
thereof), and (iii) the following shall apply:
2.6.1 In the event that the Senior Claimants
(including, for purposes of this Section 2.6.1, their Affiliates) or any of them
become the owners of one or more of the Projects, the Senior Claimants shall
apply to the outstanding balance, if any, of the Subordinated O&M Costs relating
to such Project(s) on (or promptly after) the last day of each calendar quarter
all Project Operating Revenues relating to such Project(s) received in excess of
amounts applied during such quarterly period to (a) the payment or application
of all costs for the operation and maintenance of the project in the nature of
those costs defined as "Senior O&M Costs" payable under Waterfall Level 1 of
Section 7.2 of the Credit Agreement, which expenditures shall not be materially
greater than as are consistent with operation of such Project(s) in accordance
with prudent operating practices (as determined with reference to similar
facilities under similar operating conditions), (b) the payment of a return of
and on the investment of the Senior Claimants, whether such investment is in the
form of equity or debt (and whether or not the Senior Claimants have foreclosed
on their liens by way of a partial or full credit bid or otherwise), which
payments shall not be greater than the periodic payments which would have been
payable under the priorities specified in Waterfall Levels 2 through 5 and 8 of
Section 7.2 of the Credit Agreement as in effect immediately prior to such
foreclosure, as reasonably determined by the Senior Claimants (assuming for
purposes of calculating such payment that (i) Loans had been extended at the
Base Rate in the amount of the unpaid balance of all Loans owed to the Senior
Claimants immediately prior to the exercise by such parties of their remedies,
(ii) such deemed Loans have not been repaid upon foreclosure, (iii) such deemed
Loans are to be deemed amortized straight line through the Loan Maturity Date
(without giving effect to any acceleration) and (iv) all outstanding Letters of
Credit were fully drawn upon by the respective LC Beneficiaries immediately
prior to foreclosure) and (c) funding of reserves in an amount which would have
been available for the benefit of the Senior Claimants under Waterfall Level 5
of Section 7.2 of the Credit Agreement as in effect immediately prior to such
foreclosure. Upon such foreclosure by the Senior Claimants, each of the
Subordinated Contracts, as applicable, shall be deemed to be amended to reflect
such arrangement.
2.6.2 In the event that the Senior Claimants sell
one or more of the Projects to a third party ("New Owner"), the New Owner shall
apply to the outstanding balance, if any, of the Subordinated O&M Costs relating
to such Project(s) on (or promptly after) the last day of each calendar quarter
all Project Operating Revenues relating to such Project(s) received in excess of
amounts applied during such quarterly period to (a) the payment of all costs for
the operation and maintenance of such Project(s) in the nature of those costs
defined as "Senior O&M Costs" payable under Waterfall Level 1 of Section 7.2 of
the Credit Agreement, which expenditures shall not be materially greater than as
are consistent with operation of such Project(s) in accordance with prudent
operating practices (as determined with reference to similar facilities under
similar operating conditions), (b) the periodic payment of fees, interest and
principal as required by the lenders to the New Owner, which payments shall not
be materially
4
<PAGE> 357
greater on an annual basis than such amounts payable by Borrower to the Senior
Claimants under the Credit Agreement as in effect immediately prior to
foreclosure by the Senior Claimants, as reasonably determined by the lenders to
the New Owner; provided that greater payments shall be permitted so long as the
payment of such excess amounts is subordinated to the Subordinated O&M Costs and
(c) the funding of reserves not materially in excess of the amounts which would
have been available for the benefit of the Senior Claimants under Waterfall
Level 5 of Section 7.2 the Credit Agreement as in effect immediately prior to
such foreclosure. The lenders to such New Owner shall be deemed to be Senior
Claimants hereunder, and the payments specified in clause (b) and (c) of this
Section 2.6.2 shall be deemed to be Senior Claims under this Agreement. Subject
to Junior Claimant's rights under Section ___ of the _____, Section _______ of
the ________ and Section ____ of the _________, Junior Claimant agrees that it
will execute and deliver to New Owner's lenders such new subordination
agreement, such amendments to each of the Subordinated Contracts, and such other
instruments, in each case consistent with the terms of this Agreement, and
Junior Claimant shall take such further action, as the lenders to the New Owner
reasonably request in furtherance of this Section 2.6.2.
3. CREDIT AGREEMENT. Junior Claimant acknowledges that it has
been provided with a copy of the Credit Agreement and has read and is familiar
with the provisions of the Credit Agreement, including without limitation
Article 7 thereof. Junior Claimant hereby consents to the application of Project
Revenues in the order of priority set forth in the Credit Agreement, including
without limitation Article 7 thereof, notwithstanding anything in either of the
Subordinated Contracts to the contrary.
4. TIME OF FILING. Notwithstanding the time of filing, attachment
or recording of any document or other instrument, it is agreed by Junior
Claimant that any liens arising under or pursuant to the Collateral Documents
(as defined in the Credit Documents) shall be senior to any liens arising in
favor of Junior Claimant as part of or relating to either of the Subordinated
Contracts.
5. WRONGFUL COLLECTIONS. Should any payment on account of, or any
collateral for any part of, the Subordinated O&M Costs be received by Junior
Claimant in violation of this Agreement, such payment or collateral shall be
delivered forthwith to Administrative Agent on behalf of the Senior Claimants by
the recipient for application to Senior Claims, in the form received.
Administrative Agent is irrevocably authorized to supply any required
endorsement or assignment which may have been omitted. Until so delivered, any
such payment or collateral shall be held by the recipient in trust for the
Senior Claimants and shall not be commingled with other funds or property of the
recipient.
6. OWNERSHIP OF SUBORDINATED O&M COSTS; AMENDMENT OF SUBORDINATED
CONTRACTS.
6.1 Junior Claimant represents and warrants that it is the
lawful owner of the right to receive the Subordinated O&M Costs and no part
thereof has been assigned to or subordinated or subjected to any other security
interest in favor of anyone other than the Senior Claimants. Junior Claimant
shall not assign all or any portion of the Subordinated O&M Costs, its
commitment under, or any of its rights or remedies under, [EITHER/ANY] of the
Subordinated Contracts without the prior written consent of Administrative Agent
and the Required Banks,
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<PAGE> 358
which may be granted or withheld in their sole discretion, and in any event only
upon the execution and delivery to Administrative Agent of an agreement by any
such assignee to be bound by the terms of this Agreement (including provisions
relating to assignment), in form and substance the same as this Agreement, or
otherwise as may be reasonably satisfactory to Administrative Agent.
6.2 Subject to Section 6.13.1 of the Credit Agreement,
Junior Claimant shall not amend either of the Subordinated Contracts without
Administrative Agent's prior written consent.
7. WAIVERS. Administrative Agent and the Senior Claimants are
hereby authorized to demand specific performance of this Agreement, whether or
not Borrower shall have complied with the provisions hereof applicable to it, at
any time when Junior Claimant shall have failed to comply with any provision
hereof applicable to it. Junior Claimant hereby irrevocably waives any defense
based on the adequacy of a remedy at law which might be asserted as a bar to the
remedy of specific performance hereof in any action brought therefor by the
Senior Claimants. Junior Claimant further waives presentment, notice and protest
in connection with all negotiable instruments evidencing Senior Claims or
Subordinated O&M Costs to which Junior Claimant may be a party, notice of the
acceptance of this Agreement by the Senior Claimants, notice of any loan made,
extension granted or other action taken in reliance hereon, and all demands and
notices of every kind in connection with this Agreement, Senior Claims or time
of payment of Senior Claims or Subordinated O&M Costs. Junior Claimant hereby
assents to any renewal, extension or postponement of the time of payment of
Senior Claims or any other indulgence with respect thereto, to any increase in
the amount of Senior Claims, to any substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon and assents to the provisions of any instrument,
security or other writing evidencing Senior Claims.
8. SUBROGATION; NO IMPAIRMENT OF BORROWER'S OBLIGATIONS. Subject
to and from and after the indefeasible payment in full of all Senior Claims and
the irrevocable termination of Senior Claimants' commitments under the Credit
Documents, Junior Claimant shall be subrogated to the rights of the Senior
Claimants to receive payments or distributions of cash, property or securities
of Borrower applicable to the Senior Claims until all amounts owing on the
Subordinated O&M Costs shall be paid in full, it being understood that the
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of Junior Claimant and the Senior Claimants;
provided that such rights of subrogation shall be nonexclusive, and shall be
shared with any other subordinated creditor of the Borrower which has entered
into an agreement with the Administrative Agent providing similar rights of
subrogation. Nothing contained in this Agreement is intended to or shall impair,
as between Borrower, its creditors other than the Senior Claimants and Junior
Claimant, the obligation of Borrower, which is absolute and unconditional, to
pay to Junior Claimant the principal of and the premium, if any, and the
interest on the Subordinated O&M Costs as and when the same shall become due and
payable in accordance with the terms of this Agreement and the Subordinated
Contracts, or to affect the relative rights of Junior Claimant and creditors of
Borrower other than the Senior Claimants.
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<PAGE> 359
9. REINSTATEMENT. The obligations of Junior Claimant under this
Agreement shall continue to be effective, or be reinstated, as the case may be,
if at any time any payment in respect of any Senior Claim, or any other payment
to any holder of any Senior Claim in its capacity as such, is rescinded or must
otherwise be restored or returned by the holder of such Senior Claims upon the
occurrence of any Proceeding, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
Borrower or any substantial part of its property, or otherwise, all as though
such payment had not been made.
10. BANKRUPTCY. This Agreement shall remain in full force and
effect as between the Junior Claimant and Senior Claimant notwithstanding the
occurrence of any Proceeding affecting Borrower.
11. FURTHER ASSURANCES. Borrower and Junior Claimant shall
execute and deliver to the Senior Claimants such further instruments and shall
take such further action as the Senior Claimants may at any time or times
reasonably request in order to carry out the provisions and intent of this
Agreement.
12. SUCCESSORS AND ASSIGNS. The rights granted to the Senior
Claimants hereunder are solely for their protection and nothing herein contained
shall impose on the Senior Claimants any duties with respect to any property of
Borrower or Junior Claimant received hereunder. The Senior Claimants shall have
no duty to preserve rights against prior parties in any property of any kind
received hereunder.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
agreement. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one counterpart signed by each of the parties
hereto.
14. GOVERNING LAW. This Agreement is intended to take effect as a
sealed instrument, shall be binding upon the parties hereto and their respective
executors, administrators, other legal representatives, successors and assigns,
and shall inure to the benefit of the Senior Claimants, their respective
successors and assigns and shall be governed by the laws of the State of New
York without reference to principles of conflict of laws (other than Section
5-1401 of the New York General Obligations Law). The parties hereto intend and
agree that this Agreement shall remain binding on such parties (other than
Borrower) notwithstanding the termination (except upon the payment in full of
Senior Claims) or unenforceability of this Agreement as against Borrower.
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<PAGE> 360
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
____________________,
a _____________________,
as Junior Claimant
By: __________________,
a ________________,
its General Partner
By: _____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: ____________________________________
Name:
Title:
The undersigned acknowledges and agrees to the foregoing:
CALPINE CONSTRUCTION FINANCE COMPANY L.P.,
a Delaware limited partnership
By: Calpine CCFC GP, Inc,
a Delaware corporation,
its General Partner
By: ____________________________________
Name:
Title:
<PAGE> 361
EXHIBIT E-1
to Credit Agreement
================================================================================
FORM OF
CONSENT AND AGREEMENT
[(CONTRACT)]
Dated as of _________, 199__
by
[CONTRACTING PARTY]
================================================================================
<PAGE> 362
FORM OF CONSENT AND AGREEMENT
This FORM OF CONSENT AND AGREEMENT ("Consent"), dated as of
___________, 1999 is executed by [CONTRACTING PARTY], a _______________
corporation (the "Undersigned"), and CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership ("Borrower"), for the benefit of THE BANK OF NOVA
SCOTIA, as Administrative Agent ("Administrative Agent") for the Banks under the
Credit Agreement (as defined below).
RECITALS
A. Borrower has entered into that certain Credit Agreement, dated
as of October 20, 1999 ("Credit Agreement"), by and among Borrower, the
financial institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse
First Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of
Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent. Unless
otherwise defined, all terms used herein which are defined in the Credit
Agreement, shall have their respective meanings as used therein.
B. The Undersigned and Borrower have entered into that certain
[CONTRACT] dated as of ________, 199__ (as amended, supplemented or modified
from time to time in accordance with its terms and the terms hereof, the
"Contract"), with respect to the _______ Project (the "Project").
C. Pursuant to the Security Agreement dated as of October 20,
1999 ("Security Agreement"), by and between Borrower and Administrative Agent,
Borrower has assigned its interest under the Contract to Administrative Agent on
behalf of Administrative Agent and the Banks.
AGREEMENT
NOW THEREFORE, the Undersigned hereby agrees as follows:
1. The Undersigned acknowledges receipt of the Security Agreement
and consents to the Borrower's transfer, assignment, grant of a security
interest and all other provisions described therein, and agrees with
Administrative Agent for the benefit of the Banks as follows:
(a) Administrative Agent shall be entitled (but not
obligated) to exercise all rights and to cure any defaults of Borrower
under the Contract. Upon receipt of notice from Administrative Agent,
the Undersigned agrees to accept such exercise and cure by
Administrative Agent and to render all performance due by it under the
Contract and this Consent to the Banks. The Undersigned agrees to make
all payments to be made by it under the Contract directly to
Administrative Agent for the benefit of the Banks upon receipt of
Administrative Agent's written instructions.
(b) The Undersigned will not, without the prior written
consent of Administrative Agent (such consent not to be unreasonably
withheld), (i) cancel or terminate the Contract or suspend performance
of its services thereunder except as provided in the Contract and in
accordance with paragraph 1(c) hereof, or consent to or accept any
cancellation, termination or suspension thereof by Borrower, (ii) sell,
assign or otherwise dispose (by operation of law or otherwise) of any
part of its interest in the Contract, or (iii) amend or modify the
Contract in any material respect. The Undersigned agrees to deliver
duplicates or copies of all notices of default delivered under or
pursuant to the Contract to Administrative Agent promptly upon receipt
or delivery thereof.
<PAGE> 363
(c) The Undersigned will not terminate the Contract on
account of any default or breach of Borrower thereunder without written
notice to Administrative Agent and first providing to Administrative
Agent (i) thirty (30) days from the date notice of default or breach is
delivered to Administrative Agent to cure such default if such default
is the failure to pay amounts to the Undersigned which are due and
payable under the Contract or (ii) a reasonable opportunity, but not
fewer than ninety (90) days, to cure such breach or default if the
breach or default cannot be cured by the payment of money to the
Undersigned so long as Administrative Agent or its designee shall have
commenced to cure the breach or default within such ninety (90)-day
period and thereafter diligently pursues such cure to completion and
continues to perform any monetary obligations under the Contract and all
other obligations under the Contract are performed by Borrower or
Administrative Agent. If possession of the Project is necessary to cure
such breach or default, and Administrative Agent or its designee(s) or
assignee(s) declare Borrower in default and commence foreclosure
proceedings, Administrative Agent or its designee(s) or assignee(s) will
be allowed a reasonable period to complete such proceedings. If
Administrative Agent or its designee(s) or assignee(s) are prohibited by
any court order or bankruptcy or insolvency proceedings from curing the
default or from commencing or prosecuting foreclosure proceedings, the
foregoing time periods shall be extended by the period of such
prohibition. The Undersigned consents to the transfer of Borrower's
interest under the Contract to the Banks or any of them or a purchaser
or grantee at a foreclosure sale by judicial or nonjudicial foreclosure
and sale or by a conveyance by Borrower in lieu of foreclosure and
agrees that upon such foreclosure, sale or conveyance, the Undersigned
shall recognize the Banks or any of them or other purchaser or grantee
as the applicable party under the Contract (provided that such Banks or
purchaser or grantee assumes the obligations of Borrower under the
Contract).
(d) In the event that the Contract is rejected by a
trustee or debtor-in-possession in any bankruptcy or insolvency
proceeding, or if the Contract is terminated for any reason other than a
default which could have been but was not cured by Administrative Agent
as provided in paragraph 1(c) above, and if, within forty-five (45) days
after such rejection or termination, the Banks or their successors or
assigns shall so request, the Undersigned will execute and deliver to
the Banks a new Contract, which Contract shall be on the terms and
conditions as the original Contract for the remaining term of the
Contract before giving effect to such termination.
(e) In the event the Banks or their designee(s) or
assignee(s) elect to perform Borrower's obligations under the Contract
or to enter into a new Contract as provided in subparagraph (c) or (d)
respectively above, the Banks, their designee(s) and assignee(s), shall
have no personal liability to the Undersigned for the performance of
such obligations, and the sole recourse of the Undersigned in seeking
the enforcement of such obligations shall be to such parties' interest
in the Project.
(f) In the event the Banks or their designee(s) or
assignee(s) succeed to Borrower's interest under the Contract or enter
into a new Contract, the Banks or their designee(s) or assignee(s) shall
cure any defaults for failure to pay amounts owed under the Contract,
but shall not otherwise be required to perform or be subject to any
defenses or offsets by reason of any of Borrower's other obligations
under the Contract that were unperformed at such time. The Banks shall
have the right to assign all or a pro rata interest in the Contract or a
new Contract entered into pursuant to subparagraph (d) to a person or
entity to whom the Project is transferred, provided such transferee
assumes the obligations of Borrower (or the Banks) under the Contract.
Upon such assignment, Administrative Agent and, if applicable, the Banks
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<PAGE> 364
(including their Administrative Agents and employees) shall be released
from any further liability thereunder to the extent of the interest
assigned.
(g) The warranties provided by the Undersigned under the
Contract shall continue in full force and effect (until the expiration
of the warranty periods set forth in the Contract) in the event that the
Banks or their designee(s) or assignee(s) succeed to Borrower's interest
in the Contract (whether by foreclosure, sale or other assignment) and
upon the further assignment or sale of the Contract by the Banks or
their designee(s) or assignee(s).
[(h) The Undersigned hereby assigns to Borrower (and
Borrower's assigns) all its interest in any subcontracts and purchase
orders in excess of $____________ now existing or hereinafter entered
into by the Undersigned for performance of any part of the Undersigned's
obligations under the Contract (the "Subcontracts"). Such assignment
shall be effective only upon the occurrence of a breach or default
(after the expiration of any applicable cure period) by the Undersigned
under the Contract or upon the termination of the Contract, and then
only as to those Subcontracts which Borrower (or its assigns) at such
time accepts in writing. The Undersigned hereby further assigns to
Borrower (and Borrower's assigns) all of its rights with respect to any
warranties under all Subcontracts. Each Subcontract hereinafter entered
into by the Undersigned shall contain a consent by the subcontractor
thereunder to the foregoing assignments set forth in this Section 1(h).]
2. The Undersigned hereby represents and warrants that:
(a) The execution, delivery and performance by the
Undersigned of the Contract and this Consent has been duly authorized by
all necessary corporate action, and does not and will not require any
further consents or approvals which have not been obtained, or violate
any provision of any law, regulation, order, judgment, injunction or
similar matters or breach any agreement presently in effect with respect
to or binding on the Undersigned;
(b) This Consent and the Contract are legal, valid and
binding obligations of the Undersigned, enforceable against the
Undersigned in accordance with their respective terms;
(c) All government approvals necessary for the execution,
delivery and performance by the Undersigned of its obligations under the
Contract have been obtained and are in full force and effect;
(d) As of the date hereof, the Contract is in full force
and effect and has not been amended, supplemented or modified;
(e) Borrower has fulfilled all of its obligations under
the Contract, and there are no breaches or unsatisfied conditions
presently existing (or which would exist after the passage of time
and/or giving of notice) that would allow the Undersigned to terminate
the Contract; and
(f) The Contract constitutes the only agreement between
the Undersigned and Borrower with respect to the matters and interests
described therein.
3. [The Undersigned acknowledges that Borrower has succeeded by
[merger/assignment] to the interests, rights, duties, obligations and
liabilities of ______________ in the Contract, and hereby consents to such
[merger/assignment].][The Undersigned agrees that its recourse
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<PAGE> 365
against Borrower under the Contract is limited to Borrower's interest in the
Project, the revenue and income produced by the Project and the proceeds of any
of the foregoing.]
4. All Notices required or permitted hereunder shall be in
writing and shall be effective (a) upon receipt if hand delivered, (b) upon
receipt if sent by facsimile and (c) if otherwise delivered, upon the earlier of
receipt or two (2) Banking Days after being sent registered or certified mail,
return receipt requested, with proper postage affixed thereto, or by private
courier or delivery service with charges prepaid, and addressed as specified
below:
If to the Undersigned:
____________________________
____________________________
____________________________
Telecopy No: ______________
Telephone No: _____________
If to Administrative Agent:
The Bank of Nova Scotia
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Project Finance Group
Telecopy No.: (212) 225-5090
Telephone No.: (212) 225-5000
If to Borrower:
Calpine Construction Finance Company, L.P.,
c/o Calpine Corporation
50 W. San Fernando Street, 5th Floor
San Jose, CA 95113
Attn: Asset Management
Telecopy No: (408) 995-0505
Telephone No: (408) 995-5115
5. This Consent shall be binding upon and inure to the benefit of
the Undersigned, the Borrower, the Banks and their respective successors,
transferees and assigns (including without limitation, any entity that
refinances all or any portion of the Obligations under the Credit Agreement).
The Undersigned agrees to confirm such continuing obligation in writing upon the
reasonable request of Borrower, the Banks or any of their respective successors,
transferees or assigns. No termination, amendment, variation or waiver of any
provisions of this Consent shall be effective unless in writing and signed by
the Undersigned, Administrative Agent and Borrower. This Consent shall be
governed by the internal laws of the State of New York, without reference to
principles of conflict of laws (other than Section 5-1401 of the New York
General Obligations Law).
6. This Consent may be executed in one or more duplicate
counterparts, and when executed and delivered by all the parties listed below,
shall constitute a single binding agreement.
7. All references in this Consent to any document, instrument or
agreement (a) shall include all exhibits, schedules and other attachments
thereto, (b) shall include all documents,
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instruments or agreements issued or executed in replacement thereof, and (c)
shall mean such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
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IN WITNESS WHEREOF, the Undersigned by its officer thereunto duly
authorized, has duly executed this Consent as of the date first set forth above.
[THE UNDERSIGNED] a ____________ corporation
By
----------------------------------------
Name:
Title:
Accepted and agreed to:
THE BANK OF NOVA SCOTIA,
as Administrative Agent for Banks
By:
-----------------------------------
Name:
Title:
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
-------------------------------
Name:
Title:
6
<PAGE> 368
Schedule E-2
to Credit Agreement
SCHEDULE OF CONSENTS
The following Consents, substantially in the form of Exhibit E-1 to the
Credit Agreement and otherwise in form and substance satisfactory to the Lead
Arrangers, shall be delivered to the Administrative Agent:
1. Zachry Construction Company (consenting to the collateral assignment
of Borrower's rights and obligations under the Contract for Construction, dated
as of March 26, 1999, between Borrower and Zachry Construction Corporation);
2. H.B. Zachry (consenting to the collateral assignment of Borrower's
rights and obligations under H.B. Zachry's guarantee of the obligations of
Zachry Construction Company under the Contract for Construction set forth in
item 1 above);
3. Siemens Power Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under the Maintenance Contract, dated as of
June 30, 1998, by and between Borrower and Westinghouse Power Generation0
4. Siemens Power Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under the Purchase Contract, dated as of June
30, 1998, by and between Borrower and Westinghouse Power Generation);
5. Magic Valley Electric Cooperative, Inc. (consenting to the collateral
assignment of Borrower's rights and obligations under the Magic Valley Power
Purchase Agreement, dated as of May 22, 1998, by and between Borrower and Magic
Valley Electric Cooperative, Inc.);
6. Sargent & Lundy, L.L.C. (consenting to the collateral assignment of
Borrower's rights and obligations under the Contract for Professional Services,
dated as of December 8, 1998, by and between Borrower and Sargent & Lundy,
L.L.C.);
7. CCNG, Inc. (consenting to the collateral assignment of Borrower's
rights and obligations under the Fuel Management Services Agreement, dated as of
May 1, 1998, by and between Borrower and CCNG, Inc.);
8. Calpine Power Services Company (consenting to the assignment of
Borrower's rights and obligations under the Power Marketing Agreement for the
Magic Valley Project, dated as of October 20, 1999, by and between Borrower and
Calpine Power Services Company);
9. Calpine Power Services Company (consenting to the assignment of
Borrower's rights and obligations under the Power Marketing Agreement for the
South Point Project, dated as of October 20, 1999, by and between Borrower and
Calpine Power Services Company);
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<PAGE> 369
10. Calpine Power Services Company (consenting to the assignment of
Borrower's rights and obligations under the Power Marketing Agreement for the
Sutter Project, dated as of October 20, 1999, by and between Borrower and
Calpine Power Services Company);
11. Calpine Power Services Company (consenting to the assignment of
Borrower's rights and obligations under the Power Marketing Agreement for the
Westbrook Project, dated as of October 20, 1999, by and between Borrower and
Calpine Power Services Company);
12. Calpine Central Fuels, L.P. (consenting to the assignment of
Borrower's rights and obligations under (i) the Gas Supply Agreement, dated as
of October 20, 1999, by and between Borrower and Calpine Central Fuels, L.P. for
the Magic Valley Project and (ii) the Fuel Management Agreement, dated as of
October 20, 1999, by and between Borrower and Calpine Central Fuels, L.P. for
the Magic Valley Project);
13. CPN East Fuels, LLC (consenting to the assignment of Borrower's
rights and obligations under (i) the Gas Supply Agreement, dated as of October
20, 1999, by and between Borrower and CPN East Fuels, LLC for the Westbrook
Project and (ii) the Fuel Management Agreement, dated as of October 20, 1999, by
and between Borrower and CPN East Fuels, LLC for the Westbrook Project);
14. CPN Gas Marketing Company (consents to the assignment of Borrower's
rights and obligations under (i) the Gas Supply Agreement, dated as of October
20, 1999, by and between Borrower and CPN Gas Marketing Company for the South
Point Project and (ii) the Fuel Management Agreement, dated as of October 20,
1999, by and between Borrower and CPN Gas Marketing Company for the South Point
Project);
15. CPN Gas Marketing Company (consents to the assignment of Borrower's
rights and obligations under (i) the Gas Supply Agreement, dated as of October
20, 1999, by and between Borrower and CPN Gas Marketing Company for the Sutter
and (ii) the Fuel Management Agreement, dated as of October 20, 1999, by and
between Borrower and CPN Gas Marketing Company for the Sutter Project);
16. Calpine Corporation (consenting to the assignment of Borrower's
rights and obligations under (i) the Construction Management Agreements, dated
as of October __, 1999, by and between Borrower and Calpine Corporation for the
South Point Project (ii) the Operating & Maintenance Agreements, dated as of
October 20, 1999, by and between Borrower and Calpine Corporation for the South
Point Project and (iii) the Project Management Agreements, dated as of October
20, 1999, by and between Borrower and Calpine Corporation for the South Point
Project);
17. Calpine Corporation (consenting to the assignment of Borrower's
rights and obligations under (i) the Construction Management Agreements, dated
as of October __, 1999, by and between Borrower and Calpine Corporation for the
Sutter Project (ii) the Operating & Maintenance Agreements, dated as of October
20, 1999, by and between Borrower and Calpine Corporation for the Sutter Project
and (iii) the Project Management Agreements, dated as of October 20, 1999, by
and between Borrower and Calpine Corporation for the Sutter Project);
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<PAGE> 370
18. Calpine Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under the Affiliated Party Agreement Guaranty
(Magic Valley Project), dated as of October 20, 199, by Calpine Corporation and
Calpine Construction Finance Company, L.P. for the benefit of The Bank of Nova
Scotia, as Administrative Agent for the Banks;
19. Calpine Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under the Affiliated Party Agreement Guaranty
(South Point Project), dated as of October 20, 199, by Calpine Corporation and
Calpine Construction Finance Company, L.P. for the benefit of The Bank of Nova
Scotia, as Administrative Agent for the Banks;
20. Calpine Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under the Affiliated Party Agreement Guaranty
(Sutter Project), dated as of October 20, 199, by Calpine Corporation and
Calpine Construction Finance Company, L.P. for the benefit of The Bank of Nova
Scotia, as Administrative Agent for the Banks;
21. Calpine Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under the Affiliated Party Agreement Guaranty
(Westbrook Project), dated as of October 20, 199, by Calpine Corporation and
Calpine Construction Finance Company, L.P. for the benefit of The Bank of Nova
Scotia, as Administrative Agent for the Banks;
22. Calpine Central, L.P. (consenting to the assignment of Borrower's
rights and obligations under (i) the Construction Management Agreement, dated as
of October 20, 1999, by and between Borrower and Calpine Central, L.P. for the
Magic Valley Project (ii) the Operating & Maintenance Agreement, dated as of
October 20, 1999, by and between Borrower and Calpine Central, L.P. for the
Magic Valley Project and (iii) the Project Management Agreement, dated as of
October 20, 1999, by and between Borrower and Calpine Central, L.P. for the
Magic Valley Project);
23. Calpine Eastern Corporation (consenting to the assignment of
Borrower's rights and obligations under (i) the Construction Management
Agreement, dated as of October 20, 1999, by and between Borrower and Calpine
Eastern Corporation for the Westbrook Project (ii) the Operating & Maintenance
Agreement, dated as of October 20, 1999, by and between Borrower and Calpine
Eastern Corporation for the Westbrook Project and (iii) the Project Management
Agreement, dated as of October 20, 1999, by and between Borrower and Calpine
Eastern Corporation for the Westbrook Project);
24. The South Point Joint Venture (consenting to the assignment of
Borrower's rights and obligations under the Contract for Engineering,
Procurement and Construction, dated as of April 12, 1999, by and between
Borrower and The South Point Joint Venture);
25. Siemens Westinghouse Power Corporation (consenting to the assignment
of Borrower's rights and obligations under the Purchase Contract for Power
Island Equipment, dated as of March 15, 1998, by and between Borrower and
Siemens Westinghouse Power Corporation for the South Point Project);
3
<PAGE> 371
26. Siemens Westinghouse Power Corporation (consenting to the assignment
of Borrower's rights and obligations under the Maintenance Contract, dated as of
March 10, 1999, by and between Borrower and Siemens Westinghouse Power
Corporation for the South Point Project);
27. Siemens Westinghouse Power Corporation (consenting to the assignment
of Borrower's rights and obligations under the Purchase Contract, dated as of
December 16, 1998, by and between Borrower and Siemens Westinghouse Power
Corporation for the Sutter Project);
28. Siemens Westinghouse Power Corporation (consenting to the assignment
of Borrower's rights and obligations under the Maintenance Contract, dated as of
December 12, 1998, by and between Borrower and Siemens Westinghouse Power
Corporation for the Sutter Project);
29. The Fort Mojave Indian Tribe (consenting to the assignment of
Borrower's rights and obligations under (i) Amended and Restated Ground Lease
Agreement, executed as of August 4, 1999 and approved as BIA Lease B1778-FM on
August 19, 1999 by and between the Fort Mojave Indian Tribe, a federally
recognized Indian Tribe, and Borrower and (ii) a Water Pipeline Construction
Agreement to be entered into between Borrower and the Fort Mojave Indian Tribe);
30. Siemens Corporation (consenting to the assignment of Borrower's
rights and obligations under the Siemens Corporation guarantee of the
obligations of Siemens Westinghouse Power Corporation under the contract set
forth in item 25 above);
31. Bechtel Power Corporation (consenting to the assignment of
Borrower's rights and obligations under the Contract for Engineering,
Procurement and Construction dated as of June 1, 1999, by and between Borrower
and Bechtel Power Corporation);
32. General Electric Company (consenting to the assignment of Borrower's
rights and obligations under the Contract Agreement, dated as of February 5,
1999, by and between Borrower and General Electric Company);
33. General Electric Company (consenting to the assignment of Borrower's
rights and obligations under the General Electric guarantee of the obligations
of General Electric International under the Long Term Parts and Long Term
Service Contract as set forth in item 34 below);
34. General Electric International (consenting to the assignment of
Borrower's rights and obligations under the Long Term Parts and Long term
Service Contract, dated as of February 5, 1999, by and between Borrower and
General Electric International);
35. City of Edinburg, Texas (consenting to the collateral assignment of
Borrower's rights and obligations under (i) the City of Edinburg Franchise
Agreement, dated as of May 14, 1999, from the City of Edinburg, Texas (ii) the
Agreement for Purchase of Treated Effluent Water, dated as of April 12, 1999, by
and between Borrower and the City of Edinburg, Texas
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<PAGE> 372
and (iii) the first Amendment to Agreement for Purchase of Treated Effluent
Water, dated as of August 4, 1999, by and between Borrower and the City of
Edinburg, Texas);
36. City of McAllen, Texas and the Board of Trustees of the McAllen
Public Utilities (consenting to the collateral assignment of Borrower's rights
and obligations under the Agreement for the Purchase of Treated Effluent Water,
dated as of August 10, 1999, by and between, on the one hand, the Borrower and,
on the other hand, the City of McAllen, Texas, and the Board of Trustees of the
McAllen Public Utility);
37. Hidalgo County Irrigation District No. One (consenting to the
collateral assignment of Borrower's rights and obligations under the Water
Delivery Contract, dated as of July 19, 1999, by and between Borrower and
Hidalgo County Irrigation District No. 1);
38. Hidalgo County Irrigation District No. 2 (consenting to the
collateral assignment of Borrower's rights and obligations under the Water
Contract, dated as of June 17, 1999, by and between Borrower and Hidalgo County
Irrigation District No. 2);
39. Central Power and Light Company (consenting to the collateral
assignment of Borrower's rights and obligations under (i) Interconnection
Agreement, dated as of February 25, 1999, by and between Borrower and Central
Power and Light Company ("CPL") (ii) Letter of Authorization to Proceed with
Engineering and Construction of Transmission Line Relocation, dated as of
December 17, 1998, by and between Borrower and Central and South West Services,
Inc. ("CSW") and (iii) Letter of Authorization to Proceed with Engineering,
Procurement and Construction of Interconnection Facilities, dated as of February
25, 1999, by and between Borrower and CSW). Such Consent shall, to the extent
required by the Lead Arrangers, include a representation from CPL that CSW is
acting as the agent for and under the direction of CPL under the agreements
described in clauses (ii) and (iii) above and that CPL has the power and
authority to Consent to the collateral assignment of Borrower's rights and
obligations under such agreements;
40. Duke Energy Hidalgo, L.P. (consenting to the collateral assignment
of Borrower's rights and obligations under that certain Pipeline Construction
and Operation Agreement dated as of October 1, 1999 and entered into between
Borrower and Duke Energy Hidalgo, L.P.). Such consent shall contain certain
amendments or modifications to the Pipeline Construction and Operation Agreement
as may be reasonably requested by the Lenders;
41. El Paso Natural Gas Company (consenting to the collateral assignment
of Borrower's rights and obligations under the El Paso Natural Gas Letter
Agreement for the Construction, Operation and Connection of the Calpine South
Point Delivery Point, dated as of July 12, 1999, by and between Borrower and El
Paso Natural Gas Company);
42. Transwestern Pipeline Company (consenting to the collateral
assignment of Borrower's rights and obligations under the Delivery Point
Construction and Operating Agreement, dated as of July 16, 1999, by and between
Transwestern Pipeline Company and Borrower);
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43. Arizona Electric Power Cooperative, Inc. (consenting to the
collateral assignment of Borrower's rights and obligations under the Topock
Substation Construction and Interconnection Agreement, dated as of July 14,
1999, by and between Arizona Electric Power Cooperative, Inc. and Borrower);
44. Aha Macav Power Service (consenting to the collateral assignment of
Borrower's rights and obligations under the Contract for Design, Contribution
and Maintenance Services, dated as of May 17, 1999, by and between Borrower and
Aha Macav Power Services);
45. United States Department of Energy Western Area Power Administration
("Western") (consenting to the collateral assignment of Borrower's rights and
obligations under (i) Contract No. 99-DSR-11050, for Long-Term Firm
Point-To-Point Transmission Service, dated as of August 5, 1999, by and between
Western and Borrower; (ii) Contract No. 99-DSR-11049, for Service Agreement for
Non-Firm Point-To-Point Transmission Service, dated as of August 5, 1999, by and
between Western and Borrower and (iii) Contract No. 99-DSR-11008, for
Construction of the South Point Transmission Project, dated as of June 25, 1999,
by and between Western and Borrower). Such consent shall, to the extent required
by the Lead Arrangers, include an acknowledgement by Western that Western is
responsible for obtaining all the real property rights necessary to construct,
own and operate the transmission facilities contemplated under Contract No.
99-DSR-11008 described above;
46. Western (consenting to the collateral assignment of Borrower's
rights and obligations under (i) the Design and Engineering Services for the
Calpine Corporation, dated as of August 2, 1999, by and between Western and
Borrower, (ii) Contract No. 99-SNR-00210 for Service Agreement for Long-Term
Firm Point-To-Point Transmission Service, dated as of August 30, 1999, by and
between Western and Borrower and (iii) Contract 99-SNR-00184 Land Acquisition
Agreement, dated as of June 4, 1999, by and between Western and Borrower
47. The City of Westbrook, Maine (consenting to the collateral
assignment of Borrower's rights and obligations under (i) the Agreement (Sewage
Treatment), dated as of February 2, 1999, by and between Borrower and the City
of Westbrook and (ii) the Credit Enhancement Agreement, dated as of June 28,
1999, by and between Borrower and the City of Westbrook, Maine and Borrower);
48. E-PRO Engineering (consenting to the collateral assignment of
Borrower's rights and obligations under the Contract for Professional Services,
dated as of September 22, 1999, between E-PRO Engineers and Environmental
Consulting LLC, and Borrower). Such consent shall, to the extent requested by
the Lead Arrangers, contain certain amendments or modifications to the Contract
for Professional Services;
49. CMP Natural Gas, L.L.C. ("CMPNG") (consenting to the collateral
assignment of Borrower's rights and obligations under the Negotiated Service
Agreement for Natural Gas Transportation, dated as of July 9, 1999, by and
between Borrower and CMPNG (the "CMP Contract")). Such Consent shall, to the
extent requested by the Lead Arrangers, clarify that CMPNG shall (i) acquire all
real estate rights necessary to construct, own and operate the gas lateral under
the CMP Contract regardless of whether, pursuant to the terms of the CMP
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<PAGE> 374
Contract, CMPNG or Borrower is ultimately responsible for constructing, owning
and operating such lateral and (ii) in the event that Borrower is ultimately
responsible for constructing, owning and operating such lateral, transfer to
Borrower all such real estate rights;
50. Central Maine Power (consenting to the Borrower's rights and
obligations under the Interconnection Agreement to be entered into between
Borrower and Central Maine Power);
51. Magic Valley Pipeline L.P. (consenting to the collateral assignment
of Borrower's rights and obligations under the Gas Pipeline Construction and
Transportation Agreement to be entered into between Borrower and Magic Valley
Pipeline L.P.);
52. In the event that Calpine Corporation guarantees the performance of
Magic Valley Pipeline L.P. under the agreement described in item 51 above, a
consent from Calpine Corporation (consenting to the collateral assignment of
Borrower's rights and obligations under such agreement);
53. In the event that a Gas Interconnection agreement is entered into by
and between Borrower (as opposed to Magic Valley Pipeline L.P.) and Pacific Gas
& Electric, a consent from Pacific Gas & Electric (consenting to the collateral
assignment of Borrower's rights and obligations under such agreement);
54. In the event that a Gas Interconnection Agreement is entered into by
and between Borrower (as opposed to Magic Valley Pipeline L.P.), and Tejas Gas,
a consent from Tejas Gas (consenting to the collateral assignment of Borrower's
rights and obligations under such agreement);
55. In the event that a Gas Pipeline Interconnection Agreement is
entered into by and between Borrower (as opposed to Magic Valley Pipeline L.P.),
and Texas Eastern, a consent from Texas Eastern (consenting to the collateral
assignment of Borrower's rights and obligations under such agreement);
56. In the event that a Gas Pipeline Interconnection Agreement is
entered into by and between Borrower (as opposed to Magic Valley Pipeline L.P.)
and Tennessee Gas, a consent from Tennessee Gas (consenting to the collateral
assignment of Borrower's rights and obligations under such agreement);
57. For any gas interconnection and/or transportation agreement entered
into by Borrower and third party providers of such services for (i) the South
Point Project and/or (ii) the Sutter Project, a consent from the Project
Participant who is the counterparty to such agreement(s) (consenting to the
collateral assignment of Borrower's rights and obligations under such
agreement(s));
58. For any Gas Pipeline Construction and Transportation Agreement
entered into by Borrower and an Affiliate of Borrower ("Calpine Pipeline") for
(i) the South Point Project and (ii) the Sutter Project, a consent from Calpine
Pipeline to such agreement(s) (consenting to the collateral assignment of
Borrower's rights and obligations under such agreement(s));
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59. United States Department of Energy Western Area Power Administration
(consenting to the collateral assignment of Borrower's rights and obligations
under the Mutual Services Agreement to be entered into between Borrower and the
Western Area Power Administration);
60. United States Department of Energy Western Area Power Administration
(consenting to the collateral assignment of Borrower's rights and obligations
under the Electric Interconnection Agreement to be entered into between Borrower
and Western Area Power Administration to provide for electrical interconnection
of the Sutter Project into the Western Area Power Administration transmission
system); and
61. Arizona Electric Power Cooperative, Inc. (consenting to the
collateral assignment of Borrower's rights and obligations under the Agreement
for Operation and Maintenance of the Topock Substation to be entered into
between the Arizona Electric Power Cooperative, Inc. and Borrower).
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EXHIBIT F-1
to Credit Agreement
BORROWER'S CLOSING CERTIFICATE
Pursuant to the Credit Agreement (as defined below), the undersigned
hereby certifies on this __ day of ____ 1999 to The Bank of Nova Scotia, as
Administrative Agent under that certain Credit Agreement dated as of October 20,
1999 (the "Credit Agreement") among Calpine Construction Finance Company, L.P.,
a Delaware limited partnership, as Borrower ("Borrower"), the financial
institutions listed on Exhibit H thereto, (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent ("Administrative
Agent"), that:
1. Attached hereto are true, complete and correct copies of each
Project Document, and material Additional Project Documents in existence as of
the Closing Date, and any supplements or amendments thereto, as listed below:
(a) The Prime Construction Contracts, including (i) Contract for
Construction between Borrower, as successor in interest to Magic Valley
Generation, L.P. and Zachry Construction Corporation, dated March 26, 1999, (ii)
Contract for Engineering, Procurement, and Construction between Borrower, as
successor in interest to CPN South Point, LLC and The South Point Joint Venture,
dated April 12, 1999, (iii) Contract for Engineering, Procurement, and
Construction between Borrower, as successor in interest to Calpine Sutter, LLC,
and Bechtel Power Corporation, dated as of June 1, 1999, and (iv) Contract
Agreement between General Electric Company and Borrower, as successor in
interest to Westbrook, LLC for the Westbrook Power Project Combined Cycle Power
Plant Westbrook, Maine, dated as of February 5, 1999;
(b) The Power Island Supply Contracts, including (i) Purchase
Contract between Westinghouse Power Generation and Borrower, as successor in
interest to Calpine Corporation, dated as of June 30, 1998, (ii) Purchase
Contract for Power Island Equipment between Siemens Westinghouse Power
Corporation and Borrower, as successor in interest to CPN South Point, LLC,
dated as of March 15, 1999, and (iii) Purchase Contract for Power Island
Equipment between Siemens Westinghouse Power Corporation and Borrower, as
successor in interest to Calpine Sutter, Inc., dated as of December 16, 1998;
(c) The Engineering Contracts, including Contract for
Professional Services between Sargent & Lundy, L.L.C. and Borrower, as successor
in interest to Magic Valley Generation, L.P., dated as of December 8, 1998;
(d) The Maintenance Contracts, including (i) Maintenance Contract
between Westinghouse Power Generation and Borrower, as successor in interest to
Calpine Corporation, dated as of June 30, 1998, (ii) Maintenance Contract
between Siemens Westinghouse Power Corporation and Borrower, as successor in
interest to Calpine Corporation,
<PAGE> 377
dated as of March 19, 1999, (iii) Maintenance Contract between Siemens
Westinghouse Power Corporation and Borrower, as successor in interest to Calpine
Corporation, dated as of December 18, 1998, and (iv) Long Term Parts & Long Term
Service Contract between Borrower, as successor in interest to Westbrook Power,
LLC and General Electric International, dated as of February 5, 1999;
(e) The Construction Management Agreements;
(f) The Project Documents related to the delivery of water to the
Projects; including (i) Agreement for Purchase of Treated Effluent Water,
between the City of Edinburg and Borrower, as successor in interest to Calpine
Corporation dated April 21, 1998; First Amendment to Agreement for Purchase of
Treated Effluent Water by and between the City of Edinburg and Borrower, as
successor in interest to Magic Valley Generation, L.P. dated August 4, 1999,
(ii) Master Agreement for Purchase and Sale of Water by and between Hidalgo
County Irrigation District No. Two and Borrower, as successor in interest to
Magic Valley Generation, L.P., dated June 17, 1999, (iii) Water Delivery
Contract by and between Hidalgo County Irrigation District No. One and Borrower,
as successor in interest to Magic Valley Generation, L.P., dated July 19, 1999,
(iv) Earnest Money Contract between Bayview Irrigation District No. 11 and
Borrower, as successor in interest to Magic Valley Generation, L.P., dated July
27, 1999; and (v) Agreement by and between Borrower, as successor in interest to
Westbrook Power, LLC, and Portland Water District, dated as of February 17,
1999;
(g) The Leases, including (i) Amended and Restated Ground Lease
Agreement, executed as of August 4, 1999 and approved as BIA Lease B1778-FM on
August 19, 1999 between the Fort Mojave Indian Tribe, a federal recognized
Indian Tribe and Borrower;
(h) the O&M Agreements;
(i) the Project Management Agreements;
(j) the Gas Supply Contracts;
(k) the Gas Transportation Agreements;
(1) the Fuel Management Agreements;
(m) the Power Purchase Agreements, including Power Purchase and
Sale Agreement between Calpine Power Services Company and Borrower, as successor
in interest to Magic Valley Electric Cooperative, Inc., dated as of May 22,
1998;
(n) the Power Marketing Agreements;
2. All of the documents listed above are in full force and effect in
accordance with their terms.
3. Borrower is not and, to Borrower's knowledge, no other party to
any Operative Document (other than any Additional Project Document not in
existence as of the
2
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Closing Date) is, or, but for the passage of time or the giving of notice or
both will be, in breach of any material obligation thereunder which is
reasonably expected to have Material Adverse Effect on Borrower or any Project.
4. Each Applicable Permit listed in Part I(A) of Exhibits G-3A, B, C
and D is in full force and effect, and except as disclosed therein, is not
subject to appeals or further proceedings or to any unsatisfied condition that
could reasonably be expected to have a Material Adverse Effect on Borrower or
any Project. Borrower has no reason to believe that any Permit identified in
Part II(A) of Exhibits G-3A, B, C or D will not be obtained without material
difficulty or delay by the time they are needed.
5. Each representation and warranty made in Article 4 of the Credit
Agreement is true and correct as of the Closing Date.
6. There exists no Event of Default or Inchoate Default or, with
respect to any Project, Non-Fundamental Project Default or Non-Fundamental
Project Inchoate Default as of the Closing Date.
7. The conditions precedent set forth in Section 3.1 of the Credit
Agreement have been satisfied or have been waived in writing by Administrative
Agent with the consent of the Banks.
8. The copies of the annual and quarterly financial statements of
Borrower delivered by Borrower pursuant to Section 3.1.20 of the Credit
Agreement are true and correct in all material respects and are the most recent
annual and quarterly financial statements of Borrower. As of the Closing Date,
no material adverse change in the consolidated assets, liabilities, operations
or financial condition of Borrower has occurred from those set forth on such
financial statements.
All capitalized terms used herein which are defined in the Credit
Agreement shall have the meaning given to them in the Credit Agreement unless
otherwise defined herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned has duly executed this
certificate on behalf of the Borrower as of the date first written above.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
By: CALPINE CCFC GP, INC.,
a Delaware corporation,
its General Partner
By:
---------------------------------------
Name:
Title:
<PAGE> 380
EXHIBIT F-2
to Credit Agreement
[MARSH USA INC. LETTERHEAD]
______, 1999
The Bank of Nova Scotia,
as Lead Arranger for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Credit Suisse First Boston
as Lead Arranger for the Banks
Eleven Madison Avenue
New York, New York 10010
Attn: Manager, Project Finance
Re: Magic Valley, South Point, Sutter and Westbrook Projects (the
"Initial Projects")
Ladies and Gentlemen:
The undersigned, a duly authorized officer of Marsh USA, Inc., a
Delaware corporation ("Insurance Consultant"), hereby provides this letter to
you in accordance with Section 3.1.9/3.3.10 of that certain Credit Agreement
dated as of October 20, 1999 (the "Credit Agreement"), among Calpine
Construction Finance Company, L.P., a Delaware limited partnership, as Borrower
("Borrower"), the financial institutions listed on Exhibit H thereto (the
"Banks"), Credit Suisse First Boston, as Lead Arranger, Syndication Agent and
Bookrunner and The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent. Except as provided herein, all terms used herein which are
defined in the Credit Agreement shall have the meanings given therein.
Insurance Consultant acknowledges that pursuant to the Credit Agreement, the
Banks will be providing financing to Borrower for the construction of the
Initial Projects and in so doing will be relying on this certificate and the
Insurance Consultant's report dated _________. Such report represents Insurance
Consultant's professional opinion as of such date and as of the date hereof.
Attached hereto as Exhibit A is a true, correct and complete list of the
coverages which have been obtained to date in connection with the Initial
Projects as evidenced by certificates of insurance and cover notes supplied by
Borrower.
Upon delivery of the original certificates of insurance, copies of
which are attached as Appendix A, Borrower will have provided satisfactory
evidence of compliance with the provisions of Exhibit K to the Credit Agreement.
Sincerely,
MARSH USA, INC.
<PAGE> 381
EXHIBIT F-3
to Credit Agreement
[R.W. BECK INC. LETTERHEAD]
______, 1999
The Bank of Nova Scotia,
as Lead Arranger for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Credit Suisse First Boston
as Lead Arranger for the Banks
Eleven Madison Avenue
New York, New York 10010
Attn: Manager, Project Finance
Re: _________________ Project(s)
Ladies and Gentlemen:
The undersigned, a duly authorized representative of R.W. Beck,
Inc., a Washington corporation ("Independent Engineer"), hereby provides this
letter to you in accordance with Section 3.1.11/3.3.12 of that certain Credit
Agreement dated as of October 20, 1999 (the "Credit Agreement"), among Calpine
Construction Finance Company, L.P., a Delaware limited partnership, as Borrower
("Borrower"), the financial institutions listed on Exhibit H thereto, Credit
Suisse First Boston ("CSFB"), as Lead Arranger, Syndication Agent and
Bookrunner, The Bank of Nova Scotia ("BNS"), as Lead Arranger, LC Bank and
Administrative Agent (BNS and CSFB collectively as the "Lead Arrangers"), TD
Securities (USA) Inc., as Co-Arranger and Co-Documentation Agent and CIBC Inc.,
as Co-Arranger and Co-Documentation Agent. Except as provided herein, all terms
used herein which are defined in the Credit Agreement shall have the meanings
given therein.
R.W. Beck, Inc. has been retained by the Lead Arrangers as the
Independent Engineer and it has prepared an Independent Engineer's Report dated
October 12, 1999 (the "Independent Engineer's Report").
The Independent Engineer's Report was prepared pursuant to the
scope of services under our Professional Services Agreement with the Lead
Arrangers and those services were provided in accordance with generally accepted
engineering practices.
In connection with the preparation of the Independent Engineer's
Report, personnel of the Independent Engineer have participated in meetings or
telephone discussions with representatives of Calpine Corporation and it's
affiliates, the Borrower, counsel to the Borrower, the Lead Arrangers and
counsel to the Lead Arrangers in regard to the Initial Projects.
This letter is solely for the information of, and assistance to,
the Lead Arrangers in conducting and documenting its investigation of the
matters covered by the Independent Engineer's Report
<PAGE> 382
in connection with the Initial Projects and is not to be used, circulated,
quoted or otherwise referred to within or without the lending group for any
purpose, nor is it to be referred to in whole or in part in any other document,
except that reference may be made to it in the above-mentioned Credit Agreement
or in any list of closing documents pertaining to the Initial Projects.
Sincerely,
R.W. BECK INC.
<PAGE> 383
EXHIBIT F-4
to Credit Agreement
[FUEL CONSULTANT LETTERHEAD]
_______________, 1999
The Bank of Nova Scotia,
as Lead Arranger for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn. Manager, Project Finance
Credit Suisse First Boston
as Lead Arranger for the Banks
Eleven Madison Avenue
New York, New York 10010
Attn: Manager, Project Finance
Re: ____________________________ Project(s)
Ladies and Gentlemen:
The undersigned, a duly authorized officer of __________________,
("Fuel Consultant"), hereby provides this letter to you in accordance with
Section 3.1.13/3.3.14 of that Credit Agreement dated as of October 20, 1999 (the
"Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower ("Borrower"), the financial
institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse First
Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of Nova
Scotia, as Lead Arranger, LC Bank and Administrative Agent. Except as provided
herein, all terms used herein which are defined in the Credit Agreement shall
have the meanings given therein.
Fuel Consultant acknowledges that pursuant to the Credit
Agreement, the Banks will be providing financing to the Borrower for the
construction of the above-referenced Project(s) and in so doing will be relying
on this Certificate and Fuel Consultant's report dated _____________. Fuel
Consultant certifies that attached hereto as Exhibit A is a true, correct and
complete copy of Fuel Consultant's report, and that said report represents Fuel
Consultant's professional opinion as of the date hereof. Further, Fuel
Consultant confirms, as of the date hereof, the evaluation, estimates,
projections, conclusions and recommendations contained in such report.
Sincerely,
[FUEL CONSULTANT]
<PAGE> 384
EXHIBIT F-5
to Credit Agreement
[INDEPENDENT POWER MARKETING CONSULTANT LETTERHEAD]
___________, 1999
The Bank of Nova Scotia
as Lead Arranger for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Credit Suisse First Boston
as Lead Arranger for the Banks
Eleven Madison Avenue
New York, New York 10010
Attn: Manager, Project Finance
Re: ______________________ Project(s)
Ladies and Gentlemen:
The undersigned, a duly authorized representative of ,
("Independent Power Marketing Consultant"), hereby provides this letter to you
in accordance with Section 3.1.14/3.3.15 of that certain Credit Agreement dated
as of October 20, 1999 (the "Credit Agreement"), among Calpine Construction
Finance Company, L.P., a Delaware limited partnership, as Borrower ("Borrower"),
the financial institutions listed on Exhibit H thereto (the "Banks"), Credit
Suisse First Boston, as Lead Arranger, Syndication Agent and Bookrunner and The
Bank of Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent. Except
as provided herein, all terms used herein which are defined in the Credit
Agreement shall have the meanings given therein.
Independent Power Marketing Consultant acknowledges that pursuant
to the Credit Agreement, the Banks will be providing financing to the Borrower
for the construction of the above-referenced Project(s) and in so doing will be
relying on this certificate and Independent Power Marketing Consultant's report
dated ____________. Independent Power Marketing Consultant certifies that
attached hereto as Exhibit A is a true, correct and complete copy of Independent
Power Marketing Consultant's report, and that said report represents Independent
Power Marketing Consultant's professional opinion as of such date and as of the
date hereof. Further, since the date of the aforementioned Independent Power
Marketing Consultant's report, nothing has come to our attention which would
cause us to change that report.
Sincerely,
[INDEPENDENT POWER MARKETING CONSULTANT]
<PAGE> 385
APPENDIX G-1A - DESCRIPTION OF MAGIC VALLEY PROJECT
Magic Valley is a 730 MW gas-fired combined cycle power plant currently under
construction in Edinburg, Texas on a 59.6-acre site. It will consist of two 230
MW Westinghouse model 501 "G" gas turbines, with one 250 MW Westinghouse
condensing steam turbine, a water-cooled steam condenser, and other ancillary
equipment. Magic Valley is being constructed using Calpine's "owner construct"
approach, with Siemens Westinghouse supplying the combustion turbines, HRSGs,
steam turbine, condenser, SCR, and other associated equipment. Zachry
Construction Corporation is the Construction Contractor, while Sargent & Lundy,
L.L.C. is providing engineering services. The Project's construction is expected
to last 24 months, with commercial operation scheduled for April 2001. The
Project will sell 250 MW to 400 MW of the net electrical output to Magic Valley
Electric Cooperative, Inc. under a 20-year power sales agreement, and will sell
the balance of the net electrical output into the ERCOT wholesale merchant power
market. The Project will be an Eligible Facility, and Borrower will be an Exempt
Wholesale Generator with respect to this Project.
<PAGE> 386
APPENDIX G-1B-DESCRIPTION OF SOUTH POINT PROJECT
South Point is a 545 MW gas-fired combined cycle power plant currently under
construction on a 320-acre site leased from the Fort Mojave Indian Tribe on
their Reservation in Arizona, approximately 110 miles south of Las Vegas,
Nevada. The electricity generated will be sold to the Arizona, Nevada and
California (WSCC) power markets. The Project will be an Eligible Facility, and
Borrower will be an Exempt Wholesale Generator with respect to this Project.
South Point will be constructed using a modified engineering, procurement and
construction approach. Siemens Westinghouse Power Corporation will supply and
guarantee performance of the power island equipment consisting of two 185 MW
Westinghouse model 501 FD combustion turbines with a 190 MW steam turbine,
condenser, selective catalytic reduction, and other associated equipment. The
design, engineering, procurement and construction of the balance-of-plant
equipment will be performed under a fixed-price, date-certain contract with a
joint venture between The Industrial Company and the Utility Engineering
Corporation. Calpine Corporation will be responsible for integrated project
management as well as for start up and commissioning. Construction of the
project commenced in June 1999, with commercial operation planned for May 2001.
<PAGE> 387
APPENDIX G-1C - DESCRIPTION OF THE WESTBROOK PROJECT
Westbrook is a 540 MW gas-fired combined cycle merchant power plant located in
Westbrook, Maine on a 30-acre parcel of industrial park property. General
Electric Company ("GE") is constructing the Westbrook project pursuant to a
fixed-price, date-certain EPC contract. Construction is expected to last 24
months, with commercial operation taking place in February 2001. The Project
will sell electricity into the wholesale merchant power market.
The Project will ultimately be an Eligible Facility.
<PAGE> 388
APPENDIX G-1D - DESCRIPTION OF SUTTER PROJECT
Sutter is a 545 MW gas-fired, combined cycle power plant currently under
construction on 19 acres of Calpine's existing 77-acre Greenleaf project site
approximately seven miles southwest of Yuba City, California. Sutter will sell
electricity into the WSCC wholesale merchant power market. The Project will be
an Eligible Facility, and Borrower will be an Exempt Wholesale Generator with
respect to this Project.
Sutter will be constructed using a modified engineering, procurement and
construction approach. Siemens Westinghouse Power Corporation will supply and
guarantee performance of the power island equipment consisting of two 170 MW
Westinghouse model 501 FD combustion turbines with a 160 MW steam turbine and
two Vogt NEM ("NEM") heat recovery steam generators, selective catalytic
reduction, and other associated equipment. Bechtel Power Corporation will
perform the design, engineering, procurement, and construction of the
balance-of-plant equipment, including the air-cooled condenser, under a
fixed-price, date-certain contract. Calpine Corporation will be responsible for
integrated project management as well as for start up and commissioning.
Construction of the Project commenced in June 1999 and commercial operation is
scheduled for April 2001.
<PAGE> 389
APPENDIX G-1E - DESCRIPTION OF ONTELAUNEE PROJECT
Ontelaunee, located in Berks County, Pennsylvania, will be a 546 MW gas-fired
combined cycle generation unit, which will sell electricity into the MAAC
wholesale merchant power market. The unit will be located on land optioned from
two private owners. The Project will be an Eligible Facility, and Borrower will
be an Exempt Wholesale Generator with respect to this Project.
Power will be produced from two Siemens Westinghouse 501 FD combustion turbines.
The Project will also be configured with two heat recovery steam generators
("HRSG") and a condensing reheat steam turbine.
<PAGE> 390
APPENDIX G-1F - DESCRIPTION OF EASTERN REGION PROJECT 03
Eastern Region Project 03 will be located in Florida. It will be a 545 MW
gas-fired combined cycle generation unit, which will sell electricity into the
SERC wholesale merchant power market. The unit will be located on a twenty-acre
parcel of land. The Project will be an Eligible Facility, and Borrower will be
an Exempt Wholesale Generator with respect to this Project.
Power will be produced from two Siemens Westinghouse 501 FD combustion turbines.
The Project will also be configured with two heat recovery steam generators
("HRSG") and a condensing reheat steam turbine.
<PAGE> 391
APPENDIX G-1G - DESCRIPTION OF EASTERN REGION PROJECT 01
[*]
<PAGE> 392
APPENDIX G-1H - DESCRIPTION OF EASTERN REGION PROJECT 02
[*]
<PAGE> 393
APPENDIX G-1I - DESCRIPTION OF EASTERN REGION PROJECT 04
Eastern Region Project 04 will be located in Florida. It will be a 500 MW
gas-fired combined cycle generation unit, which will sell electricity into the
SERC wholesale merchant power market. The unit will be located on approximately
35 acres optioned from a private landowner. The Project will be an Eligible
Facility, and Borrower will be an Exempt Wholesale Generator with respect to
this Project.
Power will be produced from two Siemens Westinghouse 501 FD combustion turbines.
The Project will also be configured with two heat recovery steam generators
("HRSG") and a condensing reheat steam turbine.
<PAGE> 394
APPENDIX G-1J - DESCRIPTION OF LOST PINES PROJECT
Lost Pines, located in Bastrop County, Texas, will be a 545 MW gas-fired
combined cycle generation unit, which will be jointly owned with Gentex Power
Corporation, a wholly owned subsidiary of Lower Colorado River Authority. Lost
Pines will be located on a 10-acre site on the Gentex-owned Sim Gideon power
plant site. Borrower and Gentex will each own a 50% undivided interest in the
Project. The Lost Pines Project will sell electricity into the ERCOT wholesale
merchant power market. The Project will be an Eligible Facility, and Borrower
will be an Exempt Wholesale Generator with respect to this Project.
Power will be produced from two Siemens Westinghouse 501 F-D combustion
turbines. The Project will also be configured with two heat recovery steam
generators and a condensing reheat steam turbine.
<PAGE> 395
APPENDIX G-1K - DESCRIPTION OF CENTRAL REGION PROJECT 01
Central Region Project 01 will be located in Alabama. It will be a 734 MW
gas-fired combined cycle cogeneration unit, which will sell steam and a portion
of its electricity to a large industrial company. The unit will be located
inside the fence of the industrial company on leased land owned by the company.
The Project will be a Qualifying Facility under PURPA and will be able to sell
power above the 168 MW maximum offtaker's capacity requirement into the SERC
wholesale market.
Power will be produced from three Siemens Westinghouse 501 F-D Combustion
turbines. The Project will also be configured with three heat recovery steam
generators ("HRSG") and a full condensing reheat steam turbine. The company's
maximum steam requirements can be provided from only one of the HRSGs.
<PAGE> 396
APPENDIX G-1L - DESCRIPTION OF BAYTOWN PROJECT
Baytown, located in Chambers County, Texas, will be a 780 MW gas-fired combined
cycle cogeneration unit, which will sell steam and a portion of its electricity
to the Bayer Corporation. The unit will be located on 18 acres of leased land
inside the Bayer Chemical facility that is owned by Bayer. The Project will be a
Qualifying Facility under PURPA and will be able to sell power above Bayer's 290
MW maximum capacity requirement into the SPP wholesale market.
Power will be produced from three Siemens Westinghouse 501 F-D combustion
turbines. The Project will also be configured with three heat recovery steam
generators and a condensing extraction steam turbine. Approximately 1,000-kpph
steam will be provided to Bayer from an extraction off of the steam turbine.
<PAGE> 397
APPENDIX G-1M - DESCRIPTION OF LYONDELL CITGO PROJECT
Lyondell CITGO, located in Pasadena, Harris County, Texas will be a 545 MW
gas-fired combined cycle cogeneration unit, which will sell steam and a portion
of its electricity production to Lyondell CITGO Refining ("LCR"). The unit will
be located on a leased 10-acre site owned by LCR just outside the refinery. The
Project will be a Qualifying Facility under PURPA and will be able to sell power
above the refiner's 172 MW maximum capacity requirement into the ERCOT wholesale
market.
Power will be produced initially from one Siemens Westinghouse 501 F-D
combustion turbine, which will be configured with a heat recovery steam
generator ("HRSG"). A second Siemens Westinghouse 501 F-D combustion turbine and
an additional HRSG will be added along with a condensing reheat steam turbine
after the initial combustion turbine reaches commercial operation. LCR's maximum
steam requirements of 600 kpph can be provided from only one of the HRSGs.
<PAGE> 398
APPENDIX G-1N - DESCRIPTION OF CENTRAL REGION PROJECT 02
[*]
<PAGE> 399
APPENDIX G-1O - DESCRIPTION OF LOS MEDANOS PROJECT
The Los Medanos Energy Facility, located in Contra Costa County, California,
will be a 530 MW gas-fired combined cycle cogeneration unit, which will sell
steam and a portion of its electricity to USS-POSCO Industries ("UPI"). The unit
will be located "outside the fence" of UPI on land leased from UPI. The Project
will be a Qualifying Facility under PURPA and will be able to sell power above
55 MW capacity requirement into the WSCC wholesale market.
Power will be produced from two General Electric 7241 FA Combustion turbines.
The Project will also be configured with two heat recovery steam generators
("HRSG") and a condensing reheat steam turbine. Steam will be provided to UPI
from the HRSGs when the gas turbine is operating and from one auxiliary boiler
when the turbines are down for maintenance or forced outages.
<PAGE> 400
APPENDIX G-1P - DESCRIPTION OF WEST PHOENIX PROJECT
West Phoenix, located in Arizona, will be a nominally rated 500 MW gas-fired
combined cycle generation unit which will be jointly owned with Pinnacle West
Capital Corporation ("PNW)". Borrower and PNW will each own a 50% undivided
interest in the Project. The West Phoenix Project will sell electricity into the
WSCC wholesale merchant power market. The unit will be located on land leased
from Arizona Public Service adjacent to its existing West Phoenix Power Plant.
The Project will be an Eligible Facility, and Borrower will be an Exempt
Wholesale Generator with respect to this Project.
Power will be produced from two Siemens Westinghouse 501 FD2 combustion
turbines. The Project will also be configured with two heat recovery steam
generators ("HRSG") and a condensing reheat steam turbine.
<PAGE> 401
APPENDIX G-1Q - DESCRIPTION OF DELTA PROJECT
Delta Energy Center, located in Contra Costa County, California, will be an 800
MW gas-fired combined cycle generation unit, which may be jointly owned with
Bechtel Enterprises Holdings, Inc. or one of its wholly owned subsidiaries.
Borrower will either own 100% of the Project or Borrower and Bechtel will each
own a 50% undivided interest in the Project. The Delta Project will sell
electricity into the WSCC wholesale merchant power market. The unit will be
located at Calpine's Pittsburg I power plant. The Project will be an Eligible
Facility, and Borrower will be an Exempt Wholesale Generator with respect to
this Project.
Power will be produced from three Siemens Westinghouse 501 FD2 combustion
turbines. The Project will also be configured with three heat recovery steam
generators ("HRSG") and a condensing reheat steam turbine.
<PAGE> 402
APPENDIX G-1R - DESCRIPTION OF METCALF PROJECT
Metcalf Energy Center, located in Santa Clara County, California, will be a 545
MW gas-fired combined cycle generation unit, which may be jointly owned with
Bechtel Enterprises Holdings, Inc. or one of its wholly owned subsidiaries.
Borrower will either own 100% of the Project or Borrower and Bechtel will each
own a 50% undivided interest in the Project. The Metcalf Project will sell
electricity into the WSCC wholesale merchant power market. The unit will be
located on land to be purchased by the Project. The Project will be an Eligible
Facility, and Borrower will be an Exempt Wholesale Generator with respect to
this Project.
Power will be produced from two Siemens Westinghouse 501 FD2 combustion
turbines. The Project will also be configured with two heat recovery steam
generators ("HRSG") and a condensing reheat steam turbine.
<PAGE> 403
APPENDIX G-1-S
WESTERN REGION PROJECT 04
[*]
<PAGE> 404
APPENDIX G-2-A
MAGIC VALLEY POWER MARKETING PLAN
[*]
<PAGE> 405
APPENDIX G-2-B
SOUTH POINT POWER MARKETING PLAN
[*]
<PAGE> 406
APPENDIX G-2-C
WESTBROOK POWER MARKETING PLAN
[ * ]
<PAGE> 407
APPENDIX G-2-D
SUTTER POWER MARKETING PLAN
[ * ]
<PAGE> 408
Appendix G-3A
MAGIC VALLEY:
<TABLE>
<CAPTION>
Date Issued
Permit Issuing Agency Or Required
- ------ -------------- -----------
<S> <C> <C>
PART I. APPLICABLE PERMITS
A. BORROWER
Texas Air Permit to Operate/PSD Permit TNRCC Issued on
December 31, 1998
TPDES wastewater TNRCC Final permit issued
Discharge permit on July 16, 1999
Certify Project DOE Submit before start of
capability to use construction; submitted
alternate fuel on September 16, 1999
Rural Utility Service Approval of RUS Approval dated 4/8/99
MVEC Agreements
Notice of Intent for EPA Two days before start
NPDES General Stormwater Of construction;
Construction Permit submitted on September
28, 1998, and March 22,
1999
Stormwater Pollution EPA Complete two days
Prevention Plan before start of
construction; completed
on September 22, 1998
and March 17, 1999
Confirm that no protected Texas Historical THC sent confirmation
cultural resources are located Comm'n on March 13, 1998 and
on site March 31, 1999
Change zoning to heavy industrial City of Edinburg Change was approved on
September 1, 1998
Clean Water Act Section 404 USACE Letters stating no
Permit/Certification permit required dated
May 26, 1999 and
September 28, 1999.
Development permit Hidalgo County Exemption certificate
</TABLE>
<PAGE> 409
<TABLE>
<CAPTION>
Date Issued
Permit Issuing Agency Or Required
- ------ -------------- -----------
<S> <C> <C>
issued on October 21,
1999
Drainage System Discharge Permit Hidalgo County Drainage Dated September 9, 1999
District No. 1
Obtain building permit City of Edinburg Permit was issued on
September 10, 1999
Final Plat Approval City of Edinburg Dated on or about 6/4/99
Obtain approval for discharge Hidalgo County Drainage City of Edinburg
into drainage system District No. 1 obtained approval on
September 13, 1999
B. THIRD PARTY
City of Edinburg, amend TNRCC Issued on February 22,
existing reclaimed water 1999
reuse approval
PART II. PERMITS (TO BE OBTAINED)
A. BORROWER
Exempt Wholesale Generator FERC Prior to making sales
Certification of electric energy
Federal Power Act Section 205 FERC Prior to making sales
Approval of electric energy
CAA Title V Permit TNRCC Apply no later than the
start of operation;
short application was
filed April 20, 1999
CAA Title IV Phase II TNRCC Submit application and
Acid Rain Permit compliance plan for NOx
24 months before the
later of January 1, 2000,
or start of operation;
application was
submitted April 20,
1999
</TABLE>
<PAGE> 410
<TABLE>
<CAPTION>
Date Issued
Permit Issuing Agency Or Required
- ------ -------------- -----------
<S> <C> <C>
Obtain certificate for transfer TNRCC Transfer was requested
of water rights purchased on September 17, 1999;
from Bayview Irrigation request for conversion
District; convert water use will be initiated after
after transfer transfer
Register as electric Texas PUC Within 30 days of start
wholesale generator of generation
CAA Continuous TNRCC Apply within 120 days
Emission Monitoring of commencing system
Certification commercial operations
B. THIRD PARTY
City of McAllen, amend TNRCC City will seek
Existing water reuse approval amendment before
providing reclaimed
water to Project
United Irrigation District, convert TNRCC/Watermaster United will convert
water use under its water rights before commencing
delivery of raw water
on October 1, 2000
United Irrigation District, submit TNRCC/Watermaster Submit prior to
annual contract delivery on October 1,
2000, and on or before
January 15 of each
subsequent year
Hidalgo County Irrigation District TNRCC/Watermaster HCID No. 2 will convert
No. 2, convert water use under before commencing
its water rights delivery of raw water
on October 1, 2000
Hidalgo County Irrigation District TNRCC/Watermaster Submit before delivery
No. 2, submit annual contract of raw water on October
1, 2000, and before
January 1, 2001 through
2005
</TABLE>
<PAGE> 411
Appendix G-3B
SOUTH POINT:
<TABLE>
<CAPTION>
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
<S> <C> <C>
PART I.
Final Environmental Impact Bureau of Indian 01/99
Statement (FEIS) re: Lease Affairs
Agreement(1)
FEIS Record of Decision Bureau of Indian 03/99
re: Lease Agreement Affairs
CAA Permit to Construct and Environmental Protection 05/24/99
Commence Initial Operation Agency
of the Project/PSD Permit
Finding of No Significant Impact Bureau of Land Management 12/12/97
and Rights-of-Way for Construction
Operation, Maintenance and
Termination of Substation and
Transmission Lines to the Project(2)
Right-of-Way Grant and Bureau of Land Management 06/17/99
and Temporary Use Permit
for Placement and Construction of
Gas Pipeline to the Project(3)
</TABLE>
- ----------
(1) Amended Ground Lease Agreement between Fort Mojave Indian Tribe and
Calpine South Point, Inc.
(2) 30-year term subject to renewal.
(3) Right-of-Way has term of 20 years subject to renewal; temporary use permit
for construction has two-year term from 05/12/99 subject to renewal.
<PAGE> 412
<TABLE>
<CAPTION>
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
<S> <C> <C>
Notice of Intent for Baseline Environmental Protection NOI dated 08/02/99
Construction Stormwater Agency
Discharges from
Construction of the Project(4)
Stormwater Pollution Prevention Environmental Protection Dated 7/9/99
Plan
Clean Water Act Section 404 Nationwide Corps of Engineers 03/18/99
Permit 12 for Construction of Water
Supply Pipeline to the Project(5)
Clean Water Act Section 401 Environmental Protection 12/13/96(6)
Water Quality Certification Agency
in Indian Country for Construction
of Water Supply Pipeline to the Project
Clean Water Act Section 404 Corps of Engineers Jurisdictional
Nationwide Permit 14 for submittal filed
Construction of the Project
Clear Water Act Section 401 Environmental Protection 12/13/96(7)
Water Quality Certification in Agency
Indian Country for Construction
of the Project
Self Certification of Coal U.S. Department of Energy Filed 09/01/99
Capability under Power Plant and
Industrial Fuel Use Act
Planned Area Development Plan FMIT June 2, 1999
Water Use Permit FMIT March 15, 1999
Building Permit FMIT June 7, 1999
</TABLE>
- ----------
(4) Pollution Prevention Plan has been filed separately.
(5) Two-year term from 03/18/99 unless modified, reissued or revoked; may also
require a Notice of Intent for baseline construction stormwater
discharges.
(6) Conditional EPA CWA Section 401 water quality certification exists for CWA
Section 404 Nationwide Permit 12.
(7) Conditional EPA CWA Section 401 water quality certification exists for CWA
Section 404 Nationwide Permit 14.
<PAGE> 413
<TABLE>
<CAPTION>
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
<S> <C> <C>
Determination of No Hazard to Federal Aviation Administration Issued 08/31/99(8)
Air Navigation
PART II.
Exempt Wholesale Generator Certification FERC Prior to making sales of electric
energy
Federal Power Act Section 205 Approval FERC Prior to making sales of electric
energy
CAA Title IV Acid Rain Permit Environmental Protection Application was filed
Agency 07/28/99; permit not
yet issued
CAA Title V Permit Environmental Protection Application must be
to Operate Agency filed within one year
after commencement
of initial operation
Notice of Intent for Environmental Must be filed two
Multi-Sector Storm Water Protection days before
Discharges from Operation Agency commencement of
of the Project operation(9)
Clean Water Act Section 404 Environmental Before commencement
Nationwide Permit 12 for Protection Agency of construction(10)
Construction of Natural Gas
Pipeline to the Project(11)
</TABLE>
- ----------
(8) Expires 03/14/01 unless extended, revised or terminated by the issuing
office.
(9) Separate Pollution Prevention Plan will need to be filed.
(10) See Opinion of Steptoe & Johnson dated November 3, 1999.
(11) May also require a Notice of Intent for construction stormwater discharges
and related Pollution Prevention Plan.
<PAGE> 414
<TABLE>
<CAPTION>
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
<S> <C> <C>
Clean Water Act Section 404 Environmental 12/13/96(12)
Water Quality Certification Protection Agency
In Indian Country for Construction
of Natural Gas Pipeline to the
Project
</TABLE>
- ----------
(12) Conditional EPA CWA Section 401 water quality certification exists for CWA
Section 404 Nationwide Permit 12
<PAGE> 415
Appendix G-3C
WESTBROOK:
PART I
<TABLE>
<CAPTION>
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
<S> <C> <C>
Powerplant and Industrial Fuel Use U.S. Dept of Energy Office of Coal September 16, 1999
Act Self Certification of Coal & Power IM/EX
Capability
PUC Approval of the Water Agreement Maine Public Utilities Commission February 25, 1999
Maine DEP Site Location of Maine Department of Environmental Issued 12/31/98
Development Act Permit Protection
Maine DEP Site Location of Maine Department of Environmental Issued 12/31/98
Development Stormwater Permit - Protection
Submitted as part of SLDA Permit
Maine DEP Site Location of Maine Department of Environmental Issued 6/23/99
Development Act Amendment Protection
Natural Resource Protection Act Maine Department of Environmental Issued 12/17/98
Permit (NRPA) Protection
Clean Water Act Section 404 Permit U.S. Army Corps of Engineers Issued 12/8/98
National Pollutant Discharge U.S. Environmental Protection Agency Issued February 22, 1999
Elimination System (NPDES)
Construction General Permit
Stormwater Pollution Prevention Plan U.S. Environmental Protection Agency Dated February 24, 1999
Conditional Use Site Plan City of Westbrook Issued 7/7/98 Extended to
7/7/99, Construction
Commenced
</TABLE>
<PAGE> 416
<TABLE>
<S> <C> <C>
Building Permit City of Westbrook Obtained by General
Contractor
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
Air License Maine Department of Environmental Issued December, 1998
Protection
Stormwater Permit for Operations EPA Region 1
FAA Notification Federal Aviation Administration Issued 1/5/99
PART II. PERMITS (TO BE OBTAINED)
Action Agency Involved Date Action Taken
- ------ --------------- -----------------
Exempt Wholesale Generator FERC Prior to making sales of
Certification electric energy
Federal Power Act Section 205 FERC Prior to making sales of
Approval electric energy
NEPOOL Interconnection Approval NEPOOL Prior to making sales of
electric energy
FERC Approval of NEPOOL NEPOOL Prior to making sales of
Interconnection electric energy
Title IV Acid Rain Permit Maine DEP Prior to operational
start-up
Title V Permit Maine DEP Must submit application
within 12 months after
operational start-up
Certificate of Occupancy City of Westbrook To be obtained by General
Contractor
Street Opening Permit City of Westbrook To be obtained by General
Contractor
Sign Permit City of Westbrook To be obtained by General
Contractor
</TABLE>
<PAGE> 417
Appendix G-3D
SUTTER:
<TABLE>
<CAPTION>
Date Issued
Permit Issuing Agency Or Required
- ------ -------------- -----------
<S> <C> <C>
PART I. APPLICABLE PERMITS
Powerplant and Industrial Fuel Use Act US Dept of Energy September 16, 1999
Act Self Certification of Coal Office of Coal & Power
Capability IM/EX
Streambed Alteration Agreement for CDFG Currently in signing
bridge construction and stormwater stages
outfall
Clean Water Act Section 401 Permit CRWQCB April 23, 1999
Waiver
Clean Water Act Section 404 Permit USACE June 3, 1999
Powerplant Site Certification California Energy April 14, 1999
Commission
Final Determination of Feather River Air Quality December 1, 1998
Compliance/Authority to Construct Management District (Errata to November 13,
(FRAQMD) 1998 FDOC)
Biological Opinion NMFS March 7, 1999
Consultation/Biological Opinion USFWS April 2, 1999
CEC Modification of Condition of CEC Dated 10/1/99
Certification BIO-7
Stormwater Discharge Permit or SWRCB May 28, 1999
Waiver/Notice of Intent for
Construction
Stormwater Pollution Prevention Plan SWRCB Dated March 20, 1999
Consistency Determination CDFG October 7, 1999
Sutter County Plan Amendment 97-04 Sutter County March 30, 1999
and Rezone 97-07
</TABLE>
<PAGE> 418
<TABLE>
<CAPTION>
Date Issued
Permit Issuing Agency Or Required
- ------ -------------- -----------
<S> <C> <C>
PART II. PERMITS (TO BE OBTAINED)
A. BORROWER
Exempt Wholesale Generator FERC Prior to making sales
Certification of electric energy
Federal Power Act Section 205 Approval FERC Prior to making sales
of electric energy
Air Permit to Operate FRAQMD Prior to operational
start-up
Permit for Waste Discharge County Environmental Prior to operational
Health Department start-up
Stormwater Discharge Permit or SWRCB Prior to operational
Waiver/Notice of Intent for start-up
Operations
CEC Modification of Condition of CEC Pending
Certification BIO-5
Streambed Alteration Agreement for CDFG Spring of 2000
gas pipeline
Federal Operating Permit Title V USEPA Must submit application
within 12 months after
operational start-up
Continuous Emission Certification Submitted to USEPA Within 180 days of
Source Test Report operational start-up
Prevention of Significant USEPA Prior to Commencement
Deterioration (PSD) Permit of Construction
Title IV Acid Rain Permit USEPA Prior to operational
start-up - Submitted
May 6, 1999
B. THIRD PARTY
De-Watering Permit CRWQCB Prior to Commencement
</TABLE>
<PAGE> 419
<TABLE>
<CAPTION>
Date Issued
Or Required
Permit Issuing Agency of Construction
- ------ -------------- -----------
<S> <C> <C>
Project Building Permit Sutter County October 19, 1999
Transportation Permits CalTrans and County Public Immediately prior to the
Works Department work being done.
Excavation Permit Cal OSHA Immediately prior to
the work being done.
Structural Permit Cal OSHA Immediately prior to
the work being done.
Well Drilling Permits Sutter County Immediately prior to the
work being done.
</TABLE>
<PAGE> 420
APPENDIX G-4-A
MAGIC VALLEY PROJECT BUDGET
[*]
<PAGE> 421
APPENDIX G-4-B
SOUTH POINT PROJECT BUDGET
[*]
<PAGE> 422
APPENDIX G-4-C
WESTBROOK PROJECT BUDGET
[*]
<PAGE> 423
APPENDIX G-4-D
SUTTER PROJECT BUDGET
[ * ]
<PAGE> 424
G-5
BASE CASE PROJECT PROJECTIONS
[ * ]
<PAGE> 425
APPENDIX G-6-A
MAGIC VALLEY PROJECT SCHEDULE
[*]
<PAGE> 426
APPENDIX G-6-B
SOUTH POINT PROJECT SCHEDULE
[*]
<PAGE> 427
APPENDIX G-6-C
WESTBROOK PROJECT SCHEDULE
[*]
<PAGE> 428
EXHIBIT G-7
Pending Litigation
None, except with respect to the following litigation relating to the Sutter
Project:
1. In the matter of Sutter Power Project, PSD Permit No. NSR 4-4-4, SAC
98-01, PSD Appeal No. 99-6;
2. Foster v. Energy Resources Conservation and Development Commission,
California Supreme Court No. SO 81009; and
3. Foster v. Energy Resources Conservation and Development Commission, Court
of Appeal, Third District, No. 3 Civ. C033265, petition for writ of review
denied October 14, 1999.
<PAGE> 429
EXHIBIT G-8
Hazardous Substances Disclosure
None, except as disclosed in:
1. Phase I Environmental Site Assessment Magic Valley Site Edinburg, Hidalgo
County, Texas dated April 1999, prepared by Environmental Consulting and
Technology, Inc.
2. Phase I Environmental Site Assessment for the Proposed Southpoint Power
Plant dated August 13, 1999, prepared by Hallock/Gross Inc.
3. Phase I Environmental Site Assessment Review and Update Sutter Power Plant
Project dated August 17, 1999, prepared by Foster Wheeler Environmental
Corporation.
4. Phase I Environmental Site Assessment of Carmichael Property (Map 4, Lot
9), Saco Street, Westbrook, Maine dated June 1998, prepared by Hoffman
Engineering Inc.
5. Analytical Summary of Phase II Environmental Site Assessment of Proposed
Westbrook Power Plant Westbrook, Maine dated December 30, 1998, prepared by
Hoffman Engineering Inc.
<PAGE> 430
EXHIBIT H
to Credit Agreement
SCHEDULE OF BANK/LENDING OFFICES
<TABLE>
<CAPTION>
Bank Percentage of Loans Allocation
- ---- ------------------- ----------
<S> <C> <C>
1. THE BANK OF NOVA SCOTIA 5.6785714290% $56,785,714.29
One Liberty Plaza, 26th Floor
New York, New York 10006
2. CREDIT SUISSE FIRST BOSTON 5.6785714290% $56,785,714.29
Eleven Madison Avenue
New York, New York 10010
3. TORONTO DOMINION (TEXAS) INC. 5.6785714290% $56,785,714.29
909 Fannin Street, Suite 1700
Houston, Texas 77010
4. CIBC INC. 5.6785714290% $56,785,714.29
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
5. BANK OF MONTREAL 5.6785714290% $56,785,714.29
115 S. LaSalle, 11th Floor
Chicago, Illinois 60603
6. BAYERISCHE HYPO-UND 5.6785714290% $56,785,714.29
VEREINSBANK AG - NEW YORK
BRANCH
c/o Bayerische Vereinsbank AG - New York
Branch
150 East 42nd Street
New York, New York 10017
7. BAYERISCHE LANDESBANK CAYMAN 5.6785714290% $56,785,714.29
ISLANDS BRANCH
560 Lexington Ave, 17th Floor
New York, NY 10022
</TABLE>
<PAGE> 431
<TABLE>
<CAPTION>
Bank Percentage of Loans Allocation
- ---- ------------------- ----------
<S> <C> <C>
8. BANQUE NATIONALE DE PARIS 5.6785714290% $56,785,714.29
725 South Figueroa Street
Suite 2090
Los Angeles, California 90017
9. DG BANK DEUTSCHE 5.6785714280% $56,785,714.28
GENOSSENSCHAFTSBANK AG,
CAYMAN ISLAND BRANCH
609 Fifth Avenue
New York, NY 10017
10. DRESDNER BANK AG NEW YORK AND 5.6785714820% $56,785,714.28
GRAND CAYMAN BRANCHES
75 Wall Street
New York, New York 10005
11. EXPORT DEVELOPMENT 5.6785714280% $56,785,714.28
CORPORATION
151 O'Connor Street
Ottawa, Ontario KIA 1K3
12. MEESPIERSON CAPITAL CORP. 5.6785714280% $56,785,714.28
3 Stamford Plaza
301 Tresser Boulevard, 9th Floor
Stamford, CT 06901-3239
13. NEWCOURT CAPITAL USA INC. 5.6785714280% $56,785,714.28
1177 Avenue of the Americas, 47th Floor
New York, New York 10036
14. CITICORP USA, INC. 5.0% $50,000,000
2 Penn's Way
New Castle, Delaware 19720
15. COBANK, ACB 5.0% $50,000,000
5500 S. Quebec St.
Englewood, Colorado 80111
16. ING (U.S.) CAPITAL LLC 5.0% $50,000,000
55 East 52nd Street,
New York, New York 10055
</TABLE>
<PAGE> 432
<TABLE>
<CAPTION>
Bank Percentage of Loans Allocation
- ---- ------------------- ----------
<S> <C> <C>
17. UNION BANK OF CALIFORNIA, N.A. 5.6785714280% $56,785,714.28
445 S. Figueroa Street, 15th Floor
Los Angeles, CA 90071
18. CREDIT LYONNAIS NEW YORK BRANCH 3.0% $30,000,000
1301 Avenue of the Americas
New York, New York 10019
19. LANDESBANK HESSEN-THURINGEN 2.5% $25,000,000
GIROZENTRALE
420 Fifth Ave.
New York, New York 10018
-------------------------------------
TOTAL 100% 1,000,000,000
</TABLE>
<PAGE> 433
EXHIBIT I
to Credit Agreement
Annual Insurance Certificate
[LETTERHEAD OF BORROWER'S INSURANCE BROKER]
[Date]
The Bank of Nova Scotia,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
Ladies and Gentlemen:
The undersigned, a duly authorized officer of _______________ a
_______________ ("Insurance Broker"), hereby provides this letter to you in
accordance with Section 5.8.8 of that certain Credit Agreement dated as of
October 20, 1999 (the "Credit Agreement"), among Calpine Construction Finance
Company, L.P., a Delaware limited partnership, as Borrower ("Borrower"), the
financial institutions listed on Exhibit H thereto (the "Banks"), Credit Suisse
First Boston, as Lead Arranger, Syndication Agent and Bookrunner and The Bank of
Nova Scotia, as Lead Arranger, LC Bank and Administrative Agent. Except as
provided herein, all terms used herein which are defined in the Credit Agreement
shall have the meanings given therein.
Insurance Broker acknowledges that pursuant to the Credit Agreement, the
Banks are providing financing to Borrower for the construction and/or operation
of the Initial Projects and Funded Subsequent Projects and in so doing are
relying on Borrower's continued compliance with the provisions of Exhibit K to
the Credit Agreement.
Insurance Broker hereby certifies that, as of the date hereof, Borrower has
obtained and is maintaining in full force and effect insurance policies
conforming, in all material respects, to the requirements set forth in Exhibit K
to the Credit Agreement.
Respectfully submitted,
<PAGE> 434
EXHIBIT J-1
to Credit Agreement
BANK WITHHOLDING CERTIFICATE (TREATY)
[Date]
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.
a Delaware limited partnership
c/o Calpine Corporation
50 W. San Fernando Street, 5th Floor
San Jose, CA 95113
Attn: Manager, Project Finance
THE BANK OF NOVA SCOTIA
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
In connection with the Credit Agreement dated as of October 20, 1999
(the "Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower, the financial institutions listed on
Exhibit H thereto, Credit Suisse First Boston, as Lead Arranger, Syndication
Agent and Bookrunner and The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent, the undersigned hereby certifies, represents and warrants
that [NAME OF RELEVANT BANK OR AGENT] is a [NAME OF COUNTRY] corporation and is
currently exempt from any U.S. federal withholding tax on amounts paid to it
from U.S. sources under the Credit Agreement by virtue of compliance with the
provisions of the Income Tax Convention between the United States and [NAME OF
COUNTRY], signed [DATE], [AS AMENDED]. Our fiscal year is the twelve months
ending [_______________________].
The undersigned (a) is a corporation organized under the laws of
[NAME OF COUNTRY] whose registered business is managed or controlled in [NAME OF
COUNTRY], (b) [DOES NOT HAVE A PERMANENT ESTABLISHMENT OR FIXED BASE IN THE
UNITED STATES/DOES HAVE A PERMANENT ESTABLISHMENT OR FIXED BASE IN THE UNITED
STATES BUT THE CREDIT AGREEMENT IS NOT EFFECTIVELY CONNECTED WITH SUCH PERMANENT
ESTABLISHMENT OR FIXED BASE], (c) is not exempt from tax on the income in [NAME
OF COUNTRY] and (d) is the beneficial owner of the income.
We enclose two signed copies of Form 1001 of the U.S. Internal
Revenue Service.
Yours faithfully,
[NAME OF RELEVANT BANK]
By:
---------------------------------------
Name:
Title:
<PAGE> 435
EXHIBIT J-2
to Credit Agreement
BANK WITHHOLDING CERTIFICATE (EFFECTIVELY CONNECTED)
[Date]
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership
c/o Calpine Corporation
50 W. San Fernando Street, 5th Floor
San Jose, CA 95113
Attn: Manager, Project Finance
THE BANK OF NOVA SCOTIA,
as Administrative Agent for the Banks
One Liberty Plaza, 26th Floor
New York, NY 10006
Attn: Manager, Project Finance
In connection with the Credit Agreement dated as of October 20, 1999,
(the "Credit Agreement"), among Calpine Construction Finance Company, L.P., a
Delaware limited partnership, as Borrower, the financial institutions listed on
Exhibit H thereto, Credit Suisse First Boston, as Lead Arranger, Syndication
Agent and Bookrunner and The Bank of Nova Scotia, as Lead Arranger, LC Bank and
Administrative Agent, the undersigned hereby certifies, represents and warrants
that [NAME OF RELEVANT BANK OR AGENT] is entitled to exemption from withholding
tax on payments to it under the provisions of Section 1441(c) of the Internal
Revenue Code of 1986, as amended, of the United States of America.
We enclose two signed copies of Form 4224 of the U.S. Internal Revenue
Service.
Yours faithfully,
[NAME OF RELEVANT BANK]
By:
---------------------------------
Name:
Title:
<PAGE> 436
EXHIBIT K
to Credit Agreement
INSURANCE REQUIREMENTS
Defined terms used in this Exhibit K not otherwise defined herein shall
have the meanings set forth in that certain Credit Agreement dated as of October
20, 1999, by and among Calpine Construction Finance Company, L.P. ("Borrower"),
a Delaware limited partnership, Credit Suisse First Boston, as Lead Arranger,
Syndication Agent and Bookrunner, and The Bank of Nova Scotia as Lead Arranger,
LC Bank and Administrative Agent, and the Banks parties thereto.
1. With respect to each Initial Project and any Funded Subsequent
Project, Borrower shall, without cost to the Banks, maintain or cause to be
maintained on its behalf in effect at all times the types of insurance required
by the following provisions together with any other types of insurance, in form
acceptable to Administrative Agent and Financing Parties, required hereunder,
with insurance companies rated "A-" or better, with a minimum size rating of "
IX," by Best's Insurance Guide and Key Ratings, (or an equivalent rating by
another nationally recognized insurance rating agency of similar standing if
Best's Insurance Guide and Key Ratings shall no longer be published) or other
insurance companies of recognized responsibility satisfactory to Administrative
Agent, the following insurance coverages until all obligations of Borrower
pursuant to the Credit Agreement and the other Credit Documents have been fully
discharged:
a. Commercial general liability insurance for such Project on an
"occurrence" policy form or AEGIS claims-first-made form, including coverage for
premises/operations, explosion, collapse and underground hazards,
products/completed operations, broad form property damage, blanket contractual
liability for both oral and written contracts, independent contractor's and
personal injury, for Borrower and for contractors, with primary coverage limits
of no less than $1,000,000 for injuries or death to one or more persons or
damage to property resulting from any one occurrence and a $ 1, 000,000 annual
aggregate limit.
The commercial general liability policy shall also include a severability
of interest clause and a cross liability clause in the event more than one
entity is "named insured" under the liability policy. Policy exclusions which
are not standard to the commercial general liability coverage form or are added
by manual endorsements or are proposed to be added after the Closing Date for
each Initial Project or after the Funding Date for each Funded Subsequent
Project, as the case may be, that restrict coverage, are to be approved by
Administrative Agent. Work performed by others for Borrower at any such Project
shall not commence until a certificate of insurance has been delivered verifying
coverages outlined above to be in place and naming Borrower as insured or
additional insured and Administrative Agent as additional insured. Deductibles
in excess of $50,000 shall be subject to review and approval by Administrative
Agent.
b. Automobile liability insurance, including coverage for owned,
non-owned and hired automobiles for both bodily injury and property damage and
containing appropriate no-fault insurance provisions or other endorsements in
accordance with state legal requirements, with limits of no less than $1,000,000
per accident with respect to bodily injury, property damage or death.
<PAGE> 437
c. Worker's compensation insurance and employer's liability
insurance, with a limit of not less than $1,000,000, disability benefits
insurance and such other forms of insurance which Borrower is required by law to
provide for any such Project, providing statutory benefits and other states'
endorsement and USL&H Act coverage and Jones Act (if any exposure exists),
covering loss resulting from injury, sickness, disability or death of the
employees of Borrower. Work performed by others for Borrower at any such Project
shall not commence until a certificate of insurance has been delivered verifying
coverages outlined above to be in place.
d. From the point of groundbreaking for each Initial Project and
any Funded Subsequent Project and through the date of Completion for such
Project, builder's risk insurance covering each such Project separately on an
"all risk basis" on a completed value form with "extended coverage" (including
earthquake (subject to the next paragraph), flood, collapse, sinkhole and
subsidence) and "soft cost coverage" on a no coinsurance basis and providing (i)
coverage for such Project site, including removal of debris, insuring the
buildings, structures, machinery, equipment, facilities, fixtures and other
properties constituting a part of each such Project in a minimum aggregate
amount not less than the full replacement value of each such Project, and in any
case subject to a construction term aggregate limit of $100,000,000 for flood
coverage and for earthquake coverage, but in no event an amount less than the
limit necessary to satisfy the other related Project contracts; (ii) off-site
coverage with a per occurrence limit of $5,000,000 or such higher amount as is
sufficient to cover off-site equipment associated with such Project, (iii)
transit coverage with a per occurrence limit of not less than the greater of
$5,000,000 or an amount sufficient to cover the full insurable value of any item
in transit, (iv) coverage for operational testing and startup with the same
dollar coverage and modifications as set out in (i) above, (v) delay in opening
coverage for interest during construction, debt service and continuing expenses
in an amount not less than an 18 month indemnification period limit, on an "all
risk" basis, as set forth in (i) through (iv) above. All such policies may have
deductibles of not greater than $250,000 per loss; earthquake and flood coverage
shall have a deductible of not greater than $250,000 with the exception of
California earthquake (for which the deductible may be 5% of values at risk),
coastal windstorm (2% deductible) and any such Project located in a 100 year
flood zone ($500,000 deductible); and-delay in opening coverage shall have a
deductible not greater than a 45 day period; operational testing shall have a
deductible of not greater than $500,000; and transit coverage shall have a
deductible of not greater than $ 100,000. Builders risk policy shall include
first party cleanup, hazardous materials, subject to a sublimit of $250,000.
At least 45 days prior to the shipment of equipment for any Initial
Project or any Funded Subsequent Project manufactured outside the United States,
ocean cargo coverage shall be secured in an amount not less than the full
replacement costs of the value of equipment shipped. Such coverage shall apply
to all equipment, destined for the applicable Project site, which is valued in
excess of $500,000 and has a lead time to replace exceeding five (5) months. The
ocean cargo policy shall attach coverage prior to equipment departing the
premises of the manufacturer and shall continue in force until the shipment
arrives at the applicable Project site including 60 days storage, or is insured
under the builders risk policy. Marine delay in opening or advanced loss of
profits shall be insured in an amount not less than the equivalent of interest
during construction, debt service and continuing expenses subject to an
indemnification period not less than twelve months or such additional time
required to repair/replace the equipment being shipped. The waiting period shall
not exceed 45 days. The ocean cargo policy shall not be subject to cancellation
with the exception of wars and strikes preventing passage to the United States
and nonpayment of premium.
<PAGE> 438
Earthquake coverage shall include coverage for movement, earthquakes,
shocks, tremors, landslides, subsidence, volcanic activity, sinkhole coverage,
mud-flow or rock-fall, or any other earth movement, all whether direct or
indirect, approximate or remote or in whole or in part caused by, contributed to
or aggravated by any physical damage insured against by such policy regardless.;
of any other cause or event that contributes, concurrently or in sequence, to
the, loss.
Flood coverage shall include, but not be limited to, coverage for waves,
tide or tidal water, inundation, rainfall and/or resulting runoff or the rising
(including the overflowing or breaking boundaries) of lakes, ponds, reservoirs,
rivers, harbors, streams, or other bodies of water, whether or not driven by
wind.
e. From and after the date of Completion for each such Project,
"all risk" property insurance coverage in the amount not less than the full
replacement value of such Project, including a full replacement cost endorsement
(no co-insurance) with no deduction for depreciation, providing, without
limitation, (i) coverages against loss or damage by fire, lightning, windstorm,
hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, other risks
from time to time included under "all risk" or "extended coverage" policies,
earthquake, flood (provided, however, that earthquake and flood coverage may be
subject to an annual aggregate limit of not less than $100,000,000 with the
exception of California (for which the limit shall be as agreed to by
Administrative Agent and Borrower and which in Administrative Agent's reasonable
discretion, after consultation with the Banks, is commercially feasible),
collapse, sinkhole, subsidence and such other perils as Administrative Agent,
after consultation with the Banks and Borrower, may from time to time require to
be insured, with a sublimit of not less than $250,000 for on-site clean-up
required as a result of the occurrence of an insured risk (ii) off-site coverage
with a per occurrence limit of $2,000,000 or such higher amount as is sufficient
to cover off-site equipment for which there have been progress payments, (iii)
transit coverage (including ocean cargo where ocean transit will be required)
with a per occurrence limit of not less than $2,000,000, and (iv) boiler and
machinery coverage on a "comprehensive" basis including breakdown and repair
with limits not less than the full replacement cost of the insured objects.
Borrower shall also maintain or cause to be maintained with respect to each such
Project, from and after the date of Completion of such Project, business
interruption insurance on an "all risk" basis as set forth in (1) through (iv)
above, in an amount equal to satisfy policy coinsurance conditions, but not less
than the sum of 12 months scheduled Debt Service attributable to such Project,
continuing expenses and profits. Borrower shall also maintain or cause to be
maintained, expediting or extra expense coverage in an amount not less than
$3,000,000. Borrower shall also maintain or cause to be maintained with respect
to each such Project contingent business interruption insurance on a blanket
basis in an amount not less than six months scheduled Debt Service attributable
to such Project and continuing expenses and profits of such Project. The
policy/policies shall include increased cost of construction coverage, debris
removable, and building ordinance coverage to pay for loss of "undamaged"
property which may be required to be replaced due to enforcement of local,
state, or federal ordinances subject to a sublimit of $10,000,000. All such
policies may have deductibles of not greater than $250,000 per loss with the
exception of the combustion turbine ($750,000); windstorm if located in a
coastal area (2%), earthquake if located in California (for which the deductible
may be 5% of values at risk) and flood if located in a 100 year zone ($500,000);
business interruption coverage shall have a waiting period of not greater than
45 days. In the event the all risk property and the boiler and machinery
coverage are not written in the same policy, each policy shall be endorsed to
provide a joint loss agreement.
<PAGE> 439
f. Umbrella / excess liability insurance of not less than
$50,000,000 per occurrence and in the aggregate during the construction and the
operation of each such Project. Such coverages shall be on a per occurrence
policy form or AEGIS claims-first-made form and over and above coverage provided
by the policies described in paragraphs (a), (b) and (c) above whose limits
shall apply toward the $50,000,000 limits set forth in this section. The
umbrella and/or excess policies shall not contain endorsements which restrict
coverages as set forth in paragraphs (a), (b) and (c) above, and which are
provided in the underlying policies. The limit applying for each such Project
can be satisfied by insuring multiple Projects under one policy subject to a per
Project aggregate endorsement. If the policy or policies provided under this
paragraph contain(s) aggregate limits applying to other operations of Borrower
or the Contractor or the Operator other than with respect to each individual
Project, and such limits are diminished below $25,000,000 by any incident,
occurrence, claim, settlement or judgment against such insurance which has
caused the carrier to establish a reserve, Borrower shall take immediate steps
to restore such aggregate limits or shall provide other equivalent insurance
protection for such aggregate limits.
g. Watercraft liability and protection and indemnity, to the
extent exposure exists, in an amount not less than $ 10,000,000 for all owned,
non-owned and hired watercraft used in connection with the construction and
operation of each such Project. Such coverage can be accomplished under policies
provided pursuant to general liability policies, protection and indemnity
policies or separate watercraft liability policies.
h. Aircraft liability, to the extent exposure exists, in an amount
not less than $10,000,000 for all owned, non-owned and hired aircraft, fixed
wing or rotary, used in connection with the operation of each such Project.
i. Such other or additional insurance (as to risks covered, policy
amounts, policy provisions or otherwise) as, under Prudent Utility Practices,
are from time to time insured against for property and facilities similar in
nature, use and location to the Initial Projects and the Funded Subsequent
Projects which Administrative Agent may reasonably require.
j. All Major Contractors and Major Subcontractors and the Operator
(unless covered under the Borrower's insurance) at each such Project shall,
prior to performing work at each such Project site, supply proper evidence of
insurance as set forth in paragraphs 1.a., 1.b., and 1.c. above. In addition,
excess liability or umbrella liability limits of not less than $5,000,000 for
Major Contractors and Major Subcontractors and Operators shall be certified.
Such insurance, with the exception of workers compensation, supplied by these
parties shall:
(i) add Borrower, Administrative Agent and Financing Parties,
as additional insureds;
(ii) be primary as respects insurance provided by Borrower and
Administrative Agent,
(iii) waive rights of subrogation against Borrower and
Administrative Agent;
(iv) continue in force until obligations of Contractors and
Subcontractors or the Operator are fulfilled at each such
Project.
Contractors and Subcontractors shall be responsible for tools and
equipment brought onto each Project site unless such tools and equipment are
financed by Borrower; all such financed tools and equipment shall be covered
under the builders risk policy.
<PAGE> 440
2. All insurance coverage shall be on a "no coinsurance or self
insurance/replacement cost" basis and in such form (including the form of the
loss payable clauses) as shall be acceptable to Administrative Agent (which
acceptance shall not be unreasonably withheld). Borrower shall submit certified
copies of all policies received pursuant to the requirements of this Exhibit to
Administrative Agent for its review and approval.
3. All policies wherein the Banks party to this Agreement have an
insurable interest shall insure the interests of the Banks as well as Borrower
and all policies, with the exception of workers compensation insurance, and
shall name Administrative Agent and the Banks as additional insured, unless
Administrative Agent and/or the Banks are named as an insured under the policy.
All policies covering real or personal property or business interruption shall
name Administrative Agent or its assigns as First Loss Payee in accordance with
Lender's Loss Payable Endorsement 438 BFU or equivalent and shall provide that
any payment thereunder for any loss or damage with respect to the applicable
Project shall be made to Administrative Agent and paid into the Loss Proceeds
Account , except that such policies may provide that any payments of less than
$1,000,000 (not to exceed $2,000,000 in any year) made in respect of any single
casualty or other occurrence may be paid solely to Borrower, unless
Administrative Agent shall have notified the insurer that an Event of Default or
a related Non-Fundamental Project Default has occurred there under and shall be
continuing. Upon payment and satisfaction of all of Borrower's obligations
under, and termination of, the Credit Documents, Administrative Agent will
instruct the insurers to name Borrower, or such successor credit provider or
other Person as Borrower shall specify, as loss payee. Each policy shall
expressly provide that all provisions thereof, except the limits of liability
(which shall be applicable to all insureds as a group) and liability for
premiums (which shall be solely a liability of Borrower) shall operate in the
same manner as if there were a separate policy covering each such insured. Each
policy shall waive subrogation against Administrative Agent, any of the Banks or
Borrower and shall waive any right of the insurers to any setoff or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of Borrower or the Banks. Each such policy shall provide that if any
premium or installment is not paid when due, or if such insurance is to be
cancelled, terminated or materially changed for any reason whatsoever, the
insurers (or their representatives) will promptly' notify Borrower and
Administrative Agent, and any such cancellation, termination or change shall not
be effective until 30 days after receipt of such notice by Administrative Agent,
and that appropriate certification shall be made to Borrower by each insurer
with respect thereto. Policies of insurance, provided in accordance with this
Exhibit K shall be primary with respect to any other insurance carried by the
Banks.
4. In the event that Borrower (or Contractor as appropriate) fails to
respond in a timely and appropriate manner (as reasonably determined by
Administrative Agent) to take any steps necessary or reasonably requested by
Administrative Agent to collect from any insurers for any loss covered by any
insurance required to be maintained by this Exhibit K, Administrative Agent
shall have the right to make all proofs of loss, adjust all claims and/or
receive all or any part of the proceeds of the foregoing insurance policies,
either in its own name or the name of Borrower; provided, however, that Borrower
shall, upon Administrative Agent's request and at Borrower's own cost and
expense, make all proofs of loss and take all other steps necessary or
reasonably requested by Administrative Agent to collect from insurers for any
loss covered by any insurance required to be obtained by this Exhibit K.
<PAGE> 441
5. On or before December 30th of each year, Borrower shall furnish to
Administrative Agent, with a copy for each Bank, a certificate signed by a
Responsible Officer of Borrower or authorized insurance representative, showing
the insurance then maintained by or on behalf of Borrower pursuant to this
Exhibit K and stating that such insurance complies in all material aspects with
the terms hereof, together with evidence of payment of the premiums thereon. In
the event that at any time the insurance as herein provided shall be reduced or
cease to be maintained, then (without limiting the rights of Administrative
Agent hereunder in respect of the Event of Default or a related Non-Fundamental
Project Default which arises as a result of such failure) Administrative Agent
may at its option maintain the insurance required hereby and, in such event,
Borrower shall reimburse Administrative Agent upon demand for the cost thereof
together with interest thereon at a rate per annum equal to the Default Rate,
but in no event shall the rate of interest exceed the maximum rate permitted by
law.
6. In the event any insurance (including the limits or deductibles
thereof) hereby required to be maintained, other than insurance required by law
to be maintained and the builder's risk insurance described in paragraph I (e)
above, shall not be available and commercially feasible in the commercial
insurance market, Administrative Agent, with the approval of the Insurance
Consultant, shall not unreasonably withhold its agreement to waive such
requirement to the extent the maintenance thereof is not so available; provided,
however, that (i) Borrower shall first request any such waiver in writing, which
request shall be accompanied by written reports prepared by an independent
insurance advisor of recognized national standing certifying that such insurance
is not reasonably available and commercially feasible in the commercial
insurance market for electric generating plants of similar type and capacity
(and, in any case where the required amount is not so available, certifying as
to the maximum amount which is so available) and explaining in detail the basis
for such conclusions, such insurance advisers and the form and substance of such
reports to be reasonably acceptable to Administrative Agent; (ii) at any time
after the granting of any such waiver, Administrative Agent may request, and
Borrower shall furnish to Administrative Agent within 15 days after such
request, supplemental reports reasonably acceptable to Administrative Agent from
such insurance advisers updating their prior reports and reaffirming such
conclusion; and (iii)any such waiver shall be effective only so long as such
insurance shall not be available and commercially feasible in the commercial
insurance market, it being understood that the failure of Borrower to timely
furnish any such supplemental report shall be conclusive evidence that such
waiver is no longer effective because such condition no longer exists, but that
such failure is not the only way to establish such non-existence.
7. In the event that any policy is written on a "claims-made" basis and
such policy is not renewed or the retroactive date of such policy is to be
changed, Borrower shall obtain for each such policy or policies the broadest
basic and supplemental extended reporting period coverage or "tail" reasonably
available in the commercial insurance market for each such policy or policies
and shall provide Administrative Agent with proof that such basic and
supplemental extended reporting period coverage or "tail" has been obtained.
<PAGE> 442
EXHIBIT L
MAGIC VALLEY PROJECT PRE-FUNDING REQUIREMENTS
[*]
<PAGE> 443
EXHIBIT M
SOUTH POINT PROJECT PRE-FUNDING REQUIREMENTS
[*]
<PAGE> 444
EXHIBIT N
SUTTER PROJECT PRE-FUNDING REQUIREMENTS
[*]
<PAGE> 445
EXHIBIT 0
WESTBROOK PROJECT PRE-FUNDING REQUIREMENTS
<PAGE> 446
EXHIBIT P
MAGIC VALLEY PROJECT PRE-COMPLETION REQUIREMENTS
[ * ]
<PAGE> 447
EXHIBIT Q
South Point Project Pre-Completion Requirements
<PAGE> 448
EXHIBIT R
SUTTER PROJECT PRE-COMPLETION REQUIREMENTS
[*]
<PAGE> 449
EXHIBIT S
WESTBROOK PROJECT PRE-COMPLETION REQUIREMENTS
[*]
<PAGE> 1
EXHIBIT 10.3.4
PETER CARTWRIGHT EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") has been entered into
effective as of the first day of January, 2000, between CALPINE CORPORATION, a
Delaware corporation (the "Company"), and PETER CARTWRIGHT ("Executive") to
provide for the employment of Executive on the terms and conditions set forth
herein.
WHEREAS, Executive has served as the President and Chief Executive Officer
of the Company since its inception in 1984 and has served as the Chairman of the
Board of Directors of the Company (the "Board") since September 1996; and
WHEREAS, the Company wishes to assure itself of the continued employment
efforts of Executive for the period provided in this Agreement, and Executive is
willing to continue to serve in the employ of the Company on a full-time basis
for said period upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, intending to be legally bound, the Company and Executive agree as
follows:
1. Employment. The Company hereby employs Executive, and Executive
hereby accepts such employment by the Company, upon the terms and conditions
herein provided.
2. Term of Employment. Executive's employment with the Company pursuant
to this Agreement shall commence on January 1, 2000 and shall continue through
December 31, 2004 (which period of time shall be referred to as the "Term of
this Agreement"), unless such employment is sooner terminated or subsequently
extended as hereinafter provided. Unless earlier terminated, this Agreement
shall automatically continue in effect for two (2) additional successive
calendar year periods after December 31, 2004 (each such successive calendar
year periods shall be referred to as the "Extended Term of this Agreement"),
unless either the Company or Executive elects to terminate this Agreement as of
the start of any subsequent calendar year by providing not less than sixty (60)
days prior written notice to the other party. The period during which this
Agreement continues in effect shall constitute the "Employment Period".
3. Positions and Responsibilities.
(a) Position. During the Employment Period, Executive shall serve
as the Company's President and Chief Executive Officer ("CEO") and shall be
responsible for the general management of the affairs of the Company, reporting
directly to the Board.
(b) Duties. During the Employment Period, and subject to the
control of the Board, Executive shall have general executive powers and active
management and supervision over
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<PAGE> 2
the property, business and affairs of the Company and shall perform such other
executive and/or administrative duties consistent with the office of President
and CEO as from time to time may be assigned to Executive by the Board, but
subject to the conditions in this Agreement. Executive shall devote
substantially Executive's full business time and attention to, and exert
Executive's best efforts in, the performance of Executive's duties hereunder, so
as to promote the business of the Company. Executive's principal place of
business shall be at the Company's corporate offices in San Jose, California.
(c) Board Membership. The Company shall take all actions that are
necessary or appropriate to cause Executive to be nominated and elected to serve
as a member of the Board and as the Chairman of the Board during the Employment
Period.
4. Compensation. For all services rendered by Executive pursuant to
this Agreement, the Company shall pay Executive, and Executive agrees to accept,
the salary, bonuses and other benefits described below in this Section 4. Only
for purposes of this Section 4, the term "Board" shall be deemed to mean either
the Board of Directors of the Company or, where appropriate, the Compensation
Committee of the Board of Directors of the Company.
(a) Salary. The Company shall pay Executive an annual base salary
("Base Salary") as determined by the Board in accordance with this Section 4,
payable at periodic intervals in accordance with the Company's payroll practices
for salaried employees. Executive's Base Salary for the calendar year ending
December 31, 1999 is currently Seven Hundred Fifty Thousand Dollars
($750,000.00). In accordance with Subsection 4(c) hereof, the amount of the Base
Salary shall be reviewed by the Board on at least an annual basis during each
year of the Employment Period, and any increases will be effective as of the
first day of January of such year or on such other date determined appropriate
by the Board. Executive's Base Salary may be increased for any reason, including
to reflect inflation or such other adjustments as the Board may deem
appropriate; provided, however, that Executive's Base Salary, as currently in
effect as stated above or as so increased, may not be subsequently decreased,
except with the prior written consent of Executive.
(b) Bonuses. In addition to Base Salary, Executive shall be
entitled to receive, for each fiscal year of the Company ending with or within
the Employment Period, an annual bonus ("Bonus"), whether pursuant to a formal
bonus or incentive plan or program of the Company or otherwise. Subject to this
Subsection 4(b) and Subsection 4(c) hereof, such Bonus shall be based on such
criteria as are in good faith deemed appropriate by the Board. Any Bonus earned
by Executive for service or performance rendered in any fiscal year within the
Employment Period shall be paid to Executive in accordance with the applicable
plan or program and the Company's policies governing such matters. Executive is
entitled to participate in and receive a Bonus in accordance with the terms and
conditions set forth in the Company's Annual Management Incentive Plan;
provided, however, that (i) the target bonus for Executive as set forth in the
current Annual Management Incentive Plan shall be one hundred forty-five percent
(145%), and (ii) ninety percent (90%) of Executive's bonus shall be based on the
Company's financial performance and ten percent (10%) of Executive's bonus will
be based on the Executive's individual performance which shall be evaluated on
the basis of qualitative, non-financial criteria which shall be determined and
articulated by the Board on an annual basis.
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<PAGE> 3
(c) Annual Compensation Review. Notwithstanding anything herein to
the contrary, Executive's compensation, consisting of salary, bonus and stock
option grants, shall be reviewed not less than annually by the Board. In order
to assist the Board in accomplishing such review, the Company shall retain an
independent executive compensation consultant to prepare a survey of the
compensation of senior executives in positions similar to Executive.
(d) Health Care. During the Employment Period, Executive shall be
eligible to participate in any health insurance programs and medical plans under
current policies maintained by the Company for executives.
(e) Participation in Benefit and Equity Compensation Plans. During
the Employment Period, Executive shall be eligible to receive all benefits,
including those under equity participation and bonus programs, to which key
employees are or become eligible under such plans or programs as may be
established by the Board. In addition to any other plans or programs established
by the Company, Executive shall be entitled to participate in the Company's
Stock Option Program and any similar or replacement plan or program (the "Stock
Option Program").
(f) 401(k) Plan Benefits. In addition to the other benefits to
which Executive shall be entitled to under this Agreement, Executive shall be
entitled to participate in the Company's 401(k) Plan and shall be entitled to
receive the full benefit of contributions to be made by the Company for the
benefit of Executive under the terms of the 401(k) Plan.
(g) Disability Benefits. In the event of the Disability of
Executive, the Company shall continue to pay Executive the salary payable to
Executive in accordance with Subsection 4(a) hereof during the period of
Executive's Disability; provided, however, that, in the event that Executive is
disabled for a continuous period exceeding six (6) calendar months, the Company
may elect at the expiration of this six (6) month period to terminate this
Agreement and pay Executive the greater of (i) Executive's available monthly
benefits from any existing Company-sponsored long-term disability plan; or (ii)
sixty-seven percent (67%) of the salary provided in Subsection 4(a) for the
duration of the Term of this Agreement or the Extended Term of this Agreement,
as applicable. In the event of Executive's Disability during the Employment
Period, the Company shall also pay to Executive the pro rata portion of the
Bonus that Executive would have earned in respect of the portion of the year
prior to Executive's Disability.
(h) Death Benefits. In the event of Executive's death (as defined
in the Company's group life insurance program) during Executive's Disability or
otherwise during the Employment Period, the Company shall cause payment to be
made to Executive's most recently designated beneficiary (which, absent specific
designation of a beneficiary for purposes of this provision, shall be
Executive's most recently designated beneficiary under the Company's group life
insurance program) a sum equal to three (3) times Executive's Base Salary. In
the event of Executive's death (as defined in the Company's group life insurance
program) during the Employment Period, the Company shall pay to Executive's
estate the pro rata portion of the Bonus that Executive would have earned with
respect of the portion of the year prior to Executive's death. The above payment
obligations of the Company shall be discharged to the extent benefits are
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<PAGE> 4
actually paid pursuant to the Company's group life insurance program, with the
balance of said obligation to be discharged either by a cash payment from the
Company, or, if the Company so elects, by supplementary life insurance policies
to be obtained and maintained by the Company.
5. Vacation. During the Employment Period, Executive shall be entitled
to vacation of twenty-five (25) business days in each year, with full salary,
and Executive shall accrue paid vacation benefits during the Employment Period
in accordance with the Company policy in effect for executive officers.
6. Indemnification. The Company shall maintain indemnification of
Executive pursuant to the provisions of the Company's Articles of Incorporation
and Bylaws to the fullest extent of California law and all other applicable law,
and shall provide Executive with indemnification pursuant to the Company's
standard indemnification agreement and any director's and officer's liability
insurance policy maintained by the Company.
7. Severance Benefits.
(a) Voluntary Resignation. If Executive's employment terminates by
reason of Executive's voluntary resignation (and such termination is not an
Involuntary Termination or a termination for Cause), then Executive shall not be
entitled to receive severance or other benefits except for those (if any) to
which Executive may be entitled under this Agreement or any separate agreement
with the Company or as may then be established under the Company's then existing
severance and benefit plans and policies at the time of such termination.
(b) Voluntary Resignation Following a Change of Control. If within
twelve (12) months after a Change of Control, Executive's employment terminates
by reason of Executive's voluntary resignation (and such termination is not an
Involuntary Termination or a termination for Cause), then the following
severance benefits shall be paid or otherwise provided to Executive:
(i) the Company shall pay to Executive in the form of a lump
sum payment, in cash, a severance payment equal to the greater of (I) two (2)
times Executive's Current Compensation or (II) Executive's Current Compensation
multiplied by the number of years (or any portion thereof, calculated on a daily
basis) remaining under this Agreement had Executive's employment not been
terminated, which shall be paid to Executive within ten (10) days after the date
of termination;
(ii) until the earlier of (I) the date this Agreement would
otherwise have terminated had Executive's employment not been terminated or (II)
the expiration of the three (3) year period measured from the date of
Executive's termination of employment, the Company shall at its sole cost and
expense provide Executive (and Executive's eligible dependents, if any) with
life, disability, accident and group health insurance benefits substantially
similar to those benefits that Executive (and Executive's dependents) were
receiving immediately prior to Executive's termination of employment; provided,
however, that the benefits otherwise receivable by Executive pursuant to this
subsection 7 (b) shall be reduced to the extent comparable benefits are
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<PAGE> 5
concurrently received by Executive (or Executive's dependents) pursuant to a
similar plan or program of another employer, and any such other benefits
actually received by Executive (or Executive's dependents) must be reported to
the Company; and provided further, however, that the health care coverage
provided by the Company pursuant to this subsection 7 (b) shall be in lieu of
any other continued health care coverage to which Executive or Executive's
dependents would otherwise, at Executive's own expense, be entitled in
accordance with the requirements of Internal Revenue Code of 1986, as amended
("Code"), Section 4980B ("COBRA") by reason of Executive's termination of
employment; and
(iii) all stock options, warrants, rights and other Company
stock-related awards granted to Executive by the Company that would otherwise
have vested or become exercisable at any time in the future shall become fully
vested and nonforfeitable upon the date of Executive's termination of
employment, the Company's repurchase rights, if any, with respect to those
vested shares shall immediately lapse, and each such stock option, to the extent
vested, shall remain exercisable for the vested option shares until the
expiration or sooner termination of the option term in accordance with the
provisions of the agreement evidencing such option.
(c) Involuntary Termination Other Than For Cause. If Executive's
employment is terminated as a result of an Involuntary Termination other than
for Cause, then the following severance benefits shall be paid or otherwise
provided to Executive:
(i) the Company shall pay to Executive in the form of a lump
sum payment, in cash, a severance payment equal to the greater of (I) three (3)
times Executive's Current Compensation or (II) Executive's Current Compensation
multiplied by the number of years (or any portion thereof, calculated on a daily
basis) remaining under this Agreement had Executive's employment not been
terminated, which shall be paid to Executive within ten (10) days after the date
of termination;
(ii) until the earlier of (I) the date this Agreement would
otherwise have terminated had Executive's employment not been terminated or (II)
the expiration of the three (3) year period measured from the date of
Executive's termination of employment, the Company shall at its sole cost and
expense provide Executive (and Executive's eligible dependents, if any) with
life, disability, accident and group health insurance benefits substantially
similar to those benefits that Executive (and Executive's dependents) were
receiving immediately prior to Executive's termination of employment; provided,
however, that the benefits otherwise receivable by Executive pursuant to this
subsection 7 (c) shall be reduced to the extent comparable benefits are
concurrently received by Executive (or Executive's dependents) pursuant to a
similar plan or program of another employer, and any such other benefits
actually received by Executive (or Executive's dependents) must be reported to
the Company; and provided further, however, that the health care coverage
provided by the Company pursuant to this subsection 7 (c) shall be in lieu of
any other continued health care coverage to which Executive or Executive's
dependents would otherwise, at Executive's own expense, be entitled in
accordance with the requirements COBRA, by reason of Executive's termination of
employment;
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(iii) all stock options, warrants, rights and other Company
stock- related awards granted to Executive by the Company that would otherwise
have vested or become exercisable at any time in the future shall become fully
vested and nonforfeitable upon the date of Executive's termination of
employment, the Company's repurchase rights, if any, with respect to those
vested shares shall immediately lapse, and each such stock option, to the extent
vested, shall remain exercisable for the vested option shares until the
expiration or sooner termination of the option term in accordance with the
provisions of the agreement evidencing such option; and
(iv) the Company shall pay or reimburse Executive for any and
all expenses incurred by Executive for outplacement services selected by
Executive until the earlier of (I) the first anniversary of the date of
termination of employment or (II) the date on which Executive commences
employment with another employer.
(d) Termination for Cause. If Executive's employment is terminated
for Cause, then Executive shall not be entitled to receive any severance
payments or other severance benefits under this Section 7. Executive's benefits
will be continued under the Company's then existing benefit plans and policies
in accordance with such plans and policies in effect on the date of termination.
(e) Parachute Payments. If all or any portion of the amounts
payable to Executive under this Agreement or otherwise are subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the "Code") (or
similar state tax and/or assessment), Company shall pay to Executive an amount
necessary to place Executive in the same after tax position as Executive would
have been in had no such excise tax been imposed. The amount payable pursuant to
the preceding sentence shall be increased to the extent necessary to pay income
and excise taxes due on such amount. The determination of the amount of any such
additional amount shall be made by the independent accounting firm then employed
by the Company.
8. Noncompetition and Confidential Information. While employed by the
Company, Executive will not directly or indirectly manage, operate, participate
in, be employed by, perform consulting services for, or otherwise be connected
in any manner with, any firm, person, corporation, or enterprise which would be
competitive with the business of the Company. Executive will not at any time
disclose to others any confidential information relating to the Company or to
the business of the Company and confirms that such information constitutes the
exclusive property of the Company. The foregoing shall not preclude Executive's
investment in any such firm, corporation or enterprise provided that at any one
time Executive and members of Executive's immediate family do not own more than
one percent (1%) of any voting securities of any such entity.
9. Consulting. Executive and the Company may, but are not required to,
enter into an agreement pursuant to which Executive will provide consulting
services to the Company after the date of Executive's retirement or termination.
Any consulting fees paid to Executive will be in addition to any retirement or
severance payments.
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10. Failure to Comply. If, for any reason other than Executive's death,
Disability or Involuntary Termination, Executive shall cease to render services
as required by this Agreement without the written consent of the Company, or if
Executive shall breach the provisions of Section 8 hereof, then, except as
provided in Section 7 hereof, Executive will thereby relinquish all rights to
any benefits hereunder, including future salary payments and death benefits, and
the Company shall reserve whatever rights, if any, it may have against Executive
under this Agreement or otherwise.
11. Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
or to all or substantially all of the Company's business and/or assets shall
assume the obligations under this Agreement and shall perform the obligations
under this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a succession.
The terms of this Agreement and all of Executive's rights hereunder shall inure
to the benefit of, and be enforceable by, Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
12. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to Executive shall be
addressed to Executive at the home address from which Executive most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notice shall
be directed to the attention of its Secretary.
13. Miscellaneous Provisions.
(a) Definition of Terms. The capitalized terms in this Agreement
shall have the meanings set forth in this Agreement or in Appendix A hereto.
(b) No Duty to Mitigate. Executive shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor shall any such payment be
reduced by earnings that Executive may receive from any other source.
(c) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Executive and by an authorized officer or
representative of the Company (other than Executive). No waiver by either party
of any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other condition
or provision or of the same condition or provision of another time.
(d) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
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(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity of
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(g) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled by arbitration in the County of
San Francisco, California, in accordance with the rules of the American
Arbitration Association then in effect. Such arbitration proceedings shall be
nonbinding and any claim with respect to this Agreement, whether or not
previously the subject of an arbitration proceeding, may be brought in any court
of competent jurisdiction.
(h) Employment Taxes. All payments made pursuant to this Agreement
will be subject to withholding of applicable income and employment taxes.
(i) Assignment by Company. The Company may assign its rights under
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company; provided, however, that if
there is any such assignment, the Company will guarantee all payments and the
performance of all obligations under this Agreement. In the case of any such
assignment, the term "Company" when used in a section of this Agreement shall
mean the corporation or other entity that actually employs Executive.
(j) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
14. Previous Agreement. This Agreement replaces and supersedes the
Amended and Restated Employment Contract with Executive which covered the period
from January 1, 1995 through December 31, 1999.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
day and year first above written.
CALPINE CORPORATION: EXECUTIVE:
By:
--------------------------------- ---------------------------------
Susan C. Schwab, Chairman of the Peter Cartwright, in his individual
Compensation Committee of the capacity
Board of Directors
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APPENDIX A
DEFINITIONS
Cause. "Cause" shall mean (i) material breach of any material terms of
this Agreement, (ii) conviction of a felony, (iii) repeated unexplained or
unjustified absence, (iv) willful breach of fiduciary duty under this Agreement
or (v) gross negligence or willful misconduct where such gross negligence or
willful misconduct has resulted or is likely to result in substantial and
material damage to the Company or its subsidiaries.
Change of Control. "Change of Control" shall mean 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 Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than the Company's current stockholders or a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or any corporation owned, directly or indirectly, by the Company's
stockholders in substantially the same proportions as their ownership of
the Company's stock, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the total combined
voting power of the Company's then outstanding securities; or
(ii) the majority of the members of the Board ceases to be comprised
of individuals who are Continuing Members; for such purpose, a "Continuing
Member" shall mean an individual who is a member of the Board on the date
of this Agreement and any successor of a Continuing Member who is elected
to the Board or nominated for such election by action of a majority of
Continuing Members then serving on the Board; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the
total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets.
10
<PAGE> 11
Current Compensation. "Current Compensation" shall mean (i) an amount
equal to the greater of (A) Executive's highest annual base salary for the year
preceding the year in which a termination of employment occurs or (B)
Executive's annual base salary at any time during the year in which a
termination of employment occurs, plus (ii) an amount equal to the greater of
the bonus payments Executive received in the preceding calendar year or the
target bonus payment for the year in which a termination of employment occurs.
Disability. "Disability" shall mean the inability of Executive to perform
all the material duties of Executive's position as determined by an independent
physician selected with the approval of the Company and Executive.
Involuntary Termination. "Involuntary Termination" shall mean termination
by the Company of Executive's employment for any reason other than for Cause,
and shall include Executive's voluntary resignation following (i) the material
breach by the Company of one or more of its obligations under this Agreement
which are not otherwise corrected within ten (10) days following Executive's
written notice to the Company of such breach, or (ii) the occurrence of any of
the following events without Executive's express prior written consent: (A) a
change in Executive's position with the Company which materially reduces
Executive's level of responsibilities, (B) a reduction in Executive's level of
compensation (including base salary, benefits and any non-discretionary and
objective-standard incentive payment or bonus award), (C) a relocation of
Executive's place of employment by more than twenty (20) miles from Executive's
current place of employment, (D) the assignment of additional material job
responsibilities or a reduction in job responsibilities inconsistent with
Executive's position with the Company and Executive's prior responsibilities, or
(E) in the event Executive is no longer the Company's President and CEO
reporting to the Board.
11
<PAGE> 1
EXHIBIT 21
Subsidiaries of Calpine Corporation
Set forth below are the names of certain subsidiaries, at least 50%
owned, directly or indirectly, of Calpine Corporation as of December 31, 1999,
unless otherwise indicated. Certain subsidiaries which when considered in the
aggregate would not constitute a significant subsidiary, are omitted from the
list below:
<TABLE>
<CAPTION>
State or Other
Calpine Jurisdiction of Incorporation
Name Interest Percentage or Organization
- ---- ------------------- -----------------------------
<S> <C> <C>
Geysers Power Company
Geysers Power Company, LLC 100% Delaware
Geysers Power I Company 100% Delaware
Geysers Power II Company 100% Delaware
Thermal Power Company 100% California
Calpine Thermal Power, Inc. 100% California
Geysers Finance Company 100% Delaware
Texas City Power Plant
Texas City Cogeneration, LP 100% Texas
Texas Cogeneration One Company 100% Delaware
Texas Cogeneration Five, Inc. 100% Delaware
Texas Cogeneration Company 100% Delaware
Calpine Finance Company 100% Delaware
Pasadena Power Plant
Pasadena Cogeneration, LP 100% Delaware
Calpine Pasadena Cogeneration,
Inc. 100% Delaware
Calpine Texas Cogeneration, Inc. 100% Delaware
King City Power Plant
Calpine King City Cogen LLC 100% Delaware
Calpine King City 1, Inc. 100% Delaware
Calpine King City 2, Inc. 100% Delaware
Calpine Securities Company, LP 100% Delaware
Gilroy Power Plant
Calpine Gilroy Cogen, LP 100% Delaware
Calpine Gilroy 1, Inc. 100% Delaware
Calpine Gilroy 2, Inc. 100% Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 31, 2000 included in this Form 10-K, into the
Company's previously filed Registration Statement on Form S-8 (File No.
333-16529). It should be noted that we have not audited any financial
statements of the Company subsequent to December 31, 1999 or performed any
audit procedures subsequent to the date of our report.
Arthur Andersen LLP
San Jose, California
February 28, 2000
<PAGE> 2
EXHIBIT 23(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 5, 1999 included in this Form 10-K, into the Company's
previously filed Registration Statement on Form S-8 (File No. 333-16529). It
should be noted that we have not audited any financial statements of the Company
subsequent to December 31, 1998 or performed any audit procedures subsequent to
the date of our report.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
March 23, 1999
<PAGE> 3
EXHIBIT 23(C)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 10, 1998 included in this Form 10-K, into the Company's
previously filed Registration Statement on Form S-8 (File No. 333-16529). It
should be noted that we have not audited any financial statements of the Company
subsequent to December 31, 1997 or performed any audit procedures subsequent to
the date of our report.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
March 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 349,371
<SECURITIES> 0
<RECEIVABLES> 130,828
<ALLOWANCES> 3,343
<INVENTORY> 16,417
<CURRENT-ASSETS> 33,135
<PP&E> 3,093,506
<DEPRECIATION> 227,059
<TOTAL-ASSETS> 3,991,606
<CURRENT-LIABILITIES> 275,311
<BONDS> 1,551,750
270,713
0
<COMMON> 63
<OTHER-SE> 964,569
<TOTAL-LIABILITY-AND-EQUITY> 3,991,606
<SALES> 760,325
<TOTAL-REVENUES> 847,735
<CGS> 517,421
<TOTAL-COSTS> 557,477
<OTHER-EXPENSES> 63,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,162
<INCOME-PRETAX> 158,216
<INCOME-TAX> 61,973
<INCOME-CONTINUING> 96,973
<DISCONTINUED> 0
<EXTRAORDINARY> 1,150
<CHANGES> 0
<NET-INCOME> 95,093
<EPS-BASIC> 1.82
<EPS-DILUTED> 1.71
</TABLE>
