EXHIBIT 4.22.11
EXECUTION COPY
PARTICIPATION AGREEMENT (RG-1)
Dated as of October 18, 2001
among
ROCKGEN ENERGY LLC, as Facility Lessee,
ROCKGEN OL-1, LLC, as Owner Lessor,
βββββ� FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, not in its individual
capacity, except as expressly provided herein, but solely as Lessor Manager,
CALPINE CORPORATION, as Guarantor,
SBR OP-1, LLC, as Owner Participant,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except
as expressly provided herein, but solely
as Indenture Trustee, and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except
as expressly provided herein, but solely
as Pass Through Trustees
ROCKGEN PROJECT
===============================================================================
TABLE OF CONTENTS
PAGE
SECTION 1.DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT ...................................... 3
SECTION 2.PARTICIPATION; CLOSING DATE; TRANSACTION COSTS ................................................... 3
Section 2.1 Agreements to Participate .................................................................. 3
Section 2.2 Closing Date; Procedure for Participation. ................................................. 4
Section 2.3 Transaction Costs. ......................................................................... 5
SECTION 3. REPRESENTATIONS AND WARRANTIES .................................................................. 6
Section 3.1 Representations and Warranties of the Facility Lessee ...................................... 6
Section 3.2 Representations and Warranties of the Owner Lessor ......................................... 15
Section 3.3 Representations and Warranties of the Lessor Manager and the Trust Company ................. 16
Section 3.4 Representations and Warranties of the Owner Participant .................................... 18
Section 3.5 Representations and Warranties of Indenture Trustee and the Lease Indenture Company ........ 20
Section 3.6...Warranties and Covenants of the Pass Through Trustees and the Pass Through Company ......... 22
SECTION 4 CLOSING CONDITIONS ......................................................................... 23
Section 4.1 Completion of the Facility ................................................................. 25
Section 4.2 Operative Documents ........................................................................ 25
Section 4.3 Certificates and the Lessor Notes .......................................................... 25
Section 4.4 Equity Investment .......................................................................... 25
Section 4.5 Organizational Documents ................................................................... 25
Section 4.6 Representations and Warranties ............................................................. 25
Section 4.7 Defaults, Events of Default, Events of Loss ................................................ 25
Section 4.8 Regulatory Approvals ....................................................................... 25
Section 4.9 Consents ................................................................................... 26
Section 4.10 Governmental Actions ....................................................................... 27
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TABLE OF CONTENTS (continued)
PAGE
Section 4.11 Insurance .................................................................................. 27
Section 4.12 Ratings .................................................................................... 27
Section 4.13 Environmental Report ....................................................................... 27
Section 4.14 Surveys .................................................................................... 27
Section 4.15 Appraisal; Condition of the Facility ....................................................... 27
Section 4.16 Letter from the Appraiser .................................................................. 27
Section 4.17 Other Reports .............................................................................. 28
Section 4.18 Opinion with Respect to Certain Tax Aspects ................................................ 28
Section 4.19 Opinions of Counsel ........................................................................ 28
Section 4.20 Recordings and Filings ..................................................................... 28
Section 4.21 Conditions to Closing ...................................................................... 28
Section 4.22 Taxes ...................................................................................... 28
Section 4.23 No Changes in Applicable Law ............................................................... 29
Section 4.24 Registered Agent for the Facility Lessee and the Owner Lessor .............................. 29
Section 4.25 Operating Lease Treatment .................................................................. 29
Section 4.26 Rent Adjustments ........................................................................... 29
Section 4.27 Title Insurance ............................................................................ 29
Section 4.28 Parent Guaranty ............................................................................ 29
Section 4.29 Letter as to Number of Offerees ............................................................ 29
Section 4.30 Lien Search ................................................................................ 30
Section 4.31 Litigation ................................................................................. 30
Section 4.32 No Material Adverse Change ................................................................. 30
Section 4.33 Private Placement Number ................................................................... 30
Section 4.34 Proceedings and Documents .................................................................. 30
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TABLE OF CONTENTS (continued)
PAGE
Section 4.35 No Proposed Tax Law Change ................................................................ 30
Section 4.36 Payment of Fees and Expenses .............................................................. 30
SECTION 5.COVENANTS OF FACILITY LESSEE AND GUARANTOR ....................................................... 30
Section 5.1 Maintenance of Existence ................................................................... 31
Section 5.2 Merger, Consolidation, Sale of Substantially All Assets .................................... 31
Section 5.3 Guaranty and Contingent Obligations ........................................................ 31
Section 5.4 Assignment of Rights ....................................................................... 32
Section 5.5 Lessor Manager Fees ........................................................................ 32
Section 5.6 Conduct of Business, Properties, Etc. ...................................................... 32
Section 5.7 Obligations ................................................................................ 32
Section 5.8 Books, Records, Access ..................................................................... 32
Section 5.9 Other Information. ......................................................................... 33
Section 5.10 Warranty of Title to Facility Site. ........................................................ 33
Section 5.11 ERISA ...................................................................................... 33
Section 5.12 Certain Contracts and Agreements ........................................................... 34
Section 5.13 Certain Costs .............................................................................. 34
Section 5.14 Limitations on Liens ....................................................................... 34
Section 5.15 Investments ................................................................................ 34
Section 5.16 Survey ..................................................................................... 35
Section 5.17 Regulations ................................................................................ 35
Section 5.18 Partnerships ............................................................................... 35
Section 5.19 Dissolution ................................................................................ 35
Section 5.20 Termination of Operative Documents ......................................................... 35
Section 5.21 Name and Location .......................................................................... 35
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TABLE OF CONTENTS (continued)
PAGE
Section 5.22 Use of Facility Site ........................................... 35
Section 5.23 Abandonment of Facility ........................................ 35
Section 5.24 Taxes, Other Government Charges and Utility Charges ............ 35
Section 5.25 Compliance with Laws, Instruments, Etc. ........................ 36
Section 5.26 PUHCA .......................................................... 36
Section 5.27 Further Assurances ............................................. 36
Section 5.28 No Subsidiaries ................................................ 37
Section 5.29 Permitted Business ............................................. 37
Section 5.30 Support Arrangements ........................................... 37
Section 5.31 Insurance ...................................................... 38
Section 5.32 Tax Status ..................................................... 38
Section 5.33 Transmission Assets. ........................................... 38
SECTION 6. COVENANTS OF THE OWNER LESSOR, THE TRUST
COMPANY AND THE LESSOR MANAGER ....................................... 39
Section 6.1 Compliance with the LLC Agreement .............................. 39
Section 6.2 Owner Lessor's Liens ........................................... 40
Section 6.3 Amendments to Operative Documents .............................. 40
Section 6.4 Transfer of the Owner Lessor's Interest ........................ 40
Section 6.5 Owner Lessor; Lessor Estate .................................... 40
Section 6.6 Limitation on Indebtedness and Actions ......................... 40
Section 6.7 Change of Location ............................................. 40
Section 6.8 Bankruptcy of Owner Lessor ..................................... 40
SECTION 7.COVENANTS OF THE OWNER PARTICIPANT ...................................... 41
Section 7.1 Restrictions on Transfer of Member Interest. ................... 41
Section 7.2 Owner Participant's Liens ...................................... 44
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TABLE OF CONTENTS (continued)
PAGE
Section 7.3 Amendments or Revocation of LLC Agreement ................................. 44
Section 7.4 Bankruptcy Filings ........................................................ 44
Section 7.5 Instructions .............................................................. 44
Section 7.6 Right of First Refusal .................................................... 44
Section 7.7 Prohibition on Fundamental Changes ........................................ 45
Section 7.8 Appointment of Successor Lessor Manager ................................... 45
Section 7.9 Cooperation ............................................................... 45
SECTION 8.COVENANTS OF THE INDENTURE TRUSTEE AND THE PASS THROUGH TRUSTEES ................ 46
Section 8.1 Indenture Trustee's Liens ................................................. 46
Section 8.2 Pass Through Trustees' Covenant Not to Transfer Lessor Notes .............. 46
SECTION 9. INDEMNIFICATION ................................................................ 46
Section 9.1 General Indemnity. ........................................................ 46
Section 9.2 General Tax Indemnity. .................................................... 53
SECTION 10. FACILITY LESSEE'S RIGHT OF QUIET ENJOYMENT .................................... 62
SECTION 11 SUPPLEMENTAL FINANCING IMPROVEMENTS; OPTIONAL REFINANCINGS ..................... 62
Section 11.1 Financing Improvements .................................................... 62
Section 11.2 Optional Refinancing of Lease Debt ........................................ 64
Section 11.3 Cooperation ............................................................... 65
SECTION 12.CERTAIN ADJUSTMENTS TO PERIODIC RENT, TERMINATION VALUE AND OTHER AMOUNTS ...... 65
SECTION 13 TRANSFER OF THE FACILITY LESSEE OWNERSHIP; SPECIAL LESSEE TRANSFERS ............ 67
Section 13.1 Transfer of the Facility Lessee Ownership. ................................ 67
Section 13.2 Special Facility Lessee Transfers ......................................... 68
SECTION 14. MISCELLANEOUS ................................................................. 69
Section 14.1 Consents; Cooperation ..................................................... 69
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TABLE OF CONTENTS(continued)
PAGE
Section 14.2 Successor Owner Lessor .................................................... 69
Section 14.3 Bankruptcy of Lessor Estate ............................................... 69
Section 14.4 Amendments and Waivers .................................................... 69
Section 14.5 Notices ................................................................... 70
Section 14.6 Survival .................................................................. 74
Section 14.7 Successors and Assigns .................................................... 74
Section 14.8 Business Day .............................................................. 74
Section 14.9 Governing Law ............................................................. 74
Section 14.10 Severability .............................................................. 74
Section 14.11 Counterparts .............................................................. 74
Section 14.12. Headings and Table of Contents ............................................ 75
Section 14.13 Limitation of Liability. .................................................. 75
Section 14.14. Consent to Jurisdiction; Waiver of
Trial by Jury; Process Agent ............................................ 76
Section 14.15 Further Assurances ........................................................ 77
Section 14.16 Effectiveness ............................................................. 77
Section 14.17 Measuring Life 77
Section 14.18 No Partnership, Etc. ...................................................... 77
Section 14.19 Entire Agreement .......................................................... 77
Section 14.20 Public Utility Regulation ................................................. 78
Section 14.21. Confidentiality of Information ............................................ 78
Section 14.22 Reliance .................................................................. 79
Section 14.23 Amendments, Etc. .......................................................... 79
APPENDICES:
Appendix A Definitions and Rules of Interpretation
SCHEDULES:
Schedule 1-A Equity Investment
Schedule 1-B Indenture Trustee's Account
Schedule 1-C Owner Participant's Account
Schedule 2 Pricing Assumptions
Schedule 3.1(m) Environmental Matters - Hazardous Substances
Schedule 4.20 Recording and Filings
Schedule 5.31 Maintenance of Insurance
EXHIBITS:
Exhibit A Description of Facility
Exhibit B-1 Form of ββββ of Sale
Exhibit B-2 Form of Warranty Deed
Exhibit C Form of Facility Lease Agreement
Exhibit D Form of Facility Site Lease
Exhibit E Form of Facility Site Sublease
Exhibit F Form of Pass Through Trust Agreement
Exhibit G Form of OP Parent Guaranty
Exhibit H Form of Calpine Guaranty
Exhibit I Form of Collateral Trust Indenture
Exhibit J Form of OP Assignment and Assumption Agreement
Exhibit K List of Competitors
Exhibit L Form of Guarantor Assignment and Assumption Agreement
Exhibit M Forms of Consents
vii
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of October 18, 2001 (as
amended, supplemented or otherwise modified from time to time, in
accordance with the provisions hereof, this "Participation Agreement" or
this "Agreement"), among (i) ROCKGEN ENERGY LLC (herein, together with
its successors and permitted assigns, called the "Facility Lessee"), a
limited liability company organized under the laws of the State of
Wisconsin, (ii) CALPINE CORPORATION, a Delaware corporation, as Guarantor
(together with its successors and permitted assigns, the "Guarantor")
under the Calpine Guaranty (RG-1), (the "Calpine Guaranty"), (iii)
ROCKGEN OL-1, LLC, a Delaware limited liability company (the "Owner
Lessor"), (iv) SBR OP-1, LLC, a Delaware limited liability company
(herein, together with its successors and permitted assigns, called the
"Owner Participant"), (v) STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States, not in its
individual capacity, except as expressly provided herein, but solely as
trustee under the Collateral Trust Indenture (herein in its capacity as
trustee under the Collateral Trust Indenture, together with its
successors and permitted assigns, called the "Indenture Trustee", and
herein in its individual capacity, together with its successors and
permitted assigns, called the "Lease Indenture Company"), (vi) STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the
United States, not in its individual capacity, except as expressly
provided herein, but solely as trustee under each of the Pass Through
Trust Agreements (herein in its capacity as trustee under the Pass
Through Trust Agreements, the "Pass Through Trustees", and herein in its
individual capacity, together with its successors and permitted assigns,
the "Pass Through Company"), and (vii) βββββ� FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States, not in its individual
capacity except as expressly provided herein, but solely as independent
manager under the LLC Agreement (herein in its capacity as independent
manager under the LLC Agreement, together with its successors and
permitted assigns, called the "Lessor Manager", and herein in its
individual capacity, together with its successors and permitted assigns,
called the "Trust Company").
WITNESSETH:
WHEREAS, (a) Facility Lessee, an indirect, wholly-owned subsidiary
of Calpine, will, as of the Closing Date, own a 520 MW gas-fired combined cycle
merchant power plant located near Christiana, Wisconsin and more fully
described in Exhibit A hereto ("Facility");
WHEREAS, Facility Lessee desires to sell to the Owner Lessor the
Undivided Interest pursuant to the ββββ of Sale and lease to the Owner Lessor
the Ground Interest pursuant to the Facility Site Lease, and to lease the
Undivided Interest and sublease the Ground Interest
from the Owner Lessor pursuant to the Facility Lease and the Facility Site
Sublease, respectively;
WHEREAS, the Owner Participant desires to cause the Owner Lessor to
purchase such Undivided Interest from the Facility Lessee pursuant to the ββββ
of Sale, to lease the Ground Interest from the Facility Lessee pursuant to the
Facility Site Lease, and to lease the Undivided Interest and sublease the
Ground Interest to the Facility Lessee pursuant to the Facility Lease and
Facility Site Sublease, respectively;
WHEREAS, the Owner Participant has entered into the LLC Agreement,
pursuant to which the Owner Participant has authorized the Owner Lessor to,
among other things and subject to the terms and conditions thereof and hereof,
issue the Lessor Notes and sell such Lessor Notes to the relevant Pass Through
Trust, purchase the Undivided Interest from the Facility Lessee pursuant to the
ββββ of Sale, lease the Ground Interest from Facility Lessee pursuant to the
Undivided Interest and the Ground Interest to the Facility Lessee pursuant to
the Facility Lease and Facility Site Lease and lease the Undivided Interest and
sublease the Ground Interest to the Facility Lessee pursuant to the Facility
Lease and the Facility Site Sublease, respectively;
WHEREAS, in order to provide a portion of the Purchase Price payable
by the Owner Lessor in respect of its acquisition of the Undivided Interest
pursuant to the ββββ of Sale, the Owner Participant is willing to make an
investment in the Owner Lessor in an amount equal to the Equity Investment, all
in the manner and subject to the conditions set forth herein;
WHEREAS, on the Closing Date, the Owner Lessor intends to sell the
Lessor Notes to the relevant Pass Through Trust and to grant to the Indenture
Trustee liens and security interests in the Indenture Estate to secure its
obligations thereunder;
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, each Pass Through Trustee has entered into a Pass
Through Trust Agreement, pursuant to which such Pass Through Trustee has been
directed to use the Proceeds to purchase the Lessor Notes from the Owner Lessor
on the Closing Date;
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Facility Lessee has entered into the Certificate
Purchase Agreement with the Initial Purchasers and the Pass Through Trusts
pursuant to which the Initial Purchasers will purchase the Certificates on the
Closing Date from the Pass Through Trusts;
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the OP Guarantor has executed and delivered the OP
Parent Guaranty pursuant to which the OP Guarantor guarantees the payment and
performance obligations of the Owner Participant under the Operative Documents;
WHEREAS, pursuant to the Calpine Guaranty, Calpine has guaranteed all
of the obligations of the Facility Lessee under the Participation Agreement and
as of the Closing Date shall guarantee all of the obligations of the Facility
Lessee under the other Operative Documents to which the Facility Lessee is a
party; and
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WHEREAS, the parties hereto desire to consummate the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual agreements herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT
The capitalized terms used in this Participation Agreement, including
the foregoing recitals, and not otherwise defined herein shall have the
respective meanings specified in Appendix A hereto. The rules of interpretation
set forth in Appendix A shall apply to terms used in this Participation
Agreement and specifically defined herein.
PARTICIPATION; CLOSING DATE; TRANSACTION COSTS
Agreements to Participate. Subject to the terms and conditions of this
Agreement, and in reliance on the agreements, representations and warranties
made herein, the parties agree to participate in the transactions described in
this Section 2.1 on the Closing Date as follows:
the Owner Participant agrees to provide funds in an amount sufficient to (i)
fund the Equity Investment and (ii) pay the Transaction Costs which the
Owner Lessor is responsible to pay pursuant to Section 2.3(a) hereof
(collectively, the "Owner Participant's Commitment");
the Facility Lessee agrees to sell the Undivided Interest to the Owner Lessor
on the terms and conditions set forth in the ββββ of Sale and to lease the
Ground Interest to the Owner Lessor on the terms set forth in the Facility
Site Lease; the Owner Lessor agrees to buy the Undivided Interest and to
lease the Ground Interest from the Facility Lessee, and each agrees to
execute and deliver the ββββ of Sale and the Facility Site Lease;
the Owner Lessor agrees to lease the Undivided Interest to the Facility Lessee
and to sublease the Ground Interest from the Facility Lessee on the terms
and conditions set forth in the Facility Lease and Facility Site Sublease;
the Facility Lessee agrees to lease the Undivided Interest and sublease
the Ground Interest from the Owner Lessor, and each agrees to execute and
deliver the respective Facility Lease and the Facility Site Sublease;
the Indenture Trustee agrees to act as the trustee under and enter into the
Collateral Trust Indenture pursuant to which the Lessor Notes will be
issued;
the Pass Through Trustees agree to use the Proceeds from the sale of the
Certificates by the Pass Through Trusts to purchase the Lessor Notes from
the Owner Lessor;
the Owner Lessor agrees to sell to the relevant Pass Through Trusts the
applicable Lessor Notes and to grant to the Indenture Trustee, for the
benefit of the Pass Through Trustees, certain liens and security interests
in the Indenture Estate to secure its obligations thereunder;
the OP Guarantor will guarantee the performance and payment obligations of the
Owner Participant under the Operative Documents pursuant to the OP Parent
Guaranty;
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the Owner Lessor agrees to use the funds received from the Owner Participant
and the Pass Through Trusts pursuant to clause (a)(i) and (e),
respectively, of this Section 2.1 on the Closing Date to pay the Purchase
Price;
the Owner Participant and the Facility Lessee agree to enter into the Tax
Indemnity Agreement; and
the parties agree to enter into the agreements referred to above and the other
Operative Documents, and to cause each Affiliate thereof that is not a
party hereto but is a party to an Operative Document to enter into such
Operative Document, as the case may be (in each case, if attached as an
Exhibit hereto, in substantially the form attached hereto).
Closing Date; Procedure for Participation.
Closing Date. The closing of the transactions contemplated hereby (the
"Closing") shall take place after 10:00 a.m., New York City time, on the
Scheduled Closing Date or such other date as the parties hereto shall
mutually agree (the "Closing Date"), at the offices of βββββ� ββββββββββ
LLP or at such other place as the parties hereto shall mutually agree.
Procedures for Funding. Unless the Closing Date shall have been postponed
pursuant to Section 2.2(c), subject to the terms and conditions of this
Participation Agreement, the Owner Participant shall make the Owner
Participant's Commitment available not later than 10:00 a.m., New York
City time, on the Scheduled Closing Date, by transferring or delivering
such amount, in funds immediately available on such Scheduled Closing
Date, to the Owner Lessor in New York, New York.
Postponement of the Closing. The Scheduled Closing Date may be postponed from
time to time for any reason if the Facility Lessee gives the Owner
Participant, the Owner Lessor, the Indenture Trustee and the Pass Through
Trustees a facsimile or telephonic (confirmed in writing) notice of such
postponement and notice of the date to which the Closing has been
postponed, such notice of postponement to be received by each party no
later than noon, New York City time, on the Scheduled Closing Date. If,
prior to receipt of a postponement notice under this Section 2.2(c), the
Owner Participant shall have provided funds in accordance with Section
2.2(b), such funds shall be returned to the Owner Participant, as soon as
reasonably practicable but in no event later than the Business Day
following the date of such notice, unless the Owner Participant shall have
otherwise directed. All funds made available pursuant to Section 2.2(b)
will be held by the Owner Lessor in trust for the Owner Participant and
shall not be part of the Indenture Estate or the Lessor Estate, shall be
invested by the Owner Lessor in accordance with clause (d) below and such
funds shall remain the sole property of the Owner Participant unless and
until released by the Owner Participant and made available to the Owner
Lessor and applied to pay the Purchase Price or Transaction Costs or
returned to the Owner Participant, as provided in this Agreement.
Investment of Funds. If, on the Scheduled Closing Date, the Owner Participant
has made the Owner Participant's Commitment available to the Owner Lessor
in accordance with Section 2.2(b), the Closing does not occur on such date
and the Owner Lessor is unable to return such funds to the Owner
Participant on such date, the Owner Lessor shall, subject to Section
2.2(c)
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above, use reasonable efforts to invest such funds from time to time at
the written direction of Calpine, and at Calpine's sole expense and risk,
in Permitted Investments until such funds can be returned to the Owner
Participant. If, on the Scheduled Closing Date, the Owner Participant has
made the Owner Participant's Commitment available to the Owner Lessor in
accordance with Section 2.2(b), the Closing does not occur on such date
and the Owner Lessor has not returned such funds to the Owner Participant
on or before 1:00 p.m., New York City time, on such date, then Calpine
shall reimburse the Owner Participant for loss of the use of such funds
at the Applicable Rate for each day, from and including the day that such
funds were made available to the Owner Lessor by the Owner Participant
to, but excluding the earlier of (i) the day that such funds have been
returned to the Owner Participant pursuant to Section 2.2(c) (funds
received by the Owner Participant after 1:00 p.m., New York City time, of
any day shall be deemed to be returned on the next succeeding Business
Day) and (ii) the Closing Date. Subject to payment for the account of the
Owner Participant of any reimbursement for loss of use of funds due to it
at the Applicable Rate, any net gain realized on the investment of such
funds (including interest) shall be paid to Calpine by the Owner Lessor
on the earlier of (i) the date such funds are returned to the Owner
Participant pursuant to Section 2.2(c) and (ii) the Closing Date. The
Owner Lessor shall not be liable for any interest on or loss resulting
from such investments and, if such funds are made available to the Owner
Lessor and utilized to pay the Purchase Price or Transaction Costs on the
Closing Date, Calpine shall reimburse the Owner Lessor for any net loss
realized on the investment of such funds. If such funds are not so
utilized, Calpine shall, in addition to its obligation to reimburse the
Owner Participant for loss of use as provided above, reimburse the Owner
Participant on the date such funds are returned to the Owner Participant
for any net loss realized on the investment of such funds. In order to
obtain funds for payment of the Purchase Price or Transaction Costs or to
return funds made available to the Owner Lessor by the Owner Participant,
the Owner Lessor is authorized to sell any investments or obligations
purchased as aforesaid.
Expiration of Commitments. The obligation of the Owner Participant to make
its Equity Investment shall expire at 5:00 p.m., New York City time, on
December 31, 2001. If the Closing Date has not occurred on or before
December 31, 2001 the Transaction Parties shall have no obligation to
consummate the transactions contemplated under this Agreement and, except
as provided in Sections 2.3, 9.1 and 9.2, all obligations of the
Transaction Parties shall cease and terminate.
Transaction Costs.
If the transactions contemplated by this Agreement are consummated, all
Transaction Costs up to an amount equal to US$1,125,000, which shall be
substantiated or otherwise supported in reasonable detail (provided that
legal bills may be redacted to preserve attorney-client privilege), shall
be paid within 10 days after the Closing Date by the Owner Lessor (with
funds provided by the Owner Participant), assuming all invoices have been
approved by Calpine and received by the Owner Lessor by 7 days after the
Closing Date. All other Transaction Costs, fees, costs and expenses
incurred by the Facility Lessee, the Owner Lessor and the Owner
Participant shall be paid by Calpine. If the Overall Transaction is not
consummated for any reason (including as a result of the Facility Lessee
terminating this Agreement pursuant to Section 12(a)), then Calpine shall
bear all Transaction Costs;
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provided, however, that Calpine shall not be obligated to pay Transaction
Costs incurred by the Owner Participant if the Overall Transaction is not
consummated on the basis of the provisions of this Agreement due to a
failure of the Owner Participant to satisfy any condition to the Closing
required to be satisfied by the Owner Participant.
Following the Closing Date, the Facility Lessee will be responsible for,
and will pay as Supplemental Rent on an After-Tax Basis to the Owner
Participant, the annual administration fees, if any, and expenses
(including reasonable and documented fees and expenses of its outside
counsel) of the Lessor Manager, the Indenture Trustee (as such and in its
individual capacity) and the Pass Through Trustees.
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of the Facility Lessee. The Facility Lessee
represents and warrants that as of the date of execution and delivery hereof
and as of the Closing Date:
Due Incorporation, etc. The Facility Lessee is a limited liability company
duly organized, validly existing, and in good standing under the laws of
the State of Wisconsin. The Facility Lessee is duly licensed or qualified
and in good standing (as evidenced by a certificate of status issued by
the Wisconsin Department of Financial Institutions) in each jurisdiction
where the character of its properties or the nature of its activities
makes such qualification necessary, and the Facility Lessee has the power
and authority to (x) own or hold under lease the property it purports to
own or hold under lease, (y) carry on its business as now being conducted
and as presently proposed to be conducted and (z) take all actions as may
be necessary to consummate the transactions contemplated hereunder and
under the other Operative Documents to which each is a party. The
Facility Lessee is an indirect wholly-owned subsidiary of Calpine.
Authorization; Enforceability, etc. This Agreement and each of the other
Operative Documents to which the Facility Lessee is or will be a party
have been, or when executed and delivered will be, duly authorized,
executed and delivered by all necessary action by the Facility Lessee,
and, assuming the due authorization, execution and delivery by each other
party thereto, this Agreement constitutes and, when executed and
delivered, the other Operative Documents to which the Facility Lessee is
or will be a party will constitute the legal, valid and binding
obligations of the Facility Lessee, enforceable against the Facility
Lessee in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and by general
principles of equity.
Non-Contravention. (1) The execution, delivery and performance by the
Facility Lessee of this Agreement and each of the other Operative
Documents to which it is or will be a party, the consummation by the
Facility Lessee of the transactions contemplated hereby and thereby, and
compliance by the Facility Lessee with the terms and provisions hereof
and thereof, do not and will not (i) contravene any Applicable Law
binding on the Facility Lessee or its property, or its organizational
documents, (ii) constitute a default by the Facility Lessee under, or
result in the creation of any Lien upon the property of the Facility
Lessee (other than pursuant to any Operative Document) under any
indenture, mortgage or other material
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contract, agreement or instrument to which the Facility Lessee is a party
or by which the Facility Lessee or any of its property is bound, (iii)
contravene any Organic Document of the Facility Lessee or (iv) require
the consent or approval of any Person which has not already been
obtained, in each case with respect to clauses (i), (ii) and (iv) above,
which would reasonably be expected to have a Material Adverse Effect.
(2) Neither the sale of the Undivided Interest or the lease of the
Ground Interest by Facility Lessee to the Owner Lessor, nor the grant by the
Owner Lessor to the Indenture Trustee of the Liens and security interests in
the Undivided Interest and the applicable Operative Documents executed in
connection therewith to secure its obligations thereunder does or will
constitute a default by the Facility Lessee or the Owner Lessors under the
Ownership and Operation Agreement.
Government Actions. The Facility Lessee has all Permits with or from any
Governmental Entity or under any Applicable Law required (x) for the due
execution, delivery or performance by the Facility Lessee of this
Agreement, and the other Operative Documents to which the Facility Lessee
is or will be a party or (y) without regard to any other transactions or
other actions of the Owner Participant, the Owner Lessor or any Affiliate
of any of them or any assignee or transferee of any of the Owner
Participant, the Owner Lessor (or any Affiliate of any transferee or
assignee) and assuming that none of the Owner Participant, the Owner
Lessor or any Affiliate of any of them or any assignee or transferee of
any of the Owner Participant (or any Affiliate of any such transferee or
assignee) is an "electric utility" or a "public utility" or a "public
utility holding company" or any similar entity subject to public utility
regulation under any Applicable Law immediately prior to the Closing,
with respect to the participation by the Owner Participant, the Owner
Lessor in the Overall Transaction, other than (i) any Permit where the
failure to obtain or maintain such Permit would not be reasonably likely
to result in a Material Adverse Effect, (ii) the FERC Orders, (iii) as
may be required under Applicable Law providing for the supervision or
regulation of the Owner Participant, the Owner Lessor or any Affiliate of
any of them as a result of investing, lending or other commercial
activity in which the Owner Participant, the Owner Lessor or any
Affiliate of any of them is or may be engaged other than the transactions
contemplated hereby or by any of the other Operative Documents, (iv) as
may be required under existing Applicable Laws to be obtained, given,
accomplished or renewed at any time, or from time to time, in each case,
after the Closing Date and which the Facility Lessee has no reason to
believe will not be timely obtained and the lack of which would not
reasonably be expected to have a Material Adverse Effect or involve any
danger of criminal or material civil liability being incurred by the
Owner Participant, the Owner Lessor, the Indenture Trustee or the Pass
Through Trustees, (v) in connection with any modification to or
rebuilding or replacement of the Facility or any portion thereof that may
occur in the future, (vi) as may be required in connection with any
refinancing of the Lessor Notes or the Certificates or the issuance of
Additional Lessor Notes or Additional Certificates, (vii) as may be
required in consequence of any transfer of the Member Interest or any
transfer of the Undivided Interest or the Owner Lessor's Interest, or any
part thereof by the Owner Lessor or the exercise by any such party of
dispossessory remedies under the Operative Documents or any
relinquishment of the use or operation of the Facility by the Facility
Lessee, (viii) appropriate filing and recording to perfect the Lien of
the Collateral Trust Indenture, if required, and the ownership and
7
leasehold interests conveyed pursuant to this Agreement, or (ix) as may
be required under any Applicable Law enacted or adopted after the date
hereof.
Litigation. There is no pending or, to the Actual Knowledge of the Facility
Lessee, threatened, action, suit, investigation or proceeding against the
Facility Lessee or any other Calpine Party before any Governmental Entity
which (i) questions the validity of the Operative Documents or the
ability of the Facility Lessee or such other Calpine Party to perform its
obligations under the Operative Documents to which the Facility Lessee or
such other Calpine Party is or will be a party or (ii) if determined
adversely to it, could reasonably be expected to have a Material Adverse
Effect or otherwise materially adversely affect the Undivided Interest
leased by the Facility Lessee.
No Defaults. Neither the Facility Lessee nor any other Calpine Party is
in default, and no condition exists that with notice or lapse of time or
both would constitute a default, under any mortgage, indenture or other
contract, agreement or instrument to which the Facility Lessee or such
other Calpine Party is a party or by which the Facility Lessee or such
other Calpine Party or its property is bound in any such case where any
such default, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
Location of Chief Executive Office and Principal Place of Business, etc. (1)
The chief executive office and principal place of business of the
Facility Lessee and the office where the Facility Lessee keeps its
company records concerning the Facility, the Undivided Interest, the
Ground Interest, the Facility Site and the Operative Documents is located
at: c/o Calpine Corporation, ββ ββββ βββ� ββββββββ ββββββ, βββ� βββββ�, βββ�
ββββ, ββ βββββ�.
(2) The Facility is located on the Facility Site.
(3) The condition of the Facility is substantially identical
to the condition it was in when inspected by the Appraiser in connection with
the Closing Appraisal.
Title; Liens. (1) On and before the Closing Date, the Facility Lessee has
(i) good and valid title to the Facility, free and clear of all Liens
other than Permitted Closing Date Liens, and (ii) good and valid title to
the Facility Site free and clear of all Liens other than Permitted
Closing Date Liens.
(2) Upon execution and delivery of the Operative Documents and
recording or filing (as appropriate) of the instruments and documents referred
to in Part I of Schedule 4.20 in accordance with Section 4.20, (A) good and
valid title to the Undivided Interest will be duly, validly and effectively
conveyed and transferred to the Owner Lessor free and clear of all Liens other
than Permitted Closing Date Liens, and (B) good and valid leasehold interest in
the Ground Interest will be duly, validly and effectively granted to the Owner
Lessor upon the terms and conditions in the corresponding Facility Site Lease,
free and clear of all Liens other than Permitted Closing Date Liens.
(3) When duly authorized, executed and delivered by each of
the parties thereto, the Collateral Trust Indenture will create a valid and,
when the filings and recordings to be made pursuant to Section 4.20 have been
made, first priority perfected Lien in favor of the Indenture Trustee in the
Indenture Estate and no filing, recording, registration or notice with, or
8
payment of any fees to, any federal or state Governmental Entity will be
necessary to establish or, except for such filings and recordings as will be
made pursuant to Section 4.20, to perfect, or give record notice of, the Lien
in favor of the Indenture Trustee in the Indenture Estate to the extent such
Lien may be perfected by filings or recordings.
(4) None of the Permitted Encumbrances will, on and after the
Closing, interfere with the use, operation or possession of the Facility (as
contemplated by the Operative Documents) or the use of or the exercise by the
Owner Lessor of its rights under the ββββ of Sale or the Facility Site Lease or
the Facility Lease, in a manner which could reasonably be expected to have a
Material Adverse Effect.
Regulation U, etc. No Calpine Party is 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 Lessor
Notes or the Equity Investment will be used by any Calpine Party,
directly or indirectly, for the purpose of buying or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or
carrying or trading in any securities under such circumstances as to
involve such Person in a violation of Regulation X of said Board (12 CFR
224) or to involve any broker or dealer in a violation of Regulation T of
said Board (12 CFR 220).
Holding Company Act. The Facility Lessee is not an "electric utility
company," a "holding company", a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of
the Holding Company Act, and the execution, delivery and performance of
the Operative Documents to which the Facility Lessee is or will be a
party will not subject the Facility Lessee to such regulation under the
Holding Company Act and do not violate any provision of the Holding
Company Act or any rule or regulation thereunder.
Investment Company Act. The Facility Lessee is not an "investment company"
or a company controlled by an "investment company" within the meaning of
the Investment Company Act of 1940.
Securities Act. Neither the Facility Lessee nor anyone authorized by it has
directly or indirectly offered or sold any interest in the Member
Interest, the Lessor Notes or the Certificates or any part thereof, or in
any similar security or lease, or in any security or lease the offering
of which for the purposes of the Securities Act would be deemed to be
part of the same offering as the offering of the Member Interest, the
Lessor Notes or the Certificates or any part thereof or solicited any
offer to acquire any of the same, in any such case, in violation of the
registration requirements of Section 5 of the Securities Act.
Environmental Matters. Except as set forth in Schedule 3.1(m):
(1) The Facility Lessee has not received or has Actual
Knowledge of any written notice, letter, citation, order, warning, complaint,
inquiry, claim or demand from any Governmental Entity or any other Person that:
(i) there has been a Release, or there is a threat of Release, of Hazardous
Substances in, on, under or from the Facility, or the Facility Site; (ii) the
9
Facility Lessee or any other Calpine Party is or is asserted to be liable, in
whole or in part, for the costs of cleaning up, remedying or responding at any
location (including any location at which any Hazardous Substances have been
generated, stored, treated or disposed by or on behalf of the Facility Lessee
or such other Calpine Party) to a Release or threatened Release of any
Hazardous Substance generated, used or stored at or Released in, on, under or
from the Facility or the Facility Site; (iii) the Facility or the Facility Site
is subject to a Lien in favor of any Governmental Entity in response to a
Release or threatened Release of Hazardous Substances or (iv) the Facility or
the Facility Site is or is asserted to be in violation of or not in compliance
with any Environmental Law, in any case with respect to clauses (ii), (iii) or
(iv), which could reasonably be expected to have a Material Adverse Effect;
(2) The Facility Lessee and the other Calpine Parties are in
compliance with and have complied with all Environmental Laws, except to the
extent that failure to so comply could not reasonably be expected to have a
Material Adverse Effect; and
(3) To the Facility Lessee's Actual Knowledge, there is not and
has not been any Environmental Condition (A) at, on, under or from the Facility
or the Facility Site, or (B) at, on, under or from any other location resulting
from or arising in connection with the operation by any Person of the Facility
or the Facility Site, that in each case could reasonably be expected to have a
Material Adverse Effect or involve any danger of (i) foreclosure, sale,
forfeiture or loss of, or imposition of a material lien on, such Facility or
the Facility Site, (ii) the impairment of the ownership (or leasehold or
easement interest in), use, operation or, maintenance of the Facility or
Facility Site in any material respect, or (iii) any criminal or material civil
liability being incurred by the Owner Participant, the Owner Lessor, the Lessor
Manager, the Indenture Trustee or the Pass Through Trustees.
(4) All environmental permits necessary to own, operate, lease or
maintain the Facility and the Facility Site in accordance with the Operative
Documents and the Ownership and Operation Agreement and Environmental Laws have
been obtained on behalf of the Owner Lessor or by the Facility Lessee and they
are final, in proper form, and in full force and effect, with all appeal
periods expired, and the Facility Lessee is in compliance with the provisions
of all such permits, except where the failure to obtain, maintain the
effectiveness of, or comply with such permits would not reasonably be expected
to have a Material Adverse Effect or involve any danger of (i) foreclosure,
sale, forfeiture or loss of, or imposition of a material lien on, the Facility
or the Facility Site, (ii) the impairment of the ownership (or leasehold or
easement interest in), use, operation or maintenance of the Facility or the
Facility Site in any material respect, or (iii) any criminal or material civil
liability being incurred by the Owner Participant, the Owner Lessor, the
Indenture Trustee, the Lessor Manager, the Pass Through Trustees or the
Certificateholders.
Operation and Use. Assuming the Facility will continue to be operated
substantially as operated as of the Closing Date, the rights and
interests to be possessed on the Closing Date by the Facility Lessee with
respect to the Undivided Interest and the Ground Interest and based upon
the Facility Lessee's reasonable expectations and on Applicable Law in
effect on and as of the Closing Date, the rights and interests made
available to the Owner Lessor pursuant to the Operative Documents and the
rights contemplated by the Facility Lease to be made available under such
Operative Documents, permit on a commercially practicable basis
10
during the Facility Lease Term and the period following the expiration or
termination of the Facility Lease Term, as applicable, until the end of
the Facility's useful life as set forth in the Closing Appraisal, (i) the
location, occupation, interconnection, maintenance and repair of each
Facility, (ii) the use, operation and possession of the Facility, (iii)
as of the Closing Date, the use, operation, possession, maintenance,
replacement, renewal and repair of all Improvements required to be made
to the Facility, (iv) adequate ingress to and egress from the Facility in
connection with the ownership, use, operation, possession, maintenance or
repair of the Facility and (v) the transmission of electricity from the
Facility substantially in the manner currently transmitted as of the
Closing Date.
Tax Returns. The Facility Lessee and each other Calpine Party has filed all
federal, state and local income tax returns which are required to be
filed by it and has paid all Taxes shown to be due and payable on such
returns or pursuant to any assessment received by it (other than Taxes
and assessments the payment of which is being contested in good faith by
such Person and with respect to which appropriate accounting reserves
have to the extent required by GAAP been set aside) and neither the
Facility Lessee nor any other Calpine Party has any Actual Knowledge of
any actual or proposed assessment in connection therewith which, either
in any case or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
Jurisdiction. In accordance with Section 14.14 hereof, the Facility Lessee
has validly submitted to the jurisdiction of the Supreme Court of the
State of New York, New York County and the United States District Court
for the Southern District of New York.
Applicable Law. The Facility Lessee is in compliance with all Applicable Law,
including all applicable zoning, use and building codes, laws,
regulations and ordinances relating to the operations, maintenance, use,
lease or ownership of the Facility and the Facility Site, except where
the noncompliance would not reasonably be expected to have a Material
Adverse Effect or involve any danger of (i) foreclosure, sale, forfeiture
or loss of, or imposition of a material lien on, the Facility or the
Facility Site, (ii) the impairment of the ownership (or leasehold or
easement interest in), use, operation or maintenance of the Facility or
the Facility Site in any material respect, or (iii) any criminal or
material civil liability being incurred by the Owner Participant, the
Owner Lessor, the Lessor Manager, the Indenture Trustee or the Pass
Through Trustees, including subjecting the Owner Participant or the Owner
Lessor to regulation as a public utility under Applicable Law. None of
the Calpine Parties is in default of any judgments, orders or decrees of
any Governmental Entity relating to such Facility or the Facility Site.
ERISA. Assuming the accuracy of the representations of the other parties
hereto and the Certificateholders in the Certificates, the execution and
delivery of the Operative Documents and the issuance and sale of the
Lessor Notes under the Collateral Trust Indenture and the Certificates
under the Pass Through Trust Agreements will be exempt from, or will not
involve any transaction which is subject to, the prohibitions of either
Section 406 of ERISA or Section 4975 of the Code and will not involve any
transaction in connection with which a penalty could be imposed under
Section 502(i) of ERISA or a tax could be imposed pursuant to Section
4975 of the Code.
11
Insurance. All insurance required to be obtained pursuant to Schedule 5.31
is in full force and effect.
No Default; No Event of Loss; Burdensome Buyout. No Lease Default or Lease
Event of Default, exists or will exist upon execution and delivery of the
Operative Documents. No Event of Loss exists or will exist upon the
execution and delivery of the Operative Documents. To the Actual
Knowledge of the Facility Lessee, no Burdensome Buyout Event has occurred
or will occur upon the execution and delivery of the Operative Documents
and the Facility Lessee does not have Actual Knowledge of any event that
could reasonably be expected to result in a Burdensome Buyout Event.
Special Assessments. There is no action pending or, to the Facility Lessee's
Actual Knowledge, threatened by a Governmental Entity or other Person to
specially assess the Facility or the Facility Site for any public
improvements constructed or to be constructed which would reasonably be
expected to have a Material Adverse Effect.
Utility Services. The Facility and the Facility Site have available all
services of public utilities necessary for use and operation of the
Facility as currently being used and as contemplated by the applicable
Operative Documents, except where the failure to have any such services
or public utilities available would not result in a material adverse
effect with respect to the Facility.
Eminent Domain. There is no action pending with respect to, or threatened by
a Governmental Entity or other Person to initiate, a Requisition of any
of the Undivided Interest, the Facility, the Ground Interest or the
Facility Site, which would reasonably be expected to have a Material
Adverse Effect.
Permitted Liens. There are no violations or proceedings or actions pending or
threatened, with respect to any easements, reciprocal easement agreements,
declarations, development agreements or recorded restrictions or covenants
relating to the Facility or the Facility Site, which would reasonably be
expected to have a Material Adverse Effect.
Access; Egress. Access to and egress from the Facility and the Facility Site
is available and provided by public streets and/or private roads fully
accessible by the Facility Lessee. To the Facility Lessee's Actual
Knowledge, there are no plans of any Governmental Entity to change the
highway or road system in the vicinity of the Facility or the Facility
Site, or to restrict or change access from any such highway or road to
the Facility or the Facility Site, in either case, in any manner which
would reasonably be expected to have a Material Adverse Effect.
Notices. To the Facility Lessee's Actual Knowledge, (i) there are no
outstanding written notices from any Governmental Entity of any violation
of, or that the Facility or Facility Site is not in compliance with, any
and all Applicable Laws relating to the Facility and Facility Site or the
ownership, use, occupancy and operation thereof and (ii) there are no
outstanding written notices that any repairs or work or capital
improvements are required to be done at or with respect to the Facility
or Facility Site by any Governmental Entity or by any insurance company
which currently issues any insurance to the Facility Lessee or by any
board of fire
12
underwriters or other body exercising similar functions, except, in
either case with respect to (i) or (ii) above, where such violation,
noncompliance or repairs could not reasonably be expected to have a
Material Adverse Effect.
Business. The Facility Lessee has not conducted any business other than the
acquisition, construction, development, ownership, operation,
maintenance, leasing and financing of the Facility and Facility Site and
activities incidental thereto.
Intellectual Property. To the Actual Knowledge of the Facility Lessee, the
Facility Lessee has the right to use all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights which are
necessary for the operation of its business as presently conducted and to
transfer all such rights to the Owner Lessor subsequent to termination of
the Facility Lease, except to the extent failure to possess such rights
would not reasonably be likely to result in a Material Adverse Effect.
Land Not in Flood Zone. No portion of the Facility or the Facility Site
includes improved real property that is 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.
No Fraudulent Conveyances. The Facility Lessee is consummating the
transactions contemplated hereby (including the transfer of certain of
its assets and properties to the Owner Lessor) in good faith and without
any intent to defraud creditors of the Facility Lessee or subsequent
purchasers. The execution and delivery of the Operative Documents to
which the Facility Lessee is a party will not render the Facility Lessee
insolvent under GAAP or leave the Facility Lessee with assets whose
present fair valuation of assets is less than the present fair valuation
of the Facility Lessee's debts. As used in this Section 3.1(dd), "debts"
includes any and all liabilities, whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent, and whether or
not such liabilities are required under GAAP to be shown on the Facility
Lessee's balance sheet. The execution and delivery of the Operative
Documents to which the Facility Lessee is a party will not leave it with
property remaining in its hands which would constitute unreasonably small
assets or capital, and the Facility Lessee has and, after giving effect
to such transactions will have, an adequate amount of assets and capital
to engage in its business now and in the future, based on the actual and
anticipated needs for capital of the businesses anticipated to be
conducted by the Facility Lessee, and based upon the other information
described herein. After giving effect to the transactions contemplated
under the Operative Documents, the Facility Lessee will be able to pay
all of its debts and liabilities, including unrecorded contingent
liabilities, as they mature, the Facility Lessee will have positive cash
flow after paying all of its scheduled and anticipated debt as it
matures, and the Facility Lessee will realize sufficient monies from
current assets in the ordinary and usual course of business to pay
recurring current debt, short-term debt and long-term debt as such debts
mature.
No Additional Fees. Except for the fees referred to in clause (xiv) and (xv)
of the definition of Transaction Costs, the Facility Lessee has not paid
or become obligated to pay any fee or
13
commission to any broker, finder or intermediary for or on account of
arranging the financing of the transactions contemplated by the Operative
Documents.
Status under Certain Statutes. Neither the Facility Lessee, the Owner
Participant, the Owner Lessor, The Lessor Manager, the Indenture Trustee,
the Pass Through Trustees nor any Certificateholder solely as a result of
execution, delivery and performance of, and the consummation of the
transactions contemplated by the Operative Documents shall be or become
(i) subject to regulation as a "public utility company," "holding
company," an "affiliate" of a "holding company" or a "subsidiary company"
of a "holding company" within the meaning of PUHCA or (ii) a "public
utility" (except that the Facility Lessee will be a public utility
subject to the Federal Power Act with authority to sell wholesale
electricity at market-based rates and with waivers of regulations
customarily granted to a public utility that sells wholesale power at
market-based rates), a "transmitting utility," or an "electric utility"
within the meaning of the Federal Power Act, (iii) subject to state
regulation of rates or organizational requirements for electric utilities.
Material Omission. Neither the Offering Circular (including any preliminary
offering circular approved by the Facility Lessee for distribution) nor
the written information furnished to the Owner Lessor, the Owner
Participant, the Lessor Manager, the Indenture Trustee and the Pass
Through Trustees by or on behalf of the Facility Lessee or any of its
Affiliates in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; provided, that no representation or warranty is made with
regard to (i) any projections or other forward-looking statements
provided by or on behalf of the Facility Lessee, or (ii) the descriptions
of the Operative Documents or the tax consequences to beneficial owners
of Certificates; provided, further, each of the Transaction Parties
acknowledge and agrees that (i) Calpine has heretofore provided to the
Appraiser, solely in order to assist the Appraiser in connection with the
preparation of the appraisal to be delivered by the Appraiser to certain
of the Transaction Parties at the Closing, certain (1) general market
information, (2) information about the Wisconsin energy markets and (3)
information passed along from other Persons and (ii) that the Facility
Lessee makes no representation or warranty whatsoever with respect to the
information described in clause (i) above except to the extent expressly
set forth in Section 4(b) of the Tax Indemnity Agreement.
Exempt Wholesale Generator. The Facility Lessee is an "exempt wholesale
generator" under PUHCA. The Facility is interconnected with the high
voltage network operated by American Transmission Company and has access
to transmission services and ancillary services sufficient to sell the
net generating capacity of the Facility at wholesale, and the Facility
Lessee has the authority to sell wholesale electric power from the net
generating capacity of such generating Facility at market-based rates.
FERC Orders. The Facility Lessee has duly filed with FERC the filings
referenced in Section 4.8 and, except with respect to the FERC Owner
Lessor EWG Orders and the FERC Orders referred to in clause (v) of the
definition of "FERC Orders" in Appendix A hereto, received from FERC the
orders referenced therein.
14
Fully Taxable. As of the Closing Date, each Person owning an Ownership
Interest (i) is fully taxable at the highest federal tax rate and (ii)
expects to be fully taxable at the highest federal tax rate throughout
the Facility Lease Term; for the avoidance of doubt, this representation
is not intended to be construed as nor shall it be deemed to be a
guaranty as to any such Person's future taxation.
Commencement of Commercial Operations and Compliance. To the knowledge of
the Facility Lessee, the Facility has commenced commercial operations and
is currently capable of producing at least 520 MW of capacity and
complies in all material respects with the other specifications set forth
in the purchase and construction contracts for the Facility.
Representations and Warranties of the Owner Lessor. The Owner Lessor represents
and warrants that as of the date of execution and delivery hereof and as of the
Closing Date:
Due Organization. The Owner Lessor is a duly organized and validly existing
limited liability company under the laws of the State of Delaware of
which the Owner Participant is the sole member, and has the power and
authority to enter into and perform its obligations under this Agreement
and each of the other Operative Documents to which it is a party.
Due Authorization, Enforceability; etc. (1) (i) This Agreement and each of
the other Operative Documents (other than the Lessor Notes) to which the
Owner Lessor is or will be a party has been or when executed and
delivered will be duly authorized, executed and delivered by the Owner
Lessor, and (ii) assuming the due authorization, execution and delivery
of this Agreement by each party hereto other than the Owner Lessor, this
Agreement constitutes and when executed and delivered each of the other
Operative Documents (other than the Lessor Notes) to which it is or will
be a party will be the legal, valid and binding obligations of the Owner
Lessor, enforceable against the Owner Lessor in accordance with its
terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the rights of creditors generally and by general principles of equity.
(2) Upon the execution of the Lessor Notes by the Owner Lessor
in accordance with the Collateral Trust Indenture and delivery of such Lessor
Notes against payment therefor, the Lessor Notes will constitute legal, valid
and binding obligations of the Owner Lessor, enforceable against the Owner
Lessor in accordance with their terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and by general principles of
equity.
Non-Contravention. The execution and delivery by the Owner Lessor of this
Agreement and the other Operative Documents to which it is or will be a
party, the consummation by the Owner Lessor of the transactions
contemplated hereby and thereby, and the compliance by the Owner Lessor
with the terms and provisions hereof and thereof, do not and will not
contravene any Applicable Law of the United States of America or the
State of Delaware, or the LLC Agreement or the Owner Lessor's other
organizational documents or contravene the provisions of, or constitute a
default by the Owner Lessor under any indenture, mortgage or other
material contract, agreement or instrument to which the Owner Lessor is a
party or by which the Owner Lessor or its property is bound, or in the
creation of any Owner Lessor's
15
Lien; provided, however, that no representation is made with respect to
the right, power or authority of the Owner Lessor to act as operator of
the Facility following a Lease Event of Default or the expiration or
termination of the Facility Lease.
Governmental Actions. Assuming the representations and warranties of the
Facility Lessee contained in paragraphs (j), (k), (l), (m), (q), (z),
(ff) and (hh) of Section 3.1 are true, no authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Owner Lessor, as the case may be, of the LLC
Agreement, the Collateral Trust Indenture, the Lessor Notes, this
Agreement or the other Operative Documents to which the Owner Lessor is
or will be a party, other than any such authorization or approval or
other action or notice or filing as has been duly obtained, taken or
given.
Litigation. There is no pending or, to the Actual Knowledge of the Owner
Lessor, threatened, action, suit, investigation or proceeding against the
Owner Lessor before any Governmental Entity which (i) questions the
validity of the Operative Documents or the ability of the Owner Lessor to
perform its obligations under the Operative Documents to which it is or
will be a party or (ii) if determined adversely to it, could reasonably
be expected to materially adversely affect the ability of the Owner
Lessor to perform its obligations under this Agreement or any other
Operative Document to which it is or will be a party or would materially
adversely affect the Facility, the Facility Site or any interest therein
or part thereof or the Lien of the Indenture Trustee on the Indenture
Estate.
Liens. The Owner Lessor's right, title and interest in and to the Lessor
Estate is free of all Owner Lessor's Liens.
Location of Registered Office; Location of Corporate Records. The registered
office of the Owner Lessor is ββββ ββββββ ββββββ, ββββββββββ, ββββββββ
βββββ�, and the Owner Lessor will keep its corporate records concerning
the Facility, the Facility Site, the Operative Documents and the South
Point Ground Lease with the Lessor Manager, at the Lessor Manager's
address set forth in Section 14.5 hereof.
Securities Act. Neither the Owner Lessor nor anyone authorized by it has
directly or indirectly offered or sold any interest in the Member
Interest, the Lessor Notes or the Certificates or any part thereof, or in
any similar security or lease, the offering of which for the purposes of
the Securities Act would be deemed to be part of the same offering as the
offering of the Member Interest, the Lessor Notes or the Certificates or
any part thereof or solicited any offer to acquire any of the same in
violation of the registration requirements of Section 5 of the Securities
Act.
Representations and Warranties of the Lessor Manager and the Trust Company. The
Trust Company (only with respect to representations and warranties expressly
relating to the Trust Company) and the Lessor Manager hereby severally
represent and warrant that as of the date of execution and delivery hereof and
as of the Closing Date:
Due Organization. The Trust Company is national banking association duly
organized and validly existing and in good standing under the laws of the
United States, has the corporate
16
power and authority, as Lessor Manager and/or in its individual capacity
to the extent expressly provided herein or in the LLC Agreement, to enter
into and perform its obligations under the LLC Agreement, this Agreement
and each of the other Operative Documents to which it is a party.
Due Authorization, Enforceability; etc. (1) (i) The LLC Agreement has been
duly authorized, executed and delivered by the Trust Company, and (ii)
assuming the due authorization, execution and delivery of the LLC
Agreement by the Owner Participant, the LLC Agreement constitutes the
legal, valid and binding obligation of the Trust Company, enforceable
against it in its individual capacity or as Lessor Manager, as the case
may be, in accordance with its terms, except as may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights
of creditors generally and by general principals of equity.
(2) Execution. This Agreement and each of the other Operative
Documents to which the Trust Company or the Lessor Manager is or will be a
party has been or when executed and delivered will be duly authorized, executed
and delivered by the Trust Company or the Lessor Manager, and (ii) assuming the
due authorization, execution and delivery of this Agreement by each party
hereto other than the Trust Company or the Lessor Manager, this Agreement
constitutes and when executed and delivered each of the other Operative
Documents to which it is or will be a party will be the legal, valid and
binding obligations of the Lessor Manager and, to the extent expressly provided
herein, the Trust Company, as the case may be, enforceable against the Lessor
Manager and, to the extent expressly provided herein, the Trust Company, in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of equity.
Non-Contravention. The execution and delivery by the Trust Company, in its
individual capacity or as Lessor Manager, as the case may be, of the LLC
Agreement, this Agreement and the other Operative Documents to which it
is or will be a party, the consummation by the Trust Company, in its
individual capacity or as Lessor Manager, as the case may be, of the
transactions contemplated hereby and thereby, and the compliance by the
Trust Company, in its individual capacity or as Lessor Manager, as the
case may be, with the terms and provisions hereof and thereof, do not and
will not contravene any Applicable Law of the State of Utah governing the
Trust Company or any United States federal law governing the banking or
trust powers of the Trust Company, or the LLC Agreement or its
organizational documents or bylaws or contravene the provisions of, or
constitute a default by the Trust Company under any indenture, mortgage or
other material contract, agreement or instrument to which the Trust
Company is a party or by which the Trust Company or its property is bound,
or in the creation of any Owner Lessor's Lien; provided, however, that no
representation is made with respect to the right, power or authority of
the Trust Company or the Lessor Manager to act as operator of the Facility
following a Lease Event of Default.
Governmental Actions. Assuming the representations and warranties of the
Facility Lessee contained in paragraphs (j), (k), (l), (m), (q), (z), (ff)
and (hh) of Section 3.1 are true, no authorization or approval or other
action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the
17
Trust Company or the Lessor Manager, as the case may be, of the LLC
Agreement, this Agreement or the other Operative Documents to which the
Trust Company or the Lessor Manager is or will be a party, other than any
such authorization or approval or other action or notice or filing as has
been duly obtained, taken or given.
Litigation. There is no pending or, to the Actual Knowledge of the Trust
Company, threatened, action, suit, investigation or proceeding against the
Trust Company either in its individual capacity or as Lessor Manager, as
the case may be, before any Governmental Entity which (i) questions the
validity of the Operative Documents or the ability of the Owner Lessor to
perform its obligations under the Operative Documents to which it is or
will be a party or (ii) if determined adversely to it, could reasonably be
expected to materially adversely affect the ability of the Trust Company
either in its individual capacity or as Lessor Manager, as the case may
be, to perform its obligations under the LLC Agreement, this Agreement or
any other Operative Document to which it is or will be a party or would
materially adversely affect the Facility, the Facility Site or any
interest therein or part thereof or the Lien of the Indenture Trustee on
the Indenture Estate.
Liens. The Lessor Estate is free of any Owner Lessor's Liens attributable to
the Trust Company, in its individual capacity, or the Lessor Manager.
Securities Act. Neither the Trust Company, the Lessor Manager nor anyone
authorized by either of such Persons has directly or indirectly offered or
sold any interest in the Member Interest, the Lessor Notes or the
Certificates or any part thereof, or in any similar security or lease, the
offering of which, for the purposes of the Securities Act, would be deemed
to be part of the same offering as the offering of the Member Interest,
the Lessor Notes or the Certificates or any part thereof or solicited any
offer to acquire any of the same in violation of the registration of
Section 5 of the Securities Act.
Representations and Warranties of the Owner Participant. The Owner Participant
represents and warrants that as of the date of execution and delivery hereof
and as of the Closing Date:
Due Organization. The Owner Participant is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the power and authority to enter into and
perform its obligations under this Agreement, the LLC Agreement and the
Tax Indemnity Agreement. The Owner Participant is a direct wholly owned
subsidiary of Newcourt Capital USA Inc.
Due Authorization, Enforceability; etc. This Agreement, the LLC Agreement
and the Tax Indemnity Agreement have been or when executed and delivered
will be duly authorized, executed and delivered by the Owner Participant
and assuming the due authorization, execution and delivery by each other
party thereto, this Agreement, the LLC Agreement, the Tax Indemnity
Agreement and any other Operative Document to which the Owner Participant
is or will be a party constitute or when executed and delivered will
constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance with
their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of
equity.
18
Non-Contravention. The execution and delivery by the Owner Participant of
this Agreement, the LLC Agreement, the Tax Indemnity Agreement and any
other Operative Document to which the Owner Participant is or will be a
party, the consummation by the Owner Participant of the transactions
contemplated hereby and thereby, and the compliance by the Owner
Participant with the terms and provisions hereof and thereof, do not and
will not contravene any Applicable Law binding on the Owner Participant,
or its organizational documents, or contravene the provisions of, or
constitute a default under any indenture, mortgage or other material
contract, agreement or instrument to which the Owner Participant is a
party or by which the Owner Participant or its property is bound or result
in the creation of any Owner Participant's Lien (other than any Lien
created under any Operative Document) upon the Lessor Estate, the Facility
Site or any interest therein or part thereof (it being understood that no
representation or warranty is being made as to (i) any Applicable Laws
relating to the particular nature of the Facility or the Facility Site or
(ii) other than its representations set forth in Section 3.4(g), ERISA or
Section 4975 of the Code).
Governmental Action. Assuming the representations and warranties of the
Facility Lessee contained in paragraphs (j), (k), (l), (m), (q), (z), (ff)
and (hh) of Section 3.1 are true, no authorization or approval or other
action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Owner Participant of this Agreement, the LLC Agreement,
the Tax Indemnity Agreement or any other Operative Document to which the
Owner Participant is or will be a party, other than any authorization or
approval or other action or notice or filing as has been duly obtained,
taken or given (it being understood that no representation or warranty is
being made as to any Applicable Laws relating to the Facility or the
Facility Site).
Litigation. There is no pending or, to the Actual Knowledge of the Owner
Participant, threatened, action, suit, investigation or proceeding against
the Owner Participant before any Governmental Entity which (i) questions
the validity of the Operative Documents or the ability of the Owner
Participant to perform its obligations under the Operative Documents to
which it is or will be a party or (ii) if determined adversely to it,
could reasonably be expected to materially adversely affect the ability of
the Owner Participant to perform its obligations under the LLC Agreement,
this Agreement or any other Operative Document to which it is or will be a
party or would materially adversely affect the Facility, the Facility Site
or any interest therein or part thereof or the Lien of the Indenture
Trustee on the Indenture Estate.
Liens. The Lessor Estate is free of any Owner Participant's Liens.
ERISA. No part of the funds to be used by the Owner Participant to make
its investment pursuant to this Agreement, directly or indirectly,
constitutes or is deemed to constitute assets (within the meaning of ERISA
and any applicable rules, regulations and court decisions thereunder) of
any "employee benefit plan" (as defined in Section 3(3) of ERISA) that is
subject to ERISA, of any Transaction Party and ERISA Affiliate thereof.
Acquisition for Investment. The Owner Participant is purchasing the Member
Interest to be acquired by it for its own account with no present
intention of distributing such Member Interest or any part thereof in any
manner which would require registration under or would
19
violate the Securities Act, but without prejudice, however, to the right
of the Owner Participant at all times to sell or otherwise dispose of all
or any part of such Member Interest under an exemption from registration
available under such Act.
Securities Act. Neither the Owner Participant nor anyone authorized by it
has directly or indirectly offered or sold any interest in the Member
Interest, the Lessor Notes or the Certificates or any part thereof, or in
any similar security or lease, or in any security or lease the offering of
which for the purposes of the Securities Act would be deemed to be part of
the same offering as the offering of the Member Interest, the Lessor Notes
or the Certificates or any part thereof or solicited any offer to acquire
any of the same in violation of the registration requirements of Section 5
of the Securities Act.
Holding Company Act and Federal Power Act. Immediately prior to executing
this Agreement, the Owner Participant is not an "electric utility",
"electric utility company", "public utility", "public-utility company",
"holding company" or a "subsidiary company" or "affiliate" of any of the
foregoing, under the Federal Power Act or the Holding Company Act.
Investment Company Act. The Owner Participant is not an "investment
company" or a company controlled by an "investment company" within the
meaning of the Investment Company Act of 1940.
Regulatory Event of Loss. The Owner Participant is not aware of any fact
or circumstance that would constitute a Regulatory Event of Loss.
Representations and Warranties of Indenture Trustee and the Lease
Indenture Company. The Lease Indenture Company and the Indenture Trustee hereby
severally represent and warrant that as of the date of execution and delivery
hereof and as of the Closing Date:
Due Organization. The Lease Indenture Company is a national banking
association duly organized, validly existing and in good standing under
the laws of the United States, has the corporate power and authority, as
Indenture Trustee and/or in its individual capacity to the extent
expressly provided herein or in the Collateral Trust Indenture, to enter
into and perform its obligations under the Collateral Trust Indenture,
this Agreement and each of the other Operative Documents to which it is or
will be a party.
Due Authorization, Enforceability; etc. (1) (i) This Agreement has been
duly authorized, executed and delivered by the Indenture Trustee and the
Lease Indenture Company, and (ii) assuming the due authorization,
execution and delivery of this Agreement by each party hereto other than
the Indenture Trustee and the Lease Indenture Company, this Agreement
constitutes a legal, valid and binding obligation of the Lease Indenture
Company and the Indenture Trustee, enforceable against the Lease Indenture
Company or the Indenture Trustee, as the case may be, in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and by general principles of equity.
(2) (i) Each of the other Operative Documents to which the
Indenture Trustee is or will be a party has been or when executed and
delivered will be duly authorized, executed and delivered by the Indenture
Trustee, and (ii) assuming the due authorization, execution and
20
delivery of each of the other Operative Documents by each party thereto
other than the Indenture Trustee, each of the other Operative Documents to
which the Indenture Trustee is or will be a party constitutes or when executed
and delivered will be a legal, valid and binding obligation of the Indenture
Trustee, enforceable against the Indenture Trustee in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and by general principles of equity.
Non-Contravention. The execution and delivery by the Lease Indenture
Company, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement and the other Operative Documents to which it is
or will be a party, the consummation by the Lease Indenture Company, in
its individual capacity or as Indenture Trustee, as the case may be, of
the transactions contemplated hereby and thereby, and the compliance by
the Lease Indenture Company, in its individual capacity or as Indenture
Trustee, as the case may be, with the terms and provisions hereof and
thereof, do not and will not contravene any Applicable Law of the State of
Connecticut or the United States of America governing the Lease Indenture
Company or the banking or trust powers of the Lease Indenture Company, or
its articles of association or by-laws, or contravene the provisions of,
or constitute a default by the Lease Indenture Company under or pursuant
to any indenture, mortgage or other material contract, agreement or
instrument to which the Lease Indenture Company is a party or by which the
Lease Indenture Company or its property is bound, or result in the
creation of any Lien attributable to the Lease Indenture Company upon the
Indenture Estate, the Facility Site or any interest therein or any part
thereof (other than the Lien of the Collateral Trust Indenture), which
would materially adversely affect the ability of the Lease Indenture
Company, in its individual capacity or as Indenture Trustee, as the case
may be, to perform its obligations under this Agreement or the other
Operative Documents to which it is or will be a party or would materially
adversely affect the Facility, the Facility Site or any interest therein
or part thereof or the security interest of the Indenture Trustee in the
Indenture Estate; provided, however, that no representation or warranty is
made with respect to the right, power or authority of the Lease Indenture
Company or the Indenture Trustee to act as operator of the Facility
following a Lease Event of Default.
Governmental Action. Assuming the representations and warranties of the
Facility Lessee contained in paragraphs (j), (k), (l), (m), (q), (z), (ff)
and (hh) of Section 3.1 are true, no authorization or approval or other
action by, and no notice to or filing or registration with, any
Governmental Entity of the State of Delaware or of the United State of
America governing its banking or trust powers is required for the due
execution, delivery or performance by the Lease Indenture Company or the
Indenture Trustee, as the case may be, of this Agreement or the other
Operative Documents to which the Indenture Trustee is or will be a party,
other than any such authorization or approval or other action or notice or
filing as has been duly obtained, taken or given.
Litigation. There is no pending or, to the Actual Knowledge of the Lease
Indenture Company, threatened, action, suit, investigation or proceeding
against the Lease Indenture Company before any Governmental Entity which
(i) questions the validity of the Operative Documents or the ability of
the Lease Indenture Company or the Indenture Trustee to perform its
obligations under the Operative Documents to which it is or will be a
party or (ii) if
21
determined adversely to it, could reasonably be expected to materially
adversely affect the ability of the Lease Indenture Company to perform its
obligations under this Agreement or any other Operative Document to which
it is or will be a party or could reasonably be expected to materially
adversely affect the Facility, the Facility Site or any interest therein
or part thereof or the Lien of the Indenture Trustee on the Indenture
Estate.
Representations, Warranties and Covenants of the Pass Through Trustees
and the Pass Through Company. The Pass Through Company and the Pass Through
Trustees hereby severally represent and warrant that as of the date of
execution and delivery hereof and as of the Closing Date:
Due Organization. The Pass Through Company is a national banking
association duly organized, validly existing and in good standing under
the laws of the United States, has the corporate power and authority, as
Pass Through Trustee and/or in its individual capacity to the extent
expressly provided herein or in the Pass Through Trust Agreements, to
enter into and perform its obligations under the Pass Through Trust
Agreements, this Agreement and each of the other Operative Documents to
which it is or will be a party.
Due Authorization, Enforceability; etc.
(A) This Agreement has been duly authorized, executed and delivered by the
Pass Through Trustees and the Pass Through Company and (B) assuming the
due authorization, execution and delivery of this Agreement by each party
hereto other than each Pass Through Trustee and the Pass Through Company,
as the case may be, this Agreement constitutes a legal, valid and binding
obligation of the Pass Through Company and each Pass Through Trustee,
enforceable against the Pass Through Company or each Pass Through Trustee,
as the case may be, in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of
equity.
(A) Each of the other Operative Documents to which the Pass Through
Company or any Pass Through Trustee is or will be a party has been or when
executed and delivered will be duly authorized, executed and delivered by
the Pass Through Company or such Pass Through Trustee, as the case may be,
and (B) assuming the due authorization, execution and delivery of each of
the other Operative Documents by each party thereto other than the Pass
Through Company or such Pass Through Trustee, as the case may be, each of
the other Operative Documents to which the Pass Through Company or any
Pass Through Trustee is or will be a party constitutes or when executed
and delivered will constitute a legal, valid and binding obligation of the
Pass Through Company or such Pass Through Trustee, enforceable against the
Pass Through Company or such Pass Through Trustee, as the case may be, in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights
of creditors generally and by general principles of equity.
Non-Contravention. The execution and delivery by the Pass Through Company,
in its individual capacity or as Pass Through Trustee, as the case may be,
of this Agreement and the other Operative Documents to which it is or will
be a party, the consummation by the Pass
22
Through Company, in its individual capacity or as Pass Through Trustee, as
the case may be, of the transactions contemplated hereby and thereby, and
the compliance by the Pass Through Company, in its individual capacity or
as Pass Through Trustee, as the case may be, with the terms and provisions
hereof and thereof, do not and will not contravene any Applicable Law of
the United States of America or the State of Connecticut governing the
Pass Through Company or the banking or trust powers of the Pass Through
Company, or its organizational documents or by-laws, or contravene the
provisions of, or constitute a default by the Pass Through Company under,
or result in the creation of any Lien attributable to the Pass Through
Company upon the Certificates or any indenture, mortgage or other material
contract, agreement or instrument to which the Pass Through Company is a
party or by which the Pass Through Company or its property is bound which
would materially adversely affect the ability of the Pass Through Company,
in its individual capacity or as Pass Through Trustee, as the case may be,
to perform its obligations under this Agreement or the other Operative
Documents to which it is a party or would materially adversely affect the
Facility, the Facility Site or any interest therein or part thereof or the
security interest of any Pass Through Trustee in the Indenture Estate;
provided, however, that no representation is made with respect to the
right, power or authority of the Pass Through Company or any Pass Through
Trustee to act as operator of the Facility following a Lease Event of
Default.
Governmental Action. Assuming the representations and warranties of the
Facility Lessee contained in paragraphs (j), (k), (l), (m), (q), (z), (ff)
and (hh) of Section 3.1 are true, no authorization or approval or other
action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required for
the due execution, delivery or performance by the Pass Through Company or
any Pass Through Trustee, as the case may be, of this Agreement or the
other Operative Documents to which such Pass Through Trustee is or will be
a party, other than any such authorization or approval or other action or
notice or filing as has been duly obtained, taken or given.
Litigation. There is no pending or, to the knowledge of the Pass Through
Company, threatened action, suit, investigation or proceeding against the
Pass Through Company either in its individual capacity or as Pass Through
Trustee, before any Governmental Entity which, if determined adversely to
it, would materially adversely affect the ability of the Pass Through
Company, in its individual capacity or as Pass Through Trustee, as the
case may be, to perform its obligations under this Agreement or the other
Operative Documents to which it is a party or would materially adversely
affect the Facility, the Facility Site or any interest therein or part
thereof or the security interest of any Pass Through Trustee in the
Indenture Estate or which questions the validity or enforceability of any
Operative Document to which the Pass Through Company or any Pass Through
Trustee is a party.
CLOSING CONDITIONS
The obligations of the Owner Participant, the Owner Lessor, the
Lessor Manager, the Lease Indenture Company, the Indenture Trustee, the
Pass Through Company, the Pass Through Trustees, the Guarantor and the Facility
Lessee to consummate the transactions contemplated hereby on the Closing Date
shall be subject to the following conditions, except that the obligations of
any Person shall not be subject to such Person's own performance or compliance,
and each of the Transaction Parties (other than the Certificateholders) shall
provide
23
such proof of satisfaction of these conditions as any other Transaction
Party shall reasonably request.
24
Completion of the Facility. The Facility shall have commenced commercial
operations and shall currently be capable of producing at least 520 MW of
capacity and shall comply in all material respects with the other
specifications set forth in the purchase and construction contracts for the
Facility.
Operative Documents. On or before the Closing Date, each of the Operative
Documents to be delivered at or before the Closing (as well as any other
agreements, certificates and other documents relating to the Overall
Transaction to be delivered at Closing (including, without limitation, the
Offering Circular)) shall have been duly authorized, executed and delivered by
the parties thereto (if attached as an Exhibit hereto, in substantially the
form attached as such Exhibit or if not so attached, in form and substance
satisfactory to each Transaction Party), shall each be in full force and
effect, and executed counterparts of each shall have been delivered to each of
the parties hereto (other than the Tax Indemnity Agreement, which shall only be
delivered to the parties thereto).
Certificates and the Lessor Notes. Each of the conditions precedent
contained in the Certificate Purchase Agreement shall have been satisfied or
waived by the Initial Purchasers and such Initial Purchasers shall have
purchased the Certificates pursuant to and in accordance with, the terms of the
Certificate Purchase Agreement and the Proceeds shall have been provided to the
Owner Lessor through the purchase by the Pass Through Trustees of the
applicable Lessor Notes.
Equity Investment. The Owner Participant shall have made or caused to be
made the Equity Investment available to the Owner Lessor at the place and in
the manner contemplated by Section 2.
Organizational Documents. Each of the Transaction Parties shall have
received certified copies of the organizational documents of each of the other
parties hereto and resolutions of the board of directors of each such other
corporate party duly authorizing the transaction and such documents and such
evidence as each party may reasonably request in order to establish the
authority of each such other party to consummate the transactions contemplated
by this Agreement, the taking of all corporate and other proceedings in
connection therewith and compliance with the conditions herein or therein set
forth and the incumbency of all officers signing any of the Operative
Documents. Each of the foregoing documents shall be reasonably satisfactory to
each recipient thereof.
Representations and Warranties. The representations and warranties of
each party hereto set forth in Section 3 shall be true and correct on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date.
Defaults, Events of Default, Events of Loss. No Lease Event of Default,
Lease Indenture Event of Default, Event of Loss or Burdensome Buyout Event or
event that with the passage of time or giving of notice or both would
constitute a Lease Event of Default, Lease Indenture Event of Default, Event of
Loss or Burdensome Buyout Event shall have occurred and be continuing.
Regulatory Approvals. Except with respect to the FERC Owner Lessor EWG
Orders and the FERC Orders set forth in clause (v) of the definition of "FERC
Orders" set forth in Appendix A hereto, the Owner Participant and the Pass
Through Trustees shall have received evidence of receipt of the FERC Orders.
25
Consents. (a) All permits, licenses, approvals and consents (including
management, credit and other internal approvals of the Transaction
Parties, but excluding the Third Party Consents referred to in (b) below)
necessary to consummate the Overall Transaction and to own and operate the
Facility as currently operated shall have been duly obtained and shall be
in full force and effect and in the form and substance satisfactory to
each of the Transaction Parties.
Each Third Party Consent shall have been obtained and shall be in full
force and effect substantially in the form attached hereto as Exhibit O
which is applicable to the relevant third party granting such consent;
provided that if any Third Party Consent is not substantially in the form
attached hereto as Exhibit O, an authorized officer of Calpine shall
provide a certificate to the Owner Lessor, the Indenture Trustee and the
Pass Through Trustee certifying that any differences between the form of
such consent attached hereto and the executed version are not materially
adverse to any of the Indenture Trustee, the Pass Through Trustee, the
Noteholders, the Certificateholders or the Owner Lessor.
26
Governmental Actions. All actions, if any, required to have been taken by
any Governmental Entity on or prior to the Closing Date in connection with the
transactions contemplated by any Operative Document, including, without
limitation, the FERC Orders, shall have been taken and, except with respect to
the FERC Owner Lessor EWG Orders and the FERC Orders set forth in clause (v) of
the definition of "FERC Orders" set forth in Appendix A hereto, all Applicable
Permits required to be in effect on the Closing Date in connection with the
consummation of the transactions contemplated by the Operative Documents shall
have been issued and shall be in full force and effect; and all such Applicable
Permits shall be final, in full force and effect on the Closing Date.
Insurance. Insurance (including all related endorsements) complying with
the requirements of Schedule 5.31 shall be in full force and effect and all
premiums thereon shall be current. The Owner Participant, the Manager, the
Lessor Manager, the Indenture Trustee and the Pass Through Trustees shall have
received a certificate or certificates (or binders, if certificates are not
then available) dated the Closing Date of Summit Global Partners Insurance
Services or an independent insurance broker or carrier reasonably satisfactory
to such Persons stating that such insurance complies with the requirements of
Schedule 5.31, is in full force and effect and all premiums then due and
payable in connection therewith have been paid.
Ratings. The Certificates shall have been rated at least Ba1 by βββββ�'β�
and BB+ by S&P.
Environmental Report. The Owner Participant, the Manager, the Indenture
Trustee and the Pass Through Trustees shall have received copies of the
Environmental Reports which shall be in form and substance satisfactory to such
parties. The Facility Lessee shall cause the Environmental Consultant to
deliver at the same time a reliance letter addressed to the Owner Lessor, the
Manager and the Owner Participant allowing them to rely on such reports as if
addressed to each of them.
Surveys. The Owner Participant shall have received a bringdown certificate
(which certificate shall be in form and substance satisfactory to the Owner
Participant) from the surveyor with respect to its survey of the Facility Site
dated February 22, 2000.
Appraisal; Condition of the Facility. The Owner Participant shall have
received the Closing Appraisal prepared by the Appraiser addressed and
delivered only to the Owner Participant and in form and substance satisfactory
to the Owner Participant, together with a letter of the Appraiser certifying
that its conclusions set forth in the Closing Appraisal are true and correct as
of the Closing Date. The Indenture Trustee, the Pass Through Trustees and the
Initial Purchasers shall have received a copy of the verification of value,
useful life and estimated residual value prepared by the Appraiser in
connection with the appraisal of assets subject to the Facility Lease, each of
which will be reasonably satisfactory to the recipient.
Letter from the Appraiser. Each of the Owner Lessor and the Manager shall
have received a satisfactory letter of the Appraiser setting forth the
conclusions of the Closing Appraisal as to the fair market value and remaining
economic useful life of the Facility as of the Closing Date and the methodology
of determination thereof.
27
Other Reports. The Owner Participant, the Indenture Trustee and the Pass
Through Trustees shall have received copies of the reports of the Engineering
Consultant, the Insurance Consultant, and the Power Market Consultant, which
reports shall be dated as of the Closing Date and shall otherwise each be in
form and substance reasonably satisfactory to the recipients.
Opinion with Respect to Certain Tax Aspects. The Owner Participant shall
have received the opinion, dated the Closing Date, of βββββ� ββββββββββ LLP
addressed and delivered only to the Owner Participant as to certain tax matters
and in form and substance satisfactory to the Owner Participant.
Opinions of Counsel. Each of the relevant Transaction Parties shall have
received an opinion or opinions, dated the Closing Date, of (a) ββββββ β�.
βββββββ�, Esq., in-house counsel to the Facility Lessee and Guarantor (which
opinion shall include, without limitation, a favorable opinion with respect to
the sale by the Facility Lessee of its interest in the Undivided Interest to
the Owner Lessor), (b) ββββββ ββββ & Priest LLP, special counsel to the
Facility Lessee and Guarantor, (c) βββββ� ββββββ & ββββββββ LLP, special
regulatory counsel to the Facility Lessee, (d) Reinhart, Boerner, Van Deuren,
ββββββ & Rieselbach, S.C., Wisconsin counsel to the Facility Lessee, the Owner
Participant, the Owner Lessor and the Initial Purchasers, (e) βββββ� βββββββββ�,
Esq., in-house counsel to the Equity Investor, (f) βββββ� ββββββββββ LLP,
counsel to the Owner Participant and to the Owner Lessor, (g) βββββββ� ββββ LLP,
counsel to the Lease Indenture Company and the Indenture Trustee, (h) βββββββ�
ββββ LLP, counsel to the Pass Though Trustees and the Pass Through Company, and
(i) βββ� βββββββ� & βββββββ�, in-house counsel to the Lessor Manager, in each case
in form and substance reasonably satisfactory to each Transaction Party. Each
such Person expressly consents to the rendering by its counsel of the opinion
referred to in this Section 4.19 and acknowledges that such opinion shall be
deemed to be rendered at the request and upon the instructions of such Person,
each of whom has consulted with and has been advised by its counsel as to the
consequences of such request, instructions and consent. Furthermore, each such
counsel shall, to the extent requested, permit the Rating Agencies and the
Initial Purchasers to rely on their opinion as if such opinion were addressed
to such parties.
Recordings and Filings. All filings and recordings listed on Schedule 4.20
hereto shall have been duly made and all filing, recordation, transfer and
other fees payable in connection therewith shall have been paid; and the filing
of all precautionary financing statements under the Uniform Commercial Code of
Wisconsin and any other documents as may be reasonably requested by counsel to
the Owner Participant, the Indenture Trustee or the Pass Through Trustees to
perfect (i) the Owner Lessor's Interest, or any part thereof or interest
therein and (ii) and the Lien of the Indenture Trustee on the Indenture Estate.
Conditions to Closing. All conditions required to have been satisfied by
on or before the Closing Date under the Operative Documents shall have been
satisfied or waived and the Owner Participant shall be satisfied that the
Facility shall be in the condition described in the Closing Appraisal.
Taxes. All Taxes, if any, due and payable on or before the Closing Date in
connection with the execution, delivery, recording and filing of this Agreement
or any other Operative Document, or any document or instrument contemplated
thereby shall have been duly paid in full.
28
No Changes in Applicable Law. No change shall have occurred in Applicable
Law or the interpretation thereof by any competent court or other Governmental
Entity that would make it illegal for the Owner Participant, the Owner Lessor,
the Lessor Manager, the Indenture Trustee, the Pass Through Trustees or the
Facility Lessee, to participate in any of the transactions contemplated by the
Operative Documents or would materially adversely affect the Facility or the
Facility Site. On the Closing Date, each Certificateholder's purchase of Lessor
Notes shall (i) be permitted by the laws and regulations of each jurisdiction
to which such Certificateholder is subject, (ii) not violate any Applicable Law
(including Regulation U, T or X of the Board of Governors of the Federal
Reserve System) and (iii) not subject any Certificateholder to any tax, penalty
or liability under or pursuant to any Applicable Law, which Applicable Law was
not in effect on the date hereof. If requested by any Certificateholder, such
Certificateholder shall have received an Officer's Certificate of the Owner
Lessor, in form and substance satisfactory to such Certificateholder,
certifying as to such matters of fact as such Certificateholder may reasonably
specify to enable such Certificateholder to determine whether such purchase is
so permitted.
Registered Agent for the Facility Lessee and the Owner Lessor. National
Registered Agents, Inc. shall have been appointed by the Facility Lessee, and
CT Corporation System shall have been appointed by the Owner Lessor, each as
registered agent for service of process in the State of New York as provided in
the Operative Documents and each of National Registered Agents, Inc. and CT
Corporation System shall have accepted such appointments.
Operating Lease Treatment. The present value of Basic Rent payable during
the Basic Lease Term under the Facility Lease (taking into account any rent
adjustment through or contemplated on the Closing Date), together with all rent
payable under the related Facility Site Lease, discounted at the Discount Rate,
shall satisfy the 90 percent test for operating lease classification under FASB
13. The Facility Lessee shall have received confirmation from ββββββ ββββββββ
LLP that the Facility Lease will be treated as an operating lease under FASB 13
and FASB 98 for the purposes of GAAP.
Rent Adjustments. The aggregate of all rent adjustments made on or before,
or contemplated to be made on, the Closing Date (other than adjustments to
reflect a change in Transaction Costs or the actual interest rates on the
Certificates) shall not cause either (i) the pre-tax net present value of Basic
Rent discounted at 6% to increase by more than 100 basis points or (ii) the
total Basic Rent to increase by more than 2%.
Title Insurance. The Title Policy shall have been delivered to the Owner
Participant, the Owner Lessor, the Indenture Trustee, as the case may be, with
copies to the Pass Through Trustees.
Parent Guaranty. The OP Guarantor shall have executed and delivered to the
other Transaction Parties an OP Parent Guaranty in the form of Exhibit G hereto.
Letter as to Number of Offerees. (i) The Owner Participant and the
Certificateholders shall have received a certification from the Facility Lessee
as to the number of offerees by it of the Lessor Estate and (ii) the Facility
Lessee shall have received certification from the Newcourt Capital Securities,
Inc. as to the number of offerees by it of the Lessor Estate and (iii) the
Facility Lessee shall have received certification from CSFB as to the number of
offerees by it of the Lessor Estate.
29
Lien Search. The Owner Participant (with a copy to the Indenture Trustee)
shall have received Lien searches with respect to the Facility Lessee in form
and substance satisfactory to the Owner Participant.
Litigation. There shall be no actions, investigations, suits or proceedings
pending or threatened against the Facility Lessee and/or the Calpine Parties
or their properties before any court or Governmental Entity which,
individually or in the aggregate, would, if adversely determined, be reasonably
likely to have a Material Adverse Effect (including, but not limited to, the
Facility Lessee, the Owner Participant, the Owner Lessor or the
Certificateholders being subject to or not exempted from regulation as a
"public utility company" or a "holding company" under PUHCA or under state laws
and regulations respecting the rates or the financial and organizational
regulation of electric utilities), nor shall any order, judgment or decree have
been issued or proposed by any Governmental Entity at the time of the Closing
Date, to set aside, restrain, enjoin or prevent the consummation of the
Operative Documents or any of the Transactions contemplated by any of the
Operative Documents.
No Material Adverse Change. The annual reports, information, documents and
other reports referred to in Section 3.2(a) of the Calpine Guaranty shall have
been received by the Owner Participant, and there shall have been no material
adverse change in the financial condition, business assets or operation of
Calpine and its Consolidated Subsidiaries since the date of such annual
reports, information, documents and other reports.
Private Placement Number. A private placement number issued by S&P's CUSIP
Service bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Certificates.
Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory to the Facility Lessee, the Owner Participant and the Initial
Purchasers and their respective special counsel, and such parties and their
respective special counsel shall have received all such information and
counterpart originals or certified or other copies of such documents and
certificates as each such party or its special counsel may reasonably request
in connection with the matters contemplated hereby and by the other Operative
Documents.
No Proposed Tax Law Change. There has been no Proposed Tax Law Change for
which an adjustment has not been made pursuant to Section 12 of this Agreement.
Payment of Fees and Expenses. Without limiting the provisions of Section
2.3, all Transaction Costs invoiced at least 3 Business Days prior to Closing
to the Owner Participant with a copy to the Facility Lessee shall be paid
promptly after the Closing Date (but no later than October 29, 2001).
COVENANTS OF FACILITY LESSEE AND GUARANTOR
The Facility Lessee and the Guarantor, to the extent provided below,
covenant as follows;
30
Maintenance of Existence. Except as permitted by Section 5.2, the Facility
Lessee, at its own cost and expense, will at all times do or cause to be done
all things necessary to preserve and keep in full force and effect both its
legal existence and its qualification to do business in any state in which the
conduct of its business or the ownership or leasing of assets used in its
business requires such qualification and where the failure to be so qualified
would reasonably be expected to have a Material Adverse Effect.
Merger, Consolidation, Sale of Substantially All Assets. The Facility
Lessee covenants and agrees as follows:
The Facility Lessee will not consolidate or merge with or into any other
Person, or sell, assign, convey, lease, transfer or otherwise dispose of,
all or substantially all of its properties or assets to any Person or
Persons in one or a series of transactions, unless (i) immediately after
giving effect to any such transaction or transactions, either (A) Calpine
would own, directly or indirectly, at least a majority of the Ownership
Interest of each succeeding or surviving entity, the Calpine Guaranty
remains in full force and effect (without a transferee of Calpine's
obligations thereunder having succeeded thereto in accordance with Section
8.4(b) thereof) and Calpine shall have reaffirmed in writing its
obligations under the Calpine Guaranty and the other Operative Documents
to which Calpine is a party in a manner reasonably satisfactory to the
Owner Participant and the Owner Lessor or (B) Calpine's obligations under
the Calpine Guaranty have been succeeded to in accordance with Section
8.4(b) of the Calpine Guaranty, the transferee of Calpine shall own,
directly or indirectly, at least a majority of the Ownership Interest of
each succeeding or surviving entity and the Calpine Guaranty shall remain
in full force and effect, (ii) immediately after giving effect to such
transaction, the requirements set forth in Section 13.1(b)(i) through (vi)
of this Agreement (with appropriate conforming changes to take into
account the nature of the transactions referred to hereunder) have been
satisfied in connection with such transfer, and (iii) each succeeding or
surviving entity shall be organized under the laws of the United States,
any state thereof or the District of Columbia.
Upon the consummation of such transaction described in Section 5.2(a), the
resulting, surviving or succeeding entity, if other than the Facility
Lessee, shall succeed to, and be substituted for, and may exercise every
right and power and shall perform every obligation of, the Facility Lessee
under this Participation Agreement and each other Operative Document to
which the Facility Lessee was a party immediately prior to such
transaction, with the same effect as if such entity had been named herein
and therein. The Facility Lessee will pay the costs and expenses
(including reasonable attorneys' fees and expenses) of the Owner
Participant, the Owner Lessor, the Lessor Manager, the Indenture Trustee,
the Pass Through Trustees and the Certificateholders in connection with
any transaction contemplated by this Section 5.2.
Guaranty and Contingent Obligations. The Facility Lessee will not create,
incur, assume or suffer to exist any Indebtedness (including without limitation
any guaranty or other contingent obligations) except (i) by reason of
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of the Facility Lessee's business, (ii)
indemnities in respect of unfiled mechanics' liens and other liens permitted by
clause (d) of the definition of "Permitted Liens", (iii) contingent obligations
set forth in, or incurred in connection with, or indemnities set forth in, the
Operative Documents, (iv) unsecured indemnities provided
31
by, and other unsecured contingent obligation incurred by, the Facility
Lessee in connection with either (x) easements relating to its applicable
interest in the Facility or the Facility Site or (y) any contract, agreement or
other document or instrument relating to the RockGen project which is entered
into in the ordinary course of the Facility Lessee's business, (v) customary
indemnities in favor of the title insurers providing the title policies
covering the Facility Site or any portion thereof or any easement or
appurtenant right relating thereto in respect of claims by the holder of
mechanics' liens, (vi) the indemnities referred to in Section 9.1 and 9.2 of
the Participation Agreement or pursuant to the Tax Indemnity Agreement and
(vii) unsecured Indebtedness incurred in accordance with Section 11.1 or 11.2
hereof.
Assignment of Rights. The Facility Lessee shall not assign any of its
rights or obligations except as permitted by the Operative Documents.
Lessor Manager Fees. The Facility Lessee and Calpine shall pay the fees,
costs and expenses of the Lessor Manager (including the reasonable compensation
and expenses of its counsel), as set forth in a letter agreement approved by
the Facility Lessee arising out of the Owner Lessor's and the Owner
Participant's discharge of their duties under or in connection with the
Operative Documents, as in effect on the Closing Date.
Conduct of Business, Properties, Etc. Except as otherwise expressly
permitted under this Agreement, the Facility Lessee shall (a) perform and
comply with all of its contractual obligations under the Operative Documents to
which it is a party and all other material agreements and contracts by which it
is bound, unless (other than in connection with the Operative Documents) such
noncompliance would not cause a Material Adverse Effect, and (b) engage only in
the business contemplated by the Operative Documents to which it is a party.
Obligations. The Facility Lessee shall pay all of its obligations,
howsoever arising, as and when due and payable except such as may be contested
in good faith or as to which a bona fide dispute may exist; provided, that (i)
adequate reserves consistent with GAAP requirements are maintained for such
contested or disputed obligations or (ii) the Facility Lessee otherwise
establishes and maintains adequate security arrangements for the payment of
such contested or disputed obligations which are reasonably acceptable to the
Owner Participant.
Books, Records, Access. The Facility Lessee shall maintain or cause to be
maintained adequate books, accounts and records with respect to itself, the
Facility and Facility Site and prepare all financial statements required
hereunder in accordance with GAAP and in compliance with the regulations of any
Governmental Entity having jurisdiction thereof, and permit employees, agents
and representatives of the Owner Lessor, the Owner Participant, and, so long as
the Lien of the Collateral Trust Indenture shall have not been terminated or
discharged, the Indenture Trustee, the Pass Through Trustees and the
Certificateholders, and such parties' independent consultants, at all
reasonable times during normal business hours and upon reasonable prior notice
and at no risk or (except during the existence of a Lease Default or Lease
Event of Default) expense to the Facility Lessee to inspect, the Facility and
Facility Site, to examine or audit all of or any of the Facility Lessee's
books, accounts and records and make copies and memoranda thereof and, together
with such consultants, to observe the operation, maintenance and repair of the
Facility; provided, however, any such inspection shall be conducted in
accordance with Section 12 of the Facility Lease.
32
Other Information.
The Facility Lessee shall furnish, or shall cause to be furnished to, the
Owner Lessor, the Owner Participant and, so long as the Lien of the
Collateral Trust Indenture has not been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees, and their respective
authorized representatives from time to time such information as such
party shall reasonably request concerning the Facility and Facility Site
including information concerning the condition, operation, maintenance and
use of the Facility and Facility Site and such other financial or
operating information as it shall reasonably request and which is
routinely made available to creditors of the Facility Lessee, to the
extent it possesses such information; provided that, the Facility Lessee
reserves the right not to provide any information that is not otherwise
publicly available to any transferee Owner Participant (or its Owner
Lessor) if it reasonably believes in its good faith judgment that such
transferee Owner Participant or any Affiliate thereof is a competitor or
is an Affiliate of a competitor of the Facility Lessee or its Affiliates
in the competitive power market, unless, before receiving any such
information, such transferee Owner Participant shall have put in place (to
the reasonable satisfaction of the Facility Lessee) appropriate
confidentiality arrangements. To the extent such information consists of
information contained in records kept by the Facility Lessee or any
Affiliate, such information shall be furnished without cost to the
recipient.
(b) The Facility Lessee will advise the Owner Participant, the
Owner Lessor, the OP Guarantor, the Pass Through Trustees and the
Indenture Trustee promptly in writing of the occurrence of any Significant
Lease Default, Lease Event of Default or Lease Indenture Event of Default (to
the extent the Facility Lessee has Actual Knowledge of any such Lease Indenture
Event of Default) and, as soon as practicable thereafter, will provide a
description thereof and a statement as to the actions, if any, the Facility
Lessee proposes to take with respect thereto.
Warranty of Title to Facility Site.
Each Facility Lessee shall maintain good and valid fee, title to, or
easement or other surface rights in, as applicable, its Facility Site,
subject only to Permitted Liens.
Each Facility Lessee shall maintain good and valid title to all of its
other properties and assets (other than properties and assets disposed of
in the ordinary course of business including any sale, transfer or other
disposition of any obsolete, surplus or worn out equipment, parts,
supplies or other materials or assets to the extent permitted by the
Operative Documents), subject only to Permitted Liens.
ERISA. The Facility Lessee shall not establish, maintain or contribute to, any
Plan. If any Plan is established, maintained or contributed to by either the
Facility Lessee or any ERISA Affiliate, or if the Facility Lessee or any ERISA
Affiliate becomes obligated to contribute to any Plan, (a) with respect to each
such Plan, the Facility Lessee or such ERISA Affiliate (i) shall have at all
times fulfilled in all material respects their obligations under the minimum
funding standards of ERISA and the Code, (ii) shall not allow any such Plan to
have an Unfunded Current Liability, (iii) shall, with respect to each Plan (and
each related trust, if any) which is intended to be qualified under Sections
401(a) and 501(a) of the Code, obtain a determination letter from the
33
Internal Revenue Service to the effect that such Plan (and trust, if any) meets
the requirements of Sections 401(a) and 501(a) of the Code, and (iv) shall at
all times be in compliance in all material respects with applicable provisions
of ERISA and the Code, and (b) within fifteen (15) days after (i) the
occurrence of any reportable event (as defined in Section 4043(c) of ERISA)
with respect to any Plan, (ii) the complete or partial withdrawal by the
Facility Lessee or any ERISA Affiliate from any Multiemployer Plan, (iii) to
the extent the Facility Lessee or any ERISA Affiliate is notified that any
Multiemployer Plan has entered reorganization status, has become insolvent, or
has terminated (or any Multiemployer Plan notifies the Facility Lessee or any
ERISA Affiliate of its intent to terminate) under Section 4041A of ERISA, (iv)
the institution of any action to terminate a Plan in a distress termination
under Section 4041(c) of ERISA, or (v) in the case of the breach of any other
covenant contained in this Section 5.11, the Facility Lessee shall report such
occurrence or breach to the Indenture Trustee, the Pass Through Trustees, the
Owner Lessor and the Owner Participant and furnish such information as such
Persons may reasonably request with respect thereto.
Certain Contracts and Agreements. Without the consent of the Owner Participant,
the Facility Lessee agrees that, except as required by the Operative Documents,
it will not enter into or become bound by any contract or agreement providing
for the sale of energy produced from the Facility, or the purchase of services
to be performed at, for or in connection with, the Facility or any other
contract or agreement relating to the Facility that (i) has a term that extends
beyond the Basic Lease Term or the scheduled expiration of any Renewal Lease
Term then in effect or elected by the Facility Lessee, unless such contract or
agreement may be terminated by the Facility Lessee without material costs or
obligation prior to the Basic Lease Term or the scheduled expiration of such
Renewal Lease Term, as the case may be or (ii) results in any lien,
encumbrance, restriction or agreement relating to the Facility which extends
beyond the expiration of the Facility Lease Term or which binds the Facility or
the owner of the Facility beyond the expiration of the Facility Lease Term;
provided that nothing in this Section 5.12 shall prevent the Operator from
entering agreements to operate the Facility in accordance with the Operative
Documents.
Certain Costs. The Facility Lessee agrees to pay to the Owner Lessor as
Supplemental Rent (i) overdue interest with respect to the Lessor Notes issued
under the Collateral Trust Indenture if the same is due and payable because of
the occurrence of a Lease Indenture Event of Default which is attributable to a
Lease Event of Default and (ii) an amount equal to any Make-Whole Amount which
has become due and payable with respect to the Lessor Notes under the
Collateral Trust Indenture.
Limitations on Liens. The Facility Lessee shall not, directly or indirectly,
create, assume or permit to exist any Lien, securing a charge or obligation on
the Facility, the Facility Site, or on any of its other properties real or
personal, whether now owned or hereafter acquired, except Permitted Liens.
Investments. The Facility Lessee shall not make or permit to remain outstanding
any advances, loans or extensions of credit to, or purchase or own any stock,
bonds, notes, debentures or other securities of any Person, except Permitted
Investments.
34
Survey. The Facility Lessee shall use diligent and commercially reasonable
efforts to deliver a copy of the Survey as soon as practicable, such survey to
be an ALTA survey or other survey in form and substance reasonably satisfactory
to the Owner Participant, provided that the failure to do so shall not
constitute, in whole or in part, the basis of any default under any Operative
Document.
Regulations. The Facility Lessee shall not, directly or indirectly, apply the
proceeds of the sale of Lessor Notes or any 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.
Partnerships. The Facility Lessee shall not become a general or limited partner
in any partnership or a joint venturer in any joint venture.
Dissolution. The Facility Lessee shall not liquidate or dissolve, except
pursuant to transactions permitted under Section 5.2.
Termination of Operative Documents. The Facility Lessee shall not without the
prior written consent of the Owner Participant and, except as otherwise
provided in Section 8 of the Collateral Trust Indenture and so long as the Lien
of the Collateral Trust Indenture has not been terminated or discharged, the
Indenture Trustee, (a) cause or consent to or (b) permit, any amendment,
modification, extension, termination, variance or waiver of timely compliance
with any terms or conditions of any Operative Document.
Name and Location. The Facility Lessee shall not change its name or the
location of its chief executive office or place of business without notice to
the Owner Lessor, the Lessor Manager, the Indenture Trustee, the Pass Through
Trustees and the Owner Participant at least thirty (30) days prior to such
change.
Use of Facility Site. The Facility Lessee shall not use, or permit to be used,
the Facility Site for any purpose other than for the operation and maintenance
of the Facility, except as otherwise required or permitted under the Operative
Documents.
Abandonment of Facility. The Facility Lessee shall not voluntarily abandon the
operation, maintenance or repair the Facility, except as otherwise permitted by
the Operative Documents.
Taxes, Other Government Charges and Utility Charges. The Facility Lessee shall
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 the Facility Lessee, its
interests in the Facility Site and Facility, all utility and other charges
incurred in the operation, maintenance, use, occupancy and upkeep of the
Facility or the Facility Site, and all assessments and charges lawfully made by
any Governmental Entity for public improvements that may be secured by a Lien
on any part of the Facility; provided, that the Facility Lessee 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 the Facility Lessee is in
good faith contesting the same, so long as (a) adequate reserves consistent
with GAAP requirements (or other security arrangements reasonably satisfactory
to the Indenture Trustee and the Owner Participant) are
35
established and maintained 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, and (b) 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.
Compliance with Laws, Instruments, Etc. At its expense, the Facility Lessee
shall promptly (a) comply or cause compliance with all Applicable Laws,
including those relating to pollution control, environmental protection, equal
employment opportunity plans, Plans and employee safety, with respect to
itself, the Facility or the Facility Site, whether or not compliance therewith
shall require structural changes in the Facility or any part thereof or require
major changes in operational practices or interfere with the use and enjoyment
of the Facility or any part thereof, and (b) procure, maintain and comply, or
cause to be procured, maintained and complied with, all Applicable Permits,
except in the case of clause (a) or (b) above (1) as may be contested in
accordance with Section 7 or 8 of the Facility Lease and (2) the Facility
Lessee may, in good faith and by appropriate proceedings, diligently contest
the validity or application of any such Applicable Laws in any reasonable
manner which does not involve any danger of (i) foreclosure, sale, forfeiture
or loss of, or imposition of a material Lien on the Facility, (ii) impair the
use, operation or maintenance of the Facility in any material respect, (iii)
any criminal liability being incurred by the Owner Participant, the Owner
Lessor, the Lessor Manager, the Indenture Trustee, the Lease Indenture Company,
the Pass Through Trustees, the Pass Through Company or any Certificateholder,
(iv) the Owner Participant, the Owner Lessor, the Lessor Manager, the Indenture
Trustee, the Lease Indenture Company, the Pass Through Trustees, the Pass
Through Company or any Certificateholder being subjected to any unindemnified
civil liability or of the Owner Participant or the Owner Lessor being subject
to regulation as a public utility under Applicable Law, or (v) any Material
Adverse Effect.
PUHCA. The Facility Lessee shall not take any action or fail to take any action
within its control that would subject the Owner Lessor, the Lessor Manager, the
Owner Participant, the Indenture Trustee or the Pass Through Trustees to
regulation under PUHCA.
Further Assurances. The Facility Lessee, at its own cost, expense and
liability, will cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may be necessary
in order to carry out the intent and purposes of this Participation Agreement
and the other Operative Documents, and the transactions contemplated hereby and
thereby. The Facility Lessee, at its own cost, expense and liability, will
cause such financing statements and fixture filings (and continuation
statements with respect thereto) as may be necessary and such other documents
as the Owner Participant, the Owner Lessor and, so long as the Lien of the
Collateral Trust Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees shall reasonably request to be
recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary in
order to establish, preserve, protect and perfect the right, title and interest
of the Owner Lessor in and to the Undivided Interest, the Ground Interest, any
Component or any portion of any thereof or any interest therein and the first
priority Lien intended to be created by the Collateral Trust Indenture therein.
The Facility Lessee shall promptly from time to time furnish to the Owner
Participant, the Owner Lessor or, so long as the Lien of the Collateral Trust
Indenture shall not have been terminated or discharged, the Indenture
36
Trustee or the Pass Through Trustees such information with respect to the
Facility or the Facility Site or the transactions contemplated by the Operative
Documents to which the Facility Lessee is a party as may be required to enable
the Owner Participant, the Owner Lessor or, so long as the Lien of the
Collateral Trust Indenture shall not have been terminated or discharged, the
Indenture Trustee or the Pass Through Trustees, as the case may be, to timely
file with any Governmental Entity any reports and obtain any licenses or
permits required to be filed or obtained by the Owner Lessor under any
Operative Document, the Owner Participant as the owner of the Member Interest
or the Indenture Trustee. The Facility Lessee will preserve, protect, defend
and enforce, or cause to be preserved, protected, defended and enforced, the
rights of itself, the Owner Lessor and the Owner Participant under each and
every Operative Document to which it is a party (including by assignment and
assumption of the rights thereunder), including using commercially reasonable
efforts to prosecute suits to enforce any such rights and, at the request of
Indenture Trustee, so long as the Lien of the Collateral Trust Indenture has
not been discharged or terminated (and thereafter at the request of the Owner
Participant), permit the Indenture Trustee and the Owner Participant, at their
respective cost and expense, to participate in such capacity as it may choose
in any such suit, any defense thereof or in the preparation therefor; provided,
however, that upon the occurrence and during the continuance of any Lease Event
of Default, if the Indenture Trustee or the Owner Participant request that
certain actions be taken and the Facility Lessee fails to take the requested
action, or to cause the requested action to be taken within (5) Business Days,
the Indenture Trustee, so long as the Lien of the Collateral Trust Indenture
has not been discharged or terminated, and the Owner Lessor may, at the
Facility Lessee's reasonable expense, enforce, in its own name, or the Facility
Lessee's name, such rights of the Facility Lessee.
No Subsidiaries. The Facility Lessee shall not create or suffer to exist any
Subsidiaries.
Permitted Business. The Facility Lessee shall not engage in any business or
activities other than the lease, operation, maintenance and marketing and sale
of the output, fuel or other products from, or related or incidental to, the
Facility leased by the Facility Lessee. Notwithstanding any of the foregoing
the Facility Lessee may not change the nature of its business.
Support Arrangements. The Facility Lessee agrees that, to the extent that the
rights described in Section 3.1(n) which have already been made available to
the Owner Lessor prior to the expiration or termination of the Facility Lease
Term, and any rights assigned pursuant to the last sentence of this Section
5.30, are insufficient to permit on a commercially practicable basis during the
period following the expiration or termination of the Facility Lease Term,
until the end of the Facility's useful life as set forth in the Closing
Appraisal, (i) the location, occupation, interconnection (including with
respect to electricity, steam, gas and water), maintenance and repair of the
Facility, (ii) the use, operation and possession of the Facility, (iii) the
use, operation, possession, maintenance, replacement, renewal and repair of all
Improvements then required to be made to the Facility, (iv) adequate ingress to
and egress from the Facility in connection with the ownership, use, maintenance
or operation of the Facility, (v) adequate transmission of electricity from the
Facility to enable such Person to deliver the net electrical and steam output
of the Facility on a commercially reasonable basis and (vi) the interest of the
Owner Lessor (or any successor) in the Undivided Interest or the Ground
Interest, the Facility Lessee will cause Calpine to provide, and Calpine will
provide, the Owner Lessor with any additional services relating to the Owner
Lessor's Interest and operation of the Facility substantially in the same
37
manner as operated as of the Closing Date (to the extent Calpine or any
Affiliate thereof then owns or controls the physical assets and/or contractual
rights necessary to provide such services (or can enter into contracts on a
commercially reasonable basis for such ownership, control or other rights) and
remains in the business of providing such services) necessary to permit the
Owner Lessor to use the Facility as described in (i) through (vi) above. Such
arrangements will provide for fair market value compensation to Calpine
(payable periodically on no more frequently than a monthly and no less
frequently than on a quarterly basis) and will terminate upon the expiration or
termination of the Facility Site Lease, or earlier at the option of the Owner
Lessor. The Facility Lessee shall also, subject to obtaining any required third
party consents, assign to the Owner Lessor upon termination of the Facility
Lease any support or similar agreements to the extent relating to the Facility
it has with third parties.
Insurance. The Facility Lessee shall comply with the covenants set forth in
Schedule 5.31.
Tax Status. The Facility Lessee and each Person owning an Ownership Interest
therein will not voluntarily take any action to cause the Facility Lessee to be
subject to taxation as a separate entity for federal income tax purposes.
Transmission Assets.
If and to the extent that on the Closing Date the FERC Order referred to in
clause (v) of the definition thereof has not been obtained with respect
to the jurisdictional facilities referred to therein (which facilities are
identified in Exhibit A as Transmission Assets (the "Transmission
Assets")), the Owner Participant shall, upon 5 days' prior written notice
to the Facility Lessee, and subject to the grant of the aforesaid order,
cause the Owner Lessor to acquire an undivided interest equal to the Owner
Lessor's Percentage in the Facility Lessee's right, title and interest in
the Transmission Assets, for a price equal to $1.00. Upon payment by the
Owner Lessor of such amount, the Facility Lessee shall execute and deliver
such documentation as is reasonably requested by the Owner Lessor to
transfer such undivided interest in the Facility Lessee's right, title and
interest in the Transmission Assets to the Owner Lessor. Upon such
transfer such Undivided Interest shall be and shall be deemed to be an
integral part of the Undivided Interest (to the extent constituting a
portion of the Facility) and the Ground Interest (to the extent
constituting a portion of the leasehold interest in the Facility Site) for
all purposes of the Operative Documents without the necessity of amending
or supplementing any Operative Document, subject nevertheless to Section
14.15 hereof.
Without limiting Section 10 hereof or Section 4.2 of the Facility Lease,
the Facility Lessee agrees that from and after the Closing Date and until
the earlier to occur of (A) the transfer referred to in clause (a) above
and (B) the termination of the Facility Lease, the Facility Lessee shall
make available to the Owner Lessor, for no additional compensation, such
rights in the Transmission Assets solely to the extent as shall be
necessary so that the representation in Section 3.1(n) will be correct to
the same extent as if such transfer had occurred on the Closing Date.
38
COVENANTS OF THE OWNER LESSOR, THE TRUST COMPANY AND THE LESSOR MANAGER
Compliance with the LLC Agreement. Each of the Owner Lessor, the Trust Company
and the Lessor Manager hereby severally covenants and agrees that during the
Facility Lease Term it will:
comply with all of the terms of the LLC Agreement applicable to it; and
not amend, supplement, or otherwise modify Section 9.1, 9.3, 13.1 or
clause (i) of Section 13.2 of the LLC Agreement without the prior written
consent of the Facility Lessee so long as no Significant Lease Default or
Lease Event of Default has occurred and is continuing and the Indenture
Trustee so long as the Lien of the Collateral Trust Indenture has not
been terminated or discharged.
39
Owner Lessor's Liens. The Owner Lessor, the Trust Company and the Lessor
Manager each covenants severally and as to itself only that it will not
directly or indirectly create, incur, assume or suffer to exist any Owner
Lessor's Lien attributable to it and will promptly notify the Facility Lessee,
the Owner Participant and the Indenture Trustee of the imposition of any such
Lien of which it has Actual Knowledge and shall promptly, at its own expense,
take such action as may be necessary to duly discharge such Owner Lessor's Lien
attributable to it.
Amendments to Operative Documents. The Lessor Manager, the Trust Company and
the Owner Lessor each covenants severally and as to itself only that it will
not unless such action is expressly permitted by the Operative Documents (a)
through its own action terminate any Operative Document to which it is a party,
(b) amend, supplement, waive or modify (or consent to any such amendment,
supplement, waiver or modification) such Operative Documents in any manner or
(c) except as provided in Section 11 hereof or Section 2.10 or Section 5.6 of
the Collateral Trust Indenture, take any action to prepay or refund the Lessor
Notes or amend any of the payment terms of the Lessor Notes without, in each
case, the prior written consent of the Facility Lessee so long as no
Significant Lease Default or Lease Event of Default shall have occurred and be
continuing and, in the case of clause (a) or (b), the Indenture Trustee so long
as the Lien of the Collateral Trust Indenture has not been terminated or
discharged.
Transfer of the Owner Lessor's Interest. Other than as permitted by the
Operative Documents, each of the Lessor Manager and the Owner Lessor covenants
that it will not assign, pledge, sell, lease, convey or otherwise transfer any
of its then existing right, title or interest in and to the Owner Lessor's
Interest, the Lessor Estate or the other Operative Documents.
Owner Lessor; Lessor Estate. Each of the Trust Company, the Lessor Manager and
the Owner Lessor covenants that it will not voluntarily take any action to
subject the Owner Lessor or the Lessor Estate to the provisions of any
applicable bankruptcy, insolvency or similar law (as now or hereafter in
effect).
Limitation on Indebtedness and Actions. Each of the Lessor Manager and the
Owner Lessor covenants that it will not incur any Indebtedness nor enter into
any business or activity except as required or expressly permitted by any
Operative Document.
Change of Location. The Owner Lessor shall provide the Owner Participant, the
Indenture Trustee, the Certificateholders, the Pass Through Trustees and the
Facility Lessee 30 days' written notice of any relocation of the Owner Lessor's
chief executive office or the place where documents and records relating to the
Owner Lessor or the Lessor Estate are kept from the location set forth in
Section 3.2(g) and of any change in its name.
Bankruptcy of Owner Lessor. Each of the Trust Company, the Lessor Manager and
the Owner Lessor hereby agrees severally and as to itself only that it shall
not voluntarily take any action that shall, or cause any action to be taken
that is intended to, submit the Owner Lessor, as debtor, to any proceeding
under any Applicable Law involving bankruptcy, insolvency, reorganization or
other laws affecting the rights of creditors generally unless a Lease Event of
Default or a Significant Lease Default shall have occurred and be continuing
(in which case, if the Lien of the Collateral Trust Indenture shall not have
been discharged, the Trust Company or the Owner
40
Lessor shall not take any such action unless the Indenture Trustee shall have
given its prior written consent to such action in its sole discretion.
COVENANTS OF THE OWNER PARTICIPANT
Restrictions on Transfer of Member Interest.
The Owner Participant covenants and agrees that it shall not during the
Facility Lease Term assign, convey or transfer any of its right, title or
interest in the Member Interest without the prior written consent of the
Facility Lessee and, so long as the Lien of the Collateral Trust Indenture
has not been terminated or discharged, without the prior written consent
of the Indenture Trustee; provided, however, that the Owner Participant
may, subject to Section 7.6, assign, convey or transfer all or any part of
its interest in the Member Interest without such consent to a Person (the
"Transferee") which shall assume the duties and obligations of the Owner
Participant under the Operative Documents with respect to the interest
being transferred pursuant to an OP Assignment and Assumption Agreement
substantially in the form of Exhibit J hereto, if each of the following
conditions shall have been satisfied on or prior to such transfer:
the Facility Lessee, the Indenture Trustee and the Pass Through Trustees
shall have received an opinion(s) of counsel (including an opinion with
respect to a guaranty pursuant to clause (iii) of this Section 7.1, if
applicable), which opinion(s) and counsel are reasonably satisfactory to
each such recipient and consistent in scope to the opinions delivered on
behalf of the Owner Participant at the Closing, including that all
regulatory approvals required in connection with such transfer or
necessary to assume the Owner Participant's obligations under the
Operative Documents shall have been obtained and that the proposed
transfer of the Member Interest will not require registration under the
Securities Act;
the Transferee shall be a "United States person" within the meaning of
Section 7701(a)(30) of the Code;
the Transferee shall be either (A) an Affiliate of the transferor Owner
Participant which does not otherwise qualify under clause (B) below (but
in any event, such Affiliate shall not be a Competitor of Calpine);
provided that all of the payment and performance obligations of the
Transferee with respect to the interest being transferred under the
Operative Documents shall be guaranteed by the transferor Owner
Participant, or a Person then providing a guaranty of the transferor Owner
Participant's obligations hereunder, pursuant to an OP Parent Guaranty or
(B) a Person which meets, or the payment and performance obligations of
which with respect to the interest being transferred under the Operative
Documents are guaranteed (pursuant to a OP Parent Guaranty) by a Person
(the transferor Owner Participant or such other guarantor, the "Transferee
Guarantor") which meets, the following criteria: (1) the tangible net
worth of the Transferee or Transferee Guarantor, is at least equal to $75
million calculated in accordance with GAAP; and (2) unless waived in
writing by the Facility Lessee prior to such transfer, such Transferee is
not a Competitor of Calpine or in material litigation against the Facility
Lessee or any Affiliate of the Facility Lessee without the consent of the
Facility Lessee; and
41
upon consummation of such transfer, there shall not be more than four (4)
Owner Participants for the Overall Transaction; provided that any related
Owner Participants that shall have the same decision maker and vote their
interest together as a single vote shall count as one for purposes of this
clause (iv).
Notwithstanding the foregoing, the restrictions set forth in
Section 7.1 shall not inure to the benefit of the Facility Lessee if such
transfer occurs during the continuance of a Significant Lease Default or Lease
Event of Default.
For purposes of determining whether a Transferee is a "Competitor" of
Calpine, Calpine shall provide to the transferor Owner Participant on or
prior to the Closing Date a list of entities which Calpine reasonably
believes in its good faith judgment are competitors of Calpine or any of
its Affiliates, in the business in which Calpine or any of its Affiliates
is engaged as of the Closing Date, which list shall be attached to this
Agreement as Exhibit K. Any such Person on such list shall be deemed to be
a "Competitor" for purposes of Section 7.1(a). The initial list of
Competitors may be modified or supplemented (in a manner consistent with
the first sentence of this clause (b)), from time to time, but no later
than five (5) Business Days after the Facility Lessee receives each notice
from the Owner Participant of its intent to transfer its interest and, in
addition, no more than once in any calendar year plus each time the
Facility Lessee receives such notice of transfer from the Owner
Participant, and such list as modified shall govern for the purposes of
this Section 7.1(b).
The Facility Lessee shall not be responsible for any adverse tax
consequence to the Owner Lessor or the Owner Participant resulting from
any transfer pursuant to this Section 7.1 and the Pricing Assumptions
shall not be changed as a result of any such transfer.
The Owner Participant shall give the Owner Lessor, the Indenture Trustee
and the Facility Lessee ten (10) Business Days' prior written notice of
such transfer, specifying the name and address of any proposed Transferee
and such additional information as shall be necessary to determine whether
the proposed transfer satisfies the requirements of this Section 7.1. If
requested by the Owner Participant or the Indenture Trustee, the Facility
Lessee will acknowledge qualifying transfers. All reasonable fees,
expenses and charges of the Indenture Trustee, the Pass Through Trustees,
and the Facility Lessee (including reasonable attorneys' fees and expenses
in connection with any such transfer or proposed transfer), including any
of the foregoing relating to any amendments to the Operative Documents
required in connection therewith, shall be paid on an After-Tax Basis by
the Owner Lessor, without any right of indemnification from the Facility
Lessee or any other Person; provided, however, that the Owner Participant
shall have no obligation to pay fees, expenses or charges of the Facility
Lessee as a result of any transfer while a Significant Lease Default or a
Lease Event of Default is continuing, in which case the Facility Lessee
shall be obligated to pay such costs.
Upon any such transfer in compliance with this Section 7.1, (i) such
Transferee shall (x) be deemed the "Owner Participant" for all purposes,
and (y) enjoy the rights and privileges and perform the obligations of the
Owner Participant hereunder and under each of the OP Assignment and
Assumption Agreement, the Calpine Guaranty and each other Operative
Document to which such Owner Participant is a party, and each reference in
this Agreement,
42
the Calpine Guaranty and each other Operative Document to the "Owner
Participant" shall thereafter be deemed to include such Transferee for all
purposes and (ii) the transferor Owner Participant and the OP Guarantor,
if any, of such transferor Owner Participant's obligations shall be
released from all obligations hereunder and under each other Operative
Document to which such transferor or OP Guarantor is a party or by which
such transferor Owner Participant or OP Guarantor is bound to the extent
such obligations are expressly assumed by a Transferee meeting the
requirements of this Section 7.1; provided, however, that in no event
shall any such transfer waive or release the transferor or its OP
Guarantor from any liability accruing or existing in respect of any period
occurring on or prior to or occurring simultaneously with such transfer.
The transfer restrictions set forth in Section 7.1 (other than the
requirement that the Owner Participant and the Transferee enter into an OP
Assignment and Assumption Agreement) shall also apply to any transfer of
the equity ownership interests of an Owner Participant which has as its
sole (or substantially equivalent to sole) business activity its
participation in the transactions contemplated by the Operative Documents.
In the case of such a transfer of equity ownership interests which
satisfies such restrictions of this Section 7.1, the Owner Participant's
obligations under the Operative Documents shall continue, but the Owner
Participant shall, except in the case of a transfer to a transferee
described in clause (a)(iii)(A) above, procure a new OP Parent Guaranty
from a guarantor meeting the requirements of clause (a)(iii)(B) above.
43
Owner Participant's Liens. The Owner Participant covenants that it will not
directly or indirectly create, incur, assume or suffer to exist any Owner
Participant's Lien and the Owner Participant shall promptly notify the Facility
Lessee and the Indenture Trustee of the imposition or existence of any such
Lien of which the Owner Participant has Actual Knowledge and shall promptly, at
its own expense, take such action as may be necessary to duly discharge such
Owner Participant's Lien.
Amendments or Revocation of LLC Agreement. Notwithstanding anything to the
contrary contained in the LLC Agreement, the Owner Participant covenants that
during the Facility Lease Term it will not (a) amend, supplement, or otherwise
modify Section 9.1, 9.3, 13.1 or clause (i) of 13.2 of the LLC Agreement
without the prior written consent of the Facility Lessee so long as no
Significant Lease Default or Lease Event of Default has occurred and is
continuing, and without the prior written consent of the Indenture Trustee so
long as the Lien of the Collateral Trust Indenture has not been terminated or
discharged, or (b) revoke, or otherwise waive compliance with or terminate the
LLC Agreement without the prior written consent of the Facility Lessee so long
as no Significant Lease Default or Lease Event of Default has occurred and is
continuing, and the Indenture Trustee so long as the Lien of the Collateral
Trust Indenture has not been terminated or discharged.
Bankruptcy Filings. The Owner Participant agrees that it will not file a
petition, or join in the filing of a petition, seeking reorganization,
arrangement, adjustment or composition of, or in respect of, the Owner Lessor
under the Bankruptcy Code, or any other applicable federal or state law or the
law of the District of Columbia.
Instructions. The Owner Participant agrees that it will not instruct the Owner
Lessor to take any action prohibited by this Agreement or any other Operative
Document.
Right of First Refusal. In the event the Owner Participant desires to sell,
lease, convey or otherwise transfer its Member Interest or cause the Owner
Lessor to sell all or substantially all of the Owner Lessor's Interest at any
time during the three (3) year period commencing on the termination or
expiration of the Facility Lease (except in the event that a Lease Event of
Default shall have existed at such time of termination or expiration), any such
sale or other transfer shall be subject to the Facility Lessee's right of first
refusal on the terms and conditions set forth in this Section 7.6. The Owner
Participant shall give the Facility Lessee prompt written notice of all bona
fide offers that have been received from any other Person to purchase or
acquire its interest of the Owner Lessor's Interest or the Member Interest of
the Owner Participant, and which offers it wishes to accept, together with a
full and complete statement of the price and all of the terms, conditions and
provisions contained in such offers. The Facility Lessee shall thereafter have
the right within a period of 45 days from and after the receipt by them of such
notice (the "Notice Period") to notify the Owner Participant of its intent to
exercise its right of first refusal. If the Facility Lessee elects to exercise
the right provided in the preceding sentence, it will within 60 days of such
notice (the "Agreement Period") execute a contract on the same terms and
conditions as the offer giving rise to such right. If the Facility Lessee does
not give such notice to the Owner Participant within the 45 day period or
execute such a contract within 60 days of such notice, the Owner Participant
will be free to proceed under the terms and conditions set forth in its notice
to the Facility Lessee, unless the failure to execute the contract within 60
days is attributable to acts or omissions of the Owner Participant. In the
event that
44
such terms are revised in any way that changes the agreement for sale, lease,
conveyance or transfer such that the terms of the sale are less favorable to
the Owner Participant (it being understood and agreed that any reduction in the
price or a change in the terms of payment thereof in a manner beneficial to the
potential purchaser shall be deemed to be less favorable to the Owner
Participant), the Owner Participant shall again comply with the notice and
right of first refusal provisions of this Section prior to entering into such
revised agreement; provided that, for such revised offer, the Notice Period
shall be 10 Business Days from the date of such new notice, and the Agreement
Period shall not exceed 45 days from the date of the Facility Lessee's notice
accepting such new terms.
Notwithstanding the foregoing, if, concurrently with the Owner
Participant's offer to sell its Member Interest pursuant to this Section 7.6,
it or one of its Affiliates offers to sell any interest in an owner lessor who
has entered into any Other RockGen Facility Lease, then the Facility Lessee
shall exercise its purchase rights under this Section 7.6 only if, concurrently
therewith, it exercises its purchase rights under Section 7.6 of each such
Other RockGen Facility Lease.
Prohibition on Fundamental Changes. If the Owner Participant is an entity which
has as its sole (or substantially equivalent to sole) business activity, the
participation in the transactions contemplated by the Operative Documents, the
Owner Participant shall not change its form of organization and shall not enter
into or engage in any business other than as contemplated by the Operative
Documents and the activities related thereto.
Appointment of Successor Lessor Manager. Notwithstanding any other provision of
this Agreement, a successor Lessor Manager shall not be appointed by the Owner
Participant without the consent of the Facility Lessee and, so long as the Lien
of the Collateral Trust Indenture has not been terminated or discharged and the
Indenture Trustee unless such successor Lessor Manager (a) meets the
requirements of the LLC Agreement, (b) has a combined capital and surplus of at
least $150 million, and (c) the Facility Lessee and, so long as Lien of the
Collateral Trust Indenture has not been terminated or discharged, the Indenture
Trustee, shall have received at the expense of Facility Lessee on an After-Tax
Basis: (i) an opinion or opinions of counsel, such counsel and such opinion to
be reasonably acceptable to such parties, to the effect that no regulatory
consents or approvals are required, or (ii) such other documentation reasonably
satisfactory to the Facility Lessee or the Indenture Trustee as the case may be.
Cooperation. The Owner Lessor agrees, and each of the Owner Participant and the
Lessor Manager agree to cause the Owner Lessor to, at the request of the
Facility Lessee and at the sole cost and expense of the Facility Lessee on an
After-Tax Basis, take such actions as may be necessary for the Owner Lessor to
take as the holder of the leasehold interest in the Facility for purposes of
obtaining the valid and effective issue, transfer or amendment, as the case may
be, of all Governmental Approvals to the extent the same are required for the
use, ownership, operation or maintenance of the Facility, the Facility Site,
the Undivided Interest, the Ground Interest or any Component by the Facility
Lessee or any permitted assignee of the Facility Lessee in the manner
contemplated by the Operative Documents, except to the extent the same involves
any (i) material risk of foreclosure, sale, forfeiture or loss of, or
imposition of a Lien (other than a Permitted Lien) on, the Facility, the
Undivided Interest or the Facility Site or the impairment of
45
the use, operation or maintenance of the Facility or the Facility Site in any
material respect, (ii) the risk of criminal liability being incurred by the
Owner Lessor, the Owner Participant, the Equity Investor or the OP Guarantor,
or (so long as the Lessor Notes are outstanding and the Lien of the Lease
Indenture has not been discharged) the Indenture Trustee or the Pass Through
Trustee or any of their respective Affiliates or (iii) material risk of any
material adverse effect on the interests of the Owner Lessor, the Owner
Participant, the Equity Investor or the OP Guarantor, or (so long as the Lessor
Notes are outstanding and the Lien of the Collateral Trust Indenture has not
been discharged) the Indenture Trustee or the Pass Through Trustee or any of
their respective Affiliates (including, without limitation, subjecting any such
Person to regulation as a public utility under any applicable law. The Facility
Lessee shall pay on an After-Tax Basis all reasonable costs and expenses
(including, without limitation, the reasonable fees and expenses of counsel) of
the Owner Lessor and each other Person party to an Operative Document incurred
in connection with any such action. It is understood and agreed that, with
respect to the action requested of it, and taken by it, under this Section 7.9,
the Owner Lessor, the Owner Participant and the Lessor Manager shall make no
representation or warranty as to, and shall have no responsibility for, the
effectiveness of such action to accomplish or promote the objective intended by
the Person making such request.
COVENANTS OF THE INDENTURE TRUSTEE AND THE PASS THROUGH TRUSTEES
Indenture Trustee's Liens. Neither the Lease Indenture Company, nor the
Indenture Trustee will directly or indirectly create, incur, assume or suffer
to exist any Indenture Trustee's Lien attributable to it and arising out of
events or conditions not related to its rights in the Indenture Estate or the
administration thereof, and will promptly notify the Owner Participant, the
Lessor Manager, the Owner Lessor and the Facility Lessee of the imposition of
any such Lien of which it has Actual Knowledge and shall promptly (and in any
event within 30 days of obtaining Actual Knowledge of such Lien), at its own
expense, take such action as may be necessary to duly discharge such Indenture
Trustee's Lien.
Pass Through Trustees' Covenant Not to Transfer Lessor Notes. The Pass Through
Trustees agree that it will not transfer any Lessor Note (or any part thereof)
to any entity (except to a successor Pass Through Trustee appointed pursuant to
the terms of the Pass through Trust Agreement) until it receives from such
entity a certification which makes a representation and warranty as of the date
of such transfer that no part of the funds to be used by it for the purchase
and holding of such Lessor Note (or any part thereof) constitutes assets of any
Plan or that such purchase and holding will be covered by a prohibited
transaction class exemption issued by the U.S. Department of Labor.
INDEMNIFICATION
General Indemnity.
Claims Indemnified. Subject to the exclusions stated in paragraph (b)
below, the Facility Lessee agrees to indemnify, protect, defend and hold
harmless, and do hereby indemnify the Owner Participant, the Owner Lessor,
the Trust Company, in its individual capacity, the Lessor Manager, the
Lease Indenture Company in its individual capacity, the Indenture Trustee,
each Certificateholder, the Pass Through Company in its individual
capacity, the Pass
46
Through Trustees, and their respective Affiliates, successors, assigns,
agents, directors, officers and employees (each an "Indemnitee") against
any and all Claims (whether or not any of the transactions contemplated by
the Operative Documents are consummated) imposed on, incurred or suffered
by or asserted against any Indemnitee in any way relating to or resulting
from or arising out of or attributable to:
the construction, financing, refinancing, acquisition, operation,
rebuilding, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, return,
purchase, sale or other disposition, insuring, sublease, or other use or
non-use of the Undivided Interest, the Ground Interest, the Facility, the
Facility Site, or any Component or any portion of any thereof or any
interest therein;
the conduct of the business or affairs of the Facility Lessee or Calpine
and any other business or affairs conducted at the Facility or the
Facility Site;
the manufacture, design, purchase, acceptance, rejection, delivery or
condition of, or improvement to, the Facility, the Facility Site, or any
Component, or any portion of any thereof or any interest therein;
the Facility Lease, the Facility Site Lease, the Facility Site Sublease,
or any other Operative Document, the execution or delivery thereof or the
performance, enforcement, attempted enforcement or amendment of any terms
thereof, or the transactions contemplated thereby or resulting therefrom;
any Environmental Condition at, related to or caused by the Facility, the
Facility Site or any Component, or any portion thereof, including, for the
avoidance of doubt, any such Environmental Condition existing prior to the
Closing Date;
the offer, issuance, sale, acquisition or delivery of the Lessor Notes,
the Certificates, any Additional Lessor Notes, any Additional Certificates
or any refinancing thereof;
the reasonable and documented costs and expenses of the Transaction
Parties in connection with amendments or supplements to the Operative
Documents requested by the Facility Lessee, or resulting from the actions
of the Facility Lessee or in connection with any Lease Default or Lease
Event of Default;
the imposition of any Lien other than with respect to a particular
Indemnitee (or a Related Party), an Owner Lessor's Lien, an Owner
Participant's Lien or Indenture Trustee's Lien attributable to such
Indemnitee;
any violation by, or liability relating to, the Facility Lessee or any
other Calpine Party, the Facility or the Facility Site, of, or under, any
Applicable Law, whether now or hereafter in effect (including
Environmental Laws), or any action of any Governmental Entity or other
Person taken with respect to the Facility, the Facility Site, the
Operative Documents or the interests of the Owner Participant, the Owner
Lessor, the Indenture Trustee or the Pass Through Trustees, or under the
Operative Documents or the presence, use, storage, release, threatened
release, transportation, arrangement for transportation, treatment,
arrangement for treatment, manufacture, disposal or arrangement for
disposal of any Hazardous Substance in,
47
at, under or from the Facility or the Facility Site, including, for the
avoidance of doubt, any of the foregoing existing or occurring prior to
the Closing Date;
the non-performance or breach by the Facility Lessee or any Calpine Party
of any obligation contained in this Agreement or any other Operative
Document or the falsity or inaccuracy of any representation, warranty or
obligation of any such Person contained in this Agreement or any other
Operative Document;
the continuing fees (if any) and expenses of the Owner Lessor and the
Lessor Manager (including the reasonable compensation and expenses of
their respective counsel) arising out of the Owner Lessor's discharge of
its duties under or in connection with the Operative Documents (other than
the Facility Lease and the Facility Site Lease);
the continuing fees (if any) and expenses of the Lease Indenture Company,
the Indenture Trustee, the Pass Through Company, the Pass Through
Trustees, (including the reasonable compensation and expenses of their
respective counsel, accountants and other professional persons) arising
out of the discharge of their respective duties as provided in the
Operative Documents; or
any Applicable Permits including any obligations imposed by FERC in
connection with the Facility or the Facility Site.
Claims Excluded. Any Claim, to the extent relating to or resulting from or
arising out of or attributable to any of the following, is excluded from
the Facility Lessee's obligations to indemnify, defend, protect and hold
harmless any Indemnitee under this Section 9.1:
(A) acts, omissions or events with respect to the Facility first occurring
after the later of (x) expiration or early termination of the Facility
Lease and, where required by the Facility Lease, surrender to the Owner
Lessor or its successor of its interest in the Facility in compliance with
the provisions of the Facility Lease or (y) if the Owner Lessor exercises
its option set forth in Article VI of the Facility Site Lease, the
performance by the Facility Lessee of all obligations required to be
performed by it thereunder, or (B), if the Closing Date does not occur,
acts, omission or events occurring after the date set forth in Section
2.2(e);
with respect to a particular Indemnitee and Related Parties, any offer,
sale, assignment, transfer or other disposition (voluntary or involuntary)
by or on behalf of (A) in the case of the Owner Participant, the Owner
Participant of its Member Interest or with respect to any Related Party,
its direct or indirect interest in the Owner Participant, (B) in the case
of the Owner Lessor, and if such action is taken at the written direction
of the Owner Participant, the Owner Participant, and Related Parties, the
Owner Lessor of all or any of the Owner Lessor's Interest, (C) the
Indenture Trustee of all or any of its interest in the Lessor Notes,
unless, in any such case referred to in this paragraph (ii), such transfer
is required by the terms of the Operative Documents or occurs during the
continuance of a Lease Event of Default; (provided that this paragraph
(ii) shall not serve to cap the indemnity to be received by a transferee
Indemnitee for a Claim (other than a Claim relating solely to or arising
solely out of any offer, transfer, sale, assignment or other disposition
of any such rights or interests)
48
based on what the relevant transferor Indemnitee would have received had
no such transfer occurred);
with respect to any Indemnitee, any Claim attributable to (i) the gross
negligence or willful misconduct of such Indemnitee or a Related Party
except to the extent such gross negligence or willful misconduct is
attributable to any breach by the Facility Lessee (or any of them) or any
other Calpine Party of any covenant, representation or warranty contained
in any Operative Document or (ii) any violation of Applicable Law by any
such Person except to the extent attributable to a violation of Applicable
Law by the Facility Lessee or any other Calpine Party or to any breach by
the Facility Lessee or such other Calpine Party of any covenant,
representation or warranty contained in any Operative Document;
as to any Indemnitee, any Claim to the extent attributable to the
noncompliance of such Indemnitee or a Related Party, with any of the terms
of, or any misrepresentation or breach of warranty by such Indemnitee or
Related Party contained in any Operative Document made by such Indemnitee
or Related Party or any breach by such Indemnitee or a Related Party of
any covenant contained in any Operative Document or any breach by such
Indemnitee or a Related Party of any covenant contained in any Operative
Document made by such Indemnitee or Related Party except to the extent
attributable to any breach by the Facility Lessee or any other Calpine
Party of any covenant, representation or warranty contained in any
Operative Document;
any Claim constituting or arising from an Owner Lessor's Lien;
with respect to the Indenture Trustee and the Lease Indenture Company, any
Claim constituting or arising from a Indenture Trustee's Lien;
with respect to the Owner Participant, any claim constituting or arising
from an Owner Participant's Lien;
any Claim that is a Tax, or is a cost of contesting a Tax whether or not
the Facility Lessee is required to indemnify therefor pursuant to Section
9.2 hereof or under the Tax Indemnity Agreement;
any failure on the part of the Lessor Manager to distribute in accordance
with the LLC Agreement any amounts received by it under the Operative
Documents and distributable by it thereunder;
a Claim arising out of a Indenture Default or Lease Indenture Event of
Default that is not also (or attributable to) a Lease Default or Lease
Event of Default;
with respect to a particular Indemnitee and Related Party, any obligation
or liability expressly assumed in any Operative Document by the Indemnitee
seeking indemnification;
any Claim that constitutes scheduled principal and/or interest on the
Lessor Notes, Additional Lessor Notes, or the corresponding payments under
the Certificates or any Additional Certificates; and
49
any Claim relating to the payment of any amount which constitutes
Transaction Costs which the Owner Participant is obligated to pay pursuant
to Section 2.3(a) hereof or any other amount to the extent such Indemnitee
or a Related Party has expressly agreed in any Operative Document to pay
such amount without express right of reimbursement;
provided that the terms "omission," "gross negligence" and "willful
misconduct," when applied with respect to the Owner Lessor, the Owner
Participant, the Indenture Trustee, the Pass Through Trustees or any Affiliate
of any thereof, shall not include any liability imputed as a matter of law to
such Indemnitee solely by reason of any such entity's interest in the Facility
or the Facility Site or such Indemnitee's failure to act in respect of matters
which are or were the obligation of the Facility Lessee under this Agreement or
any other Operative Document. Nothing herein shall be deemed to constitute a
guaranty of any useful life or any present or future residual value of the
Facility or a guaranty that any amount of any Secured Indebtedness will be
paid.
Insured Claims. Subject to the provisions of paragraph (e) of this Section
9.1, in the case of any Claim indemnified by the Facility Lessee hereunder
which is covered by a policy of insurance maintained by the Facility
Lessee, each Indemnitee agrees, unless it and each other Indemnitee shall
waive its rights to indemnification (for itself and each Related Party
thereto) in a manner reasonably acceptable to the Facility Lessee, to
cooperate, at the sole cost and expense of the Facility Lessee, with
insurers in exercise of their rights to investigate, defend or compromise
such Claim.
After-Tax Basis. The Facility Lessee agrees that any payment or indemnity
pursuant to this Section 9.1 in respect of any Claim shall be made on an
After-Tax Basis to the Indemnitees.
Claims Procedure. Each Indemnitee shall promptly after such Indemnitee
shall have Actual Knowledge thereof notify the Facility Lessee of any
Claim as to which indemnification is sought; provided, that the failure so
to notify the Facility Lessee shall not reduce or affect the Facility
Lessee's liability which it may have to such Indemnitee under this Section
9.1, and no payment hereunder by the Facility Lessee to an Indemnitee
shall be deemed to constitute a waiver or release of any right or remedy
that the Facility Lessee may have against any such Indemnitee for actual
damages resulting directly from the failure or delay of such Indemnitee to
give the Facility Lessee such notice. Subject to the foregoing, any amount
payable to any Indemnitee pursuant to this Section 9.1 shall be paid
within thirty (30) days after receipt of such written demand therefor from
such Indemnitee, accompanied by a certificate of such Indemnitee stating
in reasonable detail the basis for the indemnification thereby sought and
(if such Indemnitee is not a party hereto) an agreement to be bound by the
terms hereof as if such Indemnitee were such a party. The foregoing shall
not, however, constitute an obligation to disclose confidential
information of any kind without the execution of an appropriate
confidentiality agreement. Promptly after the Facility Lessee receives
notification of such Claim accompanied by a written statement describing
in reasonable detail the Claims which are the subject of and basis for
such indemnity and the computation of the amount so payable, the Facility
Lessee shall, without affecting its obligations hereunder, notify such
Indemnitee whether it intends to pay, object to, compromise or defend any
matter involving the asserted liability of such Indemnitee. The Facility
Lessee shall have the right to investigate and so long as no Significant
Lease Default or Lease Event of Default
50
shall have occurred and be continuing, the Facility Lessee shall have the
right in its sole discretion, to defend or compromise any Claim for which
indemnification is sought under this Section 9.1 which the Facility Lessee
acknowledges is subject to indemnification hereunder; provided that no
such defense or compromise shall involve any danger of (i) foreclosure,
sale, forfeiture or loss of, or imposition of a Lien on any part of the
Facility, the Undivided Interest, the Ground Interest, the Facility Site,
the Lessor Estate or the Indenture Estate or the impairment of the
Facility or the Facility Site, in any material respect or (ii) any
criminal liability being incurred or any material adverse effect on such
Indemnitee; provided, further, that no Claim shall be compromised by the
Facility Lessee on a basis that admits any criminal violation or gross
negligence or willful misconduct on the part of such Indemnitee without
the express written consent of such Indemnitee; and provided, further,
that to the extent that other Claims unrelated to the transactions
contemplated by the Operative Documents are part of the same proceeding
involving such Claim, the Facility Lessee may assume responsibility for
the contest or compromise of such Claim only if the same may be and is
severed from such other Claims (and each Indemnitee agrees to use
reasonable efforts to obtain such a severance). In the event that in the
course of the investigation or defense of a claim, the Facility Lessee
shall in good faith reasonably determine that it is not liable for
indemnification with respect thereto under this Section 9.1, it may give
notice to the applicable Indemnitee of such fact; and, in such case, any
acknowledgment, theretofore made by the Facility Lessee of liability with
respect to such claim under this Section 9.1 shall be deemed revoked, and
the Facility Lessee may thereupon cease to defend such claim; provided
that (i) the Facility Lessee shall have given the Indemnitee reasonable
prior notice of its intention to renounce such acknowledgment, (ii) the
Facility Lessee's conduct regarding the defense of such claim or any
decision to withdraw from such defense shall not prejudice or have
prejudiced the Indemnitee's ability to contest such claim (taking into
account, among other things, the timing of the Facility Lessee's
withdrawal and the theory or theories upon which the Facility Lessee shall
have based its defense), and (iii) the Facility Lessee shall have given
such Indemnitee all materials, documents and records relating to its
defense of such claim as such Indemnitee shall have reasonably requested
in connection with the assumption by such Indemnitee of the defense of
such claim at the cost and expense of the Facility Lessee. In the event
that the Facility Lessee shall cease to defend any claim pursuant to the
preceding sentence, the Facility Lessee shall indemnify each Indemnitee,
without regard to any exclusion that might otherwise apply hereunder, to
the extent that the actions of the Facility Lessee in defending such claim
or the manner or time of the Facility Lessee's election to withdraw from
the defense of such claim shall have caused such Indemnitee to incur any
loss, cost, liability or expense which such Indemnitee would not have
incurred had the Facility Lessee not ceased to defend such claim in such
manner or such time. If the Facility Lessee elect, subject to the
foregoing, to compromise or defend any such asserted liability, it may do
so at its own expense and by counsel selected by it. Upon the Facility
Lessee's election to compromise or defend such asserted liability and
prompt notification to such Indemnitee of its intent to do so, such
Indemnitee shall cooperate at the Facility Lessee's expense with all
reasonable requests of the Facility Lessee in connection therewith and
will provide the Facility Lessee with all information not within the
control of the Facility Lessee as is reasonably available to such
Indemnitee which the Facility Lessee may reasonably request; provided,
however, that such Indemnitee shall not, unless otherwise required by
Applicable Law, be obligated to disclose to the Facility Lessee or any
other Person, or permit
51
the Facility Lessee or any other Person to examine (i) any income tax
returns of the Owner Participant or (ii) any confidential information or
pricing information not generally accessible by the public possessed by
the Owner Participant (and, in the event that any such information is made
available, the Facility Lessee shall treat such information as
confidential and shall take all actions reasonably requested by such
Indemnitee for purposes of obtaining a stipulation from all parties to the
related proceeding providing for the confidential treatment of such
information from all such parties). Where the Facility Lessee, or the
insurers under a policy of insurance maintained by the Facility Lessee
undertakes the defense of such Indemnitee with respect to a Claim (with
counsel reasonably satisfactory to such Indemnitee and without reservation
of rights against such Indemnitee), no additional legal fees or expenses
of such Indemnitee in connection with the defense of such Claim shall be
indemnified hereunder unless such fees or expenses were incurred at the
request of the Facility Lessee or such insurers. Notwithstanding the
foregoing, an Indemnitee may participate at its own expense in any
judicial proceeding controlled by the Facility Lessee pursuant to the
preceding provisions, but only to the extent that such party's
participation does not in the reasonable opinion of counsel to the
Facility Lessee interfere with such control or defense of such claim;
provided, however, that such party's participation does not constitute a
waiver of the indemnification provided in this Section 9.1; provided,
further, that if and to the extent that (i) such Indemnitee is advised by
counsel that an actual or potential conflict of interest exists where it
is advisable for such Indemnitee to be represented by separate counsel or
(ii) there is a risk that such Indemnitee may be subject to criminal
liability and such Indemnitee informs the Facility Lessee that such
Indemnitee desires to be represented by separate counsel, such Indemnitee
shall have the right to control its own defense of such Claim and the
reasonable fees and expenses of such defense (including, without
limitation, the reasonable fees and expenses of such separate counsel)
shall be borne by the Facility Lessee. So long as no Lease Event of
Default described in clause (a), (b), (g) or (h) of Section 16 of the
Facility Lease has occurred and be continuing, no Indemnitee shall enter
into any settlement or other compromise with respect to any Claim without
the prior written consent of the Facility Lessee unless (i) the Indemnitee
waives its rights to indemnification hereunder or (ii) the Facility Lessee
has not acknowledged their indemnity obligation with respect thereto and
there is a significant risk that a default judgment will be entered
against such Indemnitee. Nothing contained in this Section 9.1(e) shall be
deemed to require an Indemnitee to contest any Claim or to assume
responsibility for or control of any judicial proceeding with respect
thereto.
Subrogation. To the extent that a Claim indemnified by the Facility Lessee
under this Section 9.1 is in fact paid in full by the Facility Lessee or
an insurer under an insurance policy maintained by the Facility Lessee (so
long as no Lease Event of Default shall have occurred and be continuing),
such insurer shall be subrogated to the rights and remedies of the
Indemnitee on whose behalf such Claim was paid to the extent of such
payment (other than rights of such Indemnitee under insurance policies
maintained at its own expense) with respect to the transaction or event
giving rise to such Claim. Should an Indemnitee receive any refund, in
whole or in part, with respect to any Claim paid by the Facility Lessee
hereunder, it shall promptly pay over to the Facility Lessee the lesser of
(i) the amount refunded reduced by the amount of any Tax incurred by
reason of the receipt or accrual of such refund and increased by the
amount of any Tax (but not in excess of the amount of such reduction)
saved as a result of such payment or (ii) the amount the Facility Lessee
or any of
52
their insurers has paid in respect of such Claim; provided that, so long
as a Significant Lease Default or Lease Event of Default shall have
occurred and is continuing such amount may be held by the Owner Lessor as
security for the Facility Lessee's obligations under the Facility Lease
and the other Operative Documents.
Minimize Claims. The Owner Participant, the Owner Lessor, and each of the
other Transaction Parties will use their respective reasonable and
diligent efforts to minimize Claims indemnifiable by the Facility Lessee
under this Section 9.1, including by complying with reasonable requests by
the Facility Lessee to do or to refrain from doing any act if such
compliance is, in the good faith opinion of the Owner Participant, the
Owner Lessor, or such other Transaction Party, as the case may be, of a
purely ministerial nature or otherwise has no unindemnified adverse impact
on the Owner Participant, the Owner Lessor, or such Transaction Party, as
the case may be, or any Affiliate of any thereof or on the business or
operations of any of the foregoing.
General Tax Indemnity.
Indemnity. Except as provided in paragraph (b), the Facility Lessee agrees
to indemnify each of the Owner Participant, the Owner Lessor, any OP
Guarantor, the Trust Company in its individual capacity, the Lessor
Manager, the Lease Indenture Company in its individual capacity, the
Indenture Trustee, the Pass Through Company in its individual capacity,
the Pass Through Trustees, each Certificateholder and their respective
successors and assigns, the past and present partners or members of or
holders of the ownership interests in, as the case may be, the Owner
Participant (each of the foregoing, together with any Affiliate thereof, a
"Tax Indemnitee") for, to hold each Tax Indemnitee harmless from and to
defend each Tax Indemnitee against all Taxes that are imposed upon or with
respect to or borne by or asserted against any Tax Indemnitee, the
Facility, the Undivided Interest, the Facility Site, the Ground Interest,
or any portion or Component thereof or any interest therein, or upon any
Operative Document or interest therein, or in any way arising out of, in
connection with or relating to, any of the following:
the acceptance, rejection, delivery, construction, financing, refinancing,
acquisition, operation, warranty, ownership, possession, maintenance,
repair, lease, condition, alteration, modification, restoration,
refurbishing, rebuilding, return, transport, assembly, repossession,
servicing, dismantling, abandonment, retirement, decommissioning,
preparation, installation, storage, replacement, purchase, sale or other
disposition, insuring, sublease, or other use or non-use of, the
imposition of any lien (or incurrence of any liability to refund or pay
over any amount as a result of any lien) on, the Facility, the Undivided
Interest, the Ground Interest, the Facility Site or any portion or
Component thereof or any interest therein;
the Facility, the Facility Site, the Undivided Interest, the Ground
Interest, any portion thereof or Component or interest therein, the
applicability of the Facility Lease to the Facility or the Undivided
Interest, or the conduct of the business or affairs of the Facility Lessee
or Calpine, the Facility or the Facility Site;
53
the manufacture, design, purchase, acceptance, rejection, delivery,
non-delivery, redelivery or condition of, or improvement to, the Facility,
the Facility Site or any portion or Component thereof, or any interest
therein;
the Facility Lease, or any other Operative Document, the execution or
delivery thereof, any other documents contemplated thereby or the
performance, enforcement or amendment of any terms thereof;
the payment or receipt of Periodic Rent and Supplemental Rent or any other
payment, receipt or earning under the Facility Lease or the Facility Site
Lease or arising from the Facility, the Undivided Interest, the Ground
Interest, the Facility Site, or any portion or Component thereof or any
interest therein;
any other amount paid or payable pursuant to the Operative Documents;
the conveyance of title to the Undivided Interest; or
otherwise relating to the transactions contemplated by the Operative Documents.
Notwithstanding anything herein to the contrary and without regard
to paragraph (b) hereof, the Facility Lessee will indemnify the Owner
Participant and the Owner Lessor on an After-Tax Basis for any Taxes collected
by way of withholding (and any interest, penalties or additions to tax
associated therewith) (or for the failure to withhold taxes) imposed on the
Lessor Notes or the Additional Lessor Notes or any other payments to each
Certificateholder or the Indenture Trustee (each a "Certificateholder
Indemnitee"), including any penalties, interest, or additions to tax applicable
in connection therewith; provided, however, that if the Facility Lessee is
required, for any reason, to indemnify the Owner Participant or the Owner
Lessor with respect to any failure to withhold such tax, and the withholding
tax would otherwise be an Excluded Tax under Section 9.2(b) without regard to
the first sentence of this paragraph, then the Certificateholder Indemnitee
with respect to which such withholding was not made will pay the amount of tax
not withheld to the relevant taxing authority if such taxes remain unpaid or
will reimburse the Facility Lessee for the amount of tax not withheld, but paid
to such taxing authority, on demand, plus interest at (a) the Lease Debt Rate
during the period commencing on the date the Facility Lessee shall have made
the indemnity payment to such taxing authority and ending the earlier of the
date of repayment by such Tax Indemnitee and five Business Days after the date
the Facility Lessee demands reimbursement thereof pursuant to this sentence,
and (b) the Overdue Rate for the period thereafter to the date the Facility
Lessee actually receives such payment.
Excluded Taxes. The indemnity provided for in paragraph (a) above shall
not extend to any of the following Taxes (the "Excluded Taxes"):
Taxes imposed by the United States federal government or any state or local
government, any political subdivision of any of the foregoing, imposed on,
based on or measured by gross or net income, receipts, capital gain,
capital or net worth, or conduct of business (other than, in each case,
Taxes that are or are in the nature of sales, use, rental, license, value
added (to the extent value added taxes are not imposed in clear and direct
substitution for income taxes) or property taxes) ("Income Taxes"),
including any such Taxes collected by way of
54
withholding, minimum or alternative minimum taxes, and franchise taxes;
provided that this exclusion (i) shall not affect any express requirement
that payments be made on an "after-tax" basis;
Taxes imposed on a Tax Indemnitee other than a Certificateholder Indemnitee
that are attributable to any act, event or omission by such Tax Indemnitee
that occurs after expiration or other termination of the Facility Lease
and surrender of the Undivided Interest to the Owner Lessor or its
successors (or in the case of a Certificateholder Indemnitee, Taxes
imposed for any period after the repayment of the Lease Debt) in
accordance with the Facility Lease, (as opposed to any act, event or
omission occurring prior to or simultaneous with such expiration,
termination or surrender (or, in the case of a Certificateholder
Indemnitee, such repayment)), provided that this exclusion shall not apply
so long as a Lease Event of Default shall have occurred and be continuing;
Taxes imposed on a Tax Indemnitee that are attributable to the gross
negligence or willful misconduct of such Tax Indemnitee, unless such
negligence or misconduct is imputed to such Tax Indemnitee solely as a
result of its participation in the transactions contemplated by the
Operative Documents and not as a result of any action or inaction by such
Tax Indemnitee;
Taxes imposed on a Tax Indemnitee arising from a breach by such Tax
Indemnitee of any of its representations, warranties or covenants under
any Operative Document except to the extent attributable to any breach by
the Facility Lessee or any other Calpine Party of any covenant,
representation or warranty contained in any Operative Document;
Taxes (A) that are attributable to any voluntary direct or indirect
assignment, sale, transfer or other voluntary disposition or an
involuntary direct or indirect transfer or disposition arising out of or
caused by a bankruptcy or similar proceeding for relief of debtors in
which such Tax Indemnitee is a debtor or a foreclosure by a creditor of
(1) in the case of the Owner Lessor or the Owner Participant, the Owner
Participant of all or part of its Member Interest or Undivided Interest,
(2) in the case of the Owner Lessor or the Owner Participant, the Owner
Lessor of all or part of its interest in the Facility or the Facility Site
(other than to a successor Lessor Manager), or (3) in the case of the
Indenture Trustee, the Indenture Trustee of any interest in the Lease Debt
or the Indenture Estate, or (4) in the case of the Owner Lessor or the
Owner Participant any direct or indirect interest in the Owner Lessor or
the Owner Participant, including by reason of an election made pursuant to
Section 338 of the Code, in each case to the extent imposed by reason of
any transfer described in this clause (v)(A), or (B) to the extent that,
under law in effect on the date of the transfer such Taxes exceed the
amount of Taxes that would be indemnified hereunder had there been no such
assignment, sale, transfer or other voluntary disposition, unless such
transfer or disposition occurs during the continuance of a Lease Event of
Default or is otherwise pursuant to the Facility Lessee's exercise of its
rights under the Operative Documents; provided that this exclusion shall
not apply with respect to any initial syndication of interests in the
Owner Participant accomplished prior to December 29, 2001;
Taxes imposed on a Tax Indemnitee that would not have been imposed but for
the creation or existence of any Owner Lessor's Lien or Owner
Participant's Lien attributable to such Tax Indemnitee;
55
Taxes that are included as a part of the cost of the Facility;
Taxes imposed on the Lessor Manager or the Indenture Trustee that are based
on or measured by the fees or other compensation received by the Lessor
Manager or Indenture Trustee for acting in their respective capacities.
With respect to the Owner Participant, Taxes for which the Facility Lessee
is obligated to indemnify the Owner Participant under the Tax Indemnity
Agreement (or which are expressly excluded from indemnification
thereunder);
Taxes that are imposed on a Tax Indemnitee (other than a Certificateholder
Indemnitee) resulting from the Owner Lessor not being treated as a grantor
trust or other conduit entity for federal, state or local income tax
purposes, but only to the extent such Taxes exceed Taxes indemnified
hereunder that otherwise would have been imposed and are otherwise
indemnifiable;
Taxes imposed on a Tax Indemnitee that are attributable to the failure of
such Tax Indemnitee to comply with certification, information,
documentation, reporting or other similar requirements concerning the
nationality, residence, identity or connection with the jurisdiction
imposing such Taxes; provided that the foregoing exclusion shall only
apply if such compliance is required by statute or regulation of the
jurisdiction imposing such Taxes as a precondition to relief or exemption
from or reduction in such Taxes, such Tax Indemnitee is eligible to comply
with such requirement, the Facility Lessee shall have given such Tax
Indemnitee timely written notice of such requirement and the Tax
Indemnitee shall have determined in good faith that compliance with any
such requirement shall not result in any identified non-immaterial adverse
effect to its interests or to those of its Affiliates;
Taxes consisting of interest, penalties, additions to tax or fines
resulting from a failure of such Tax Indemnitee to properly and timely
file returns as required by a taxing authority unless such failure is
attributable to the Facility Lessee not providing information that it is
expressly required to provide under the Operative Documents;
Taxes imposed on any Tax Indemnitee resulting from an amendment,
modification, supplement to or waiver of any provision of, any Operative
Document which amendment, modification, supplement or waiver was not
requested by or consented to by the Facility Lessee, and as to which the
Facility Lessee is not a party and the Tax Indemnitee (or, in the case of
the Owner Participant, the Owner Lessor if acting at the express direction
of the Owner Participant or any Related Party) is a party, provided that
this exclusion shall not apply if such amendment, modification, supplement
or waiver (A) was required by applicable law or the Operative Documents,
(B) may be necessary or appropriate to, and is in conformity with, any
amendment to any Operative Document requested by the Facility Lessee in
writing, or (C) was expressly consented to by a Calpine Party in writing;
Taxes imposed as a result of, or in connection with, any "prohibited
transaction," within the meaning of Section 4975 of the Code, Section 406
of ERISA or any comparable laws of any Governmental Entity, engaged in by
any Tax Indemnitee (which for this purpose shall include any ERISA
Affiliate thereof) resulting from the breach by such Tax Indemnitee of
56
any of its representations or warranties contained in Section 3.4(g) or
Section 8.2 of the Participation Agreement;
Taxes to the extent such Taxes would not have been imposed on a Tax Indemnitee
if such Tax Indemnitee were a United States Person; and
Taxes imposed that would not have been imposed on a Tax Indemnitee but for
the activities in the taxing jurisdiction of such Tax Indemnitee or any
Affiliate thereof unrelated to the transactions contemplated by the
Operative Documents other than Taxes that are or are in the nature of
sales, use, rental or license taxes, value added taxes (except to the
extent value added taxes are imposed in clear and direct substitution for
income taxes) or property taxes.
Payment. Notwithstanding anything to the contrary herein and without
regard to paragraph (b) hereof, any payment by the Facility Lessee
pursuant to this Section 9.2 shall be increased by amounts necessary to
ensure that all such payments are made on an After-Tax Basis. Each payment
required to be made by the Facility Lessee to a Tax Indemnitee pursuant to
this Section 9.2 shall be paid either (i) when due directly to the
applicable taxing authority by the Facility Lessee if it is permitted to
do so, or (ii) where direct payment is not permitted, and with respect to
gross up amounts, in immediately available funds to such Tax Indemnitee by
the later of (A) 10 days following the Facility Lessee's receipt of the
Tax Indemnitee's written demand for the payment pursuant to clause (g)(i)
below (which demand shall be accompanied by a written statement of the Tax
Indemnitee describing in reasonable detail the Taxes for which the Tax
Indemnitee is demanding payment and the computation of such Taxes), (B)
subject to paragraph (g) below, in the case of amounts which are being
contested pursuant to such paragraph (g), at the time and in accordance
with a final determination of such contest or (C) in the case of any
indemnity demand for which the Facility Lessee has requested review and
determination pursuant to paragraph (d) below, the completion of such
review and determination; provided, however, in no event later than the
date which is one Business Day prior to the date on which such Taxes are
required to be paid to the applicable taxing authority. Any amount payable
to the Facility Lessee pursuant to paragraph (e) or (f) below shall be
paid promptly after the Tax Indemnitee realizes a Tax Benefit giving rise
to a payment under paragraph (e) or receives a refund or credit giving
rise to a payment under paragraph (f), as the case may be, and shall be
accompanied by a statement of the Tax Indemnitee computing in reasonable
detail the amount of such payment. Upon the final determination of any
contest pursuant to paragraph (g) below in respect of any Taxes for which
the Facility Lessee has made a Tax Advance, the amount of the Facility
Lessee's obligation under paragraph (a) above shall be determined as if
such Tax Advance had not been made. Any obligation of the Facility Lessee
under this Section 9.2 and the Tax Indemnitee's obligation to repay the
Tax Advance will be satisfied first by set off against each other, and any
difference owing by either party will be paid within 10 days of such final
determination.
Independent Examination. Within 10 days after the Facility Lessee receives
any computation from the Tax Indemnitee, the Facility Lessee may request
in writing that an independent public accounting firm selected by the Tax
Indemnitee and reasonably acceptable to the Facility Lessee review and
determine on a confidential basis the amount of any indemnity payment by
the Facility Lessee to the Tax Indemnitee pursuant to this Section 9.2 or
any
57
payment by a Tax Indemnitee to the Facility Lessee pursuant to paragraph
(e) or (f) below. The Tax Indemnitee shall cooperate with such accounting
firm and supply it with all information reasonably necessary for the
accounting firm to conduct such review and determination (but not tax
returns and books); provided that such accounting firm shall agree in
writing in a manner reasonably satisfactory to the Tax Indemnitee to
maintain the confidentiality of such information. The parties hereto agree
that the independent public accounting firm's sole responsibility shall be
to verify the computation of any payment pursuant to this Section 9.2 and
that matters of interpretation of this Participation Agreement or any
other Operative Document are not within the scope of the independent
accountant's responsibility. The fees and disbursements of such accounting
firm will be paid by the Facility Lessee; provided that such fees and
disbursements will be paid by the Tax Indemnitee if the verification
results in an adjustment in the Facility Lessee's favor of 5 percent or
more of the indemnity payment or payments computed by the Tax Indemnitee.
Tax Benefit. If, as the result of any Taxes paid or indemnified against by the
Facility Lessee under this Section 9.2, the aggregate Taxes actually paid
by the Tax Indemnitee for any taxable year and not subject to
indemnification pursuant to this Section 9.2 are less (whether by reason
of a deduction, credit, allocation or apportionment of income or
otherwise) than the amount of such Taxes that otherwise would have been
payable by such Tax Indemnitee (a "Tax Benefit"), then to the extent such
Tax Benefit was not taken into account in determining the amount of
indemnification payable by the Facility Lessee under paragraph (a) or (c)
above and provided no Significant Lease Default or Lease Event of Default
shall have occurred and be continuing (in which event the payment provided
under this Section 9.2(e) shall be deferred until the Significant Lease
Default or Lease Event of Default has been cured), such Tax Indemnitee
shall pay to the Facility Lessee the lesser of (A) (y) the amount of such
Tax Benefit, plus (z) an amount equal to any United States federal, state
or local income tax benefit resulting to the Tax Indemnitee from the
payment under clause (y) above and this clause (z) (determined using the
same assumptions as set forth in the second sentence under the definition
of After-Tax Basis) and (B) the amount of the indemnity paid pursuant to
this Section 9.2 giving rise to such Tax Benefit; provided, however, that
any excess of (A) over (B) shall be carried forward and reduce the
Facility Lessee's obligations to make subsequent payments to such Tax
Indemnitee pursuant to this Section 9.2. If it is subsequently determined
that the Tax Indemnitee was not entitled to such Tax Benefit, the portion
of such Tax Benefit that is required to be repaid or recaptured will be
treated as Taxes for which the Facility Lessee must indemnify the Tax
Indemnitee pursuant to this Section 9.2 without regard to paragraph (b)
hereof.
Notwithstanding anything to the contrary herein, each
Certificateholder Indemnitee shall determine the allocation of any tax
benefits, savings, credit, deduction or allocation in its sole good faith
discretion and each position to be taken on its tax return shall be in its sole
control and it shall not be required to disclose any tax return or related
documentation to any Person.
Refund. If a Tax Indemnitee obtains a refund or credit of all or part of
any Taxes paid, reimbursed or advanced by the Facility Lessee pursuant to
this Section 9.2, the Tax Indemnitee promptly shall pay to the Facility
Lessee (x) the amount of such refund or credit (net of any Tax payable by
the Tax Indemnitee as a result of the receipt or accrual of such
58
refund or credit) plus (y) an amount equal to any United States federal,
state or local income tax benefit realized by such Tax Indemnitee by
reason of such payment to the Facility Lessee (determined using the same
assumptions as set forth in the second sentence under the definition of
After-Tax Basis); provided that (A) if at the time such payment is due to
the Facility Lessee a Significant Lease Default or Lease Event of Default
shall have occurred and be continuing, such amount shall not be payable
until such Significant Lease Default or Lease Event of Default has been
cured, and (B) the amount payable to the Facility Lessee pursuant to this
sentence shall not exceed the amount of the indemnity payment in respect
of such refunded or credited Taxes that was made by the Facility Lessee.
Any excess of (x) and (y) over (B) in this Section 9.2(f) shall be carried
forward and reduce the Facility Lessee's obligations to make subsequent
payments to such Tax Indemnitee pursuant to this Section 9.2. If it is
subsequently determined that the Tax Indemnitee was not entitled to such
refund or credit, the portion of such refund or credit that is required to
be repaid or recaptured will be treated as Taxes for which the Facility
Lessee must indemnify the Tax Indemnitee pursuant to this Section 9.2
without regard to paragraph (b) hereof. If, in connection with a refund or
credit of all or part of any Taxes paid, reimbursed or advanced by the
Facility Lessee pursuant to this Section 9.2, a Tax Indemnitee receives an
amount representing interest on such refund or credit, the Tax Indemnitee
promptly shall pay to the Facility Lessee (1) the amount of such interest
that shall be fairly attributable to such Taxes paid, reimbursed or
advanced by the Facility Lessee prior to the receipt of such refund or
credit (net of Taxes payable in respect of the receipt or accrual of such
interest) and (2) any Tax savings resulting from payments made by the Tax
Indemnitee under (1) and (2).
Contest.
Notice of Contest. If a written claim for payment is made by any taxing
authority against a Tax Indemnitee for any Taxes with respect to which the
Facility Lessee may be liable for indemnity hereunder (a "Tax Claim"),
such Tax Indemnitee shall give the Facility Lessee written notice of such
Tax Claim promptly after its receipt, and shall furnish the Facility
Lessee with copies of such Tax Claim and all other writings received from
the taxing authority to the extent relating to such claim; provided that
failure to so notify the Facility Lessee shall not relieve the Facility
Lessee of any obligation to indemnify the Tax Indemnitee hereunder except
to the extent that such failure effectively precludes the ability to
conduct a contest hereunder (and without limiting any damage claim or
remedy the Facility Lessee may otherwise have for such failure).
Control of Contest. Subject to subsection (g)(iii) below, the Facility
Lessee will be entitled to contest (acting through counsel selected by the
Facility Lessee and reasonably satisfactory to the Tax Indemnitee), and
control the contest of, any Tax Claim if (A) such Tax Claim may be pursued
in the name of the Facility Lessee and may be segregated procedurally from
tax claims for which the Facility Lessee is not obligated to indemnify the
Tax Indemnitee or (B) the Tax Indemnitee requests that the Facility Lessee
control such contest. In the case of all other Tax Claims, the Tax
Indemnitee will contest the Tax Claim if the Facility Lessee shall request
that the Tax be contested (subject to subsection (g)(iii) below), and the
following rules shall apply with respect to such contest:
59
(1) the Tax Indemnitee will control the contest of such Tax
Claim (acting through counsel selected by the Tax Indemnitee and reasonably
satisfactory to the Facility Lessee) at the Facility Lessee's expense,
(2) the decisions regarding what actions to be taken shall be
made by the Tax Indemnitee in its sole judgment, and
(3) the Tax Indemnitee shall not otherwise settle, compromise
or abandon such contest without the Facility Lessee's prior written consent
except as provided in paragraph (g)(iv) below.
In either case, the party conducting such contest shall consult in
good faith with the other party and its designated counsel with respect to such
Tax Claim and shall provide the other party with copies of any reports or
claims (or extracts therefrom) issued by the relevant auditing agents or taxing
authority relating to such Tax Claim.
Conditions of Contest. Notwithstanding the foregoing, no contest with
respect to a Tax Claim will be required or permitted pursuant to this
Section 9.2, and the Facility Lessee shall be required to pay the
applicable Taxes without contest, unless:
(1) within 30 days after written notice by the Tax Indemnitee
to the Facility Lessee of such Tax Claim (or such shorter period, to be
specified by the Tax Indemnitee in such notice, as required for taking action
with respect to such Tax Claim), the Facility Lessee shall request in writing
to the Tax Indemnitee that such Tax Claim be contested,
(2) no Significant Lease Default or Lease Event of Default has
occurred and is continuing, unless the Facility Lessee has provided security
for the indemnity payment and the expenses of contest in a manner reasonably
acceptable to the Tax Indemnitee and the Indenture Trustee, both as to coverage
and credit,
(3) there is no risk of sale, forfeiture or loss of, or the
creation of any Lien on any Facility, the Facility Site, the Undivided
Interest, the Ground Interest, or any portion or Component thereof or any
interest therein as a result of such Tax Claim; provided that this clause (3)
shall not apply if the Facility Lessee posts security satisfactory to the Tax
Indemnitee, both as to coverage and credit, in its sole discretion,
(4) there is no risk of imposition of any criminal penalties
or liabilities,
(5) if such contest involves payment of such Tax, the Facility
Lessee will advance such amount necessary to pay the Tax to the Tax Indemnitee
or its Affiliates on an interest-free basis and with no after-tax cost to such
Tax Indemnitee (a "Tax Advance"),
(6) the Facility Lessee agrees to pay (and pays on demand) and
with no after-tax cost to such Tax Indemnitee or its Affiliates all reasonable
costs, losses and expenses incurred by the Tax Indemnitee in connection with
the contest of such claim (including, without limitation, all reasonable legal,
accounting and investigatory fees and disbursements and penalties, interest and
additions to tax),
60
(7) the Tax Indemnitee, if it so requests has been provided
at the Facility Lessee's sole expense with an opinion, reasonably acceptable to
such Tax Indemnitee, of independent tax counsel selected by the Tax Indemnitee
and reasonably acceptable to the Facility Lessee to the effect that there is a
Reasonable Basis for contesting such Tax Claim,
(8) in the case of a judicial appeal, the appeal is not to the
U.S. Supreme Court,
(9) if such contest is controlled by the Facility Lessee,
prior to commencement of a judicial action with respect to the contest, the
Facility Lessee shall have admitted in writing its liability to pay an
indemnity pursuant to this Section 9.2 with respect to such Tax, which
admission shall be binding on the Facility Lessee unless and to the extent such
contest is determined in a manner that conclusively demonstrates that the
Facility Lessee is not so liable, and
(10) if the subject matter of such claim shall be of a
continuing or recurring nature and shall have previously been decided pursuant
to this paragraph (g), there shall have been a change in law after such
previously decided claim and such Tax Indemnitee receives, at the Facility
Lessee's sole cost, an opinion of counsel selected by such Tax Indemnitee and
reasonably acceptable to the Facility Lessee to the effect that such change is
favorable to the position asserted in the previous contest.
Waiver of Indemnification. Notwithstanding anything to the contrary
contained in this Section 9.2, the Tax Indemnitee at any time may elect to
decline to take any action or any further action with respect to (and the
Facility Lessee shall not be permitted to contest) a Tax Claim and may in
its sole discretion settle or compromise any contest with respect to such
Tax Claim without the Facility Lessee's consent if the Tax Indemnitee:
(1) waives its right to any indemnity payment by the Facility
Lessee pursuant to this Section 9.2 in respect of such Tax Claim (and any other
claim for Taxes with respect to any other taxable year the contest of which is
effectively precluded by the Tax Indemnitee's declination to take action with
respect to the Tax Claim), and
(2) promptly repays to the Facility Lessee any Tax Advance and
any amount paid to such Tax Indemnitee under Section 9.2(a) above in respect of
such Taxes, but not any costs or expenses with respect to any such contest.
Except as provided in the preceding sentence, any such waiver shall
be without prejudice to the rights of the Tax Indemnitee with respect to any
other Tax Claim.
Reports.
If any report, statement or return is required to be filed by a Tax
Indemnitee with respect to any Tax that is subject to indemnification
under this Section 9.2, the Facility Lessee will (1) notify the Tax
Indemnitee in writing of such requirement not later than 30 days prior to
the date such report, statement or return is required to be filed
(determined without regard to extensions) and (2) either (y) unless
directed by the Tax Indemnitee otherwise, if permitted by applicable law,
prepare such report, statement or return for filing by the Facility Lessee
in
61
such manner as will show the ownership of the Facility by the Owner Lessor
for United States federal, state and local income tax purposes (if
applicable), send a copy of such report, statement or return to the Tax
Indemnitee and timely file such report, statement or return with the
appropriate taxing authority, or (z) in all other cases, prepare and
furnish to such Tax Indemnitee not later than 30 days prior to the date
such report, statement or return is required to be filed (determined
without regard to extensions) a proposed form of such report, statement or
return for filing by the Tax Indemnitee; provided that the only
consequence for failure to file after compliance by the Facility Lessee
with the requirements hereof shall be a loss of indemnification from the
Facility Lessee in respect of any Tax to the extent resulting from such
failure.
Each of the Tax Indemnitee and the Facility Lessee, as the case may be,
will timely provide the other, at the Facility Lessee's expense, with all
information (other than books or income tax returns that such party
reasonably deems confidential) in its possession that the other party may
reasonably require and request to satisfy its tax filing obligations.
Non-Parties. If a Tax Indemnitee is not a party to this Agreement, the
Facility Lessee may require such Tax Indemnitee to agree in writing, in a
form reasonably acceptable to the Facility Lessee, to the terms of this
Section 9.2 prior to making any payment to such Tax Indemnitee under this
Section. Subject to the preceding sentence, the Facility Lessee's
obligations under this Section 9.2 shall inure to the benefit of each and
every Tax Indemnitee without regard to whether such Tax Indemnitee is a
party to this Agreement.
FACILITY LESSEE'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and consents in
all respects to, the terms of the Facility Lease and the Facility Site Lease
and expressly, severally and as to its own actions only, agrees that, so long
as no Lease Event of Default has occurred and is continuing, it shall not take
or cause to be taken any action or direct that any action be taken, which is
contrary to or inconsistent with the rights under the Facility Lease and
Facility Site Sublease, including the right to possession, use and quiet
enjoyment of the Undivided Interest and the Ground Interest.
SUPPLEMENTAL FINANCING IMPROVEMENTS; OPTIONAL REFINANCINGS
Financing Improvements. Upon the request of the Facility Lessee delivered at
least 90 days prior to financing a portion of the cost of any Required or
Non-Severable Improvement, the Owner Lessor and the Indenture Trustee agree to
cooperate with the Facility Lessee to (a) issue Additional Lessor Notes under
the Collateral Trust Indenture to finance such Improvement which will rank pari
passu with the Initial Lessor Notes and/or any Additional Lessor Notes then
outstanding; (b) execute and deliver one or more supplements to the Collateral
Trust Indenture for purpose of subjecting the Owner Lessor's interest in any
such Improvements to the Liens thereof, and (c) execute and deliver an
amendment to the Facility Lease to reflect the adjustments required by clause
(iv) below; provided, however, that (x) the Owner Participant shall have been
given the opportunity, but shall have no obligation, to provide all or part of
the funds required to finance any such Improvement by making an Additional
Equity Investment in such amount, if any, as it may determine in its sole and
absolute discretion, but the Facility Lessee shall have no
62
obligation to accept such Additional Equity Investment; and (y) the conditions
set forth below and in Section 2.12 of the Collateral Trust Indenture shall
have been satisfied. The obligation to finance such Improvements through the
issuance of Additional Lessor Notes under Section 2.12 of the Collateral Trust
Indenture (any financing of Improvements through the issuance of such
Additional Lessor Notes under the Collateral Trust Indenture being called a
"Supplemental Financing") is subject to the following additional conditions:
except with respect to Required Improvements, there shall be no more than
one such financing in any calendar year;
the Additional Lessor Notes (A) shall have a final maturity no later than
the final maturity of the Lessor Notes issued on the Closing Date and (B)
will be fully repaid out of additional Basic Rent, as adjusted pursuant to
the Facility Lease, during the Facility Lease Term;
the Additional Lessor Notes shall have an average life to maturity equal
to the average life to maturity of the Lessor Notes issued on the Closing
Date;
appropriate increases to Basic Rent and Termination Value (determined
without regard to any tax benefits associated with such Improvements,
unless the Owner Participant is making an Additional Equity Investment)
shall be made to protect the Owner Participant's Net Economic Return;
provided that there shall be no changes to the amortization schedule or
interest amounts and payment dates on the then outstanding Lessor Notes;
the Facility Lessee shall have paid, on an After-Tax Basis, all reasonable
costs and expenses of the Transaction Parties, including the reasonable
fees and expenses of counsel to the Owner Participant, the Owner Lessor,
the Indenture Trustee, the Lease Indenture Company, the Pass Through
Company and the Pass Through Trustees, in each case to the extent incurred
in connection with any financing or refinancing pursuant to this Section
11 whether or not the financing is consummated;
no Significant Lease Default or Lease Event of Default shall have occurred
and be continuing unless the Improvements to be constructed with the
proceeds of the Additional Lessor Notes shall cure such Significant Lease
Default or Lease Event of Default and such Improvements shall be made in
compliance with the Operative Documents;
such Additional Lessor Notes represent an aggregate amount not less than
$20 million, nor greater than 100% of the costs of the Improvements being
financed; provided that the aggregate balance of the Lessor Notes for the
Undivided Interest never exceeds 80% of the fair market value (which fair
market value shall be determined by an appraiser selected by the Facility
Lessee and reasonably acceptable to the Owner Participant) of the
Undivided Interest taking into account the fair market value of such
Improvements;
the Owner Participant shall have received a favorable opinion of its tax
counsel satisfactory to such Owner Participant to the effect that such
financing creates no incremental tax risk not indemnified to the Owner
Participant's satisfaction (including additional indebtedness incurred to
finance the Improvements not constituting "qualified nonrecourse
indebtedness" within the meaning of Treasury Regulations Section
1-861-10T(b));
63
the Owner Participant shall suffer no adverse accounting effects under
GAAP as a result of such financing;
the Facility Lessee shall have made or delivered such representations,
warranties, covenants, opinions or certificates as the Owner Participant,
the Indenture Trustee may reasonably request;
the Facility Lessee or the Guarantor shall have, at such time, a credit
rating of at least Investment Grade from S&P and βββββ�'β�;
the Facility Lessee shall pay to (a) the Owner Participant a fee of
$100,000 and (b) the Pass Through Trustees for the benefit of the
Certificateholders, to be shared by such Certificateholders on a pro rata
basis, a fee of $100,000 for each such financing, in each case under
clauses (a) and (b) above, other than the first financing; and
Calpine shall have affirmed to the Transaction Parties that the Calpine
Guaranties cover the additional indebtedness contemplated by this Section
11.1.
Notwithstanding the prior provision dealing with the financing of
Improvements through the Facility Lease, the Facility Lessee shall at all times
have the right to fund Improvements to the Facility other than through the
Facility Lease; provided that Required Improvements and non-Severable
Improvements may only be financed other than through the Facility Lease on an
unsecured basis. Notwithstanding any of the foregoing of this Section 11.1,
except for Required Improvements and Improvements relating to pollution
control, no Improvement shall materially decrease the value, residual value,
utility or remaining economic useful life of the Facility immediately prior to
such Improvement or cause the Facility to become limited-use property.
Optional Refinancing of Lease Debt. The Facility Lessee shall have the right,
exercisable at any time on no more than three occasions, to request the Owner
Lessor (and the Owner Lessor shall reasonably consider and not unreasonably
withhold its consent), to refund or refinance the Lease Debt, in whole but not
in part, through the issuance of Additional Lessor Notes; provided that all
conditions to the issuance of such Additional Lessor Notes contained in Section
2.12 of the Collateral Trust Indenture shall have been satisfied and all
applicable Make-Whole Amounts shall have been paid. Any refinancing under this
Section 11.2 shall also be subject to satisfaction of the following additional
conditions:
the Owner Lessor shall be able to issue and sell such debt in an amount
adequate to accomplish such refunding or refinancing;
with respect to the refinancing of the Initial Lessor Notes of a
particular maturity, such Additional Lessor Notes shall have a final
maturity no later than the final maturity date of such Initial Lessor
Notes and will be fully repaid out of Basic Rent during the Facility Lease
Term;
appropriate adjustments to Basic Rent and Termination Value shall be made
to preserve the Owner Participant's Net Economic Return; provided that no
adjustments shall be made to the amortization schedule;
64
no Significant Lease Default or Lease Event of Default shall have occurred and
be continuing;
the Owner Participant shall suffer no adverse accounting effects under GAAP;
the Facility Lessee shall have made or delivered such representations,
warranties, covenants, opinions and certificates as the Owner Participant
may reasonably request, which representations, warranties, covenants and
agreements shall be of no greater scope than those provided by the
Facility Lessee on the Closing Date under the Operative Documents to which
it is a party (except to the extent necessitated by differences between
existing Operative Documents and the terms and conditions of the proposed
refinancing);
all documentation in connection with such refinancing shall be reasonably
satisfactory to the Owner Lessor and the Owner Participant;
the Owner Participant shall receive a consent fee of $100,000 in the
aggregate for each refinancing after the first such refinancing;
the Lease Debt as financed constitutes qualified nonrecourse indebtedness
within the meaning of Treasury Regulations Section 1-861-10T(b) and the
Owner Participant shall have received an opinion satisfactory to it to
such effect; and
the Owner Participant shall receive an opinion satisfactory to it that the
refinancing (as opposed to the right to request such refinancing) shall
not result in any incremental tax risk not indemnified to the Owner
Participant's satisfaction.
Calpine shall have affirmed in writing to the Transaction Parties
that the Calpine Guaranty covers the additional indebtedness contemplated by
this Section 11.2.
Cooperation. The Owner Participant will cooperate with and assist the Facility
Lessee in connection with any refinancing and/or assumption of the Lease Debt,
so long as such refinancing and/or assumption of the Lease Debt is in
accordance with the terms of the Operative Documents. The Owner Participant
will execute such agreements and documents as may be necessary with respect to
any such refinancing and will instruct the Owner Lessor to act accordingly.
CERTAIN ADJUSTMENTS TO PERIODIC RENT, TERMINATION VALUE AND OTHER AMOUNTS
Prior to or on the Closing Date, Periodic Rent, Termination Value,
Allocated Rent, Proportional Rent, Lessor 467 Loan Principal Balance,
Lessee 467 Loan Principal Balance, Lessor 467 Loan Interest and Lessee 467
Loan Interest shall be adjusted, either upward or downward, in accordance
with the Facility Lease:
at the request of the Facility Lessee, and at the Facility Lessee's
option, to re-optimize the Lease Debt; provided such re-optimization shall
not result in a change to average life by more than six (6) months;
65
at the request of the Facility Lessee or the Owner Participant, to reflect
any changes in the Pricing Assumptions, including without limitation, (x)
the initial interest rate on any of the Lessor Notes which is different
from the applicable interest rate set forth in the Pricing Assumptions,
(y) an increase in the Transaction Costs from the amount assumed in the
Pricing Assumptions, unless the Facility Lessee has elected to pay such
increase, and (z) a Closing Date other than the Scheduled Closing Date;
and
at the request of the Facility Lessee or the Owner Participant to reflect any
enactment, promulgation, release or adoption of, amendment to or change in
the Code, Treasury Regulations, Revenue Rulings or Revenue Procedures
("Tax Law Change") enacted prior to the Closing;
provided that if any adjustment required by this paragraph (a) would result in
(i) the Facility Lease not qualifying as an operating lease for the Facility
Lessee under FASB 13 or FASB 98, or (ii) the aggregate of all rent adjustments
made on or before, or contemplated to be made on, the Closing Date (other than
adjustments to reflect a change in Transaction Costs or the actual interest
rate of the Certificates) shall cause either (x) the after-tax net present
value of Basic Rent discounted at 6% to increase by more than 100 basis points
or (y) the total Basic Rent to increase by more than 2%, then in either such
case, the Facility Lessee shall not be obligated to close the Overall
Transaction. Any adjustments pursuant to Section 3.4 of the Facility Lease
shall comply with Applicable Law (including any final or proposed Treasury
Regulations issued under Section 467 of the Code) as well as the requirements
of Revenue Procedure 2001-28 and Sections 4.02(5), 4.07(1) and 4.07(2) of
Revenue Procedure 2001-29 in a manner such that amending the Facility Lease
complies with the "safe harbors" under such Treasury Regulations or otherwise
does not cause the Facility Lease to be a "disqualified leaseback or long-term
agreement" within the meaning of Section 467 of the Code and any Treasury
Regulations issued thereunder, in each case, to the extent of such compliance
on the Closing Date.
After the Closing Date, Periodic Rent, Termination Value, Allocated Rent,
Proportional Rent, Lessor 467 Loan Principal Balance, Lessee 467 Loan
Principal Balance, Lessor 467 Loan Interest and Lessee 467 Loan Interest
shall be adjusted at the request of the Facility Lessee or the Owner
Participant in accordance with the terms of the Facility Lease to which it
is a party.
Any adjustment pursuant to this Section 12 shall be calculated (A) to
preserve the Owner Participant's Net Economic Return through the Basic
Lease Term and (B) to the extent consistent with (A) above, to maintain
operating lease treatment for the Facility Lessee; provided, however, that
to the extent consistent with preserving the Owner Participant's Net
Economic Return, all adjustments shall at the option of the Facility
Lessee be calculated to (x) minimize the average annual Basic Rent over
the Basic Lease Term and the Lessor Put Renewal Lease Term for the
Facility Lessee's GAAP accounting purposes and/or (y) minimize the present
value to the Facility Lessee of Basic Rent; and provided, further, that no
such adjustment shall require the Owner Participant to record a loss as of
the date such adjustment is made. Adjustments will be computed by the
Owner Participant based upon the Pricing Assumptions and the Tax
Assumptions originally used to calculate the Periodic Rent, Termination
Value, Allocated Rent, Proportional Rent, Lessor 467 Loan Principal
Balance, Lessee 467 Loan Principal Balance, Lessor 467 Loan Interest and
Lessee 467 Loan Interest.
66
Adjustments made pursuant to this Section 12 shall be subject to
verification as provided in Section 3.4 of the Facility Lease.
TRANSFER OF THE FACILITY LESSEE OWNERSHIP; SPECIAL LESSEE TRANSFERS
Transfer of the Facility Lessee Ownership.
The Facility Lessee covenants and agrees that it shall not during the
Facility Lease Term assign the Facility Lease or any other Operative
Document, or any interest therein, without the prior written consent of
the Owner Lessor, the Owner Participant and, so long as the Lien of the
Collateral Trust Indenture has not been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees. Notwithstanding the
foregoing, upon satisfaction of the conditions in paragraph (b) below, the
Facility Lessee may assign the Facility Lease or any other Operative
Document to which it is a party, or any interest therein to any Person,
without the consent of the Owner Lessor, the Owner Participant, the
Indenture Trustee or any other Transaction Party.
Assignment under Section 13(a) above by the Facility Lessee shall be
permitted if (A) after giving effect to such assignment or assignments,
either (x) Calpine owns, directly or indirectly, at least a majority of
the Ownership Interest of each assignee (as well as at least a majority of
the Ownership Interest of any non-assigning Facility Lessee), the Calpine
Guaranty remains in full force and effect (without a transferee of
Calpine's obligations thereunder having succeeded thereto in accordance
with Section 8.4(b) thereof), and Calpine shall have reaffirmed in writing
its obligations under the Calpine Guaranty or (y) Calpine's obligations
under the Calpine Guaranty has been succeeded to in accordance with
Section 8.4(b) thereof, the transferee of Calpine shall own, directly or
indirectly, at least a majority of the Ownership Interest of each assignee
(as well as at least a majority of the Ownership Interest of any
non-assigning Facility Lessee) and the Calpine Guaranty shall remain in
full force and effect and (B) satisfaction of the following conditions:
the transferee shall assume all the obligations of the Facility Lessee
under the Operative Documents, and the first priority Lien of the pledge
of the Collateral as defined in and pursuant to the Facility Lease shall
continue in effect, pursuant to an assignment and assumption agreement in
form and substance satisfactory to the Owner Participant, Owner Lessor
and, so long as the Lien of the Collateral Trust Indenture shall not have
been terminated or discharged, the Indenture Trustee;
the Owner Participant, the Owner Lessor and, so long as the Lien of the
Collateral Trust Indenture shall not have been terminated or discharged,
the Indenture Trustee and the Pass Through Trustees shall have received an
Opinion of Counsel as to such assignment and assumption agreement and the
satisfaction of the requirements and conditions set forth in this Section
13.1(b) (except for clauses (iii) and (vi) hereof);
no Significant Lease Default or Lease Event of Default shall have occurred
and be continuing at the time of or immediately following such transfer;
the transfer shall not subject any of the Facility Lessee, the Owner
Participant, the Owner Lessor, the Lessor Manager, the Indenture Trustee,
the Pass Through Trustees or any
67
Certificateholder to regulation under PUHCA or state laws and regulations
regarding the rate and financial or organizational regulation of electric
utilities in the affected party's reasonable opinion, nor result in a
Regulatory Event of Loss;
the transferee shall be organized under the laws of the United States, any
state thereof or the District of Columbia;
the Facility Lessee shall have paid, at no after-tax cost to such parties,
all reasonable documented out-of-pocket expenses (including reasonable
attorneys' fees and expenses) of the Owner Lessor, the Lessor Manager, the
Owner Participant, the Indenture Trustee, the Lease Indenture Company and
the Pass Through Trustees in connection with such assignment;
the Facility Lessee has provided the Indenture Trustee with (x) an
indemnity against the risk that such assignment will cause a Tax Event to
occur to any direct or indirect holder of any Lessor Note (including any
Certificateholder) or (y) an opinion of counsel to the effect that such
assignment will not cause a Tax Event to occur to any direct holder of any
Lessor Note and any Certificateholder; and
the transfer shall not cause the Facility to become "tax-exempt use
property within the meaning of Section 168(h) of the Code (unless the
Facility Lessee shall make a payment contemporaneously with such transfer
that in the reasonable judgment of the Owner Participant compensates the
Owner Participant for the adverse tax consequences therefrom).
Special Facility Lessee Transfers. Upon the occurrence and during the
continuance of a Special Lessee Transfer Event, the Facility Lessee (or its
designee as provided below) may (a) terminate the Facility Lease in accordance
with its terms, or (b) upon not less than 30 days' written notice to the Owner
Participant, the Indenture Trustee and the Pass Through Trustees, purchase
subject to the limitations set forth in Section 7.1, all of the Member Interest
(any purchase under clause (b) being referred to a the "Special Lessee
Transfer") on the applicable Termination Date at a price equal to the Special
Lessee Transfer Amount determined as of the date of such transfer and keep the
Facility Lease in effect. On the applicable Termination Date, the Facility
Lessee (or its designee) shall pay to the Owner Participant or the OP
Guarantor, the Special Lessee Transfer Amount determined as of such date, plus
all amounts due and payable to the Owner Participant on such date (including
all reasonable and documented costs and expenses of the Owner Participant or
the OP Guarantor and all sales, use, value added and other Taxes covered and
not excluded by Section 9.2 hereof associated with the Special Lessee Transfer
pursuant to this Section 13.2, to the extent such amounts have not otherwise
been reimbursed by the Facility Lessee pursuant to this Section 13.2, it being
understood that any transfer pursuant to this Section 13.2 shall not be
considered a voluntary transfer for purposes of Section 9.2). Concurrently with
the payment of all sums required to be paid pursuant to this Section 13.2 (or
on such later date of transfer of the Member Interest in accordance with clause
(ii) below) (i) the Facility Lessee shall cease to have any liability to the
Owner Participant or the OP Guarantor with respect to the Operative Documents,
except for obligations (including Section 9.1 and 9.2 hereof and the Tax
Indemnity Agreement) surviving pursuant to the express terms of the Operative
Documents or which have otherwise accrued but not been paid as of such date and
(ii) the Owner Participant or the OP Guarantor will transfer (by an appropriate
instrument of transfer) the Member Interest to the Facility Lessee (or its
designee); provided, however, that if
68
the Lien of the Collateral Trust Indenture has not been terminated or
discharged, such transfer shall not be made to the Facility Lessee, but shall
be made to the Facility Lessee's designee promptly upon the Facility Lessee's
designation of such designee and such designee will agree not to transfer the
Member Interest to the Facility Lessee until the Lien is terminated or
discharged. At the time of any transfer under this Section 13.2, the Owner
Participant or the OP Guarantor shall represent and warrant as to the absence
of Liens attributable to the Owner Participant on the Member Interest. It is
understood and agreed among the parties hereto that the transaction
contemplated by this Section 13.2 shall not effect a merger of the Facility
Lessee's interest in the Facility and the Facility Site with the Owner Lessor's
Interest. The Facility Lessee will pay, on an After-Tax Basis, all reasonable
and documented transaction costs and expenses of the parties (including
reasonable attorneys' fees and disbursements) in connection with any transfer
pursuant to this Section 13.2. Subsequent to such transfer, the Facility Lessee
and the Owner Lessor may, without the consent of the Indenture Trustee or the
Pass Through Trustees, waive the Regulatory Event of Loss or the Burdensome
Termination Event that gave rise to the Special Lessee Transfer Event and the
Facility Lease shall continue in full force and effect in accordance with its
terms.
MISCELLANEOUS
Consents; Cooperation. The Owner Participant covenants and agrees that it shall
not unreasonably withhold its consent to any consent requested of the Owner
Lessor under the terms of the Operative Documents that by its terms is not to
be unreasonably withheld by the Owner Lessor.
Successor Owner Lessor. The parties hereto agree that the transfer or
assignment pursuant to the terms of the LLC Agreement by the Owner Lessor to a
successor Owner Lessor, will not violate the terms of any Operative Document.
Bankruptcy of Lessor Estate. If (i) all or any part of the Lessor Estate
becomes the property of a debtor subject to the reorganization provisions of
Title 11 of the United States Code, as amended from time to time, (ii) pursuant
to such reorganization provisions the Owner Participant is required, by reason
of the Owner Participant being held to have recourse liability to the debtor or
the trustee of the debtor directly or indirectly, to make payment on account of
any amount payable as principal or interest on the Lessor Notes, and (iii) the
Indenture Trustee actually receives any Excess Amount, as defined below, which
reflects any payment by the Owner Participant on account of clause (ii) above,
the Indenture Trustee shall promptly refund to the Owner Participant such
Excess Amount (and, to the extent so refunded, such amount owing under the
Lessor Notes shall be reinstated). For purposes of this Section 14.3, "Excess
Amount" means the amount by which such payment exceeds the amount which would
have been received by the Indenture Trustee if the Owner Participant had not
become subject to the recourse liability referred to in clause (ii) above.
Nothing contained in this Section 14.3 shall prevent the Indenture Trustee from
enforcing any personal recourse obligations (and retaining the proceeds
thereof) of the Owner Participant as contemplated by this Participation
Agreement (other than referred to in clause (ii)).
Amendments and Waivers. No term, covenant, agreement or condition of this
Agreement may be terminated, amended or compliance therewith waived (either
generally or in a particular
69
instance, retroactively or prospectively) except by an instrument or
instruments in writing executed by each party hereto.
Notices. Unless otherwise expressly specified or permitted by the terms hereof,
all communications and notices provided for herein shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (b) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (c) in the case of notice by such a
telecommunications device, upon transmission thereof; provided such
transmission is promptly confirmed by either of the methods set forth in
clauses (a) or (b) above, in each case addressed to each party hereto at its
address set forth below or, in the case of any such party hereto, at such other
address as such party may from time to time designate by written notice to the
other parties hereto:
If to the Facility Lessee:
RockGen Energy LLC
c/o Calpine Northbrook Office
βββ� ββββββ ββββ, βββββ� βββ�
ββββββββββ, ββ βββββ�
Attention: Senior Counsel
Telephone: (βββ�) βββ�-ββββ
Facsimile: (βββ�) βββ�-ββββ
with a copy to:
Calpine Corporation
ββ ββββ βββ� ββββββββ ββββββ, βββ� βββββ�
βββ� ββββ, ββββββββββ βββββ�
Attention: Asset Manager and General Counsel
Telephone: (βββ�) βββ�-ββββ
Facsimile: (βββ�) βββ�-ββββ
If to the Guarantor:
Calpine Corporation
ββ ββββ βββ� ββββββββ ββββββ, βββ� βββββ�
βββ� ββββ, ββββββββββ βββββ�
Attention: Asset Manager and General Counsel
Telephone: (βββ�) βββ�-ββββ
Facsimile: (βββ�) βββ�-ββββ
If to the Owner Lessor, the Trust Company or the Lessor Manager:
c/o Wells Fargo Bank Northwest, National Association
MAC U1254-031
ββ βββββ� ββββ ββββββ
ββ
ββββ ββββ ββββ, ββ βββββ�
Telephone: (βββ�) βββ�-ββββ
Facsimile: (βββ�) βββ�-ββββ
Attention: Corporate Trust Services
If to the Owner Participant:
SBR OP-1, LLC
c/o Wells Fargo Bank Northwest, National Association
MAC U1254-031
ββ βββββ� ββββ ββββββ
ββββ ββββ ββββ, ββ βββββ�
Telephone: (βββ�) βββ�-ββββ
Facsimile: (βββ�) βββ�-ββββ
Attention: Corporate Trust Services
with a copy to:
Newcourt Capital USA Inc.
1211 Avenue of the ββββββββ - ββββ βββββ�
βββ� ββββ, βββ� ββββ βββββ�
Telephone: (βββ�) βββ�-ββββ
Facsimile: (βββ�) βββ�-ββββ
Attention: Managing Director
71
If to the Indenture Trustee:
State Street Bank and Trust Company of Connecticut, National
Association
βββ� ββββββ ββββββ, βββββββ� ββββββ
ββββββββ, ββ βββββ�
Telephone No.: (βββ�) βββ�-ββββ
Facsimile No.: (βββ�) βββ�-ββββ
Attn: Corporate Trust Department
with a copy to:
State Street Bank and Trust Company of California, National
Association
βββ� ββββ βββ� ββββββ, ββββ βββββ�
βββ� βββββββ�, ββββββββββ βββββ�
Telephone No.: (βββ�) βββ�-ββββ
Facsimile No.: (βββ�) βββ�-ββββ
Attention: Corporate Trust Department
If to the Pass Through Trustees:
State Street Bank and Trust Company of Connecticut, National
Association
βββ� ββββββ ββββββ, βββββββ� ββββββ
ββββββββ, ββ βββββ�
Telephone No.: (βββ�) βββ�-ββββ
Facsimile No.: (βββ�) βββ�-ββββ
Attn: Corporate Trust Department
with a copy to:
State Street Bank and Trust Company of California, National
Association
βββ� ββββ βββ� ββββββ, ββββ βββββ�
βββ� βββββββ�, ββββββββββ βββββ�
Telephone No.: (βββ�) βββ�-ββββ
Facsimile No.: (βββ�) βββ�-ββββ
Attention: Corporate Trust Department
If to the Manager:
Credit Suisse First Boston
Eleven βββββββ� ββββββ
βββ� ββββ, βββ� ββββ βββββ�-ββββ
Telephone No.: (βββ�) βββ�-ββββ
Attention: βββββββ� O'Day
A copy of all notices provided for herein shall be sent by the party
giving such notice to each of the other parties hereto. In addition,
72
the Facility Lessee shall (unless otherwise directed by the
applicable Rating Agency) provide to each Rating Agency a copy of
any information, report or notice it gives to the Indenture Trustee
hereunder or any other Operative Documents.
73
Survival. All warranties, representations, indemnities and covenants made by
any party hereto, herein or in any certificate or other instrument delivered by
any such party or on behalf of any such party under this Agreement shall be
considered to have been relied upon by each other party hereto and shall
survive the consummation of the transactions contemplated hereby and in the
other Operative Documents regardless of any investigation made by any such
party or on behalf of any such party. In addition, the indemnifications by the
Facility Lessee under Sections 9.1 and 9.2 of this Agreement, subject to
Sections 9.1(b) and 9.2(b), respectively, the Facility Site Lease and the
Calpine Guaranty, shall expressly survive the expiration or early termination
(in either case, for whatever reason) of the Facility Lease or the transfer or
other disposition of the respective interests of the Owner Participant, the
Owner Lessor, the Lessor Manager, the Lease Indenture Company, the Indenture
Trustee, the Pass Through Trustees and the Certificateholders in, to and under
this Agreement, the Assignment Agreement and the other Operative Documents.
Except as expressly provided above or in Section 22.3 of the Facility Lease,
the Tax Indemnity Agreement or as otherwise expressly provided in the Operative
Documents, the representations, warranties, covenants and agreements of the
Transaction Parties under the Operative Documents shall terminate and be of no
further force and effect effective upon the expiration or earlier termination
of the Facility Lease.
Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of, and shall be enforceable by, the parties hereto and their
respective successors and assigns as permitted by and in accordance with the
terms hereof, including each successive holder of the Member Interest of the
Owner Participant permitted under Section 7.1 and each successive transferee or
transferees of Lessor Notes permitted under Section 2.8 of the Collateral Trust
Indenture. Except as expressly provided herein or in the other Operative
Documents, no party hereto may assign its interests herein without the prior
written consent of the other parties hereto.
Business Day. Notwithstanding anything herein or in any other Operative
Document to the contrary, if the date on which any payment is to be made
pursuant to this Agreement or any other Operative Document is not a Business
Day, the payment otherwise payable on such date shall be payable on the next
succeeding Business Day with the same force and effect as if made on such
scheduled date and (provided such payment is made on such succeeding Business
Day) no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.
Governing Law. This Agreement has been delivered in the State of New York and
shall be in all respects governed by and construed in accordance with the laws
of the State of New York including all matters of construction, validity and
performance without giving effect to the conflicts of laws provisions thereof
except New York General Obligations Law Section 5-1401.
Severability. If any provision hereof shall be invalid, illegal or
unenforceable under Applicable Law, the validity, legality and enforceability
of the remaining provisions hereof shall not be affected or impaired thereby.
Counterparts. This Agreement may be executed in any number of counterparts,
each executed counterpart constituting an original but all together only one
agreement.
74
Headings and Table of Contents. The headings of the sections of this Agreement
and the Table of Contents are inserted for purposes of convenience only and
shall not be construed to affect the meaning or construction of any of the
provisions hereof.
Limitation of Liability.
None of the Owner Participant, the Owner Lessor, the Trust Company, the
Lessor Manager, the Indenture Trustee, the Lease Indenture Company, the
Pass Through Trustees, the Pass Through Company or the Certificateholders
shall have any obligation or duty to the Facility Lessee or to others with
respect to the transactions contemplated hereby, except those obligations
or duties expressly set forth in this Agreement and the other Operative
Documents to which such Person is a party, and none of the Owner
Participant, the Owner Lessor, the Indenture Trustee, the Lease Indenture
Company, the Pass Through Trustees, the Pass Through Company or the
Certificateholders shall be liable for performance by any other party
hereto of such other party's obligations or duties hereunder. Without
limitation of the generality of the foregoing, under no circumstances
whatsoever shall the Owner Participant be liable to the Facility Lessee
for any action or inaction on the part of the Owner Lessor in connection
with the transactions contemplated herein, whether or not such action or
inaction is caused by willful misconduct or gross negligence of the Owner
Lessor, unless such action or inaction is at the written direction of the
Owner Participant.
Neither the Facility Lessee nor any other Calpine Party shall have any
obligation or duty to the Owner Participant, the Owner Lessor, the
Indenture Trustee, the Lease Indenture Company, the Pass Through Trustees,
the Pass Through Company, the Certificateholders or to others with respect
to the transactions contemplated hereby, except those obligations or
duties expressly set forth in this Agreement and the other Operative
Documents, and neither the Facility Lessee nor any other Calpine Party
(except Calpine to the extent set forth in the Calpine Guaranty) shall be
liable for performance by any other party hereto of such other party's
obligations or duties hereunder.
The Lease Indenture Company and the Pass Through Company are entering into
the Operative Documents to which it is a party solely as trustees under
the Collateral Trust Indenture and the Pass Through Trust Agreements,
respectively, and not in their individual capacities, except as expressly
provided herein or therein, and in no case whatsoever shall the Lease
Indenture Company and the Pass Through Company be personally liable for,
or for any loss in respect of, any of the statements, representations,
warranties, agreements or obligations of the Owner Lessor hereunder or
under any other Operative Document, as to all of which the other parties
hereto agree to look solely to the Indenture Estate and the Lessor Estate,
respectively; provided, however, that the Lease Indenture Company and the
Pass Through Trust Company shall be liable hereunder for their own
negligence or willful misconduct or for a breach of their representations,
warranties and covenants made in their individual capacity under any
Operative Document.
The right of the Indenture Trustee or the Pass Through Trustees to perform
any discretionary act enumerated herein or in any other Operative Document
(including, without limitation, the right to consent to any action which
requires their consent and the right to waive any provision of, or consent
to any change or amendment to, any of the Operative Documents)
75
shall not be construed as a duty, and neither the Indenture Trustee nor
the Pass Through Trustees shall be liable or answerable for other than its
negligence or willful misconduct in the performance of such acts. In
connection with any such discretionary acts, the Indenture Trustee may in
its sole discretion (but shall not, except as otherwise provided herein or
in the Collateral Trust Indenture or as otherwise required by Applicable
Law, have any obligation to) request the approval or instruction of the
Pass Through Trustees as the holder of the Lessor Notes, and the Pass
Through Trustees may in its sole discretion (but shall not, except as
otherwise provided in the Operative Documents or as otherwise required by
Applicable Law, have any obligation to) request the approval of the
Certificateholders.
The Owner Participant will give the Facility Lessee at least 15 days'
prior notice of any proposed amendment or supplement to the LLC Agreement
(other than an amendment solely effecting a transfer of the Owner
Participant's interest in the Lessor Estate) and deliver true, complete
and fully executed copies to the Facility Lessee of any amendment or
supplement to the LLC Agreement. No amendment or supplement to the LLC
Agreement that would reasonably be expected to materially adversely affect
the interests of the Facility Lessee or the Indenture Trustee shall become
effective without the written consent of the Indenture Trustee and the
Facility Lessee.
Consent to Jurisdiction; Waiver of Trial by Jury; Process Agent.
Each of the parties hereto (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the Supreme Court of the State of New York,
New York County (without prejudice to the right of any party to remove to
the United States District Court for the Southern District of New York)
and to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York for the purposes of any suit, action
or other proceeding arising out of this Agreement, the other Operative
Documents, or the subject matter hereof or thereof or any of the
transactions contemplated hereby or thereby brought by any of the parties
hereto or their successors or assigns; (ii) hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and
determined in such New York State court, or in such federal court; and
(iii) to the extent permitted by Applicable Law, hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the above-named courts, that the
suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this
Agreement, the other Operative Documents, or the subject matter hereof or
thereof may not be enforced in or by such court.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY SUCH
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, THE OTHER
OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES
HERETO OR THEIR SUCCESSORS OR ASSIGNS.
76
By the execution and delivery of this Agreement, the Facility Lessee
designate, appoint and empower National Registered Agents, Inc., βββ� βββββ�
ββββββ, βββ� βββββ�, βββ� ββββ, βββ� ββββ βββββ�, and the Owner Lessor
designates, appoints and empowers CT Corporation System, with an office at
βββ� ββββββ ββββββ, βββ� ββββ, βββ� ββββ βββββ�, as its authorized agent to
receive for and on its behalf service of any summons, complaint or other
legal process in any such action, suit or proceeding in the State of New
York for so long as any obligation of the Facility Lessee or the Owner
Lessor, as applicable, shall remain outstanding hereunder or under any of
the other Operative Documents. the Facility Lessee shall grant an
irrevocable power of attorney to CT Corporation System, in respect of such
appointment and shall maintain such power of attorney in full force and
effect for so long as any obligation of the Facility Lessee shall remain
outstanding hereunder or under any of the Operative Documents.
Further Assurances. Each party hereto will promptly and duly execute and
deliver such further documents to make such further assurances for and take
such further action reasonably requested by any party to whom such first party
is obligated, all as may be reasonably necessary to carry out more effectively
the intent and purpose of this Agreement and the other Operative Documents.
Effectiveness. This Agreement has been dated as of the date first above written
for convenience only. This Agreement shall be effective on the date of
execution and delivery by each of the parties hereto.
Measuring Life. If and to the extent that any of the options, rights and
privileges granted under this Agreement, would, in the absence of the
limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule or law relating to
the vesting of interests in property or the suspension of the power of
alienation of property, then it is agreed that notwithstanding any other
provision of this Agreement, such options, rights and privileges, subject to
the respective conditions hereof governing the exercise of such options, rights
and privileges, will be exercisable only during (a) the longer of (i) a period
which will end twenty-one (21) years after the death of the last survivor of
the descendants living on the date of the execution of this Agreement of the
following Presidents of the United States: ββββββββ β�. βββββββββ�, βββββ� β�.
ββββββ, ββββββ β�. ββββββββββ, ββββ β�. βββββββ�, ββββββ β�. βββββββ�, βββββββ� β�.
βββββ�, ββββββ β�. ββββ, βββββ� β�. ββββββ, ββββββ β�. ββββββ, ββββββ β�.β�. ββββ,
βββββββ� β�. βββββββ� and ββββββ β�. ββββ or (ii) the period provided under the
Uniform Statutory Rule Against Perpetuities or (b) the specific applicable
period of time expressed in this Agreement, whichever of (a) and (b) is
shorter.
No Partnership, Etc. The parties hereto intend that nothing contained in this
Participation Agreement or any other Operative Document shall be deemed or
construed to create a partnership, joint venture or other co-ownership
arrangement by and among any of them.
Entire Agreement. This Agreement, together with the other applicable Operative
Documents, constitutes the entire agreement of the parties hereto and thereto
with respect to the subject matter hereof and thereof and supersedes all oral
and all prior written agreements and understandings with respect to such
subject matter; provided that, notwithstanding the foregoing, the obligations
of Calpine with respect to fees and expenses set forth in the letter agreement,
77
dated July 24, 2001 between Calpine and CSFB and the letter agreement dated
August 1, 2001 between Calpine and Newcourt Capital Securities, Inc. shall not
be superceded hereby and shall remain in full force and effect.
Public Utility Regulation. the Facility Lessee, the Owner Lessor and the Owner
Participant agree to cooperate and to take reasonable measures to alleviate the
source or consequence of any regulation constituting a Regulatory Event of
Loss, at the cost and expense of the Facility Lessee, so long as there shall be
no adverse consequences to the Owner Lessor or the Owner Participant as the
result of such cooperation or taking of reasonable measures.
Confidentiality of Information. Each of the parties hereto agrees that any
information (x) contained herein or in the other Operative Documents (including
any terms, conditions, agreements, financial projections, and other financial
and operating information contained herein or therein, and the terms of any
insurance policies required or otherwise maintained pursuant hereto), (y)
disclosed or to be disclosed by one such party to another such party (for
purposes of this Section 14.21, each of the parties to this Agreement being
referred to herein as a "Receiving Party") in connection with this Agreement or
any other Operative Document, or (z) otherwise received in connection with this
Agreement or any other Operative Document (or the transactions contemplated
thereby) and designated by the disclosing party in writing as confidential,
shall, in each case, be kept confidential by the Receiving Party and shall not
be used otherwise than in connection with the business of the Parties
contemplated hereunder except:
to the extent such information is generally available to the public prior
to the Receiving Party's receipt thereof, or which becomes public after
such receipt, but through no violation by such Receiving Party of this
Section 14.21;
as may be required by Applicable Law or, upon prompt prior written notice
to the affected party, by judicial process;
as may be independently developed by the Receiving Party other than in
connection with the transactions contemplated hereby with respect to the
Facility or the Facility Site;
as may be disclosed to counsel, auditors or accountants to the Receiving
Party, or to the National Association of Insurance Commissioners;
to the extent used in connection with any litigation to which the
Receiving Party is a party, provided that the other parties hereto shall
have been given prompt prior written notice (to the extent permitted by
law) of such proposed disclosure;
as may be disclosed to any transferee or proposed transferee of the
Receiving Party; provided, however, that, prior to any such disclosure,
any such transferee or proposed transferee, as the case may be, shall have
agreed in writing to be bound by the terms of this Section 14.21; or
as may be necessary or desirable in connection with the enforcement of
remedies by any party to any of the Operative Documents.
The foregoing obligation as to confidentiality and non-use shall
survive the termination of this Agreement for a period of five years.
78
Reliance. Calpine and the Facility Lessee agree that the Transaction Parties
may rely on the Environmental Reports.
Amendments, Etc. No Operative Document nor any of the terms thereof (including
the terms of this Section 14.23) may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing (a) signed in the case
of a waiver, by the party against which enforcement of such waiver is sought,
and no such waiver shall become effective unless signed copies thereof shall
have been delivered to each such party or (b) in the case of termination,
amendments, supplements or modifications, consented to by all parties hereto;
provided, however, that the consent of the Facility Lessee is not required in
the case of amendments to any Operative Document to which the Facility Lessee
is not a party and which would not increase or accelerate the Facility Lessee's
or the Guarantor's obligations under any of the Operative Documents nor impair
the Facility Lessee's or the Guarantor's rights under any of the Operative
Documents. Notwithstanding the foregoing, Section 5.6 of the Collateral Trust
Indenture shall not be amended without the Guarantor's consent.
79
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered by their respective
officers thereunto duly authorized.
ROCKGEN ENERGY LLC,
a Wisconsin limited liability company
By: ___________________________________
Name:
Title:
Date:
ROCKGEN OL-1 LLC, a Delaware limited liability
company
By: βββββ� FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION
not in its individual capacity but solely as
Lessor Manager
By: ___________________________________
Name:
Title:
Date:
SBR OP-1 LLC, a Delaware limited liability
company
By: βββββ� FARGO BANK NORTHWEST, NATIONAL
ASSOCIATION
not in its individual capacity but solely as
Lessor Manager
By: ___________________________________
Name:
Title:
Date:
βββββ� FARGO BANK NORTHWEST,
NATIONAL ASSOCIATION,
not in its individual capacity, except as expressly
provided herein, but solely as Lessor Manager
By: ___________________________________
Name:
Title:
Date:
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except to the extent
expressly provided herein, but solely as Indenture
Trustee under the Collateral Trust Indenture
By: ___________________________________
Name:
Title:
Date:
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except to the extent
expressly provided herein, but solely as Pass Through
Trustees under the Pass Through Trust Agreement
By: ___________________________________
Name:
Title:
Date:
CALPINE CORPORATION
a Delaware corporation
By: ___________________________________
Name:
Title:
Date:
APPENDIX A - DEFINITIONS AND RULES OF INTERPRETATION
RULES OF INTERPRETATION
In this Appendix A and each Operative Document (as hereinafter
defined), unless otherwise provided herein or therein:
(a) the terms set forth in this Appendix A or in any such Operative
Document shall have the meanings herein provided for and any term used in
an Operative Document and not defined therein or in this Appendix A but
in another Operative Document shall have the meaning herein or therein
provided for in such other Operative Document;
(b) any term defined in this Appendix A by reference to another
document, instrument or agreement shall continue to have the meaning
ascribed thereto whether or not such other document, instrument or
agreement remains in effect;
(c) words importing the singular include the plural and vice versa;
(d) words importing a gender include any gender;
(e) a reference to a part, clause, section, paragraph, article, party,
annex, appendix, exhibit, schedule or other attachment to or in respect
of an Operative Document is a reference to a part, clause, section,
paragraph, or article of, or a party, annex, appendix, exhibit, schedule
or other attachment to, such Operative Document unless, in any such case,
otherwise expressly provided in any such Operative Document;
(f) a reference to any statute, regulation, proclamation, ordinance or
law includes all statutes, regulations, proclamations, ordinances or laws
varying, consolidating or replacing the same from time to time, and a
reference to a statute includes all regulations, policies, protocols,
codes, proclamations and ordinances issued or otherwise applicable under
that statute unless, in any such case, otherwise expressly provided in
any such statute or in such Operative Document;
(g) a definition of or reference to any document, schedule, exhibit,
instrument or agreement includes an amendment or supplement to, or
restatement, replacement, modification or novation of, any such
document, schedule, exhibit, instrument or agreement unless otherwise
specified in such definition or in the context in which such reference
is used;
(h) a reference to a particular section, paragraph or other part of a
particular statute shall be deemed to be a reference to any other section,
paragraph or other part substituted therefor from time to time;
2
(i) if a capitalized term describes, or shall be defined by reference
to, a document, instrument or agreement that has not as of any particular
date been executed and delivered and such document, instrument or
agreement is attached as an exhibit to the Participation Agreement (as
hereinafter defined), such reference shall be deemed to be to such form
and, following such execution and delivery and subject to paragraph (g)
above, to the document, instrument or agreement as so executed and
delivered;
(j) a reference to any Person (as hereinafter defined) includes such
Person's successors and permitted assigns;
(k) any reference to "days" shall mean calendar days unless "Business
Days" (as hereinafter defined) are expressly specified;
(l) if the date as of which any right, option or election is
exercisable, or the date upon which any amount is due and payable, is
stated to be on a date or day that is not a Business Day, such right,
option or election may be exercised, and such amount shall be deemed due
and payable, on the next succeeding Business Day with the same effect as
if the same was exercised or made on such date or day (without, in the
case of any such payment, the payment or accrual of any interest or other
late payment or charge, provided such payment is made on such next
succeeding Business Day);
(m) any reference to the satisfaction, release and/or discharge of the
Collateral Trust Indenture or the Collateral Documents (each as
hereinafter defined) or the Lien (as hereinafter defined) thereof or
words of similar import shall, whether or not so expressly stated, be
deemed to be a reference to the satisfaction, release and discharge in
full and cancellation of the Lien of the Collateral Trust Indenture or
the Collateral Documents, as the case may be, in accordance with the
express provisions thereof.
(n) words such as "hereunder", "hereto", "hereof" and "herein" and
other words of similar import shall, unless the context requires
otherwise, refer to the whole of the applicable document and not to any
particular article, section, subsection, paragraph or clause thereof;
and
(o) a reference to "including" shall mean including without limiting
the generality of any description preceding such term, and for purposes
hereof and of each Operative Document the rule of ejusdem generis shall
not be applicable to limit a general statement, followed by or referable
to an enumeration of specific matters, to matters similar to those
specifically mentioned.
DEFINED TERMS
"467 LOAN PRINCIPAL BALANCE" shall have the meaning set forth in Section
3.2(d) of the Facility Lease.
"ACCEPTABLE BANK" shall mean, for the purposes of Section 5.3 of the
Facility Lease, a banking institution, the senior long-term unsecured
debt of which is rated at least A by
3
S&P and by βββββ�'β�, and which maintains an office or corresponding bank
located in New York City.
"ACTUAL KNOWLEDGE" shall mean, with respect to any Transaction Party,
actual knowledge of, or receipt of written notice by, an officer (or other
employee whose responsibilities include the administration of the Overall
Transaction) of such Transaction Party.
"ADDITIONAL CERTIFICATES" shall mean any additional certificates issued by
the Pass Through Trusts in connection with the issuance of Additional
Lessor Notes.
"ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any, the Owner
Participant shall provide (in its sole and absolute discretion) to finance
all or a portion of the Owner Lessor's Percentage of the cost of any
Required or Non-Severable Improvement financed pursuant to Section 11.1 of
the Participation Agreement.
"ADDITIONAL LESSOR NOTES" shall have the meaning specified in Section
2.12(a) of the Collateral Trust Indenture.
"AFFILIATE" of a particular Person shall mean, at any time, (a) any Person
directly or indirectly controlling, controlled by or under common control
with such particular Person and (b) any Person beneficially owning or
holding, directly or indirectly, 10% or more of any class of voting or
equity interest of such first Person or any corporation of which such
first Person beneficially owns or holds, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity interest. For
purposes of this definition, "control" when used with respect to any
particular Person shall mean the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing;
provided, however, that under no circumstances shall the Lease Indenture
Company be considered to be an Affiliate of either the Indenture Trustee
or any Certificateholder, nor shall any of the Indenture Trustee or any
Certificateholder be considered to be an Affiliate of the Lease Indenture
Company, nor shall the Lease Indenture Company, the Indenture Trustee,
solely because any Operative Document contemplates that any of them may
request or act at the instruction of any such Person or such Person's
Affiliate.
"AFTER-TAX BASIS" shall mean, in the context of determining the amount of
a payment to be made on such basis, the payment of an amount which, after
reduction by the net increase in Taxes of the recipient (actual or
constructive) of such payment, which net increase shall be calculated by
taking into account any reduction in such Taxes resulting from any Tax
benefits realized or to be realized by the recipient as a result of such
payment, shall be equal to the amount required to be paid. In calculating
the amount payable by reason of this provision, all income taxes payable
and tax benefits realized or to be realized shall be determined on the
assumptions that (i) the recipient shall be subject to the applicable
income taxes at the highest marginal tax rates then applicable to
corporate taxpayers taxed on the same basis as the recipient that are in
effect in the applicable jurisdictions at the time such amount is received
or properly accrued, and
4
(ii) all related tax benefits are utilized at the highest marginal rates
then applicable to corporate taxpayers taxed on the same basis as the
recipient that are then in effect in the applicable jurisdictions.
"AGREEMENT PERIOD" shall have the meaning set forth in Section 7.6 of
the Participation Agreement.
"ALLOCATED RENT" shall have the meaning specified in Section 3.2(b) of
the Facility Lease.
"APPLICABLE LAW" shall mean, without limitation, all applicable laws,
including, without limitation, all Environmental Laws, and treaties,
judgments, decrees, injunctions, writs and orders of any court,
arbitration board or Governmental Entity and rules, regulations,
orders, ordinances, licenses and permits of any Governmental Entity.
"APPLICABLE PERMIT" shall mean any Permit, including any zoning,
environmental protection, pollution, sanitation, FERC, safety, siting or
building Permit, (a) that is necessary at any given time in light of the
stage of development, construction or operation of the Facility or
Facility Site to acquire, operate, maintain, repair, own, lease or use
the Facility, the Undivided Interest (if any), the Ground Interest or
Facility Site as contemplated by the Operative Documents, to sell
electricity therefrom, to enter into any Operative Document or to
consummate any transaction contemplated thereby, or (b) that is
necessary so that none of the Owner Lessor, the Owner Participant, the
Lessor Manager, the Indenture Trustee, the Pass Through Trustees or any
Certificateholder nor any Affiliate of any of them may be deemed by any
Governmental Entity to be subject to regulation under PUHCA or under
any other Applicable Law relating to electric utilities, generators,
wholesalers or retailers, in each case as a result of the operation of
the Facility or the sale of electricity therefrom.
"APPLICABLE RATE" shall mean the Prime Rate plus 1% per annum.
"APPRAISER" shall mean Deloitte & Touche LLP Valuation Group.
"APPRAISAL PROCEDURE" shall mean (except with respect to the Closing
Appraisal and any appraisal to determine Fair Market Sales Value or Fair
Market Rental Value during any period when a Lease Event of Default shall
have occurred and be continuing), an appraisal conducted by an appraiser
or appraisers in accordance with the following procedures. Within ten (10)
Business Days of written notice from the initiating party of the
commencement of an Appraisal Procedure, the Owner Participant and the
Facility Lessee will each appoint one Independent Appraiser, which
Independent Appraisers shall attempt to agree upon the Fair Market Sales
Value or Fair Market Rental Value that is the subject of the appraisal. If
either the Owner Participant or the Facility Lessee does not appoint its
appraiser within such ten Business Day period, the determination of the
other appraiser shall be conclusive and binding on the Owner Participant
and the Facility Lessee. If the appraisers appointed by the Owner
Participant and the Facility Lessee are unable to agree upon the value,
period, amount or other determination in question within thirty (30) days,
such appraisers shall jointly appoint a third Independent Appraiser or, if
5
such appraisers do not appoint a third Independent Appraiser, the Owner
Participant and the Facility Lessee shall jointly appoint the third
Independent Appraiser. In such case, the average of the determinations of
the three appraisers shall be conclusive and binding on the Owner
Participant and the Facility Lessee, unless the determination of one
appraiser is disparate from the middle determination by more than twice
the amount by which the third determination is disparate from the middle
determination, in which case the determination of the most disparate
appraiser shall be excluded, and the average of the remaining two
determinations shall be conclusive and binding on the Owner Participant
and the Facility Lessee. Any appraisal determined in accordance with the
foregoing must be delivered within thirty (30) days after the date on
which the last of the appraisers is appointed pursuant to the process set
forth above.
"ASSIGNED DOCUMENTS" shall have the meaning specified in clause (1) of
the Granting Clause of the Collateral Trust Indenture.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the rate of
interest set forth or implicit in the terms of such lease (or, if not
practicable to determine such rate, the weighted average rate of interest
borne by the Certificates outstanding under the Pass Through Trust
Agreement (calculated, in the event of the issuance of any original issue
discount Lessor Notes, based on the imputed interest rate with respect
thereto)), compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing
(i) the sum of the products of (A) the numbers of years from the date
of determination to the dates of each successive scheduled principal
payment of such Indebtedness or scheduled redemption or similar payment
with respect to such Indebtedness or Preferred Stock multiplied by (B)
the amount of such payment by (ii) the sum of all such payments.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of 1978,
as amended from time to time, 11 U.S.C. [sec] 101 et seq.
"BANKRUPTCY LAW" means Title 11 of the United States Code or any
similar Federal or State law for the relief of debtors.
"BASIC LEASE TERM" shall have the meaning specified in Section 3.1 of
the Facility Lease.
"BASIC RENT" shall have the meaning specified in Section 3.2(a) of the
Facility Lease.
"BENEFICIARY" OR "BENEFICIARIES" with respect to the Calpine Guaranty,
shall have the meaning set forth in Section 4 thereof.
"ββββ OF SALE" shall mean the ββββ of Sale (RG-1) dated as of the
Closing Date between the Facility Lessee and the Owner Lessor,
substantially in the form of Exhibit B-1 to the
6
Participation Agreement duly completed, executed and delivered on the
Closing Date pursuant to which the Owner Lessor will purchase the
Undivided Interest from the Facility Lessee.
"BOARD OF DIRECTORS" means the Board of Directors or General Partner,
as applicable, of the Guarantor or the Facility Lessee, as the context
requires, or any authorized committee of either thereof.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Guarantor 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 Indenture Trustee.
"BROAD RIVER ASSIGNMENT AGREEMENTS" shall mean each of the assignment
agreements executed and delivered pursuant to the Broad River
Participation Agreements.
"BROAD RIVER CALPINE GUARANTIES" shall mean the Calpine guaranty and
payment agreements executed and delivered by Calpine pursuant to the
Broad River Participation Agreements.
"BROAD RIVER COLLATERAL TRUST INDENTURES" shall mean each of the
collateral trust indentures executed and delivered pursuant to the
Broad River Participation Agreements.
"BROAD RIVER FACILITY LEASES" shall mean a collective reference to each
of the four facility lease agreements, dated as of October 18, 2001, by
and between the applicable Broad River Owner Lessor and the Broad River
Facility Lessee, pursuant to which the applicable Broad River Owner
Lessor will lease the applicable Broad River Ground Interests to Broad
River Facility Lessee.
"BROAD RIVER FACILITY LESSEE" shall mean Broad River Energy LLC.
"BROAD RIVER FACILITY SITE" shall have the meaning set forth in the
recitals to the Broad River Facility Site Leases.
"BROAD RIVER FACILITY SITE LEASES" shall mean a collective reference to
each of the four facility site leases, dated as of October 18, 2001, by
and between the applicable Broad River Owner Lessor and the Broad River
Facility Lessee, pursuant to which the applicable Broad River Owner
Lessor will lease the applicable Broad River Ground Interest to the
Broad River Facility Lessee.
"BROAD RIVER GROUND INTERESTS" shall mean the undivided leasehold
interests in the Broad River Facility Site conveyed to the Broad River
Owner Lessors under the Broad River Assignment Agreements.
"BROAD RIVER INDENTURE TRUSTEES" shall mean each of the indenture
trustees relating to the Broad River Collateral Trust Indentures.
7
"BROAD RIVER LESSOR MANAGERS" shall mean each of the lessor managers
acting on behalf of the Broad River Owner Lessors pursuant to the Broad
River Operative Documents.
"BROAD RIVER OWNER LESSORS" shall mean Broad River OL-1, LLC, Broad
River ββ-β�, βββ�, βββββ� βββββ� ββ-β�, LLC and Broad River OL-4, LLC.
"BROAD RIVER OWNER PARTICIPANTS" shall mean SBR OP-1, LLC, SBR OP-2,
LLC, SBR OP-3, LLC and SBR OP-4, LLC.
"BROAD RIVER LEASE TRANSACTIONS" shall mean the transactions involving
the assignment and transfer of the Broad River Undivided Interests and
the Broad River Ground Interests to the Broad River Owner Lessors, and
the simultaneous lease of the Broad River Undivided Interests and Broad
River Ground Interests to the Broad River Facility Lessee on
substantially the same terms and conditions as under, and dated the
same date as, the Broad River Overall Transaction.
"BROAD RIVER OPERATIVE DOCUMENTS" shall mean the other "Operative
Documents" for each of the Broad River Lease Transactions.
"BROAD RIVER OVERALL TRANSACTION" shall mean all of the transactions
contemplated by the Broad River Operative Documents.
"BROAD RIVER PARTICIPATION AGREEMENTS" shall mean a collective
reference to each of the other three separate participation agreements
entered into by the Broad River Facility Lessee, the applicable Broad
River Owner Lessor, the applicable Broad River Lessor Manager, the
applicable Broad River Owner Participant, the applicable Broad River
Indenture Trustee, the Pass Through Trustees and Calpine and designated
Participation Agreement (BR-1), Participation Agreement (BR-2),
Participation Agreement (BR-3) and Participation Agreement (BR-4), each
dated as of the Closing Date, pursuant to which, among other things,
the Broad River Facility Lessee has agreed to (a) assign and transfer
to the applicable Broad River Owner Lessors certain undivided leasehold
interests in the Broad River Facility, and (b) lease from the
applicable Broad River Owner Lessors such undivided leasehold interest
in the Broad River Facility pursuant to the Broad River Facility Leases.
"BROAD RIVER UNDIVIDED INTERESTS" shall mean the undivided leasehold
interests in the Broad River Facility conveyed to the Broad River Owner
Lessors under the Broad River Assignment Agreement.
"BURDENSOME BUYOUT EVENT" shall mean the occurrence of any event which
gives the Facility Lessee the right to terminate the Facility Lease
pursuant to Section 13.1 or Section 13.2 thereof.
"BURDENSOME TERMINATION NOTICE" shall mean a notice required in
accordance with Section 13.1 or Section 13.2, as the case may be, of
the Facility Lease upon the exercise of a termination option by the
Facility Lessee.
8
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or a
day on which commercial banking institutions are authorized or required
by law, regulation or executive order to be closed in New York, New
York, the city and the state in which the Corporate Trust Office of the
Indenture Trustee is located or the city and state in which the Pass
Through Trustees are located.
"BUYER(S)" shall mean, individually or collectively, (a) Wisconsin
Power & Light Company, (b) IES Utilities and (c) Interstate Power Company.
"CALPINE" shall mean Calpine Corporation, a Delaware corporation.
"CALPINE DOCUMENTS" shall mean have the meaning set forth in Section 3.1
of the Calpine Guaranty.
"CALPINE GUARANTY" shall mean the Calpine Guaranty and Payment Agreement
(RG-1) dated as of the Closing Date in favor of the Beneficiaries,
substantially in the form of Exhibit H to the Participation Agreement.
"CALPINE GUARANTY EVENT OF DEFAULT" shall mean any of the "Events of
Default" as specified in Section 7.1 of the Calpine Guaranty.
"CALPINE PARTIES" shall mean Calpine, the Facility Lessee, Calpine
Northbrook Services, LLC, and each other Affiliate of Calpine that is
party to any Operative Document.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation or any and all equivalent ownership interests in a Person
(other than a corporation).
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the rental
obligations under any lease of any property (whether real, personal or
mixed) of which the discounted present value of the rental obligations
of such Person as lessee, in conformity with GAAP, is required to be
capitalized on the balance sheet of such Person; the Stated Maturity of
any such lease 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.
"CERTIFICATE PURCHASE AGREEMENT shall mean the Certificate Purchase
Agreement, dated the Closing Date, among the Facility Lessee, Calpine, and the
Initial Purchasers.
"CERTIFICATEHOLDER INDEMNITEE" shall have the meaning set forth in
Section 9.2(a) of the Participation Agreement.
"CERTIFICATEHOLDERS" shall mean each of the holders of Certificates,
and each of such holder's successors and permitted assigns.
9
"CERTIFICATES" shall mean the 8.400% Pass Through Certificates Series A
issued on the Closing Date and any certificates issued in replacement
therefor pursuant to Section 3.3, 3.4 or 3.5 of the Pass Through Trust
Agreement.
"CLAIM(S)" individually or collectively as the context may require,
shall mean any liability (including in respect of negligence (whether
passive or active or other torts), strict or absolute liability in tort
or otherwise, warranty, latent or other defects (regardless of whether or
not discoverable), statutory liability, property damage, bodily injury or
death), obligation, loss, settlement, damage, penalty, claim, action,
suit, proceeding (whether civil or criminal), judgment, penalty, fine and
other legal or administrative sanction, judicial or administrative
proceeding, cost, expense or disbursement, including reasonable legal,
investigation and expert fees, expenses and reasonable related charges,
of whatsoever kind and nature.
"CLOSING" shall have the meaning specified in Section 2.2(a) of the
Participation Agreement.
"CLOSING APPRAISAL" shall mean the appraisal, dated as of the Closing
Date, prepared by the Appraiser with respect to the Owner Lessor's
Interest.
"CLOSING DATE" shall have the meaning specified in Section 2.2(a) of the
Participation Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute.
"COLLATERAL DOCUMENTS" shall mean the Collateral Trust Indenture and the
financing statements.
"COLLATERAL TRUST INDENTURE" shall mean the Indenture of Trust, Mortgage
and Security Agreement (RG-1), dated as of the Closing Date, between the
Owner Lessor and the Indenture Trustee, in substantially the form of
Exhibit I to the Participation Agreement.
"COMMENCEMENT DATE" with respect to the Facility Site Lease, shall have
the meaning specified in Section 2.1(a) of the Facility Site Lease.
"COMPETITOR" shall have the meaning specified in Section 7.1(b) of the
Participation Agreement.
"COMPONENT" shall mean any appliance, part, instrument, appurtenance,
accessory, furnishing, equipment or other property of whatever nature
that may from time to time be incorporated in the Facility, except to
the extent constituting Improvements or spare parts while being held
for future use.
"CONSOLIDATED CURRENT LIABILITIES," as of the date of determination,
means the aggregate amount of consolidated liabilities of the Guarantor
and its consolidated Restricted Subsidiaries which may properly be
classified as current liabilities (including taxes accrued as
estimated), after eliminating (i) all inter-company items between the
10
Guarantor and its Subsidiaries and (ii) all current maturities of
long-term Indebtedness, all as determined in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of
determination, as applied to the Guarantor, the total amount of
Consolidated assets (less accumulated depreciation or amortization,
allowances for doubtful receivables, other applicable reserves and
other properly deductible items) under GAAP which would appear on a
Consolidated balance sheet of the Guarantor and its Subsidiaries,
determined in accordance with GAAP, and after giving effect to purchase
accounting and after deducting therefrom, to the extent otherwise
included, the amounts of: (i) Consolidated Current Liabilities; (ii)
minority interests in consolidated Restricted Subsidiaries held by
Persons other than the Guarantor or a Restricted Subsidiary; (iii)
excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors; (iv) any
revaluation or other write-up in value of assets subsequent to December
31, 1993 as a result of a change in the method of valuation in
accordance with GAAP; (v) unamortized debt discount and expenses and
other unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, licenses, organization or
developmental expenses and other intangible items; (vi) treasury stock;
and (vii) any cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other retirement of
Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities.
"CONSOLIDATED SUBSIDIARY" shall mean with respect to any Person at any
date any Subsidiary or other entity the accounts of which would be
consolidated in accordance with GAAP with those of such Person in its
consolidated financial statements as of such date.
"CONSOLIDATION" means, with respect to any Person, the consolidation of
accounts of such Person and each of its subsidiaries if and to the
extent the accounts of such Person and such subsidiaries are
consolidated in accordance with GAAP. The term "Consolidated" shall
have a correlative meaning.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Indenture
Trustee, the office of such Person in the city in which at any particular
time its corporate trust business shall be principally administered.
"CSFB" shall mean Credit Suisse First Boston.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"DEBT PORTION OF TERMINATION VALUE" in respect of any determination of
Termination Value or amount determined by reference to the Termination
Value payable pursuant to the Operative Documents, shall mean an amount
equal to the excess of (i) the Termination Value set forth opposite the
Termination Date corresponding to such date of determination on
Schedule 2 of the Facility Lease, and, if such date of determination is
a Rent Payment Date, Periodic Rent due on that date (to the extent
payable in arrears)
11
minus (ii) the sum of (A) the Equity Portion of Termination Value and (B)
if such date of determination is a Rent Payment Date, the Equity Portion
of Periodic Rent due on that date.
"DEED" means that certain Warranty Deed (RG-1), dated as of October 18,
2001, from Facility Lessee to Owner Lessor, substantially in the form
of Exhibit B-2 to the Participation Agreement.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, a Calpine Guaranty Event of Default.
"DEPRECIATION DEDUCTION" shall have the meaning specified in Section
1(a) of the Tax Indemnity Agreement.
"DISCOUNT RATE" shall mean the Facility Lessee's incremental borrowing
rate as determined by the Facility Lessee in accordance with FASB 13.
"DOLLARS" or the sign "$" shall mean United States dollars or other
lawful currency of the United States.
"ENFORCEMENT NOTICE" shall have the meaning specified in Section 5.1 of
the Collateral Trust Indenture.
"ENGINEERING CONSULTANT" shall mean Stone and βββββββ� Consultants, Inc.
"ENGINEERING REPORT" shall mean, with respect to the Facility, the
report of the Engineering Consultant, dated September 12, 2001.
"ENVIRONMENTAL CONDITION" shall mean any action, omission, event,
condition or circumstance, including, without limitation, the presence of
any Hazardous Substance, which does or reasonably could (i) require
assessment, investigation, abatement, correction, removal or remediation,
(ii) give rise to any obligation or liability of any nature (whether
civil or criminal, arising under a theory of negligence or strict
liability, or otherwise) under any Environmental Law, (iii) create or
constitute a public or private nuisance or trespass, or (iv) constitute a
violation of or non-compliance with any Environmental Law.
"ENVIRONMENTAL CONSULTANT" shall mean βββββββ� Group Services, Inc..
"ENVIRONMENTAL LAWS" shall mean any international, national, Native
American, provincial, regional, federal, state, municipal or local
laws, ordinances, rules, orders, statutes, decrees, judgments,
injunctions, directives, permits, licenses, approvals, codes,
regulations, common or decisional law (including principles of tort,
negligence, trespass, nuisance, strict liability, contribution and
indemnification) or other requirement of any Governmental Entity
relating to the environment, the safety or health of human beings or
other living organisms, natural resources or toxic, explosive,
corrosive, flammable, infectious, radioactive or other Hazardous
Substances, as each may from time to time be amended, supplemented or
supplanted.
12
"ENVIRONMENTAL REPORTS" shall mean the Phase I Environmental Site
Assessment Report, dated September 27, 2001, prepared by the Environmental
Consultant.
"EQUITY INVESTMENT" shall mean the amount specified with respect thereto
on Schedule 1-A to the Participation Agreement.
"EQUITY INVESTOR" shall mean Newcourt Capital USA Inc.
"EQUITY PORTION OF PERIODIC RENT" shall mean for any Rent Payment Date
the difference between (i) Periodic Rent scheduled to be paid under the
Facility Lease on such Rent Payment Date and (ii) the principal and
interest scheduled to be paid on the Lessor Notes on such Rent Payment
Date.
"EQUITY PORTION OF TERMINATION VALUE" in respect of any determination
of Termination Value or amount determined by reference to Termination Value
payable pursuant to the Operative Documents, shall mean an amount equal to the
excess, if any, of (i) the Termination Value set forth opposite the Termination
Date corresponding to such date of determination on Schedule 2 of the Facility
Lease, and, if such date of determination is a Rent Payment Date, Periodic Rent
due on that date (to the extent payable in arrears) over (ii) the balance,
including scheduled (in accordance with the payment terms of the Lessor Notes)
accrued interest, on the Lessor Notes scheduled (in accordance with the payment
terms of the Lessor Notes) to be outstanding on such date of determination
corresponding to the Facility Lease.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Facility Lessee or a Subsidiary of the
Facility Lessee would be deemed to be a "single employer" (i) within the
meaning of Section 414(b), (c), (m) and/or (o) of the Code or (ii) as a
result of the Facility Lessee or a Subsidiary of the Facility Lessee
being or having been a general partner of such person.
"EVENT OF LOSS" shall mean any of the following events:
(i) the loss of the Facility or use thereof due to destruction
or damage to the Facility that renders repair uneconomic or that renders
the Facility permanently unfit for normal use or which does not satisfy
the preconditions for repair of the Facility set forth in Section 10 of
the Facility Lease; or
(ii) any damage to the Facility that results in an insurance
settlement with respect thereto on the basis of a total loss or an
agreed constructive or a compromised total loss of the Facility; or
(iii) (a) seizure, condemnation, confiscation or taking of, or
requisition (a "Requisition") of title to the Facility by any Governmental
Entity that shall have resulted in loss by the Owner Lessor, of title to
its Undivided Interest or leasehold interest of the Ground Interest,
following exhaustion of all permitted appeals or an election by the
Facility Lessee in its discretion not to pursue such appeals or rights;
provided that no such contest (or exercise) shall extend beyond the earlier
of the date which is (x) six
13
months after the loss of such leasehold interest or title, or (y) 48
months prior to the end of the Basic Lease Term or any Renewal Lease Term
then in effect or elected by the Facility Lessee or (b) Requisition of use
of, or leasehold in, the Undivided Interest or the Ground Interest by any
Governmental Entity that shall have resulted in the loss of possession of
the Undivided Interest or all or any part of the Ground Interest that is
required for the use or operation of the Facility; provided that in any
case involving Requisition of use of the Facility, or all or any part of
the Facility Site that is required for the use or operation, of the
Facility, such event shall be an Event of Loss only if loss of possession
continues beyond the Basic Lease Term or any Renewal Lease Term then in
effect or elected by the Facility Lessee; or
(iv) if elected in writing by the Owner Participant, such election
to be made only in circumstances where the termination of the Facility
Lease shall remove the basis of the regulation described below, subjection
of the Owner Participant or the Owner Lessor to any public utility
regulation of any Governmental Entity or law which in the reasonable
opinion of the Owner Participant is burdensome, or the subjection of the
Owner Participant's or the Owner Lessor's interest in the Facility Lease
to any rate of return regulation by any Governmental Entity, in either
case by reason of the participation of the Owner Lessor, the Owner
Participant or the OP Guarantor in the transactions contemplated by the
Operative Documents and not, in any event, as a result of (a) investments,
loans or other business activities of the Owner Participant or any of its
Affiliates in respect of equipment or facilities similar in nature to the
Facility or any part thereof or in any other electrical, cogeneration or
other energy or utility related equipment or facilities or the general
business or other activities of the Owner Participant or any of its
Affiliates or the nature of any of the properties or assets from time to
time owned, leased, operated, managed or otherwise used or made available
for use by the Owner Participant or any of its Affiliates or (b) a failure
of the Owner Participant to perform routine, administrative or ministerial
actions the performance of which would not subject the Owner Participant
or any of its Affiliates to any material adverse consequence (in the
reasonable opinion of such Owner Participant acting in good faith);
provided that the Facility Lessee and the Owner Lessor and Owner
Participant agree to cooperate and to take reasonable measures to
alleviate the source or consequence of any regulation constituting an
Event of Loss under this paragraph (iv), so long as there shall be no
adverse consequences to the Owner Lessor or Owner Participant as a result
of such cooperation or the taking of reasonable measures (the events and
circumstances described herein this paragraph (iv), a "Regulatory Event of
Loss"); or
(v) if elected by the Owner Participant, in the event that the FERC
Owner Lessor EWG Order shall not have been obtained and become final
within ninety (90) days of the Closing Date, such election to be
conditioned upon receipt of a reasoned legal opinion of nationally
recognized independent counsel (Owner Participant's outside counsel at
Closing to be deemed to meet such qualifications) that any pending
proceeding, if adversely determined, would reasonably be expected to have
a material adverse effect on the Owner Participant or subject the Owner
Participant or the Owner Lessor to regulation as a public utility company
or a holding company under the Holding Company Act; or
14
(vi) if elected by the Owner Participant, in the event that the
FERC Order set forth in clause (v) of the definition of "FERC Orders"
herein shall not have been obtained and become final within ninety (90)
days of the Closing Date, such election to be conditioned upon receipt of
a reasoned legal opinion of nationally recognized independent counsel
(Owner Participant's outside counsel at Closing to be deemed to meet such
qualifications) that any pending proceeding, if adversely determined,
would reasonably be expected to have a material adverse effect on the
Owner Participant or subject the Owner Participant or the Owner Lessor to
regulation as public utility company or a holding company under the
Holding Company Act.
(vii) one or more of the Buyers under the RockGen PPA has exercised
the purchase option to acquire the Facility pursuant to the RockGen PPA,
such purchase option presently being set forth in Section 3.05 thereof.
The date of occurrence of an Event of Loss described in clauses (i) or
(ii) above shall be the date of the Facility Lessee's notice to the Owner
Lessor, the Owner Participant, the Indenture Trustee and the Pass Through
Trustees pursuant to Section 10.1 of the Facility Lease that it does not
elect to rebuild the Facility pursuant to Section 10.3 of the Facility
Lease but to pay Termination Value and terminate the Facility Lease
pursuant to Section 10.2 thereof, or the date an Event of Loss is deemed
to occur pursuant to the last sentence of Section 10.1 of the Facility
Lease. The date of occurrence of an Event of Loss described in clause
(iii)(a) above shall be the earlier of (A) the date which is six months
following the loss of title, (B) the date upon which the Facility Lessee
shall have concluded all efforts to contest such loss of title or exercise
its rights of eminent domain, and (C) the date which is 48 months prior to
the end of the Basic Lease Term or any Renewal Lease Term then in effect
or elected by the Facility Lessee (if an event described in clause
(iii)(a) shall be continuing at such time). The date of occurrence of an
Event of Loss described in clause (iii)(b) above shall be the date of
requisition of title to the Facility Site or, in the case of a requisition
of use of the Facility Site, the date which is the scheduled expiration
date of the Basic Lease Term or any Renewal Lease Term then in effect or
elected by the Facility Lessee, as the case may be (if an event described
in clause (iii)(b) shall be continuing at such time). The date of
occurrence of an Event of Loss described in clause (iv) above shall be the
date on which the Facility Lessee receives the Owner Participant's
election made in accordance with such clause (iv) during any period when
an event is continuing which upon election by Owner Participant in
accordance with such clause (iv) would constitute a Regulatory Event of
Loss. The date of occurrence of an Event of Loss described in clause (v)
or (vi) above shall be the date on which the Facility Lessee receives the
Owner Participant's election made in accordance with such clause (v) or
(vi), as applicable. The date of occurrence of an Event of Loss in clause
(vii) above shall be the date on which the Owner Lessor's interest is
conveyed pursuant to the terms of the Facility Lease.
"EXCEPTED PAYMENTS" shall mean and include (i)(A) any right, title or
interest to any indemnity (whether or not constituting Supplemental Rent
and whether or not a Lease Event of Default exists) payable to either the
Owner Lessor, the Lessor Manager, the Trust Indenture Company, or the
Owner Participant or to their respective Indemnitees and successors and
permitted assigns (other than the Indenture Trustee) pursuant to
15
Section 2.3, 9.1, 9.2, 11.1 or 11.2 of the Participation Agreement, and
any payments under any Tax Indemnity Agreement (provided that Excepted
Payments shall not include any Periodic Rent) or (B) any amount payable by
the Facility Lessee to the Owner Lessor or the Owner Participant to
reimburse any such Person for its costs and expenses in exercising its
rights under the Operative Documents, (ii)(A) insurance proceeds, if any,
payable to the Owner Lessor or the Owner Participant under insurance
separately maintained by the Owner Lessor or the Owner Participant with
respect to the Facility as permitted by Section 3(b) of Schedule 5.31 to
the Participation Agreement or (B) proceeds of personal injury or property
damage liability insurance maintained under any Operative Document for the
benefit of the Owner Lessor or the Owner Participant, (iii) any amount
payable to the Owner Participant as the purchase price of the Owner
Participant's right and interest in the Member Interest, (iv) all other
fees expressly payable to the Owner Participant under the Operative
Documents, (v) any payments in respect of interest, or any payments made
on an After-Tax Basis, to the extent attributable to payments referred to
in clause (i) through (vi) above; (vii) any amounts paid to the Owner
Lessor as reimbursement for amounts expended pursuant to Section 20 of the
Facility Lease; (viii) proceeds of the items referred to in clause (i)
through (vii) above; and (ix) any rights to demand, collect, βββ� for, or
otherwise receive and enforce payment of the foregoing amounts, including
under the Calpine Guaranty, but without limiting clause (v) of this
definition above.
"EXCESS AMOUNT" shall have the meaning specified in Section 14.3 of the
Participation Agreement, and, with respect to the Collateral Trust
Indenture, the meaning specified in Section 9.13 thereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXCLUDED TAXES" shall have the meaning specified in Section 9.2(b) of
the Participation Agreement.
"EXEMPT WHOLESALE GENERATOR" or "EWG" shall mean an entity which is an
"exempt wholesale generator" as defined in Section 32 of PUHCA.
"FACILITY" shall mean a 520 MW nameplate capacity gas-fired simple cycle
merchant power plant located in Christiana, Wisconsin, and more fully
described in Exhibit A to the Participation Agreement. The Facility does
not include the Facility Site.
"FACILITY LEASE" shall mean, the Facility Lease Agreement (RG-1), dated
as of October 18, 2001, between the Owner Lessor and the Facility
Lessee, substantially in the form of Exhibit C to the Participation
Agreement.
"FACILITY LEASE TERM" with respect to the Facility Lease, shall mean the
term of the Facility Lease, including the Basic Lease Term and all Renewal
Lease Terms.
"FACILITY LESSEE" shall have the meaning set forth in the recitals to the
Participation Agreement.
"FACILITY SITE" shall have the meaning set forth in the recitals to the
Facility Site Lease.
16
"FACILITY SITE LEASE" shall mean the Facility Site Lease (RG-1), dated
as of October 18, 2001, between Facility Lessee and the Owner Lessor,
substantially in the form of Exhibit D to the Participation Agreement,
pursuant to which Facility Lessee will lease the Ground Interest to the
Owner Lessor.
"FACILITY SITE LESSEE" shall mean Owner Lessor
"FACILITY SITE LESSOR" shall mean RockGen Energy LLC .
"FACILITY SITE RENT" shall have the meaning set forth in Section 4.1 of
the Facility Site Lease.
"FACILITY SITE SUBLEASE" shall mean the Facility Site Sublease (RG-1),
dated as of October 18, 2001, between the Facility Lessee and the Owner
Lessor, substantially in the form of Exhibit E to the Participation
Agreement, pursuant to which the Owner Lessor will sublease the Ground
Interest to the Facility Lessee.
"FACILITY SITE SUBLESSEE EVENT OF DEFAULT" shall have the meaning set
forth in Section 13.1 of the Facility Site Lease and Section 13.1 of
the Facility Site Sublease.
"FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" shall mean with
respect to any property or service as of any date, the cash rent or cash
price obtainable in an arm's-length lease, sale or supply, respectively,
between an informed and willing lessee or purchaser under no compulsion to
lease or purchase and an informed and willing lessor or seller or supplier
under no compulsion to lease or sell or supply the property or service in
question, and shall, in the case of the Undivided Interest or the Owner
Lessor's Interest, be determined (except pursuant to Section 17 of the
Facility Lease or as otherwise provided below or in the Operative
Documents) on the basis and assumption that (i) the conditions contained
in Sections 7 and 8 of the Facility Lease shall have been complied with in
all respects, (ii) the lessee or buyer shall have rights in, or an
assignment of, the Operative Documents to which the Owner Lessor is a
party and the obligations relating thereto, (iii) the Undivided Interest
or the Owner Lessor's Interest, as the case may be, is free and clear of
all Liens (other than Owner Lessor's Liens, Owner Participant's Liens and
Indenture Trustee Liens), (iv) taking into account the remaining term of
the Facility Site Lease, and (v) in the case the Fair Market Rental Value,
taking into account the terms of the Facility Lease and the other
Operative Documents. If the Fair Market Sales Value of the Owner Lessor's
Interest is to be determined during the continuance of a Lease Event of
Default or in connection with the exercise of remedies by the Owner Lessor
pursuant to Section 17 of the Facility Lease, such value shall be
determined by an Independent Appraiser appointed solely by the Owner
Lessor on an "as-is", "where-is" and "with all faults" basis and shall
take into account all Liens (other than Owner Lessor's Liens, Owner
Participant's Liens and Indenture Trustee Liens); provided, however, in
any such case where the Owner Lessor shall be unable to obtain
constructive possession sufficient to realize the economic benefit of the
Owner Lessor's Interest, Fair Market Sales Value of the Owner Lessor's
Interest shall be deemed equal to $0 (zero). If in any case other than in
the preceding sentence the parties are unable to agree upon a Fair Market
Sales Value of the Owner Lessor's Interest within 30 days after a request
therefor
17
has been made, the Fair Market Sales Value of the Owner Lessor's Interest
shall be determined by appraisal pursuant to the Appraisal Procedures. Any
fair market value determination of a Severable Improvement shall take into
consideration any liens or encumbrances to which the Severable Improvement
being appraised is subject and which are being assumed by the transferee.
"FASB 13" shall mean the Statement of the Financial Accounting Standards
Board No. 13, as amended and interpreted from time to time.
"FASB 98" shall mean the Statement of the Financial Accounting Standards
Board No. 98, as amended and interpreted from time to time.
"FEDERAL POWER ACT" or "FPA" shall mean the Federal Power Act, as amended.
"FERC" shall mean the Federal Energy Regulatory Commission of the United
States or any successor or predecessor agency thereto.
"FERC ORDERS" shall mean any or all of the following of the FERC Orders
required pursuant to Section 4.8 of the Participation Agreement:
(i) a determination by FERC of EWG status of the Facility Lessee
and Owner Lessor and the Owner Participant;
(ii) an approval from FERC for the Facility Lessee to sell power
at market-based rates under Section 205 of the FPA effective on or before
the Closing Date;
(iii) either an approval by FERC of the issuance of securities
and the assumption of obligations necessary to effect the
sale/leaseback pursuant to Section 204 of the Federal Power Act or
blanket authorization to issue securities and assume obligations under
such Section;
(iv) Intentionally Omitted; and
(v) an approval from FERC under Section 203 of the Federal Power
Act for the transfer of jurisidictional facilities in the sale/leaseback
contemplated by the Operative Documents.
"FERC OWNER LESSOR EWG ORDER" shall mean the orders issued by the FERC
determining that the Owner is an EWG.
"FINAL DETERMINATION" shall have the meaning specified in Section 9 of
the Tax Indemnity Agreement.
"FIRST RENEWAL LEASE TERM" with respect to the Facility Lease, shall
have the meaning specified in Section 15.1(a) of the Facility Lease.
"FIRST WINTERGREEN RENEWAL LEASE OPTION" with respect to the Facility
Site Lease, shall have the meaning specified in Section 2.2(a)(i) of the
Facility Site Lease.
18
"FMV RENEWAL LEASE OPTION" with respect to the Facility Lease Term, shall
have the meaning set forth in Section 2.2(a)(iii) of the Facility Site
Lease.
"FMV RENEWAL LEASE TERM" with respect to the Facility Lease, shall have
the meaning specified in Section 15.2 of the Facility Lease.
"FORECLOSURE TRANSFER" with respect to the Facility Site Lease, shall
have the meaning set forth in Section 19.3 of the Facility Site Lease.
"GAAP" shall mean generally accepted accounting principles.
"GOVERNMENTAL ACTIONS" shall mean all authorizations, consents, approvals,
waivers, exceptions, variances, filings, permits, orders, licenses,
exemptions and declarations of or with any Governmental Entity and shall
include those citing, environmental and operating permits and licenses
(including the Applicable Permits) that are required for the use and
operation of the Facility, the Undivided Interest (if any), the Ground
Interest and the Facility Site.
"GOVERNMENTAL ENTITY" shall mean and include any international, national,
Native American, provincial, regional, state, municipal or local
government, any political subdivision of any thereof or any board,
commission, department, division, organ, instrumentality, court or agency
of any thereof.
"GROUND INTEREST" shall mean the Owner Lessor's 25% undivided leasehold
interest in the Facility Site.
"GUARANTOR" shall mean Calpine Corporation.
"GUARANTOR ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an assignment
and assumption agreement in form and substance substantially in the form
of Exhibit L to the Participation Agreement.
"HAZARDOUS SUBSTANCE" shall mean any pollutant, contaminant, hazardous
substance, hazardous waste, toxic substance, petroleum or
petroleum-derived substance, waste, or additive, asbestos, PCBs,
radioactive material, or other compound, element, material or substance
in any form whatsoever (including products) regulated, restricted or
controlled by or under any Environmental Law.
"HOLDING COMPANY ACT" shall mean the Public Utility Holding Company Act of
1935, as amended.
"IMPROVEMENT" shall mean an addition, betterment or enlargement of the
Facility. Improvements shall include any Required Improvements or Optional
Improvements, but do not include Components.
"INCOME TAXES" shall have the meaning set forth in Section 9.2(b)(i) of
the Participation Agreement.
19
"INCUR" means, as applied to any obligation, to create, incur, issue,
assume, guarantee or in any other manner become liable with respect to,
contingently or otherwise, such obligation, and "Incurred," "Incurrence"
and "Incurring" shall each have a correlative meaning; provided, however,
that any amendment, modification or waiver of any provision of any
document pursuant to which Indebtedness was previously Incurred shall not
be deemed to be an Incurrence of Indebtedness as long as (i) such
amendment, modification or waiver does not (A) increase the principal or
premium thereof or interest rate thereon, (B) change to an earlier date
the Stated Maturity thereof or the date of any scheduled or required
principal payment thereon or the time or circumstances under which such
Indebtedness may or shall be redeemed, (C) if such Indebtedness is
contractually subordinated in right of payment to the Obligations, modify
or affect, in any manner adverse to the Beneficiaries, such subordination
or (D) if the Guarantor is the obligor thereon, provide that a Restricted
Subsidiary shall be an obligor and (ii) such Indebtedness would, after
giving effect to such amendment, modification or waiver as if it were an
Incurrence, comply with clause (i) of the first proviso to the definition
of "Refinancing Indebtedness."
"INDEBTEDNESS" of any Person shall mean (i) all indebtedness of such
Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of property
or services, (iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (v) all Lease
Obligations of such Person (including payments of Termination Value and
any other amounts owed pursuant to the Operative Documents), (vi) all
obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, (vii) all unconditional
obligations of such Person to purchase, redeem, retire, defease or
otherwise acquire for value any capital stock or other equity interests of
such Person or any warrants, rights or options to acquire such capital
stock or other equity interests, (viii) all net obligations under "swaps",
"caps", "floors", "collars", or other interest rate hedging contracts or
similar arrangements, (ix) all Indebtedness of any other Person of the
type referred to in clauses (i) through (viii), guaranteed by such Person
or for which such Person shall otherwise (including pursuant to any
keepwell, makewell or similar arrangement) become directly or indirectly
liable, and (x) all Indebtedness of the type referred to in clauses (i)
through (ix) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property (including accounts and contracts rights) owned
by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, the amount of such obligation being
deemed to be the lesser of the value of such property or the amount of the
obligation so secured.
"INDEMNITEE" shall have the meaning specified in Section 9.1(a) of the
Participation Agreement.
"INDEMNITOR" shall have the meaning set forth in Section 13.3 of the
Facility Site Lease.
20
"INDENTURE BANKRUPTCY DEFAULT" shall mean any event or occurrence, which,
with the passage of time or the giving of notice or both, would become an
Lease Indenture Event of Default under Section 4.2(e) or (f) of the
Collateral Trust Indenture.
"INDENTURE DEFAULT" shall mean any event or occurrence, which, with the
passage of time or the giving of notice or both, would become an Lease
Indenture Event of Default.
"INDENTURE ESTATE" shall have the meaning specified in the Granting Clause
of the Collateral Trust Indenture.
"INDENTURE TRUSTEE" shall mean State Street Bank and Trust Company of
Connecticut, N.A., not in its individual capacity, except as expressly
provided herein, but solely as Indenture Trustee under the Operative
Documents.
"INDENTURE TRUSTEE OFFICE" shall mean the office to be used for notices to
the Indenture Trustee from time to time pursuant to Section 9.5 of the
Collateral Trust Indenture.
"INDENTURE TRUSTEE'S ACCOUNT" shall mean the account specified with
respect thereto on Schedule 1-B to the Participation Agreement or such
other account of the Indenture Trustee, as the Indenture Trustee may from
time to time specify in a notice to the other parties to the Participation
Agreement.
"INDENTURE TRUSTEE'S LIENS" shall mean any Lien on the Lessor Estate, the
Facility, the Facility Site or any part thereof or any interest therein
arising as a result of (i) Taxes against or affecting the Lease Indenture
Company or the Indenture Trustee, or any Affiliate thereof that are not
related to, or that are in violation of, any Operative Document or the
transactions contemplated thereby, (ii) Claims against or any act or
omission of the Lease Indenture Company or the Indenture Trustee, or
Affiliate thereof that is not related to, or that is in violation of, any
of such Person's representations, warranties, covenants or agreements in
an Operative Document or the transactions contemplated thereby or that is
in breach of any covenant or agreement of the Lease Indenture Company or
the Indenture Trustee specified therein, (iii) Taxes imposed upon the
Lease Indenture Company or the Indenture Trustee, or any Affiliate thereof
that are not indemnified against by the Facility Lessee pursuant to any
Operative Document or (iv) Claims against or affecting the Lease Indenture
Company or the Indenture Trustee, or any Affiliate thereof arising out of
the voluntary or involuntary transfer by the Lease Indenture Company or
the Indenture Trustee of any portion of the interest of the Lease
Indenture Company or the Indenture Trustee in the Lessor Estate, other
than pursuant to the Operative Documents.
"INDEPENDENT APPRAISER" shall mean a disinterested, licensed industrial
property appraiser who is a member of the Appraisal Institute having
experience in the business of evaluating facilities similar to the
Facility.
"INITIAL LESSOR NOTES" shall have the meaning set forth in Section 2.2 of
the Collateral Trust Indenture.
21
"INITIAL PURCHASERS" shall mean CSFB, Banc of America Securities LLC,
Scotia Capital (USA) Inc. and TD Securities (USA) Inc.
"INITIAL SUBLEASE TERM" with respect to a Facility Site Sublease, shall
have the meaning set forth in Section 2.1(a) of such Facility Site
Sublease.
"INITIAL TERM" with respect to the Facility Site Lease, shall have the
meaning specified in Section 2.1(a) of the Facility Site Lease.
"INSURANCE CONSULTANT" shall mean βββββ� USA, Inc.
"INVESTMENT BANKER" shall have the meaning set forth in Section 2.10(d)
of the Collateral Trust Indenture.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of 1940.
"INVESTMENT GRADE" with respect to a Rating Agency, shall mean, with
respect to S&P, BBB- or higher, and with respect to Moody's, Baa3 or
higher, or, if after the Closing Date a different system of ratings is
established, the term shall mean a rating in one of such Rating Agency's
generic rating categories that is comparable to such ratings.
"IRS" shall mean the Internal Revenue Service of the United States
Department of Treasury or any successor agency.
"L/C BANK" shall mean the Acceptable Bank providing a letter of credit
pursuant to Section 5.3 of the Facility Lease.
"LEASE DEBT" shall mean the debt evidenced by the Lessor Notes.
"LEASE DEBT RATE" shall mean the applicable interest rate accruing on
Lessor Notes.
"LEASE DEFAULT" shall mean any event or occurrence, which, with the
passage of time or the giving of notice or both, would become a Lease
Event of Default.
"LEASE EVENT OF DEFAULT" with respect to the Facility Lease, shall have
the meaning specified in Section 16 of the Facility Lease.
"LEASE INDENTURE COMPANY" shall mean State Street Bank and Trust Company
of Connecticut, N.A., in its individual capacity under the Operative
Documents.
"LEASE INDENTURE EVENT OF DEFAULT" shall have the meaning set forth in
Section 4.2 of the Collateral Trust Indenture.
"LEASE OBLIGATIONS" shall mean, without duplication, (i) indebtedness
represented by obligations under a lease that is required to be
capitalized for financial reporting purposes, (ii) with respect to
operating leases of electric generating facilities, the termination value
or similar amount payable by the lessee under such lease and (iii) the
principal amount of financial obligations under any synthetic lease, tax
retention operating
22
lease, off-balance sheet loan or similar off-balance sheet financing
product where such transaction is considered borrowed money indebtedness
of the lessee for tax purposes but is classified as an operating lease
under GAAP.
"LEASEHOLD LIEN" with respect to the Facility Site Lease or the Facility
Site Sublease, shall have the meaning set forth in Section 16.4 of the
Facility Site Lease or Section 15.3 of the Facility Site Sublease.
"LEASEHOLD MORTGAGEE" with respect to the Facility Site Lease or the
Facility Site Sublease, shall have the meaning set forth in Section 16.4
of the Facility Site Lease or Section 15.3 of the Facility Site Sublease.
"LESSEE 467 LOAN INTEREST" with respect to the Facility Lease, shall have
the meaning specified in Section 3.2(d) of the Facility Lease.
"LESSEE 467 LOAN PRINCIPAL BALANCE" with respect to the Facility Lease,
shall have the meaning set forth in Section 3.2(d) of the Facility Lease.
"LESSOR 467 LOAN INTEREST" with respect to the Facility Lease, shall have
the meaning specified in Section 3.2(d) of the Facility Lease.
"LESSOR 467 LOAN PRINCIPAL BALANCE" with respect to the Facility Lease,
shall have the meaning set forth in Section 3.2(d) of the Facility Lease.
"LESSOR ESTATE" shall mean all the estate, right, title and interest of
the Owner Lessor in, to and under the Undivided Interest, the Ground
Interest and the Operative Documents, including all funds advanced to the
Owner Lessor by the Owner Participant, all installments and other payments
of Periodic Rent, Supplemental Rent or Termination Value under the
Facility Lease, condemnation awards, purchase price, sale proceeds,
insurance proceeds and all other proceeds, rights and interests of any
kind for or with respect to the estate, right, title and interest of the
Owner Lessor in, to and under the Undivided Interest, the Ground Interest
and the Operative Documents and any of the foregoing, but shall not
include Excepted Payments.
"LESSOR MANAGER" shall mean βββββ� Fargo Bank Northwest, National
Association not in its individual capacity, but solely as an independent
manager under the LLC Agreement and each other Person that may from time
to time be acting as Independent Manager in accordance with the
provisions of the LLC Agreement.
"LESSOR NOTE(S)" shall mean, individually or collectively as the context
may require, the Initial Lessor Notes and Additional Lessor Notes, each
issued pursuant to the Collateral Trust Indenture.
"LESSOR PUT RENEWAL LEASE TERM" with respect to the Facility Lease, shall
have the meaning specified in Section 15.2 of the Facility Lease.
"LIEN" shall mean any mortgage, security deed, security title, pledge,
lien, charge, encumbrance, lease, and security interest or title retention
arrangement.
23
"LLC AGREEMENT" shall mean the Amended and Restated Limited Liability
Company Agreement, dated as of October 1, 2001, between the Owner
Participant and the Lessor Manager, pursuant to which the Owner Lessor
shall be governed.
"MAJORITY IN INTEREST OF NOTEHOLDERS" as of any date of determination,
shall mean Noteholders holding in aggregate more than 50% of the total
outstanding principal amount of the Lessor Notes; provided, however, that
any Note held by the Facility Lessee, the Guarantor or any Affiliate of
either such party shall not be considered outstanding for purposes of this
definition.
"MAKE-WHOLE AMOUNT" shall mean, with respect to any Lessor Note subject
to redemption pursuant to the Lease Indenture, an amount equal to the
Discounted Present Value calculated for such Lessor Note being redeemed
less the unpaid principal amount of such Lessor Note; provided that the
Make Whole Amount shall not be less than zero. For purposes of this
definition, the "Discounted Present Value" of any Lessor Note subject to
redemption pursuant to the Lease Indenture shall be equal to the
discounted present value, as of the date of redemption, of all principal
and interest payments scheduled to become due in respect of such Lessor
Note, after the date of such redemption calculated using a discount rate
equal to the sum of (i) the yield to maturity on the U.S. Treasury
security having an average life equal to the remaining average life of
such Lessor Note and trading in the secondary market at the price closest
to par and (ii) 50 basis points; provided, however, that if there is no
U.S. Treasury security having an average life equal to the remaining
average life of such Lessor Note, such discount rate shall be calculated
using a yield to maturity interpolated or extrapolated on a straight-line
basis (rounding to the nearest calendar month, if necessary) from the
yields to maturity for two U.S. Treasury securities having average lives
most closely corresponding to the remaining life of such Lessor Note and
trading in the secondary market at the price closest to par.
"MANAGER" shall mean CSFB.
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" shall mean a
material adverse effect on (a) the economic prospects, operations, assets,
financial position, results of operation or business of the Guarantor,
including a material adverse effect on (i) the Facility, the Undivided
Interest, the Facility Site or the Ground Interest which adversely affects
the ability of the Guarantor to perform its obligations under the
Operative Documents or (ii) the validity or enforceability of the
Operative Documents, (b) the Indenture Estate or the Lessor Estate, the
security interests in the Lessor Estate, or (c) with respect to the Owner
Participant's (but not the Certificateholders') interest in the Undivided
Interest, the residual value or remaining useful life of the Facility.
"MEMBER INTEREST" shall mean the interest of the Owner Participant in the
Owner Lessor.
"MEMORANDUM OF FACILITY SITE LEASE" shall mean the Memorandum of Facility
Site Lease (RG-1), dated as of the Closing Date, between the Facility
Lessee, as landlord, and the Owner Lessor, as tenant, and filed with the
Recorder of Dane County, Wisconsin.
24
"MEMORANDUM OF FACILITY SITE SUBLEASE" shall mean the Memorandum of
Facility Site Sublease (RG-1), dated as of the Closing Date, between the
Owner Lessor, as sublandlord, and the Facility Lessee, as subtenant filed
with the Recorder of Dane County, Wisconsin.
"MEMORANDUM OF LEASE" shall mean the Memorandum of Facility Lease (RG-1),
dated as of the Closing Date, between the Owner Lessor and the Facility
Lessee filed with the Recorder of Dane County, Wisconsin.
"MOODY'S" shall mean βββββ�'β� Investors Service, Inc. and any successor
thereto.
"MULTIEMPLOYER PLAN" shall mean any Plan that is a multiemployer plan (as
defined in Section 4001(a)(3) of ERISA).
"NOTE REGISTER" shall have the meaning specified in Section 2.8 of the
Collateral Trust Indenture.
"NOTEHOLDER(S)" shall mean any holder of record (as reflected on the Note
Register) from time to time of a Lessor Note outstanding.
"NOTICE PERIOD" shall have the meaning set forth in Section 7.6 of the
Participation Agreement.
"OBLIGATIONS" shall have the meaning set forth in Section 2.2 of the
Calpine Guaranty.
"OBSOLESCENCE TERMINATION DATE" shall have the meaning specified in
Section 14.1 of the Facility Lease.
"OFFERING CIRCULAR" shall mean the Offering Circular, dated October 11,
2001, with respect to the Certificates.
"OFFICER" shall mean, solely with respect to the Guarantor, the Chairman,
the President, any Vice President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, the Secretary, any Assistant Treasurer,
any Assistant Secretary or the Controller or Principal Accounting Officer
of the Guarantor.
"OFFICER'S CERTIFICATE" shall mean with respect to any Person, a
certificate signed (i) in the case of a corporation, by the Chairman of
the Board, the President, or a Vice President of such Person or any Person
authorized by or pursuant to the organizational documents, the by-laws or
any resolution of the Board of Directors or Executive Committee of such
Person (whether general or specific) to execute, deliver and take actions
on behalf of such Person in respect of any of the Operative Documents,
(ii) in the case of a partnership, by the Chairman of the Board of
Directors, the President or any Vice President, the Treasurer or an
Assistant Treasurer of a corporate general partner and (iii) in the case
of an Indenture Trustee, a certificate signed by a Responsible Officer of
such Indenture Trustee.
25
"OFFICIAL RECORDS" shall have the meaning specified in the recitals to the
Facility Site Lease.
"OP ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean an assignment and
assumption agreement in form and substance substantially in the form of
Exhibit J to the Participation Agreement.
"OP GUARANTOR" shall mean Newcourt Credit Group USA Inc., or any Person
that shall guaranty the obligations of a Transferor under the Operative
Documents in accordance with Section 7.1 of the Participation Agreement.
"OP LLC AGREEMENT" shall mean the Amended and Restated Limited Liability
Company Agreement, dated as of October 1, 2001, between Newcourt Capital
USA Inc. and the Lessor Manager, pursuant to which the Owner Participant
shall be governed.
"OP PARENT GUARANTY" shall mean, as applicable, (i) that certain guaranty
of Newcourt Credit Group USA Inc., dated as of the Closing Date in favor
of the Facility Lessee, the Owner Lessor, the Lessor Manager, the Trust
Company, the Indenture Trustee, the Pass Through Trustees and the
Certificateholders, or (ii) any other guaranty agreement provided by an OP
Guarantor in form and substance substantially in the form of Exhibit G to
the Participation Agreement.
"OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the ββββ of
Sale, the Facility Lease, the Certificates, the Facility Site Lease, the
Facility Site Sublease, the Collateral Trust Indenture, the Lessor Notes,
the Pass Through Trust Agreements, the LLC Agreement, the Tax Indemnity
Agreement, the Calpine Guaranty, the OP Parent Guaranty (if any), the
Certificate Purchase Agreement, and the Ownership and Operation Agreement.
"OPERATOR" shall mean Calpine Northbrook Services, LLC or any replacement
Operator appointed pursuant to the Operative Documents.
"OPINION OF COUNSEL" shall mean, with respect to any Calpine Party, a
written opinion (i) from ββββββ β�. βββββββ� or any other internal counsel
of Calpine, as to matters contained in such opinions delivered at Closing,
and as to all other matters, ββββββ ββββ & Priest LLP and/or βββββ� ββββββ
& Tremaine LLP, or any other outside legal counsel reasonably acceptable
to the Owner Participant, (ii) in form and substance (with respect to
qualifications, exception, assumption and the like) substantially
equivalent to the legal opinions delivered at Closing, with any material
modification or supplements thereto to be reasonably acceptable to the
Owner Participant, or in any such other form as may be reasonably
acceptable to the Owner Participant, and (iii) the scope of which shall
cover due authorization, execution, delivery and enforceability of the
applicable agreement(s), and exemption from regulation, in each case,
substantially in the form set forth in the opinions delivered at Closing
with any material modifications thereto to be reasonably acceptable to the
Owner Participant.
"OPTIONAL IMPROVEMENT" with respect to the Facility Lease, shall have the
meaning specified in Section 8.2 of the Facility Lease.
26
"ORGANIC DOCUMENT" shall mean, with respect to any Person that is a
corporation, its certificate of incorporation, its by-laws and all
shareholder agreements, voting trusts and similar arrangements applicable
to any of its authorized shares of capital stock; with respect to any
Person that is a limited partnership, its certificate of limited
partnership and partnership agreement; with respect to any Person that is
a limited liability company, its certificate of formation and its limited
liability company agreement, in each case, as from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect
from time to time; and with respect to any Person that is a business
trust, its certificate of business trust and its trust agreement, in each
case, as from time to time amended, supplemented, amended and restated, or
otherwise modified and in effect from time to time.
"OTHER CALPINE GUARANTIES" shall mean collectively, the Other RockGen
Calpine Guaranties, the Broad River Calpine Guaranties and the South
Point Calpine Guaranties.
"OTHER FACILITY LEASES" shall mean collectively, the Other RockGen
Facility Leases, the Broad River Facility Leases and the South Point
Facility Leases.
"OTHER OWNER LESSORS" shall mean collectively, the Other RockGen Owner
Lessors, the Broad River Owner Lessors and the South Point Owner Lessors.
"OTHER ROCKGEN BILLS OF SALE" shall mean each of the bills of sale
executed and delivered pursuant to the Other RockGen Participation
Agreements.
"OTHER ROCKGEN CALPINE GUARANTIES" shall mean the other Calpine guaranty
and payment agreements executed and delivered by Calpine pursuant to the
Other RockGen Participation Agreements.
"OTHER ROCKGEN COLLATERAL TRUST INDENTURES" shall mean each of the
collateral trust indentures executed and delivered pursuant to the Other
RockGen Participation Agreements.
"OTHER ROCKGEN FACILITY LEASES" shall mean the other RockGen facility
lease agreements, dated as of October 18, 2001, by and between the Other
RockGen Owner Lessors and the Facility Lessee, pursuant to which the Other
RockGen Owner Lessors will lease the Other RockGen Undivided Interests to
the Facility Lessee.
"OTHER ROCKGEN FACILITY SITE LEASES" shall mean the other facility site
leases, dated as of October 18, 2001, by and between the Other RockGen
Owner Lessors and the Facility Lessee pursuant to which the Facility
Lessee will lease the Other RockGen Ground Interests to the Other RockGen
Owner Lessors.
"OTHER ROCKGEN FACILITY SITE SUBLEASES" shall mean the other facility site
subleases, dated as of October 18, 2001, by and between the Other RockGen
Owner Lessors and the Facility Lessee pursuant to which the Other RockGen
Owner Lessors will sublease the Ground Interest to the Facility Lessee.
27
"OTHER ROCKGEN GROUND INTERESTS" shall mean the undivided interests in the
Facility Site not conveyed to the Owner Lessor under the Facility Site
Lease.
"OTHER ROCKGEN INDENTURE TRUSTEES" shall mean each of the indenture
trustees relating to the Other RockGen Collateral Trust Indentures.
"OTHER ROCKGEN LEASE TRANSACTIONS" shall mean the transactions involving
the sale of the Other RockGen Undivided Interests and the lease of the
Other RockGen Ground Interests to the Other RockGen Owner Lessors, and the
lease by the Other RockGen Owner Lessors of the Other RockGen Undivided
Interests and sublease by the Other RockGen Owner Lessors of the Other
RockGen Ground Interest to the Facility Lessee on substantially the same
terms and conditions as under, and dated the same date as, the Overall
Transaction.
"OTHER ROCKGEN LESSOR MANAGERS" shall mean each of the lessor managers
acting on behalf of the Other RockGen Owner Lessors pursuant to the Other
RockGen Operative Documents.
"OTHER ROCKGEN OWNER LESSORS" shall mean RockGen ββ-β�, βββ�, βββββββ� ββ-β�,
LLC and RockGen OL-4, LLC.
"OTHER ROCKGEN OWNER PARTICIPANTS" shall mean SBR OP-2, LLC, SBR OP-3, LLC
and SBR OP-4, LLC.
"OTHER ROCKGEN OPERATIVE DOCUMENTS" shall mean the other "Operative
Documents" for each of the Other RockGen Lease Transactions.
"OTHER ROCKGEN PARTICIPATION AGREEMENTS" shall mean a collective reference
to each of the other three separate participation agreements entered into
by the Facility Lessee, the applicable Other RockGen Owner Lessor, the
Other RockGen Lessor Manager, Other RockGen Owner Participant, Other
RockGen Indenture Trustee, Pass Through Trustees and Calpine and
designated Participation Agreement (RG-2), Participation Agreement (RG-3)
and Participation Agreement (RG-4), each dated as of the Closing Date,
pursuant to which, among other things, the Facility Lessee has agreed to
(a) sell to the applicable Other RockGen Owner Lessors certain undivided
interests in the Facility and lease certain undivided interests in the
Facility Site, and (b) sublease from the applicable Other RockGen Owner
Lessors such undivided interest in the Facility Site pursuant to the Other
RockGen Facility Site Sublease.
"OTHER ROCKGEN UNDIVIDED INTERESTS" shall mean the undivided interest in
the Facility not conveyed to the Owner Lessor under the ββββ of Sale.
"OVERALL TRANSACTION" shall mean all of the transactions contemplated by
the Operative Documents.
"OVERDUE RATE" shall mean a rate per annum equal to the prime commercial
lending rate of the Chase Manhattan Bank (as publicly announced to be
effect from time to time,
28
such rate to be adjusted automatically, without notice, on the effective
date of any change in such rate) plus 1%.
"OWNER LESSOR" shall mean RockGen OL-1, LLC, a Delaware limited liability
company created for the benefit of the Owner Participant.
"OWNER LESSOR'S ACCOUNT" shall mean βββββ� Fargo Bank Northwest, National
Association, Salt Lake City, Utah, ABA # βββ�-βββ�-βββ�, Account: Corporate
Trust Services, Account # 051-βββββββ�, Credit to: RockGen OL-1, LLC.
"OWNER LESSOR'S INTEREST" shall mean the Owner Lessor's right, title and
interest in and to the Undivided Interest and the Ground Interest.
"OWNER LESSOR'S LIEN(S)" individually or collectively as the context may
require, shall mean any Lien on the Lessor Estate, the Facility Sites, or
any part of any thereof or interest therein arising as a result of (i)
Taxes against or affecting the Owner Lessor, the Trust Company or the
Lessor Manager or any Affiliate thereof that are not related to, or that
are in violation of, any Operative Document or the transactions
contemplated thereby, (ii) Claims against or any act or omission of the
Owner Lessor, the Trust Company or the Lessor Manager or Affiliate thereof
that is not related to, or that is in violation of, any Operative Document
or the transactions contemplated thereby or that is in breach of any
covenant or agreement of the Owner Lessor, the Trust Company or the Lessor
Manager specified therein, (iii) Taxes imposed upon the Owner Lessor, the
Trust Company or the Lessor Manager or any Affiliate thereof that are not
indemnified against by the Facility Lessee pursuant to any Operative
Document or (iv) Claims against or affecting the Owner Lessor, the Trust
Company or the Lessor Manager or any Affiliate thereof arising out of the
voluntary or involuntary transfer by the Owner Lessor, the Trust Company
or the Lessor Manager of any portion of the interest of the Owner Lessor
in the Owner Lessor's Interest, other than pursuant to the Operative
Documents.
"OWNER LESSOR'S PERCENTAGE" shall mean 25%.
"OWNER PARTICIPANT" shall mean SBR OP-1, LLC, a Delaware limited
liability company.
"OWNER PARTICIPANT'S ACCOUNT" shall mean the account maintained by the
Owner Participant at the bank specified with respect thereto on Schedule
1-C to the Participation Agreement, or such other account of the Owner
Participant, as the Owner Participant may from time to time specify in a
notice to the Indenture Trustee pursuant to Section 9.5 of the Collateral
Trust Indenture.
"OWNER PARTICIPANT'S COMMITMENT" shall mean the Owner Participant's
investment in the Owner Lessor contemplated by Section 2.1(a) of the
Participation Agreement.
"OWNER PARTICIPANT'S LIEN(S)" individually or collectively as the context
may require, shall mean any Lien on the Lessor Estate, the Facility Sites,
or any part of any thereof or interest therein arising as a result of (i)
Claims against or any act or omission of the Owner Participant that is not
related to, or that is in violation of, any Operative Document
29
or the transactions contemplated thereby or that is in breach of any
covenant or agreement of the Owner Participant set forth therein, (ii)
Taxes against the Owner Participant that are not indemnified against by
the Facility Lessee pursuant to the Operative Documents or (iii) Claims
against or affecting the Owner Participant arising out of the voluntary or
involuntary transfer by the Owner Participant of any portion of the
interest of the Owner Participant in the Member Interest, other than any
transfer (x) pursuant to the exercise of any of the Facility Lessee's (or
any Affiliate thereof) rights under the Operative Documents or (y) during
the continuance of a Lease Event of Default.
"OWNER PARTICIPANT'S NET ECONOMIC RETURN" shall mean the Owner
Participant's anticipated (i) after-tax yield, calculated according to the
multiple investment sinking fund method of analysis, and (ii) periodic
GAAP income and aggregate after-tax cash flow.
"OWNERSHIP AND OPERATION AGREEMENT" shall mean the Ownership and Operation
Agreement, dated as of October 18, 2001, among the Facility Lessee, the
Owner Lessor and the Other RockGen Owner Lessors.
"OWNERSHIP INTEREST" shall mean, with respect to the Facility Lessee (or
any assigns of the Facility Lessee), any and all equity interest in the
Facility Lessee (or such assignee of the Facility Lessee) howsoever
designated (whether capital stock, partnership interest, member interest
or any equivalent interest).
"PARTICIPATION AGREEMENT" shall mean the Participation Agreement, dated as
of October 18, 2001, among the Facility Lessee, the Guarantor, the Owner
Lessor, the Owner Participant, βββββ� Fargo Bank Northwest, National
Association, not in its individual capacity, except as expressly provided
therein, but solely as Lessor Manager, State Street Bank and Trust Company
of Connecticut, as Indenture Trustee, and State Street Bank and Trust
Company of Connecticut, as Pass Through Trustees.
"PASS THROUGH COMPANY" shall mean State Street Bank and Trust Company of
Connecticut, N.A., in its individual capacity, together with its
successors and permitted assigns.
"PASS THROUGH TRUST AGREEMENT" shall mean one or more, as the context may
require, of (i) the Pass Through Trust Agreement A, dated as of October
18, 2001, and (ii) the Pass Through Trust Agreement B, dated as of October
18, 2001, in each case between the Facility Lessee and a Pass Through
Trustee.
"PASS THROUGH TRUSTEES" shall mean State Street Bank and Trust Company of
Connecticut, N.A., not in its individual capacity, but solely as Pass
Through Trustees under each of the Pass Through Trust Agreements, and each
other Person that may from time to time be acting as a Pass Through
Trustee in accordance with the provisions of a Pass Through Trust
Agreement.
"PASS THROUGH TRUSTS" shall mean the pass through trusts created pursuant
to the Pass Through Trust Agreements.
30
"PAYING AGENT" shall have the meaning set forth in Section 2.6 of the
Collateral Trust Indenture.
"PERIODIC RENT" with respect to the Facility Lease, shall mean the sum of
Basic Rent and Renewal Rent, if any, as specified in Schedule 1 to the
Facility Lease.
"PERMIT" shall mean any action, approval, certificate, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or
license of or from, and any filing with a Governmental Entity.
"PERMITTED CLOSING DATE LIENS" shall mean Permitted Liens described in
clause (a), (b), (d), (f), (g), (i), (j), (k), (l), (m), (n) and (o) of
the definition thereof.
"PERMITTED ENCUMBRANCES" shall mean with respect to the Facility Site, all
matters shown as exceptions on Schedule B to each of the Title Policies as
in effect on the Closing Date.
"PERMITTED INVESTMENTS" shall mean investments in securities that are: (i)
direct obligations of the United States or any agency thereof; (ii)
obligations fully guaranteed by the United States or any agency thereof;
(iii) certificates of deposit or bankers acceptances issued by commercial
banks (or any of their affiliates) organized under the laws of the United
States or of any political subdivision thereof or under the laws of
Canada, Japan, Switzerland or any country that is a member of the European
Economic Community having a combined capital and surplus of at least $250
million and having long-term unsecured debt securities then rated "A" or
better by S&P or "A2" or better by Moody's (but at the time of investment
not more than $25,000,000 may be invested in such certificates of deposit
from any one bank); (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in
clauses (i) and (ii) above, entered into with any financial institution
meeting the qualifications specified in clause (iii) above; (v) open
market commercial paper of any corporation incorporated or doing business
under the laws of the United States or of any political subdivision
thereof having a rating of at least "A-1" from S&P and "P-1" from Moody's
(but at the time of investment not more than $25,000,000 may be invested
in such commercial paper from any one company); (vi) auction rate
securities or money market preferred stock having one of the two highest
ratings obtainable from either S&P or Moody's (or, if at any time neither
S&P nor βββββ�'β� is rating such obligations, then from another nationally
recognized rating service acceptable to the Depositary); and (vii)
investments in money market funds or money market mutual funds sponsored
by any securities broker dealer of recognized national standing (or an
affiliate thereof), having an investment policy that requires
substantially all the invested assets of such fund to be invested in
investments described in any one or more of the foregoing clauses having a
rating of "A" or better by S&P or "A2" or better by Moody's.
"PERMITTED LIENS" shall mean (a) the rights and interests of the parties
as provided in the Operative Documents, as well as the rights of
sublessees and/or assignees to the extent set forth in or expressly
permitted pursuant to the Facility Lease or any other Operative Document,
(b) as to the Facility Lessee, Owner Lessor's Liens, Owner
31
Participant's Liens and Indenture Trustee's Liens, (c) Liens for any tax,
assessment or other governmental charge, either secured by a bond
reasonably acceptable to the Indenture Trustee and the Pass Through
Trustees and, so long as no Lease Indenture Event of Default which is not
a Lease Event of Default exists, the Owner Lessor, or not yet due or being
contested in good faith and by appropriate proceedings, so long as (i)
such proceedings shall not reasonably be expected to give rise to criminal
liability or material civil liability on the part of the Owner Lessor, the
Owner Participant, the Lessor Manager, the Trust Company, the Indenture
Trustee, the Pass Through Trustees or any Certificateholders, and would
not otherwise reasonably be expected to have a Material Adverse Effect, or
(ii) adequate reserves consistent with GAAP requirements have been
established and are maintained, so as to assure such Persons that any
taxes, assessments or other charges determined to be due will be promptly
paid in full when such contest is determined, (d) materialmen's,
mechanics', workers', repairmen's, employees' or other like Liens arising
in the ordinary course of business or in connection with the maintenance
or repair of the Facility, 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 reasonably be expected to give rise to criminal
liability or material civil liability on the part of the Owner Lessor, the
Owner Participant, the Lessor Manager, the Trust Company, the Indenture
Trustee, the Pass Through Trustees or any Certificateholders, and would
not otherwise reasonably be expected to have a Material Adverse Effect,
and (ii) adequate reserves consistent with GAAP requirements have been
established and are maintained, so as to ensure that any amounts
determined to be due will be promptly paid in full when such contest is
determined, (e) Liens arising out of judgments or awards, but only so long
as an appeal or proceeding for review is being prosecuted in good faith
and so long as (i) such proceedings shall not reasonably be expected to
give rise to criminal liability or material civil liability on the part of
the Owner Lessor, the Owner Participant, the Lessor Manager, the Trust
Company, the Indenture Trustee, the Pass Through Trustees or any
Certificateholders, and would not otherwise reasonably be expected to have
a Material Adverse Effect, and (ii) adequate reserves consistent with GAAP
requirements have been established and are maintained, so as to ensure
that any amounts determined to be due will be promptly paid in full when
such contest is determined, or are fully covered by insurance, (f) mineral
rights the use and enjoyment of which do not materially interfere with the
use and enjoyment of the Facility, (g) Permitted Encumbrances, (h) 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, (i) existing Liens that have been disclosed to the
Transaction Parties prior to the Closing Date and which are reasonably
acceptable to the Transaction Parties, (j) Liens incident to the ordinary
course of business that are not incurred in connection with the obtaining
of any loan, advance or credit in respect of borrowed money permitted to
be incurred pursuant to the Operative Documents so long as such Liens (x)
do not in the aggregate materially impair the use of the property or
assets of the Facility Lessee or the value of such property or assets for
the purposes of such business and (y) shall not reasonably be expected to
give rise to criminal liability or unindemnified, material civil liability
on the part of the Owner Lessor, the Owner Participant, the Lessor
Manager, the Trust Company, the Indenture Trustee, the Pass Through
Trustees or any Certificateholders, and would not otherwise
32
reasonably be expected to have a Material Adverse Effect, (k) the
interests of the Other RockGen Owner Lessors and the Other RockGen
Indenture Trustees in the Facility, the Facility Site and the Ownership
and Operation Agreement, (l) the interests of the Facility Lessee, the
Other RockGen Owner Participants, the Other RockGen Owner Lessors, the
Other RockGen Lessor Managers, the Other RockGen Indenture Trustees, and
Pass Through Trustees under any of the Other RockGen Operative Documents,
(m) the Ownership and Operation Agreement and (n) the interest of the
co-owners of the Facility as tenants in common in the Facility and the
rights of such owners under the Ownership and Operation Agreement.
"PERSON" shall mean any individual, corporation, cooperative, partnership,
joint venture, association, joint-stock company, limited liability
company, other entity, trust, unincorporated organization or government or
any agency or political subdivision thereof or any other entity.
"PLAN" shall mean any pension plan as defined in Section 3(2) of ERISA,
which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Facility Lessee or a Subsidiary of the
Facility Lessee or an ERISA Affiliate, and each such plan for the five
year period immediately following the latest date on which Facility
Lessee, or a Subsidiary of Facility Lessee or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"POWER MARKET CONSULTANT" shall mean Pace Energy Global Services, LLC.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of
such corporation, over shares of Capital Stock of any other class of such
corporation.
"PRICING ASSUMPTIONS" shall mean the "Pricing Assumptions" (attached as
Schedule 2 to the Participation Agreement) for the Facility Lease,.
"PRIME RATE" shall mean the rate of interest publicly announced by
Citibank, N.A. from time to time as its prime rate.
"PROCEEDS" shall mean the proceeds from the sale of the Certificates by
the Pass Through Trust to the Certificateholders on the Closing Date.
"PROPORTIONAL RENTAL AMOUNT" shall have the meaning set forth in Section
3.2(c) of the Facility Lease.
"PROPOSED TAX LAW CHANGE" shall mean a Tax Law Change (a) that has been
reported out of the Senate Finance Committee of the House Ways and Means
Committee, (b) that has been included in the issuance or amendment of a
proposed Treasury Regulation, (c) that is part of a ββββ that has been
introduced into the House of Representatives or the Senate and which has
been publicly endorsed by the Executive Branch or the Department of
Treasury, or (d) with respect to which a notice of a specific proposed
change in
33
administrative guidance has been issued by the Internal Revenue Service or
the Department of Treasury and which has been published in the Federal
Register.
"PRUDENT INDUSTRY PRACTICE" shall mean, at a particular time, (a) any of
the practices, methods and acts engaged in or approved by a significant
portion of the competitive electric generating industry at such time, or
(b) with respect to any matter to which clause (a) does not apply, any of
the practices, methods and acts which, in the exercise of reasonable
judgment at the time the decision was made, could have been expected to
accomplish the desired result at a reasonable cost consistent with good
business practices, reliability, safety and expedition. "Prudent Industry
Practice" is not intended to be limited to the optimum practice, method or
act to the exclusion of all others, but rather to be a spectrum of
possible practices, methods or acts having due regard for, among other
things, manufacturers' warranties and the requirements of any Governmental
Entity of competent jurisdiction.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended.
"PURCHASE PRICE" with respect to the Undivided Interest, shall mean
$56,250,000.
"QUALIFYING CASH BIDS" with respect to the Facility Lease, shall have the
meaning specified in Section 13.2 of the Facility Lease.
"RATING AGENCIES" shall mean S&P and βββββ�'β�.
"REASONABLE BASIS" for a position shall exist if tax counsel may properly
advise reporting such position on a tax return in accordance with Formal
Opinion 85-352 issued by the Standing Committee on Ethics and Professional
Responsibility of the American Bar Association (or any successor to such
opinion).
"REBUILDING CLOSING DATE" with respect to the Facility Lease, shall have
the meaning specified in Section 10.3(e) of the Facility Lease.
"RECEIVING PARTY" shall have the meaning set forth in Section 14.21 of the
Participation Agreement.
"REDEMPTION DATE" shall mean, when used with respect to any Note to be
redeemed, the date fixed for such redemption by or pursuant to the
Collateral Trust Indenture or the respective Note, which date shall be a
Termination Date.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness of the Guarantor or a
Restricted Subsidiary existing on the date of the Guaranty or Incurred in
compliance with the Indenture, dated as of August 10, 2000, between the
Guarantor and Wilmington Trust Company, as Trustee (including Indebtedness
of the Guarantor that refinances Indebtedness of any Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary that refinances Indebtedness
of another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness;
34
provided, however, that (i) if the Indebtedness being refinanced is
contractually subordinated in right of payment to the Obligations, the
Refinancing Indebtedness shall be contractually subordinated in right of
payment to such Obligations to at least the same extent as the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness is
scheduled to mature either (a) no earlier than the Indebtedness being
refinanced or (b) after the Stated Maturity of the Obligations, (iii) the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life
of the Indebtedness being refinanced and (iv) such Refinancing
Indebtedness is in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or
less than the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding (plus fees and
expenses, including any premium, swap breakage and defeasance costs) under
the Indebtedness being refinanced; and provided, further, that Refinancing
Indebtedness shall not include (x) Indebtedness of a Subsidiary of the
Guarantor that refinances Indebtedness of the Guarantor or (y)
Indebtedness of the Guarantor or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"REGISTRAR" shall have the meaning set forth in Section 2.8 of the
Collateral Trust Indenture.
"REGULATORY EVENT OF LOSS" shall have meaning specified in clause (iv) of
the definition of "Event of Loss".
"RELATED PARTY" shall mean, with respect to any Person or its successors
and assigns, an Affiliate of such Person or its successors and assigns and
any director, officer, servant, employee or agent of that Person or any
such Affiliate or their respective successors and assigns; provided that
none of the Trust Company, the Lessor Manager or the Owner Lessor shall be
treated as Related Parties to each other and none of the Trust Company,
the Owner Lessor or the Lessor Manager shall be treated as a Related Party
to any Owner Participant Equity Investor except that, for purposes of
Section 9 of the Participation Agreement, the Owner Lessor will be treated
as a Related Party to an Owner Participant to the extent that the Owner
Lessor acts on the express direction or with the express consent of an
Owner Participant.
"RELEASE" shall mean any release, pumping, pouring, emptying, injecting,
escaping, leaching, migrating, dumping, seepage, spill, flow, leak,
discharge, disposal or emission.
"RENEWAL RENT" with respect to the Facility Lease, shall mean the rent
payable during any Renewal Lease Term, in each case as determined in
accordance with Section 15.4 of the Facility Lease.
"RENEWAL LEASE TERM" with respect to the Facility Lease, shall mean the
First Renewal Lease Term, the Second Renewal Term, any FMV Renewal Lease
Term or the Lessor Put Renewal Term.
35
"RENEWAL SITE LEASE TERM(S)" individually or collectively as the context
shall require, with respect to the Facility Site Lease, shall have the
meaning set forth in Section 2.2(b) of the Facility Site Lease.
"RENEWAL TERM" shall have the meaning set forth in Section 2.1(b) of the
Facility Site Sublease.
"RENT" shall mean Basic Rent, Renewal Rent and Supplemental Rent.
"RENT PAYMENT DATE" with respect to the Facility Lease, shall mean,
January 18, 2002 each May 30 and November 30 occurring thereafter (through
and including May 30, 2031) and October 18, 2031.
"RENT PAYMENT PERIOD" with respect to the Facility Lease, shall mean (i)
in the case of the first Rent Payment Period the period commencing on the
Closing Date and ending on January 18, 2002 (ii) in the case of the second
Rent Payment Period, the period commencing on January 19, 2002 and ending
on May 30, 2002 and (iii) in all cases thereafter (except for the last
Rent Payment Period which period shall commence on May 31, 2031 and end
on, and include, October 18, 2031) each six-month period commencing on
each Rent Payment Date through and including the following May 30 or
November 30 as the case may be.
"REPLACEMENT COMPONENT" shall have the meaning specified in Section 7.2 of
the Facility Lease.
"REQUIRED IMPROVEMENT" with respect to the Facility Lease, shall have the
meaning specified in Section 8.1 of the Facility Lease.
"REQUISITION" shall have the meaning specified in clause (iii) of the
definition of "Event of Loss".
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, (i) its
Chairman of the Board, its President, any Senior Vice President, the Chief
Financial Officer, any Vice President, the Treasurer or any other
management employee (a) that has the power to take the action in question
and has been authorized, directly or indirectly, by the Board of Directors
or equivalent body of such Person, (b) working under the direct
supervision of such Chairman of the Board, President, Senior Vice
President, Chief Financial Officer, Vice President or Treasurer and (c)
whose responsibilities include the administration of the Overall
Transaction and (ii) with respect to the Pass Through Trustees and the
Indenture Trustee an officer in their respective corporate trust
departments.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Guarantor that is not
designated an Unrestricted Subsidiary by the Board of Directors.
"REVENUES" shall have the meaning specified in clause (2) of the Granting
Clause of the Collateral Trust Indenture.
36
"ROCKGEN PPA" shall mean the Power Purchase Agreement dated as of August
10, 1998 (as amended by Amendment No. 1 dated December 22, 1998 and
Amendment No. 2 dated December 16, 1999) by and between the Buyers and the
Facility Lessee, as the same may hereafter be further amended (subject to
Section 5.33 of the RockGen PPA).
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property
now owned or hereafter acquired whereby the Guarantor or a Subsidiary
transfers such property to a Person and leases it back from such Person,
other than leases for a term of not more than 36 months or between the
Guarantor and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"SCHEDULED CLOSING DATE" shall mean October 18, 2001.
"SEC" shall mean the Securities and Exchange Commission.
"SECOND RENEWAL LEASE TERM" with respect to the Facility Lease, shall have
the meaning specified in Section 15.1(b) of the Facility Lease.
"SECOND WINTERGREEN RENEWAL LEASE OPTION" with respect to the Facility
Site Lease, shall have the meaning set forth in Section 2.2(a)(ii) of the
Facility Site Lease.
"SECTION 467 INTEREST" with respect to the Facility Lease, shall have the
meaning set forth in Section 3.2(d) of the Facility Lease.
"SECTION 467 LOAN" with respect to the Facility Lease, shall have the
meaning specified in Section 3.2(d) of the Facility Lease.
"SECURED INDEBTEDNESS" shall have the meaning specified in Section 1(b)
of the Collateral Trust Indenture.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SEVERABLE IMPROVEMENT" shall mean any Improvement that is readily
removable without causing material damage to the Facility.
"SIGNIFICANT LEASE DEFAULT" shall mean, with respect to the Facility
Lease, (i) an event that is, or solely with the passage of time or the
giving of notice (or both) would become, a "Lease Event of Default" under
clauses (a), (b), (c), (g), (h) or (k) of Section 16 of the Facility
Lease, (ii) the failure of the Facility Lessee to comply in any material
respect with its obligations under Section 6 of the Facility Lease and
(iii) the occurrence and continuation of a Significant Lease Default under
any Other RockGen Facility Lease.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary (other than an Unrestricted
Subsidiary) that would be a "Significant Subsidiary" of the Guarantor
within the meaning of Rule 1-02 under Regulation S-X promulgated by the
SEC.
"SITE LEASE EVENT OF DEFAULT" with respect to the Facility Site Lease,
shall have the meaning set forth in Section 14.1 of the Facility Site
Lease.
37
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
ββββββ-ββββ Companies, Inc. or any successor thereto.
"SOUTH POINT ASSIGNMENT AGREEMENTS" shall mean each of the assignment
agreements executed and delivered pursuant to the South Point
Participation Agreements.
"SOUTH POINT CALPINE GUARANTIES" shall mean the Calpine guaranty and
payment agreements executed and delivered by Calpine pursuant to the South
Point Participation Agreements.
"SOUTH POINT COLLATERAL TRUST INDENTURES" shall mean each of the
collateral trust indentures executed and delivered pursuant to the South
Point Participation Agreements.
"SOUTH POINT FACILITY LEASES" shall mean a collective reference to each
of the four facility lease agreements, dated as of October 18, 2001, by
and between the applicable South Point Owner Lessor and the South Point
Facility Lessee, pursuant to which the South Point Owner Lessor will lease
the applicable South Point Undivided Interests to the South Point Facility
Lessee.
"SOUTH POINT FACILITY LESSEE" shall mean South Point Energy Center, LLC.
"SOUTH POINT FACILITY SITE" shall have the meaning set forth in the
recitals to the South Point Facility Site Leases.
"SOUTH POINT FACILITY SITE LEASES" shall mean a collective reference to
each of the four facility site leases, dated as of October 18, 2001, by
and between the applicable South Point Owner Lessor and the South Point
Facility Lessee, pursuant to which South Point Owner Lessor will lease the
applicable South Point Ground Interests to the South Point Facility Lessee.
"SOUTH POINT GROUND INTERESTS" shall mean the undivided leasehold
interests in the South Point Facility Site conveyed to the South Point
Owner Lessors under the South Point Facility Site Leases.
"SOUTH POINT INDENTURE TRUSTEES" shall mean each of the indenture
trustees relating to the South Point Collateral Trust Indentures.
"SOUTH POINT LEASE TRANSACTIONS" shall mean the transactions involving
the assignment and transfer of the South Point Undivided Interests and the
South Point Ground Interests to the South Point Owner Lessors, and the
simultaneous lease of the South Point Undivided Interests and the South
Point Ground Interests to the South Point Facility Lessee on substantially
the same terms and conditions as under, and dated the same date as, the
South Point Overall Transaction.
"SOUTH POINT LESSOR MANAGERS" shall mean each of the lessor managers
acting on behalf of the South Point Owner Lessors pursuant to the South
Point Operative Documents.
38
"SOUTH POINT OWNER LESSORS" shall mean South Point OL-1, LLC βββββ� βββββ�
ββ-β�, βββ�, βββββ� βββββ� ββ-β�, LLC and South Point OL-4, LLC.
"SOUTH POINT OWNER PARTICIPANTS" shall mean SBR OP-1, LLC, SBR OP-2, LLC,
SBR OP-3, LLC and SBR OP-4, LLC.
"SOUTH POINT OPERATIVE DOCUMENTS" shall mean the other "Operative
Documents" for each of the South Point Lease Transactions.
"SOUTH POINT OVERALL TRANSACTION" shall mean all of the transactions
contemplated by the South Point Operative Documents.
"SOUTH POINT PARTICIPATION AGREEMENTS" shall mean a collective reference
to each of the four separate participation agreements entered into by the
South Point Facility Lessee, the applicable South Point Owner Lessor, the
applicable South Point Lessor Manager, the applicable South Point Owner
Participant, the applicable South Point Indenture Trustee, the Pass
Through Trustees and Calpine and designated Participation Agreement
(SP-1), Participation Agreement (SP-2), Participation Agreement (SP-3) and
Participation Agreement (SP-4), each dated as of the Closing Date,
pursuant to which, among other things, the South Point Facility Lessee has
agreed to (a) sell to the applicable South Point Owner Lessors certain
undivided interests in the South Point Facility, and (b) lease from the
applicable South Point Owner Lessors such undivided interest in the South
Point Facility pursuant to the South Point Facility Leases.
"SOUTH POINT UNDIVIDED INTERESTS" shall mean the undivided ownership
interests in the South Point Facility conveyed to the South Point Owner
Lessors under the South Point Bills of Sale.
"SPECIAL LESSEE TRANSFER" shall have the meaning specified in Section
13.2 of the Participation Agreement.
"SPECIAL LESSEE TRANSFER AMOUNT" shall mean for any date, the amount
determined as follows (but without duplication):
(a) (i) if the determination shall be a Termination Date, the Termination
Value under the Facility Lease on such date, or (ii) if such date shall
not be a Termination Date, the Termination Value under the Facility Lease
on the immediately succeeding Termination Date; plus
(b) (i) any unpaid Basic Rent or Renewal Rent due before the date of
determination plus (ii) if the determination date is a Rent Payment Date,
the Basic Rent or Renewal Rent due on that date (to the extent payable in
arrears); minus
(c) the sum of all outstanding principal, premium, if any, and accrued
interest on the Lessor Notes, if any, on such determination date (in each
case, if such determination date is a Rent Payment Date, before taking
into account any Basic Rent or Renewal Rent due on such determination
date).
39
"SPECIAL LESSEE TRANSFER EVENT" shall mean the occurrence of (i) a
Regulatory Event of Loss, (ii) a Burdensome Buyout Event under Section
13.1 of the Facility Lease, or (iii) if the Owner Lessor has agreed to
sell and the Facility Lessee has agreed to buy the Undivided Interest, a
Burdensome Buyout Event under Section 13.2 of the Facility Lease.
"STATED MATURITY" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security
is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of
such security at the option of the holder thereof upon the happening of
any contingency).
"SUBSIDIARY" shall mean, with respect to any Person (the "parent"), any
corporation or other entity of which sufficient securities or other
ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are
at the time directly or indirectly owned by such parent.
"SUPPLEMENTAL FINANCING" shall have the meaning specified in Section 11.1
of the Participation Agreement.
"SUPPLEMENTAL RENT" shall mean any and all amounts, liabilities and
obligations (other than Basic Rent and Renewal Rent) which the Facility
Lessee assumes or agrees to pay under the Operative Documents (whether or
not identified as "Supplemental Rent") to the Owner Lessor or any other
Person, including, without limitation, Termination Value.
"SURVEY" shall mean a survey of the Facility Site, to be delivered after
the Closing Date pursuant to Section 5.16 of the Participation Agreement,
which inter alia, will show the location of the Facility Site.
"TAX" or "TAXES" shall mean all fees (including license, documentation
and registration fees), taxes (including, without limitation, income
taxes, receipts, franchise, rental, turn over sales taxes, use taxes,
stamp taxes, value-added taxes, excise taxes, ad valorem taxes and
property taxes (personal and real, tangible and intangible)), licenses,
exports, duties, recording charges, levies, assessments, withholdings ,
fees, assessments and other charges and impositions of any nature, plus
all related interest, penalties, fines and additions to tax, now or
hereafter imposed by any federal, state, local or foreign government or
other taxing authority.
"TAX ADVANCE" shall have the meaning specified in Section 9.2(g)(iii)(5)
of the Participation Agreement.
"TAX ASSUMPTIONS" shall mean the items described in Section 1 of the Tax
Indemnity Agreement.
"TAX BENEFIT" shall have the meaning set forth in Section 9.2(e) of the
Participation Agreement.
"TAX CLAIM" shall have the meaning set forth in Section 9.2(g)(i) of the
Participation Agreement.
40
"TAX EVENT" shall mean any event or transaction that will be a taxable
transaction to the holders of the Lessor Notes (or any Certificateholder)
or result in an adverse change in the tax characterization of the Pass
Through Trust.
"TAX INDEMNITEE" shall have the meaning set forth in Section 9.2(a) of
the Participation Agreement.
"TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement (RG-1),
dated as of the Closing Date, between the Facility Lessee and the Owner
Participant.
"TAX LAW CHANGE" shall have the meaning specified in Section 12(a) of the
Participation Agreement.
"TAX REPRESENTATION" shall mean each of the items described in Section 4
of the Tax Indemnity Agreement.
"TAXES AND ASSESSMENTS" with respect to the Facility Site Lease, shall
have, collectively, the meaning set forth in Section 18.1 of the Facility
Site Lease.
"TERM" with respect to the Facility Site Lease or the Facility Site
Sublease, shall have the meaning set forth in Section 2.2(b) of the
Facility Site Lease or Section 2.1(b) of the Facility Site Sublease.
"TERMINATION DATE" with respect to the Facility Lease, shall mean each of
the monthly dates during the Facility Lease Term identified as a
"Termination Date" on Schedule 2 of the Facility Lease.
"TERMINATION PAYMENT DATE" with respect to the Facility Lease, shall have
the meaning specified in Section 10.2(a) of the Facility Lease.
"TERMINATION VALUE" with respect to the Facility Lease and each
Termination Date, shall mean the amount specified on Schedule 2 to the
Facility Lease as the corresponding "Termination Value".
"THIRD PARTY CONSENTS" shall mean each of the following consents, the
form of which is attached hereto as Exhibit M: (a) Clarification Letter
from Duke Energy Trading and Marketing, L.L.C. ("DETM") with respect to
the Tolling Agreement, dated as of January 8, 1999 (as amended), between
DETM and the Facility Lessee; and (b) Consent and Agreement from ANR
Pipeline Company ("ANR") with respect to the Interconnection Agreement,
dated as of May 28, 1999 (as amended), between ANR and the Facility Lessee.
"TIA" shall mean the Trust Indenture Act of 1939.
"TITLE COMPANY" shall mean, First American Title Insurance Company.
"TITLE POLICY" shall mean, the title insurance policy (#0303-7538-630)
dated as of October 18, 2001.
41
"TRANSACTION COSTS" shall mean the following costs, to the extent
substantiated or otherwise supported in reasonable detail:
(i) the reasonable costs of reproducing and printing the Operative
Documents and all costs and fees, including, but not limited to, filing
and recording fees and recording, transfer, mortgage, intangible and
similar taxes in connection with the execution, delivery, filing and
recording of the Facility Lease, the Facility Site Lease, and any other
Operative Document and any other document required to be filed or recorded
pursuant to the provisions hereof or of any other Operative Document and
any Uniform Commercial Code filing fees in respect of the perfection of
any security interests created by any of the Operative Documents or as
otherwise reasonably required by the Owner Lessor or the Indenture Trustee
and surveyor fees;
(ii) the reasonable fees and expenses of βββββ� ββββββββββ LLP, counsel to
the Owner Participant and the Owner Lessor for their services rendered in
connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;
(iii) the reasonable fees and expenses of ββββββββ, βββββββ� Van Deuren,
ββββββ & Rieselbach, S.C.,Wisconsin counsel to the Facility Lessee;
(iv) the reasonable fees and expenses of ββββββ ββββ & Priest LLP,
counsel to the Facility Lessee and the Guarantor for their services
rendered in connection with the negotiation, execution and delivery of the
Participation Agreement and other Operative Documents;
(v) the reasonable fees and expenses of βββββ� ββββββ & Tremaine LLP,
special regulatory counsel to the Facility Lessee;
(vi) the reasonable fees and expenses of Skadden, Arps, Slate, βββββββ�
and ββββ LLP, counsel to the Underwriter, for their services rendered in
connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;
(vii) the reasonable fees and expenses for services rendered in
connection with the recording of the Memorandum of Lease, the Memorandum
of Facility Site Lease and the other applicable Operative Documents;
(viii) the reasonable fees and expenses of βββββββ� ββββ LLP, counsel for
the Indenture Trustee and the Lease Indenture Company and the Pass Through
Company and the Pass Through Trustees, for their services rendered in
connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;
(ix) the reasonable fees, expenses and disbursements of the Indenture
Trustee and Pass Through Trustees in connection with the execution and
delivery of the Participation Agreement and the other Operative Documents
to which either one is or will be a party;
42
(x) the fees and expenses of the Engineering Consultant, for its services
rendered in connection with delivering the Engineering Report required by
Section 4.17 of the Participation Agreement;
(xi) the fees and expenses of the other consultants listed in Section
4.17 of the Participation Agreement, for their respective services
rendered in connection with delivering the reports required by such
Section 4.17;
(xii) the fees and expenses of the Appraiser, for its services rendered
in connection with delivering the Closing Appraisal required by Section
4.15 of the Participation Agreement;
(xiii) the fees and expenses of the Environmental Consultant retained by
the Owner Participant;
(xiv) the debt and equity arrangement fees set forth in the letter
agreement dated July 24, 2001 between CSFB and Calpine, and its reasonable
out-of-pocket costs and expenses payable to the Underwriter;
(xv) the reasonable underwriting fees, legal fees, expenses and
disbursement of the Initial Purchasers and any discounts or commissions in
connection with the sale of the Certificates;
(xvi) all reasonable costs and expenses incurred pursuant to the
syndication and/or sale of the debt and equity;
(xvii) the fees and expenses of the Rating Agencies in connection with
the rating of the Certificates;
(xviii) the out-of-pocket expenses of the Owner Participant, Indenture
Trustee and the Pass Through Trustees incurred in connection with the
Overall Transaction including cost of the title insurance and fees and
expenses, if any, related to delivery of any non-consolidation opinions;
and
(xix) the fees and expenses set forth in the letter agreement dated
August 1, 2001 between Newcourt Capital Securities, Inc. and Calpine.
Notwithstanding the foregoing, Transaction Costs shall not include
internal costs and expenses such as salaries and overhead of whatsoever
kind or nature nor costs incurred by the parties to the Participation
Agreement pursuant to arrangements with third parties for services (other
than those expressly referred to above), such as computer time procurement
(other than out-of-pocket expenses of the Owner Participant), financial
analysis and consulting, advisory services, and costs of a similar nature.
"TRANSACTION PARTY" shall mean, individually or collectively, as the
context shall require, all or any of the parties to the Operative
Documents (including the Lease Indenture Company and the Pass Through
Company).
43
"TRANSACTIONS" shall mean, collectively, each of the transactions
contemplated under the Participation Agreement and the other Operative
Documents.
"TRANSFEREE" shall mean a transferee of the Owner Participant permitted
by Section 7.1 of the Participation Agreement.
"TRANSFEREE GUARANTOR" shall have the meaning set forth in Section
7.1(a)(iii) of the Participation Agreement.
"TREASURY REGULATIONS" shall mean regulations, including temporary
regulations, promulgated under the Code.
"TRUST COMPANY" shall mean βββββ� Fargo Bank Northwest, National
Association.
"UNDERWRITER" shall mean CSFB.
"UNDIVIDED INTEREST" shall mean the Owner Lessor's 25% undivided interest
in the Facility.
"UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount, if any,
by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial
assumptions at such time consistent with those prescribed by the PBGC for
purposes of Section 4044 of ERISA, exceeds the fair market value of all
plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions).
"UNIFORM COMMERCIAL CODE" or "UCC" shall mean the Uniform Commercial Code
as in effect in the applicable jurisdiction.
"UNITED STATES PERSON" shall have the meaning specified in Section
7701(a)(30) of the Code or any successor provision thereto.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board
of Directors in the manner provided by the Indenture, dated as of August
10, 2000, between the Guarantor and Wilmington Trust Company, as Trustee
and (ii) any Subsidiary of an Unrestricted Subsidiary.
"VERIFIER" shall have the meaning specified in Section 3.4(c) of the
Facility Lease.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary (other than an Unrestricted
Subsidiary) all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Guarantor or another Wholly Owned
Subsidiary.
44