Exhibit 4.22.12
EXECUTION COPY
PARTICIPATION AGREEMENT (RG-2)
Dated as of October 18, 2001
among
ROCKGEN ENERGY LLC, as Facility Lessee,
ROCKGEN OL-2, LLC, as Owner Lessor,
WELLS 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-2, 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 Representations, 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 8COVENANTS 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
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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 Bill 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-2), (the "Calpine Guaranty"), (iii)
ROCKGEN OL-2, LLC, a Delaware limited liability company (the "Owner
Lessor"), (iv) SBR OP-2, 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) WELLS 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 Bill 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 Bill 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 Bill 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 Bill 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 Bill 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 Bill 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 Dewey Ballantine 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)
4
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
6
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, 50 West San Fernando Street, 5th Floor, San Jose, CA 95113.
(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 Bill 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 1209 Orange Street, Wilmington, Delaware
19801, 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 Moody's 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 Dewey Ballantine 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) Ronald W.
Fischer, 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) Thelen Reid & Priest LLP, special counsel to the Facility
Lessee and Guarantor, (c) Davis Wright & Tremaine LLP, special regulatory
counsel to the Facility Lessee, (d) Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, S.C., Wisconsin counsel to the Facility Lessee, the Owner
Participant, the Owner Lessor and the Initial Purchasers, (e) Karen Scowcroft,
Esq., in-house counsel to the Equity Investor, (f) Dewey Ballantine LLP, counsel
to the Owner Participant and to the Owner Lessor, (g) Bingham Dana LLP, counsel
to the Lease Indenture Company and the Indenture Trustee, (h) Bingham Dana LLP,
counsel to the Pass Though Trustees and the Pass Through Company, and (i) Ray
Quinney & Nebeker, 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.
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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 Arthur Andersen
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.
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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;
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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
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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.
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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
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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),
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(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
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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 Moody's;
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.
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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
650 Dundee Road, Suite 350
Northbrook, IL 60062
Attention: Senior Counsel
Telephone: (847) 559-9800
Facsimile: (847) 559-1805
with a copy to:
Calpine Corporation
50 West San Fernando Street, 5th Floor
San Jose, California 95113
Attention: Asset Manager and General Counsel
Telephone: (408) 995-5115
Facsimile: (408) 995-0505
If to the Guarantor:
Calpine Corporation
50 West San Fernando Street, 5th Floor
San Jose, California 95113
Attention: Asset Manager and General Counsel
Telephone: (408) 995-5115
Facsimile: (408) 995-0505
If to the Owner Lessor, the Trust Company or the Lessor Manager:
c/o Wells Fargo Bank Northwest, National Association
MAC U1254-031
79 South Main Street
70
Salt Lake City, UT 84111
Telephone: (801) 246-5630
Facsimile: (801) 246-5053
Attention: Corporate Trust Services
If to the Owner Participant:
SBR OP-2, LLC
c/o Wells Fargo Bank Northwest, National Association
MAC U1254-031
79 South Main Street
Salt Lake City, UT 84111
Telephone: (801) 246-5630
Facsimile: (801) 246-5053
Attention: Corporate Trust Services
with a copy to:
Newcourt Capital USA Inc.
1211 Avenue of the Americas - 22nd Floor
New York, New York 10036
Telephone: (212) 382-7255
Facsimile: (212) 382-9033
Attention: Managing Director
71
If to the Indenture Trustee:
State Street Bank and Trust Company of Connecticut, National
Association
225 Asylum Street, Goodwin Square
Hartford, CT 06103
Telephone No.: (860) 244-1822
Facsimile No.: (860) 244-1889
Attn: Corporate Trust Department
with a copy to:
State Street Bank and Trust Company of California, National
Association
633 West 5th Street, 12th floor
Los Angeles, California 90071
Telephone No.: (213) 362-7373
Facsimile No.: (213) 362-7357
Attention: Corporate Trust Department
If to the Pass Through Trustees:
State Street Bank and Trust Company of Connecticut, National
Association
225 Asylum Street, Goodwin Square
Hartford, CT 06103
Telephone No.: (860) 244-1822
Facsimile No.: (860) 244-1889
Attn: Corporate Trust Department
with a copy to:
State Street Bank and Trust Company of California, National
Association
633 West 5th Street, 12th floor
Los Angeles, California 90071
Telephone No.: (213) 362-7373
Facsimile No.: (213) 362-7357
Attention: Corporate Trust Department
If to the Manager:
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Telephone No.: (212) 325-2000
Attention: Richard 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., 440 Ninth
Avenue, 5th Floor, New York, New York 10001, and the Owner Lessor
designates, appoints and empowers CT Corporation System, with an office at
111 Eighth Avenue, New York, New York 10011, 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: Franklin D. Roosevelt, Harry S.
Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M.
Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan, George H.W. Bush,
William J. Clinton and George W. Bush 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-2 LLC, a Delaware limited liability company
By: WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
not in its individual capacity but solely as
Lessor Manager
By: _________________________________
Name:
Title:
Date:
SBR OP-2 LLC, a Delaware limited liability company
By: WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION
not in its individual capacity but solely as
Lessor Manager
By: _________________________________
Name:
Title:
Date:
WELLS 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;
(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
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S&P and by Moody's, 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
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(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
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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.
"BILL OF SALE" shall mean the Bill of Sale (RG-2) dated as of the
Closing Date between the Facility Lessee and the Owner Lessor,
substantially in the form of Exhibit B-1 to the
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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.
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"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 OL-2, LLC, Broad River OL-3, 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.
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"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-2) 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.
8
"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-2), 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
9
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)
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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-2), 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 Webster 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 Clayton 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.
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"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
12
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
13
(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
14
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, sue 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-2), 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.
15
"FACILITY SITE LEASE" shall mean the Facility Site Lease (RG-2), 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-2),
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
16
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.
17
"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.
18
"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.
19
"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.
20
"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 Marsh 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
21
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 Wells 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.
22
"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-2), 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.
23
"MEMORANDUM OF FACILITY SITE SUBLEASE" shall mean the Memorandum of
Facility Site Sublease (RG-2), 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-2), 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 Moody's 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.
24
"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 Bill
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 Ronald W. Fischer or any other internal counsel
of Calpine, as to matters contained in such opinions delivered at
Closing, and as to all other matters, Thelen Reid & Priest LLP and/or
Davis Wright & 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.
25
"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.
26
"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 OL-1, LLC, RockGen
OL-3, LLC and RockGen OL-4, LLC.
"OTHER ROCKGEN OWNER PARTICIPANTS" shall mean SBR OP-1, 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-1), 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 Bill 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,
27
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-2, LLC, a Delaware limited
liability company created for the benefit of the Owner Participant.
"OWNER LESSOR'S ACCOUNT" shall mean Wells Fargo Bank Northwest, National
Association, Salt Lake City,Utah, ABA # 121-000-248, Account: Corporate
Trust Services, Account # 051-0922115, Credit to: RockGen OL-2, 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-2, 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
28
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, Wells 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.
29
"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 Moody's 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
30
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
31
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 bill 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
32
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 Moody's.
"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;
33
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.
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"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.
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"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.
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"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw-Hill 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.
37
"SOUTH POINT OWNER LESSORS" shall mean South Point OL-1, LLC South Point
OL-2, LLC, South Point OL-3, 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).
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"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.
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"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-2),
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.
40
"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 Dewey Ballantine 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 Reinhart, Boerner Van Deuren,
Norris & Rieselbach, S.C.,Wisconsin counsel to the Facility Lessee;
(iv) the reasonable fees and expenses of Thelen Reid & 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 Davis Wright & Tremaine LLP,
special regulatory counsel to the Facility Lessee;
(vi) the reasonable fees and expenses of Skadden, Arps, Slate, Meagher
and Flom 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 Bingham Dana 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;
41
(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).
42
"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 Wells 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.
43