EXHIBIT 10.1.11
EXECUTION VERSION
================================================================================
CREDIT AGREEMENT
dated as of February 25, 2005
among
CALPINE STEAMBOAT HOLDINGS, LLC
(Borrower)
COBANK, ACB
(Lead Arranger, Co-Syndication Agent, Underwriter and Co-Book Runner)
CALYON NEW YORK BRANCH
(Lead Arranger, Underwriter, Collateral Agent,
Administrative Agent, LC Issuer and Co-Book Runner)
UFJ BANK LIMITED
(Lead Arranger, Co-Documentation Agent and Underwriter)
HSH NORDBANK AG
(Lead Arranger, Co-Documentation Agent and Underwriter)
BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH
(Lead Arranger, Co-Syndication Agent and Underwriter)
and
THE FINANCIAL INSTITUTIONS PARTIES HERETO
(Lenders)
---------------------------------
Freeport Energy Center
250 MW Cogeneration Facility
Freeport, Texas
Mankato Energy Center
375 MW Combined Cycle Electricity Generation Facility
Blue Earth County, Minnesota
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS............................................................................ 2
1.1 Definitions.................................................................. 2
1.2 Rules of Interpretation...................................................... 2
ARTICLE 2 THE CREDIT FACILITIES.................................................................. 2
2.1 Loan Facilities.............................................................. 2
2.2 Security Fund LC Facility.................................................... 12
2.3 Total Commitments............................................................ 14
2.4 Fees......................................................................... 15
2.5 Security Fund LC Fees........................................................ 15
2.6 Other Payment Terms.......................................................... 16
2.7 Pro Rata Treatment........................................................... 20
2.8 Change of Circumstances...................................................... 20
2.9 Funding Losses............................................................... 23
2.10 Alternate Office; Minimization of Costs...................................... 23
ARTICLE 3 CONDITIONS PRECEDENT................................................................... 24
3.1 Conditions Precedent to the Closing Date..................................... 24
3.2 Conditions Precedent to Each Credit Event.................................... 33
3.3 Conditions Precedent to Term-Conversion...................................... 37
3.4 Conditions Precedent to Use of Proceeds Outside of Initial Allocated
Portions..................................................................... 39
3.5 No Approval of Work.......................................................... 40
3.6 Adjustment of Drawdown Requests.............................................. 40
ARTICLE 4 REPRESENTATIONS AND WARRANTIES......................................................... 40
4.1 Organization................................................................. 40
4.2 Authorization; No Conflict................................................... 42
4.3 Enforceability............................................................... 43
4.4 Compliance with Law.......................................................... 44
4.5 Business, Debt, Contracts, Joint Ventures Etc................................ 45
4.6 Adverse Change............................................................... 46
4.7 Investment Company Act....................................................... 46
4.8 ERISA........................................................................ 47
4.9 Permits...................................................................... 47
4.10 Hazardous Substances......................................................... 48
4.11 Litigation................................................................... 49
4.12 Labor Disputes and Acts of God............................................... 50
4.13 Project Documents............................................................ 50
i
4.14 Disclosure................................................................... 50
4.15 Private Offering by Borrower................................................. 51
4.16 Taxes........................................................................ 51
4.17 Governmental Regulation...................................................... 51
4.18 Regulation U, Etc............................................................ 52
4.19 Budgets; Projections......................................................... 52
4.20 Financial Statements......................................................... 53
4.21 No Default................................................................... 53
4.22 Organizational ID Number; Location of Collateral............................. 53
4.23 Title and Liens.............................................................. 53
4.24 Intellectual Property........................................................ 54
4.25 Collateral................................................................... 54
4.26 Sufficiency of Project Documents............................................. 55
4.27 Utilities.................................................................... 56
4.28 Other Facilities............................................................. 56
4.29 Proper Subdivision........................................................... 56
4.30 Flood Zone Disclosure........................................................ 56
4.31 Tax Shelter Regulations...................................................... 56
ARTICLE 5 AFFIRMATIVE COVENANTS.................................................................. 57
5.1 Use of Proceeds, Equity Contributions and Project Revenues................... 57
5.2 Payment...................................................................... 58
5.3 Warranty of Title............................................................ 58
5.4 Notices...................................................................... 58
5.5 Financial Statements......................................................... 61
5.6 Books, Records, Access....................................................... 62
5.7 Compliance with Laws, Instruments, Applicable Permits, Etc................... 63
5.8 Reports...................................................................... 63
5.9 Existence, Conduct of Business, Properties, Etc.............................. 64
5.10 Debt Service Coverage Ratio; Debt to Equity Ratio............................ 64
5.11 Indemnification.............................................................. 65
5.12 Exemption from Regulation.................................................... 68
5.13 Construction of the Projects................................................. 68
5.14 Operation and Maintenance of Projects; Annual Operating Budget............... 69
5.15 Preservation of Rights; Further Assurances................................... 70
5.16 Additional Consents.......................................................... 72
5.17 Drawstop Funds............................................................... 72
5.18 Maintenance of Insurance..................................................... 72
5.19 Taxes, Other Government Charges and Utility Charges.......................... 72
5.20 Event of Eminent Domain...................................................... 73
5.21 Interest Rate Protection..................................................... 73
5.22 Additional Permits........................................................... 74
5.23 Special Purpose Entity....................................................... 74
ii
5.24 The Patriot Act.............................................................. 75
5.25 Certain Rights Under Dow Agreements.......................................... 75
5.26 Project Representative....................................................... 75
5.27 Alternate Waterline Easements................................................ 75
ARTICLE 6 NEGATIVE COVENANTS..................................................................... 76
6.1 Contingent Liabilities....................................................... 76
6.2 Limitations on Liens......................................................... 76
6.3 Indebtedness................................................................. 76
6.4 Sale or Lease of Assets...................................................... 76
6.5 Changes...................................................................... 77
6.6 Distributions................................................................ 77
6.7 Investments.................................................................. 80
6.8 Transactions With Affiliates; Subordination Agreements....................... 80
6.9 Regulations.................................................................. 80
6.10 Partnerships, etc............................................................ 80
6.11 Dissolution; Merger.......................................................... 80
6.12 Amendments; Change Orders; Completion........................................ 81
6.13 Name and Location; Fiscal Year............................................... 84
6.14 Use of Sites................................................................. 84
6.15 Assignment................................................................... 84
6.16 Accounts..................................................................... 84
6.17 Hazardous Substances......................................................... 84
6.18 Additional Project Documents................................................. 84
6.19 Project Budget Amendments.................................................... 85
6.20 Assignment By Third Parties.................................................. 85
6.21 Acquisition of Real Property................................................. 85
6.22 Employee Benefit Plans....................................................... 86
6.23 No Merchant Sales............................................................ 86
6.24 Flow of Funds................................................................ 86
6.25 Tax Election................................................................. 86
6.26 Tax Sharing Agreements....................................................... 86
ARTICLE 7 EVENTS OF DEFAULT; REMEDIES............................................................ 87
7.1 Events of Default............................................................ 87
7.2 Remedies..................................................................... 95
ARTICLE 8 SCOPE OF LIABILITY..................................................................... 97
ARTICLE 9 AGENTS; SUBSTITUTION................................................................... 98
9.1 Appointment, Powers and Immunities........................................... 98
9.2 Reliance..................................................................... 100
iii
9.3 Non-Reliance................................................................. 100
9.4 Defaults; Material Adverse Change............................................ 100
9.5 Indemnification.............................................................. 101
9.6 Successor Agent.............................................................. 101
9.7 Authorization................................................................ 102
9.8 Other Roles.................................................................. 103
9.9 Amendments; Waivers.......................................................... 103
9.10 Withholding Tax.............................................................. 104
9.11 General Provisions as to Payments............................................ 104
9.12 Substitution of Lender....................................................... 105
9.13 Participation................................................................ 105
9.14 Transfer of Commitment....................................................... 106
9.15 Laws......................................................................... 107
9.16 Assignability as Collateral.................................................. 107
9.17 Notices to Lenders........................................................... 108
9.18 Collateral Agent............................................................. 108
ARTICLE 10 INDEPENDENT CONSULTANTS............................................................... 108
10.1 Removal and Fees............................................................. 108
10.2 Duties....................................................................... 109
10.3 Independent Consultants' Certificates........................................ 109
10.4 Certification of Dates....................................................... 110
ARTICLE 11 MISCELLANEOUS......................................................................... 110
11.1 Addresses.................................................................... 110
11.2 Additional Security; Right to Set-Off........................................ 111
11.3 Delay and Waiver............................................................. 112
11.4 Costs, Expenses and Attorneys' Fees; Syndication............................. 112
11.5 Entire Agreement............................................................. 113
11.6 Governing Law................................................................ 113
11.7 Severability................................................................. 113
11.8 Headings..................................................................... 113
11.9 Accounting Terms............................................................. 114
11.10 Additional Financing......................................................... 114
11.11 No Partnership, Etc.......................................................... 114
11.12 Deed of Trust/Collateral Documents........................................... 114
11.13 Limitation on Liability...................................................... 114
11.14 Waiver of Jury Trial......................................................... 115
11.15 Consent to Jurisdiction...................................................... 115
11.16 Knowledge and Attribution.................................................... 116
11.17 Successors and Assigns....................................................... 116
11.18 Counterparts................................................................. 116
11.19 Usury........................................................................ 116
iv
11.20 Survival..................................................................... 116
11.21 Patriot Act Notice........................................................... 117
11.22 Treatment of Certain Information; Confidentiality............................ 117
11.23 Release of Project........................................................... 118
11.24 Project Expansion............................................................ 119
v
INDEX OF EXHIBITS
Exhibit A Definitions and Rules of Interpretation
NOTES
Exhibit B-1 Form of Construction Note
Exhibit B-2 Form of Term Note
Exhibit B-3 Form of FEC Note
Exhibit B-4 Form of MEC Note
Exhibit B-5 Form of Security Fund Letter of Credit
Exhibit B-6 Form of Security Fund LC Loan Note
LOAN DISBURSEMENT PROCEDURES
Exhibit C-1 Form of Notice of Construction Loan Borrowing
Exhibit C-2 Form of Notice of Term-Conversion
Exhibit C-3 Form of Confirmation of Interest Period Selection
Exhibit C-4 Form of Notice of Conversion of Loan Type
Exhibit C-5 Form of Drawdown Certificate
Exhibit C-6(a) Form of Independent Engineer's Drawdown Certificate (Mankato)
Exhibit C-6(b) Form of Independent Engineer's Drawdown Certificate (Freeport)
Exhibit C-7 Form of Notice of Security Fund LC Loan
CREDIT AND SECURITY-RELATED DOCUMENTS
Exhibit D-1 Form of FEC Deed of Trust
Exhibit D-2 Form of MEC Mortgage
Exhibit D-3 Form of Security Agreement
Exhibit D-4 Form of Borrower Depositary Agreement
Exhibit D-5 Form of FEC Depositary Agreement
Exhibit D-6 Form of MEC Depositary Agreement
Exhibit D-7 Form of Subordination Agreement
Exhibit D-8 Form of NSP Acknowledgment of Subordination
Exhibit D-9 Schedule of Security Filings
Exhibit D-10 Form of Group Pledge and Security Agreement
Exhibit D-11 Intentionally Deleted
Exhibit D-12 Form of Interest Rate Agreement
Exhibit D-13 Form of FEC Guaranty
Exhibit D-14 Form of MEC Secured Guaranty
Exhibit D-15 Form of MEC Security Agreement
Exhibit D-16 Form of FEC Security Agreement
Exhibit D-17 Form of FEC-GP Guaranty
Exhibit D-18 Form of FEC-LP Guaranty
Exhibit D-19 Form of MEC Unsecured Guaranty
vi
CONSENTS
Exhibit E-1 Form of Consent for Contracting Party
CLOSING CERTIFICATES
Exhibit F-1 Form of Borrower's Closing Certificate
Exhibit F-2 Form of FEC's Closing Certificate
Exhibit F-3 Form of MEC's Closing Certificate
Exhibit F-4 Intentionally Deleted
Exhibit F-5 Form of Insurance Consultant's Certificate
Exhibit F-6 Form of Independent Engineer's Certificate
Exhibit F-7 Form of Power Market Consultant's Certificate
PROJECT DESCRIPTION EXHIBITS
Exhibit G-1 Schedule of Applicable Permits
Exhibit G-2 Project Budget
Exhibit G-3 Base Case Project Projections
Exhibit G-4 Project Schedule
Exhibit G-5 Pending Litigation
Exhibit G-6 Hazardous Substances Disclosure
Exhibit G-7 Pending Change Orders
Exhibit G-8 Template Operating Report
Exhibit G-9 Real Estate Rights
OTHER
Exhibit H Lenders Proportionate Shares
Exhibit I Amortization Schedule
Exhibit J Form of Non-Bank Certificate
Exhibit K Insurance Requirements
Exhibit L Form of Annual Insurance Certificate
Exhibit M Form of Confidentiality Agreement
vii
EXECUTION VERSION
This CREDIT AGREEMENT, dated as of February 25, 2005 (this
"Agreement"), is entered into among CALPINE STEAMBOAT HOLDINGS, LLC, a Delaware
limited liability company, as borrower ("Borrower"), the financial institutions
listed on Exhibit H or who later become a party hereto, as Lenders (the
financial institutions party to this Agreement being collectively referred to as
the "Lenders"), CALYON NEW YORK BRANCH, as a Lead Arranger, underwriter, co-book
runner and administrative agent for the Lenders (in such capacity,
"Administrative Agent"), as collateral agent for the Secured Parties (in such
capacity, "Collateral Agent") and as issuer of the Security Fund LC (in such
capacity, "LC Issuer"), COBANK, ACB, as a Lead Arranger, underwriter,
co-syndication agent and co-book runner, HSH NORDBANK AG, as a Lead Arranger,
underwriter and co-documentation agent, UFJ BANK LIMITED, as a Lead Arranger,
underwriter and co-documentation agent, and BAYERISCHE HYPO- UND VEREINSBANK AG,
NEW YORK BRANCH, as a Lead Arranger, underwriter and co-syndication agent.
RECITALS
A. Borrower is the direct, 100% owner of Mankato Energy Center, LLC
("MEC"), the owner of a combined cycle electric generating facility, capable of
generating approximately 375 MW of electric power, to be located in Blue Earth
County, Minnesota (the "Mankato Project").
B. Borrower is also the direct 100% owner of both FEC-GP and FEC-LP.
FEC-GP is the sole 1%-owning general partner of Freeport Energy Center, LP
("FEC" and together with MEC, the "Project Companies"), and FEC-LP is the sole
99%-owning limited partner of FEC, the owner of a 250 MW cogeneration facility
to be located on an 8-acre site inside the Plant B industrial complex owned by
The Dow Chemical Company in Freeport, Texas (the "Freeport Project").
C. Borrower has requested that the Lenders provide a portion of the
construction and term financing for the Mankato Project and the Freeport Project
(together, the "Projects"), which proceeds Borrower shall on-lend to the Project
Companies for the development and construction of the Projects.
D. The Lenders are willing to provide such financing upon the terms
and subject to the conditions set forth herein and in the other Credit
Documents.
E. The credit facilities provided hereunder will be secured by,
among other things, the Freeport Project and the Mankato Project and guaranteed
by the Project Companies; and the Lenders would not be willing to extend such
credit facilities to Borrower, and allow Borrower to on-lend the proceeds
thereof to the Project Companies, without being provided such security and such
guaranties.
AGREEMENT
In consideration of the agreements herein and in the other Credit
Documents and in reliance upon the representations and warranties set forth
herein and therein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS.
Except as otherwise expressly provided, capitalized terms used in
this Agreement (including its exhibits and schedules) shall have the meanings
given to such terms in Exhibit A.
1.2 RULES OF INTERPRETATION.
Except as otherwise expressly provided, the rules of interpretation
set forth in Exhibit A shall apply to this Agreement and the other Credit
Documents.
ARTICLE 2
THE CREDIT FACILITIES
2.1 LOAN FACILITIES.
2.1.1 Construction Loan Facility.
(a) Availability. Subject to the terms and conditions set forth in
this Agreement and in reliance upon the representations and warranties of
Borrower set forth herein and of the Project Companies set forth in the Project
Company Guaranties, each Lender severally agrees to advance to Borrower from
time to time during the Construction Loan Availability Period such loans as
Borrower may request pursuant to this Section 2.1.1 (individually, a
"Construction Loan" and, collectively, the "Construction Loans"), in an
aggregate principal amount which, when added to such Lender's Proportionate
Share of the aggregate principal amount of all prior Construction Loans made
under this Agreement, does not exceed such Lender's Construction Loan
Commitment. Unless the conditions under Section 3.4 are satisfied, no more of
the Construction Loans than $215,000,000 (the "Initial MEC Allocated Portion")
may be applied toward Project Costs of the Mankato Project, and no more than
$251,500,000 (the "Initial FEC Allocated Portion") may be applied toward Project
Costs of the Freeport Project.
(b) Notice of Construction Loan Borrowing. Borrower shall request
Construction Loans by delivering to Administrative Agent a written notice in the
form of Exhibit C-1, appropriately completed (a "Notice of Construction Loan
Borrowing"), which contains or specifies, among other things:
(i) the portion of the requested Construction Loan which shall
bear interest as is provided in (A) Section 2.1.1(c)(i) (individually, a "Base
Rate Construction Loan" and, collectively, the "Base Rate Construction Loans")
or (B) Section 2.1.1(c)(ii) (individually, a "LIBOR Construction Loan" and,
collectively, the "LIBOR Construction Loans");
2
(ii) the aggregate principal amount of the requested
Construction Loan, which shall be in the minimum amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof; provided that such minimum
amount shall not apply to the Punchlist Drawing, Dow Change Order Drawing, Dow
Performance Test Drawing or the True-Up Drawing (if any);
(iii) the proposed date of the requested Construction Loan
(which shall be a Banking Day);
(iv) in the case of any requested Construction Loan to be made
as a LIBOR Construction Loan, the initial Interest Period requested therefor
(which shall be an Interest Period contemplated by Section 2.1.3(c));
(v) a certification by Borrower that, as of the date such
requested Construction Loan is proposed to be made, the Construction Loan
proposed to be made on such date, when added together with all other
Construction Loans made under this Agreement, does not either (A) exceed the
Total Construction Loan Commitment or (B) cause Construction Loans applied to
Project Costs of MEC to exceed the Initial MEC Allocated Portion or Construction
Loans applied to Project Costs of FEC to exceed the Initial FEC Allocated
Portion; and
(vi) the amount of the requested Construction Loan that shall
be designated to constitute part of the MEC Allocated Portion and the FEC
Allocated Portion.
Borrower shall request no more than one Construction Loan per month.
Borrower shall give each Notice of Construction Loan Borrowing to Administrative
Agent so as to provide not less than the Minimum Notice Period applicable to
Construction Loans of the Type requested. Any Notice of Construction Loan
Borrowing may be modified or revoked by Borrower through the Banking Day prior
to the Minimum Notice Period, and shall thereafter be irrevocable. Each Notice
of Construction Loan Borrowing shall be delivered in the manner provided in
Section 11.1.
(c) Construction Loan Interest. Subject to Section 2.6.3, Borrower
shall pay interest on the unpaid principal amount of each Construction Loan from
the date of Borrowing of such Construction Loan until the maturity or prepayment
thereof at the following rates per annum:
(i) With respect to the principal portion of such Construction
Loan which is, and during such periods as such Construction Loan is, a Base Rate
Construction Loan, at a rate per annum equal to the Base Rate (such rate to
change from time to time as the Base Rate shall change) plus the applicable Rate
Margin minus 0.75%.
(ii) With respect to the principal portion of such
Construction Loan which is, and during such periods as such Construction Loan
is, a LIBOR Construction Loan, at a rate per annum, at all times during each
Interest Period for such LIBOR Construction Loan, equal to the LIBO Rate for
such Interest Period plus the applicable Rate Margin.
3
(d) Construction Loan Principal Payments. Borrower shall repay to
Administrative Agent, for the account of each Lender, in full on the
Construction Loan Maturity Date the unpaid principal amount of all Construction
Loans made by such Lender which will not be Term-Converted to Term Loans at such
time as is provided in Section 2.1.2(a). Borrower may not re-borrow the
principal amount of any Construction Loan so repaid.
(e) Cancellation and Return of Construction Notes. Upon payment in
full or Term-Conversion in full of the aggregate principal amount of the
Construction Loans and all accrued and unpaid interest thereon, each Lender
shall promptly mark as canceled any Construction Notes issued to it under
Section 2.1.4 or 9.14 then outstanding and return such canceled Construction
Notes to Borrower.
2.1.2 Term Loan Facility.
(a) Availability. Subject to the terms and conditions set forth in
this Agreement and in reliance upon the representations and warranties of
Borrower set forth herein, each Lender severally agrees to make to Borrower on
the Term Period Commencement Date, at the request of Borrower, a term loan under
this Section 2.1.2 (individually a "Term Loan" and, collectively, the "Term
Loans") in an aggregate principal amount equal to the aggregate principal amount
of outstanding Construction Loans made by such Lender. Each Lender shall make
its Term Loan by converting the principal amount of outstanding Construction
Loans made by such Lender to a Term Loan.
(b) Notice of Term-Conversion. Borrower shall request
Term-Conversion by delivering to Administrative Agent a written notice in the
form of Exhibit C-2, appropriately completed (the "Notice of Term-Conversion"),
which specifies, among other things:
(i) the principal portion of the requested Term Loans which
shall bear interest as provided in (A) Section 2.1.2(c)(i) (individually, a
"Base Rate Term Loan" and, collectively, the "Base Rate Term Loans") or (B)
Section 2.1.2(c)(ii) (individually, a "LIBOR Term Loan" and, collectively, the
"LIBOR Term Loans");
(ii) the aggregate principal amount of the requested Term
Loans, which shall not exceed the aggregate principal amount of all Construction
Loans outstanding on the Term Period Commencement Date (which amount shall be
calculated immediately prior to Term-Conversion, after giving effect to the
Punchlist Drawing (if any), the Dow Change Order Drawing (if any), the Dow
Performance Test Drawing (if any), the True-Up Drawing (if any), and the
application of all liquidated damages and other amounts required to be applied
to the prepayment of Construction Loans pursuant to the Depositary Agreements);
(iii) the proposed date of Term-Conversion (which shall be a
Banking Day on or before the Construction Loan Maturity Date); and
(iv) in the case of any requested Term Loan to be made as a
LIBOR Term Loan, the initial Interest Period requested therefor (which shall be
an Interest Period contemplated by Section 2.1.3(c)).
4
Borrower shall deliver the Notice of Term-Conversion to
Administrative Agent so as to provide at least the Minimum Notice Period
applicable to Loans of the Type requested upon Term-Conversion; provided that
not later than 10 Banking Days prior to delivery of the Notice of
Term-Conversion, Borrower shall deliver to Administrative Agent a draft of such
Notice of Term-Conversion and evidence documenting that the conditions to
Term-Conversion set forth in Section 3.3 will be satisfied by the proposed date
of Term-Conversion. The Notice of Term-Conversion may be modified or revoked by
Borrower through the Banking Day prior to the Minimum Notice Period, and shall
thereafter be irrevocable. The Notice of Term-Conversion shall be delivered in
the manner provided in Section 11.1.
(c) Term Loan Interest. Subject to Section 2.6.3, Borrower shall pay
interest on the unpaid principal amount of each Term Loan from the date of
Borrowing of such Term Loan until the maturity or prepayment thereof at one of
the following rates per annum:
(i) With respect to the principal portion of such Term Loan
which is, and during such periods as such Term Loan is, a Base Rate Term Loan,
at a rate per annum equal to the Base Rate (such rate to change from time to
time as the Base Rate shall change) plus the applicable Rate Margin minus 0.75%.
(ii) With respect to the principal portion of such Term Loan
which is, and during such periods as such Term Loan is, a LIBOR Term Loan, at a
rate per annum during each Interest Period for such LIBOR Term Loan equal to the
LIBO Rate for such Interest Period plus the applicable Rate Margin.
(d) Term Loan Principal Payment. Beginning on the Initial Principal
Repayment Date and on each Principal Repayment Date thereafter, Borrower shall
repay to Administrative Agent, for the account of each Lender, the aggregate
unpaid principal amount of the Term Loan made by such Lender in installments in
accordance with the repayment schedule set forth on Exhibit I, with any
remaining unpaid principal, interest, fees and costs due and payable on the Term
Loan Maturity Date. Borrower may not re-borrow the principal amount of any Term
Loan so repaid. Upon scheduled repayment of the principal of Term Loans, the
Allocated Portions shall be reduced in accordance with the scheduled
amortization thereof as set forth in the Base Case Project Projections.
(e) Initial Principal Repayment Date Prior to Term Period
Commencement Date. If the Initial Principal Repayment Date occurs prior to the
Term Period Commencement Date, then Construction Loans in the required amount
shall be repaid first from any funds in the Borrower Revenue Account. After
application of all such funds, if there remains any required payment, then to
the extent that Administrative Agent reasonably concludes that reducing the
Total Construction Loan Commitment would not cause a failure to satisfy the
condition set forth in Section 3.2.16, then the Total Construction Loan
Commitment shall be reduced by up to such required amount, and to the extent of
such reduction, the payment will be deemed made.
5
2.1.3 Interest Provisions Relating to All Loans.
(a) Applicable Interest Rate. Subject to Section 2.6.3, the
applicable basis for determining the rate of interest with respect to any
Construction Loan or Term Loan shall be selected by Borrower initially at the
time a Notice of Construction Loan Borrowing or Notice of Term-Conversion is
given pursuant to Section 2.1.1 or 2.1.2, as the case may be, and with respect
to a Security Fund LC Loan, by delivery to the Administrative Agent of a notice
in the form of Exhibit C-7, appropriately completed to notify the Lenders of the
Interest Period. The basis for determining the interest rate with respect to any
Loan may be changed from time to time as specified in a Notice of Conversion of
Loan Type delivered pursuant to Section 2.1.6. If on any day a Loan is
outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
such Loan shall bear interest determined by reference to the Base Rate. Borrower
shall not request, and the Lenders shall not be obligated to make, LIBOR Loans
at any time an Event of Default exists.
(b) Interest Payment Dates. Borrower shall pay accrued interest on
the unpaid principal amount of each Loan (i) in the case of each Base Rate Loan,
on the last Banking Day of each calendar quarter, (ii) in the case of each LIBOR
Loan, on the last day of each Interest Period related to such LIBOR Loan and,
with respect to Interest Periods longer than three months, the last Banking Day
of each third month in which such LIBOR Loan is outstanding, and (iii) in all
cases, upon repayment or prepayment (to the extent thereof and including any
optional prepayments or Mandatory Prepayments), upon conversion from one Type of
Loan to another Type of Loan and at maturity (whether by acceleration or
otherwise).
(c) LIBOR Loan Interest Periods.
(i) The initial and subsequent Interest Periods for LIBOR
Loans shall be a maximum of one month until the date which falls four months
after the Closing Date (or such earlier date as may otherwise be agreed to by
Administrative Agent and Borrower). Thereafter, each subsequent Interest Period
selected by Borrower for all LIBOR Loans shall be one, three or six months.
Notwithstanding anything to the contrary in either of the two preceding
sentences, (A) any Interest Period which would otherwise end on a day which is
not a Banking Day shall be extended to the next succeeding Banking Day unless
such next Banking Day falls in another calendar month, in which case such
Interest Period shall end on the immediately preceding Banking Day, (B) any
Interest Period which begins on the last Banking Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Banking Day of a
calendar month, (C) Borrower may not select Interest Periods which would leave a
greater principal amount of Loans subject to Interest Periods ending after a
date upon which Loans are or may be required to be repaid (including the
Construction Loan Maturity Date, the Term Loan Maturity Date and each Principal
Repayment Date) than the principal amount of Loans scheduled to be outstanding
after such date and for purposes of this clause, Borrower shall assume that all
Security Fund LC Loans will be repaid on the next Principal Repayment Date, (D)
unless Term-Conversion has occurred, any Interest Period for a Construction Loan
which would otherwise end after the
6
Construction Loan Maturity Date shall end on the Construction Loan Maturity
Date, (E) any Interest Period for a Term Loan which would otherwise end after
the Term Loan Maturity Date shall end on the Term Loan Maturity Date, (F) LIBOR
Loans for each Interest Period shall be in the minimum amount of $500,000 or an
integral multiple of $100,000 in excess thereof, (G) Borrower may not at any
time have outstanding more than six different Interest Periods relating to LIBOR
Loans, and (H) Borrower shall select Types and Interest Periods for Construction
Loans and Term Loans corresponding to the "types" and "interest periods" used
for floating rate payments in the Interest Rate Agreements so as to create, to
the greatest extent possible, a complete hedge.
(ii) Borrower may contact Administrative Agent at any time
prior to the end of an Interest Period for a quotation of Interest Rates in
effect at such time for given Interest Periods and Administrative Agent shall
promptly provide such quotation. Borrower may select an Interest Period
telephonically or by electronic mail within the time periods specified in
Section 2.1.6, which selection shall be irrevocable on and after commencement of
the applicable Minimum Notice Period. Borrower shall confirm such telephonic or
electronic mail notice to Administrative Agent by facsimile on the day such
notice is given by delivery to Administrative Agent of a written notice in
substantially the form of Exhibit C-3, appropriately completed (a "Confirmation
of Interest Period Selection"). Borrower shall promptly deliver to
Administrative Agent the original of the Confirmation of Interest Period
Selection initially delivered by facsimile. If Borrower fails to notify
Administrative Agent of the next Interest Period for any LIBOR Loans in
accordance with this Section 2.1.3(c)(ii), such Loans shall automatically
convert to Base Rate Loans on the last day of the current Interest Period
therefor. Administrative Agent shall as soon as practicable (and, in any case,
within two Banking Days after delivery of the Confirmation of Interest Period
Selection) notify Borrower of each determination of the Interest Rate applicable
to each Loan.
(d) Interest Computations. All computations of interest on Base Rate
Loans shall be based upon a year of 365 days or, in the case of a leap year, 366
days, shall be payable for the actual days elapsed (including the first day but
excluding the last day), and shall be adjusted in accordance with any changes in
the Base Rate to take effect on the beginning of the day of such change in the
Base Rate. All computations of interest on LIBOR Loans shall be based upon a
year of 360 days and shall be payable for the actual days elapsed (including the
first day but excluding the last day). Borrower agrees that all computations by
Administrative Agent of interest shall be conclusive and binding in the absence
of manifest error.
2.1.4 Promissory Notes. The obligation of Borrower to repay the
Loans made by a Lender and to pay interest thereon at the rates provided herein
shall, upon the written request of such Lender, be evidenced by promissory notes
in the form of Exhibit B-1 (individually, a "Construction Note" and,
collectively, the "Construction Notes"), Exhibit B-2 (individually, a "Term
Note" and, collectively, the "Term Notes") and Exhibit B-6 (individually, a
"Security Fund LC Loan Note" and, collectively, the "Security Fund LC Loan
Notes"), each payable to the order of such requesting Lender and in the
principal amount of such Lender's Construction Loan Commitment, Term Loan
Commitment and Security Fund LC Commitment, respectively. Borrower authorizes
each such requesting Lender to record on the schedule annexed to such
7
Lender's Note or Notes, the date and amount of each Loan made by such requesting
Lender, and each payment or prepayment of principal thereunder and agrees that
all such notations shall constitute prima facie evidence of the matters noted;
provided that in the event of any inconsistency between the records or books of
Administrative Agent and any Lender's records or Notes, the records of
Administrative Agent shall be conclusive and binding in the absence of manifest
error. Borrower further authorizes each such requesting Lender to attach to and
make a part of such requesting Lender's Note or Notes continuations of the
schedule attached thereto as necessary. No failure to make any such notations,
nor any errors in making any such notations, shall affect the validity of
Borrower's obligations to repay the full unpaid principal amount of the Loans or
the duties of Borrower hereunder or thereunder. Upon the payment in full in cash
of the aggregate principal amount of, and all accrued and unpaid interest on,
the Loans, or in the case of Construction Notes, upon Term-Conversion, the
Lenders holding such Notes shall promptly mark the applicable Notes cancelled
and return such cancelled Notes to Borrower.
2.1.5 Loan Funding.
(a) Notice. Each Notice of Construction Loan Borrowing, Notice of
Term-Conversion and Notice of Conversion of Loan Type shall be delivered to
Administrative Agent in accordance with Sections 2.1.1(b), 2.1.2(b) and 2.1.6,
respectively. Administrative Agent shall promptly notify each Lender of the
contents of each Notice of Construction Loan Borrowing, Notice of
Term-Conversion and Notice of Conversion of Loan Type.
(b) Pro Rata Loans. All Loans shall be made on a pro rata basis by
the Lenders in accordance with their respective Proportionate Shares of such
Loans, with each Borrowing to consist of a Loan by each Lender equal to such
Lender's Proportionate Share of such Loan.
(c) Lender Funding. Each Lender shall, before 1:00 p.m. on the date
of each Borrowing of a Construction Loan or Term Loan, make available to
Administrative Agent by wire transfer of immediately available funds in Dollars
to the account of Administrative Agent most recently designated by it for such
purpose, such Lender's Proportionate Share of the Construction Loan or Term Loan
(as the case may be) to be made on such date. The failure of any Lender to make
the Construction Loan or Term Loan (as the case may be) to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation hereunder
to make its Construction Loan or Term Loan (as the case may be) on the date of
such Loan. No Lender shall be responsible for the failure of any other Lender to
make the Construction Loan or Term Loan (as the case may be) to be made by such
other Lender on the date of any Borrowing.
(d) Failure of Lender to Fund. Unless Administrative Agent shall
have been notified by any Lender prior to the applicable date of a Borrowing of
a Construction Loan or Term Loan that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Proportionate
Share of the Construction Loan or Term Loan (as the case may be) requested on
such date, Administrative Agent may assume that such Lender has made such amount
available to Administrative Agent on such date in accordance with the prior
paragraph and Administrative Agent may, in its sole discretion and in reliance
upon such assumption, make available to Borrower a corresponding amount on such
date. If such
8
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand (and, in any event, within two Banking Days from
the applicable date of such Borrowing) from such Lender together with interest
thereon, for each day from the applicable date of such Borrowing until the date
such amount is paid to Administrative Agent, at the Federal Funds Rate for the
first two Banking Days after such date. If such Lender pays such amount to
Administrative Agent, then such amount (excluding any interest paid to
Administrative Agent thereon) shall constitute such Lender's Proportionate Share
of such Construction Loan or Term Loan (as the case may be) included in such
Construction Loan or Term Loan (as the case may be). If such Lender does not pay
such corresponding amount forthwith upon Administrative Agent's demand therefor
or within two Banking Days from the applicable date of such Borrowing of a
Construction Loan or Term Loan (as the case may be), Administrative Agent shall
promptly notify Borrower and Borrower shall immediately pay such corresponding
amount to Administrative Agent together with interest thereon, for each day from
the applicable date of such Borrowing until the date such amount is paid to
Administrative Agent, at the rate then payable under this Agreement for Base
Rate Loans. Nothing in this Section 2.1.5(d) shall be deemed to relieve any
Lender from its obligation to fulfill its obligations hereunder or to prejudice
any rights that Borrower may have against any Lender as a result of any default
by such Lender hereunder.
(e) Construction Accounts. No later than 2:00 p.m. on the date
specified in each Notice of Construction Loan Borrowing, if the applicable
conditions precedent listed in Article 3 have been satisfied or waived in
accordance with the terms thereof and, subject to Section 2.1.5(d), to the
extent Administrative Agent shall have received the appropriate funds from the
Lenders, Administrative Agent shall make available the Construction Loans
requested in such Notice of Construction Loan Borrowing (as may be adjusted
pursuant to Section 3.6) in Dollars and in immediately available funds, at
Administrative Agent's New York Branch, and shall deposit or cause to be
deposited the proceeds of such Construction Loans into the Construction
Accounts.
2.1.6 Conversion of Loans. Borrower may convert Loans from one Type
of Loan to another Type of Loan; provided, however, that (a) any conversion of
LIBOR Loans into Base Rate Loans shall be effective on, and only on, the first
day after expiration of an Interest Period for such LIBOR Loans, and (b) Loans
shall be converted only in amounts of $500,000 and increments of $100,000 in
excess thereof. Borrower shall request such a conversion by delivering to
Administrative Agent a written notice in the form of Exhibit C-4, appropriately
completed (a "Notice of Conversion of Loan Type"), which contains or specifies,
among other things:
(i) the Loans, or portion thereof, which are to be converted;
(ii) the Type of Loans into which such Loans, or portion
thereof, are to be converted;
(iii) if such Loans are to be converted into LIBOR Loans, the
initial
9
Interest Period selected by Borrower for such Loans (which Interest Period shall
be selected in accordance with Section 2.1.3(c));
(iv) the proposed date of the requested conversion (which
shall be a Banking Day and otherwise in accordance with this Section 2.1.6); and
(v) a certification by Borrower that no Event of Default has
occurred and is continuing.
Borrower shall so deliver each Notice of Conversion of Loan Type so as to
provide at least the applicable Minimum Notice Period. Any Notice of Conversion
of Loan Type may be modified or revoked by Borrower through the Banking Day
prior to the Minimum Notice Period, and shall thereafter be irrevocable. Each
Notice of Conversion of Loan Type shall be delivered in the manner provided in
Section 11.1. Administrative Agent shall promptly notify each Lender of the
contents of each Notice of Conversion of Loan Type.
2.1.7 Prepayments.
(a) Terms of All Prepayments.
(i) Upon the prepayment of any Loan (whether such prepayment
is an optional prepayment under Section 2.1.7(b) or a Mandatory Prepayment),
Borrower shall pay to Administrative Agent for the account of the Lender which
made such Loan and/or Hedge Bank, as applicable, (A) all accrued interest to the
date of such prepayment on the amount of such Loan prepaid, (B) all accrued fees
to the date of such prepayment relating to the amount of such Loan being
prepaid, (C) to the extent required by the terms of the applicable Interest Rate
Agreement, all Hedge Breaking Fees owed by Borrower to such Hedge Bank as a
result of such prepayment, and (D) if such prepayment is the prepayment of a
LIBOR Loan on a day other than the last day of an Interest Period for such LIBOR
Loan, all Liquidation Costs incurred by such Lender as a result of such
prepayment (pursuant to the terms of Section 2.9).
(ii) Notwithstanding the foregoing, but only in respect of any
Mandatory Prepayment, Borrower shall have the right, by giving five Banking
Days' notice to Administrative Agent, in lieu of prepaying a LIBOR Loan on a day
other than the last day of an Interest Period for such LIBOR Loan, to deposit or
cause Administrative Agent to deposit into an account to be held by Depositary
Agent (which account shall be subjected to the Lien of the Collateral Documents
in a manner reasonably satisfactory to Collateral Agent) an amount equal to the
LIBOR Loans to be prepaid. Such funds shall be held in such account until the
expiration of the Interest Period applicable to the LIBOR Loan to be prepaid at
which time the amount deposited in such account shall be used to prepay such
LIBOR Loan and any interest accrued on such amount shall be deposited into the
Borrower Revenue Account. The deposit of amounts into such account shall not
constitute a prepayment of Loans and all Loans to be prepaid using the proceeds
from such account shall continue to accrue interest at the then applicable
interest rate for such Loans until actually prepaid. All amounts in such account
shall only be invested in Permitted Investments as directed by and at the
expense and risk of Borrower.
10
(iii) Except as otherwise specifically set forth herein, all
prepayments of Term Loans shall be applied to reduce the remaining payments
required under Section 2.1.2(d) in inverse order of maturity. Prepayment of Term
Loans with proceeds of the Purchase Option or Put Option pursuant to Section 3.6
of the Borrower Depositary Agreement shall be applied as described in such
section. Any prepayments made pursuant to Sections 3.5.4(f) and 3.7.1 of the
applicable Project Company Depositary Agreement shall be applied to reduce the
Allocated Portion for the Project with respect to which such prepayments have
been received. Prepayment of Term Loans with proceeds of Construction Contractor
Performance LDs pursuant to Section 3.7 of the applicable Project Company
Depositary Agreement and Section 3.8 of the Borrower Depositary Agreement shall
be applied to all maturities of the Term Loans ratably. Borrower may not
re-borrow the principal amount of any Construction Loan or Term Loan which is
prepaid. In connection with any prepayment of loans made pursuant to Section
3.4.2(c) of the Borrower Depositary Agreement, the Allocated Portions shall be
reduced in proportion to their size relative to the aggregate Term Loan.
(b) Optional Prepayments. Subject to Section 2.1.7(a), Borrower may,
at its option and without premium or penalty, upon five Banking Days' notice to
Administrative Agent, prepay (i) any Construction Loans in whole or from time to
time in part in minimum amounts of $1,000,000 or an incremental multiple of
$100,000 in excess thereof (provided that such minimum amounts shall not apply
to a prepayment of all outstanding Construction Loans), (ii) any Term Loans in
whole or from time to time in part in minimum amounts of $1,000,000 or an
incremental multiple of $100,000 in excess thereof (provided that such minimum
amounts shall not apply to a prepayment of all outstanding Term Loans), or (iii)
any Security Fund LC Loans in whole or from time to time in part in minimum
amounts of $1,000,000 or an incremental multiple of $100,000 in excess thereof
(provided that such minimum amounts shall not apply to a prepayment of all
outstanding Security Fund LC Loans); provided, however, that as a condition to
Borrower's right to make any prepayment of Construction Loans, Borrower shall
reduce the Total Construction Loan Commitment in accordance with Section 2.3.3
of this Agreement by such amount that the Available Construction Loan Commitment
equals zero after giving effect to such prepayment. In connection with any
optional prepayments, Borrower shall terminate or partially terminate Hedge
Transactions such that the notional amount under all of the Hedge Transactions
does not exceed, in the aggregate, the principal amount of Loans outstanding
immediately after giving effect to such prepayment. In connection with any
optional prepayments, Borrower may at the time of such prepayment specify the
portions by which Allocated Portions shall be reduced thereby, and absent such
specification, the Allocated Portions shall be reduced in proportion to their
size relative to the aggregate Term Loan.
(c) Mandatory Prepayments. Borrower shall prepay (or cause to be
prepaid) Loans to the extent required by Section 11.23, Sections 3.2.2(d),
3.4.2(c) (second sentence), 3.4.2(e), 3.6 or 3.8 of the Borrower Depositary
Agreement, Sections 2.2(b), 3.5.4(e), 3.5.4(f) or 3.7.1(b) of the Project
Company Depositary Agreements (by virtue of requiring transfer of funds to the
Mandatory Prepayment Account), Section 3.1.6(b) of the FEC Depositary Agreement,
or any other provision of any Credit Document which expressly requires such
prepayment (such prepayment, a "Mandatory Prepayment").
11
2.1.8 Register. Administrative Agent shall maintain, at its address
referred to in Section 11.1, a register for the recordation of the names and
addresses of the Lenders, the Commitments and Loans of each Lender from time to
time and the name of each Lender which holds a Note, as well as a record of
which payments or prepayments have been applied to which Allocated Portions from
time to time (the "Register"). The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Administrative Agent shall record in the Register (a)
the Commitments and the Loans from time to time of each Lender, (b) the interest
rates applicable to all Loans and the effective dates of all changes thereto,
(c) the Interest Period for each LIBOR Loan, (d) the date and amount of any
principal or interest due and payable or to become due and payable from Borrower
to each Lender hereunder, (e) each repayment or prepayment in respect of the
principal amount of the Loans of each Lender, (f) the amount of any sum received
by Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof, (g) on each Principal Repayment Date or any other time
any principal of the Loans is paid or prepaid, the Allocated Portion to which
any such principal payment or prepayment is being applied, as well as the
resulting revised Allocated Portions, and (h) such other information as
Administrative Agent may determine is necessary for the administering of the
Loans and this Agreement. Any such recording shall be conclusive and binding in
the absence of manifest error; provided that neither the failure to make any
such recordation, nor any error in such recordation, shall affect any Lender's
Commitment or Borrower's Obligations in respect of any applicable Loans or
otherwise; and provided further that in the event of any inconsistency between
the Register and any Lender's records, the Register shall govern absent manifest
error.
2.2 SECURITY FUND LC FACILITY.
2.2.1 Issuance of the Security Fund LC. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date the LC Issuer shall
issue a letter of credit in the form of Exhibit B-5 (the "Security Fund LC") for
the account of Borrower and for the benefit of NSP, in the initial stated amount
of $18,250,000. The Security Fund LC shall be made available solely in lieu of
the "HGC" portion of the Security Fund pursuant to Section 11.1 of the Power
Purchase Agreement. If such section requires or permits that the stated amount
of the Security Fund LC be modified, based on the Sponsor's Credit Rating (as
defined in the Power Purchase Agreement) changing, Borrower shall request of LC
Issuer (and, if a reduction, NSP) to effect such change, and LC Issuer shall
effect such change, it being understood that the stated amount of the Security
Fund LC shall never be increased to exceed $23,500,000 (if prior to the Facility
Acceptance Date for the Mankato Project), or $19,200,000 (if following the
Facility Acceptance Date for the Mankato Project).
2.2.2 Security Fund LC Loans. To the extent provided in Section
2.2.5, each Lender severally agrees to advance to LC Issuer, for the account of
Borrower, such Lender's Proportionate Share of the full amount of any Drawing
Payment under the Security Fund LC. Upon such advance, the Drawing Payment shall
be deemed to constitute a loan made by such Lender to Borrower in the amount
advanced (a "Security Fund LC Loan"). All Security Fund
12
LC Loans shall be repaid in accordance with Section 3.2.2 of the Borrower
Depositary Agreement, with any remaining unpaid principal, interest, fees and
costs due and payable on the Term Loan Maturity Date. Borrower may not re-borrow
the principal amount of any Security Fund LC Loan so repaid.
2.2.3 Security Fund LC Loan Interest. Borrower shall pay interest on
the unpaid principal amount of each Security Fund LC Loan from the date of the
applicable Drawing Payment until the maturity or repayment thereof at the
following rates per annum:
(a) with respect to the principal portion of such Security
Fund LC Loan which is, and during such periods as such Security Fund LC Loan is,
a Base Rate Security Fund LC Loan, at a rate per annum equal to the Base Rate
(such rate to change from time to time as the Base Rate shall change) plus the
applicable Rate Margin minus 0.75%; and
(b) with respect to the principal portion of such Security
Fund LC Loan which is, and during such periods as such Security Fund LC Loan is,
a LIBOR Security Fund LC Loan, at a rate per annum during each Interest Period
for such LIBOR Security Fund LC Loan equal to the LIBO Rate for such Interest
Period plus the applicable Rate Margin.
2.2.4 Reduction and Reinstatement of Stated Amount. The Stated
Amount of the Security Fund LC shall be reduced by the amount of Drawing
Payments made in respect thereof. After a draw upon the Security Fund LC, where
the terms of Section 11.1(E) of the Power Purchase Agreement (as in effect on
the Closing Date) require the Stated Amount to thereafter be increased, without
further condition or consent of the Lenders, the Stated Amount of the Security
Fund LC shall be increased in the required amount by the LC Issuer issuing to
NSP an amendment in the form attached to the Security Fund LC, any such
increases not to exceed the Unutilized Security Fund LC Commitment.
2.2.5 Lender Participation. Each Lender severally agrees to
participate with LC Issuer in the extension of credit arising from the issuance
of the Security Fund LC in an amount equal to such Lender's Proportionate Share
of the Total Security Fund LC Commitment, and the issuance of the Security Fund
LC shall be deemed a confirmation to LC Issuer of such participation in such
amount. LC Issuer may request the Lenders to pay to LC Issuer their respective
Proportionate Shares of all or any portion of any Drawing Payment made or to be
made by LC Issuer under the Security Fund LC by contacting each Lender and
Administrative Agent telephonically (promptly confirmed in writing) at any time
after LC Issuer has received notice of or request for such Drawing Payment, and
specifying the amount of such Drawing Payment, such Lender's Proportionate Share
thereof, and the date on which such Drawing Payment is to be made or was made.
Upon receipt of any such request for payment from LC Issuer, each Lender shall
pay to LC Issuer such Lender's Proportionate Share of the unreimbursed portion
of such Drawing Payment, together with interest thereon at a per annum rate
equal to the Federal Funds Rate, as in effect from time to time, from the date
of such Drawing Payment to the date on which such Lender makes payment. Each
Lender's obligation to make each such payment to LC Issuer shall be absolute,
unconditional and irrevocable and shall not be affected by any circumstance
whatsoever, including the occurrence or continuance of
13
any Inchoate Default or Event of Default, or the failure of any other Lender to
make any payment under this Section 2.2.5, and each Lender further agrees that
each such payment shall be made without any offset, abatement, withholding or
reduction whatsoever. Nothing in this Section 2.2.5 shall limit or affect the
obligation of the LC Issuer to make any Drawing Payment pursuant to the Security
Fund LC.
2.3 TOTAL COMMITMENTS.
2.3.1 Security Fund Letter of Credit. The initial stated amount of
the Security Fund LC shall be as set forth in Section 2.2.1, and any increases
in the stated amount thereof shall not exceed at any time the Unutilized
Security Fund LC Commitment.
2.3.2 Loan Commitment Amounts.
(a) Total Construction Loan Commitment. Notwithstanding anything
that may be construed to the contrary in this Agreement, the aggregate principal
amount of all Construction Loans made by the Lenders shall not exceed the lesser
of (i) $466,500,000 and (ii) if such total amount is reduced by Borrower
pursuant to Section 2.3.3, such lower amount (such amount, so reduced from time
to time, the "Total Construction Loan Commitment").
(b) Total Term Loan Commitment. Notwithstanding anything that may be
construed to the contrary in this Agreement, the aggregate principal amount of
all Term Loans outstanding at any time shall not exceed the aggregate amount of
Construction Loans outstanding on the Term-Period Commencement Date after giving
effect to any Punchlist Drawing, any Dow Change Order Drawing, any Dow
Performance Test Drawing and any True-Up Drawing (such amount, as reduced from
time to time, the "Total Term Loan Commitment").
2.3.3 Reductions and Cancellations. Borrower may, from time to time
upon five Banking Days written notice to Administrative Agent, permanently
reduce (without premium or penalty), by an amount of $1,000,000 or an integral
multiple of $100,000 in excess thereof or cancel in its entirety the Total
Construction Loan Commitment, subject to the provisions of this Section 2.3.3.
Borrower may not reduce the Total Security Fund LC Commitment or the Unutilized
Security Fund LC Commitment. Borrower may not reduce or cancel the Total
Construction Loan Commitment if, after giving effect to such reduction or
cancellation, (a) the aggregate principal amount of all Construction Loans then
outstanding would exceed the Total Construction Loan Commitment, (b) the
Available Construction Funds would not, in the reasonable judgment of
Administrative Agent and the Independent Engineer, exceed remaining Project
Costs (including budgeted contingency (or the appropriate part thereof) and
anticipated Liquidation Costs and anticipated Hedge Breaking Fees arising from
any prepayment related to such reduction or cancellation), or (c) such reduction
or cancellation would cause an Inchoate Default, Event of Default or have a
Material Adverse Effect. Borrower shall pay to Administrative Agent any
Commitment Fees then due in respect of the canceled portion of the applicable
Commitment upon any cancellation and, from the effective date of any
cancellation or reduction, the Commitment Fees shall be computed on the basis of
the Available Construction
14
Loan Commitment as so canceled or reduced. Once reduced or canceled, the Total
Construction Loan Commitment may not be increased or reinstated. Any reductions
pursuant to this Section 2.3.3 shall be applied ratably to each Lender's
respective Commitments in accordance with Section 2.7.1.
2.4 FEES.
2.4.1 Administrative Agent's Fees. Borrower shall pay to
Administrative Agent solely for Administrative Agent's account the fees and
other amounts described in the Administrative Agent Fee Letter.
2.4.2 Commitment Fees.
(a) Construction Loan Commitment Fees. On each Quarterly Payment
Date on and until the Construction Loan Maturity Date (or, if the Total
Construction Loan Commitment is canceled prior to such date, on the date of such
cancellation), Borrower shall pay to Administrative Agent, for the benefit of
the Lenders, accruing from the Closing Date or the first day of such quarter, as
the case may be, a commitment fee (the "Commitment Fee") for such quarter (or
portion thereof) then ending equal to the product of (i) the daily average
unutilized Construction Loan Commitment for such quarter (or portion thereof)
multiplied by (ii) a fraction, the numerator of which is the number of days in
that calendar quarter and the denominator of which is 360 multiplied by (iii)
0.50%, payable quarterly in arrears through Term-Conversion.
(b) Unutilized Security Fund LC Commitment Fee. On each Quarterly
Payment Date, Borrower shall pay to Administrative Agent, for the benefit of the
Lenders, accruing from the Closing Date or the first day of the Payment Period,
as the case may be, a commitment fee for such quarter (or portion thereof) then
ending equal to the product of (i) the daily average Unutilized Security Fund LC
Commitment for such quarter (or portion thereof) multiplied by (ii) a fraction,
the numerator of which is the number of days in that calendar quarter and the
denominator of which is 360 multiplied by (iii) 0.50%, payable quarterly in
arrears.
2.5 SECURITY FUND LC FEES.
2.5.1 Security Fund LC Fee. On each Quarterly Payment Date, Borrower
shall pay to Administrative Agent for the benefit of the Lenders, a Security
Fund LC fee (the "Security Fund LC Fee") for each Payment Period (or portion
thereof) then ending, equal to the product of (a) the daily average Stated
Amount of the Security Fund LC for such Payment Period (or portion thereof)
multiplied by (b) a fraction, the numerator of which is the number of days in
such Payment Period (or portion thereof) and the denominator of which is 360,
multiplied by (c) the applicable Rate Margin.
15
2.5.2 Fronting Fee. On each Quarterly Payment Date, Borrower shall
pay to Administrative Agent, solely for LC Issuer's account, a letter of credit
fronting fee for the corresponding Payment Period (or portion thereof) equal to
the product of (a) the daily average Stated Amount of the Security Fund LC
multiplied by (b) 0.20% multiplied by (c) a fraction, the numerator of which is
the number of days in that calendar quarter and the denominator of which is 360.
2.6 OTHER PAYMENT TERMS.
2.6.1 Place and Manner. Except as otherwise provided in the
Arrangement Fee Letter, the Administrative Agent Fee Letter or any other
provision contained in any of the Credit Documents, Borrower shall make all
payments due to any Lender, Collateral Agent or Administrative Agent hereunder
to Administrative Agent, for the account of such Lender, Collateral Agent or
Administrative Agent (as the case may be), to the account in the name of Loan
Servicing, Account No. 01-88179-2145-00, ABA No. 026-008-073, Reference: Calpine
Steamboat Holdings, LLC, or such other account as Administrative Agent shall
notify Borrower from time to time, in Dollars and in immediately available funds
not later than 12:00 noon on the date on which such payment is due. Any payment
made after such time on any day shall be deemed received on the Banking Day
after such payment is received. Administrative Agent shall disburse to each
Lender or Collateral Agent (as the case may be) each such payment received by
Administrative Agent for such Lender or Collateral Agent (as the case may be),
such disbursement to occur on the day such payment is received if received by
12:00 noon or if otherwise reasonably possible, or otherwise on the next Banking
Day.
2.6.2 Date. Whenever any payment due hereunder shall fall due on a
day other than a Banking Day, such payment shall be made on the next succeeding
Banking Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be, without duplication of any interest or
fees so paid in the next subsequent calculation of interest or fees payable.
2.6.3 Default Interest. Notwithstanding anything to the contrary
herein, upon the occurrence and during the continuation of any Event of Default,
the outstanding principal amount of all Loans and, to the extent permitted by
applicable Legal Requirements, any accrued but unpaid interest payments thereon
and any accrued but unpaid fees, and other amounts hereunder, shall thereafter
bear interest (including post-petition interest in any proceeding under
applicable Bankruptcy Laws) payable upon demand, and the Security Fund LC Fees
shall be increased, at a rate that is (a) 2% per annum in excess of the interest
rate and Security Fund LC Fees then otherwise payable under this Agreement with
respect to the applicable Loans and Security Fund LC, or (b) in the case of any
such fees and other amounts, at a rate that is 2% per annum in excess of the
interest rate then otherwise payable under this Agreement for Base Rate Loans
(the "Default Rate"); provided that, in the case of LIBOR Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective, such LIBOR Loans shall thereupon become Base Rate
Loans and shall thereafter bear interest payable upon
16
demand at a rate that is 2% per annum in excess of the interest rate then
otherwise payable under this Agreement for Base Rate Loans.
2.6.4 Net of Taxes, Etc.
(a) Taxes. Any and all payments to or for the benefit of
Administrative Agent or any Lender by Borrower hereunder or under any other
Credit Document shall be made free and clear of and without deduction or
withholding, setoff or counterclaim of any kind whatsoever and in such amounts
as may be necessary in order that all such payments, after deduction for or on
account of any present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto (excluding net income and
franchise taxes, which include taxes imposed on or measured by the net income,
net profits or capital of Administrative Agent or such Lender by any
jurisdiction or any political subdivision or taxing authority thereof or therein
as a result of a connection between such Lender and such jurisdiction or
political subdivision, unless such connection results solely from such Lender's
executing, delivering or performing its obligations or receiving a payment
under, or enforcing, this Agreement or any Note) (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"), shall be equal to the amounts otherwise
specified to be paid under this Agreement and the other Credit Documents. If any
Taxes are required to be deducted or withheld from or in respect of any sum
payable hereunder or under any other Credit Document to Administrative Agent or
any Lender, (i) the sum payable shall be increased as may be necessary so that
after all required deductions or withholdings (including deductions or
withholdings applicable to additional sums payable under this Section 2.6.4),
Administrative Agent or such Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) Borrower shall make (or
cause to be made) such deductions, and (iii) Borrower shall pay (or cause to be
paid) the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable Legal Requirements. In addition,
Borrower agrees to pay any present or future stamp, recording or documentary
taxes and any other excise or property taxes, charges or similar levies (not
including income or franchise taxes) that arise under the laws of the United
States of America, the State of New York, the State of Texas or the State of
Minnesota from any payment made hereunder or under any other Credit Document or
from the execution or delivery or otherwise with respect to this Agreement or
any other Credit Document (hereinafter referred to as "Other Taxes").
(b) Tax Indemnity. Borrower shall indemnify each Lender for and hold
it harmless against the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.6.4) paid by any Lender, or any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted; provided that
Borrower shall not be obligated to indemnify any Lender for any penalties,
interest or expenses relating to Taxes or Other Taxes arising from such Lender's
gross negligence or willful misconduct. Each Lender agrees to give written
notice to Borrower of the assertion of any claim against such Lender relating to
such Taxes or Other Taxes as promptly as is practicable after being notified of
such assertion, and in no event later than 180 days after the
17
principal officer of such Lender responsible for administering this Agreement
obtains knowledge thereof; provided that any Lender's failure to notify Borrower
of such assertion within such 180 day period shall not relieve Borrower of its
obligation under this Section 2.6.4 with respect to Taxes or Other Taxes,
penalties, interest or expenses arising prior to the end of such period, but
shall relieve Borrower of its obligations under this Section 2.6.4 with respect
to Taxes or Other Taxes, penalties, interest or expenses between the end of such
period and such time as Borrower receives notice from such Lender as provided
herein. Payments by Borrower pursuant to this indemnification shall be made
within 30 days from the date such Lender makes written demand therefor
(submitted through Administrative Agent), which demand shall be accompanied by a
certificate describing in reasonable detail the basis thereof.
(c) Notice. Within 30 days after the date of any payment of Taxes by
Borrower, Borrower shall furnish to Administrative Agent, at its address
referred to in Section 11.1, the original or a certified copy of a receipt
evidencing payment thereof or, if such receipt is not obtainable, other evidence
of such payment by Borrower reasonably satisfactory to Administrative Agent.
Borrower shall compensate each Lender for all reasonable losses and expenses
sustained by such Lender as a result of any failure by Borrower to so furnish
such copy of such receipt.
(d) Conduit Financing. Notwithstanding anything to the contrary
contained in this Section 2.6.4, if a Lender is a conduit entity participating
in a conduit financing arrangement (as defined in Section 7701(l) of the Code
and the Treasury Regulations issued thereunder) with respect to any payments
made by Borrower under this Agreement and under any Note, Borrower shall not be
obligated to pay additional amounts to such Lender pursuant to this Section
2.6.4 to the extent that the amount of Taxes exceeds the amount that would have
otherwise been payable were such Lender not a conduit entity participating in a
conduit financing arrangement.
(e) Reimbursement by Lenders. If any Lender receives an
indemnification payment pursuant to Section 2.6.4(b) and if such Lender is able,
in its sole opinion, to apply or otherwise take advantage of any refund or tax
credit arising out of or in conjunction with any Taxes or Other Taxes which give
rise to such indemnification, such Lender shall, to the extent that in its sole
opinion it can do so without prejudice to the retention of the amount of such
refund or credit and without any other adverse tax consequences for such Lender,
reimburse to Borrower at such time as such tax refund or credit shall have
actually been received by such Lender such amount as the Lender shall, in its
sole opinion, have determined to be attributable to the relevant Taxes or Other
Taxes and as will leave such Lender in no better or worse position than it would
have been in if the payment of such Taxes or Other Taxes had not been required.
Nothing in this Section 2.6.4(e) shall oblige any Lender to disclose to Borrower
or any other Person any information regarding its tax affairs or tax
computations, or shall interfere with Lender's absolute discretion to arrange
its tax affairs in whatever manner it thinks fit. In particular, no Lender shall
be under any obligation to claim relief from its corporate profits or similar
tax liability in credits or deductions available to it and, if it does claim,
the extent, order and manner in which it does so shall be at its absolute
discretion.
18
(f) Survival of Obligations. The obligations of Borrower under this
Section 2.6.4 shall survive the termination of this Agreement and the repayment
of Borrower's Obligations.
2.6.5 Application of Payments. Except as otherwise expressly
provided herein or in the other Credit Documents, payments made under this
Agreement or the other Credit Documents and other amounts received by
Administrative Agent, Collateral Agent, Depositary Agent or the Lenders under
this Agreement or the other Credit Documents shall first be applied to any fees,
costs, charges or expenses payable to Administrative Agent, Collateral Agent,
Depositary Agent or the Lenders hereunder or under the other Credit Documents,
next to any accrued but unpaid interest then due and owing, and then to
outstanding principal then due and owing or otherwise to be prepaid (in each
case, such application to be made on a pro rata basis among such applicable
Persons).
2.6.6 Withholding Exemption Certificates. Administrative Agent on
the Closing Date, each Lender upon becoming a Lender and each Person to which
any Lender grants a participation (or otherwise transfers its interest in this
Agreement) agree that they will deliver to Administrative Agent and Borrower
either (a) if such Lender or Person is a United States person (other than a
corporation established under the laws of the United States or any political
subdivision thereof), an executed copy of a United States Internal Revenue
Service Form W-9, or (b) if such Lender or Person is not a corporation
established under the laws of the United States or any political subdivision
thereof, two duly completed copies of United States Internal Revenue Service
Form W-8BEN or W-8ECI or successor applicable form, as the case may be
(certifying therein an entitlement to an exemption from, United States
withholding taxes) plus, in the case of a Lender or a Person using the so-called
"portfolio interest exemption," a duly completed and executed non-bank
certificate in the form of Exhibit J, if applicable. Each Lender which delivers
to Borrower and Administrative Agent a Form W-8BEN or W-8ECI pursuant to the
preceding sentence further undertakes to deliver to Borrower and Administrative
Agent further copies of the Form W-8BEN or W-8ECI, or successor applicable
forms, or other manner of certification or procedure, as the case may be, on or
before the date that any such form expires or becomes obsolete or within a
reasonable time after gaining knowledge of the occurrence of any event requiring
a change in the most recent forms previously delivered by it to Borrower, and
such extensions or renewals thereof as may reasonably be requested by Borrower,
certifying in the case of a Form W-8BEN or W-8ECI that such Lender is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless in any such cases an event (including
any change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent a Lender from duly completing and delivering
any such form with respect to it and such Lender advises Borrower that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax. Borrower shall not be obligated, however, to pay any
additional amounts in respect of United States federal income tax pursuant to
Section 2.6.4 (or make an indemnification payment pursuant to Section 2.6.4) to
any Lender (including any entity to which any Lender sells, assigns, grants a
participation in, or otherwise transfers its rights under this Agreement) if
19
the obligation to pay such additional amounts (or such indemnification) would
not have arisen but for a failure of such Lender to comply with its obligations
under this Section 2.6.6.
2.7 PRO RATA TREATMENT.
2.7.1 Borrowings, Commitment Reductions, Etc. Except as otherwise
provided herein, (a) each Borrowing consisting of Construction Loans, Term
Loans, Security Fund LC Loans or each Drawing Payment under the Security Fund LC
and each reduction of the Total Construction Loan Commitment, Total Term Loan
Commitment or Total Security Fund LC Commitment shall be made or allocated among
the Lenders pro rata according to their respective Proportionate Shares of such
Loans or Commitments, as the case may be, (b) each payment of principal of and
interest on Construction Loans, Term Loans or Security Fund LC Loans shall be
made or shared among the Lenders holding such Loans or Commitments pro rata
according to their respective unpaid principal amounts of such Loans or
Commitments held by such Lenders, and (c) each payment of Commitment Fees shall
be shared among the Lenders pro rata according to (i) their respective
Proportionate Shares of the Commitments to which such fees apply, and (ii) in
the case of each Lender which becomes a party to this Agreement hereunder after
the Closing Date, the date upon which such Lender so became a party hereunder.
2.7.2 Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of Loans owed to it, in excess of its
Proportionate Share of payments on account of such Loans obtained by all Lenders
entitled to such payments, such Lender shall forthwith purchase from the other
Lenders such participation in the Loans, as the case may be, as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
such Lender shall be rescinded and each other Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such other Lender's Proportionate Share (according to
the proportion of (a) the amount of such other Lender's required repayment to
(b) the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.7.2 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation.
2.8 CHANGE OF CIRCUMSTANCES.
2.8.1 Inability to Determine Rates. If, on or before the first day
of any Interest Period for any LIBOR Loans, (a) Administrative Agent determines
that the LIBO Rate for such Interest Period cannot be adequately and reasonably
determined due to the unavailability of
20
funds in or other circumstances affecting the London interbank market, or (b)
Lenders holding aggregate Proportionate Shares of 33-1/3% or more of the
Commitments shall advise Administrative Agent that (i) the rates of interest for
such LIBOR Loans do not adequately and fairly reflect the cost to such Lenders
of making or maintaining such Loans, or (ii) deposits in Dollars in the London
interbank market are not available to such Lenders (as conclusively certified by
each such Lender in good faith in writing to Administrative Agent and to
Borrower) in the ordinary course of business in sufficient amounts to make
and/or maintain their LIBOR Loans, then Administrative Agent shall immediately
give notice of such condition to Borrower. After the giving of any such notice
and until Administrative Agent shall otherwise notify Borrower that the
circumstances giving rise to such condition no longer exist, Borrower's right to
request the making of or conversion to, and the Lenders' obligations to make or
convert to, LIBOR Loans shall be suspended. Any LIBOR Loans outstanding at the
commencement of any such suspension shall be converted at the end of the then
current Interest Period for such Loans into Base Rate Loans unless such
suspension has then ended.
2.8.2 Illegality. If, after the date of this Agreement, the adoption
of any Governmental Rule, any change in any Governmental Rule or the application
or requirements thereof (whether such change occurs in accordance with the terms
of such Governmental Rule as enacted, as a result of amendment, or otherwise),
any change in the interpretation or administration of any Governmental Rule by
any Governmental Authority, or compliance by any Lender or Borrower with any
request or directive (whether or not having the force of law, but if not having
the force of law, being of a type with which a Lender customarily complies) of
any Governmental Authority (a "Change of Law") shall make it unlawful or
impossible for any Lender to make or maintain any LIBOR Loan, then such Lender
shall immediately notify Administrative Agent and Borrower of such Change of
Law. Upon receipt of such notice, (a) Borrower's right to request the making of
or conversion to, and the Lender's obligations to make or convert to, LIBOR
Loans shall be suspended for so long as such condition shall exist, and (b)
Borrower shall, at the request of such Lender, either (i) pursuant to Section
2.1.6, convert any then outstanding LIBOR Loans into Base Rate Loans at the end
of the current Interest Periods for such Loans, or (ii) immediately repay LIBOR
Loans pursuant to Section 2.1.7 or convert LIBOR Loans into Base Rate Loans if
such Lender shall notify Borrower that such Lender may not lawfully continue to
fund and maintain such Loans. Any conversion or prepayment of LIBOR Loans made
pursuant to the preceding sentence prior to the last day of an Interest Period
for such Loans shall be deemed a prepayment thereof for purposes of Section 2.9.
2.8.3 Increased Costs. If, after the date of this Agreement, any
Change of Law:
(a) shall subject any Lender or LC Issuer (the term "Lender" as used
below in this Section to include LC Issuer) to any tax, duty or other charge
with respect to any LIBOR Loan or Commitment in respect thereof, or shall change
the basis of taxation of payments by Borrower to any Lender on such a Loan or
with respect to any such Commitment (except for Taxes, Other Taxes or changes in
the rate of taxation on the overall net income of any Lender); or
21
(b) shall impose, modify or hold applicable any reserve, special
deposit or similar requirement (without duplication of any reserve requirement
included within the applicable Interest Rate through the definition of "Reserve
Requirement") against assets held by, deposits or other liabilities in or for
the account of, advances or loans by, or any other acquisition of funds by any
Lender for any LIBOR Loan; or
(c) shall impose on any Lender any other condition directly related
to any LIBOR Loan or Commitment in respect thereof;
and the effect of any of the foregoing is to increase the cost to such Lender of
making, issuing, creating, renewing, participating in (subject to the
limitations in Section 9.13) or maintaining any such LIBOR Loan or Commitment in
respect thereof or to reduce any amount receivable by such Lender hereunder,
then Borrower shall from time to time, within 10 days after demand by such
Lender, pay to such Lender additional amounts sufficient to reimburse such
Lender for such increased costs or to compensate such Lender for such reduced
amounts. A certificate setting forth in reasonable detail the amount of such
increased costs or reduced amounts and the basis for determination of such
amount, submitted by such Lender to Borrower, shall, in the absence of manifest
error, be conclusive and binding on Borrower for purposes of this Agreement.
2.8.4 Capital Requirements. If any Lender determines that (a) any
Change of Law after the date of this Agreement increases the amount of capital
required or expected to be maintained by such Lender, or the Lending Office of
such Lender or any Person controlling such Lender (a "Capital Adequacy
Requirement"), and (b) the amount of capital maintained by such Lender or such
Person which is attributable to or based upon the Loans, the Commitments or this
Agreement must be increased as a result of such Capital Adequacy Requirement
(taking into account such Lender's or such Person's policies with respect to
capital adequacy), then Borrower shall pay to such Lender or such Person, within
10 days after delivery of demand by such Lender or such Person, such amounts as
such Lender or such Person shall reasonably determine are necessary to
compensate such Lender or such Person for the increased costs to such Lender or
such Person of such increased capital. A certificate of such Lender or such
Person, setting forth in reasonable detail the computation of any such increased
costs, delivered to Borrower by such Lender or such Person shall, in the absence
of manifest error, be conclusive and binding on Borrower for purposes of this
Agreement.
2.8.5 Notice; Participating Lenders' Rights. Each Lender shall
notify Borrower of any event occurring after the date of this Agreement that
will entitle such Lender to compensation pursuant to this Section 2.8, as
promptly as practicable, and in no event later than 180 days after the principal
officer of such Lender responsible for administering this Agreement obtains
knowledge thereof; provided that any Lender's failure to notify Borrower within
such 180 day period shall not relieve Borrower of its obligation under this
Section 2.8 with respect to claims arising prior to the end of such period, but
shall relieve Borrower of its obligations under this Section 2.8 with respect to
the time between the end of such period and such time as Borrower receives
notice from the indemnitee as provided herein. No Person purchasing from a
Lender a participation in any Commitment (as opposed to an assignment) shall be
entitled to any payment from or on behalf of Borrower pursuant to Section 2.8.3
or Section 2.8.4 which would
22
be in excess of the applicable proportionate amount (based on the portion of the
Commitment in which such Person is participating) which would then be payable to
such Lender if such Lender had not sold a participation in that portion of the
Commitment.
2.9 FUNDING LOSSES.
If Borrower shall (a) repay or prepay any LIBOR Loans on any day
other than the last day of an Interest Period for such Loans (whether an
optional prepayment or a Mandatory Prepayment), (b) fail to borrow any LIBOR
Loans in accordance with a Notice of Construction Loan Borrowing delivered to
Administrative Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise) after such Notice of Construction Loan
Borrowing has become irrevocable, (c) fail to convert any Loans into LIBOR Loans
in accordance with a Notice of Conversion of Loan Type delivered to
Administrative Agent (whether as a result of the failure to satisfy any
applicable conditions or otherwise) after such Notice of Conversion of Loan Type
has become irrevocable, (d) fail to continue a LIBOR Loan in accordance with a
Confirmation of Interest Period Selection delivered to Administrative Agent, (e)
fail to convert any Construction Loans into Term Loans in accordance with a
Notice of Term Conversion delivered to Administrative Agent (whether as a result
of a failure to satisfy any applicable conditions or otherwise), or (f) fail to
make any prepayment in accordance with any notice of prepayment delivered to
Administrative Agent, then Borrower shall, within 10 days after demand by any
Lender, reimburse such Lender for all reasonable costs and losses incurred by
such Lender as a result of such repayment, prepayment or failure ("Liquidation
Costs"). Borrower understands that such costs and losses may include losses
incurred by a Lender as a result of funding and other contracts entered into by
such Lender to fund LIBOR Loans (other than non-receipt of the margin applicable
to such LIBOR Loans). Each Lender demanding payment under this Section 2.9 shall
deliver to Borrower a certificate setting forth in reasonable detail the basis
for and the amount of costs and losses for which demand is made. Such a
certificate so delivered to Borrower shall, in the absence of manifest error, be
conclusive and binding as to the amount of such loss for purposes of this
Agreement.
2.10 ALTERNATE OFFICE; MINIMIZATION OF COSTS.
2.10.1 To the extent reasonably possible, each Lender shall
designate an alternative Lending Office with respect to its LIBOR Loans and
otherwise take any reasonable actions to reduce any liability of Borrower to any
Lender under Section 2.6.4, 2.8.3, 2.8.4 or 2.9, or to avoid the unavailability
of any Type of Loans under Section 2.8.2 so long as (in the case of the
designation of an alternative Lending Office) such Lender, in its sole
discretion, determines that (a) such designation is not disadvantageous to such
Lender and (b) such actions would eliminate or reduce liability to such Lender.
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or actions within 10 Banking Days
of demand thereof to Borrower.
23
2.10.2 If and with respect to each occasion that a Lender either
makes a demand for compensation pursuant to Section 2.6.4, 2.8.3 or 2.8.4 or is
unable for a period of three consecutive months to fund LIBOR Loans pursuant to
Section 2.8.2 or such Lender wrongfully fails to fund a Loan, then Borrower may,
upon at least five Banking Days' prior irrevocable written notice to each of
such Lender and Administrative Agent, in whole permanently replace the Loans and
Commitments of such Lender; provided that Borrower shall replace such Loans and
Commitments with the Loans and Commitments of a commercial bank reasonably
satisfactory to Administrative Agent, and with respect to the Security Fund LC
Commitment, reasonably satisfactory to the LC Issuer. Such replacement Lender
shall upon the effective date of replacement purchase the Borrower's Obligations
hereunder owed to such replaced Lender for the aggregate amount thereof and
shall thereupon for all purposes become a "Lender" hereunder. Such notice from
Borrower shall specify an effective date for the replacement of such Lender's
Loans and Commitments, which date shall not be later than the fourteenth day
after the day such notice is given. On the effective date of any replacement of
such Lender's Loans and Commitments pursuant to this Section 2.10.2, Borrower
shall pay to Administrative Agent for the account of such Lender (a) any fees
due to such Lender to the date of such replacement, (b) the principal of and
accrued interest on the principal amount of outstanding Loans held by such
Lender to the date of such replacement (such amount to be represented by the
purchase of the Borrower's Obligations hereunder of such replaced Lender by the
replacing Lender and not as a prepayment of such Loans), and (c) the amount or
amounts due to such Lender pursuant to each of Sections 2.6.4, 2.8.3 and 2.8.4,
as applicable, and any other amount then payable hereunder to such Lender.
Borrower will remain liable to such replaced Lender for any Liquidation Costs
that such Lender sustains or incurs as a consequence of the purchase of such
Lender's Loans (unless such Lender has defaulted on its obligation to fund a
Loan hereunder). Upon the effective date of the purchase of any Lender's Loans
owed to such Lender and termination of such Lender's Commitments pursuant to
this Section 2.10.2, such Lender shall cease to be a Lender hereunder. No such
termination of any such Lender's Commitments and the purchase of such Lender's
Loans pursuant to this Section 2.10.2 shall affect (i) any liability or
obligation of Borrower or any other Lender to such terminated Lender, or any
liability or obligation of such terminated Lender to Borrower or any other
Lender, which accrued on or prior to the date of such termination, or (ii) such
terminated Lender's rights hereunder in respect of any such liability or
obligation.
2.10.3 Upon written notice to Administrative Agent, any Lender may
designate a Lending Office other than the Lending Office most recently
designated to Administrative Agent and may assign all of its interests under the
Credit Documents and its Notes (if any) to such Lending Office; provided that
such designation and assignment do not at the time of such designation and
assignment increase the reasonably foreseeable liability of Borrower under
Section 2.6.4, 2.8.3 or 2.8.4 or make an Interest Rate option unavailable
pursuant to Section 2.8.2.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT TO THE CLOSING DATE.
24
The obligation of each Lender to enter into this Agreement and to
make the initial Construction Loans under this Agreement and of the LC Issuer to
issue the Security Fund LC is subject to the prior satisfaction of each of the
following conditions (unless waived in writing by Administrative Agent with the
consent of the Lenders) (the date such conditions precedent are so satisfied or
waived being referred to as the "Closing Date"):
3.1.1 Resolutions. Delivery to the Lead Arrangers of a copy of one
or more resolutions or other authorizations, in form and substance reasonably
satisfactory to the Lenders, of each Borrower Party, each other Affiliate of
Borrower that is a party to an Operative Document as of the Closing Date (each
such Affiliate, an "Affiliated Major Project Participant" and, together with
each Borrower Party, the "Calpine Entities") certified by a Responsible Officer
of each such Calpine Entity as being in full force and effect on the Closing
Date, authorizing, as applicable and among other things, the Borrowings herein
provided for, the granting of the Liens under the Collateral Documents, the
contribution of equity to the Project Companies and the execution, delivery and
performance of this Agreement and the other Operative Documents and any
instruments or agreements required hereunder or thereunder to which such Calpine
Entity is a party.
3.1.2 Incumbency. Delivery to the Lead Arrangers of a certificate,
in form and substance reasonably satisfactory to the Lenders, from each Calpine
Entity signed by the appropriate authorized officer or manager of each such
Calpine Entity and dated as of the Closing Date, as to the incumbency of the
natural Persons authorized to execute and deliver this Agreement and the other
Operative Documents and any instruments or agreements required hereunder or
thereunder to which such Calpine Entity is a party.
3.1.3 Formation Documents. Delivery to the Lead Arrangers of (a)
copies of the articles of incorporation, certificate of incorporation, charter
or other state certified constituent documents of each Calpine Entity, certified
by the secretary of state of such Calpine Entity's state of incorporation or
formation, as applicable, and (b) copies of the bylaws, limited liability
company operating agreement or other comparable constituent documents, if
applicable, of each Calpine Entity, certified by a Responsible Officer of such
Calpine Entity as being true, correct and complete on the Closing Date.
3.1.4 Good Standing Certificates. Delivery to the Lead Arrangers of
certificates issued by (a) the secretary of state of the state in which each
Calpine Entity is formed or incorporated, as applicable, (b) in the case of each
Affiliated Major Project Participant (other than Calpine and FEC-LP) which is a
party to a FEC Major Project Document, the Secretary of the State of Texas or
the Comptroller of the State of Texas, as the case may be, and (c) in the case
of each Affiliated Major Project Participant (other than Calpine) which is a
party to a MEC Major Project Document, the Secretary of State of the State of
Minnesota, in each case (i) dated a date reasonably close prior to the Closing
Date and (ii) certifying that such Calpine Entity is in good standing and, if
necessary in connection with performance of its obligations under the applicable
Major Project Document, is qualified to do business in, and has paid all
franchise taxes or similar taxes due to, such states.
25
3.1.5 Third Party Approvals. The Lead Arrangers shall have received
all information and copies of all documents and copies of any approval by any
Person (including any Governmental Authority) reasonably required in connection
with any transaction herein contemplated or contemplated in any other Credit
Document, which the Lead Arrangers may reasonably have requested in connection
herewith.
3.1.6 Credit Documents and Project Documents. Delivery to the Lead
Arrangers of (a) executed originals of this Agreement and each other Credit
Document to be executed on the Closing Date and any supplements or amendments
thereto, all of which shall be in form and substance reasonably satisfactory to
the Lenders, (b) a certified list of, and true, correct and complete copies of,
each FEC Project Document (other than any FEC Project Document which is only
incidental to the development, construction, leasing, ownership or operation of
the Freeport Project) executed on or prior to the Closing Date (together with
any supplements or amendments thereto), all of which shall be in form and
substance reasonably satisfactory to the Lenders, and all of which shall have
been duly authorized, executed and delivered by the parties thereto, and all of
which FEC Project Documents shall be certified by a Responsible Officer of FEC
as being true, complete and correct and in full force and effect on the Closing
Date pursuant to the certificate delivered pursuant to Section 3.1.7, and (c) a
certified list of, and true, correct and complete copies of, each MEC Project
Document (other than any MEC Project Document which is only incidental to the
development, construction, leasing, ownership or operation of the Mankato
Project) executed on or prior to the Closing Date (together with any supplements
or amendments thereto, all of which shall be in form and substance reasonably
satisfactory to the Lenders, and all of which shall have been duly authorized,
executed and delivered by the parties thereto, and all of which MEC Project
Documents shall be certified by a Responsible Officer of MEC as being true,
complete and correct and in full force and effect on the Closing Date pursuant
to the certificate delivered pursuant to Section 3.1.7.
3.1.7 Closing Certificates.
(a) Certificate of Borrower. Delivery to the Lead Arrangers of a
certificate, dated as of the Closing Date, duly executed by a Responsible
Officer of Borrower, in substantially the form of Exhibit F-1.
(b) Certificate of FEC. Borrower shall cause FEC to deliver to the
Lead Arrangers a certificate, dated as of the Closing Date, duly executed by a
Responsible Officer of FEC, in substantially the form of Exhibit F-2, which
certificate shall, among other things, (a) state that neither FEC nor, to FEC's
knowledge, any other party to any FEC Project Document (other than any FEC
Project Document which is only incidental to the development, construction,
leasing, ownership or operation of the Freeport Project) is or, but for the
passage of time or giving of notice or both will be, in breach of any material
obligation thereunder, except as otherwise set forth in the Dow Consent, (b)
state that all conditions precedent to the performance of FEC, and, to FEC's
knowledge, all conditions precedent to the performance of the other parties
under such FEC Project Documents then required to have been performed shall have
been satisfied, except as disclosed in writing by FEC prior to the Closing Date,
and
26
(c) contain each other certification required to be made by a Responsible
Officer of FEC on the Closing Date pursuant to Sections 3.1.6 and 3.1.16.
(c) Certificate of MEC. Borrower shall cause MEC to deliver to the
Lead Arrangers a certificate, dated as of the Closing Date, duly executed by a
Responsible Officer of MEC, in substantially the form of Exhibit F-3, which
certificate shall, among other things, (a) state that neither MEC nor, to MEC's
knowledge, any other party to any MEC Project Document (other than any MEC
Project Document which is only incidental to the development, construction,
leasing, ownership or operation of the Mankato Project) is or, but for the
passage of time or giving of notice or both will be, in breach of any material
obligation thereunder, (b) state that all conditions precedent to the
performance of MEC, and, to MEC's knowledge, all conditions precedent to the
performance of the other parties under such MEC Project Documents then required
to have been performed shall have been satisfied, except as otherwise disclosed
in writing by MEC prior to the Closing Date, and (c) contain each other
certification required to be made by a Responsible Officer of MEC on the Closing
Date pursuant to Sections 3.1.6 and 3.1.16.
(d) Certificates of FEC-GP and FEC-LP. Borrower shall cause each of
FEC-GP and FEC-LP to deliver to the Lead Arrangers a certificate, dated as of
the Closing Date, duly executed by a Responsible Officer of FEC-GP and FEC-LP,
respectively, in substantially the form of Exhibit F-8, which certificate shall
contain each certification required to be made by a Responsible Officer of
FEC-GP and FEC-LP on the Closing Date pursuant to Section 3.1.16.
3.1.8 Legal Opinions. Delivery to the Lead Arrangers of legal
opinions of counsel to the Calpine Entities and each Major Project Participant
(other than NSP (with respect to the MEC Interconnection Agreement) and NNG), in
each case in form and substance reasonably satisfactory to the Lenders.
3.1.9 Certificate of Insurance Consultant. Delivery to the Lead
Arrangers of the Insurance Consultant's certificate, dated as of the Closing
Date and in substantially the form of Exhibit F-5, together with the Insurance
Consultant's report, in form and substance reasonably satisfactory to the
Lenders, attached thereto.
3.1.10 Insurance. Insurance complying with terms and conditions set
forth in Exhibit K shall be in full force and effect and the Lead Arrangers and
the Insurance Consultant shall have received (a) a certificate from FEC and
MEC's insurance broker(s), dated as of the Closing Date and in form and
substance reasonably satisfactory to the Lenders, (i) identifying underwriters,
type of insurance, insurance limits and policy terms, (ii) listing the special
provisions required as set forth in Exhibit K, (iii) describing the insurance
obtained and (iv) stating that such insurance is in full force and effect and
that all premiums then due thereon have been paid and that, in the opinion of
such broker(s), such insurance complies with the terms and conditions set forth
in Exhibit K, and (b) certified copies of all policies evidencing such insurance
(or a binder, commitment or certificates signed by the insurer or a broker
authorized to bind the insurer), each in form and substance reasonably
satisfactory to the Lenders.
27
3.1.11 Certificate of the Independent Engineer. Delivery to the Lead
Arrangers of the Independent Engineer's certificate, dated as of the Closing
Date and in substantially the form of Exhibit F-6, together with the Independent
Engineer's report, in form and substance reasonably satisfactory to the Lenders,
attached thereto.
3.1.12 Certificate of Power Market Consultant. Delivery to the Lead
Arrangers of the Power Market Consultant's certificate, dated as of the Closing
Date and in substantially the form of Exhibit F-7, together with the Power
Market Consultant's report, in form and substance reasonably satisfactory to the
Lenders, attached thereto.
3.1.13 Schedule of Applicable Permits.
(a) Delivery to the Lead Arrangers of Exhibit G-1, the schedule of
Permits required by any Borrower Party or Dow to develop, construct, lease, own
and operate the Projects, in form and substance reasonably satisfactory to the
Lenders. Borrower shall also deliver and cause FEC and MEC to deliver to the
Lead Arrangers copies of each Permit listed in Part I of Exhibit G-1 in form and
substance reasonably satisfactory to the Lenders. Except as disclosed in Exhibit
G-1, each Applicable Permit listed in Part I of Exhibit G-1 shall (A) constitute
in the Lead Arrangers' reasonable opinion all of the Applicable Permits as of
the Closing Date, (B) have been duly obtained or been assigned in Dow, FEC or
MEC's name as applicable, (C) be in full force and effect, (D) not be subject to
any current legal proceeding, and (E) not be subject to any Unsatisfied
Condition that could reasonably be expected to result in material modification
or revocation of such Applicable Permit, and all applicable appeal periods with
respect to each such Applicable Permit shall have expired.
(b) Part II of Exhibit G-1 shall list all other Permits that are not
Applicable Permits (as of the Closing Date) required by any Borrower Party or
Dow to develop, construct, lease, own and operate the Projects as contemplated
by the Operative Documents. The Permits listed in Part II of Exhibit G-1 shall,
in the Lead Arrangers' reasonable opinion, be timely obtainable (i) on or before
the date any Borrower Party or Dow requires such Permit, (ii) without delay
materially in excess of the time provided therefor in the Project Schedule (if
applicable), and (iii) without expense materially in excess of the amounts
provided therefor in the Project Budget by FEC or MEC as applicable.
(c) Except as disclosed in Exhibit G-1, the Permits listed in Part I
of Exhibit G-1 shall not be subject to any restriction, condition, limitation or
other provision which could reasonably be expected to have a Material Adverse
Effect or result in the Projects being operated in a manner substantially
inconsistent with the assumptions underlying the Base Case Project Projections.
3.1.14 Absence of Litigation. Except as disclosed on Exhibit G-5, no
action, suit, proceeding or investigation shall have been instituted or
threatened in writing against any Borrower Party. No action, suit, proceeding or
investigation shall have been instituted or, to Borrower's knowledge, threatened
in writing against any other Major Project Participant that (for purposes of
this Section 3.1.14, in the Lead Arrangers' sole discretion) could reasonably be
28
expected to (a) have a Material Adverse Effect, or (b) cause or deem the
Lenders, Administrative Agent, Collateral Agent, the Lead Arrangers or any
Borrower Party or any Affiliate of any of them to be subject to, or not exempted
from, regulation under PUHCA, or treated as a public utility under the laws of
the State of Minnesota (in the case of the Mankato Project) or of Texas (in the
case of the Freeport Project), as constituted and construed by the courts of
Minnesota or Texas as applicable, respecting the rates or the financial or
organizational regulation of electric utilities.
3.1.15 Payment of Fees. All taxes, fees and other costs payable in
connection with the execution, delivery, recordation and filing of the documents
and instruments referred to in this Section 3.1 and due on the Closing Date
shall have been paid in full or, as approved by the Lenders, provided for.
Borrower shall have paid (or caused to be paid) all outstanding amounts due, as
of the Closing Date, and owing to (a) the Lenders, Administrative Agent or the
Lead Arrangers under any fee or other letter, including without limitation the
Arrangement Fee Letter and the Upfront Fee Letter, or pursuant to Section 2.4.1,
(b) the Lenders' attorneys and consultants (including the Independent
Consultants) and the Title Insurers for all services rendered and billed prior
to the Closing Date, (c) the Depositary Agent under the Depositary Agreements,
and (d) Administrative Agent for any other amounts required to be paid or
deposited by Borrower on the Closing Date.
3.1.16 Financial Statements. Delivery to the Lead Arrangers of
accurate and complete copies of the most recent (a) unaudited annual financial
statements of each Borrower Party (other than Borrower) for the year ended
December 31, 2004, (b) audited annual financial statements or Form 10-K of
Sponsor, Dow and NSP, for the year ended December 31, 2003, (c) unaudited
quarterly financial statements or Form 10-Q of Sponsor for the fiscal quarter
ended on September 30, 2004, (d) unaudited profit and loss statement and balance
sheet for CCMCI, Operator and CES for the fiscal quarter ended September 30,
2004 and (e) for each Borrower Party, unaudited pro forma income statement,
balance sheet, cash flow statement (other than Borrower, FEC-GP and FEC-LP) and
reconciliation of net worth of each such Borrower Party as of the Closing Date,
together with, in the case of each such Borrower Party, a certificate from the
appropriate Responsible Officer thereof, dated as of the Closing Date and in
substantially the form of Exhibit F-2 (in the case of FEC), Exhibit F-3 (in the
case of MEC) or Exhibit F-8 (in the case of FEC-GP and FEC-LP), stating that no
Material Adverse Change in the consolidated assets, liabilities, operations or
financial condition of such Person has occurred from those set forth in the most
recent financial statements provided to the Lead Arrangers.
3.1.17 UCC Reports. Delivery to the Lead Arrangers of a UCC report
of a date no less recent than 30 days before the Closing Date for each of the
jurisdictions in which the UCC-1 financing statements and the fixture filings
are intended to be filed in respect of the Collateral, showing that upon due
filing or recordation (assuming such filing or recordation occurred on the date
of such respective reports), as the case may be, the security interests created
under the Collateral Documents, with respect to such Collateral, will be prior
to all other financing statements, future filings or other security documents
wherein the security interest is perfected by filing or recording in respect of
the Collateral.
29
3.1.18 Project Budget. Delivery to the Lead Arrangers of a budget in
the form of Exhibit G-2 (the "Project Budget") for all anticipated costs to be
incurred in connection with the development, construction, installation,
start-up and testing of each Project, which Project Budget shall be satisfactory
to the Lenders.
3.1.19 Base Case Project Projections. Delivery to the Lead Arrangers
of the Base Case Project Projections of operating expenses and cash flow for
each Project in the form of Exhibit G-3, which Base Case Project Projections
shall be in form and substance satisfactory to the Lenders.
3.1.20 No Material Adverse Change. Since December 31, 2003, no
Material Adverse Change has occurred and is continuing.
3.1.21 A.L.T.A. Surveys. Administrative Agent shall have received
A.L.T.A. surveys of the Sites (which surveys shall be reasonably current and in
form and substance reasonably satisfactory to the Lenders and the Title
Insurer), certified to FEC or MEC, as applicable, Administrative Agent and the
Title Insurer by a licensed Texas surveyor (in the case of the Freeport Project)
or a licensed Minnesota surveyor (in the case of the Mankato Project) reasonably
satisfactory to the Lenders, showing, among other things, (a) as to the Sites,
the location and dimensions thereof (including (i) the location of all means of
access thereto and all easements or encumbrances relating thereto, and (ii) the
perimeter within which all improvements are to be located), (b) the existing
utility facilities servicing the Projects (including water, electricity, fuel,
telephone, sanitary sewer and storm water distribution and detention
facilities), (c) other than Permitted Liens, no existing or contemplated
improvements encroach or interfere with adjacent property or existing easements
or other rights (whether on, above or below ground), and that there are no gaps,
gores, projections, protrusions or other survey defects, (d) whether the MEC
Site or any portion thereof is located in a special flood hazard zone, and (e)
no other matters constituting a defect in title other than Title Exceptions;
provided, however, that the matters described in clauses (a)(ii) and (d) above
may be shown by separate maps, surveys or other information reasonably
satisfactory to the Lenders, and the surveyor shall not be required to certify
as to the location of any easements, improvements, encroachments utilities or
other matters which do not exist as of the Closing Date.
3.1.22 Title Policies. Delivery to the Lead Arrangers of a lender's
A.L.T.A. extended coverage policy of title insurance with respect to the Mankato
Project and a Mortgagee Policy of Title Insurance with respect to the Freeport
Project (collectively, the "Title Policies") (with any standard coverage
exception reasonably acceptable to the Lead Arrangers but without a mechanics'
and materialmen's exception included therein (except where applicable
Governmental Rules prevent the deletion of such exception) necessary to cause
the Title Insurer to issue affirmative coverage for mechanics' and materialmens'
liens in form and substance reasonably satisfactory to the Lenders), together
with such endorsements thereto as are reasonably required by the Lead Arrangers
and otherwise available in the applicable state, or the unconditional and
irrevocable commitment of the Title Insurer to issue such policies, dated as of
the Closing Date, in an amount equal to 50% of Project Costs for the Freeport
Project and 50% of Project Costs for the Mankato Project (with such reinsurance
as is reasonably satisfactory to
30
the Lenders) issued by the applicable Title Insurer in form and substance
satisfactory to the Lead Arrangers, insuring (or agreeing to insure) that:
(a) FEC has good and indefeasible right to occupy and use the FEC
Site and the FEC Easements as lessee and easement holder, in each case free and
clear of all Liens and exceptions to title whatsoever, other than (i) the Title
Exceptions, and (ii) such Liens or other exceptions to title as are reasonably
satisfactory to the Lenders;
(b) MEC has a good, marketable and insurable (i) fee simple interest
in the MEC Site, and (ii) easement interest in the MEC Easements, in each case
free and clear of Liens or other exceptions to title, other than (A) the Title
Exceptions, and (B) such Liens or other exceptions to title as are reasonably
satisfactory to the Lenders;
(c) the FEC Deed of Trust is (or will be when recorded) a valid
first lien on FEC's leasehold interest in the FEC Mortgaged Property, free and
clear of all Liens and exceptions to title whatsoever, other than (i) the Title
Exceptions, and (ii) such Liens or other exceptions to title as are reasonably
satisfactory to the Lenders; and
(d) the MEC Mortgage is (or will be when recorded, so long as the
NSP Acknowledgement of Subordination is recorded prior thereto) a valid first
lien on MEC's interest in the MEC Mortgaged Property, free and clear of all
Liens and exceptions to title whatsoever, other than (i) the Title Exceptions,
and (ii) such Liens or other exceptions to title as are reasonably satisfactory
to the Lenders.
3.1.23 Real Estate Rights. Except as disclosed on Exhibit G-9, each
Borrower Party and each other Major Project Participant shall have obtained and
shall hold all fee interests, leasehold interests, easements or other possessory
rights in real estate, together with necessary real property permits and
crossing rights (collectively, "Rights of Way") necessary for (a) performance in
full of each such Person's obligations under the Operative Documents to which
such Person is a party and each Permit to which such Person or its assets is
bound by, and (b) the development, leasing, construction and operation of the
Projects in accordance with the Base Case Project Projections. The use of such
Rights of Way shall not encroach on or interfere with property adjacent to such
Rights of Way or existing easements or other rights (whether on, above or below
ground), except for Permitted Liens, and the full length of the Rights of Way
shall be continuous, without break, gap or interruption.
3.1.24 Regulatory Status. Delivery to the Lead Arrangers of (a) an
order issued by FERC confirming that MEC is an Exempt Wholesale Generator, (b)
an order issued by FERC authorizing MEC to sell electricity at market-based
rates and granting MEC all waivers of regulations and blanket authorizations as
are customarily granted by FERC to entities with market-based rate authority,
(c) evidence reasonably satisfactory to the Lead Arrangers confirming that the
Freeport Project is a Qualifying Facility, and (d) all necessary approvals from
any Governmental Authority in respect of the MEC Interconnection Agreement, the
Power Purchase Agreement and the Capacity Sales Agreement, to the extent
applicable.
31
3.1.25 Notice to Proceed. The Construction Contractor shall have
been given (or shall be given simultaneously with the Closing Date) an
unconditional notice to proceed or otherwise been unconditionally directed (or
shall be directed simultaneously with the Closing Date) to begin performance
under the Project Documents to which such Person is a party and the Lead
Arrangers shall have received reasonably satisfactory evidence thereof.
3.1.26 Establishment of Accounts. The Accounts required to be
established as of the Closing Date for the Projects under the Control Agreements
and the Depositary Agreements shall have been established to the satisfaction of
the Lead Arrangers.
3.1.27 Representations and Warranties. Each representation and
warranty of each Borrower Party and each other Calpine Entity under the Credit
Documents shall be true and correct as of the Closing Date.
3.1.28 No Default. No Event of Default or Inchoate Default shall
have occurred and be continuing as of the Closing Date.
3.1.29 Utilities. Delivery to the Lead Arrangers of reasonably
satisfactory evidence that all potable water, sewer, telephone, electric and all
other utility services necessary for the development, construction, ownership
and operation of the Projects are either contracted for, or are readily
available on commercially reasonable terms, at the Projects.
3.1.30 Project Schedule. Delivery to the Lead Arrangers of the
Project Schedule in the form of Exhibit G-4, which Project Schedule shall be
reasonably satisfactory to the Lenders.
3.1.31 Consents. Delivery to the Lead Arrangers of executed Consents
from each of the Major Project Participants, which Consents shall be in
substantially the form of Exhibit E-1 or such other form agreed to by Borrower
and the Lead Arrangers, and otherwise reasonably satisfactory to the Lenders.
3.1.32 Process Agents. Delivery to the Lead Arrangers of evidence
reasonably acceptable to the Lead Arrangers that each Calpine Entity has
appointed Corporation Service Company as its respective agent for service of
process in the State of New York in respect of each Credit Document to which
such Person is a party which is governed by the laws of the State of New York.
3.1.33 PPA Security Fund. The Security Fund shall have been provided
to NSP in compliance with all applicable requirements under the Power Purchase
Agreement and shall be in full force and effect.
3.1.34 Undertaking Support LCs. Collateral Agent shall have been
absolutely assigned, and shall be in possession of, the Undertaking Support LCs,
subject to Collateral Agent's continuing obligations with respect to such
Undertaking Support LCs as set forth in Section 3.7 of the Borrower Depositary
Agreement.
32
3.1.35 Use of Equity. Borrower shall have certified to the Lead
Arrangers (in form and substance reasonably satisfactory to the Lenders) and the
Lead Arrangers and the Independent Engineer shall have confirmed, that FEC and
MEC have applied the proceeds of cash equity contributions made by Sponsor to
the payment of Project Costs in an aggregate amount not less than the Base
Equity Requirement.
3.2 CONDITIONS PRECEDENT TO EACH CREDIT EVENT.
The obligation of the Lenders to make each Construction Loan
(including the first Construction Loan, and any Punchlist Drawing, Dow Change
Order Drawing, Dow Performance Test Drawing or True-Up Drawing), of the LC
Issuer to issue the Security Fund LC, and of Collateral Agent to authorize
release of Project Revenues from the Construction Account for application to
Project Costs (each such loan and issuance, a "Credit Event"), is subject to the
prior satisfaction (or written waiver by Administrative Agent with the consent
of the Majority Lenders) of each of the following conditions:
3.2.1 Representations and Warranties. Each representation and
warranty made by or on behalf of Borrower and each Benefiting Project Company in
any of the Credit Documents (other than representations and warranties relating
solely to a Project Company which is not a Benefiting Project Company) shall be
true and correct in all material respects as if made on the date of such Credit
Event, unless such representation or warranty expressly relates solely to an
earlier date. Each representation and warranty of each Major Project Participant
(other than any Person which is a Major Project Participant solely by virtue of
its relationship with a Project Company which is not a Benefiting Project
Company) contained in the Operative Documents (other than this Agreement) shall
be true and correct in all material respects as if made on the date of such
Credit Event, unless such representation and warranty expressly relates solely
to an earlier date, and except where the untruth of such representation and
warranty could not reasonably be expected to have a Material Adverse Effect.
3.2.2 No Default. No Event of Default or Inchoate Default shall have
occurred and be continuing or will result from such Credit Event.
3.2.3 Operative Documents in Effect. Each Credit Document and Major
Project Document relating to the Benefiting Project Company shall remain in full
force and effect in accordance with its terms (except for any Major Project
Document that has expired or been terminated in accordance with the terms
thereof and, if applicable, the relevant Consent).
3.2.4 No Material Adverse Change. Since the Closing Date, no
Material Adverse Change shall have occurred and be continuing.
3.2.5 Notice of Construction Loan Borrowing; Calculations. Borrower
shall have delivered a Notice of Construction Loan Borrowing to Administrative
Agent in accordance with the procedures specified in Section 2.1.1, provided
that no Notice of Construction Loan Borrowing shall be required if the sole
Credit Event occurring is release of Project Revenues toward payment of Project
Costs. To the extent that the proceeds of the requested Construction Loan are
intended to be used to reimburse Sponsor for certain equity contributions made
by it as
33
contemplated by Section 5.1.1, then Borrower shall have delivered the
calculations and other information described in Section 5.10 as and when
required thereby.
3.2.6 Drawdown Certificate and Independent Engineer's Certificate.
(a) At least six Banking Days prior to each Credit Event, Borrower
shall have provided Administrative Agent and the Independent Engineer with a
duly executed copy of the Drawdown Certificate, dated the date of delivery of
such certificate, setting forth the date of the proposed occurrence of such
Credit Event and signed by a Responsible Officer of Borrower, substantially in
the form of Exhibit C-5.
(b) At least four Banking Days prior to each Credit Event, the
Independent Engineer shall have provided Administrative Agent with a certificate
of the Independent Engineer, dated the date of delivery of such certificate,
setting forth the date of the proposed occurrence of such Credit Event and
signed by an authorized representative of the Independent Engineer,
substantially in the form of Exhibit C-6 (the "Independent Engineer's Drawdown
Certificate").
(c) Borrower shall use reasonable efforts to provide Administrative
Agent and the Independent Engineer with drafts of any certificates and other
materials to be delivered pursuant to this Section 3.2.6 in advance of the time
frames listed above as reasonably requested in writing by Administrative Agent.
3.2.7 Amount. Construction Loans made on any single date of
Borrowing shall not exceed an aggregate amount equal to the lesser of (a) the
Available Construction Loan Commitment determined as of such date, and (b) such
amounts as shall ensure that uncommitted funds remaining in the Construction
Accounts other than the subaccounts thereof shall be disbursed to the greatest
extent possible, subject to the requirements of Section 2.1.1(b)(ii).
3.2.8 Title Policy Endorsements. Borrower shall provide, or
Administrative Agent shall be adequately assured, that (A) at the time of each
Credit Event where MEC is the Benefiting Project Company, the Title Insurer is
committed to issue to Administrative Agent a date-down endorsement of the Title
Policy insuring the MEC Mortgage, dated as of the date of such Credit Event,
insuring the continuing first priority of the MEC Mortgage (subject only to (a)
the exceptions to title contained in the title policy delivered pursuant to
Section 3.1.22, (b) Permitted Liens described in clause (b) of the definition
thereof (to the extent the same are afforded priority over the Lien of the MEC
Mortgage by operation of law), and (c) any other exceptions to title as are
reasonably acceptable to Administrative Agent), and otherwise in form and
substance reasonably satisfactory to Administrative Agent, and (B) at the time
of each Credit Event where FEC is the Benefiting Project Company, that the Title
Insurer is committed to issue to Administrative Agent a letter addressed to
Administrative Agent addressing matters of record which may have arisen since
the last Credit Event, provided that no such commitment, endorsement or letter
shall be required if the sole Credit Event occurring is release of Project
Revenues toward payment of Project Costs.
34
3.2.9 Lien Releases. If requested by Administrative Agent and
subject to the Benefiting Project Company's right to contest liens as described
in the definition of "Permitted Liens," the Benefiting Project Company shall
have delivered to Administrative Agent duly executed acknowledgments of payments
and releases of mechanics' and materialmen's liens, in the form attached to the
relevant Project Document or otherwise in form and substance reasonably
acceptable to Administrative Agent and the Title Insurer, from each contractor
or vendor that is a Major Project Participant of the Benefiting Project Company
for all work, services and materials (including equipment and fixtures of all
kinds, done, previously performed or furnished for the construction of such
Project), for which the disbursement of Construction Loan or non-Loan funds (as
the case may be) is being requested; provided, however, that such releases may
be conditioned upon receipt of payment with respect to work, services and
materials to be paid for with the proceeds of the requested Construction Loan or
disbursement of non-Loan proceeds, as applicable.
3.2.10 Applicable Permits.
(a) All Applicable Permits, required to have been obtained by the
Benefiting Project Company and, if the Benefiting Project Company is FEC, Dow by
the date of such Credit Event from any Governmental Authority shall have been
issued and be in full force and effect and not subject to current legal
proceedings or to any Unsatisfied Conditions that could reasonably be expected
to result in material modification or revocation, and all applicable appeal
periods with respect thereto shall have expired.
(b) With respect to any of the Permits not yet obtained and listed
in Part II of Exhibit G-1, to Borrower's knowledge, no fact or circumstance
shall exist which makes it likely that any such Permit will not be timely
obtainable by the Benefiting Project Company and, if the Benefiting Project
Company is FEC, Dow (i) prior to the time that it becomes an Applicable Permit,
as applicable, (ii) without delay materially in excess of the time periods
thereof in the Project Schedule (if applicable), and (iii) without expense
materially in excess of the amounts provided therefor in the then-current
Project Budget by FEC or MEC as applicable.
(c) Except as disclosed in Exhibit G-1, the Permits listed in
Exhibit G-1 which have been obtained by the Benefiting Project Company and, if
the Benefiting Project Company is FEC, Dow, shall not be subject to any
restriction, condition, limitation or other provision that could reasonably be
expected to have a Material Adverse Effect.
3.2.11 Additional Documentation. With respect to Additional Project
Documents entered into or obtained, transferred or required (whether because of
the status of the development, construction or operation of the Projects or
otherwise) since the date of the most recent Credit Event by the Benefiting
Project Company, there shall be (a) redelivery of such matters as are described
in Section 3.1.6(b) to the extent applicable to such Additional Project
Documents, and (b) if reasonably requested by Administrative Agent, delivery of
such matters as are described in Sections 3.1.1 and 3.1.8 from the applicable
Borrower Party, and Sections 3.1.8 and, to the extent required by Section 5.16,
Section 3.1.31, from the counterparty to such Additional Project Document;
provided that references to such matters being satisfactory to the
35
Lead Arrangers shall, for purposes of this Section 3.2.11, be deemed to be
references to such matters being reasonably satisfactory to Administrative
Agent.
3.2.12 Acceptable Work; No Liens. All work that has been done on the
Project owned by the Benefiting Project Company has been done in a good and
workmanlike manner and in accordance with the applicable Construction Contract,
and in accordance with the standard of care set forth in the applicable
Construction Contract, and there shall not have been filed against any of the
Collateral relating to the Benefiting Project Company or otherwise filed with or
served upon Borrower or the Benefiting Project Company with respect to the
applicable Project or any part thereof, notice of any Lien, claim of Lien or
attachment upon or claim affecting the right to receive payment of any of the
moneys payable to any of the Persons named on such request which has not been
released by payment or bonding or otherwise or which will not be released with
the payment of such obligation out of such Construction Loan or non-Loan
proceeds, other than Permitted Liens.
3.2.13 Casualty. If at the time of any Credit Event any Benefiting
Project Company shall have suffered a Major Casualty Event, Depositary Agent
shall have received funds (including applicable Loss Proceeds or equity funds
irrevocably committed on terms and conditions reasonably satisfactory to
Administrative Agent and, if in excess of $5,000,000, supported by a Qualified
Letter of Credit) sufficient in the reasonable judgment of Administrative Agent
and the Independent Engineer to assure (i) restoration of such Project to
substantially the same operating and performance parameters (including
applicable O&M Costs required to operate such Project) as were in effect
immediately prior to such Major Casualty Event, and (ii) Completion of such
Project prior to the Construction Loan Maturity Date.
3.2.14 Absence of Litigation. Except as set forth on Exhibit G-5, no
action, suit, proceeding or investigation shall have been instituted or
threatened in writing against Borrower, the Benefiting Project Company, the
applicable Major Project Participants or the applicable Project which could
reasonably be expected to (a) have a Material Adverse Effect, or (b) cause or
deem the Lenders, Administrative Agent, Collateral Agent, the Lead Arrangers or,
except to the extent provided in the first sentence of Section 4.17, any
Borrower Party or any Affiliate of any of them to be subject to, or not exempted
from, regulation under PUHCA, or treated as a public utility under the laws of
the State of Texas (in the case of the Freeport Project), or Minnesota (in the
case of the Mankato Project), as constituted and construed by the courts of
Texas or Minnesota, as applicable, respecting the rates or the financial or
organizational regulation of electric utilities.
3.2.15 Insurance. Insurance complying with the requirements of
Section 5.18 shall be in effect for the Borrower and the Benefiting Project
Company, and, upon the reasonable written request of Administrative Agent,
evidence thereof shall have been provided to Administrative Agent.
3.2.16 Available Construction Funds. After taking into consideration
the making of the applicable Credit Event, Administrative Agent (based on
consultation with the Independent Engineer) shall have reasonably determined
that Available Construction Funds
36
allocable to the Benefiting Project Company shall not be less than the aggregate
unpaid amount required to cause the Completion Date for such Project to occur in
accordance with all Legal Requirements, the applicable Construction Contract,
each other applicable Project Document pursuant to which construction work with
respect to the applicable Project is being performed, and the Credit Documents,
prior to the Construction Loan Maturity Date and to pay or provide for all
anticipated non-construction Project Costs of the Benefiting Project Company,
all as set forth in the then-current Project Budget with respect to such
Benefiting Project Company.
3.2.17 Delivery of First Amendment to PPA. Where MEC is the
Benefiting Project Company, for any Credit Events to occur more than seven
months following the Closing Date, delivery to the Lead Arrangers of the First
Amendment to PPA, fully executed and approved by all necessary Governmental
Authorities.
3.3 CONDITIONS PRECEDENT TO TERM-CONVERSION.
No Construction Loans shall Term-Convert unless the following
conditions shall have been satisfied or waived in writing by Administrative
Agent with consent of the Majority Lenders (the date such conditions are so
satisfied or waived being referred to as the "Term Period Commencement Date"):
3.3.1 Credit Event Conditions. The conditions set forth in Section
3.2, with the exception of Sections 3.2.5-3.2.9 and 3.2.16, shall have been
satisfied as of the date of Term-Conversion.
3.3.2 Payment of Obligations. Borrower shall have paid to
Administrative Agent the principal amount of the Construction Loans outstanding
which will not be Term-Converted to Term Loans as provided in Section 2.1.2,
plus all interest due and owing through such date on such Construction Loans and
all other Obligations of Borrower due and owing through such date to
Administrative Agent, Collateral Agent and the Lenders hereunder or under any
other Credit Document.
3.3.3 Punchlist Drawing; Dow Change Order Drawing; Dow Performance
Test Drawing; True-Up Drawing.
(a) Punchlist Drawing. Prior to Term-Conversion, Borrower shall have
made a drawing up to any then-remaining Available Construction Loan Commitment
(the "Punchlist Drawing") in an amount equal to, when aggregated with any
amounts then on deposit (or being simultaneously deposited) in the respective
Construction Accounts immediately prior to such Punchlist Drawing, the amount
necessary to fund in full the payments set forth in Section 3.1.3 of the Project
Company Depositary Agreements for Punchlist and other items necessary to achieve
Final Completion of both Projects. The amounts drawn for Punchlist items
pursuant to this Section 3.3.3(a) shall be deposited into the applicable Project
Company Construction Account.
(b) Dow Change Order Drawing. If, after giving effect to the making
of the Punchlist Drawing (if any), (i) there remains any Available Construction
Loan Commitment on
37
the Term Period Commencement Date and (ii) Dow has elected less than $5,000,000
of changes pursuant to Section 2.3.2 of the Capacity Sales Agreement, then
Borrower, at its election, may draw additional Construction Loans at or prior to
Term-Conversion (the "Dow Change Order Drawing"), in an amount up to the lesser
of (A) $5,000,000 minus the cost of changes which Dow did elect pursuant to such
section, and (B) $4,000,000. Such amount shall be deposited into Borrower's
Revenue Account.
(c) Dow Performance Test Drawing. Solely in the event that any
performance tests at the Freeport Project have been deferred pursuant to
Sections 4.3.2 and 4.3.3 of the Capacity Sales Agreement (a "Dow Test
Deferral"), then if, after giving effect to the making of the Punchlist Drawing
(if any) and Dow Change Order Drawing (if any), there remains any Available
Construction Loan Commitment, then Borrower shall draw additional Construction
Loans on the Term Period Commencement Date in an amount equal to the lesser of
(i) the Available Construction Loan Commitment and (ii) the Dow Performance Test
Exposure. The amount of such drawing (the "Dow Performance Test Drawing Amount"
shall be deposited into the First Step Construction Sub-Account pursuant to
Section 3.1.1(h) of the FEC Depositary Agreement.
(d) True-Up Drawing. If, after giving effect to the making of the
Punchlist Drawing (if any), the Dow Change Order Drawing (if any), and the Dow
Performance Test Drawing (if any), (i) there remains any Available Construction
Loan Commitment and (ii) the Debt to Equity Ratio (as determined in accordance
with Section 5.10(b)) is less than the Target Debt to Equity Ratio, then
Borrower, at its election, may draw additional Construction Loans on the Term
Period Commencement Date (the "True-Up Drawing") in an amount up to the lesser
of (i) the amount of the then-remaining Available Construction Loan Commitment,
and (ii) an amount which, after giving effect to the making of the Punchlist
Drawing (if any), the Dow Change Order Drawing (if any), and the Dow Performance
Test Drawing (if any), yields the Target Debt to Equity Ratio. Such amount shall
be deposited into the Borrower Revenue Account. After the True-Up Drawing, any
remaining Construction Loan Commitment shall be cancelled.
3.3.4 Completion. Completion with respect to each Project shall have
occurred and Borrower shall have delivered to Administrative Agent, in form and
substance reasonably satisfactory to Administrative Agent, a certification that
Completion with respect to each Project has occurred.
3.3.5 Annual Budget. Administrative Agent shall have received the
Annual Operating Budget for each Project as required under Section 5.14.3 for
the period from the Term Period Commencement Date through the end of the
calendar year in which Term-Conversion is to occur; provided that if such period
is less than three months, Administrative Agent shall have also received the
Annual Operating Budget for each Project for the first full calendar year
thereafter. In the event that either such Annual Operating Budget does not, in
Administrative Agent's reasonable opinion acting in consultation with the
Independent Engineer, properly reflect the operation of the applicable Project
during such calendar year as a result of the actual date of Term-Conversion
being different from the date anticipated therefor and set forth in such
38
Annual Operating Budget, Administrative Agent shall have received an amendment
to such Annual Operating Budget properly reflecting the actual date of
Term-Conversion upon written request to Borrower for the same.
3.3.6 Debt Service Reserve Account. On the Term Period Commencement
Date, the amount on deposit in or credited to the Debt Service Reserve Account,
together with the stated amount of any Qualified Letter of Credit available for
payment to Administrative Agent for disbursement to the Debt Service Reserve
Account, shall be not less than 50% of the DSR Required Balance, and each
Project Company has available to it in its O&M Account or in use as working
capital the amount of working capital required under the applicable Depositary
Agreement.
3.3.7 Term Notes. Borrower shall have delivered duly executed Term
Notes to each Lender, if any Lender shall have requested such Term Notes in
writing pursuant to Section 2.1.4 or 9.14.
3.3.8 Delivery of Documents. Administrative Agent shall have
received, in form and substance reasonably satisfactory to Administrative Agent,
such date-down opinions, resolutions, certificates and other evidence as
Administrative Agent may reasonably request in writing to ensure Administrative
Agent's reasonable satisfaction with the matters covered in Sections 3.1.8 (with
respect solely to Borrower Parties), 3.1.6 (with respect to any Credit Document
or Project Document not previously delivered) and 3.1.10.
3.3.9 Sufficient Funds for Initial Principal Repayment Date. In the
event that Term-Conversion takes place less than three months prior to the
Initial Principal Repayment Date, Borrower shall have demonstrated to
Administrative Agent's reasonable satisfaction that amounts retained in the
Revenue Accounts after Term-Conversion plus anticipated Project Revenues prior
to the Initial Principal Repayment Date will be sufficient to make the payments
of principal and interest due on the Initial Principal Repayment Date.
3.4 CONDITIONS PRECEDENT TO USE OF PROCEEDS OUTSIDE OF INITIAL ALLOCATED
PORTIONS.
Prior to "Substantial Completion" under the MEC Construction
Contract and funding of the Punchlist Drawing for the Mankato Project, Borrower
may not draw any Construction Loan in an amount which would cause a violation of
the Initial Allocated Portion requirements set forth in Section 2.1.1(a), unless
the following conditions shall have been satisfied or waived in writing by
Administrative Agent with consent of the Majority Lenders:
3.4.1 The Initial Allocated Portion of the Project Company requiring
additional funds shall have been fully expended.
3.4.2 The Independent Engineer shall have certified that the
remaining Commitments are sufficient for Completion of both Projects, and the
Administrative Agent shall have provided consent for the additional draw based
upon the Independent Engineer's certification.
39
3.5 NO APPROVAL OF WORK.
The making of any Loan hereunder shall in no event be deemed
an approval or acceptance by Administrative Agent, Collateral Agent, the Lenders
or any other Secured Party of any work, labor, supplies, materials or equipment
furnished or supplied with respect to the Projects.
3.6 ADJUSTMENT OF DRAWDOWN REQUESTS.
In the event Administrative Agent determines that any item
listed in a Drawdown Certificate as a Project Cost is not properly included in
such Drawdown Certificate, Administrative Agent may in its reasonable discretion
cause to be made a Loan or Loans in the amount requested in such Drawdown
Certificate less the amount of such item or may reduce the amount of Loans made
pursuant to any subsequent Drawdown Certificate. In the event that Borrower
prevails in any dispute as to whether such Project Costs were properly included
in such Drawdown Certificate, Loans in the amount requested but not initially
made shall forthwith be made.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties on
behalf of each Borrower Party to and in favor of the Secured Parties as of the
Closing Date (unless such representation and warranty expressly relates solely
to another time) and, to the extent set forth in Article 3, as of the date of
each Credit Event, all of which shall survive the Closing Date and the making of
the Loans:
4.1 ORGANIZATION.
4.1.1 Borrower is (a) a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware,
and (b) is duly qualified as a foreign limited liability company, and is in good
standing, in each other jurisdiction in which such qualification is required by
law. Borrower has all requisite limited liability company power and authority to
(i) own or hold under lease and operate the property it purports to own or hold
under lease, (ii) carry on its business as now being conducted and as now
proposed to be conducted in respect of the Projects, (iii) execute, deliver and
perform each Operative Document to which it is a party, and (iv) take each
action as may be necessary to consummate the transactions contemplated
thereunder.
4.1.2 (a) The capital of Borrower is adequate for the business and
undertakings of Borrower; (b) Borrower's funds and assets are not, and will not
be, commingled with those of any other entity; (c) the Governing Documents of
Borrower require it to maintain proper books of account and minutes of meetings
and other proceedings of its directors; and (d) Borrower has
40
not entered into any transactions or conducted any business unrelated to the
transactions contemplated by this Agreement.
4.1.3 FEC is (a) a limited partnership duly formed, validly existing
and in good standing under the laws of the State of Delaware, and (b) is duly
qualified as a foreign limited partnership, and is in good standing, in each
jurisdiction in which such qualification is required by law. FEC has all
requisite limited partnership power and authority to (i) own or hold under lease
and operate the property it purports to own or hold under lease, (ii) carry on
its business as now being conducted and as now proposed to be conducted in
respect of the Freeport Project, (iii) execute, deliver and perform each
Operative Document to which it is a party, and (iv) take each action as may be
necessary to consummate the transactions contemplated thereunder. As of the
Closing Date, Borrower is the 100% owner of FEC-LP, the 100% owner of FEC-GP,
and the 100% indirect owner of FEC.
4.1.4 FEC-GP is (a) a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware, and (b)
is duly qualified as a foreign limited liability company, and is in good
standing, in each jurisdiction in which such qualification is required by law.
FEC-GP has all requisite limited liability company power and authority to (i)
own or hold under lease and operate the property it purports to own or hold
under lease, (ii) carry on its business as now being conducted and as now
proposed to be conducted in respect of the Freeport Project, (iii) execute,
deliver and perform each Operative Document to which it is a party, and (iv)
take each action as may be necessary to consummate the transactions contemplated
thereunder. As of the Closing Date, FEC-GP is the 1%-owning general partner of
FEC.
4.1.5 FEC-LP is (a) a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware, and (b)
is duly qualified as a foreign limited liability company, and is in good
standing, in each jurisdiction in which such qualification is required by law.
FEC-LP has all requisite limited liability company power and authority to (i)
own or hold under lease and operate the property it purports to own or hold
under lease, (ii) carry on its business as now being conducted and as now
proposed to be conducted in respect of the Freeport Project, (iii) execute,
deliver and perform each Operative Document to which it is a party, and (iv)
take each action as may be necessary to consummate the transactions contemplated
thereunder. As of the Closing Date, FEC-LP is the 99%-owning limited partner of
FEC.
4.1.6 MEC is (a) a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware, and (b)
is duly qualified as a foreign limited liability company, and is in good
standing, in each jurisdiction in which such qualification is required by law.
MEC has all requisite limited liability company power and authority to (i) own
or hold under lease and operate the property it purports to own or hold under
lease, (ii) carry on its business as now being conducted and as now proposed to
be conducted in respect of the Mankato Project, (iii) execute, deliver and
perform each Operative Document to which it is a party, and (iv) take each
action as may be necessary to consummate the transactions contemplated
thereunder. As of the Closing Date, MEC is directly wholly-owned by Borrower.
41
4.2 AUTHORIZATION; NO CONFLICT.
4.2.1 Borrower has duly authorized, executed and delivered each
Operative Document to which Borrower is a party (or such Operative Documents
have been duly and validly assigned to Borrower and Borrower has authorized the
assumption thereof, and has assumed the obligations of the assignor thereunder)
and neither Borrower's execution and delivery thereof nor its consummation of
the transactions contemplated thereby nor its compliance with the terms thereof
(a) does or will contravene the Governing Documents or any other Legal
Requirement applicable to or binding on Borrower or any of its properties which,
in the case of such Legal Requirements, could reasonably be expected to have a
Material Adverse Effect, (b) does or will contravene or result in any breach of
or constitute any default under, or result in or require the creation of any
Lien (other than Permitted Liens) upon any of its property under, any agreement
or instrument to which it is a party or by which it or any of its properties may
be bound or affected, or (c) does or will require the consent or approval of any
Person, and with respect to any Governmental Authority, does or will require any
registration with, or notice to, or any other action of, with or by any
applicable Governmental Authority, in each case which has not already been
obtained and disclosed in writing to Administrative Agent (except as set forth
on Exhibit G-1 or otherwise provided in Section 4.9).
4.2.2 FEC has duly authorized, executed and delivered each Operative
Document to which FEC is a party and neither FEC's execution and delivery
thereof nor its consummation of the transactions contemplated thereby nor its
compliance with the terms thereof (a) does or will contravene the Governing
Documents or any other Legal Requirement applicable to or binding on FEC or any
of its properties which, in the case of such Legal Requirements, could
reasonably be expected to have a Material Adverse Effect, (b) does or will
contravene or result in any breach of or constitute any default under, or result
in or require the creation of any Lien (other than Permitted Liens) upon any of
its property under, any agreement or instrument to which it is a party or by
which it or any of its properties may be bound or affected, or (c) does or will
require the consent or approval of any Person, and with respect to any
Governmental Authority, does or will require any registration with, or notice
to, or any other action of, with or by any applicable Governmental Authority, in
each case which has not already been obtained and disclosed in writing to
Administrative Agent (except as set forth on Exhibit G-1 or otherwise provided
in Section 4.9).
4.2.3 FEC-GP has duly authorized, executed and delivered each
Operative Document to which FEC-GP is a party and neither FEC-GP's execution and
delivery thereof nor its consummation of the transactions contemplated thereby
nor its compliance with the terms thereof (a) does or will contravene the
Governing Documents or any other Legal Requirement applicable to or binding on
FEC-GP or any of its properties which, in the case of such Legal Requirements,
could reasonably be expected to have a Material Adverse Effect, (b) does or will
contravene or result in any breach of or constitute any default under, or result
in or require the creation of any Lien (other than Permitted Liens) upon any of
its property under, any agreement or instrument to which it is a party or by
which it or any of its properties may be bound or
42
affected, or (c) does or will require the consent or approval of any Person, and
with respect to any Governmental Authority, does or will require any
registration with, or notice to, or any other action of, with or by any
applicable Governmental Authority, in each case which has not already been
obtained and disclosed in writing to Administrative Agent (except as set forth
on Exhibit G-1 or otherwise provided in Section 4.9).
4.2.4 FEC-LP has duly authorized, executed and delivered each
Operative Document to which FEC-LP is a party and neither FEC-LP's execution and
delivery thereof nor its consummation of the transactions contemplated thereby
nor its compliance with the terms thereof (a) does or will contravene the
Governing Documents or any other Legal Requirement applicable to or binding on
FEC-LP or any of its properties which, in the case of such Legal Requirements,
could reasonably be expected to have a Material Adverse Effect, (b) does or will
contravene or result in any breach of or constitute any default under, or result
in or require the creation of any Lien (other than Permitted Liens) upon any of
its property under, any agreement or instrument to which it is a party or by
which it or any of its properties may be bound or affected, or (c) does or will
require the consent or approval of any Person, and with respect to any
Governmental Authority, does or will require any registration with, or notice
to, or any other action of, with or by any applicable Governmental Authority, in
each case which has not already been obtained and disclosed in writing to
Administrative Agent (except as set forth on Exhibit G-1 or otherwise provided
in Section 4.9).
4.2.5 MEC has duly authorized, executed and delivered each Operative
Document to which MEC is a party (or such Operative Documents have been duly and
validly assigned to MEC and MEC has authorized the assumption thereof, and has
assumed the obligations of the assignor thereunder) and neither MEC's execution
and delivery thereof nor its consummation of the transactions contemplated
thereby nor its compliance with the terms thereof (a) does or will contravene
the Governing Documents or any other Legal Requirement applicable to or binding
on MEC or any of its properties which, in the case of such Legal Requirements,
could reasonably be expected to have a Material Adverse Effect, (b) does or will
contravene or result in any breach of or constitute any default under, or result
in or require the creation of any Lien (other than Permitted Liens) upon any of
its property under, any agreement or instrument to which it is a party or by
which it or any of its properties may be bound or affected, or (c) does or will
require the consent or approval of any Person, and with respect to any
Governmental Authority, does or will require any registration with, or notice
to, or any other action of, with or by any applicable Governmental Authority, in
each case which has not already been obtained and disclosed in writing to
Administrative Agent (except as set forth on Exhibit G-1 or otherwise provided
in Section 4.9).
4.3 ENFORCEABILITY.
4.3.1 Each of the Operative Documents to which Borrower is a party
is a legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy,
43
insolvency, moratorium, reorganization or other similar laws affecting the
enforcement of creditors' rights or by the effect of general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). None of the Operative Documents to which
Borrower is a party has been amended or modified after the Closing Date except
in accordance with this Agreement.
4.3.2 Each of the Operative Documents to which FEC is a party is a
legal, valid and binding obligation of FEC, enforceable against FEC in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights or by the
effect of general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). None of the
Operative Documents to which FEC is a party has been amended or modified after
the Closing Date except in accordance with this Agreement.
4.3.3 Each of the Operative Documents to which FEC-GP is a party is
a legal, valid and binding obligation of FEC-GP, enforceable against FEC-GP in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights or by the
effect of general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). None of the
Operative Documents to which FEC-GP is a party has been amended or modified
after the Closing Date except in accordance with this Agreement.
4.3.4 Each of the Operative Documents to which FEC-LP is a party is
a legal, valid and binding obligation of FEC-LP, enforceable against FEC-LP in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights or by the
effect of general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). None of the
Operative Documents to which FEC-LP is a party has been amended or modified
after the Closing Date except in accordance with this Agreement.
4.3.5 Each of the Operative Documents to which MEC is a party is a
legal, valid and binding obligation of MEC, enforceable against MEC in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights or by the
effect of general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). None of the
Operative Documents to which MEC is a party has been amended or modified after
the Closing Date except in accordance with this Agreement.
4.4 COMPLIANCE WITH LAW.
4.4.1 There are no material violations by Borrower or, to Borrower's
knowledge, any Calpine Entity, of any Legal Requirement (including any Hazardous
Substance Laws).
44
Except as otherwise have been delivered to Administrative Agent, no notices of
any material violation of any Legal Requirement (including any Hazardous
Substance Laws) relating to the Projects or the Sites have been issued, entered
or received by Borrower or, to Borrower's knowledge, any Calpine Entity.
4.4.2 There are no material violations by FEC of any Legal
Requirement (including any Hazardous Substance Laws). Except as otherwise have
been delivered to Administrative Agent or set forth on Exhibit G-6, no notices
of any material violation of any Legal Requirement (including any Hazardous
Substance Laws) relating to the Freeport Project or the FEC Site have been
issued, entered or received by FEC or, to Borrower's knowledge, any Calpine
Entity.
4.4.3 There are no material violations by FEC-GP of any Legal
Requirement (including any Hazardous Substance Laws). Except as otherwise have
been delivered to Administrative Agent or set forth on Exhibit G-6, no notices
of any material violation of any Legal Requirement (including any Hazardous
Substance Laws) relating to the Freeport Project or the FEC Site have been
issued, entered or received by FEC-GP or, to Borrower's knowledge, any Calpine
Entity.
4.4.4 There are no material violations by FEC-LP of any Legal
Requirement (including any Hazardous Substance Laws). Except as otherwise have
been delivered to Administrative Agent or set forth on Exhibit G-6, no notices
of any material violation of any Legal Requirement (including any Hazardous
Substance Laws) relating to the Freeport Project or the FEC Site have been
issued, entered or received by FEC-GP or, to Borrower's knowledge, any Calpine
Entity.
4.4.5 There are no material violations by MEC of any Legal
Requirement (including any Hazardous Substance Laws). Except as otherwise have
been delivered to Administrative Agent, no notices of any material violation of
any Legal Requirement (including any Hazardous Substance Laws) relating to the
Mankato Project or the MEC Site have been issued, entered or received by MEC or,
to Borrower's knowledge, any Calpine Entity.
4.5 BUSINESS, DEBT, CONTRACTS, JOINT VENTURES ETC.
4.5.1 Borrower has not conducted any business other than the
business contemplated by the Operative Documents, does not have any outstanding
Debt or other material liabilities other than pursuant to or allowed by the
Operative Documents, and Borrower is not a party to or bound by any material
contract other than the Operative Documents.
4.5.2 Borrower is not a general partner or a limited partner in any
general or limited partnership or a joint venturer in any joint venture other
than the sole member of MEC, FEC-LP and FEC-GP.
4.5.3 Borrower does not have any Subsidiaries other than FEC-LP,
FEC-GP, FEC and MEC.
45
4.5.4 FEC has not conducted any business other than the business
contemplated by the Operative Documents, does not have any outstanding Debt
other than pursuant to or allowed by the Credit Documents or other material
liabilities other than pursuant to the Operative Documents to which it is a
party, and FEC is not a party to or bound by any material contract other than
the Operative Documents.
4.5.5 FEC does not have any Subsidiaries.
4.5.6 FEC-GP has not conducted any business other than the business
contemplated by the Operative Documents, does not have any outstanding Debt or
other material liabilities, and FEC-GP is not a party to or bound by any
material contract other than the Credit Documents, the FEC Partnership
Agreement, or the Operative Documents to which FEC is a party by reason of
FEC-GP being the general partner of FEC.
4.5.7 FEC-GP does not have any Subsidiaries other than FEC.
4.5.8 FEC-LP has not conducted any business other than the business
contemplated by the Operative Documents, does not have any outstanding Debt or
other material liabilities, and FEC-LP is not a party to or bound by any
material contract other than the Credit Documents, the FEC Partnership Agreement
and the Operative Documents to which FEC is a party by reason of FEC-LP being
the limited partner of FEC.
4.5.9 FEC-LP does not have any Subsidiaries other than FEC.
4.5.10 MEC has not conducted any business other than the business
contemplated by the Operative Documents, does not have any outstanding Debt
other than pursuant to or allowed by the Credit Documents or other material
liabilities other than pursuant to the Operative Documents to which it is a
party, and MEC is not a party to or bound by any material contract other than
the Operative Documents.
4.5.11 MEC is not a general partner or a limited partner in any
general or limited partnership or a joint venturer in any joint venture.
4.5.12 MEC does not have any Subsidiaries.
4.5.13 No Borrower Party has any deposit or other accounts other
than as created under the Depositary Agreements, the MEC Checking Account and
the FEC Checking Account.
4.6 ADVERSE CHANGE.
To Borrower's knowledge, since the Closing Date there has occurred
no event or circumstance which could reasonably be expected to have a Material
Adverse Effect, except as disclosed to Administrative Agent in writing at or
prior to the time the representation in this Section 4.6 is being made.
4.7 INVESTMENT COMPANY ACT.
46
None of the Borrower Parties or any other Calpine Entity is an
investment company or a company controlled by an investment company, within the
meaning of the Investment Company Act of 1940, as amended.
4.8 ERISA.
Either (a) there are no ERISA Plans or Multiemployer Plans for any
Calpine Entity or any ERISA Affiliate, or (b) (i) each Calpine Entity and each
ERISA Affiliate have fulfilled their obligations (if any) under the minimum
funding standards of ERISA and the Code for each ERISA Plan, (ii) each such Plan
is in compliance in all material respects with the currently applicable
provisions of ERISA and the Code, and (iii) neither any Calpine Entity nor any
ERISA Affiliate has incurred any liability to the PBGC or an ERISA Plan or
Multiemployer Plan under Title IV of ERISA (other than liability for premiums
due in the ordinary course). None of any Calpine Entity's assets constitute
assets of an employee benefit plan within the meaning of 29 C.F.R. Section
2510.3-101. No Borrower Party maintains or contributes to, and is obligated to
contribute to, or has at any point of its existence maintained or contributed
to, or been obligated to contribute to, any employee benefit plan subject to
ERISA.
4.9 PERMITS.
There are no Permits under existing Legal Requirements as the
Projects are currently designed that are or will become Applicable Permits other
than the Permits listed in Exhibit G-1 (as such Exhibit may be supplemented by
Borrower Parties to reflect any Change of Law or the issuance or modification of
any Permit after the Closing Date). Except as disclosed in Exhibit G-1 (as so
supplemented), each Permit listed in Part I of Exhibit G-1 is in full force and
effect and is not subject to any current legal proceeding or to any Unsatisfied
Condition that could reasonably be expected to have a Material Adverse Effect,
and all applicable appeal periods with respect thereto have expired. Each Permit
listed in Part II of Exhibit G-1 is of a type that is routinely granted upon
submission of a timely application and demonstration that the Projects comply
with applicable standards and Legal Requirements. No Permit listed in Part II is
required under applicable Legal Requirements or Project Documents to be obtained
before the time contemplated to be obtained by the applicable Borrower Party or
Dow. No fact or circumstance exists, to any Borrower Party's knowledge, which
makes it likely that any Permit identified in Part II of Exhibit G-1 shall not
be timely obtainable by the applicable Borrower Party or Dow before it becomes
an Applicable Permit without expense in excess of amounts provided therefor in
the then-current Project Budget or the then-current Annual Operating Budget, as
the case may be, and without delay materially in excess of the time provided
therefor in the Project Schedule (if applicable). Each Borrower Party and Dow is
in compliance with all Applicable Permits except to the extent such
noncompliance could not reasonably be expected to have a Material Adverse
Effect.
47
4.10 HAZARDOUS SUBSTANCES.
4.10.1 Except as set forth in Exhibit G-6: After giving effect to
the environmental indemnity provided by Dow under Section 17.2.2 of the FEC
Ground Lease and Dow's curative actions performed under Section 17.3.2 of the
FEC Ground Lease, (a) each Project Company, with respect to the Sites,
Improvements, other FEC Mortgaged Property or other MEC Mortgaged Property, is
not and has not in the past been in violation of any Hazardous Substance Law
which violation could reasonably be expected to result in a material liability
to any Borrower Party or its properties and assets or in an inability of any
Borrower Party to perform its obligations under the Operative Documents, (b) no
Project Company or, to Borrower's knowledge, any other Person has used,
Released, generated, manufactured, produced or stored in, on, under, or about
the Sites, Improvements, other FEC Mortgaged Property or other MEC Mortgaged
Property, or transported thereto or therefrom, any Hazardous Substances that
could reasonably be expected to subject any Secured Party to liability or any
Borrower Party to material liability under any Hazardous Substance Law, (c) to
Borrower's knowledge, there are no underground tanks, whether operative or
temporarily or permanently closed, located on the Sites, Improvements, other FEC
Mortgaged Property or other MEC Mortgaged Property that could reasonably be
expected to subject any Secured Party to liability, or Borrower to material
liability under any Hazardous Substances Laws, (d) there are no Hazardous
Substances used, stored or present at or on the Sites, Improvements, other FEC
Mortgaged Property or other MEC Mortgaged Property, except in compliance with
Hazardous Substance Laws and other Legal Requirements or, in the case of MEC, as
disclosed in the Environmental Reports or, in the case of FEC, that could not
reasonably be expected to have a Material Adverse Effect or to subject any
Secured Party to liability or any Borrower Party to liability under any
Hazardous Substance Laws, (e) to Borrower's knowledge, there are no Hazardous
Substances that could reasonably be expected to migrate onto the Sites,
Improvements, other FEC Mortgaged Property or other MEC Mortgaged Property that
could reasonably be expected to impose on any Borrower Party a material
liability, except, in the case of MEC, as disclosed in the Environmental Reports
or, in the case of FEC, that could not reasonably be expected to have a Material
Adverse Effect and (f) to Borrower's knowledge there neither is nor has been any
condition, circumstance, action, activity or event that could reasonably be
expected to be, or result in, a material violation by any Borrower Party of any
Hazardous Substance Law, or to result in liability to any Secured Party or
material liability to any Borrower Party under any Hazardous Substance Law.
4.10.2 Except as set forth on Exhibit G-5 or Exhibit G-6 and after
giving effect to the environmental indemnity provided by Dow under Section
17.2.2 of the FEC Ground Lease and Dow's curative actions performed under
Section 17.3.2 of the FEC Ground Lease, (a) as of the Closing Date, there is no
pending or, to Borrower's knowledge, threatened in writing, action or proceeding
by any Governmental Authority (including the Minnesota Public Utilities
Commission, Blue Earth County, Minnesota, Brazoria County, Texas, U.S. Army
Corps of Engineers and U.S. Environmental Protection Agency) or any other Person
which is not a Governmental Authority with respect to the presence or Release of
Hazardous Substances in, on, from or to the Sites, Improvements, other FEC
Mortgaged Property or other MEC Mortgaged
48
Property and, (b) thereafter, there is no pending or, to Borrower's knowledge,
threatened in writing, action or proceeding by any Governmental Authority
(including the Minnesota Public Utilities Commission, Blue Earth County,
Minnesota, Freeport County, Texas, U.S. Army Corps of Engineers and U.S.
Environmental Protection Agency) or any non-governmental third party with
respect to the presence or Release of Hazardous Substances in, on, from or to
the Sites, Improvements, other FEC Mortgaged Property or other MEC Mortgaged
Property which could reasonably be expected to have a Material Adverse Effect.
4.10.3 Except as set forth in the Environmental Report and after
giving effect to the environmental indemnity provided by Dow under Section
17.2.2 of the FEC Ground Lease and Dow's curative actions performed under
Section 17.3.2 of the FEC Ground Lease, to Borrower's knowledge, there are no
past violations that have not been finally resolved or existing violations of
any Hazardous Substances Laws by any Person affecting the Sites, Improvements,
other FEC Mortgaged Property or other MEC Mortgaged Property, which violations
could reasonably be expected to result in a material liability to any Borrower
Party.
4.11 LITIGATION.
(a) Except as set forth on Exhibit G-5, as of the Closing Date, no
action, suit, proceeding or investigation has been instituted or, to Borrower's
knowledge, threatened in writing against any Borrower Party.
(b) Except as set forth on Exhibit G-5, as of the Closing Date,
Borrower has no knowledge of (i) any action, suit, proceeding or investigation
that has been instituted or threatened in writing against, any Calpine Entity or
any other Major Project Participant, or by which any of them or their properties
are bound, which could reasonably be expected to have a Material Adverse Effect,
or (ii) any order, judgment or decree that has been issued or proposed to be
issued by any Governmental Authority that, as a result of the construction,
development, ownership or operation of the Projects by any Borrower Party, the
sale of electricity or steam therefrom by any Borrower Party or the entering
into of any Operative Document or any transaction contemplated hereby or
thereby, could reasonably be expected to cause or deem the Lenders,
Administrative Agent, Collateral Agent, the Lead Arrangers or any Borrower Party
or any Affiliate of any of them to be subject to, or not exempted from,
regulation under PUHCA, or treated as a public utility under the laws of the
State of Texas (in the case of the Freeport Project) or Minnesota (in the case
of the Mankato Project) as presently constituted and as construed by the courts
of Texas or Minnesota, as applicable, respecting the rates or the financial or
organizational regulation of electric utilities.
(c) After the Closing Date, there are no pending or, to Borrower's
knowledge, threatened actions or proceedings of any kind, including actions or
proceedings of or before any Governmental Authority, to which each Borrower
Party is a party or is subject, or by which any of them or any of their
properties are bound, which could reasonably be expected to have a
49
Material Adverse Effect and which have not been disclosed by Borrower Parties to
Administrative Agent in accordance with, and to the extent required by, Section
5.4.
4.12 LABOR DISPUTES AND ACTS OF GOD.
Neither the business nor the properties of any Borrower Party or, to
Borrower's knowledge, Dow or NSP are currently affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), which could reasonably be expected to
have a Material Adverse Effect.
4.13 PROJECT DOCUMENTS.
4.13.1 Copies of all of the Major Project Documents and Major
Equipment Contracts executed on or prior to such date have been delivered to
Administrative Agent. Since the Closing Date, except as has been disclosed to
Administrative Agent in writing and as permitted hereunder, as of such date,
none of such Major Project Documents has been amended, modified or terminated
(other than expiration thereof in accordance with its terms and the Credit
Documents).
4.13.2 To Borrower's knowledge, except as disclosed to
Administrative Agent in writing at or prior to the time the representation and
warranty in this Section 4.13.2 is being made, the representations and
warranties of the Major Project Participants contained in the Operative
Documents (other than this Agreement) are true and correct in all material
respects except where the untruth of such representation and warranty could not
reasonably be expected to have a Material Adverse Effect.
4.14 DISCLOSURE.
Neither this Agreement nor any certificate or other documentation
(other than the Project Budgets, the Annual Operating Budgets or the Base Case
Project Projections) furnished or verified by a Borrower Party to the Lead
Arrangers, Administrative Agent, Collateral Agent, or the Lenders, or to any
consultant submitting a report to Administrative Agent, the Lead Arrangers or
the Lenders, by or, to Borrower's knowledge, on behalf of any Borrower Party
with respect to the Projects, the Borrower Parties or any other Calpine Entity
or in connection with the transactions contemplated by this Agreement, the other
Credit Documents or the design, construction, description or operation of the
Projects, contained (at the time of delivery or verification thereof) any untrue
statement of a material fact or omitted (at the time of delivery or verification
thereof) to state a material fact necessary in order to make the statements
contained herein or therein not misleading under the circumstances in which they
were made at the time such statements were made (other than any information that
was corrected or updated in writing to the Lead Arrangers prior to the Closing
Date). As of the Closing Date, there is no fact known to Borrower which has had
or could reasonably be expected to have a Material Adverse Effect which has not
been disclosed in writing to Administrative Agent, the Lead Arrangers,
50
Collateral Agent, or the Lenders by or on behalf of any Borrower Party on or
prior to the Closing Date in connection with the transactions contemplated
hereby.
4.15 PRIVATE OFFERING BY BORROWER.
Assuming that each Lender is acquiring its Notes for investment
purposes only, and not for purposes of resale or distribution thereof except for
assignments or participations as provided in Sections 9.13 and 9.14, no
registration of such Notes under the Securities Act of 1933, as amended, or
under the securities laws of the States of Texas, Minnesota or New York is
required in connection with the offering, issuance and sale of such Notes
hereunder. No Borrower Party or anyone acting on its behalf has taken, or will
take, any action which would subject the issuance or sale of any Notes to
Section 5 of the Securities Act of 1933, as amended.
4.16 TAXES.
(a) Each Borrower Party has timely filed, or caused to be filed, all
federal, state and local tax returns and reports that it is required to file,
has paid all taxes, material assessments, utility charges, fees and other
governmental charges it is required to pay to the extent due (other than those
taxes that it is contesting in good faith and by appropriate proceedings in
accordance with the requirements of Section 5.20). Borrower knows of no proposed
tax assessment against any Borrower Party or any other Calpine Entity which
could reasonably be expected to have a Material Adverse Effect (other than those
proposed tax assessments that any Borrower Party is contesting in good faith and
by appropriate proceedings in accordance with the requirements of Section 5.20).
In either case, to the extent such taxes, assessments, charges and fees are not
due, the applicable Calpine Entity has established reserves that are adequate
for the payment thereof in conformity with GAAP.
(b) At all times since its formation, each Borrower Party has been
an entity with a single owner (with the exception of FEC which has two owners)
that is disregarded as separate from its owner for federal tax purposes. No Form
8832 has ever been filed with respect to any Borrower Party as other than a
disregarded entity and no such election shall have been made.
(c) No Borrower Party has liability for the taxes of any Person
(other than such Borrower Party) (i) under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii) as a transferee
or successor, (iii) by contract, or (iv) otherwise.
(d) No Borrower Party intends to treat the Loans (including the
incurrence thereof) as being a "reportable transaction" (within the meaning of
Treasury Regulation Section 1.6011-4).
4.17 GOVERNMENTAL REGULATION.
51
None of Borrower Parties, Administrative Agent, Collateral Agent, or
any Lender, nor any Affiliate of any of them will, solely as a result of the
construction, ownership, leasing or operation of the Projects, the sale of
electricity, steam, capacity or ancillary services therefrom or the entering
into any Operative Document in respect of the Projects or any transaction
contemplated hereby or thereby, be subject to, or not exempt from, regulation
under the FPA or PUHCA or under state laws and regulations respecting the rates
or the financial or organizational regulation of electric utilities, except that
(a) MEC is subject to the compliance requirements under PUHCA applicable to an
Exempt Wholesale Generator and an owner of an Eligible Facility, (b) each of MEC
and CES is a "public utility" subject to FERC jurisdiction under the FPA with
authority to sell wholesale electric power at market based rates, and with all
waivers of regulations and blanket authorizations as are customarily granted by
FERC to a "public utility" that sells wholesale electric power and ancillary
services at market based rates, (c) FEC is subject to the requirements under
PURPA and the regulations of FERC promulgated thereunder, as amended from time
to time, necessary to be a Qualifying Facility, (d) FEC is subject to state laws
and regulations respecting the rates or the financial or organizational
regulation of electric utilities to the extent contemplated by 18 C.F.R. Section
292.602(c), and (e) the exercise of remedies, as provided for under the
Collateral Documents, with respect to MEC and the Mankato Project may be subject
to Section 32 of PUHCA and Section 203, 204 and/or 205 of the FPA. Except to the
extent provided in the first sentence of this Section 4.17, no Borrower Party
will be deemed by any Governmental Authority having jurisdiction to be subject
to financial, organizational or rate regulation as an "electric utility",
"electric corporation", "electrical company", "public utility", "holding
company", or "public utility holding company" or any similar Person under any
applicable Governmental Rule then in effect.
4.18 REGULATION U, ETC.
No Borrower Party is engaged principally, or as one of its principal
activities, in the business of extending credit for the purpose of "buying",
"carrying" or "purchasing" margin stock (each as defined in Regulations T, U or
X of the Federal Reserve Board), and no part of the proceeds of the Loans or the
Project Revenues will be used by any Borrower Party for the purpose of "buying",
"carrying" or "purchasing" any such margin stock or for any other purpose which
violates the provisions of the regulations of the Federal Reserve Board.
4.19 BUDGETS; PROJECTIONS.
Borrower has prepared the Project Budgets, the Annual Operating
Budgets and the Base Case Project Projections and is responsible for developing
the assumptions on which such Project Budgets, Annual Operating Budgets and the
Base Case Project Projections are based; and such Project Budgets, Annual
Operating Budgets and the Base Case Project Projections (a) as of the date
delivered, updated or supplemented are based on reasonable assumptions
(including as to all legal and factual matters material to the estimates set
forth therein), (b) as of the date delivered, updated or supplemented are
consistent in all material respects with the provisions of the Project Documents
executed on or prior to such date, and (c) as of the date delivered, updated or
supplemented indicate that the estimated aggregate Project Costs will not exceed
Available Construction Funds.
52
4.20 FINANCIAL STATEMENTS.
In the case of each financial statement of each Borrower Party
(other than the financial statements delivered by any Borrower Party pursuant to
Sections 3.1.16(a) and (e)) and accompanying information delivered by each
Borrower Party under the Credit Documents (insofar as financial statements
relate to each such Borrower Party), each such financial statement and
information has been prepared in conformity with GAAP and fairly presents, in
all material respects, the financial position (on a consolidated and, where
applicable, consolidating basis) of each Borrower Party, as the case may be,
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated and, where
applicable, consolidating basis) of each Borrower Party, as the case may be,
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments and the absence of footnote disclosure. Except for
obligations under the Operative Documents to which it is a party, each Borrower
Party does not (and will not following the funding of the initial Loans) have
any contingent obligations, unmatured liabilities, contingent liability or
liability for taxes, long-term lease or forward or long-term commitment required
to be shown under GAAP that is not reflected in the foregoing financial
statements or the notes thereto and which in any such case is material in
relation to the business, results of operations, properties, financial condition
or prospects of each Borrower Party.
4.21 NO DEFAULT.
No Event of Default or Inchoate Default which has not been disclosed
to Administrative Agent in writing has occurred and is continuing.
4.22 ORGANIZATIONAL ID NUMBER; LOCATION OF COLLATERAL.
4.22.1 (a) Borrower's organizational identification number is
3899075; (b) FEC's organizational identification number is 3754988; (c) FEC-GP's
organizational identification number is 3754613; (d) FEC-LP's organization
identification number is 3754610; and (e) MEC's organizational identification
number is 3861873.
4.22.2 All of the Collateral (other than the Accounts, the
membership interests in any Borrower Party, general intangibles and the Siemens
Turbines) is, or when installed pursuant to the Project Documents will be,
located on the Sites or the Easements or at the applicable Borrower Party's
address set forth in Section 11.1; provided that certain equipment may be
temporarily removed from the Sites and/or Easements from time to time in the
ordinary course of business and equipment owned by Borrower may be located at
other sites as indicated in writing to the Collateral Agent, who shall have the
right to inspect such equipment from time to time.
4.23 TITLE AND LIENS.
53
Borrower has good, legal and valid title to the Collateral in which
it grants the Collateral Agent a Lien. FEC has good and indefeasible title to
the Collateral in which it grants the Collateral Agent a Lien and a valid and
enforceable leasehold interest in the FEC Site and its interest in the
Easements, in each case free and clear of all Liens, encumbrances or other
exceptions to title other than Permitted Liens. MEC has good, marketable and
insurable fee simple interest in the Collateral in which it grants the
Collateral Agent a Lien, in each case free and clear of all Liens, encumbrances
or other exceptions to title other than Permitted Liens. The Lien of the
Collateral Documents constitutes a valid and subsisting first priority lien of
record on all the FEC Mortgaged Property described in the FEC Deed of Trust and
MEC Mortgage described in the MEC Mortgage and a first priority perfected
security interest in all the personal property described in the Collateral
Documents, subject to no Liens except Permitted Liens.
4.24 INTELLECTUAL PROPERTY.
Except as disclosed in Exhibit G-5:
(a) Each Borrower Party owns, possesses or has entered into
contracts with others who possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and trade names,
or rights thereto, that are necessary for the operation of its business, without
known conflict with the rights of others.
(b) No product of any Borrower Party infringes in any material
respect any license, permit, franchise, authorization, patent, copyright,
service mark, trademark, trade name or other right owned by any other Person.
(c) There is no violation by any Person of any right of any Borrower
Party with respect to any patent, copyright, service mark, trademark, trade name
or other right owned or used by any Borrower Party.
(d) There exists no pending or threatened claim or litigation
against or affecting any Borrower Party contesting its right to sell or use any
such product, process, method, substance, part or other material.
4.25 COLLATERAL.
The respective liens and security interests granted to Collateral
Agent (for the benefit of the Secured Parties) pursuant to the Collateral
Documents (a) constitute as to personal property included in the Collateral a
valid security interest, and (b) constitute as to the FEC Mortgaged Property and
the MEC Mortgaged Property included in the Collateral a valid lien and security
interest in the FEC Mortgaged Property and the MEC Mortgaged Property,
respectively. The security interest granted to Collateral Agent (for the benefit
of the Secured Parties) pursuant to the Collateral Documents in the Collateral
consisting of personal property will be perfected (i) with respect to any
property that can be perfected by filing, upon the filing of financing
statements in the filing offices identified in Exhibit D-9, (ii) with respect to
any property that can be perfected by control, upon execution of the Control
Agreements and the Depositary Agreements, and (iii) with respect to any property
(if any) that can be perfected by possession,
54
upon Collateral Agent receiving possession thereof, and in each case such
security interest will be, as to Collateral perfected under the UCC or otherwise
as aforesaid, superior and prior to the rights of all third Persons now existing
or hereafter arising whether by way of mortgage, lien, security interests,
encumbrance, assignment or otherwise, except (i) Title Exceptions and Permitted
Liens described in clauses (a) and (e) of the definition of "Permitted Liens",
and (ii) to the extent required by Governmental Rule, those matters described in
clauses (b), (c) and (g) of the definition of "Permitted Liens". Except to the
extent possession of portions of the Collateral is required for perfection, all
such action as is necessary has been taken to establish and perfect Collateral
Agent's rights in and to the Collateral in existence on such date to the extent
Collateral Agent's security interest can be perfected by filing, including any
recording, filing, registration, giving of notice or other similar action. As of
the Closing Date, no filing, recordation, re-filing or re-recording other than
those listed on Exhibit D-9 hereto is necessary to perfect and maintain the
perfection of the interest, title or Liens of the Collateral Documents, and on
the Closing Date all such filings or recordings will have been made to the
extent Collateral Agent's security interest can be perfected by filing. Each
Borrower Party has properly delivered or caused to be delivered, or provided
control, to Collateral Agent or Depositary Agent with respect to all Collateral
that permits perfection of the Lien and security interest described above by
possession or control.
4.26 SUFFICIENCY OF PROJECT DOCUMENTS.
4.26.1 Other than those that can be reasonably expected to be
commercially available when and as required, the services to be performed, the
materials to be supplied and the real property interests, the Easements and
other rights granted, or to be granted, pursuant to the Project Documents in
effect as of such date:
(a) comprise all of the property interests necessary to secure any
right material to the acquisition, leasing, development, construction,
installation, completion, operation and maintenance of the Projects in
accordance with all Legal Requirements and in accordance with the Project
Schedule, all without reference to any proprietary information not owned by or
available to any Borrower Party;
(b) are sufficient to enable the Projects to be located, constructed
and operated on the Sites and the Easements; and
(c) provide adequate ingress and egress from the Sites for any
reasonable purpose in connection with the construction and operation of the
Projects.
4.26.2 There are no services, materials or rights required for the
construction or operation of the Projects in accordance with the Construction
Contracts, the other Major Project Documents and the assumptions that form the
basis of Base Case Project Projections, other than those (a) to be provided
under the Project Documents, or (b) that can reasonably be expected to be
commercially available at or for delivery to the Sites on commercially
reasonable terms
55
consistent with the then-current Project Budget, the then-current Annual
Operating Budget and the Base Case Project Projections.
4.27 UTILITIES.
All utility services necessary for the construction and the
operation of each Project for its intended purposes are available at each such
Project or can reasonably be expected to be so available as and when required
upon commercially reasonable terms consistent with the then-current Project
Budget, Project Schedule, the then-current Annual Operating Budget and the Base
Case Project Projections.
4.28 OTHER FACILITIES.
4.28.1 All roads necessary for the construction and full utilization
of each Project for its intended purposes have either been completed or the
applicable Borrower Party possesses the necessary rights of way therefor, other
than rights of way that can reasonably be expected to be available on
commercially reasonable terms as and when needed.
4.28.2 Each Borrower Party possesses, or the counterparties to the
Major Project Documents (including the Power Purchase Agreement and the Capacity
Sales Agreement) pursuant to which interconnection facilities will be
constructed if necessary and, if applicable, operated for the benefit of each
Project, possess and are obligated to provide or make available to the
applicable Project Company, all necessary equipment, easements, rights of way,
licenses, agreements and/or other rights, as necessary, for the construction,
interconnection and utilization of the interconnection facilities (including
fuel, water, wastewater and electrical).
4.29 PROPER SUBDIVISION.
The MEC Site has been subdivided or entitled to exception therefrom.
For all purposes, the MEC Site may be mortgaged, conveyed and otherwise dealt
with as separate legal lot or parcel. FEC's leasehold interest in the FEC Site
may be mortgaged and conveyed.
4.30 FLOOD ZONE DISCLOSURE.
No material portion of the Collateral includes Improvements that are
or will be located in an area that has been identified by the Federal Emergency
Management Agency as an area having special flood or mudslide hazards and in
which flood insurance has been made available under the National Flood Insurance
Act of 1968, as amended.
4.31 TAX SHELTER REGULATIONS.
Borrower does not intend to treat the Loans and related transactions
as being a "reportable transaction" (within the meaning of Treasury Regulation
section 1.6011-4). If Borrower determines to take any action inconsistent with
such intention, it will promptly notify
56
the Administrative Agent thereof. Borrower acknowledges that the Administrative
Agent or one or more of the Lenders may treat the Loans as part of a transaction
that is subject to Treasury Regulation section 1.6011-4 or section 301.6112 - 1
(or any successor sections), and the Administrative Agent and such Lender or
Lenders, as applicable, may file such Internal Revenue Service forms or maintain
such lists and other records as they may determine is required by such Treasury
Regulations.
ARTICLE 5
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that until the repayment in full in
cash of all of Borrower's Obligations (other than those contingent Obligations
that are intended to survive the termination of this Agreement or the other
applicable Credit Documents), return and cancellation of the Security Fund LC
and the expiration or termination of all Commitments and Interest Rate
Agreements to which any Secured Party is a party, Borrower shall, or as
applicable shall cause (whether directly or through FEC-GP and FEC-LP) the
applicable Project Company to:
5.1 USE OF PROCEEDS, EQUITY CONTRIBUTIONS AND PROJECT REVENUES.
5.1.1 Proceeds and Equity Contributions.
(a) Unless otherwise applied by Administrative Agent pursuant to
this Agreement and the other Credit Documents, (i) Borrower shall on-lend
proceeds of the Construction Loans to the Project Companies in accordance with
an approved drawdown request, (ii) each Project Company shall deposit the
proceeds of the Construction Loans and any cash equity contributions (including
Additional Borrower Equity) in its Construction Account, (iii) subject to
Section 5.1.1(b), use them solely to pay Project Costs, and in accordance with
the Credit Documents.
(b) Notwithstanding anything to the contrary herein, Borrower shall
be permitted to use the proceeds of the initial Construction Loans, the Dow
Change Order Drawing and the True-Up Drawing, to reimburse Sponsor for (i)
Project Costs paid (A) by Sponsor, or (B) by a Project Company with the proceeds
of cash or in-kind equity contributions made by Sponsor to such Project Company
(in each case, as verified by the Independent Engineer) on or before the date of
the initial Construction Loan, and (ii) Construction Loans made pursuant to
Section 5.17 to reimburse Sponsor for Drawstop Funds in accordance with Section
5.17.
5.1.2 Revenues. Unless otherwise applied by Administrative Agent or
Collateral Agent pursuant to the terms of this Agreement or the other Credit
Documents, each Borrower Party shall apply any Project Revenues, equity
contributions, Loan proceeds, Insurance Proceeds, Eminent Domain Proceeds and
damage payments solely for the purpose, and in the order and manner, provided
for in the Depositary Agreements.
57
5.2 PAYMENT.
5.2.1 Credit Documents. Borrower shall pay all sums due under this
Agreement and the other Credit Documents to which it is a party according to the
terms hereof and thereof. Each Project Company shall pay all sums due under the
Intercompany Note to which it is a party, to the extent of funds available
therefor at the applicable Waterfall Levels under the Project Company Depositary
Agreements.
5.2.2 Project Documents. Each Project Company shall pay all of its
obligations due under the Project Documents, howsoever arising, as and when due
and payable, except (a) such as may be contested in good faith or as to which a
bona fide dispute may exist; provided that adequate cash reserves have been
established in conformity with GAAP, or Administrative Agent is satisfied in its
reasonable discretion that non-payment of such obligation pending the resolution
of such contest or dispute will not in any way endanger its Project or result in
a Material Adverse Change or that provision is made to the satisfaction of
Administrative Agent in its reasonable discretion for the posting of security
(other than the Collateral) for or the bonding of such obligations or the prompt
payment thereof in the event that such obligation is payable, (b) each Project
Company's trade payables which shall be paid in the ordinary course of business
and (c) such failures as could not reasonably be expected to have a Material
Adverse Effect.
5.3 WARRANTY OF TITLE.
(a) MEC shall maintain good, marketable and insurable fee simple
interest in the MEC Site, (b) FEC shall maintain good, indefeasible and
insurable leasehold interest in the FEC Site, and (c) MEC shall maintain (i)
good, marketable and insurable easement interest in the MEC Easements, and (ii)
good, legal and valid title to all of its other respective material properties
and assets (other than properties and assets disposed of in the ordinary course
of business or otherwise disposed of in accordance with Section 6.4) and (d) FEC
shall maintain (i) a good, indefeasible and insurable easement interest in the
FEC Easements, and (ii) good, legal and valid title to all of its other
respective material properties and assets (other than properties and assets
disposed of in the ordinary course of business or otherwise disposed of in
accordance with Section 6.4), in each case free and clear of all Liens other
than Permitted Liens.
5.4 NOTICES.
Each Borrower Party shall promptly, upon acquiring notice or giving
notice (except as otherwise specified below), as the case may be, or obtaining
knowledge thereof, give written notice (with copies of any underlying notices,
papers, files or related documentation) to Administrative Agent of:
5.4.1 any litigation pending or, to each Borrower Party's knowledge,
threatened in writing against any Borrower Party involving claims against any
Borrower Party or either Project in excess of $500,000 individually or
$1,000,000 in the aggregate per calendar year or involving any injunctive,
declaratory or other equitable relief, such notice to include, if requested
58
in writing by Administrative Agent, copies of all papers filed in such
litigation and to be given monthly if any such papers have been filed since the
last notice given;
5.4.2 any dispute or disputes for which written notice has been
received by any Borrower Party which may exist between such Borrower Party and
any Governmental Authority and which involve (a) claims against such Borrower
Party which exceed $500,000 individually or $1,000,000 in the aggregate per
calendar year, (b) injunctive or declaratory relief, or (c) revocation,
modification, failure to renew or the like of any Applicable Permit;
5.4.3 any Event of Default or Inchoate Default;
5.4.4 any casualty, damage or loss, whether or not insured, through
fire, theft, other hazard or casualty, or any act or omission of (a) any
Borrower Party, its employees, agents, contractors, consultants or
representatives in excess of $500,000 for any one casualty or loss or $1,000,000
in the aggregate in any calendar year, or (b) to each Borrower Party's
knowledge, any other Person if such casualty, damage or loss could reasonably be
expected to have a Material Adverse Effect;
5.4.5 any cancellation, suspension or material change in the terms,
coverage or amounts of any insurance described in Exhibit K;
5.4.6 any contractual obligations incurred by any Borrower Party
exceeding $500,000 per year in the aggregate for the Projects, not including any
obligations incurred pursuant to the Credit Documents or the Project Documents
or any obligation contemplated in the then-current Project Budget or the
then-current Annual Operating Budget;
5.4.7 any intentional withholding of compensation to, or any right
to withhold compensation claimed by, any Major Project Participant or pursuant
to any Major Project Document, other than (a) retention provided by the express
terms of any such contracts and (b) any such withholding or right which exceeds
$500,000 individually or $1,000,000 in the aggregate;
5.4.8 any (a) termination (other than expiration in accordance with
its terms and any applicable Consent) or material default of which any Borrower
Party has knowledge or written notice thereof under any Major Project Document,
and (b) material Project Document Modification (with copies of all such Project
Document Modifications whether or not requiring approval of Administrative Agent
or the Majority Lenders pursuant to Section 6.12);
5.4.9 any written claim of events of force majeure, change orders in
excess of $500,000, or any Borrower Party caused delay under the Construction
Contracts or any other Major Project Document (including claims therefor
regardless of whether such Borrower Party believes such claim has merit) and, to
the extent requested in writing by Administrative Agent, copies of invoices or
statements which are reasonably available to such Borrower Party under the
Construction Contracts or any other Major Project Document, certified by an
authorized representative of such Borrower Party, together with a copy of any
supporting documentation,
59
schedule, data or affidavit delivered under the Construction Contracts or such
other Major Project Document;
5.4.10 within one Banking Day after any Borrower Party receives
notice pursuant to any Major Project Document of the proposed conduct of
Performance Tests for either Project or material portion thereof and promptly
prior to the proposed conduct of any subsequent Performance Tests, written
notice of such proposed Performance Tests;
5.4.11 after giving effect to the environmental indemnity provided
by Dow under Section 17.2.2 of the FEC Ground Lease and Dow's curative actions
performed under Section 17.3.2 of the FEC Ground Lease, any (a) material
noncompliance with any Hazardous Substance Law or any material Release of
Hazardous Substances on or from the Sites, Improvements, other FEC Mortgaged
Property or other MEC Mortgaged Property that has resulted or could reasonably
be expected to result in personal injury or material property damage or to have
a Material Adverse Effect, (b) pending or, to each Borrower Party's knowledge,
threatened in writing, Environmental Claim against any Borrower Party or, to
each Borrower Party's knowledge, any of its Affiliates, contractors, lessees or
any other Persons, arising in connection with their occupying or conducting
operations on or at the Projects, the Sites, the Improvements, other FEC
Mortgaged Property or other MEC Mortgaged Property which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect, or
(c) underground tank, whether operative or temporarily or permanently closed,
located on the Sites, Improvements, other FEC Mortgaged Property or other MEC
Mortgaged Property;
5.4.12 promptly, but in no event later than 30 days prior to the
time any Person will become a member of any of Borrower Parties or the
occurrence of any other change in or transfer of ownership interests in any
Borrower Party or the Projects, notice thereof, which notice shall identify such
Person and such Person's interest in the Borrower Party or shall describe, in
reasonable detail, such other change or transfer;
5.4.13 any material written notices, reports or information
(including any notice that either Project has achieved any completion milestone
under the Construction Contracts, the Power Purchase Agreement, or the Capacity
Sales Agreement) delivered to or received by any Borrower Party or CCMCI from,
the parties to the Major Project Documents;
5.4.14 initiation of any condemnation proceedings involving either
Project or either Site or any material portion thereof;
5.4.15 promptly, but in no event later than 15 Banking Days after
any Borrower Party has knowledge of the execution and delivery thereof, a copy
of each Additional Project Document;
5.4.16 promptly, but in no event later than 30 days after the
receipt thereof by any Borrower Party, copies of (a) all Applicable Permits
obtained by such Borrower Party after the Closing Date, (b) any material
amendment, supplement or other modification to any Applicable Permit received by
any Borrower Party after the Closing Date, and (c) all material
60
notices relating to either Project received by any Borrower Party from, or
delivered by such Borrower Party to, any Governmental Authority;
5.4.17 promptly, but in no event later than five days after
occurrence thereof, notice of any forced outage with an anticipated duration in
excess of five days;
5.4.18 within five Banking Days of receipt thereof, copies of any
recovery plan ("Remedial Plan") proposed by the Construction Contractor pursuant
to Section 3.3.3 of either Construction Contract for review by Administrative
Agent and the Independent Engineer;
5.4.19 (a) within 10 days prior to the occurrence of a Reportable
Event with respect to any ERISA Plan, (b) promptly, but in no event later than
15 days, after the withdrawal of any Calpine Entity or any ERISA Affiliate from
a Multiemployer Plan, (c) promptly, but in no event later than five days, after
the PBGC institutes any proceedings to terminate any ERISA Plan or takes action
to appoint a trustee of any ERISA Plan under Section 4042 of ERISA, (d)
promptly, but in no event later than 10 days, after the occurrence of any event
which could give rise to a lien in favor of the IRS or the PBGC under any ERISA
Plan, (e) promptly, but in no event later than 30 days, after any Calpine Entity
or any ERISA Affiliate has knowledge that a Multiemployer Plan is in
reorganization, is insolvent or intends to terminate under Section 4041A of
ERISA, and (f) promptly, but in no event 10 days prior to the date, any Calpine
Entity or any ERISA Affiliate shall fail to fulfill its obligations under the
minimum funding standards of ERISA or the Code for any ERISA Plan; and
5.4.20 promptly, but in no event later than the time period
specified in the Construction Contracts, notice of any Material Adverse Change
in the Project Schedule or in the economics or feasibility of the Project
Companies developing, constructing, owning or operating the Projects, or any
other event or circumstance which could reasonably be expected to have a
Material Adverse Effect.
5.5 FINANCIAL STATEMENTS.
5.5.1 Each Borrower Party shall deliver or cause to be delivered to
Administrative Agent, in form and detail reasonably satisfactory to
Administrative Agent (except where GAAP is specifically required), except that
where a specified financial statement is publicly available due to the issuer's
filings with the United States Securities and Exchange Commission, Borrower may
so notify Administrative Agent and the specified financial statement will not be
required to be delivered hereunder:
(a) as soon as practicable and in any event within 120 days after
the close of each applicable fiscal year (commencing from fiscal year 2004 for
each Borrower Party except for the Borrower, and commencing from fiscal year
2005 for Borrower), unaudited annual financial statements of, without
duplication, each Borrower Party and the related statements of income, cash
flow, and shareholders' or members' equity (as applicable) for such fiscal year,
setting forth in each case in comparative form corresponding unaudited figures
from the
61
preceding fiscal year, all prepared in accordance with GAAP (subject to changes
resulting from audit and normal year-end adjustments and the absence of footnote
disclosure);
(b) as soon as practicable and in any event within 60 days after the
end of the first, second and third quarterly accounting periods of its fiscal
year, unaudited quarterly financial statements of Sponsor. Such financial
statements shall include the related statements of income, cash flow, and
shareholders' equity for such quarterly period and (in the case of second and
third quarterly periods) for the portion of fiscal year ending with the last day
of such quarterly period, setting forth in each case in comparative form
corresponding unaudited figures from the preceding fiscal year, all prepared in
accordance with GAAP (subject to changes resulting from audit and normal
year-end adjustments and the absence of footnote disclosure); and
(c) as soon as practicable and in any event within 120 days after
the close of each applicable fiscal year (commencing from fiscal year 2005),
unaudited pro forma income statement, balance sheet, cash flow statement and
reconciliation of net worth of, without duplication, each Borrower Party and the
related statements of income, cash flow, and shareholders' or members' equity
(as applicable) for such fiscal year, setting forth in each case in comparative
form corresponding unaudited figures from the preceding fiscal year, all
prepared in accordance with GAAP (subject to changes resulting from audit and
normal year-end adjustments and the absence of footnote disclosure).
5.5.2 Cause to be delivered, along with such financial statements of
each Borrower Party, a certificate signed by a Responsible Officer of such
Borrower Party, as applicable, certifying that (a) such Responsible Officer has
made or caused to be made a review of the transactions and financial condition
of such Person during the relevant fiscal period and that such review has not,
to such Responsible Officer's knowledge, disclosed the existence of any event or
condition which constitutes an Event of Default or Inchoate Default, or if any
such event or condition existed or exists, the nature thereof and the corrective
actions that such Person has taken or proposes to take with respect thereto, (b)
such Person is in compliance with all applicable material provisions of each
Credit Document to which such Person is a party or, if such is not the case,
stating the nature of such non-compliance and the corrective actions which such
Person has taken or proposes to take with respect thereto, and (c) such
financial statements are true and correct in all material respects and that no
material adverse change in the consolidated assets, liabilities, operations, or
financial condition of such Person has occurred since the date of the
immediately preceding financial statements provided to Administrative Agent or,
if a material adverse change has occurred, the nature of such change.
5.6 BOOKS, RECORDS, ACCESS.
Borrower and each Project Company shall maintain, or cause to be
maintained, adequate books, accounts and records with respect to itself and its
Project, as applicable, and prepare all financial statements required hereunder
in accordance with GAAP (subject, in the case of unaudited financial statements,
to changes resulting from audit and normal year-end adjustments and the absence
of footnote disclosure) and in compliance with the regulations of
62
any Governmental Authority having jurisdiction thereof; and, subject to
requirements of Governmental Rules, safety requirements and existing
confidentiality restrictions imposed upon any Borrower Party by any other
Person, permit employees or agents of Administrative Agent and Independent
Engineer at any reasonable times and upon reasonable prior notice to Borrower,
the applicable Project Company, Construction Contractor, Dow or Operator, as
applicable, to inspect all of Borrower Parties' properties, including the Sites,
to examine or audit all of Borrower Parties' books, accounts and records and
make copies and memoranda thereof, to communicate with Borrower Parties'
auditors outside the presence of such Borrower Party and to witness any
Performance Tests.
5.7 COMPLIANCE WITH LAWS, INSTRUMENTS, APPLICABLE PERMITS, ETC.
Borrower and each Project Company shall promptly comply, or cause
compliance, in all material respects with all Legal Requirements (including
Legal Requirements and Applicable Permits relating to pollution control,
environmental protection, equal employment opportunity or employee benefit
plans, ERISA Plans and employee safety) with respect to itself and its Project,
as applicable, and make, or cause to be made, such alterations to its Project
and its Site as may be required for such compliance.
5.8 REPORTS.
5.8.1 Each Project Company shall promptly after receipt thereof,
deliver to Administrative Agent copies of all progress reports of the
construction of its Project issued by Construction Contractor and received by
any Borrower Party, supplementing such reports in reasonable detail with
material information not already included therein, detailing the progress of the
development and construction of its Project since the last prior report
hereunder (including any change orders then requested by any Borrower Party or
Construction Contractor).
5.8.2 Each Project Company shall deliver to Administrative Agent
within 30 days of the end of each calendar quarter after the Project Commercial
Operation Date with respect to the Freeport Project and the Facility Acceptance
Date with respect to the Mankato Project, a summary operating report with
respect to each Project, which shall include, with respect to the period most
recently ended, the information set forth on the Template Operating Report, as
further described in the annotations thereto.
5.8.3 Each Project Company shall provide to Administrative Agent
promptly upon request such reports, statements, lists of property, accounts,
budgets, forecasts and other information concerning its Project and, to the
extent reasonably available, the Major Project Participants and at such times as
Administrative Agent shall reasonably require, including such reports and
information as are reasonably required by the Independent Consultants.
5.8.4 Each Project Company shall within 30 days after each annual
policy renewal date, deliver to Administrative Agent a certificate,
substantially in the form of Exhibit L, and otherwise in form and substance
reasonably satisfactory to Administrative Agent in
63
consultation with the Insurance Consultant, certifying that the insurance
requirements of Exhibit K have been implemented and are being complied with in
all material respects.
5.8.5 If in any year either Project Company's gross merchant
revenues (defined as gross revenues deriving from merchant sales, minus the cost
of fuel and other direct expenses) amount to less than 80% of the Project's
gross merchant revenues set forth in the Base Case Project Projections, then at
Borrower's expense, the Administrative Agent may commission the Power Market
Consultant or any replacement thereto, to perform a market study for the market
in which the Project is located.
5.9 EXISTENCE, CONDUCT OF BUSINESS, PROPERTIES, ETC.
Except as otherwise expressly permitted under this Agreement, each
Borrower Party shall (a) maintain and preserve its existence as a Delaware
limited liability company in the case of Borrower, a Delaware limited
partnership in the case of FEC, a Delaware limited liability company in the case
of FEC-GP, a Delaware limited liability company in the case of FEC-LP, and a
Delaware limited liability company in the case of MEC, and all material rights,
privileges and franchises necessary in the normal conduct of its business, (b)
subject to Section 5.2.2, perform (to the extent not excused by force majeure
events or the nonperformance of the other party and not subject to a good faith
dispute) all of its material contractual obligations under the Major Project
Documents to which it is party or by which it is bound, (c) maintain and, in the
case of FEC, cause Dow to maintain, all Applicable Permits, except to the extent
that any such failure to maintain could not reasonably be expected to have a
Material Adverse Effect, and (d) at or before the time that any Permit becomes
an Applicable Permit, obtain such Permit.
5.10 DEBT SERVICE COVERAGE RATIO; DEBT TO EQUITY RATIO.
(a) Following Term-Conversion, no later than 10 Banking Days after
each Principal Repayment Date, Borrower shall calculate and deliver to
Administrative Agent the Debt Service Coverage Ratio for the Calculation Period
for such Principal Repayment Date. The calculations of Debt Service Coverage
Ratios hereunder shall be used in determining the application and distribution
of funds pursuant to Section 6.6, and Section 3.3 of the Borrower Depositary
Agreement.
(b) No later than five Banking Days prior to the making of any
True-Up Drawing pursuant to Section 3.3.3(d), or any distribution pursuant to
Section 3.1.5 of the FEC Depositary Agreement, Borrower shall calculate and
deliver to Administrative Agent the Debt to Equity Ratio (after giving effect to
the making of the Punchlist Drawing (if any), the Dow Change Order Drawing, (if
any) and the Dow Performance Test Drawing (if any)), together with such written
information as is necessary for Administrative Agent to verify the Debt to
Equity Ratio. Administrative Agent shall notify Borrower in writing of any
suggested corrections, changes or adjustments to such calculations within three
Banking Days after receipt. Borrower shall incorporate all such corrections,
changes or adjustments as are required
64
to accurately reflect the Debt to Equity Ratio, and (if necessary) shall
promptly recalculate and resubmit to Administrative Agent such calculations.
5.11 INDEMNIFICATION.
5.11.1 Each Borrower Party shall indemnify, defend and hold harmless
each Lead Arranger, Administrative Agent, Collateral Agent, LC Issuer, and each
Lender, and in their capacities as such, their respective officers, directors,
shareholders, controlling Persons, employees, agents and servants (collectively,
the "Indemnitees") from and against and reimburse the Indemnitees for:
(a) any and all claims, obligations, liabilities, losses, damages,
injuries (to Person, property, or natural resources), penalties, stamp or other
similar taxes, actions, suits, judgments, costs and expenses (including
reasonable attorney's fees) of whatever kind or nature, whether or not well
founded, meritorious or unmeritorious, demanded, asserted or claimed against any
such Indemnitee (collectively, "Subject Claims") in any way relating to, or
arising out of or in connection with this Agreement or the other Operative
Documents to which it is a party, except for claims by a Calpine Entity against
an Indemnitee that are in whole or in part successful;
(b) any and all Subject Claims arising in connection with the
Release or presence of any Hazardous Substances at either Project, whether
foreseeable or unforeseeable, including all costs of removal, investigation,
remediation and disposal of such Hazardous Substances, all reasonable costs
required to be incurred in (i) determining whether such Project is in
compliance, and (ii) causing such Project to be in compliance, with all
applicable Legal Requirements, all reasonable costs associated with claims for
damages to Persons or property, and reasonable attorneys' and consultants' fees
and court costs; and
(c) any and all Subject Claims in any way relating to, or arising
out of or in connection with any claims, suits or liabilities against any
Borrower Party or any of its Affiliates to the extent related to the Projects or
the transactions contemplated by the Operative Documents.
5.11.2 The foregoing indemnities shall not apply with respect to an
Indemnitee, to the extent arising as a result of the gross negligence or willful
misconduct of such Indemnitee, but shall continue to apply to other Indemnitees.
5.11.3 The provisions of this Section 5.11 shall survive foreclosure
of the Collateral Documents and satisfaction or discharge of Borrower's
obligations hereunder and under the other Credit Documents to which it is a
party, and shall be in addition to any other rights and remedies of the Lead
Arrangers, Administrative Agent, Collateral Agent and any Lender.
65
5.11.4 In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall notify the applicable Borrower
Party of the commencement thereof, and such Borrower Party shall be entitled, at
its expense, acting through counsel reasonably acceptable to such Indemnitee, to
participate in, and, to the extent that such Borrower Party desires, to assume
and control the defense thereof. Such Indemnitee shall be entitled, at its
expense, to participate in any action, suit or proceeding the defense of which
has been assumed by such Borrower Party. Notwithstanding the foregoing, each
Borrower Party shall not be entitled to assume and control the defenses of any
such action, suit or proceedings if and to the extent that, in the reasonable
opinion of such Indemnitee and its counsel, such action, suit or proceeding
involves the potential imposition of criminal liability upon such Indemnitee or
a conflict of interest between such Indemnitee and such Borrower Party or
between such Indemnitee and another Indemnitee (unless such conflict of interest
is waived in writing by the affected Indemnitees), and in such event (other than
with respect to disputes between such Indemnitee and another Indemnitee) such
Borrower Party shall pay the reasonable expenses of such Indemnitee in such
defense.
5.11.5 If a Borrower Party has assumed the defense of any action,
suit or proceeding pursuant to Section 5.11.4, such Borrower Party shall
promptly report to such Indemnitee on the status of such action, suit or
proceeding as material developments shall occur and from time to time as
requested by such Indemnitee (but not more frequently than every 60 days). Such
Borrower Party shall deliver to such Indemnitee a copy of each document filed or
served on any party in such action, suit or proceeding, and each material
document which such Borrower Party possesses relating to such action, suit or
proceeding.
5.11.6 Notwithstanding each Borrower Party's rights hereunder to
control certain actions, suits or proceedings:
(a) if any Indemnitee reasonably determines that failure to
compromise or settle any Subject Claim made against such Indemnitee is
reasonably likely to subject such Indemnitee to civil, criminal or
administrative penalties, to result in the loss, suspension or impairment of a
license or Permit held by such Indemnitee or to cause material damage to such
Indemnitee's reputation, such Indemnitee shall be entitled to compromise or
settle such Subject Claim; and
(b) if the Majority Lenders reasonably determine that failure to
compromise or settle any Subject Claim made against such Indemnitee is
reasonably likely to have a Material Adverse Effect, Administrative Agent shall
provide the applicable Borrower Party with written notice of a proposed
compromise or settlement of such claim specifying in detail the nature and
amount of such proposed settlement or compromise. Such Borrower (and any other
relevant Calpine Entity) shall be deemed to have approved such proposed
compromise or settlement unless, within 30 days after the date such Borrower
receives such notice of intended compromise or settlement, such Borrower
provides the Lenders with a written legal analysis from counsel reasonably
acceptable to the Majority Lenders reasonably concluding that, based on the
magnitude of the Subject Claim, the legal basis for such Subject Claim, or the
cost of defending such Subject Claim, the amount of such proposed settlement or
compromise is not
66
within a reasonable range of settlements or compromises for such Subject Claim,
and indicating, based on such factors, such counsel's view as to the appropriate
amount of a reasonable settlement or compromise for such Subject Claim (the
"Settlement Amount"). If the Lenders receive such legal analysis required by
this Section 5.11.6 within such 30-day period, then (i) the Majority Lenders may
elect to settle or compromise such Subject Claim and such Borrower Party shall
be responsible for the payment of all amounts of such compromise or settlement
up to 125% of the Settlement Amount, (ii) such Indemnitee shall be responsible
for payment of all amounts of such compromise or settlement in excess of such
125% limit, and (iii) such compromise or settlement shall be binding upon the
Borrower Party. If the Borrower Party does not provide such legal analysis
within such period, or if such legal analysis is not reasonable, in the
reasonable determination of the Majority Lenders, then such Indemnitee may
settle or compromise such Subject Claim (and such Borrower Party shall cause any
other relevant Calpine Entity to agree to the same) and shall be fully
indemnified by such Borrower Party therefor. The Lenders shall not otherwise
settle or compromise any such Subject Claim other than at their own expense.
5.11.7 Upon payment of any Subject Claim by the applicable Borrower
Party pursuant to this Section 5.11 or other similar indemnity provisions
contained herein to or on behalf of an Indemnitee, such Borrower Party, without
any further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto, and such Indemnitee shall cooperate with
such Borrower Party and such Borrower Party's insurance carrier and give such
further assurances as are necessary or advisable to enable such Borrower Party
vigorously to pursue such claims.
5.11.8 Any amounts payable by a Borrower Party pursuant to this
Section 5.11 shall be regularly payable within 30 days after such Borrower Party
receives an invoice for such amounts from any applicable Indemnitee, and if not
paid within such 30-day period shall bear interest at the Default Rate.
5.11.9 Notwithstanding anything to the contrary set forth herein,
such Borrower Party shall not, in connection with any one legal proceeding or
claim, or separate but related proceedings or claims arising out of the same
general allegations or circumstances, in which the interests of the Indemnitees
do not materially differ, be liable to the Indemnitees (or any of them) under
any of the provisions set forth in this Section 5.11 for the fees and expenses
of more than one separate firm of attorneys (which firm shall be selected by the
affected Indemnitees, or upon failure to so select, by Administrative Agent).
5.11.10 If, for any reason whatsoever, the indemnification provided
under this Section 5.11 is unavailable to any Indemnitee or is insufficient to
hold it harmless to the extent provided in this Section 5.11, then provided such
payment is not prohibited by or contrary to any applicable Governmental Rule,
Legal Requirement or public policy, such Borrower Party shall contribute to the
amount paid or payable by such Indemnitee as a result of the Subject Claim in
such proportion as is appropriate to reflect the relative economic interests of
such Borrower Party and its Affiliates on the one hand, and such Indemnitee on
the other hand, in the matters contemplated by this Agreement as well as the
relative fault of such Borrower Party (and its
67
Affiliates) and such Indemnitee with respect to such Subject Claim, and any
other relevant equitable considerations.
5.11.11 Nothing in this Section 5.11 shall constitute a release by a
Borrower Party of any claims that it has as a result of a breach or a default by
any of the Secured Parties of their respective obligations under this Agreement
or any other Credit Document.
5.12 EXEMPTION FROM REGULATION.
Each applicable Project Company shall take or cause to be taken all
necessary or appropriate actions so that (a) (i) MEC will be an Exempt Wholesale
Generator and (ii) the Mankato Project will be an Eligible Facility at all times
hereunder, (b) the Freeport Project will be a Qualifying Facility at all times
hereunder, (c) except to the extent provided in the first sentence of Section
4.17, each Project shall not be subject to, or shall be exempt from, financial
or organizational regulation as a "public utility company" or "public utility
holding company" under PUHCA or financial, organizational or rate regulation as
a public utility under the laws of the State of Minnesota in the case of MEC or
Texas in the case of FEC, as presently constituted and as construed by the
courts of Minnesota and Texas, respectively, (d) MEC will be authorized to sell
electricity at market-based rates, with all waivers of regulations and blanket
authorizations as are customarily granted by FERC to entities with market-based
rate authority, and (e) FEC shall not be subject to regulation as a "public
utility" under the FPA.
5.13 CONSTRUCTION OF THE PROJECTS.
(a) Each Project Company shall cause its Project to be constructed
and equipped substantially in accordance with the Plans and Specifications, the
then-current Project Budget, the Construction Contracts and the other Major
Project Documents, as any of the same may be amended from time to time pursuant
to Section 6.12.
(b) Each Project Company shall terminate, as applicable, either the
FEC Construction Contract or the MEC Construction Contract under the terms
provided for therein or in the applicable Consent, upon receipt of notice from
Administrative Agent upon direction of the Majority Lenders and after
consultation with the applicable Project Company that (i) there has been an
Event of Default (as defined in the applicable Construction Contract) by CCMCI
in the performance of its obligations under such Construction Contract, or (ii)
there has been a Bankruptcy Event of CCMCI or Sponsor and, as a result thereof,
in the opinion of the Majority Lenders, there exists the reasonable possibility
that CCMCI will not be able to perform all of its obligations under such
Construction Contract in a manner consistent with the terms thereof and of the
other Operative Documents (including Section 5.13(a) hereof). Upon any such
termination of a Construction Contract, the applicable Project Company shall
replace CCMCI as construction contractor with an entity approved by the Majority
Lenders, under a construction contract approved by the Majority Lenders.
68
5.14 OPERATION AND MAINTENANCE OF PROJECTS; ANNUAL OPERATING BUDGET.
5.14.1 Each Project Company shall keep its Project, or cause the
same to be kept, in an operating condition consistent with the standard of care
set forth in the O&M Agreements, all Applicable Permits, Legal Requirements and
the Operative Documents, and make or cause to be made all repairs (structural
and non-structural, extraordinary or ordinary) necessary to keep the Projects in
such condition.
5.14.2 Each Project Company shall operate its Project, or cause the
same to be operated, in a manner consistent with Prudent Utility Practices and
in compliance with the terms of the Power Purchase Agreement, including any MAPP
requirements as defined and described therein, in the case of the Mankato
Project and with the terms of the Dow Agreements, including any ERCOT
requirements as described therein, in the case of the Freeport Project.
5.14.3 On or before the date that is 60 days prior to the later to
occur of the anticipated Facility Acceptance Date and the anticipated Project
Commercial Operation Date and thereafter 60 days prior to the beginning of each
subsequent calendar year, each Project Company shall submit an operating plan
and a budget, detailed by month, of anticipated revenues and anticipated
expenditures under all applicable Waterfall Levels, and, with respect to the
budget submitted for MEC, anticipated expenditures from the MEC Major
Maintenance Reserve Account, each such budget to include Debt Service, the
projected Debt Service Coverage Ratio, proposed dividend distributions, Major
Maintenance, reserves and all anticipated O&M Costs (including reasonable
allowance for contingencies) applicable to the applicable Project for the
ensuing calendar year (or, in the case of the initial Annual Operating Budgets,
partial calendar year) and, in the case of Major Maintenance in accordance with
Section 5.14.5, to the conclusion of the second full calendar year thereafter
(each such annual operating plan and budget, including the initial Annual
Operating Budgets, an "Annual Operating Budget"). Each Annual Operating Budget
for each Project shall be subject to the reasonable approval of Administrative
Agent acting in consultation with the Independent Engineer, such approval not to
be unreasonably withheld. Failure by Administrative Agent to approve or
disapprove any such draft Annual Operating Budget within 30 days after receipt
thereof shall be deemed to be an approval by Administrative Agent of such draft
as the final Annual Operating Budget for such Project. Borrower and each Project
Company shall consider in good faith Administrative Agent's suggestions in
preparation of a final Annual Operating Budget for each Project. Borrower shall,
or shall cause each Project Company to, prepare a final Annual Operating Budget
for each Project no less than 30 days in advance of the later to occur of the
anticipated Facility Acceptance Date and the Project Commercial Operation Date,
and each subsequent calendar year. The O&M Costs in each Annual Operating Budget
which are subject to escalation limitations in the Project Documents shall not,
absent extraordinary circumstances, be increased by more than the amounts
provided in such Project Documents.
5.14.4 Each Project Company shall operate, or cause to be operated,
and maintain its Project, within amounts for (a) any Operating Budget Category
not to exceed 110%
69
(on a year-to-date basis), and (b) for all Operating Budget Categories not to
exceed 105% (on a year-to-date basis), in each case of the amounts budgeted
therefor as set forth in the then-current Annual Operating Budget for the
applicable Project as approved or deemed approved by Administrative Agent;
provided, however, that (i) subject to Section 6.12, each Project Company may
propose an amendment to the Annual Operating Budget for such Project for
Administrative Agent's approval if at any time either Project Company cannot
comply with clause (a) or (b) above (and Administrative Agent shall consider
each such amendment in good faith and shall not unreasonably withhold its
consent to the approval of any such amendment), and (ii) the 110% limitation
shall not apply to Variable O&M Costs to the extent that such Variable O&M Costs
result from the dispatch of the applicable Project at levels in excess of the
levels contemplated by the then-current Annual Operating Budget for such
Project. Pending approval of any Annual Operating Budget or amendment thereto in
accordance with the terms of this Section 5.14.4, each Project Company shall use
its best efforts to operate and maintain its Project, or cause such Project to
be operated and maintained, within the then-current Annual Operating Budget for
such Project (it being acknowledged that if a particular calendar year's Annual
Operating Budget for such Project has not been approved by the time periods
provided in Section 5.14.3, then the then-current Annual Operating Budget for
such Project shall be deemed to be the Annual Operating Budget in effect for
such Project prior to the delivery of the final Annual Operating Budget for such
Project pursuant to Section 5.14.3); provided that the amounts specified therein
shall be increased or decreased to the extent specified in the MEC O&M/Major
Maintenance Agreement.
5.14.5 Borrower shall also include in each Annual Operating Budget a
reassessment of (a) the Major Maintenance Reserve Requirement for the Mankato
Project, determined as provided in the definition of "Major Maintenance Reserve
Requirement" in the MEC Depositary Agreement, (b) the anticipated scheduling,
probable cost and a reasonably detailed description of each anticipated item of
Major Maintenance, through the next major turbine overhaul cycle for each
Project (the "Major Maintenance Plan"), and (c) the anticipated amounts which
will be on deposit in the MEC Major Maintenance Reserve Account and FEC Major
Maintenance Reserve Account during each year of the Major Maintenance Plan.
Borrower shall cause each Project Company to cause its Project to perform (or
cause to be performed) all Major Maintenance on its respective Project
substantially in accordance with the then-current Major Maintenance Plan and in
all material respects in accordance with the provisions of the Operative
Documents. The Major Maintenance Plan, including without limitation the
assumptions made in connection with calculating the Mankato Project's Major
Maintenance Reserve Requirement, shall be subject to approval by the
Administrative Agent in consultation with the Independent Engineer, such
approval not to be unreasonably withheld.
5.15 PRESERVATION OF RIGHTS; FURTHER ASSURANCES.
5.15.1 Each Project Company shall cause its Project to maintain in
full force and effect, perform (subject to Section 5.2) the obligations of the
applicable Project Company under, preserve, protect and defend the material
rights of such Project Company under and, subject to Section 5.13(b), take all
reasonable action necessary to prevent termination (except by expiration
70
in accordance with its terms) of each and every Major Project Document,
including (where each such Project Company in the exercise of its business
judgment deems it proper) prosecution of suits to enforce any material right of
such Project Company thereunder and enforcement of any material claims with
respect thereto. Without limiting the foregoing, Borrower shall enforce all of
its rights under the Completion Undertaking Agreements and the Undertaking
Support LCs (to the extent the Undertaking Support LCs are held by Borrower) and
the Project Companies shall enforce all of their rights under the Construction
Contract Guaranties.
5.15.2 From time to time, Borrower shall, and shall cause each
Borrower Party to, execute, acknowledge, record, register, deliver and/or file
all such notices, statements, instruments and other documents (including any
memorandum of lease or other agreement, financing statement, continuation
statement, certificate of title or estoppel certificate), relating to the Loans
stating the interest and charges then due and any known Events of Default or
Inchoate Defaults, and take such other steps as may be necessary or advisable to
render fully valid and enforceable under all applicable laws the rights, liens
and priorities of the Secured Parties with respect to all Collateral and other
security from time to time furnished under this Agreement and the other Credit
Documents or intended to be so furnished, in each case in such form and at such
times as shall be reasonably requested by Collateral Agent, and pay all
reasonable fees and expenses (including reasonable attorneys' fees) incident to
compliance with this Section 5.15.2.
5.15.3 If any Borrower Party shall at any time acquire any real
property or leasehold or other interest in real property not covered by the FEC
Deed of Trust or the MEC Mortgage, then promptly upon such acquisition, execute,
deliver and record a supplement to such Deed of Trust, reasonably satisfactory
in form and substance to Collateral Agent, subjecting the real property or
leasehold or other interests to the Lien and security interest created by such
Deed of Trust. If reasonably requested by Collateral Agent, such Borrower Party
shall obtain an appropriate endorsement or supplement to, as applicable, the
Title Policy or the Term Title Policy insuring the Lien of the Secured Parties
in such additional property, subject only to Permitted Liens and other
exceptions to title approved by Collateral Agent.
5.15.4 Upon the request of Administrative Agent or Collateral Agent,
the applicable Borrower Party shall execute and deliver all documents as shall
be necessary or that Administrative Agent or Collateral Agent (as the case may
be) shall reasonably request in connection with the rights and remedies of
Administrative Agent or Collateral Agent (as the case may be) and the Lenders
under the Operative Documents, and perform such other reasonable acts as may be
necessary to carry out the intent of this Agreement and the other Credit
Documents.
5.15.5 The applicable Borrower Party shall take such action,
including the execution and filing of all such documents and instruments, as may
be necessary to effect and continue the appointment of Corporation Service
Company as its agent for service of process in full force and effect, or if
necessary by reason of any fact or condition relating to such agent, to replace
such agent (but only after having given notice and evidence thereof to
Administrative Agent).
71
5.16 ADDITIONAL CONSENTS.
Upon the reasonable request of Administrative Agent, with respect to
(a) any Major Project Document (including any Additional Project Document)
entered into after the Closing Date and (b) any Major Project Document entered
into by a Replacement Obligor pursuant to Article 7, in each case, the
applicable Project Company shall cause the applicable counterparty or
Replacement Obligor, as applicable, to execute and deliver to Administrative
Agent a Consent in substantially the form of Exhibit E-1, with such changes as
are reasonably acceptable to Administrative Agent.
5.17 DRAWSTOP FUNDS.
Notwithstanding anything in this Agreement to the contrary, if,
during any period when Loans are not available to Borrower as a result of a
failure to meet any of the applicable conditions set forth in Article 3 hereof
or Article 3 of the Borrower Depositary Agreement, Sponsor pays Project Costs
through direct or indirect cash equity contributions provided to or on behalf of
Borrower (such amounts used to pay such Project Costs, as certified by the
Independent Engineer and confirmed by Administrative Agent, the "Drawstop
Funds"), then, at such time as such conditions shall be met and Construction
Loans shall become available to Borrower, Borrower shall be entitled to make a
Borrowing of Construction Loans in the amount of the Drawstop Funds, but in no
event in excess of the Available Construction Loan Commitment, and shall be
permitted to reimburse Sponsor for such excess cash equity contributions.
5.18 MAINTENANCE OF INSURANCE.
Borrower shall cause each Project Company to maintain or cause to be
maintained on its behalf in effect at all times the types of insurance required
pursuant to Exhibit K, in the amounts and on the terms and conditions specified
therein, from the quality of insurers specified in such Exhibit or other
insurance companies of recognized responsibility reasonably satisfactory to
Administrative Agent.
5.19 TAXES, OTHER GOVERNMENT CHARGES AND UTILITY CHARGES.
Subject to the second sentence of this Section 5.19 and except for
Permitted Liens, each Borrower Party shall timely file all tax returns and 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 any Borrower Party or
either Project, including sales and use taxes and real estate taxes, all utility
and other charges incurred in the operation, maintenance, use, occupancy and
upkeep of each Project, and all assessments and charges lawfully made by any
Governmental Authority for public improvements that may be secured by a Lien on
each Project. Borrower Parties may contest in good faith any such taxes,
assessments and other charges and, in such event, may permit the taxes,
assessments or other charges so contested to remain unpaid during any period,
including appeals, when Borrower Parties are in good faith contesting the same,
so long as (a) reserves to the extent required by GAAP have been established in
an amount sufficient to pay any such
72
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 maintained at all times during such
contest, (b) enforcement of the contested tax, assessment or other charge is
effectively stayed for the entire duration of such contest, and (c) any tax,
assessment or other charge determined to be due, together with any interest or
penalties thereon, is promptly paid after resolution of such contest.
5.20 EVENT OF EMINENT DOMAIN.
If an Event of Eminent Domain shall occur with respect to any
Collateral, Borrower shall cause each Project Company (in the case of the
Freeport Project, insofar as consistent with Dow's rights under the Dow
Agreements), to (a) diligently pursue all its rights to compensation against the
relevant Governmental Authority in respect of such Event of Eminent Domain, (b)
not, without the written consent of the Administrative Agent (which consent
shall not be unreasonably withheld or delayed), compromise or settle any claim
against such Governmental Authority, and (c) pay or apply all Eminent Domain
Proceeds in accordance with Section 3.5 of each of the FEC Depositary Agreement
and the MEC Depositary Agreement. Each Borrower Party consents to, and agrees
not to object to or otherwise impede or impair, the participation of
Administrative Agent in any eminent domain proceedings, and each Borrower Party
shall from time to time deliver to Administrative Agent all documents and
instruments reasonably requested by it to permit such participation.
5.21 INTEREST RATE PROTECTION.
5.21.1 Compliance With Interest Rate Agreements. Within 45 days
after the initial Construction Loan, Borrower shall enter into one or more
Interest Rate Agreements with one or more Lenders (or Affiliates thereof) for
the period commencing on the date of such Interest Rate Agreements and ending on
the Term Loan Maturity Date, in a notional amount equal to at least 50% of the
anticipated amount of Loans projected to be outstanding during such period
(which anticipated amount (a) shall be determined by reference to the Base Case
Project Projections, (b) shall take into account any scheduled or projected
repayments or prepayments of Loans contemplated thereunder, and (c) shall
otherwise be determined in consultation with the Administrative Agent). Borrower
shall at all times comply with and maintain in full force and effect through the
end of such period such Interest Rate Agreements.
5.21.2 Hedge Breaking Fees. To the extent required pursuant to the
terms of the Hedge Transactions, Borrower shall pay all costs, fees and expenses
incurred by Borrower in connection with any unwinding, breach or termination of
such Hedge Transactions ("Hedge Breaking Fees"), all to the extent provided in
and as calculated pursuant to the applicable Interest Rate Agreements.
5.21.3 Security. Each Interest Rate Agreement provided by a Lender
(or an Affiliate thereof) hereunder, including all Hedge Transactions
thereunder, entered into in accordance with the terms of this Agreement, and all
Hedge Breaking Fees shall be and are
73
hereby secured by any Collateral Documents, pari passu with the Loans. The
parties hereto agree that, for purposes of any sharing of Collateral under the
Collateral Documents, any Hedge Bank, in its capacity as a counterparty or
intermediary to the Interest Rate Agreements, shall be deemed to have made a
Loan to Borrower in an amount equal to the unpaid amount of any Hedge Breaking
Fees owed by Borrower to such Hedge Bank, under any such Hedge Transaction on
the date that an Early Termination Date (as defined in the applicable Interest
Rate Agreement) occurs. For purposes of any such Collateral sharing such Hedge
Bank shall be deemed a Lender under the Collateral Documents to the extent of
such deemed Loan. For purposes of voting on matters under this Agreement, such
Hedge Bank shall be deemed a Lender and hold votes to the extent specified in
the definition of "Proportionate Share."
5.22 ADDITIONAL PERMITS.
Promptly, but in no event later than 30 days after obtaining
knowledge of any Applicable Permit relating to any Borrower Party or Dow (other
than any such Permits set forth in Exhibit G-1 as of such time or otherwise
theretofore disclosed in writing to Administrative Agent), Borrower shall
provide written notice of such Applicable Permit to Administrative Agent.
5.23 SPECIAL PURPOSE ENTITY.
5.23.1 Borrower shall conduct its business solely in its own name
through its duly authorized directors, officers or agents so as not to mislead
others as to the identity of the company with which those others are concerned,
and particularly will avoid the appearance of conducting business on behalf of
any other entity or that its assets or the assets of any other entity are
available to pay the creditors of such other entity. Without limiting the
generality of the foregoing, all oral and written communications of Borrower,
including, without limitation, letters, invoices, purchase orders, contracts and
statements, will be made solely in the name of Borrower.
5.23.2 Borrower shall maintain records and books of account separate
from those of all other entities.
5.23.3 Borrower shall obtain proper authorization from its managers
of all action requiring such authorization. Meetings of the managers of Borrower
shall be held with such frequency as required by Delaware law or otherwise
deemed appropriate by Borrower.
5.23.4 Operating expenses and liabilities of Borrower shall be paid
from its own funds.
5.23.5 The resolutions, agreements and other instruments underlying
the transactions contemplated by this Agreement shall be continuously maintained
by Borrower as official records.
74
5.23.6 Other than as permitted pursuant to Section 6.8, Borrower
shall maintain an arm's-length relationship with all other entities.
5.23.7 Borrower shall keep its assets and its liabilities wholly
separate from those of all other entities.
5.24 THE PATRIOT ACT.
Borrower shall and shall cause Sponsor and each Borrower Party to
comply with the disclosure requirements pursuant to Section 11.21.
5.25 CERTAIN RIGHTS UNDER DOW AGREEMENTS.
In the event that the circumstances arise that are described in
Section 5.6 of the FEC Ground Lease, Borrower shall cause FEC to take such
actions, and to fully exercise its rights under such section, as may be
necessary to obtain adequate real estate rights, Permits, and contract rights so
that if Dow were to fail, FEC would have exercised all reasonable efforts toward
being able to operate the Freeport Project independently of Dow.
5.26 PROJECT REPRESENTATIVE.
Borrower shall cause each Project Company to designate one or more
individuals who will be responsible for protecting the interests of such Project
Company in all contract discussions and negotiations, with Affiliates of the
Project Company and otherwise, and will for purposes of interactions with the
Independent Engineer, be and in all respects act, as the representative of the
owner of the applicable Project.
5.27 ALTERNATE WATERLINE EASEMENTS.
MEC and Borrower have advised the Lenders and each of the Lenders
understands and agrees that the waterline path currently proposed for the
Mankato Project may be relocated during the course of development and
construction of the Mankato Project, and, notwithstanding anything in this
Agreement or the MEC Mortgage to the contrary, the Lenders agree that MEC may,
in accordance with MEC's business judgment, relocate the waterline provided
that, in such event, MEC shall provide the Lenders with a survey of the new
waterline easement(s) that complies with the requirements of Section 3.1.21 and
endorsements to the lender's title policy as originally provided pursuant to
Section 3.1.22 which will add the new waterline easement(s) as an insured
easement(s), and, in connection with such relocation, MEC and the Lenders shall
execute an agreement modifying the MEC Mortgage to extend the lien of the MEC
Mortgage to the new waterline easement(s) and to release the lien of the MEC
Mortgage from the former waterline easement(s).
75
ARTICLE 6
NEGATIVE COVENANTS
Borrower covenants and agrees that until the repayment in full in
cash of all of Borrower's Obligations (other than those contingent Obligations
that are intended to survive the termination of this Agreement and the other
applicable Credit Documents) and the expiration or termination of all
Commitments and Interest Rate Agreements to which any Secured Party is a party,
Borrower shall not and shall cause the applicable Borrower Party to not take the
following actions:
6.1 CONTINGENT LIABILITIES.
Except as provided in this Agreement, Borrower and each other
Borrower Party shall not become liable as a surety, guarantor, accommodation
endorser or otherwise, for or upon the obligation of any other Person; provided,
however, that this Section 6.1 shall not be deemed to prohibit or otherwise
limit the occurrence of Permitted Debt.
6.2 LIMITATIONS ON LIENS.
Borrower and each other Borrower Party shall not create, assume or
suffer to exist any Lien, securing a charge or obligation on the Projects or on
any of the Collateral, real or personal, whether now owned or hereafter
acquired, except Permitted Liens.
6.3 INDEBTEDNESS.
Borrower and each Project Company shall not incur, create, assume or
permit to exist any Debt except Permitted Debt. FEC-GP and FEC-LP shall not
incur any Debt except Debt incurred under the FEC-GP Guaranty by FEC-GP and
under the FEC-LP Guaranty by FEC-LP.
6.4 SALE OR LEASE OF ASSETS.
6.4.1 Except as provided under Section 6.5(b) of the Security
Agreement, Borrower, FEC-GP and FEC-LP shall not sell, lease, assign, transfer
or otherwise dispose of assets, whether now owned or hereafter acquired, except
assets used for the administration of their respective businesses and having a
value of less than $10,000.
6.4.2 Each Project Company shall not sell, lease, assign, transfer
or otherwise dispose of assets, whether now owned or hereafter acquired, except
(a) in the ordinary course of its business and as contemplated by the Operative
Documents, (b) to the extent that such asset is unnecessary, worn out or no
longer useful or usable in connection with the operation or maintenance of its
Project, at fair market value, (c) the sale, transfer or release, with or
without consideration, of real property or interests in real property related to
its Project to the extent that such real property or interests in real property
is only incidental to, or no longer useful in
76
connection with, the development, construction, leasing, ownership or operation
of its Project, or (d) the granting of easements or other interests in real
property related to its Project to other Persons if, with respect to clauses (c)
and (d) only, the Administrative Agent has determined that such sale, transfer
or release could not reasonably be expected to have a Material Adverse Effect.
Upon any such sale, lease, assignment, transfer or other disposition of any such
assets, all Liens in favor of any Secured Party relating to such asset shall be
released.
6.5 CHANGES.
Borrower and each other Borrower Party shall not change the nature
of its business or expand its business beyond the business contemplated in the
Operative Documents; provided further that the representations with respect to
ownership of the Borrower Parties set forth in Section 4.1 shall remain true at
all times.
6.6 DISTRIBUTIONS.
6.6.1 Pre-Initial Principal Repayment Date. Except as provided in
Section 6.6.4, prior to the first Principal Repayment Date after
Term-Conversion, Borrower shall not directly or indirectly, make or declare any
dividend or other distribution (in cash, property or obligation) on, or other
payment on account of, any interest in any Borrower Party.
6.6.2 Post-Initial Principal Repayment Date. Except as provided in
Section 6.6.4, from and after the first Principal Repayment Date after
Term-Conversion, Borrower shall not directly or indirectly, make or declare any
dividend or other distribution (in cash, property or obligation) on, or other
payment on account of, any interest in any Borrower Party or make any payment of
principal or interest due under any permitted subordinated note, unless the
following conditions have been satisfied (the "Restricted Payment Conditions"):
(a) such dividend or distribution is on a date occurring within 15
Banking days after the immediately preceding Principal Repayment Date;
(b) no Event of Default or Inchoate Default has occurred and is
continuing as of the date of such applicable dividend or distribution, and such
dividend or distribution would not cause an Event of Default or Inchoate
Default;
(c) the Debt Service Coverage Ratio for the Calculation Period
relating to the Principal Repayment Date immediately preceding the proposed date
of such dividend or distribution is greater than or equal to 1.25 to 1;
(d) no Material Adverse Change shall have occurred and be continuing
as of the date of the applicable dividend or distribution or would result from
the making of such dividend or distribution;
77
(e) the funds necessary to make any such dividend or distribution
are on deposit in the Distribution Suspense Account as of the Principal
Repayment Date to which the applicable dividend or distribution relates and are
otherwise available to be withdrawn from the Distribution Suspense Account on
such date in accordance with the terms and conditions of the Borrower Depositary
Agreement;
(f) all reserve accounts are funded in the amount required by the
Depositary Agreements;
(g) no Security Fund LC Loans are then outstanding; and
(h) for the first distribution pursuant to this Section 6.6.2 only,
the following conditions have been satisfied: (i) Collateral Agent shall have
received as-built A.L.T.A. surveys of the Sites, in form and substance
reasonably satisfactory to Collateral Agent and the Title Insurer, certified to
Borrower, Collateral Agent and the Title Insurer as to completeness and accuracy
as of not more than 60 days prior to the first distribution under Section 6.6.2
by a licensed Texas surveyor (in the case of the Freeport Project) and a
licensed Minnesota surveyor (in the case of the Mankato Project) reasonably
satisfactory to Collateral Agent, showing, among other things, (A) as to the
Sites, the location and dimensions thereof, including the location of all means
of access thereto and all easements and encumbrances relating thereto and
showing the perimeter within which all improvements are located, (B) the
location and dimensions of all improvements, fences or encroachments located in
or on the Sites, (C) the existing utility facilities servicing the Projects
(including water, electricity, fuel, telephone, sanitary sewer and storm water
distribution and detention facilities), (D) that the location of each Project
does not encroach on or interfere with adjacent property or existing easements,
encumbrances or other rights (whether on, above or below ground), other than
Permitted Liens, and that there are no gaps, gores, projections, protrusions or
other survey defects, (E) whether either Site or any portion thereof is located
in a special flood hazard zone, and (F) no other matters constituting a defect
in title other than relevant Title Exceptions; provided, however, that the
matters described in clause (E) may be shown by separate maps, surveys or other
information reasonably satisfactory to Collateral Agent, and (ii) Collateral
Agent shall have received (A) endorsements to the Title Policies delivered to
Collateral Agent pursuant to Section 3.1.22 reasonably satisfactory to
Collateral Agent reflecting the items referred to in clause (B) below (such
policy and endorsements being collectively referred to as the "Term Title
Policies"), insuring the continued first priority Lien on the FEC Mortgaged
Property evidenced by the FEC Deed of Trust and on the MEC Mortgaged Property
evidenced by the MEC Mortgage (in each case without a mechanics' and
materialmen's exception included in such title policy), and such other matters
as Collateral Agent may reasonably request, and, if such endorsements are not
available in Texas or Minnesota, then (B) a Mortgagee Policy of Title Insurance,
together with such endorsements thereto as are reasonably required by Collateral
Agent and are obtainable in the State of Texas with respect to the Freeport
Project and an A.L.T.A. extended coverage lender's policy of title insurance,
together with such endorsements as are available thereto in the State of
Minnesota with respect to the Mankato Project, at reasonable costs, in an amount
equal to the aggregate amount of Loans Term-Converted into Term Loans, issued by
the Title Insurer, in form and substance and with such
78
reinsurance as is reasonably satisfactory to Collateral Agent, and insuring
Collateral Agent as to all matters described in Section 3.1.22, the continued
first priority of the Lien on the FEC Mortgaged Property evidenced by the FEC
Deed of Trust and on the MEC Mortgaged Property evidenced by the MEC Mortgage
(in each case without a mechanics' and materialmen's exception included therein,
except where applicable Governmental Rules prevent the deletion of such
exception, in which case, if permissible under applicable Governmental Rules,
the Title Insurer shall be provided with any affidavits or indemnities (with
respect to which Borrower shall have no reimbursement obligations) necessary to
cause the Title Insurer to issue affirmative coverage for mechanics' and
materialmens' liens in form and substance reasonably satisfactory to Collateral
Agent) and as to such other matters as Collateral Agent may reasonably request,
and containing only (1) any standard coverage exception reasonably acceptable to
Collateral Agent, (2) Title Exceptions, and (3) Permitted Liens described in
clauses (a) and (b) of the definition thereof (to the extent the same are
afforded priority over the Lien of the FEC Deed of Trust and the MEC Mortgage by
operation of law), such Permitted Liens as are junior and subordinate to the FEC
Deed of Trust and the MEC Mortgage and any other exceptions to title as are
reasonably acceptable to Collateral Agent.
6.6.3 No Borrower Party shall enter into any agreement, contract or
arrangement (other than the Operative Documents) restricting its ability to pay
or make dividends or distributions in cash or kind, to make loans, advances or
other payments of any nature or to make transfers or distributions of all or any
part of its assets to Borrower or, in the case of FEC, to FEC-GP and/or FEC-LP.
6.6.4 Notwithstanding anything to the contrary contained in this
Agreement, nothing in this Section 6.6 shall prohibit, or otherwise limit (1)
any payment made to, or for the account of, Sponsor in accordance with Section
5.1.1(b), 5.17 and 11.23, and Section 3.6 of the Borrower Depositary Agreement,
(2) the payment of O&M Costs in accordance with the FEC Depositary Agreement and
the MEC Depositary Agreement, (3) the payment of unsubordinated amounts due and
payable to any Affiliated Major Project Participant pursuant to any Major
Project Document, (4) any payment among the Borrower Parties expressly
contemplated by any of the Depositary Agreements, (5) any subordinated payments
allowed at Borrower's Waterfall Level 9, (6) the special distributions to be
made on the Term Period Commencement Date pursuant to Borrower's Waterfall Level
11, (7) the distributions described in Section 3.1.4 of each of the FEC
Depositary Agreement and the MEC Depositary Agreement (relating to Undertaking
Support LCs which have been drawn due to expiration or issuer credit quality),
(8) the distribution described in Section 3.1.5 of the FEC Depositary Agreement
(relating to certain Project Revenues retained due to a Dow Test Deferral, (9)
the distribution described in Section 3.1.6 of the FEC Depositary Agreement
(relating to the delayed true-up resulting from a Dow Test Deferral), (10)
payment by NSP (or its escrow agent) to MEC (or at its direction) of any
escrowed amounts release by NSP (or its escrow agent) which amounts constituted
High Grade Collateral prior to the Closing Date, (11) the payment of any funds
to CCMCI by Borrower as required pursuant to Section 2.6 of the Completion
Undertaking Agreements, or (12) the transfer or sale of either Siemens Turbine
(or any Collateral substituted therefor as contemplated by Section 6.5(b) of the
Borrower Security Agreement) and the cancellation of the related Subordinated
Note, in each case at any time after such Siemens Turbine (or substitute
79
collateral, as the case may be) is released from the Collateral pursuant to
Section 11.23 and/or Section 6.5(b) of the Borrower Security Agreement.
6.7 INVESTMENTS.
No Borrower Party shall make any investments (whether by purchase of
stocks, bonds, notes or other securities, loan, extension of credit, advance or
otherwise) other than Permitted Investments. FEC-GP and FEC-LP shall not make
any investments, other than their ownership interests in FEC.
6.8 TRANSACTIONS WITH AFFILIATES; SUBORDINATION AGREEMENTS.
No Borrower Party shall directly or indirectly enter into any
transaction or series of transactions relating to the Projects with or for the
benefit of an Affiliate without the prior written approval of Administrative
Agent, except for (a) the Project Documents in effect on the Closing Date, and
the transactions permitted thereby, (b) except insofar as a counterparty to such
Project Document has entered into a Subordination Agreement, transactions that
contain terms no less favorable to each Borrower Party than would be included in
an arm's-length transaction entered into by a prudent Person with a
non-Affiliated third party, (c) any employment, noncompetition or
confidentiality agreement entered into by each Borrower Party with any of its
employees, officers or directors in the ordinary course of business, and (d) as
otherwise expressly permitted or contemplated by this Agreement and the other
Credit Documents. Except for the COSCI Subordination Agreement, which has
already been approved, no Borrower Party shall enter into any Subordination
Agreement with any Affiliate or any other Person without approval by the
Majority Lenders.
6.9 REGULATIONS.
No Borrower Party shall directly or indirectly apply any part of the
proceeds of any Loan, any cash equity contributions received by Borrower or
other funds or revenues to the "buying", "carrying" or "purchasing" of any
margin stock within the meaning of Regulations T, U or X of the Federal Reserve
Board, or any regulations, interpretations or rulings thereunder.
6.10 PARTNERSHIPS, ETC.
No Borrower Party shall become a general or limited partner in any
partnership or a joint venturer in any joint venture or create and hold stock in
any subsidiary, except as described in Section 4.1.
6.11 DISSOLUTION; MERGER.
No Borrower Party shall liquidate or dissolve, or combine, merge or
consolidate with or into any other entity, or change its legal form, or purchase
or otherwise acquire all or substantially all of the assets of any Person.
80
6.12 AMENDMENTS; CHANGE ORDERS; COMPLETION.
6.12.1 No Project Company shall directly or indirectly amend,
modify, supplement or waive, accept, or permit or consent to the termination,
amendment, modification, supplement or waiver (including any waiver (or refund)
of damages (liquidated or otherwise) payable by any contractor under any Major
Project Document) of, any of the material provisions of, or give any material
consent under any of the Major Project Documents which could reasonably be
expected to have a Material Adverse Effect (each such termination, amendment,
modification, supplement, waiver or consent, inclusive of any applicable change
orders, being referred to herein as a "Project Document Modification"), except
(a) as otherwise permitted by this Section 6.12, or (b) as may otherwise be
approved by the Majority Lenders; provided, that the extension of the term of a
Major Project Document on substantially the same terms and conditions then in
effect shall not require the consent or approval of Administrative Agent or the
Majority Lenders; and provided, further, that the Lenders shall be deemed to
have approved the First Amendment to Purchased Power Agreement between NSP and
MEC, in the form delivered to the Lenders on the Closing Date.
6.12.2 Without the prior written consent of Administrative Agent
(which consent shall not be unreasonably withheld or delayed), in consultation
with the Independent Engineer and acting at the direction of the Majority
Lenders, no Project Company shall direct or consent to any Project Document
Modification (including, without limitation, modifications to the FEC Technical
Requirements or the Dow/DEC Technical Requirements) unless:
(a) except for any Project Document Modification made by FEC as a
result of a Dow Change pursuant to Section 2.3.2 of the Capacity Sales
Agreement, such Project Document Modification is not, individually in an amount
greater than $250,000 or, together with all previous Project Document
Modifications issued after the Closing Date, will not increase or decrease the
Project Costs by more than $1,000,000 in the aggregate, respectively (exclusive
of increases reimbursed by insurance awards, condemnation awards or contractual
damage awards);
(b) the applicable Project Company has certified in writing to
Administrative Agent and the Lenders, as confirmed and countersigned by the
Independent Engineer, that such Project Document Modification (i) is technically
feasible in light of the Plans and Specifications and the overall design of the
applicable Project, and (ii) will not materially delay Completion of the
applicable Project, or in any event is not reasonably likely to delay Completion
of the applicable Project beyond the Construction Loan Maturity Date;
(c) such Project Document Modification will not alter any guaranty,
liquidated damages provision or the standards for any of the Performance Tests;
(d) such Project Document Modification is not reasonably likely to
result in any adverse modification or impair the enforceability of any warranty
under any Construction Contract, the O&M Agreements or any other Major Project
Document;
81
(e) such Project Document Modification is not reasonably likely to
materially impair or reduce the maximum capacity, efficiency, output,
performance, reliability, durability or availability of the applicable Project,
or materially increase O&M Costs or heat rate associated with the applicable
Project, or materially decrease Project Revenues;
(f) such Project Document Modification is permitted by the
applicable Project Document and could not reasonably be expected to (i)
materially diminish any obligation of any Major Project Participant, or (ii)
materially increase any obligation of any Borrower Party under any Major Project
Document;
(g) such Project Document Modification is not reasonably likely to
present a significant risk of the revocation or material modification of any
Applicable Permit or jeopardize the MEC's status as an Exempt Wholesale
Generator or the Freeport Project's status as a Qualifying Facility;
(h) such Project Document Modification will not eliminate, modify or
impair any consent, verification or approval rights afforded to Administrative
Agent, the Lenders or the Independent Engineer under any Major Project Document;
(i) such Project Document Modification could not reasonably be
expected to cause either Project not to comply with Legal Requirements;
(j) except for any Project Document Modification made by FEC as a
result of a Dow Change pursuant to Section 2.3.2 of the Capacity Sales
Agreement, such Project Document Modification is not an amendment, modification,
supplement, termination, waiver or consent thereto of the Power Purchase
Agreement or any Dow Agreement; and
(k) such Project Document Modification will not obligate either
Project Company to arrange or procure fuel supply or fuel transportation
services or electrical transmission services.
6.12.3 Neither Project Company shall (a) declare, with respect to
its Project or material portion thereof, Final Completion (as such term is
defined in the Construction Contracts), (b) approve the successful completion of
any Performance Test, (c) approve, modify or amend the testing protocols under
the Construction Contracts, or (d) agree to accept any facilities being
constructed under any other Major Project Document as "commercially
operational", "mechanically complete", "substantially complete" or "complete"
(however defined therein), in each case without the approval of Administrative
Agent acting in consultation with the Independent Engineer, or use the proceeds
of any Loan to make any payment under any Construction Contract all or any
portion of which payment the Independent Engineer has given the applicable
Project Company written notice (prior to the due date thereof) that it disputes
is then due, without the written approval of Administrative Agent acting in
consultation with the Independent Engineer, which approval, if given, shall not
be unreasonably delayed or withheld, taking into account applicable time
limitations imposed by the terms of the applicable Project Document.
82
6.12.4 Neither Project Company shall agree on any Remedial Plan or
Punchlist with respect to any Project work without the written approval of
Administrative Agent acting in consultation with the Independent Engineer, which
approval, if given, shall not be unreasonably delayed or withheld, taking into
account applicable time limitations imposed by the terms of any Construction
Contract.
6.12.5 Neither Project Company shall consent, without Administrative
Agent's prior written approval, to (a) any action taken by Construction
Contractor to modify the equipment or services provided by Construction
Contractor to conform to the intellectual property rights of others if such
action could reasonably be expected to materially and adversely affect either
Project Company's continued use of its Project or (b) the settlement by
Construction Contractor of any claim or proceeding which could reasonably be
expected to materially adversely affect either Project Company's rights.
6.12.6 Neither Project Company shall direct any party to a
Construction Contract to suspend any construction activities being performed
under any such Construction Contract without Administrative Agent's prior
written consent, except to avoid immediate danger to Persons or property.
6.12.7 Neither Project Company shall except as expressly
contemplated by the Project Documents, construct, install, or permit the
construction or installation of, shared or joint facilities between its Project
and any plants, facilities, generating stations or other improvements which are
not located on its Project Site or the Easements (including any such plants,
facilities, generating stations or other improvements owned by NSP or Dow).
6.12.8 Neither Project Company shall accept any letter of credit,
bond or other form of credit support in lieu of retainage under any Project
Document not in form and substance reasonably satisfactory to Administrative
Agent.
6.12.9 Without the prior written consent of Administrative Agent,
neither Project Company shall submit any notice or certificate to NSP or Dow
declaring or acknowledging, in the case of the Mankato Project, the occurrence
of the Facility Acceptance Date, or in the case of the Freeport Project, the
date on which the Commercial Operation of each FEC Work Phase occurs or the
Project Commercial Operation Date.
6.12.10 Without the prior written consent of Administrative Agent,
neither Project Company shall approve the replacement of a major maintenance
provider or operator.
6.12.11 Without the prior written consent of Administrative Agent
(in consultation with the Independent Engineer), FEC shall not propose a
reduction to the "Fixed Prices" schedule, as contemplated by Section 3.3 of the
Major Maintenance Service Arrangement.
Administrative Agent shall use good faith efforts to respond to each
request pursuant to this Section 6.12 as soon as possible and in all events
within 30 days of its receipt of written notification thereof and shall not
unreasonably withhold its approval of such request. No
83
request pursuant to this Section 6.12 requiring approval by Administrative Agent
shall be deemed approved by Administrative Agent until expressly approved.
6.13 NAME AND LOCATION; FISCAL YEAR.
No Borrower Party shall change its name, its jurisdiction of
organization, the location of its principal place of business, its organization
identification number or its fiscal year without providing 30 days prior written
notice to Administrative Agent.
6.14 USE OF SITES.
Neither Project Company shall use, or permit to be used, its Project
Site for any purpose (a) which may constitute a public or private nuisance that
could reasonably be expected to have a Material Adverse Effect, or (b) other
than for the construction, operation and maintenance of its Project as
contemplated by the Operative Documents.
6.15 ASSIGNMENT.
No Borrower Party shall assign its rights hereunder, under the other
Credit Documents or under any Major Project Document to any Person, except as
set forth in this Agreement and the other Credit Documents.
6.16 ACCOUNTS.
No Borrower Party shall maintain, establish or use any account
(other than the Accounts) without the prior written consent of Administrative
Agent.
6.17 HAZARDOUS SUBSTANCES.
No Borrower Party shall release into the environment any Hazardous
Substances in violation of any Hazardous Substance Laws, Legal Requirements or
Applicable Permits, except for (a) temporary unplanned exceedances not allowed
under either Project's Permits, which temporary unplanned exceedances could not
reasonably be expected to have a Material Adverse Effect and which such
applicable Borrower Party is diligently and in good faith attempting to correct
(or, in the case of FEC, causing Dow to diligently attempt to correct), and (b)
unintentional violations with respect to which (i) the Release is not continuing
or reasonably likely to re-occur and is not reasonably susceptible to prevention
or cure, (ii) there are no unsatisfied reporting and/or remediation requirements
under applicable Hazardous Substance Laws, Legal Requirements or Applicable
Permits, (iii) no non-monetary penalties or sanctions have been imposed or are
reasonably likely to be imposed (except for the remediation of such violation)
under applicable Hazardous Substance Laws, Legal Requirements or Applicable
Permits, and (iv) the Release could not reasonably be expected to materially
impair the value of either Site or any other Collateral, and could not otherwise
reasonably be expected to have a Material Adverse Effect.
6.18 ADDITIONAL PROJECT DOCUMENTS.
84
Without the consent of the Majority Lenders (which consent shall not
be unreasonably withheld), no Borrower Party shall enter into, or become a party
to any Project Document not in existence on the Closing Date, except any Project
Document which (a) provides for the payment by Project Companies of, or the
provision to Project Companies of such goods and services with a value of,
$250,000 per annum individually or less, which may be entered into with the
prior written consent of Administrative Agent, (b) provides for the payment by
Project Companies of, or the provision to Project Companies of such goods and
services with a value of, less than $1,000,000 in the aggregate, which may be
entered into with the prior written consent of Administrative Agent, (c) provide
for payment of Emergency Operating Costs, provided that prior to entering into
or becoming a party to any such contract under this Section 6.18(c) that
provides for the payment by Project Companies of, or the provision to Borrower
Parties of such goods and services with a value of, more than $1,000,000 per
annum, such applicable Project Company shall have exercised reasonable efforts
to obtain the consent of Administrative Agent; provided, further, that such
applicable Borrower Party shall provide notice to Administrative Agent of
contracts entered into under this Section 6.18(c) as soon as practicable, and in
no event more than 15 Banking Days after such contract is entered into, or (d)
are contracts by Borrower, FEC-GP or FEC-LP of an individual value less than
$25,000 and in the aggregate no greater than $250,000, provided that such
contracts are consistent with the requirements under Section 5.24.
6.19 PROJECT BUDGET AMENDMENTS.
Without the prior consent of Administrative Agent, neither Project
Company shall amend, allocate, re-allocate or modify its Project Budget to
increase the aggregate amount payable thereunder, unless such amendment,
allocation, re-allocation or modification is (a) a necessary conforming change
related to an amendment to a Project Document permitted by Section 6.12, and (b)
concurrent and consistent with cash equity contributions made available to the
Project Companies which were not theretofore contemplated in the applicable
Project Budget (including liquidated damages being applied to obligations
hereunder and proceeds of insurance applied in accordance with the terms of this
Agreement and the Depositary Agreements); provided that the foregoing shall not
prevent the Project Companies from applying identified cost savings in a budget
category (after completing each of the items to which such category relates), as
confirmed by the Independent Engineer, to cost overruns in another budget
category (as confirmed by the Independent Engineer) without increasing the
aggregate amount payable under the applicable Project Budget; provided, however,
that neither Project Company shall apply identified cost savings in any budget
category to cost overruns in any budget category relating to management expenses
or development fees payable to any Person or any other fees and costs payable to
any Affiliate of Sponsor.
6.20 ASSIGNMENT BY THIRD PARTIES.
Without prior written consent of the Required Lenders or unless
provided in a Consent, neither Project Company shall consent to the assignment
of any obligations under any Major Project Document by any counterparty thereto.
6.21 ACQUISITION OF REAL PROPERTY.
85
No Borrower Party shall acquire or lease any real property or other
interest in real property (excluding the acquisition of any easements, the
acquisition (but not the exercise) of any options to acquire any such interests
in real property or any expansions of the FEC Site in connection with the
procurement of substitute services or in connection with Borrower and FEC's
obligations under Section 5.25) other than the Sites, Easements and other
interests in real property acquired on or prior to the Closing Date or as
contemplated by Section 5.27.
6.22 EMPLOYEE BENEFIT PLANS.
No Borrower Party shall maintain, contribute to, or become obligated
to contribute to any employee benefit plans subject to ERISA.
6.23 NO MERCHANT SALES.
Neither Project Company, as applicable, shall (a) sell or provide
electrical products from either Project to any Person other than (i) by MEC, to
NSP under the Power Purchase Agreement, and (ii) by FEC, to Dow under the
Capacity Sales Agreement or to CES with respect to the Reserved Capacity under
the Capacity Sales Agreement, or (b) exercise the Put Option (as such term is
defined in the Capacity Sales Agreement) pursuant to Section 15.1 of the
Capacity Sales Agreement, in each case without the prior written consent of the
Required Lenders.
6.24 FLOW OF FUNDS.
Neither Project Company nor Borrower shall agree to any amendment,
modification or termination of either Intercompany Note without the prior
written consent of the Majority Lenders; or apply, contribute or fund any
amounts received in connection with any Loan to Borrower unless such amounts are
loaned by Borrower to a Project Company and allocated between FEC and MEC in
accordance with and pursuant to the terms of the Project Budget, or as otherwise
permitted by Section 3.4.
6.25 TAX ELECTION.
No Borrower Party shall make an election to be classified for
federal income tax purposes as an association taxable as a corporation without
the prior written consent of the Administrative Agent, which consent shall not
be unreasonably withheld or delayed.
6.26 TAX SHARING AGREEMENTS.
No Borrower Party shall enter into any tax sharing agreements with
any other Calpine Entity other than to the extent taxes to be paid pursuant to
any such agreement are paid only using funds, if any, that may from time to time
be on deposit in the Distribution Suspense Account and are otherwise available
for the making of distributions in strict accordance with the requirements of
Section 6.6 and the Depositary Agreements.
86
ARTICLE 7
EVENTS OF DEFAULT; REMEDIES
7.1 EVENTS OF DEFAULT.
The occurrence of any of the following events by any of the Borrower
Parties shall constitute an event of default (each, an "Event of Default")
hereunder:
7.1.1 Failure to Make Payments. Borrower shall fail to pay, in
accordance with the terms of this Agreement (i) any principal on any Loan on the
date that such sum is due, (ii) any interest on any Loan within five days after
the date such sum is due, (iii) any scheduled fee, cost, charge or sum due
hereunder or under any other Credit Documents within five days of the date that
such sum is due, or (iv) any other fee, cost, charge or other sum due under this
Agreement or the other Credit Documents within 10 days after written notice that
such sum is due.
7.1.2 Bankruptcy; Insolvency. Any Borrower Party or any other Major
Project Participant (so long as such Major Project Participant shall have
outstanding or unperformed obligations under the Operative Document to which it
is a party) shall become subject to a Bankruptcy Event; provided that, solely
with respect to a Bankruptcy Event with respect to a Person other than any
Borrower Party, Sponsor (for so long as CCMCI's obligations under the
Construction Contracts remain outstanding), NSP or Dow, no Event of Default
shall occur as a result of such Bankruptcy Event if (a) such applicable Borrower
Party obtains a Replacement Obligor for the affected party within 90 days
thereafter and such Bankruptcy Event has not had and does not have, prior to so
obtaining such Replacement Obligor, a Material Adverse Effect or (b) the
applicable Major Project Participant is substantially performing its remaining
obligations with respect to the Project Documents to which it is a party and has
affirmed, within 90 days thereafter, the Operative Document(s) to which it is a
party.
7.1.3 Defaults Under Other Indebtedness.
(a) Any Borrower Party shall default for a period beyond any
applicable grace period (i) in the payment of any principal, interest or other
amount due under any agreement involving Debt and the outstanding amount or
amounts payable under any such agreement equals or exceeds $1,000,000 in the
aggregate, or (ii) in the performance of any obligation due under any agreement
involving Debt if pursuant to such default, the holder of the obligation
concerned has the right to accelerate the maturity of any indebtedness evidenced
thereby which equals or exceeds $1,000,000 in the aggregate.
(b) So long as neither of the Projects has achieved Completion, or
even if one of the Projects has achieved Completion, if the full original stated
amounts of the Undertaking Support LCs are not available for draw, Sponsor shall
default for a period beyond any applicable grace period (i) in the payment of
any principal, interest or other amount due under any agreement involving Debt
and the outstanding amount or amounts payable under any such agreement equals or
exceeds $10,000,000 in the aggregate, or (ii) in the performance of any
obligation due under any agreement involving Debt if pursuant to such default,
the holder of the
87
obligation concerned has the right to accelerate the maturity of any
indebtedness evidenced thereby which equals or exceeds $10,000,000 in the
aggregate.
(c) From and after such time as one of the Projects has achieved
Completion, if the full original stated amounts of the Undertaking Support LCs
are available for draw, and so long as CCMCI's obligations under the
Construction Contracts remain outstanding, Sponsor shall default under any
agreement involving Debt which equal or exceed $10,000,000 in the aggregate, and
the holder thereof shall have accelerated Sponsor's obligations in at least such
amount.
7.1.4 Judgments. A final judgment or judgments shall be entered
against (a) Sponsor, so long as CCMCI's obligations under the Construction
Contracts remain outstanding, in the amount of $25,000,000 or more individually
or in the aggregate or (b) any Borrower Party in the amount of $500,000 or more
individually or $1,000,000 or more in the aggregate (other than, in each case,
(i) a judgment which is fully covered by insurance or discharged within 60 days
after its entry, or (ii) a judgment, the execution of which is effectively
stayed within 60 days after its entry but only for 60 days after the date on
which such stay is terminated or expires).
7.1.5 ERISA. If any Calpine Entity or any ERISA Affiliate should
establish, maintain, contribute to or become obligated to contribute to any
ERISA Plan and (a) a Reportable Event (under Section 4043(b) or (c) of ERISA for
which notice to the PBGC is not waived) shall have occurred with respect to any
ERISA Plan and, within 30 days after the reporting of such Reportable Event to
Administrative Agent by any Borrower Party (or Administrative Agent otherwise
obtaining knowledge of such event) and the furnishing of such information as
Administrative Agent may reasonably request with respect thereto, Administrative
Agent shall have notified such applicable Borrower Party in writing that (i)
Administrative Agent or Majority Lenders has made a determination that, on the
basis of such Reportable Event, there are reasonable grounds for the termination
of such ERISA Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such ERISA Plan and (ii) as a
result thereof, an Event of Default exists hereunder, or (b) a trustee shall be
appointed by a United States District Court to administer any ERISA Plan, or (c)
the PBGC shall institute proceedings to terminate any ERISA Plan, (d) a complete
or partial withdrawal by any Borrower Party or any ERISA Affiliate from any
Multiemployer Plan shall have occurred and, within 30 days after the reporting
of any such occurrence to Administrative Agent by such applicable Borrower Party
(or Administrative Agent otherwise obtaining knowledge of such event) and the
furnishing of such information as Administrative Agent or Majority Lenders may
reasonably request with respect thereto, Administrative Agent shall have
notified such applicable Borrower Party in writing that Administrative Agent has
made a determination that, on the basis of such occurrence, an Event of Default
exists hereunder, or (e) any Calpine Entity or any ERISA Affiliate shall have
failed to fulfill its obligations under the minimum funding standards of ERISA
or the Code with respect to any ERISA Plan; provided that any of the events
described in this Section 7.1.5 shall result in aggregate liability to all
Calpine Entities and all ERISA Affiliates in excess of $5,000,000.
88
7.1.6 Breach of Terms of Agreement.
(a) Defaults Without Cure Periods. (i) Any Borrower Party shall fail
to perform or observe any of the covenants set forth in Sections 5.1, 5.3,
5.9(a), 5.12, 5.18, or 5.20 or Article 6 (other than Sections 6.2, 6.7, 6.8,
6.14, 6.16 or 6.19), or (ii) Construction Contractor shall fail to provide
either Undertaking Support LC under the applicable Completion Undertaking
Agreement.
(b) Defaults With 30 Day Cure Periods. Any Borrower Party shall fail
to perform or observe any of the covenants set forth in Sections 5.13(b), 5.15.1
(as to the last sentence thereof), 5.23, 5.24 or 6.16, and in each case such
failure shall continue unremedied for a period of 30 days after such Borrower
Party becomes aware thereof or receives written notice thereof from
Administrative Agent.
(c) Other Defaults. Any Borrower Party, Sponsor or any other Calpine
Entity shall fail to perform or observe any of the covenants set forth hereunder
or any other Credit Document not otherwise specifically provided for in Section
7.1.6(a), Section 7.1.6(b) or elsewhere in this Article 7, and such failure
shall continue unremedied for a period of 30 days after such Borrower Party
becomes aware thereof or receives written notice thereof from Administrative
Agent; provided, however, that, if (i) such failure cannot be cured within such
30 day period, (ii) such failure is susceptible of cure within 90 days, (iii)
such Borrower Party, Sponsor or such other Calpine Entity, as applicable, is
proceeding with diligence and in good faith to cure such failure, (iv) the
existence of such failure has not had and could not, after considering the
nature of the cure, be reasonably expected to have a Material Adverse Effect,
and (v) Administrative Agent shall have received an officer's certificate signed
by a Responsible Officer to the effect of clauses (i), (ii), (iii) and (iv)
above and stating what action such Borrower Party, Sponsor or such other Calpine
Entity, as applicable, is taking to cure such failure, then such 30 day cure
period shall be extended to such date, not to exceed a total of 90 days, as
shall be necessary for such Borrower Party, Sponsor or such other Calpine
Entity, as applicable, diligently to cure such failure.
7.1.7 Loss of Collateral. Subject to Section 11.23, any substantial
portion of the Collateral is damaged, seized or appropriated without appropriate
insurance proceeds (subject to the underlying deductible) or without fair value
being paid therefor so as to allow replacement of such Collateral and/or
prepayment of Loans and to allow each Borrower Party to continue satisfying its
obligations hereunder and under the other Operative Documents.
7.1.8 Regulatory Status.
(a) If loss of Exempt Wholesale Generator status for MEC or loss of
Eligible Facility status for the Mankato Project could reasonably be expected to
have a Material Adverse Effect, (i) MEC shall have tendered notice to FERC that
it has ceased to be an Exempt Wholesale Generator or that the Mankato Project
has ceased to be an Eligible Facility, or (ii) FERC shall have issued an order
determining that MEC no longer meets the criteria of an
89
Exempt Wholesale Generator or takes other action revoking such Exempt Wholesale
Generator status.
(b) If loss of Qualifying Facility status for the Freeport Project
could reasonably be expected to have a Material Adverse Effect, (i) FEC shall
have tendered notice to FERC that the Freeport Project has ceased to be a
Qualifying Facility, (ii) FERC shall have issued an order determining that the
Freeport Project no longer meets the criteria of a Qualifying Facility or takes
other action revoking the Freeport Project's Qualifying Facility status, or
(iii) the Freeport Project ceases to satisfy the criteria for Qualifying
Facility status.
(c) If loss of MEC's authorization to make sales of electric energy,
capacity and ancillary services and/or waivers of regulations and blanket
authorizations customarily granted by FERC to entities with market-based rate
authority could reasonably be expected to have a Material Adverse Effect, (i)
MEC shall have tendered notice to FERC that MEC has ceased to satisfy any
conditions imposed by FERC necessary to maintain such market-based rate
authorization and/or waivers and/or blanket authorizations, or (ii) FERC has
issued an order determining that MEC is no longer entitled to make sales of
electric energy, capacity and ancillary services at market-based rates and/or is
no longer entitled to waivers of regulations and blanket authorizations
customarily granted by FERC to entities with market-based rate authority.
(d) FEC shall become subject to regulation as a "public utility"
under the FPA.
(e) Any Borrower Parties shall suffer an Adverse PUHCA Event or,
except to the extent provided in the first sentence of Section 4.17, shall
otherwise become subject to, or not exempt from financial, organizational or
rate regulation as an "electric utility company", "public utility company" or
"public utility holding company" under PUHCA or as a public utility under the
laws of the State of Minnesota in the case of MEC or Texas in the case of FEC as
presently constituted and as construed by the courts of Minnesota and Texas,
respectively.
7.1.9 Abandonment.
(a) At any time prior to Term-Conversion, either Project Company
shall announce that it is abandoning its Project or the Projects shall be
abandoned or work thereon shall cease for a period of more than 30 consecutive
days for any reason (which period (i) shall be measured from the first
occurrence of a work stoppage and continuing until work of a substantial nature
is resumed and thereafter diligently continued, and (ii) shall not include
delays caused by any event of force majeure, a Dow Delay Event, or default by a
Major Project Participant (other than either Project Company or Affiliated Major
Project Participant) under any Major Project Document pursuant to which material
construction activities are being performed).
(b) At any time following Term-Conversion, either Project Company
shall announce that (i) it is abandoning its Project, or (ii) the Projects shall
be abandoned or operation thereof shall be suspended for a period of more than
30 consecutive days for any reason (other than force majeure or a Dow Delay
Event (in the case of the Freeport Project)); provided that
90
none of (A) scheduled maintenance of the Projects, (B) repairs to the Projects,
whether or not scheduled, or (C) a forced outage or scheduled outage of the
Projects, shall constitute abandonment or suspension of the Projects, so long as
such Project Company is diligently attempting to end such suspension; and
provided further, that none of the foregoing circumstances in this Section
7.1.9(b) shall cause an Event of Default with respect to the Freeport Project so
long as Capacity Payments (as defined in the Capacity Sales Agreement) continue
to be paid under the Capacity Sales Agreement.
7.1.10 Security. Any of the Collateral Documents, shall, except as
the result of the acts or omissions of Administrative Agent, Depositary Agent,
Collateral Agent or the Secured Parties, fail to provide to Collateral Agent,
for the benefit of the Secured Parties, the Liens, first priority security
interest (subject to Permitted Liens in clauses (a) and (e) of the definition
thereof and, to the extent required by Governmental Rule, clauses (b), (c) and
(g) of the definition thereof), rights, titles, interest, remedies permitted by
law, powers or privileges intended to be created thereby or, except in
accordance with its terms, cease to be in full force and effect, or the first
priority or validity thereof or the applicability thereof to the Loans, the
Notes (if any) or any other obligations purported to be secured or guaranteed
thereby or any part thereof shall be disaffirmed by or on behalf of any Borrower
Party.
7.1.11 Change of Control. Subject to Section 11.23, Sponsor shall
cease to directly or indirectly own and control (a) at any time prior to
Term-Conversion, 100% of (i) the economic interests in any Borrower Party, and
(ii) the voting interests (whether by committee, contract or otherwise) in any
Borrower Party, and (b) at any time on or after Term-Conversion, more than 50%
of (A) the economic interests in any Borrower Party, and (B) the voting
interests (whether by committee, contract or otherwise) in any Borrower Party;
provided that Sponsor may only dispose of any portion of such economic or voting
interests in any Borrower Party on and after Term-Conversion if:
(a) the applicable transferee is a corporation, limited liability
company or limited partnership organized or formed in the United States or a
state or commonwealth therein;
(b) at the time of the proposed disposition, the applicable
transferee's unsecured senior long-term debt has a rating of at least Baa3 by
Moody's and BBB- by S&P;
(c) the electric energy generation business is a substantial part of
the applicable transferee's business;
(d) on or before the date of any such disposition, the applicable
transferee enters into a pledge agreement in substantially the form of Exhibit
D-10, pursuant to which such transferee shall pledge all of its ownership
interests in such Borrower Party to Collateral Agent, for the benefit of the
Secured Parties, and executes and delivers all other applicable Credit Documents
as requested by Administrative Agent, Collateral Agent or the Majority Lenders;
(e) on or before the date of any such disposition, the applicable
transferee delivers to Administrative Agent such opinions, resolutions,
certificates and other evidence as
91
Administrative Agent may reasonably request (all of which shall be in form and
substance reasonably satisfactory to Administrative Agent) to insure
Administrative Agent's reasonable satisfaction as of the date of any such
disposition with the matters covered by Sections 3.1.1 through 3.1.6(a), 3.1.8
and 3.1.18 (with respect solely to the applicable transferee and, if reasonably
requested by Administrative Agent, the applicable Borrower Party); and
(f) after giving effect to any such disposition, Sponsor retains
economic and voting control of such Borrower Party.
7.1.12 Loss of or Failure to Obtain Applicable Permits.
(a) Either Project Company or Dow shall fail to obtain any Permit on
or before the date that such Permit becomes an Applicable Permit with respect to
its Project, and such failure could reasonably be expected to have a Material
Adverse Effect.
(b) Any Applicable Permit necessary for operation of the Projects
and for each Project Company's performance of its obligations under the Project
Documents shall be materially modified (other than modifications contemplated in
a Project Document requested by a Project Company and approved in writing in
advance of such modification by Administrative Agent acting at the direction of
the Required Lenders, which approval shall not be unreasonably withheld),
revoked, canceled or not renewed by the issuing agency or other Governmental
Authority having jurisdiction (or otherwise ceases to be in full force and
effect) and within 30 days thereafter such Project Company is not able to
demonstrate to the reasonable satisfaction of the Required Lenders that such
modification of, revocation of, cancellation of, failure to renew, or failure to
maintain in full force and effect such Permit could not reasonably be expected
to have a Material Adverse Effect.
7.1.13 Unenforceability of Credit Documents. At any time after the
execution and delivery thereof, any material provision of any Credit Document
shall cease to be in full force and effect (other than by reason of the
satisfaction in full of the Borrower Parties' Obligations or any other
termination of a Credit Document in accordance with the terms hereof or thereof)
or any Credit Document shall be declared null and void by a Governmental
Authority of competent jurisdiction.
7.1.14 Misstatements; Omissions. Any representation or warranty made
or deemed made by any Borrower Party in any Credit Document to which such Person
is a party or in any separate statement, certificate or document delivered to
the Lead Arrangers, Administrative Agent, Depositary Agent, Collateral Agent, or
any Lender hereunder or under any other Credit Document to which such Person is
a party, shall be untrue or misleading in any material respect as of the time
made; provided that, in respect of unintentional misrepresentations which are
capable of being remedied and are made or deemed made after the Closing Date,
and the untruth of which could not reasonably be expected to have a Material
Adverse Effect, any such unintentional misrepresentation shall not be deemed to
be an Event of Default if such misrepresentation is corrected within 90 days of
the occurrence thereof.
92
7.1.15 Project Document Defaults.
(a) Project Companies. Either Project Company shall be in breach of,
or in default of, any material obligation under a Major Project Document and
such breach or default shall reasonably be expected to have a Material Adverse
Effect and shall not be remediable or, if remediable, shall continue unremedied
for the lesser of (i) a period of 30 days, or (ii) such period of time (without
giving effect to any extension given to Collateral Agent under any applicable
Consent with respect thereto) under such Major Project Document which such
Project Company has available to it in which to remedy such breach or default;
provided that if (A) extending such cure period does not exacerbate such
Material Adverse Effect, (B) such breach cannot be cured within such 30 day
period (or such lesser period of time, as the case may be), (C) such breach is
susceptible of cure within 90 days after such breach or default, (D) such
Project Company is proceeding with diligence and in good faith to cure such
breach, (E) the existence of such breach or default has not had and could not
after considering the nature of the cure, be reasonably expected to give rise to
termination by the counterparty to the Major Project Document which is subject
to breach or to otherwise have exacerbated the Material Adverse Effect, and (F)
Administrative Agent shall have received an officer's certificate signed by a
Responsible Officer to the effect of clauses (A)-(E) above and stating what
action such Project Company is taking to cure such breach, then such 30 day cure
period (or such lesser period of time, as the case may be) shall be extended to
such date, not to exceed a total of 90 days, as shall be necessary for such
Project Company diligently to cure such breach.
(b) Third Party. Any Person other than either Project Company shall
be in breach of, or in default under, a Major Project Document and such breach
or default shall reasonably be expected to have a Material Adverse Effect and
(i) shall not be remediable or (ii) if remediable, shall continue unremedied for
a period of 30 days from the time a Project Company obtains knowledge of such
breach or default; provided that if (A) such breach cannot be cured within such
30 day period, (B) such breach or default is susceptible of cure within 90 days,
(C) the breaching Person or the applicable Project Company is proceeding with
diligence and in good faith to cure such breach, and (D) extending the cure
period would not exacerbate the Material Adverse Effect, then such 30 day cure
period shall be extended to such date, not to exceed a total of 90 days, as
shall be necessary for such breaching Person diligently to cure such breach;
provided, further, that no Event of Default shall occur as a result of any such
action if such Project Company obtains a Replacement Obligor for the affected
party within the 90 day cure period referred to in this paragraph (or within the
30 day cure period, if no extension is given); provided, further, that no
Inchoate Default or Event of Default shall occur as a result of an "Event of
Default" under Section 16.2.2(a) of the MEC Construction Contract (relating to
"inadequate progress") unless the MEC Construction Contract is terminated as a
result thereof; and provided, further, in the case of any default or event of
default under any Major Project Document which is the basis for the making of a
drawing under either Contractor Undertaking LC pursuant to Section 2.2(c)(i)(C)
or 2.2(c)(ii) of either Completion Undertaking Agreement (or application of
proceeds of any Contractor Undertaking LC under similar circumstances as
provided in Section 2.3 of either Completion Undertaking Agreement), such
default or event of default under such Major Project Document shall be
93
deemed cured and any related Inchoate Default or Event of Default hereunder
shall no longer exist following such drawing or application of funds.
(c) Third Party Consents. (i) Any Person other than any Borrower
Party shall disaffirm or repudiate in writing its material obligations under any
Consent, (ii) any representation or warranty made in any Consent by Dow, NSP,
CCMCI, Operator or Sponsor (for so long as CCMCI's obligations under the
Construction Contracts remain outstanding) shall be untrue or misleading in any
material respect as of the time made and such untrue or misleading
representation or warranty could reasonably be expected to materially adversely
affect the rights of the Collateral Agent or the Secured Parties thereunder or
to otherwise result in a Material Adverse Change, or (iii) Dow, NSP, CES, CCMCI,
Operator or Sponsor (for so long as CCMCI's obligations under the Construction
Contracts remain outstanding) shall breach any material covenant in a Consent
and such breach or default shall not be remediable or, if remediable, shall
continue unremedied for a period of 30 days from the time of such breach or
default; provided that if (A) such breach cannot be cured within such 30 day
period, (B) such breach is susceptible of cure within 90 days, (C) the breaching
party is proceeding with diligence and in good faith to cure such breach, and
(D) the existence of such breach has not had and could not after considering the
nature of the cure, be reasonably expected to have a Material Adverse Effect,
then such 30 day cure period shall be extended to such date, not to exceed a
total of 90 days, as shall be necessary for such third party diligently to cure
such breach; provided, further, that no Event of Default shall occur as a result
of any such action if (1) the applicable Project Company obtains a Replacement
Obligor for the affected party with respect to the contract or contracts to
which such Consent relates, and (2) such Replacement Obligor executes a Consent
reasonably satisfactory to Administrative Agent, each within the 90 day cure
period referred to in this paragraph (or within the 30 day cure period, if no
extension is given) and such action does not have prior to so obtaining such
Replacement Obligor a Material Adverse Effect.
(d) Termination. Any material provision in any Major Project
Document shall for any reason cease to be valid and binding on any party thereto
(other than any Borrower Party) except upon fulfillment of such party's
obligations thereunder, or shall be declared null and void; provided that no
Event of Default shall occur as a result of such breach or default if (i) such
provision is restored or replaced by a replacement provision in form and
substance reasonably acceptable to Administrative Agent within a period of 90
days thereafter, or (ii) such applicable Borrower Party obtains a Replacement
Obligor for the affected party within 90 days thereafter and, in either case,
such breach or default has not had and does not have prior to so obtaining such
replacement provision or Replacement Obligor, a Material Adverse Effect.
7.1.16 Power Purchase Agreement and Capacity Sales Agreement. (a)
NSP shall have exercised its "step-in" rights pursuant to Section 12.7 of the
Power Purchase Agreement, (b) Sponsor shall reject or disavow its obligations
under the guaranty portion of the Security Fund, and (c) (i) any valid draw or
claim on the guaranty portion of the Security Fund by NSP pursuant to Section
12.7 of the Power Purchase Agreement shall fail to be timely honored in full,
and (ii) in the event that the Security Fund LC is increased as required under
Section 11.1(E) of the Power Purchase Agreement and contemplated by Section
2.2.4, Borrower
94
has not provided cash collateral in the amount of any such increase. For
purposes of the previous sentence, "cash collateral" includes amounts in the
Borrower Revenue Account prior to Term-Conversion.
7.1.17 MEC Facility Acceptance. The Facility Acceptance Date is not
achieved by three months after the Facility Acceptance Milestone, as such date
may have been extended for force majeure or other reason under the Power
Purchase Agreement.
7.1.18 FEC Commercial Operation. Commercial Operation is not
achieved or deemed achieved by three months after the date of the FEC Milestone
for achieving Commercial Operation of the FEC Phase 3 Work for the Freeport
Project, as such date may have been extended for force majeure or other reason
under the Capacity Sales Agreement.
7.1.19 Guaranties. The Borrower Party party thereto shall fail to
perform any of its material obligations under Section 2 of each of the MEC
Guaranties, the FEC Guaranty, the FEC-GP Guaranty or the FEC-LP Guaranty.
7.1.20 Shortfall of Proceeds of Purchase Option or Put Option. As
further described in Section 3.6 of the Borrower Depositary Agreement, the
proceeds of the Purchase Option or Put Option, when applied (together with any
other amounts made available to prepay the FEC Allocated Portion, any amounts
then on deposit in the Accounts established under the FEC Depositary Agreement
and an amount equal to the FEC Allocated Portion Percentage of any amounts then
on deposit in the Debt Service Reserve Account) to prepay Term Loans, are
insufficient to reduce the outstanding principal of Term Loans by the amount of
the FEC Allocated Portion.
7.2 REMEDIES.
Upon the occurrence and during the continuation of an Event of
Default, Administrative Agent, Collateral Agent, and the Lenders may, at the
election of the Majority Lenders, without further notice of default, presentment
or demand for payment, protest or notice of non-payment or dishonor, or other
notices or demands of any kind, all such notices and demands (other than notices
expressly required by the Credit Documents) being waived, exercise any or all of
the following rights and remedies, in any combination or order that the Majority
Lenders may elect, in addition to such other rights or remedies as the Secured
Parties may have hereunder, under the Collateral Documents or at law or in
equity:
7.2.1 No Further Loans or Letter of Credit. Cancel all Commitments,
refuse, and Administrative Agent, LC Issuer and the Lenders shall not be
obligated, to continue any Loans, make any additional Loans (other than Security
Fund LC Loans), issue, renew, or extend the Security Fund LC, or make any
payments, or permit the making of payments, from any Account or any Loan
proceeds or other funds held by Administrative Agent or Collateral Agent under
the Credit Documents or on behalf of Borrower; provided that in the case of an
Event of Default occurring under Section 7.1.2 with respect to Borrower, all
such Commitments shall be cancelled and terminated without further act of
Administrative Agent, Collateral Agent, or any Secured Party.
95
7.2.2 Cure by Agents. Without any obligation to do so, make
disbursements or Loans to or on behalf of Borrower or disburse amounts from the
Construction Account to cure (a) any Event of Default or Inchoate Default
hereunder, and (b) any default and render any performance under any Project
Document as the Majority Lenders in their sole discretion may consider necessary
or appropriate, whether to preserve and protect the Collateral or the Secured
Parties' interests therein or for any other reason. All sums so expended,
together with interest on such total amount at the Default Rate (but in no event
shall the rate exceed the maximum lawful rate), shall be repaid by Borrower to
Administrative Agent or Collateral Agent, as the case may be, on demand and
shall be secured by the Credit Documents, notwithstanding that such expenditures
may, together with amounts advanced under this Agreement, exceed the aggregate
amount of the Total Construction Loan Commitment.
7.2.3 Acceleration. Declare and make all or a portion of the sums of
accrued and outstanding principal and accrued but unpaid interest remaining
under this Agreement, together with all unpaid fees, costs (including
Liquidation Costs and Hedge Breaking Fees) and charges due hereunder or under
any other Credit Document, immediately due and payable and require Borrower
immediately, without presentment, demand, protest or other notice of any kind,
all of which Borrower hereby expressly waives, to pay Administrative Agent or
the Secured Parties an amount in immediately available funds equal to the
aggregate amount of any outstanding Obligations of Borrower; provided that, in
the event of an Event of Default occurring under Section 7.1.2 with respect to
Borrower, all such amounts shall become immediately due and payable without
further act of Administrative Agent, LC Issuer, Collateral Agent, or the Secured
Parties.
7.2.4 Cash Collateral; Letters of Credit. Apply or execute upon any
amounts on deposit in any Account, other than the Construction Sub-Account under
the MEC Depositary Agreement or the Third Step Construction Sub-Account under
the FEC Depositary Agreement, or any proceeds or any other moneys of Borrower on
deposit with Administrative Agent, Collateral Agent, Depositary Agent or any
Secured Party in the manner provided in the UCC and other relevant statutes and
decisions and interpretations thereunder with respect to cash collateral; or
draw upon any Collateral Replacement LC held by Collateral Agent as security.
Without limiting the foregoing, each of Administrative Agent, Collateral Agent
and Depositary Agent shall have all rights and powers with respect to the Loan
proceeds, draws upon any Collateral Replacement LC, the Accounts and the
contents of the Accounts as it has with respect to any other Collateral and may
apply, or cause the application of, such amounts to the payment of interest,
principal, fees, costs, charges or other amounts due or payable to
Administrative Agent, Collateral Agent, Depositary Agent or the Secured Parties
with respect to the Loans in such order as the Majority Lenders may elect in
their sole discretion. Borrower shall not have any rights or powers with respect
to such amounts.
7.2.5 Possession of Projects. Enter into possession of either or
both Projects and perform any and all work and labor necessary to complete the
Projects substantially according to the Plans and Specifications or to operate
and maintain the Projects, and all sums expended by Administrative Agent,
Collateral Agent or Depositary Agent in so doing, together with interest on such
total amount at the Default Rate, shall be repaid by Borrower to Administrative
Agent,
96
Collateral Agent or Depositary Agent, as the case may be, upon demand and shall
be secured by the Credit Documents, notwithstanding that such expenditures may,
together with amounts advanced under this Agreement, exceed the aggregate amount
of the Total Construction Loan Commitment.
7.2.6 Remedies Under Credit Documents. Exercise, and direct
Administrative Agent, Depositary Agent, or Collateral Agent (as the case may be)
to exercise, any and all rights and remedies available to it under any of the
Credit Documents, including judicial or non-judicial foreclosure or public or
private sale of any of the Collateral pursuant to the Collateral Documents.
Furthermore, if Administrative Agent requests that certain actions be taken and
a Project Company fails to take the requested actions within five Banking Days,
Administrative Agent or Collateral Agent (as applicable) may enforce in its own
name or in such Project Company's name, such rights of the Project Company, all
as more particularly provided in the Security Agreement and the other Credit
Documents.
ARTICLE 8
SCOPE OF LIABILITY
Except as set forth in this Article 8, notwithstanding anything in
this Agreement or the other Credit Documents to the contrary, the Lenders, the
Hedge Banks and the LC Issuer shall have no claims with respect to the
transactions contemplated by the Operative Documents against Sponsor or any of
its Affiliates (other than Borrower Parties), shareholders, officers, directors
or employees (collectively, the "Nonrecourse Persons") and the Lenders', the
Hedge Banks' and the LC Issuer's recourse against Borrower Parties and the
Nonrecourse Persons shall be limited to the Collateral, the Projects, all
Project Revenues, all Loan proceeds, Insurance Proceeds, Eminent Domain
Proceeds, and all income or revenues of the foregoing as and to the extent
provided herein and in the Collateral Documents; provided that the foregoing
provision of this Article 8 shall not (a) constitute a waiver, release or
discharge of any of the indebtedness, or of any of the terms, covenants,
conditions, or provisions of this Agreement or any other Credit Document and the
same shall continue (but without personal liability to the Nonrecourse Persons)
until fully paid, discharged, observed, or performed, (b) limit or restrict the
right of Administrative Agent, Collateral Agent or any Secured Party (or any
assignee, beneficiary or successor to any of them) to name any Borrower Party or
any other Person as a defendant in any action or suit for a judicial foreclosure
or for the exercise of any other remedy under or with respect to this Agreement
or any other Collateral Document or Credit Document, or for injunction or
specific performance, so long as no judgment in the nature of a deficiency
judgment shall be enforced against any Nonrecourse Person, except as set forth
in this Article 8, (c) in any way limit or restrict any right or remedy of
Administrative Agent, Collateral Agent or any Secured Party (or any assignee or
beneficiary thereof or successor thereto) with respect to, and each of the
Nonrecourse Persons shall remain fully liable to the extent that it would
otherwise be liable for its own actions with respect to, any fraud, willful
misrepresentation (which shall not include innocent or negligent
misrepresentation), or misappropriation of Project Revenues, Loan proceeds,
Insurance Proceeds, Eminent Domain Proceeds or any other earnings, revenues,
rents, issues, profits or proceeds from or of the Collateral, that should or
would have been paid as provided herein or paid or delivered to Administrative
Agent, Collateral Agent or
97
any Secured Party (or any assignee or beneficiary thereof or successor thereto)
towards any payment required under this Agreement or any other Credit Document,
(d) affect or diminish or constitute a waiver, release or discharge of any
specific written obligation, covenant, or agreement in respect of the
transactions contemplated by the Operative Documents made by any of the
Nonrecourse Persons or any security granted by the Nonrecourse Persons in
support of the obligations of such Persons under any Collateral Document or
Project Document (or as security for the obligations of Borrower Parties), or
the Group Pledge and Security Agreement, or (e) limit the liability of (i) any
Person who is a party to any Project Document or has issued any certificate or
other statement in connection therewith with respect to such liability as may
arise by reason of the terms and conditions of such Project Document (but
subject to any limitation of liability in such Project Document), certificate or
statement, or (ii) any Person rendering a legal opinion pursuant to this
Agreement (including Section 3.1.8, 3.2.11, 3.3.8 or 7.1.11), in each case under
this clause (e) relating solely to such liability of such Person as may arise
under such referenced agreement, instrument or opinion. The limitations on
recourse set forth in this Article 8 shall survive the termination of this
Agreement, the termination of all Commitments and the Interest Rate Agreements
to which any Secured Party is a party and the indefeasible payment in full in
cash and performance in full of the Borrower's Obligations hereunder and under
the other Operative Documents.
ARTICLE 9
AGENTS; SUBSTITUTION
9.1 APPOINTMENT, POWERS AND IMMUNITIES.
9.1.1 Each Lender hereby appoints and authorizes (a) Administrative
Agent to act as its agent hereunder and under the other Credit Documents, and
(b) Collateral Agent to act as its collateral agent hereunder and under the
other Credit Documents, in each case with such powers as are expressly delegated
to Administrative Agent or Collateral Agent (as the case may be) by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Neither Administrative Agent nor
Collateral Agent shall have any duties or responsibilities except those
expressly set forth in this Agreement or in any other Credit Document, or be a
trustee or a fiduciary for any Secured Party. Notwithstanding anything to the
contrary contained herein, neither Administrative Agent nor Collateral Agent
shall be required to take any action which is contrary to this Agreement or any
other Credit Documents or any Legal Requirement or exposes Administrative Agent
or Collateral Agent (as the case may be) to any liability. Each of the Lead
Arrangers, Collateral Agent, Administrative Agent, the Lenders and any of their
respective Affiliates shall not be responsible to any other Secured Party for
(i) any recitals, statements, representations or warranties made by each
Borrower Party or its Affiliates contained in this Agreement, the other Credit
Documents or in any certificate or other document referred to or provided for
in, or received by the Lead Arrangers, Administrative Agent, Collateral Agent,
or any Secured Party under this Agreement or any other Credit Document, (ii) the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, the other Credit Documents, any
98
Notes or any other document referred to or provided for herein, or (iii) any
failure by any Borrower Party or its Affiliates to perform their respective
obligations hereunder or thereunder. Each of Administrative Agent and Collateral
Agent may employ agents and attorneys-in-fact, and neither shall be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
9.1.2 None of Collateral Agent, Administrative Agent, the Lead
Arrangers and their respective directors, officers, employees or agents shall be
responsible for any action taken or omitted to be taken by it or them hereunder
or under any other Credit Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, (a) Administrative Agent may treat the
payee of any Note as the holder thereof until Administrative Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to Administrative Agent, (b) each of Administrative Agent and
Collateral Agent may consult with legal counsel, independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by them in accordance with the advice of such
counsel, accountants or experts, (c) none of Collateral Agent, Administrative
Agent and the Lead Arrangers makes any warranty or representation to any Secured
Party for any statements, warranties or representations made in or in connection
with any Operative Document, (d) none of Collateral Agent, Administrative Agent
and the Lead Arrangers shall have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Operative Document on the part of any party thereto, to inspect the property
(including the books and records) of any Borrower Party or any other Person or
to ascertain or determine whether a Material Adverse Effect exists or is
continuing, and (e) none of Collateral Agent, Administrative Agent and the Lead
Arrangers shall be responsible to any Secured Party for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Operative Document or any other instrument or document furnished pursuant
hereto. Except as otherwise provided under this Agreement and the other Credit
Documents, each of Administrative Agent and Collateral Agent shall take such
action with respect to the Credit Documents as shall be directed by the Majority
Lenders or, if expressly so provided, the Required Lenders.
9.1.3 None of the Co-Syndication Agents, Underwriters,
Co-Documentation Agents and Co-Book Runners shall have any right, power,
obligation, liability, responsibility or duty under this Agreement, other than
those applicable to all Secured Parties and those set forth in Section 5.11 and
this Article 9. The Lead Arrangers shall only have those rights, powers,
obligations, liabilities, responsibilities and duties set forth in Section 3.1,
Section 5.11, this Article 9 and Section 11.1. Without limiting the foregoing,
none of the Lead Arrangers, Underwriters, Co-Syndication Agents,
Co-Documentation Agents and Co-Book Runners shall have or be deemed to have a
fiduciary relationship with any Secured Party. Each Secured Party hereby makes
the same acknowledgments with respect to the Lead Arrangers, Underwriters,
Co-Syndication Agents, Co-Documentation Agents and Co-Book Runners as it makes
with respect to the Administrative Agent or the Collateral Agent in this Article
9. Notwithstanding the foregoing, the parties hereto acknowledge that the
Co-Syndication Agents, Underwriters, Co-Documentation Agents and Co-Book Runners
hold such titles in name only, and that such
99
titles confer no additional rights or obligations relative to those conferred on
any Secured Party hereunder.
9.2 RELIANCE.
Each of Administrative Agent and Collateral Agent shall be entitled
to rely upon any certificate, notice or other document (including any cable,
telegram, facsimile, electronic mail or telex) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by it. As to any other matters not
expressly provided for by this Agreement, neither Collateral Agent nor
Administrative Agent shall be required to take any action or exercise any
discretion, but shall be required to act or to refrain from acting upon
instructions of the Majority Lenders or, where expressly provided, the Required
Lenders or all Lenders (except that neither Collateral Agent nor Administrative
Agent shall be required to take any action which exposes Collateral Agent or
Administrative Agent (as the case may be) to personal liability or which is
contrary to this Agreement, any other Credit Document or any Legal Requirement).
Each of Collateral Agent and Administrative Agent shall in all cases (including
when any action by Collateral Agent or Administrative Agent (as the case may be)
alone is authorized hereunder, if Collateral Agent or Administrative Agent (as
the case may be) elects in its sole discretion to obtain instructions from the
Majority Lenders) be fully protected in acting, or in refraining from acting,
hereunder or under any other Credit Document in accordance with the instructions
of the Majority Lenders (or, where so expressly stated, the Required Lenders or
all Lenders), and such instructions of the Majority Lenders (or Required Lenders
or all Lenders, where applicable) and any action taken or failure to act
pursuant thereto shall be binding on all of the Secured Parties.
9.3 NON-RELIANCE.
Each Lender represents that it has, independently and without
reliance on the Lead Arrangers, Collateral Agent, Administrative Agent, or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of the financial condition and affairs of
the Calpine Entities and its own decision to enter into this Agreement and
agrees that it will, independently and without reliance upon the Lead Arrangers,
Collateral Agent, Administrative Agent, or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own appraisals and decisions in taking or not taking action under this
Agreement. Each of Administrative Agent, the Lead Arrangers, Collateral Agent
and any Lender shall not be required to keep informed as to the performance or
observance by any Calpine Entity or its Affiliates under this Agreement or any
other document referred to or provided for herein or to make inquiry of, or to
inspect the properties or books of any Calpine Entity or its Affiliates.
9.4 DEFAULTS; MATERIAL ADVERSE CHANGE.
None of the Lead Arrangers, Collateral Agent and Administrative
Agent shall be deemed to have knowledge or notice of the occurrence of any
Inchoate Default, Event of
100
Default or Material Adverse Change, unless such Person has received a notice
from a Lender or any Borrower Party, referring to this Agreement, describing
such Inchoate Default, Event of Default or Material Adverse Change and
indicating that such notice is a notice of the occurrence of such default or
Material Adverse Change (as the case may be). If Administrative Agent receives
such a notice of the occurrence of an Inchoate Default, Event of Default or
Material Adverse Change, Administrative Agent shall give notice thereof to the
Lenders. Each of Collateral Agent and Administrative Agent shall take such
action with respect to such Inchoate Default, Event of Default or Material
Adverse Change as is provided in Article 3, Article 7 or the terms of the Credit
Documents, or if not provided for in Article 3, Article 7 or such Credit
Documents, as Administrative Agent or Collateral Agent shall be reasonably
directed by the Majority Lenders; provided, however, that unless and until
Administrative Agent or Collateral Agent shall have received such directions,
each of Administrative Agent and Collateral Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Inchoate Default, Event of Default or Material Adverse Change as it
shall deem advisable in the best interest of the Lenders.
9.5 INDEMNIFICATION.
Without limiting the Obligations of each Borrower Party hereunder,
each Lender agrees to indemnify the Lead Arrangers, Collateral Agent and
Administrative Agent and their respective officers, directors, shareholders,
controlling Persons, employees, agents and servants, ratably in accordance with
their Proportionate Shares for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against Administrative Agent, the Lead Arrangers, Collateral
Agent or such Person in any way relating to or arising out of this Agreement or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof or of any such other documents (to the extent Borrower
has not paid any such amounts pursuant to Section 5.11); provided, however, that
no Lender shall be liable for any of the foregoing to the extent they arise from
Administrative Agent's, the Lead Arrangers', Collateral Agent's or any such
Person's gross negligence or willful misconduct. Administrative Agent or any
such Person shall be fully justified in refusing to take or to continue to take
any action hereunder or under any other Credit Document unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Without limitation of the foregoing, each Lender agrees to
reimburse Administrative Agent, the Lead Arrangers, Collateral Agent or any such
Person promptly upon demand for its Proportionate Share of any out-of-pocket
expenses (including counsel fees) incurred by Administrative Agent, the Lead
Arrangers, Collateral Agent or any such Person in connection with the
preparation, execution, administration or enforcement of, or legal advice in
respect of rights or responsibilities under, the Operative Documents, to the
extent that Administrative Agent, the Lead Arrangers, Collateral Agent or any
such Person is not reimbursed for such expenses by Borrower.
9.6 SUCCESSOR AGENT.
101
Each of Collateral Agent and Administrative Agent may resign at any
time by giving 15 days' written notice thereof to the Secured Parties and
Borrower. Each of Collateral Agent and Administrative Agent may be removed
involuntarily only for a material breach of its respective duties and
obligations hereunder and under the other Credit Documents or for gross
negligence or willful misconduct in connection with the performance of its
respective duties hereunder or under the other Credit Documents and then only
upon the affirmative vote of the Required Lenders (excluding Administrative
Agent and Collateral Agent (as the case may be) from such vote and
Administrative Agent's and Collateral Agent's (as the case may be) Proportionate
Share (if any) of the Commitments from the amounts used to determine the portion
of the Commitments necessary to constitute the required Proportionate Share of
the remaining Lenders). Upon any such resignation or removal of either
Administrative Agent or Collateral Agent, the Required Lenders shall have the
right, with the consent of Borrower (such consent not to be unreasonably
withheld or delayed) to appoint a successor Administrative Agent or Collateral
Agent (as the case may be). If no successor Administrative Agent or Collateral
Agent (as the case may be) shall have been so appointed by the Required Lenders
and shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's or Collateral Agent's (as the case may be) giving of
notice of resignation or the Lenders' removal of the retiring Administrative
Agent or Collateral Agent (as the case may be), the retiring Administrative
Agent and Collateral Agent (as the case may be) may, on behalf of the Secured
Parties, with the consent of Borrower (such consent not to be unreasonably
withheld or delayed), appoint a successor Administrative Agent or Collateral
Agent (as the case may be) hereunder, which shall be a Lender, if any Lender
shall be willing to serve, and otherwise shall be a commercial bank having a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent or Collateral Agent (as the case may be)
under the Operative Documents by a successor Administrative Agent or Collateral
Agent (as the case may be), such successor Administrative Agent or Collateral
Agent (as the case may be) shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Administrative Agent
or Collateral Agent (as the case may be), and the retiring Administrative Agent
or Collateral Agent (as the case may be) shall be discharged from its duties and
obligations as Administrative Agent or Collateral Agent (as the case may be)
only under the Credit Documents. After any retiring Administrative Agent's or
Collateral Agent's resignation or removal hereunder as Administrative Agent or
Collateral Agent (as the case may be), the provisions of this Article 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent or Collateral Agent (as the case may be) under the
Operative Documents.
9.7 AUTHORIZATION.
Each of Administrative Agent and Collateral Agent is hereby
authorized by the Secured Parties to execute, deliver and perform each of the
Credit Documents to which Administrative Agent or Collateral Agent (as the case
may be) is or is intended to be a party, and each Lender agrees to be bound by
all of the agreements of Administrative Agent and Collateral Agent contained in
the Credit Documents. Each of Administrative Agent and Collateral Agent is
further authorized by the Secured Parties to release Liens on property that
Borrower is permitted to sell or transfer pursuant to the terms of this
Agreement or the other Credit Documents and to
102
enter into agreements supplemental hereto for the purpose of curing any formal
defect, inconsistency, omission or ambiguity in this Agreement or any Credit
Document to which it is a party.
9.8 OTHER ROLES.
With respect to its Commitment, the Loans made by it and any Note
issued to it, each of the Lead Arrangers, Collateral Agent, Administrative Agent
and LC Issuer in its individual capacity shall have the same rights and powers
under the Operative Documents as any other Lender and may exercise the same as
though it were not a Lead Arranger, Collateral Agent, Administrative Agent or LC
Issuer. The term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include each of the Lead Arrangers, Collateral Agent, Administrative
Agent and LC Issuer in its individual capacity. Each of the Lead Arrangers,
Collateral Agent, Administrative Agent, LC Issuer and their respective
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with any Borrower
Party or any other Person, without any duty to account therefor to the Lenders.
For the avoidance of doubt Collateral Agent may act as Depositary Agent
notwithstanding any potential or actual conflict of interest presented by the
foregoing and any Borrower Party. Each of the Lenders hereby waives any claim
against each of the Lead Arrangers, Collateral Agent, Administrative Agent, LC
Issuer and any of their respective Affiliates based upon any conflict of
interest that such Person may have with regard to acting as an agent, arranger
or issuing bank hereunder and acting in such other roles.
9.9 AMENDMENTS; WAIVERS.
Subject to the provisions of this Section 9.9, unless otherwise
specified in this Agreement or another Credit Document, the Majority Lenders (or
Administrative Agent or Collateral Agent upon written direction or consent of
the Majority Lenders) and any Borrower Party may enter into agreements, waivers
or supplements hereto for the purpose of adding, modifying or waiving any
provisions to the Credit Documents or changing in any manner the rights of the
Lenders or any Borrower Party hereunder or thereunder or waiving any Inchoate
Default or Event of Default; provided, however, that no such supplemental
agreement shall, without the consent of all of the Lenders:
(a) increase the amount of the Commitment of any Lender hereunder;
or
(b) reduce the percentage specified in the definition of "Majority
Lenders" or "Required Lenders"; or
(c) amend this Section 9.9; or
(d) release any Collateral (other than immaterial portions thereof
or as expressly permitted pursuant to the Credit Documents) from the Lien of any
of the Collateral Documents; or
103
(e) extend the Construction Loan Maturity Date or the Term Loan
Maturity Date or reduce the principal amount of any outstanding Loans or Notes
or reduce the rate or change the time of payment of interest due on any Loan;
provided that only the consent of the Required Lenders shall be necessary to
amend the definition of "Default Rate" contained in Section 2.6.3 or to waive
any obligation of Borrower to pay interest at the Default Rate; or
(f) reduce the amount or extend the payment date for any amount due,
whether principal or interest; or
(g) subordinate the Loans to any other Debt.
No amendment, modification, termination or waiver of any provision
of this Agreement affecting the rights or obligations of Administrative Agent,
Collateral Agent, LC Issuer or the Lead Arrangers shall be effective without the
written consent of Administrative Agent, Collateral Agent, LC Issuer or the Lead
Arrangers, as the case may be.
9.10 WITHHOLDING TAX.
If the forms or other documentation required by Section 2.6.6 are
not delivered to Administrative Agent, then Administrative Agent may withhold
from any interest payment to any Lender not providing such forms or other
documentation, an amount equivalent to the applicable withholding tax.
9.10.1 If the Internal Revenue Service or any authority of the
United States or other jurisdiction asserts a claim that Administrative Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason), then such Lender shall
indemnify Administrative Agent fully for all amounts paid, directly or
indirectly, by Administrative Agent as tax or otherwise, including penalties and
interest, together with all expenses incurred, including legal expenses,
allocated staff costs, and any out of pocket expenses. Borrower shall not be
responsible for any amounts paid or required to be paid by a Lender under this
Section 9.10.1.
9.10.2 If any Lender sells, assigns, grants participation in, or
otherwise transfers its rights under this Agreement, the purchaser, assignee,
participant or transferee, as applicable, shall comply and be bound by the terms
of Section 2.6.6 and this Section 9.10 as though it were such Lender.
9.11 GENERAL PROVISIONS AS TO PAYMENTS.
Administrative Agent shall promptly distribute to each Lender,
subject to the terms of any separate agreement between Administrative Agent and
such Lender, its pro rata share of each payment of principal and interest
payable to the Lenders on the Loans and of fees hereunder received by
Administrative Agent for the account of the Lenders and of any other
104
amounts owing under the Loans. The payments made for the account of each Lender
shall be made, and distributed to it, for the account of (a) its domestic
lending office in the case of payments of principal of, and interest on, its
Base Rate Loans, (b) its domestic or foreign lending office, as each Lender may
designate in writing to Administrative Agent, in the case of LIBOR Loans, and
(c) its domestic lending office, or such other lending office as it may
designate for the purpose from time to time, in the case of payments of fees and
other amounts payable hereunder. Lenders shall have the right to alter
designated lending offices upon five Banking Days prior written notice to
Administrative Agent and Borrower.
9.12 SUBSTITUTION OF LENDER.
Should any Lender fail to make a Loan in violation of its
obligations under this Agreement (a "Non-Advancing Bank"), Administrative Agent
shall (a) in its sole discretion fund the Loan on behalf of the Non-Advancing
Bank, or (b) cooperate and consult with Borrower or any other Lender to find
another Person that shall be acceptable to Administrative Agent and that shall
be willing to assume the Non-Advancing Bank's obligations under this Agreement
(including the obligation to make the Loan which the Non-Advancing Bank failed
to make but without assuming any liability for damages for failing to have made
such Loan or any previously required Loan). Subject to the provisions of the
next following sentence, such Person shall be substituted for the Non-Advancing
Bank hereunder upon execution and delivery to Administrative Agent of an
agreement acceptable to Administrative Agent by such Person assuming the
Non-Advancing Bank's obligations (including its Commitments) under this
Agreement, and all interest and fees which would otherwise have been payable to
the Non-Advancing Bank shall thereafter be payable to such Person. Nothing in
(and no action taken pursuant to) this Section 9.12 shall relieve the
Non-Advancing Bank from any liability it might have to Borrower or to the other
Lenders as a result of its failure to make any Loan.
9.13 PARTICIPATION.
9.13.1 Sales of Participation. Nothing herein provided shall prevent
any Lender from selling a participation in one or more of its Commitments (or
Loans made hereunder); provided that (a) no such sale of a participation shall
alter such Lender's or Borrower's obligations hereunder, and (b) any agreement
pursuant to which any Lender may grant a participation in its rights with
respect to its Commitment (or Loans made hereunder) shall provide that, with
respect to such Commitment (or Loans made hereunder), subject to the following
proviso, such Lender shall retain the sole right and responsibility to exercise
the rights of such Lender, and enforce the obligations of Borrower relating to
such Commitment (or Loans made hereunder), including the right to approve any
amendment, modification or waiver of any provision of this Agreement or any
other Credit Document and the right to take action to have the Obligations
hereunder (or any portion thereof) declared due and payable pursuant to Article
7; provided, however, that such agreement may provide that the participant may
have rights to approve or disapprove decreases in Commitments, interest rates or
fees, lengthening of maturity of any Loans, extend the payment date for any
amount due under Article 2 or release of
105
any material Collateral. No recipient of a participation in any Commitment or
Loans of any Lender shall have any rights under this Agreement or shall be
entitled to any reimbursement for Taxes, Other Taxes, increased costs or reserve
requirements under Section 2.6 or 2.8 or any other indemnity or payment rights
against Borrower (but shall be permitted to receive from the Lender granting
such participation a proportionate amount which would have been payable to the
Lender from whom such Person acquired its participation).
9.13.2 Special Purpose Funding Vehicles. Notwithstanding anything to
the contrary contained herein, any Lender (a "Granting Bank") may grant to a
special purpose funding vehicle (a "SPC"), identified as such in writing from
time to time by the Granting Bank to Administrative Agent and Borrower, the
option to provide to Borrower all or any part of any Loan that such Granting
Bank would otherwise be obligated to make to Borrower pursuant to this
Agreement; provided that (a) nothing herein shall constitute a commitment by any
SPC to make any Loan, and (b) if a SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Bank shall
be obligated to make such Loan pursuant to the terms hereof. The making of a
Loan by a SPC hereunder shall utilize the Commitment of the Granting Bank to the
same extent, and as if, such Loan were made by such Granting Bank. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the Granting Bank). In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this Agreement)
that, prior to the date that is one year and one day after the payment in full
of all outstanding commercial paper or other senior indebtedness of any SPC, it
will not institute against, or join any other Person in instituting against,
such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any state thereof. In
addition, notwithstanding anything to the contrary contained in this Section
9.13, any SPC may (i) with notice to, but without the prior written consent of,
Borrower, Administrative Agent or and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to the Granting
Bank or to any financial institutions (consented to by Borrower and
Administrative Agent) providing liquidity or credit support to or for the
account of such SPC to support the funding or maintenance of Loans, and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC. This Section 9.13.2
may not be amended without the written consent of all SPCs having outstanding
Loans or Commitments hereunder.
9.14 TRANSFER OF COMMITMENT.
Notwithstanding anything else herein to the contrary (but subject to
Section 9.13.2), any Lender, after receiving Administrative Agent's prior
written consent (such consent not to be unreasonably withheld) and (so long as
no Event of Default has occurred and is continuing), after consulting with
Borrower as to the identity of the applicable assignee, may from time to time,
at its option, sell, assign, transfer, negotiate or otherwise dispose of a
portion of one or more of its Commitments (including, for purposes of this
Section 9.14, Loans made hereunder) (including the Lender's interest in this
Agreement and the other Credit Documents) to any Lender; provided, however, that
no Lender (including any assignee of any Lender) may
106
assign any portion of its Commitment (including Loans) (a) in an amount less
than $5,000,000 (unless to another Lender), or (b) in an amount which leaves the
assigning Lender with a Commitment (including Loans) of less than $5,000,000 (in
each case based on the original principal amount of the Commitment assigned)
after giving effect to such assignment and all previous assignments (except that
a Lender may be left with no Commitment or Loans if it assigns its entire
Commitment); and provided, further, that any Lender may assign all or any
portion of its Commitments to an Affiliate of such Lender without the consent of
any Person. In the event of any such assignment, (i) the assigning Lender's
Proportionate Share shall be reduced and its obligations hereunder released by
the amount of the Proportionate Share assigned to the new Lender, (ii) the
parties to such assignment shall execute and deliver an appropriate agreement
evidencing such sale, assignment, transfer or other disposition, in form and
substance reasonably satisfactory to Administrative Agent and Borrower, (iii)
the parties to the sale, assignment, transfer or other disposition, excluding
Borrower, shall collectively pay to Administrative Agent an administrative fee
of $3,500, (iv) at the assigning Lender's option, Borrower shall execute and
deliver to such new Notes in the forms attached hereto as Exhibit B-1 or Exhibit
B-2, as requested, in a principal amount equal to such new Lender's Commitment,
but only if it shall also be executing and exchanging with the assigning Lender
a replacement note for any Note in an amount equal to the Commitment retained by
the assigning Lender, if any; provided that Borrower shall have received for
cancellation the existing Note held by such assigning Lender, and (v)
Administrative Agent shall amend Exhibit H to reflect the Proportionate Shares
of the Lenders following such assignment. Thereafter, such new Lender shall be
deemed to be a Lender and shall have all of the rights and duties of a Lender
(except as otherwise provided in this Article 9), in accordance with its
Proportionate Share, under each of the Credit Documents.
9.15 LAWS.
Notwithstanding the foregoing provisions of this Article 9, no sale,
assignment, transfer, negotiation or other disposition of the interests of any
Lender hereunder or under the other Credit Documents shall be allowed if it
would require registration under the federal Securities Act of 1933, as then
amended, any other federal securities laws or regulations or the securities laws
or regulations of any applicable jurisdiction. Borrower shall, from time to time
at the request and expense of Administrative Agent, execute and deliver to
Administrative Agent, or to such party or parties as Administrative Agent may
designate, any and all further instruments as may in the opinion of
Administrative Agent be reasonably necessary or advisable to give full force and
effect to such sale, assignment, transfer, negotiation or disposition which
would not require any such registration.
9.16 ASSIGNABILITY AS COLLATERAL.
Notwithstanding any other provision contained in this Agreement or
any other Credit Document to the contrary, any Lender may assign all or any
portion of the Loans or Notes held by it to the Federal Reserve Bank and the
United States Treasury as collateral security; provided that any payment in
respect of such assigned Loans or Notes made by Borrower to or for the account
of the assigning or pledging Lender in accordance with the terms of this
107
Agreement shall satisfy Borrower's obligations hereunder in respect of such
assigned Loans or Notes to the extent of such payment. No such assignment shall
release the assigning Lender from its obligations hereunder.
9.17 NOTICES TO LENDERS.
The Administrative Agent promptly shall deliver all material
documents, instruments and notices that it receives hereunder and under the
other Operative Documents to each Lender. Except as expressly provided in this
Agreement or the other Credit Documents, the Borrower shall not be required to
deliver any documents, instruments or notices directly to the Lenders.
9.18 COLLATERAL AGENT.
The Collateral Agent shall:
9.18.1 forward promptly to Administrative Agent any notice delivered
to the Collateral Agent pursuant to any Consent;
9.18.2 have the right, but not the obligation, to (a) refuse any
item for credit to any Account except as required by the terms of the Credit
Documents, (b) refuse to honor any request for transfer in relation to any
Account that is not consistent with the Credit Documents, (c) charge to any
Account all applicable charges related to maintaining such Accounts, and (d) pay
fees, interest and other charges owing by Borrower as provided herein and in the
other Operative Documents;
9.18.3 except as otherwise provided herein and in the Depositary
Agreements (including by the provision of standing instructions therein), take
all actions and make all determinations with respect to the Collateral, the
Security Documents (including as to the advisability of taking additional steps
to perfect, or cause the perfection of, any security interest) and the other
Credit Documents to which it is a party as directed in writing by Administrative
Agent (acting in accordance with Section 9.9); and
9.18.4 have the right at any time to seek clarification and
instructions concerning the administration of the Credit Documents from
Administrative Agent, legal counsel selected by it in good faith with reasonable
care or any court of competent jurisdiction and shall be fully protected in
relying upon such instructions.
ARTICLE 10
INDEPENDENT CONSULTANTS
10.1 REMOVAL AND FEES.
Administrative Agent, in its reasonable discretion, may remove from
time to time, any one or more of the Independent Consultants and, after
consulting with Borrower as to an appropriate Person, appoint replacements as
Administrative Agent may choose. Notice of any
108
replacement Independent Consultant shall be given by Administrative Agent to
Borrower, the Lenders and to the Independent Consultant being replaced. All
reasonable fees and expenses of the Independent Consultants (whether the
original ones or replacements) shall be paid by Borrower pursuant to agreements
reasonably acceptable to Borrower; provided that no such acceptance shall be
required at any time an Event of Default shall have occurred and be continuing.
10.2 DUTIES.
Each Independent Consultant shall be contractually obligated to (a)
on or before the Closing Date, the Lead Arrangers, and (b) thereafter,
Administrative Agent to carry out the activities required of it in this
Agreement and as otherwise requested by the Lead Arrangers or Administrative
Agent (as the case may be) and shall be responsible solely to the Lead Arrangers
or Administrative Agent (as the case may be). Borrower acknowledges that it will
not have any cause of action or claim against any Independent Consultant
resulting from any decision made or not made, any action taken or not taken or
any advice given by such Independent Consultant in the due performance in good
faith of its duties to the Lead Arrangers or Administrative Agent (as the case
may be), except to the extent arising from such Independent Consultant's gross
negligence or willful misconduct.
10.3 INDEPENDENT CONSULTANTS' CERTIFICATES.
(a) Until the receipt by Administrative Agent of certificates
satisfactory to Administrative Agent from each Independent Consultant whom
Administrative Agent considers necessary or appropriate certifying Completion of
a Project or Final Completion, Borrower shall provide such documents and
information to the Independent Consultants as any of the Independent Consultants
may reasonably consider necessary in order for the Independent Consultants to
deliver to Administrative Agent the following:
(i) certificates of the Insurance Consultant, Independent
Engineer and Power Market Consultant delivered on and dated as of the Closing
Date as described in Sections 3.1.9, 3.1.11 and 3.1.12, respectively, and
containing the matters set out therein;
(ii) after the Closing Date, all certificates to be delivered
thereafter pursuant to this Agreement; and
(iii) monthly after the Closing Date, a full report and status
of the progress of each Project to that date, a complete assessment of Project
Costs to Final Completion and such other information and certification as
Administrative Agent may reasonably require from the Independent Engineer from
time to time.
(b) Following Completion of each Project, Borrower shall provide
such documents and information to the Independent Consultants as they may
reasonably consider necessary in order for the Independent Consultants to
deliver annually to Administrative Agent
109
a certificate setting forth a full report on the status of each Project and such
other information and certification as Administrative Agent may reasonably
require from time to time.
10.4 CERTIFICATION OF DATES.
Administrative Agent will request that the Independent Consultants
act diligently in the issuance of all certificates required to be delivered by
the Independent Consultants hereunder, if their issuance is appropriate.
Borrower shall provide the Independent Consultants with reasonable notice of the
expected occurrence of any dates or events requiring the issuance of such
certificates.
ARTICLE 11
MISCELLANEOUS
11.1 ADDRESSES.
Any communications between the parties hereto or notices provided
herein to be given may be given to the following addresses:
If to Administrative Agent or
Collateral Agent: Calyon New York Branch
1301 Avenue of the Americas
New York, NY 10019-6022
Attn: Project Finance-
Portfolio Management
Telephone No.: (212) 261-7882
Telecopy No.: (212) 261-3421
E-mails: Robert.Colvin@us.calyon.com;
Justine.Ventrelli@us.calyon.com
If to Borrower: Calpine Steamboat Holdings, LLC
50 West San Fernando St.
Suite 642
San Jose, CA 95113
Telephone: (408) 794-2606
Fax: (408) 792-1162
Attn: Brian Harenza
All such notices or other communications required or permitted to be
given hereunder shall be in writing and shall be considered as properly given
(a) if delivered in person, (b) if sent by overnight delivery service (including
Federal Express, UPS, ETA, Emery, DHL, AirBorne and other similar overnight
delivery services), (c) if mailed by first class United States Mail, postage
prepaid, registered or certified with return receipt requested, (d) if sent by
facsimile with receipt confirmed by telephone, or (e) by Electronic Transmission
(as defined below). Notice so given shall be effective upon receipt by the
addressee, except that communication or notice so transmitted by facsimile or
other direct written electronic means shall be deemed to have been validly and
effectively given on the day (if a Banking Day and, if
110
not, on the next following Banking Day) on which it is transmitted if
transmitted before 4:00 p.m., recipient's time, and if transmitted after that
time, on the next following Banking Day; provided, however, that if any notice
is tendered to an addressee and the delivery thereof is refused by such
addressee, such notice shall be effective upon such tender. Any party shall have
the right to change its address for notice hereunder to any other location
within the continental United States by giving of 30 days' notice to the other
parties in the manner set forth above.
Any Borrower Party may deliver to Administrative Agent, Collateral
Agent or Depositary Agent, as the case may be, any borrowing base certificate,
collateral report or other material that such Borrower Party is required to
deliver to Administrative Agent, Collateral Agent or Depositary Agent (as the
case may be) hereunder or under the other Credit Documents, by e-mail or other
electronic transmission (an "Electronic Transmission"), subject to the following
terms:
(1) Each Electronic Transmission must be sent by the treasurer
or chief financial officer of the applicable Borrower Party (or any other
authorized representative), and must be addressed to the loan officer and the
assistant loan officer of Administrative Agent or Collateral Agent or account
officer of Depositary Agent (as the case may be) that handle Borrower's account,
as designated by Administrative Agent or Collateral Agent (as the case may be)
from time to time. If any Electronic Transmission is returned to the sender as
undeliverable, the material included in such Electronic Transmission must be
delivered to the intended recipient in the manner required by Section 11.1.
(2) Each certificate, collateral report or other material
contained in an Electronic Transmission must be in a "pdf" or other imaging
format. Any signature on a certificate, collateral report or other material
contained in an Electronic Transmission shall constitute a valid signature for
purposes hereof. Administrative Agent and Collateral Agent may rely upon, and
assume the authenticity of, any such signature, and any material containing such
signature shall constitute an "authenticated" record for purposes of the Uniform
Commercial Code and shall satisfy the requirements of any applicable statute of
frauds.
(3) The Borrower Parties shall maintain the original versions
of all certificates, collateral reports and other materials delivered to
Administrative Agent or Collateral Agent by means of an Electronic Transmission
and shall furnish to Administrative Agent or Collateral Agent such original
versions within five Banking Days of Administrative Agent or Collateral Agent's
request for such materials, signed and certified (to the extent required
hereunder) by the officer submitting the Electronic Transmission.
11.2 ADDITIONAL SECURITY; RIGHT TO SET-OFF.
Any deposits or other sums at any time credited or due from Lenders
and any Project Revenues, securities or other property of any Borrower Party in
the possession of any Secured Party may at all times be treated as collateral
security for the payment of the Loans and any Notes and all other obligations of
each Borrower Party to the Lenders under this Agreement and the other Credit
Documents, and each Borrower Party hereby pledges to Collateral Agent for
111
the benefit of the Secured Parties and grants Collateral Agent for the benefit
of the Secured Parties a security interest in and to all such deposits, sums,
securities or other property. Subject to Section 2.7.2, regardless of the
adequacy of any other collateral, any Secured Party with the prior written
consent of the Collateral Agent may execute or realize on its or the Collateral
Agent's security interest in any such deposits or other sums credited by or due
from Lenders to Borrower, and may apply any such deposits or other sums to or
set them off against Borrower's obligations to Lenders under any Notes and this
Agreement at any time after the occurrence and during the continuance of any
Event of Default.
11.3 DELAY AND WAIVER.
No delay or omission to exercise any right, power or remedy accruing
to the Secured Parties upon the occurrence of any Event of Default, Inchoate
Default, Material Adverse Change or any breach or default of any Borrower Party
or any other Calpine Entity or unsatisfied condition precedent under this
Agreement or any other Credit Document shall impair any such right, power or
remedy of the Secured Parties, nor shall it be construed to be a waiver of any
such breach or default or unsatisfied condition precedent, or an acquiescence
therein, or of or in any similar breach or default or unsatisfied condition
precedent thereafter occurring, nor shall any waiver of any single Event of
Default, Inchoate Default, Material Adverse Change or other breach or default or
unsatisfied condition precedent be deemed a waiver of any other Event of
Default, Inchoate Default, Material Adverse Change or other breach or default or
unsatisfied condition precedent theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of
Administrative Agent, Collateral Agent or the Secured Parties of any Event of
Default, Inchoate Default, Material Adverse Effect or other breach or default or
unsatisfied condition precedent under this Agreement or any other Credit
Document, or any waiver on the part of Administrative Agent, Collateral Agent or
the Secured Parties of any provision or condition of this Agreement or any other
Credit Document, must be in writing and shall be effective only to the extent in
such writing specifically set forth. All remedies, either under this Agreement
or any other Credit Document or by law or otherwise afforded to Administrative
Agent, Collateral Agent, LC Issuer and the Secured Parties, shall be cumulative
and not alternative.
11.4 COSTS, EXPENSES AND ATTORNEYS' FEES; SYNDICATION.
11.4.1 Borrower will pay to each of Administrative Agent, Collateral
Agent, and the Lead Arrangers all of their respective reasonable costs and
expenses in connection with the preparation, negotiation, closing and
administering of this Agreement and the documents contemplated hereby and any
participation or syndication of the Loans or this Agreement, including the
reasonable fees, expenses and disbursements of Latham & Watkins LLP, together
with other legal counsel retained by Administrative Agent or Collateral Agent in
the States of Minnesota and Texas in connection with the preparation of such
documents and any amendments hereof; provided, however, that Borrower shall not
be required to pay the fees of the other Lenders' attorneys. Borrower will
reimburse (a) Administrative Agent and Collateral Agent for
112
all costs and expenses, including reasonable attorneys' fees, expended or
incurred by Administrative Agent, Collateral Agent, and the Lenders for their
reasonable internal out-of-pocket expenses (but not, in the case of the Lenders,
for counsel fees), in enforcing this Agreement or the other Credit Documents in
connection with an Event of Default or Inchoate Default, in actions for
declaratory relief in any way related to this Agreement or in collecting any sum
which becomes due on the Notes or under the Credit Documents and (b)
Administrative Agent, Collateral Agent, and the Lenders for their reasonable
out-of-pocket expenses, including reasonable attorney fees and reasonable
expert, consultant and advisor fees and expenses, in the case of a restructuring
of the Loans or otherwise relating to the occurrence of any Inchoate Default or
Event of Default. Borrower shall not be responsible for any counsel fees of the
Lead Arrangers, Administrative Agent, Collateral Agent or the Lenders other than
as set forth above, in Section 5.11 or as otherwise set forth in a separate
agreement.
11.4.2 In connection with syndication of the Loans and Commitments,
an information package containing certain relevant information concerning each
Borrower Party, the Projects and the other Project participants (including a
computer model prepared by Borrower containing the Base Case Project
Projections) will be prepared on behalf of Borrower and provided to potential
Lenders and participants. Borrower agrees to cooperate and to cause each other
Borrower Party and Sponsor to cooperate in the syndication of the Loans and
Commitments in all respects reasonably requested by the Lead Arrangers,
including participation of each Borrower Party and Sponsor in bank meetings held
in connection with such syndication.
11.5 ENTIRE AGREEMENT.
This Agreement and any agreement, document or instrument attached
hereto or referred to herein integrate all the terms and conditions mentioned
herein or incidental hereto and supersede all oral negotiations and prior
writings in respect to the subject matter hereof. In the event of any conflict
between the terms, conditions and provisions of this Agreement and any such
agreement, document or instrument, the terms, conditions and provisions of this
Agreement shall prevail.
11.6 GOVERNING LAW.
THIS AGREEMENT AND ANY OTHER CREDIT DOCUMENT (UNLESS OTHERWISE
EXPRESSLY PROVIDED FOR THEREIN), SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICTS OF LAWS (OTHER
THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
11.7 SEVERABILITY.
In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
11.8 HEADINGS.
113
Article, Section and Paragraph headings have been inserted in this
Agreement as a matter of convenience for reference only and it is agreed that
such headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
11.9 ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP and practices consistent with those applied in
the preparation of the financial statements submitted by Borrower to
Administrative Agent, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles and practices.
11.10 ADDITIONAL FINANCING.
The parties hereto acknowledge that as of the Closing Date the
Lenders have made no agreement or commitment to provide any financing except as
set forth herein.
11.11 NO PARTNERSHIP, ETC.
The Lenders and Borrower intend that the relationship between them
shall be solely that of creditor and debtor. Nothing contained in this
Agreement, the Notes or in any of the other Credit Documents shall be deemed or
construed to create a partnership, tenancy-in-common, joint tenancy, joint
venture or co-ownership by or between the Lenders and Borrower or any other
Person. None of the Lead Arrangers, Administrative Agent, Collateral Agent or
the Lenders shall be in any way responsible or liable for the debts, losses,
obligations or duties of Borrower or any other Person with respect to the
Projects or otherwise. All obligations to pay real property or other taxes,
assessments, insurance premiums, and all other fees and charges arising from the
ownership, operation or occupancy of the Projects (if any) and to perform all
obligations and other agreements and contracts relating to the Projects shall be
the sole responsibility of Borrower Parties.
11.12 DEED OF TRUST/COLLATERAL DOCUMENTS.
Certain guaranties of the Loans are secured in part by the FEC Deed
of Trust and the MEC Mortgage encumbering certain properties in the States of
Texas and Minnesota, in each case, solely to the extent provided therein.
Reference is hereby made to the FEC Deed of Trust and the MEC Mortgage and the
other Collateral Documents for the provisions, among others, relating to the
nature and extent of the security provided thereunder, the rights, duties and
obligations of Borrower and the rights of Administrative Agent, Collateral Agent
and the other Secured Parties with respect to such security.
11.13 LIMITATION ON LIABILITY.
No claim shall be made by any Borrower Party against the Lead
Arrangers, Administrative Agent, Collateral Agent, the Lenders or any of their
respective Affiliates, directors, employees, attorneys or agents for any loss of
profits, business or anticipated savings,
114
special or punitive damages or any indirect or consequential loss whatsoever in
respect of any breach or wrongful conduct (whether or not the claim therefor is
based on contract, tort or duty imposed by law), in connection with, arising out
of or in any way related to the transactions contemplated by this Agreement or
the other Operative Documents or any act or omission or event occurring in
connection therewith, and each Borrower Party hereby waives, releases and agrees
not to sue upon any such claim for any such damages, whether or not accrued and
whether or not known or suspected to exist in its favor, in each case, except to
the extent such claim is based on gross negligence or willful misconduct of such
Person.
11.14 WAIVER OF JURY TRIAL.
ADMINISTRATIVE AGENT, COLLATERAL AGENT, THE LENDERS, THE HEDGE
BANKS, THE LC ISSUER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF ADMINISTRATIVE
AGENT, COLLATERAL AGENT, THE LENDERS, THE HEDGE BANKS, THE LC ISSUER, OR
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BORROWER, ADMINISTRATIVE
AGENT, COLLATERAL AGENT, THE LENDERS, THE HEDGE BANKS AND THE LC ISSUER TO ENTER
INTO THIS AGREEMENT.
11.15 CONSENT TO JURISDICTION.
Administrative Agent, Collateral Agent, the Lenders, the Hedge
Banks, the LC Issuer and Borrower agree that any legal action or proceeding by
or against Borrower or with respect to or arising out of this Agreement, the
Notes, or any other Credit Document may be brought in or removed to the courts
of the State of New York, in and for the County of New York, or of the United
States of America for the Southern District of New York, as Administrative Agent
may elect. By execution and delivery of this Agreement, the Lenders, the Hedge
Banks, the LC Issuer, Administrative Agent, Collateral Agent and Borrower
accept, for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Administrative Agent,
Collateral Agent, the Lenders, the Hedge Banks, the LC Issuer and Borrower
irrevocably consent to the service of process out of any of the aforementioned
courts in any manner permitted by law. Nothing herein shall affect the right of
Administrative Agent to bring legal action or proceedings in any other competent
jurisdiction, including judicial or non-judicial foreclosure of the FEC Deed of
Trust or the MEC Mortgage. Administrative Agent, Collateral Agent, the Lenders,
the Hedge Banks, the LC Issuer and Borrower further agree that the aforesaid
courts of the State of New York and of the United States of America shall have
exclusive jurisdiction with respect to any claim or counterclaim of Borrower
based upon the assertion that the rate of interest charged by the Lenders on or
under this Agreement, the Loans or the other Credit Documents is usurious.
Administrative Agent, Collateral Agent, the Lenders, the Hedge Banks, the LC
Issuer and Borrower hereby waive any
115
right to stay or dismiss any action or proceeding under or in connection with
any or all of the Projects, this Agreement or any other Credit Document brought
before the foregoing courts on the basis of forum non-conveniens.
11.16 KNOWLEDGE AND ATTRIBUTION.
References in this Agreement and the other Credit Documents to the
"knowledge," "best knowledge" or facts and circumstances "known to" Borrower,
and all like references, mean facts or circumstances of which a Responsible
Officer of the applicable Calpine Entity has actual knowledge.
11.17 SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
Borrower may not assign or otherwise transfer any of its rights under this
Agreement except as provided in Section 6.15, and the Lenders may not assign or
otherwise transfer any of their rights under this Agreement except as provided
in Article 9.
11.18 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in one or more duplicate
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
11.19 USURY.
Nothing contained in this Agreement or the Notes shall be deemed to
require the payment of interest or other charges by Borrower or any other Person
in excess of the amount which the holders of the Notes may lawfully charge under
applicable usury laws. In the event that the Lenders shall collect moneys which
are deemed to constitute interest which would increase the effective interest
rate to a rate in excess of that permitted to be charged by applicable Legal
Requirements, all such sums deemed to constitute interest in excess of the legal
rate shall, upon such determination, at the option of the Lenders, be returned
to Borrower or credited against the principal balance then outstanding.
11.20 SURVIVAL.
All representations, warranties, covenants and agreements made
herein and in the certificates or other instruments delivered in connection with
or pursuant to this Agreement and the other Credit
116
Documents shall be considered to have been relied upon by the parties hereto and
shall survive the execution and delivery of this Agreement, the other Credit
Documents and the making of the Loans. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of Borrower set
forth in Sections 2.1.1(e), 2.1.4, 2.6.4, 2.8.3, 2.8.4, 5.11, 11.4, 11.22 and
the agreements of the Lenders set forth in Sections 9.1, 9.5, 9.8, 9.10.1 and
11.22 shall survive the payment and performance of the Loans and the other
Obligations and the reimbursement of any amounts drawn hereunder, and the
termination of this Agreement.
11.21 PATRIOT ACT NOTICE.
Each Lender, the Collateral Agent (for itself and not on behalf of
any other Person, including any Lender), the Administrative Agent (for itself
and not on behalf of any other Person, including any Lender) and LC Issuer (for
itself and not on behalf of any other Person, including any Lender) hereby
notifies Borrower, Sponsor and each other Borrower Party that, pursuant to the
requirements of the USA Patriot Act (2001 H.R. 3162 (signed into law October 26,
2001)) (the "Act"), it is required to obtain, verify and record information that
identifies Borrower, Sponsor and each other Borrower Party which information
includes the name, address, the tax identification number and other identifying
information that will allow such Lender, the Collateral Agent, the
Administrative Agent or the LC Issuer, as applicable, to identify Borrower,
Sponsor and each other Borrower Party in accordance with the Act.
11.22 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
Each Lender and each Agent agrees (on behalf of itself and each of
its Affiliates, directors, officers, employees and representatives) to keep
confidential any nonpublic information supplied to it by Borrower or any other
Calpine Entity; provided that nothing herein shall limit the disclosure of any
such information: (a) to the extent such information is required to be disclosed
by any Governmental Rule or judicial or administrative process, or to any
Governmental Authority in connection with a tax audit or dispute or otherwise,
(b) to counsel for any of the Lenders or any Agent, (c) to banking, securities
exchange or other regulatory or supervisory authorities, auditors or accountants
having proper jurisdiction and authority to require such disclosure, (d) to any
Agent or any other Lender, (e) to any entity in connection with a securitization
or proposed securitization of, among other things, all or a part of any amounts
payable to or for the benefit of any Lender or its Affiliates under the Credit
Documents so long as such entity first executes and delivers to Administrative
Agent a confidentiality agreement substantially in the form of Exhibit M, (f) in
connection with the exercise of any remedies hereunder or under any of the other
Credit Documents, including without limitation upon the occurrence of any Event
of Default and any enforcement or collection proceedings resulting therefrom or
in connection with the negotiation of any restructuring or "work-out", whether
or not consummated, of the obligations of Borrower under this Agreement or the
obligations of any Borrower Party or Major Project Participant under any other
Operative Document or any suit, action or proceeding relating to this Agreement
or any other Credit Document or the enforcement of rights hereunder or
thereunder, so long as such Borrower Party or Major Project Participant first
executes and delivers to the respective Lender and Borrower a confidentiality
agreement substantially in the form of Exhibit M, (g) to the Independent
Engineer, the Power Marketing Consultant, the Insurance Consultant or to other
experts engaged
117
by Administrative Agent or any Lender in accordance with the provisions of this
Agreement and in connection with the transactions contemplated hereby so long as
such expert first executes and delivers to Administrative Agent and Borrower a
confidentiality agreement substantially in the form of Exhibit M, or (h) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first executes
and delivers to the respective Lender and Borrower a confidentiality agreement
substantially in the form of Exhibit M. In no event shall any Lender,
Administrative Agent or Collateral Agent be obligated or required to return any
materials furnished by any Borrower Entity. Notwithstanding the foregoing
provisions of this Section 11.22, the foregoing obligation of confidentiality
shall not apply to any such information that (i) was known to any Lender or
Agent prior to the time it received such confidential information from any
Borrower Party or its respective Affiliates, or (ii) becomes part of the public
domain independently of any act of any Lender or Agent not permitted hereunder
(through publication or otherwise), or (iii) is received by any Lender or any
Agent, as applicable, without restriction as to its disclosure or use, from a
Person other than a Calpine Entity. Notwithstanding anything to the contrary set
forth herein or in any other agreement to which the parties hereto are parties
or by which they are bound, any obligations of confidentiality contained herein
and therein, as they relate to the transactions contemplated by this Agreement
(the "Loan Transactions"), shall not apply to the federal tax structure or
federal tax treatment of the Loan Transactions, and each party hereto (and any
employee, representative, or agent of any party hereto) may disclose to any and
all Persons, without limitation of any kind, the federal tax structure and
federal tax treatment of the Loan Transactions. The preceding sentence is
intended to cause the Loan Transactions not to be treated as having been offered
under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under Section
6011 of the Code and shall be construed in a manner consistent with such
purpose. In addition, each party hereto acknowledges that it has no proprietary
or exclusive rights to any tax concept, tax matter or tax idea related to the
Loan Transactions. In addition, each party hereto acknowledges that it has no
proprietary or exclusive rights to any tax concept, tax matter or tax idea
related to the Loan Transactions. In addition, each Lender and each Agent
acknowledges that the Dow Documents contain various provisions on
confidentiality and each Lender and each Agent agree to be bound by the terms
thereof, including Article XIX (Confidential and Proprietary Information) of the
Capacity Sales Agreement to the extent applicable to the performance of its
obligations under this Agreement; provided that in connection with exercise of
remedies under the Credit Documents, each Lender and each Agent's obligations
under this sentence as to potential transferees of the Collateral shall be
limited to requiring the transferee to execute a confidentiality agreement.
11.23 RELEASE OF PROJECT.
At Borrower's option upon notice to Administrative Agent, without
the consent or approval of Administrative Agent, the Lenders or any other
Person, the Collateral and the Undertaking Support LC corresponding to either
Project will be released, one of the two Siemens Turbines or substitute cash and
letter of credit pursuant to the Borrower Security Agreement will be released
and related Subordinated Note deemed cancelled, the Guaranties corresponding to
such Project shall terminate, the Intercompany Note corresponding to such
Project shall be
118
deemed paid in full, and the financing continue in reliance on the single
remaining Project, provided that (a) the Debt Service Coverage Ratio after
giving effect to such Project release shall be a minimum of 1.60x and an average
of 1.70x through the Term Loan Maturity Date; and (b) the Term Loan will be
prepaid such that the Term Loan balance on the Term Loan Maturity Date will be
no more than 90% of the loan balance at scheduled Term Loan maturity in the Pro
Forma Project Projections. If the Purchase Option or Put Option is exercised,
the proceeds, in an amount equal to the lesser of (i) all of such proceeds, and
(ii) such amount as shall result in satisfaction of the criteria set forth in
clause (a) and clause (b) above, shall be applied to prepay the Loans (other
than the Security Fund LC Loans). The above tests will not be applied to a
prepayment related to an exercise of the Put Option or Purchase Option. Upon
exercise of either such option, the Collateral and Undertaking Support LC and
such Siemens Turbine or substitute cash and letter of credit corresponding to
the Freeport Project will be released and related Subordinated Note deemed
cancelled. Any proceeds from an exercise of the Put Option or Purchase Option,
in excess of the amounts required to be applied to a prepayment of the Loans
(other than the Security Fund LC Loans) to the levels as set forth in clauses
(a) and (b) will be released upon Term-Conversion, and until then held in the
Borrower Revenue Account as security for the Obligations of Borrower, or to the
extent received after Term-Conversion, released immediately to Sponsor without
condition.
11.24 PROJECT EXPANSION.
Notwithstanding any provision to the contrary contained herein or in
any other Credit Document (including Section 9.9 hereof), upon approval (in
their sole discretion) by Lenders holding at least 80% of Proportionate Shares,
any Borrower Party at its option may obtain secured financing for an expansion
of either or both Projects to accommodate an additional combustion turbine and
related equipment. No Lender commits hereby or shall be construed by any other
term of any Credit Document to have committed to finance any such expansion.
119
IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, intending to be legally bound, have caused this Credit Agreement to
be duly executed and delivered as of the day and year first above written.
CALPINE STEAMBOAT HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Brian J. Harenza
_________________________________
Brian J. Harenza
Vice President
Signature page to Credit Agreement
S-1
COBANK, ACB,
as a Lead Arranger, Underwriter,
Co-Syndication Agent,
Co-Book Runner and a Lender
By: /s/ David Boyce
_________________________________
David Boyce
Vice President
Signature page to Credit Agreement
S-2
CALYON NEW YORK BRANCH,
as a Lead Arranger, Underwriter,
Administrative Agent, Collateral
Agent, Co-Book Runner, LC Issuer
and a Lender
By: /s/ Martin C. Livingston
_________________________________
Martin C. Livingston
Director
By: /s/ Robert G. Colvin
_________________________________
Robert G. Colvin
Director
Signature page to Credit Agreement
S-3
UFJ BANK LIMITED,
as a Lead Arranger, Co-Documentation
Agent, Underwriter and a Lender
By: /s/ Junji Hasegawa
_________________________________
Junji Hasegawa
Vice President
Signature page to Credit Agreement
S-4
HSH NORDBANK AG,
as a Lead Arranger, Co-Documentation
Agent, Underwriter and a Lender
By: /s/ Thomas Emmons
_________________________________
Thomas Emmons
Senior Vice President
By: /s/ Rohan Singh
_________________________________
Rohan Singh
Assistant Vice President
Signature page to Credit Agreement
S-5
BAYERISCHE HYPO- UND VEREINSBANK AG,
NEW YORK BRANCH,
as a Lead Arranger,
Co-Syndication Agent,
Underwriter and a Lender
By: /s/ Andrew G. Mathews
_________________________________
Name: Andrew G. Mathews
Title: Managing Director
By: /s/ Paul J. Colatrella
_________________________________
Name: Paul J. Colatrella
Title: Director
Signature page to Credit Agreement
S-6
EXHIBIT A
to Credit Agreement
DEFINITIONS
"Accounts" means the FEC Construction Account, the MEC Construction
Account, the Borrower Revenue Account, the FEC Revenue Account, the MEC Revenue
Account, the Distribution Suspense Account, the Mandatory Prepayment Account,
the FEC O&M Account, the MEC O&M Account, the MEC Major Maintenance Reserve
Account, the FEC Major Maintenance Reserve Account, the Debt Service Reserve
Account, the FEC Loss Proceeds Account, the MEC Loss Proceeds Account, the FEC
Checking Account, the MEC Checking Account, the Security Fund LC Cash Collateral
Account, and each cash collateral account referred to in the Credit Documents,
including any sub-accounts within such accounts.
"Act" has the meaning given in Section 11.21 of the Credit
Agreement.
"Additional Borrower Equity" means any cash equity deposit made by
Borrower at its sole discretion, after the Closing Date, with Administrative
Agent which cash equity is to be applied to the payment of Project Costs.
"Additional Project Documents" means MEC Additional Project
Documents and FEC Additional Project Documents.
"Administrative Agent" means Calyon New York Branch, acting in its
capacity as administrative agent for the Secured Parties under the Credit
Documents.
"Administrative Agent Fee Letter" means that certain letter
agreement regarding fees, dated as of the Closing Date, by and between
Administrative Agent and Borrower.
"Adverse PUHCA Event" means that Borrower or any of its "affiliates"
(within the meaning of Section 2(a)(11)(B) of PUHCA) becomes an "electric
utility company", "public utility company", or "public utility holding company"
required to register as such within the meaning of PUHCA at a time at which
applicable provisions of PUHCA, or any successor statute thereof, and the rules
and regulations thereunder are in effect and such event or occurrence has, or
with the passage of time will have, a Material Adverse Effect or a material and
adverse effect on Administrative Agent or the Lenders.
"Affiliate" of a specified Person means any other Person that (a)
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person specified, or (b) only
with respect to matters relating to PUHCA, holds or beneficially owns 10% or
more of the equity interest in the Person specified or 10% or more of any class
of voting securities of the Person specified. When used with respect to
Borrower, "Affiliate" shall include Sponsor, FEC-LP, FEC-GP, FEC, MEC, CCMCI,
Operator, CES, and any Affiliate thereof (other than Borrower).
1
"Affiliated Major Project Participant" has the meaning given in
Section 3.1.1 of the Credit Agreement.
"Agent" means the Collateral Agent or the Administrative Agent.
"Allocated Portion" means the FEC Allocated Portion or the MEC
Allocated Portion.
"Amortization Schedule" means the schedule for repayment of the
principal of the Term Loans as set forth on Exhibit I to the Credit Agreement.
"Annual Operating Budget" has the meaning given in Section 5.14.3 of
the Credit Agreement.
"Applicable Permit" means, at any time, any Permit, including any
zoning, land use, environmental protection, pollution (including air, water or
noise), sanitation, FERC, Minnesota Public Utilities Commission, Minnesota
Pollution Control Agency, City of Mankato, U.S. Environmental Protection Agency,
Federal Aviation Administration, Department of Energy, Minnesota Environmental
Quality Board, State Fire Marshall, import, export, safety, siting or building
Permit (a) that is necessary under applicable Legal Requirements or any of the
Operative Documents to be obtained by or on behalf of any Borrower Party and/or
those permits required to be obtained by Dow under the Dow Agreements at such
time in light of the stage of development, construction or operation of the
Projects to construct, test, operate, maintain, repair, lease, own or use the
Projects as contemplated by the Operative Documents, to sell electricity from
the Projects or deliver fuel to the Projects, or for Borrower to enter into any
Operative Document or to consummate any transaction contemplated thereby, in
each case in accordance with all applicable Legal Requirements, or (b) that is
necessary so that none of Borrower Parties, Administrative Agent, Collateral
Agent, the Lead Arrangers or the Secured Parties nor any Affiliate of any of
them may be deemed by any Governmental Authority to be subject to regulation
under the FPA or PUHCA or treated as a public utility under the Constitution and
the laws of the State of Minnesota or Texas as presently constituted and as
construed by the courts of Minnesota or Texas, respectively, with respect to the
regulation of the rates of, or the financial or organizational regulation of,
electric utilities solely as a result of the development and construction or
operation of the Projects or the sale of electricity therefrom, except that (i)
MEC is subject to the compliance requirements under PUHCA applicable to an
Exempt Wholesale Generator and an owner of an Eligible Facility, (ii) FEC is
subject to the compliance requirements under PURPA applicable to a Qualifying
Facility and will be subject to state law and regulation with respect to rates
or the financial or organizational regulation of electric utilities to the
extent contemplated by 18 C.F.R Section 292.602(c), and (iii) each of MEC and
CES is a "public utility" under the FPA with authority to sell wholesale
electric power at market based rates and with all waivers of regulations and
blanket authorizations as are customarily granted by FERC to a "public utility"
that sells wholesale electric power and ancillary services at market based
rates.
"Arrangement Fee Letter" means that certain letter agreement
regarding fees, dated as of the Closing Date, by and between Co-Book Runners and
Borrower.
2
"Available Construction Funds" means, at any time and without
duplication, the sum of (a) amounts in the Construction Accounts after giving
effect to all permitted transfers therein on any given date, including from the
Borrower Revenue Account, (b) the then-applicable Available Construction Loan
Commitment, (c) undisbursed Insurance Proceeds or Eminent Domain Proceeds which
are available for payment of Project Costs, (d) any delay liquidated damages
which either Project Company has received under either Construction Contract and
which are not required to be paid to Dow or Construction Contractor, and (e) any
undisbursed amounts on deposit with Administrative Agent or Depositary Agent
constituting Additional Borrower Equity.
"Available Construction Loan Commitment" means (a) during the
Construction Loan Availability Period, the total Construction Loan Commitment at
such time minus the aggregate principal amount of all Construction Loans
outstanding at such time, and (b) at any time after the Construction Loan
Availability Period, zero.
"Banking Day" means any day other than a Saturday, Sunday or other
day on which banks are or Administrative Agent is authorized or required to be
closed in the State of Texas, the State of Minnesota or the State of New York
and, where such term is used in any respect relating to a LIBOR Loan, which is
also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"Bankruptcy Event" shall be deemed to occur, with respect to any
Person, if that Person shall institute a voluntary case seeking liquidation or
reorganization under the Bankruptcy Law, or shall consent to the institution of
an involuntary case thereunder against it; or such Person shall file a petition
or consent or shall otherwise institute any similar proceeding under any other
applicable Federal or state law, or shall consent thereto; or such Person shall
apply for, or consent or acquiesce to, the appointment of, a receiver,
administrator, administrative receiver, liquidator, sequestrator, trustee or
other officer with similar powers for itself or any substantial part of its
assets; or such Person shall make a general assignment for the benefit of its
creditors; or such Person shall admit in writing its inability to pay its debts
generally as they become due; or if an involuntary case shall be commenced
seeking liquidation or reorganization of such Person under the Bankruptcy Law or
any similar proceedings shall be commenced against such Person under any other
applicable Federal or state law and (a) the petition commencing the involuntary
case is not timely controverted, (b) the petition commencing the involuntary
case is not dismissed within 60 days of its filing, (c) an interim trustee is
appointed to take possession of all or a portion of the property, and/or to
operate all or any part of the business of such Person and such appointment is
not vacated within 60 days, or (d) an order for relief shall have been issued or
entered therein; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, administrator, administrative
receiver, liquidator, sequestrator, trustee or other officer having similar
powers, over such Person or all or a part of its property shall have been
entered; or any other similar relief shall be granted against such Person under
any applicable Bankruptcy Law.
"Bankruptcy Law" means Title 11, United States Code, and any other
state or federal insolvency, reorganization, moratorium or similar law for the
relief of debtors, or any successor statute.
3
"Base Case Project Projections" means a projection of operating
results for the Projects, showing at a minimum Borrower's reasonable good faith
estimates, as of the Closing Date, of revenues, operating expenses, the Debt
Service Coverage Ratio, and sources and uses of revenues over the forecast
period, which projection is attached as Exhibit G-3 to the Credit Agreement.
"Base Equity Requirement" means cash equity funds equal to
$96,249,010.70.
"Base Rate" means the greater of (a) the prime commercial lending
rate established from time to time by Administrative Agent at its New York
office, or (b) the Federal Funds Rate plus 0.50%. The Base Rate may not
necessarily be the highest or lowest rate of interest charged by Administrative
Agent to its commercial borrowers.
"Base Rate Construction Loan" has the meaning given in Section
2.1.1(b)(i) of the Credit Agreement.
"Base Rate Loans" means, collectively, the Base Rate Construction
Loans, the Base Rate Term Loans and the Base Rate Security Fund LC Loan.
"Base Rate Security Fund LC Loan" means a Security Fund LC Loan that
shall bear interest at the rate set forth in Section 2.2.3(a) of the Credit
Agreement.
"Base Rate Term Loan" has the meaning given in Section
2.1.2(b)(i)(A) of the Credit Agreement.
"Benefiting Project Company" means (a) with respect to each Credit
Event consisting of Construction Loans, any Project Company receiving proceeds
of such Construction Loan, (b) with respect to issuance of the Security Fund LC,
MEC, and (c) with respect to all other Credit Events, both Project Companies.
"Borrower" means Calpine Steamboat Holdings, LLC, a Delaware limited
liability company.
"Borrower Closing Letter Agreements" means the Arrangement Fee
Letter, the Administrative Agent Fee Letter and the Upfront Fee Letter.
"Borrower Depositary Agreement" means the Depositary Agreement,
dated as of the Closing Date, in substantially the form of Exhibit D-4 to the
Credit Agreement, among Borrower, Administrative Agent, Collateral Agent and
Depositary Agent.
"Borrower Parties" means Borrower, FEC, FEC-GP, FEC-LP and MEC.
"Borrower Revenue Account" means the "Revenue Account" as defined in
the Borrower Depositary Agreement.
"Borrower Waterfall Level" means a "Waterfall Level" as defined in
the Borrower Depositary Agreement.
4
"Borrowing" means a borrowing by Borrower of any Construction Loan
or Term Loan.
"Calculation Period" means, as to a particular date, the 12 month
period (or, during the initial 12 months following Term-Conversion, the actual
number of calendar months or partial calendar months following Term-Conversion)
immediately preceding such date.
"Calpine" means Calpine Corporation, a Delaware corporation.
"Calpine Entity(ies)" has the meaning given in Section 3.1.1 of the
Credit Agreement.
"Capacity Sales Agreement" means the Amended and Restated Capacity
Sales Agreement, dated May 27, 2004, between Dow and FEC.
"Capital Adequacy Requirement" has the meaning given in Section
2.8.4(a) of the Credit Agreement.
"CCMCI" means Calpine Construction Management Company, Inc., a
Delaware corporation.
"CCMCI Subordination Agreement" means the Subordination Agreement,
dated as of February 25, 2005, by Construction Contractor in favor of
Administrative Agent, relating to the Subordinated Notes.
"CDHI" means Calpine Development Holdings, Inc., a Delaware
corporation.
"CES" means Calpine Energy Services, L.P., a Delaware limited
partnership.
"CES PPA (FEC)" means the Index Based Power Purchase Agreement,
dated as of February 25, 2005, between FEC and CES.
"Change of Law" has the meaning given in Section 2.8.2 of the Credit
Agreement.
"City of Mankato" means the City of Mankato, Minnesota.
"Closing Date" has the meaning given in Section 3.1 of the Credit
Agreement.
"Co-Book Runners" means Calyon New York Branch and CoBank, ACB.
"Code" means the Internal Revenue Code of 1986, as amended.
"Co-Documentation Agents" means UFJ Bank Limited and HSH Nordbank
AG, each acting in its capacity as co-documentation agent for the Lenders under
the Credit Agreement..
5
"Collateral" means all property which is subject or is intended to
become subject to the security interests or liens granted by any of the
Collateral Documents.
"Collateral Agent" means Calyon New York Branch, acting in its
capacity as collateral agent for the Secured Parties under the Credit Documents.
"Collateral Documents" means the Group Pledge and Security
Agreement, the MEC Mortgage, the MEC Security Agreement, the FEC Deed of Trust,
the FEC Security Agreement, the Depositary Agreements, the Control Agreements,
each Consent, the NSP Acknowledgment of Subordination, and any fixture filings,
financing statements, or other similar documents filed, recorded or delivered in
connection with the foregoing.
"Collateral Replacement LC" means any Major Maintenance Reserve
Letter of Credit and any DSR Letter of Credit.
"Commercial Operation" has the meaning given in the Capacity Sales
Agreement.
"Commitment Fee" has the meaning given in Section 2.4.2(a) of the
Credit Agreement.
"Commitments" means, with respect to each Lender, such Lender's
Construction Loan Commitment, Term Loan Commitment and Security Fund LC
Commitment and with respect to all Lenders, the Total Construction Loan
Commitment, the Total Term Loan Commitment and the Total Security Fund LC
Commitment.
"Completion" means:
(a) with respect to the Freeport Project, (i) all necessary
facilities for the transportation and receipt of the appropriate fuels to and by
the Freeport Project have been completed in accordance with the terms of the FEC
Project Documents, (ii) "Substantial Completion" of all "Phases" as defined in
the FEC Construction Contract shall have occurred, (iii) all facilities
necessary for the procurement, transportation and discharge of water to the
Freeport Project and wastewater from the Freeport Project have been obtained or
completed in accordance with the applicable FEC Project Documents and Applicable
Permits, (iv) necessary interconnection facilities sufficient to transmit all
power generated by the Freeport Project have been completed in accordance with
the Capacity Sales Agreement, (v) all real estate rights reasonably necessary
for completion of the foregoing and continued operations of the Freeport Project
have been obtained, (vi) all phases of the Freeport Project have achieved
Commercial Operation as described in the Capacity Sales Agreement, (vii) all
items listed on the Spare Parts Inventory (as such term is defined in the FEC
O&M Agreement) and which are otherwise budgeted in the Project Budget shall have
been purchased and be readily available, (viii) all Performance Tests under the
Dow Agreements have been performed and any required liquidated damages
thereunder have been paid, provided that as soon as the Capacity Payments
described in Section 11.1(c) of the Capacity Sales Agreement begin, the Freeport
Project will be deemed to have satisfied the requirements of this clause (viii)
and clauses (ii) and (ix), even if further performance testing remains, so long
as the Construction Contractor remains obligated to
6
perform and pass the tests, the Undertaking Support LCs remain outstanding in
the respective amounts required by the Completion Undertaking Agreements, and
the Completion Undertaking Agreements remain in full force and effect, and (ix)
all Demonstration Tests (as defined in the Capacity Sales Agreement) have been
performed; and
(b) with respect to the Mankato Project, (i) all necessary
facilities for the transportation and receipt of the appropriate fuels to and by
the Mankato Project have been completed in accordance with the terms of the MEC
Project Documents, (ii) "Substantial Completion" as defined in the MEC
Construction Contract shall have occurred, (iii) all facilities necessary for
the procurement, transportation and discharge of water to the Mankato Project
and wastewater from the Mankato Project have been obtained or completed in
accordance with the applicable MEC Project Documents and Applicable Permits,
(iv) necessary interconnection facilities sufficient to transmit all power
generated by the Mankato Project have been completed in accordance with the MEC
Interconnection Agreement and the Power Purchase Agreement, (v) all real estate
rights reasonably necessary for completion of the foregoing and continued
operations of the Mankato Project have been obtained, (vi) the Mankato Project
has achieved its Facility Acceptance Date under the Power Purchase Agreement,
and (vii) all items in the Spare Parts Inventory (as such term is defined in the
MEC Construction Contract) and which are otherwise budgeted in the Project
Budget shall have been purchased and be readily available.
"Completion Date" means, with respect to a Project, the date on
which Completion occurs with respect to such Project.
"Completion Undertaking Agreements" means the FEC Completion
Undertaking Agreement and the MEC Completion Undertaking Agreement.
"Confirmation of Interest Period Selection" has the meaning given in
Section 2.1.3(c)(ii) of the Credit Agreement.
"Consents" means the consents required from each Major Project
Participant under Section 3.1.31 of the Credit Agreement and any other third
party consents to the assignments contemplated by the Collateral Documents.
"Construction Account" has the meaning given in Section 1.1 of the
respective Project Company Depositary Agreements and does not include any
sub-accounts therein unless otherwise indicated in each provision.
"Construction Contract Guaranties" means the FEC Construction
Contract Guaranty and the MEC Construction Contract Guaranty.
"Construction Contractor" means CCMCI.
"Construction Contractor Performance LDs" has the meaning given in
the FEC Depositary Agreement and the MEC Depositary Agreement, respectively.
7
"Construction Contracts" means the FEC Construction Contract and the
MEC Construction Contract.
"Construction Loan" has the meaning given in Section 2.1.1(a) of the
Credit Agreement.
"Construction Loan Availability Period" means the period from the
Closing Date to the earlier to occur of (a) full utilization of the Total
Construction Loan Commitment and (b) the Construction Loan Maturity Date.
"Construction Loan Commitment" means, at any time with respect to
each Lender, such Lender's Proportionate Share of the Total Construction Loan
Commitment at such time.
"Construction Loan Maturity Date" means the date that is the
earliest to occur of (a) May 1, 2007, (b) Term-Conversion, or (c) an Event of
Default and acceleration of the Construction Loans pursuant to Section 7.2.3 of
the Credit Agreement.
"Construction Note" has the meaning given in Section 2.1.4 of the
Credit Agreement.
"Control Agreements" means the FEC Control Agreement and the MEC
Control Agreement.
"Co-Syndication Agents" means CoBank, ACB and Bayerische HYPO- UND
Vereinsbank AG, New York Branch, each acting in its capacity as co-syndication
agent for the Lenders under the Credit Agreement.
"COSCI Subordination Agreement" means the Subordination Agreement,
dated as of February 25, 2005, by Operator in favor of Administrative Agent.
"Credit Agreement" means the Credit Agreement, dated as of February
25, 2005, by and among Borrower, Administrative Agent, Collateral Agent, the
Lead Arrangers, the other agents and arrangers listed on the signature pages
thereto and the Lenders.
"Credit Documents" means the Credit Agreement, the Notes, the
Collateral Documents, the Interest Rate Agreements (including all Hedge
Transactions thereunder), the Borrower Closing Letter Agreements, any
Subordination Agreements, the Dow Payment Substitution Agreement, any Collateral
Replacement LCs, the FEC Guaranty, the FEC-LP Guaranty, the FEC-GP Guaranty, the
MEC Guaranties, and any other loan or security agreements or letter agreement or
similar document, entered into by Administrative Agent, Collateral Agent,
Depositary Agent, the Lead Arrangers or any Secured Party, on the one hand, and
the Borrower or one or more Borrower Parties, on the other hand, in connection
with the transactions contemplated by the Credit Documents.
"Credit Event" has the meaning given in Section 3.2 of the Credit
Agreement.
8
"Debt" of any Person at any date means, without duplication, (a) all
obligations (including contingent obligations) of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, and other accrued expenses
arising in the ordinary course of business which in accordance with GAAP would
be shown on the liability side of the balance sheet of such Person, but
excluding trade accounts payable (d) all obligations of such Person under leases
which are or should be, in accordance with GAAP, recorded as capital leases in
respect of which such Person is liable, (e) all obligations of such Person to
purchase securities (or other property) which arise out of or in connection with
the sale of the same or substantially similar securities (or property), (f) all
deferred obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or advanced under a letter of credit or other
instrument, (g) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, (h) all Debt of
others guaranteed directly or indirectly by such Person or as to which such
Person has an obligation substantially the economic equivalent of a guarantee,
and (i) obligations in respect of Hedge Transactions.
"Debt Service" means, for any period, the sum of (a) all fees (other
than fees paid on the Closing Date) payable by Borrower hereunder during such
period to Administrative Agent, Collateral Agent, Depositary Agent and the
Lenders, (b) interest payable by Borrower on Term Loans less (for purposes of
calculating the Debt Service Coverage Ratio) net payments, if any, received by
Borrower during such period pursuant to Hedge Transactions, (c) scheduled Term
Loan principal payments payable by Borrower (as reduced to reflect actual
prepayments through the date of such calculation) payable during such period,
and (d) net payments, if any, payable during such period pursuant to Hedge
Transactions.
"Debt Service Coverage Ratio" means, for any period, the ratio of
(a) Operating Cash Available for Debt Service for such period to (b) Debt
Service for such period.
"Debt Service Reserve Account" has the meaning given in Section 1.1
of the Borrower Depositary Agreement.
"Debt to Equity Ratio" means, as of any date of determination, the
ratio of (a) the aggregate outstanding principal amount of all Construction
Loans or Term Loans, as the case may be, to (b) all equity contributions made to
Borrower (in cash or property) and applied to Project Costs (as verified by the
Independent Engineer) as of such date of determination, to the extent such
contributions have not been reimbursed with the proceeds of any Loans (including
the Dow Change Order Drawing).
"DEC" means Dow Engineering Company, a Delaware corporation.
"Default Rate" has the meaning given in Section 2.6.3 of the Credit
Agreement.
"Depositary Agent" means Wilmington Trust Company, not in its
individual capacity but solely as depositary agent, bank and securities
intermediary under the Depositary Agreements.
9
"Depositary Agreements" means the Borrower Depositary Agreement, the
FEC Depositary Agreement and the MEC Depositary Agreement.
"Distribution Suspense Account" has the meaning given in Section 1.1
of the Borrower Depositary Agreement.
"Dollars" and "$" means United States dollars or such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts in the United States of
America.
"Dow" means The Dow Chemical Company, a Delaware corporation.
"Dow Agreements" means the Capacity Sales Agreement, the FEC Ground
Lease, the FEC O&M Agreement and the Site Services Agreement.
"Dow Change" has the meaning given in the Capacity Sales Agreement.
"Dow Change Order Drawing" has the meaning given in Section 3.3.3(b)
of the Credit Agreement.
"Dow Consent" means the Consent and Agreement, dated as of February
25, 2005, executed by Dow, FEC, and Administrative Agent.
"Dow/DEC Technical Requirements" has the meaning given in the
Capacity Sales Agreement.
"Dow Delay Event" has the meaning given in the Capacity Sales
Agreement.
"Dow Payment Substitution Agreement" means the Dow Payment
Substitution Agreement, dated as of February 25, 2005, by and between Sponsor
and Agent.
"Dow Performance Test Drawing" means a drawing of Construction Loans
pursuant to Section 3.3.3(c) of the Credit Agreement.
"Dow Performance Test Drawing Amount" has the meaning given in
Section 3.3.3(c) of the Credit Agreement.
"Dow Performance Test Exposure" means (a) if the Independent
Engineer is able to estimate with a high degree of certainty the maximum
possible amount that FEC would have to expend to perform the tests (beyond the
already-budgeted testing costs) and to achieve the Performance Guarantees (under
and as defined in the FEC Construction Contract), then the Dow Performance Test
Exposure is such estimated amount, and (b) if the Independent Engineer is not
able to make such estimate with a high degree of certainty, then the Dow
Performance Test Exposure is infinity dollars
"Dow Performance Test Pre-Completion Revenues" has the meaning given
in Waterfall Level 10 of the Borrower Depositary Agreement.
10
"Dow Test Deferral" has the meaning given in Section 3.3.3(c) of the
Credit Agreement.
"Drawdown Certificate" means a certificate delivered to
Administrative Agent substantially in the form of Exhibit C-5 to the Credit
Agreement.
"Drawing Payment" means any payment by LC Issuer honoring a drawing
under the Security Fund LC.
"Drawstop Funds" has the meaning given in Section 5.17 of the Credit
Agreement.
"DSR Letter of Credit" has the meaning given in Section 1.1 of the
Borrower Depositary Agreement.
"DSR Required Balance" means, as of any date, an amount equal to all
principal and interest in respect of the Term Loans due or to become due within
six months after such date.
"Easements" means the FEC Easements and the MEC Easements.
"Eligible Facility" means an "eligible facility" within the meaning
of PUHCA and FERC's implementing regulations pertaining thereto.
"Emergency Operating Costs" means those amounts required to be
expended for the purchase of goods and services in order to prevent or mitigate
an unforeseeable event or circumstances that, in the good faith judgment of MEC
or FEC (or Dow as its Operator) as the case may be, necessitates the taking of
immediate measures to prevent or mitigate injury to Persons or injury to or loss
of property.
"Eminent Domain Proceeds" has the meaning given in the applicable
Depositary Agreement.
"Environmental Claim" means any and all liabilities, losses,
administrative, regulatory or judicial actions, suits, demands, decrees, claims,
liens, judgments, warning notices, notices of noncompliance or violation,
investigations, proceedings, removal or remedial actions or orders, or damages
(foreseeable and unforeseeable, including consequential and punitive damages),
penalties, fees, out-of-pocket costs, expenses, disbursements or attorneys' or
consultants' fees, relating in any way to (a) a violation or alleged violation
of any Hazardous Substance Law or Permit issued under any Hazardous Substance
Law, (b) a Release or threatened Release of Hazardous Substances, or (c) any
legal or administrative proceedings relating to any of the above.
"Environmental Reports" means, collectively, with respect to the
Mankato Project (a) the Phase I Environmental Site Assessment, Wenck Associates,
dated September 2003, together with the update dated October 19, 2004, (b) the
Limited Phase II Environmental Site Assessment, Wenck Associates, dated December
2003, (c) the Phase I Environmental Site
11
Assessment (Baker Property), Wenck Associates, dated July 2004, (d) Critical
Environmental Issues Assessment, Wenck Associates, dated October 2003, (e)
Preliminary Subsurface Exploration, Laboratory Testing and Geotechnical
Engineering Analysis for Proposed Mankato Power Plant Site, STS Consultants,
Ltd., dated October 2003, (f) Site Permit Application for Mankato Energy Center
submitted by MEC to Minnesota Environmental Quality Board, dated March 2004, and
(g) Environmental Assessment, Minnesota Environmental Quality Board, dated July
2004.
"ERCOT" has the meaning given in the Capacity Sales Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any corporation, trade or business (whether
or not incorporated) that is treated as a single employer together with any
Calpine Entity under Section 414 of the Code.
"ERISA Plan" means any employee benefit plan (a) maintained by
Borrower or any ERISA Affiliate, or to which any of them contributes or has
contributed, or is or was obligated to contribute, and (b) subject to Section
302 or Title IV of ERISA, or Section 412 of the Code.
"Event of Default" has the meaning given in Article 7 of the Credit
Agreement.
"Event of Eminent Domain" means any compulsory transfer or taking by
condemnation, eminent domain or exercise of a similar power, or transfer under
threat of such compulsory transfer or taking, of any part of the Collateral or
any of the Mortgaged Property, by any agency, department, authority, commission,
board, instrumentality or political subdivision of the State of Minnesota, the
State of Texas, the United States or another Governmental Authority having
jurisdiction.
"Exempt Wholesale Generator" means an "exempt wholesale generator"
within the meaning of PUHCA and FERC's implementing regulations pertaining
thereto.
"Facility Acceptance Date" has the meaning given in Section 1.4 of
the Power Purchase Agreement.
"Facility Acceptance Milestone" has the meaning given in Section 1.4
of the Power Purchase Agreement.
"FEC" has the meaning given in the Recitals in the Credit Agreement.
"FEC Additional Project Documents" means any material contracts or
agreements related to the construction, testing, maintenance, repair, operation
or use of the Freeport Project entered into by FEC and any other Person, or
assigned to FEC, subsequent to the Closing Date; provided that all such
contracts and agreements providing for the payment by FEC of less than $500,000
per annum individually, or the provision to FEC of less than $1,000,000 per
annum
12
individually in value of goods or services, or providing for a maximum term of
less than one year shall be deemed not to constitute a FEC Additional Project
Document; and provided, further, that the FEC Additional Project Documents shall
not include any Owner/Third Party Contracts (as defined in the FEC Construction
Contract).
"FEC Allocated Portion" means the outstanding principal amount of
the Loans from time to time, deemed to be allocable to the Freeport Project by
virtue of having been initially designated as part of the FEC Allocated Portion
pursuant to a Notice of Construction Loan Borrowing (including Loans meeting the
conditions set forth in Section 3.4), and not deemed repaid pursuant to Sections
2.1.2(d), 2.1.7(a)(iii), 2.1.7(b), 11.23 or Section 3.6 of the Borrower
Depositary Agreement.
"FEC Allocated Portion Percentage" has the meaning given in the FEC
Depositary Agreement.
"FEC Checking Account" means the "Checking Account" as defined in
the FEC Depositary Agreement.
"FEC Checking Account Bank" means the "Checking Account Bank" as
defined in the FEC Depositary Agreement.
"FEC Completion Undertaking Agreement" means the Completion
Undertaking Agreement dated as of the Closing Date, between CCMCI and Borrower.
"FEC Construction Account" means the "Construction Account" created
pursuant to the FEC Depositary Agreement.
"FEC Construction Contract" means the Engineering, Procurement and
Construction Agreement, dated as of February 25, 2005, between the Construction
Contractor and FEC.
"FEC Construction Contract Guaranty" means the Guaranty, dated as of
February 25, 2005, between Sponsor and FEC.
"FEC Control Agreement" means that certain control agreement to be
entered into among FEC, Collateral Agent and FEC Checking Account Bank regarding
the perfection of Collateral Agent's Lien on the FEC Checking Account.
"FEC Deed of Trust" means the Deed of Trust, Security Agreement and
Fixture Filing, dated on or about the Closing Date, in substantially the form of
Exhibit D-1 to the Credit Agreement, by FEC in favor of Collateral Agent.
"FEC Depositary Agreement" means the Depositary Agreement, dated as
of the Closing Date, in substantially the form of Exhibit D-5 to the Credit
Agreement, among FEC, Administrative Agent, Collateral Agent and Depositary
Agent.
13
"FEC Easements" shall have the meaning given in the FEC Deed of
Trust and shall include the Access Easement (as such term is defined in the FEC
Ground Lease).
"FEC-GP" means Calpine Freeport GP, LLC a Delaware limited liability
company.
"FEC-GP Guaranty" means the FEC-GP Guaranty, dated as of the Closing
Date, in substantially the form of Exhibit D-17 to the Credit Agreement, by and
between FEC-GP and Collateral Agent.
"FEC Ground Lease" means the Ground Lease, dated May 27, 2004
between Dow and FEC.
"FEC Guaranty" means the FEC Guaranty, dated as of the Closing Date,
in substantially the form of Exhibit D-13 to the Credit Agreement, by and
between FEC and Collateral Agent.
"FEC Interconnection Agreement" has the meaning given in the
Capacity Sales Agreement.
"FEC Loss Proceeds Account" means the "Loss Proceeds Account"
created pursuant to the FEC Depositary Agreement.
"FEC-LP" means Calpine Freeport LP, LLC, a Delaware limited
liability company.
"FEC-LP Guaranty" means the FEC-LP Guaranty, dated as of the Closing
Date, in substantially the form of Exhibit D-18 to the Credit Agreement, by and
between FEC-LP and Collateral Agent.
"FEC Major Maintenance Agreement" means the Major Maintenance
Agreement, dated as of February 25, 2005, between FEC and Operator.
"FEC Major Maintenance Reserve Account" means the "Major Maintenance
Reserve Account" created pursuant to the FEC Depositary Agreement.
"FEC Major Project Documents" means the Dow Agreements, the FEC
Construction Contract, the FEC Completion Undertaking Agreement, the CES PPA
(FEC), the FEC Construction Contract Guaranty, the FEC Major Maintenance
Agreement, any guaranty agreements related to the foregoing executed by Persons
in favor of FEC and, unless otherwise agreed by Administrative Agent prior to
its execution and delivery, any FEC Additional Project Documents.
"FEC Major Project Participants" means, without duplication,
Borrower, FEC, FEC-LP, FEC-GP, Sponsor (until CCMCI's obligations under FEC's
Construction Contract are fully performed), CCMCI (until CCMCI's obligations
under FEC's Construction Contract are fully performed), Dow, CES, Operator and
any Person other than those so listed which provides
14
any guaranty agreement with respect to a FEC Major Project Document, and any
counterparty to any FEC Additional Project Document which is a FEC Major Project
Document.
"FEC Milestone" has the meaning given in the Capacity Sales
Agreement.
"FEC Mortgaged Property" means the "Trust Property" as defined in
the FEC Deed of Trust.
"FEC Note" means the promissory note in the form of Exhibit B-3 to
the Credit Agreement.
"FEC O&M Account" means the "O&M Account" created pursuant to the
FEC Depositary Agreement.
"FEC O&M Agreement" means the Operation and Maintenance Agreement,
dated as of May 27, 2004 between FEC and Dow.
"FEC Partnership Agreement" means the Amended and Restated Agreement
of Partnership of Freeport Energy Center, LP, dated as of January 25, 2005.
"FEC Phase 3 Work" has the meaning given in the Capacity Sales
Agreement.
"FEC Project Documents" means, without duplication, the FEC Major
Project Documents, the FEC Easements, and any other agreement relating to the
development, construction or operation of the Freeport Project to which FEC is a
party, provided, that the FEC Project Documents shall not include any
Owner/Third Party Contracts (as defined in the FEC Construction Contract).
"FEC Revenue Account" means the "Revenue Account" created pursuant
to the FEC Depositary Agreement.
"FEC Security Agreement" means the Security Agreement, dated as of
the Closing Date, in substantially the form of Exhibit D-16 to the Credit
Agreement, between FEC and Borrower.
"FEC Site" has the meaning given to the term "Facility Site" in the
FEC Ground Lease.
"FEC Technical Requirements" has the meaning given in the Capacity
Sales Agreement.
"FEC Waterfall Level" means a "Waterfall Level" as defined in the
FEC Depositary Agreement.
"FEC Work Phase" has the meaning given in the Capacity Sales
Agreement.
15
"Federal Funds Rate" means, for any day, the weighted average of the
per annum rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers as published by the
Federal Reserve Bank of New York for such day (or, if such rate is not so
published for any day, the average rate charged by Administrative Agent on such
day on such transactions as determined by Administrative Agent).
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"FERC" means the Federal Energy Regulatory Commission and its
successors.
"Final Completion" means that Completion shall have occurred and the
Independent Engineer shall have confirmed that (a) "Final Project Completion"
(as such term is defined in the Construction Contracts) shall have occurred, and
(b) all other work under the Construction Contracts shall have been completed
(other than amounts in dispute with respect to Construction Contractor or any
other Person, so long as amounts reasonably satisfactory to Administrative Agent
(acting in consultation with the Independent Engineer) have been reserved in the
applicable Construction Account for payment of such amounts (and as to which any
associated Lien falls within the definition of clause (c) of Permitted Liens)).
"First Amendment to PPA" means the First Amendment to PPA
substantially in the form of the draft provided to Administrative Agent on the
Closing Date.
"FPA" means the Federal Power Act, as amended.
"Freeport Project" has the meaning in the Recitals of the Credit
Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, bylaws, operating agreement or other
organizational or governing documents of such Person.
"Governmental Authority" means any national, state or local
government (whether domestic or foreign), any political subdivision thereof or
any other governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity, (including, but not
limited to, any zoning authority, FERC, the Securities Exchange Commission, the
Minnesota Public Utilities Commission, the Public Utilities Commission of Texas,
the Comptroller of the Currency or the Federal Reserve Board, any central bank
or any comparable authority) or any arbitrator with authority to bind a party at
law.
"Governmental Rule" means any law, rule, regulation, ordinance,
order, code interpretation, treaty, judgment, decree, directive, guidelines,
policy or similar form of decision of any Governmental Authority.
16
"Granting Bank" has the meaning given in Section 9.13.2 of the
Credit Agreement.
"Group Pledge and Security Agreement" means the Pledge and Security
Agreement, dated as of the Closing Date, in substantially the form of Exhibit
D-10 to the Credit Agreement by and among Borrower, CDHI, FEC-LP, FEC-GP and the
Collateral Agent.
"Hazardous Substances" means (statutory acronyms and abbreviations
having the meaning given them in the definition of "Hazardous Substances Laws")
substances defined as "hazardous substances," "pollutants" or "contaminants" in
Section 101 of the CERCLA; those substances defined as "hazardous waste,"
"hazardous materials" or "regulated substances" by the RCRA; those substances
designated as a "hazardous substance" pursuant to Section 311 of the CWA; those
substances defined as "hazardous materials" in Section 103 of the HMTA; those
substances regulated as a hazardous chemical substance or mixture or as an
imminently hazardous chemical substance or mixture pursuant to Section 6 or 7 of
the TSCA; those substances defined as "contaminants" by Section 1401 of the
SDWA, if present in excess of permissible levels; those substances regulated by
the Oil Pollution Act; those substances defined as a pesticide pursuant to
Section 2(u) of the FIFRA; those substances defined as a source, special nuclear
or by-product material by Section 11 of the AEA; those substances defined as
"residual radioactive material" by Section 101 of the UMTRCA; those substances
defined as "toxic materials" or "harmful physical agents" pursuant to Section 6
of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part
261.3; those substances defined as hazardous waste constituents in 40 C.F.R.
Part 260.10, specifically including Appendix VII and VIII of Subpart D of 40
C.F.R. Part 261; those substances designated as hazardous substances in 40
C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous substances
or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as
hazardous materials, hazardous substances, or toxic substances in 40 C.F.R. Part
1910; those substances regulated as hazardous materials, hazardous substances,
or toxic substances in any other Hazardous Substances Laws; and those substances
regulated as hazardous materials, hazardous substances, or toxic substances in
the regulations adopted and publications promulgated pursuant to said laws,
whether or not such regulations or publications are specifically referenced
herein.
"Hazardous Substances Law" means any of:
(i) the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA");
(ii) the Federal Water Pollution Control Act (33 U.S.C. Section 1251
et seq.) ("Clean Water Act" or "CWA");
(iii) the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.) ("RCRA");
(iv) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.)
("AEA");
(v) the Clean Air Act (42 U.S.C. Section 7401 et seq.) ("CAA");
17
(vi) the Emergency Planning and Community Right to Know Act (42
U.S.C. Section 11001 et seq.) ("EPCRA");
(vii) the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. Section 136 et seq.) ("FIFRA");
(viii) the Oil Pollution Act of 1990 (P.L. 101-380, 104 Stat. 486);
(ix) the Safe Drinking Water Act (42 U.S.C. Section 300f et seq.)
("SDWA");
(x) the Surface Mining Control and Reclamation Act of 1974 (30
U.S.C. Section 1201 et seq.) ("SMCRA");
(xi) the Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.) ("TSCA");
(xii) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 et seq.) ("HMTA");
(xiii) the Uranium Mill Tailings Radiation Control Act of 1978 (42
U.S.C. Section 7901 et seq.) ("UMTRCA");
(xiv) the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.) ("OSHA");
(xv) the Texas Solid Waste Disposal Act (Tex. Health & Safety Code,
Section 361.001 et seq.);
(xvi) the Texas Clean Air Act (Tex. Health & Safety Code, Section
382.001 et seq.);
(xvii) Subtitle D of the Texas Water Code (Tex. Water Code, Section
26.001 et seq.);
(xviii) the Texas Oil Spill Prevention and Response Act (Tex. Nat.
Res. Code, Section 40.001 et seq.);
(xix) the Minnesota Environmental Response and Liability Act (Minn.
Stat. Chap. 115B) ("MERLA");
(xx) the Minnesota Petroleum Tank Release Cleanup Act (Minn. Stat.
Chap. 115C);
(xxi) the Minnesota Agricultural Chemical Liability Act (Minn. Stat.
Chap. 18D);
(xxii) the Minnesota Oil and Hazardous Substance Discharge
Preparedness Act (Minn. Stat. Chap. 115E);
18
(xxiii) the Minnesota Pollution Control Agency Act (Minn. Stat.
Chap. 116);
(xxiv) the Minnesota Water Pollution Control Act (Minn. Stat. Chap.
115); and
(xxv) all other Federal, state and local Governmental Rules relating
to the protection of human health or the environment or which otherwise govern
Hazardous Substances, and the regulations adopted and publications promulgated
pursuant to all such foregoing laws.
"Hedge Bank" means a Lender, or any Affiliate thereof which, in any
case, is party to an Interest Rate Agreement with Borrower, in its capacity as
counterparty to such Interest Rate Agreement.
"Hedge Breaking Fees" has the meaning given in Section 5.21.2 of the
Credit Agreement.
"Hedge Transaction" means any "Transaction" (such as swaps, caps,
collars or floors) entered into under an Interest Rate Agreement.
"High-Grade Collateral" or "HGC" has the meaning given in Section
11.1(C) of the Power Purchase Agreement.
"HRSG Vendor" means Nooter/Eriksen, Inc., a Missouri corporation.
"Improvements" has the meaning given in the FEC Deed of Trust or MEC
Mortgage.
"Inchoate Default" or "Default" means any occurrence, circumstance
or event, or any combination thereof, which, with the lapse of time or the
giving of notice or both, would constitute an Event of Default.
"Indemnitees" has the meaning given in Section 5.11.1 of the Credit
Agreement.
"Independent Consultants" means, collectively, the Insurance
Consultant, the Power Market Consultant and the Independent Engineer.
"Independent Engineer" means R.W. Beck, Inc.
"Independent Engineer's Drawdown Certificate" has the meaning given
in Section 3.2.6(b) of the Credit Agreement.
"Initial Allocated Portion" means the Initial FEC Allocated Portion
or the Initial MEC Allocated Portion.
"Initial FEC Allocated Portion" has the meaning given in Section
2.1.1(a) of the Credit Agreement.
19
"Initial MEC Allocated Portion" has the meaning given in Section
2.1.1(a) of the Credit Agreement.
"Initial Principal Repayment Date" means March 31, 2007.
"Insurance Consultant" means Moore-McNeil, LLC.
"Insurance Proceeds" has the meaning given in the applicable
Depositary Agreement.
"Interest Period" means, with respect to any LIBOR Loan, the time
period selected by Borrower or provided for pursuant to the Credit Agreement
which commences on the first day of such Loan, or the effective date of any
conversion (as the case may be) and ends on the last day of such time period.
"Interest Rate" means the Base Rate or the LIBO Rate, as the case
may be.
"Interest Rate Agreements" means one or more interest rate swap
agreements, caps, collars, or other master interest rate hedging mechanisms,
each in substantially the form of Exhibit D-12 to the Credit Agreement, with
such changes as are reasonably required by each Hedge Bank which do not
materially change the substance thereof, and in each case having a term that
does not extend beyond the Term Loan Maturity Date.
"Interest Rate Determination Date" means, with respect to any
Interest Period, two Banking Days prior to the first day of such Interest
Period.
"LC Issuer" has the meaning given in the Recitals of the Credit
Agreement.
"Lead Arrangers" means CoBank, ACB, Calyon New York Branch, HSH
Nordbank AG, UFJ Bank Limited, and Bayerische Hypo- und Vereinsbank AG, New York
Branch.
"Legal Requirements" means, as to any Person, the Governing
Documents of such Person, any requirement under a Permit, and any Governmental
Rule in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its property is subject.
"Lender" or "Lenders" means the banks and other similar financial
institutions (including any insurance company or other financial institution
(whether a corporation, partnership, trust or other entity) that is (a) engaged
in making, purchasing or otherwise investing in commercial loans in the ordinary
course of business, (b) reasonably experienced in project finance transactions
similar to the financing contemplated by the Credit Documents, and (c) capable
of advancing Loans, and in each case having total assets in excess of
$100,000,000) that are or become parties to the Credit Agreement and their
successors and assigns including each Lender. For purposes of determining
Obligations secured by the Collateral, each Hedge Bank shall be deemed a
"Lender" party to the Credit Agreement and Credit Documents to the extent so
specified in Section 5.21.3 of the Credit Agreement.
20
"Lending Office" means, with respect to any Lender, the office
designated in writing as such to Administrative Agent and Borrower from time to
time.
"LIBO Rate" means, with respect to any LIBOR Loan for any Interest
Period, the rate per annum determined by Administrative Agent at approximately
11:00 a.m. (London time) on the Interest Rate Determination Date by reference to
the British Bankers' Association Interest Settlement Rates for deposits in
Dollars (as set forth by any service selected by Administrative Agent which has
been nominated by the British Bankers' Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to such
Interest Period; provided that, to the extent that an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition, the "LIBO
Rate" shall be the interest rate per annum determined by Administrative Agent to
be the average of the rates per annum at which deposits in Dollars are offered
for such Interest Period to major banks in the London interbank market in
London, England by Administrative Agent at approximately 11:00 a.m. (London
time) on the Interest Rate Determination Date. Each determination by
Administrative Agent pursuant to this definition shall be conclusive in the
absence of manifest error.
"LIBOR Construction Loan" has the meaning given in Section
2.1.1(b)(i) of the Credit Agreement.
"LIBOR Loans" means, collectively, the LIBOR Construction Loans and
the LIBOR Term Loans.
"LIBOR Security Fund LC Loan" means a Security Fund LC Loan that
shall bear interest at the rate set forth in Section 2.2.3(b) of the Credit
Agreement.
"LIBOR Term Loan" has the meaning given in Section 2.1.2(b)(i)(B) of
the Credit Agreement.
"Lien" means, with respect to any property or asset, any mortgage,
deed of trust, lien, pledge, charge, security interest, or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected or effective under applicable law, as well as the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Liquidation Costs" has the meaning given in Section 2.9(f) of the
Credit Agreement.
"Loan Transactions" has the meaning given the Section 11.22 of the
Credit Agreement.
"Loans" means, collectively, the Construction Loans, the Term Loans
and the Security Fund LC Loan.
"Loss Proceeds" has the meaning given in of the applicable
Depositary Agreement.
21
"Loss Proceeds Account" means the "Loss Proceeds Account" as defined
in the respective Project Company Depositary Agreements.
"Major Casualty Event" has the meaning given in the respective
Project Company Depositary Agreements.
"Major Equipment Contracts" means, collectively, (a) the Purchase
Contract for One Heat Recovery Steam Generator & Accessories, dated as of May
17, 2004, between HRSG Vendor and MEC, (b) the Purchase Contract for Steam
Turbine Generator and Accessories, dated as of July 28, 2004, between Toshiba
International Corporation and MEC, (c) the Purchase Contract for One Gas Turbine
Generator & Accessories, dated as of August 30, 2004, between Siemens
Westinghouse Power Corporation and MEC, (d) the Purchase Contract for Four
Auxiliary Boilers and Accessories, dated as of December 8, 2003, between Rentech
and FEC, and (e) the Purchase Contract for Steam Turbine Generator and
Accessories, dated as of August 27, 2004, between Toshiba International
Corporation and Construction Contractor.
"Major Maintenance" means labor, materials and other direct expenses
for any overhaul of, or major maintenance procedure for, the Projects which
require significant disassembly or shutdown of the Projects, (a) in accordance
with Prudent Utility Practices, (b) pursuant to manufacturers' requirements to
avoid voiding any such manufacturer's warranty, or (c) pursuant to any
applicable Legal Requirement, not including any subordinated major maintenance
fee.
"Major Maintenance Plan" has the meaning given in Section 5.14.5 of
the Credit Agreement.
"Major Maintenance Reserve Letter of Credit" has the meaning given
in Section 3.4.3(a) of the respective Project Company Depositary Agreements.
"Major Maintenance Reserve Requirement" means, for each Project, the
"Major Maintenance Reserve Requirement" as defined in the applicable Project
Company Depositary Agreement.
"Major Maintenance Service Arrangement" means Appendix E to the
Capacity Sales Agreement.
"Major Project Documents" means FEC Major Project Documents and MEC
Major Project Documents.
"Major Project Participants" means FEC Major Project Participants
and MEC Major Project Participants.
"Majority Lenders" means, at any time, Lenders having Proportionate
Shares which in the aggregate exceed 50%.
"Mandatory Prepayment" has the meaning given in Section 2.1.7(c) of
the Credit Agreement.
22
"Mandatory Prepayment Account" has the meaning given in Section 1.1
of the Borrower Depositary Agreement.
"Mankato Project" has the meaning in the Recitals of the Credit
Agreement.
"Material Adverse Effect" or "Material Adverse Change" means (a) a
material adverse change in the business, property, prospects, results of
operation or financial condition of Borrower (b) any event or occurrence of
whatever nature which could reasonably be expected to materially and adversely
affect Borrower's, Dow's, NSP's or CCMCI's ability to perform its material
obligations under the Operative Documents, and (c) any event or occurrence of
whatever nature which could reasonably be expected to materially and adversely
affect the value, validity or priority of the Secured Parties' security
interests in the Collateral.
"Maturity" or "maturity" means, with respect to any Loan, Borrowing,
interest, fee or other amount payable by Borrower under the Credit Agreement or
the other Credit Documents, the date such Loan, Borrowing, interest, fee or
other amount becomes due, whether upon the stated maturity or due date, upon
acceleration or otherwise.
"MEC" has the meaning given in the Recitals of the Credit Agreement.
"MEC Additional Project Documents" means any material contracts or
agreements related to the construction, testing, maintenance, repair, operation
or use of the Mankato Project entered into by MEC and any other Person, or
assigned to MEC, subsequent to the Closing Date; provided that all such
contracts and agreements providing for the payment by MEC of less than $500,000
per annum individually, or the provision to MEC of less than $1,000,000 per
annum individually in value of goods or services, or providing for a maximum
term of less than one year shall be deemed not to constitute a MEC Additional
Project Document; and provided, further, that the MEC Additional Project
Documents shall not include any Owner/Third Party Contracts (as defined in the
MEC Construction Contract).
"MEC Allocated Portion" means the outstanding principal amount of
the Loans from time to time, deemed to be allocable to the Mankato Project by
virtue of having been initially designated as part of the MEC Allocated Portion
pursuant to a Notice of Construction Loan Borrowing (including Loans meeting the
conditions set forth in Section 3.4), and not deemed repaid pursuant to Sections
2.1.2(d), 2.1.7(a)(iii), 2.1.7(b) or 11.23 of the Credit Agreement.
"MEC Checking Account" means the "Checking Account" as defined in
the MEC Depositary Agreement.
"MEC Checking Account Bank" means the "Checking Account Bank" as
defined in the MEC Depositary Agreement.
"MEC Completion Undertaking Agreement" means the Completion
Undertaking Agreement, dated as of the Closing Date between CCMCI and Borrower
23
"MEC Construction Account" means the "Construction Account" created
pursuant to the MEC Depositary Agreement.
"MEC Construction Contract" means the Engineering, Procurement and
Construction Agreement, dated as of February 25, 2005, between the Construction
Contractor and MEC.
"MEC Construction Contract Guaranty" means the Guaranty, dated as of
February 25, 2005, between Sponsor and MEC.
"MEC Control Agreement" means that certain control agreement to be
entered into among MEC, Collateral Agent and MEC Checking Account Bank regarding
the perfection of Collateral Agent's Lien on the MEC Checking Account.
"MEC Depositary Agreement" means the Depositary Agreement, dated as
of the Closing Date, in substantially the form of Exhibit D-6 to the Credit
Agreement, among MEC, Administrative Agent, Collateral Agent and Depositary
Agent.
"MEC Easements" means shall have the meaning given in the MEC
Mortgage.
"MEC Gas Interconnection Agreement" means the Facility Interconnect,
Construction and Reimbursement Agreement, dated effective December 8, 2004,
between MEC and Northern Natural Gas.
"MEC Guaranties" means the MEC Secured Guaranty and the MEC
Unsecured Guaranty.
"MEC Interconnection Agreement" means the Interconnection and
Operating Agreement, dated November 17, 2004, among MEC, Midwest Independent
Transmission System Operator, Inc. and NSP, doing business as Xcel Energy.
"MEC Loss Proceeds Account" means the "Loss Proceeds Account"
created pursuant to the MEC Depositary Agreement.
"MEC Major Maintenance Reserve Account" means the "Major Maintenance
Reserve Account" created pursuant to the MEC Depositary Agreement.
"MEC Major Project Documents" means the Power Purchase Agreement,
the MEC Interconnection Agreement, the MEC O&M/Major Maintenance Agreement, the
MEC Construction Contract, the Water Services Agreement, the MEC Gas
Interconnection Agreement, the MEC Completion Undertaking Agreement, the MEC
Construction Contract Guaranty, any guaranty agreements related to the foregoing
executed by Persons in favor of MEC and, unless otherwise agreed by
Administrative Agent prior to its execution and delivery, any MEC Additional
Project Documents.
"MEC Major Project Participants" means, without duplication,
Borrower, MEC, Sponsor (until CCMCI's obligations under MEC's Construction
Contract are fully performed),
24
CCMCI (until CCMCI's obligations under MEC's Construction Contract are fully
performed), Operator, NSP, the City of Mankato, Northern Natural Gas, and any
Person other than those so listed which provides any guaranty agreement with
respect to a MEC Major Project Document, and any counterparty to any MEC
Additional Project Document which is a MEC Major Project Document.
"MEC Mortgage" means the Mortgage, Security Agreement and Fixture
Filing, dated on or about the Closing Date, in substantially the form of Exhibit
D-2 to the Credit Agreement, by MEC in favor of Collateral Agent.
"MEC Mortgaged Property" means the "Premises" as defined in the MEC
Mortgage.
"MEC Note" means the promissory note in the form of Exhibit B-4 to
the Credit Agreement.
"MEC O&M Account" means the "O&M Account" created pursuant to the
MEC Depositary Agreement.
"MEC O&M/Major Maintenance Agreement" means the Operations and
Maintenance Services and Major Maintenance Work Agreement, dated as of October
1, 2004, between MEC and Operator.
"MEC Project Documents" means, without duplication, the MEC Major
Project Documents, the MEC Easements, the NSP Subordinated Mortgage and any
other agreement relating to the development, construction or operation of the
Mankato Project to which MEC is a party, provided, that the MEC Project
Documents shall not include any Owner/Third Party Contracts (as defined in the
MEC Construction Contract).
"MEC Revenue Account" means the "Revenue Account" created pursuant
to the MEC Depositary Agreement.
"MEC Secured Guaranty" means the Guaranty, dated as of the Closing
Date, in substantially the form of Exhibit D-14 to the Credit Agreement between
MEC and Collateral Agent.
"MEC Security Agreement" means the Security Agreement, dated as of
the Closing Date, in substantially the form of Exhibit D-15 to the Credit
Agreement between MEC and Borrower.
"MEC Site" means the Land, as defined in the MEC Mortgage.
"MEC Unsecured Guaranty" means the Guaranty, dated as of the Closing
Date, in substantially the form of Exhibit D-19 to the Credit Agreement between
MEC and Collateral Agent.
25
"MEC Waterfall Level" means the "Waterfall Level" as defined in the
MEC Depositary Agreement.
"Minimum Notice Period" means (a) at least three Banking Days before
the date of any Borrowing, Term-Conversion, continuation or conversion of a Type
of Loan resulting in whole or in part in one or more LIBOR Construction Loans or
LIBOR Term Loans, and (b) at least one Banking Day before any Borrowing,
Term-Conversion or conversion of a Type of Loan resulting in whole or in part in
one or more Base Rate Construction Loans or Base Rate Term Loans.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means any Plan that is a "multiemployer plan"
(as such term is defined in Section 3(37) or 4001(a)(3) of ERISA).
"Non-Advancing Bank" has the meaning given in Section 9.12 of the
Credit Agreement.
"Nonrecourse Persons" has the meaning given in Article 8 of the
Credit Agreement.
"NNG" means Northern Natural Gas Corporation, a Delaware
corporation.
"Notes" means, collectively, any Construction Notes, any Term Notes
and any Security Fund LC Loan Notes.
"Notice of Construction Loan Borrowing" has the meaning given in
Section 2.1.1(b) of the Credit Agreement.
"Notice of Conversion of Loan Type" has the meaning given in Section
2.1.6 of the Credit Agreement.
"Notice of Term-Conversion" has the meaning in Section 2.1.2(b) of
the Credit Agreement.
"NSP" means Northern States Power Company, a Minnesota corporation.
"NSP Acknowledgment of Subordination" means the Consent and
Agreement Concerning Subordinated Mortgage, Security Agreement and Financing
Statement, dated as of a date on or prior to the Closing Date, in substantially
the form of Exhibit D-8 to the Credit Agreement, among NSP, MEC and Collateral
Agent.
"NSP Subordinated Mortgage" means the Subordinated Mortgage,
Assignment of Leases and Rents, Security Agreement and Financing Statement dated
August 23, 2004, by MEC in favor of NSP, as supplemented by the NSP
Acknowledgement of Subordination.
26
"O&M Agreements" means the FEC O&M Agreement and the MEC O&M
Agreement.
"O&M Costs" means, for any period, cash amounts incurred and paid by
FEC and/or MEC for the operation and maintenance of its respective Project or
any portion thereof (other than as funded from the MEC Major Maintenance Reserve
Account or the FEC Major Maintenance Reserve Account), in connection with MEC's
use of any Alternate Generation Source (as such term is defined in the Power
Purchase Agreement) and for the purchase of goods and services in connection
therewith, including (a) premiums for insurance policies, (b) fuel supply and
fuel transportation costs (to the extent incurred in connection with the sale of
electrical products under the Capacity Sales Agreement (in the case of the
Freeport Project) or the Power Purchase Agreement (in the case of the Mankato
Project)) and the cost of other consumables, (c) costs of obtaining any other
materials, supplies, utilities or services for the Projects, (d) costs of
maintaining, renewing and amending Permits, (e) franchise, licensing, property,
real estate, sales and excise taxes, (f) general and administrative expenses,
(g) employee salaries, wages and other employment-related costs, (h) business
management and administrative service fees, (i) costs required to be paid by
each Project under any Project Document or Credit Document (other than scheduled
Debt Service and Project Costs) or to satisfy any Legal Requirement or obtain or
maintain any Permit, (j) legal, accounting and consulting fees and other
transaction costs and all other fees payable to the Lenders allocable to FEC or
MEC, as the case may be (other than amounts constituting scheduled Debt
Service), (k) necessary capital expenditures (other than capital expenditures
made in connection with the repair or restoration of any casualty suffered by
the Projects to the extent funded with insurance or similar proceeds applied
pursuant to Section 3.5 of the FEC Depositary Agreement or Section 3.5 of the
MEC Depositary Agreement or infusions of equity pursuant to the Credit
Documents), (l) all other fees and expenses necessary for the continued
operation and maintenance of the Projects and the conduct of the business of the
Projects, and (m) Emergency Operating Costs (except for Emergency Operating
Costs in connection with the repair or restoration of any casualty suffered by
the Projects to the extent funded with insurance or similar proceeds applied
pursuant to Section 3.5 of the FEC Depositary Agreement or Section 3.5 of the
MEC Depositary Agreement or infusions of equity pursuant to the Credit
Documents), but exclusive in all cases of non-cash charges, including
depreciation or obsolescence charges or reserves therefor, amortization of
intangibles or other bookkeeping entries of a similar nature, and also exclusive
of all interest charges and charges for the payment or amortization of principal
of indebtedness of Borrower. O&M Costs shall not include (i) costs of Major
Maintenance to the extent paid with funds on deposit in the MEC Major
Maintenance Reserve Account or the Borrower Major Maintenance Account, (ii)
Subordinated Payments, (iii) depreciation, (iv) payments for restoration or
repair of the Projects from the Loss Proceeds Account in accordance with the
terms of the applicable Depositary Agreement, or (v) costs and fees associated
with the maintenance of the Undertaking Support LCs or any Collateral
Replacement LCs.
"Obligations" means and includes, with respect to any Person, all
loans, advances, debts, liabilities, and obligations, howsoever arising, owed by
such Person to the Lead Arrangers, Administrative Agent, Depositary Agent,
Collateral Agent, the Hedge Banks or the Lenders of
27
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, pursuant to
the terms of the Credit Agreement or any of the other Credit Documents,
including all interest, fees, charges, expenses, attorneys' fees and accountants
fees chargeable to such Person and payable by such Person hereunder or
thereunder.
"Operating Budget Category" means (a) individually, any line item
category set forth in that portion of the then-current Annual Operating Budget
for a Project showing sources and uses of Project funds, and (b) collectively,
all line item categories set forth in that portion of the then-current Annual
Operating Budget for a Project showing sources and uses of Project funds.
"Operating Cash Available for Debt Service" means, for any period,
Project Revenues during such period minus (a) O&M Costs during such period, and
(b) deposits into the MEC Major Maintenance Reserve Account or the FEC Major
Maintenance Reserve Account during such period.
"Operative Documents" means, collectively, the Credit Documents and
the Project Documents.
"Operator" means Calpine Operating Services Company, Inc., a
Delaware corporation.
"Other Taxes" has the meaning given in Section 2.6.4(a) of the
Credit Agreement.
"Payment Period" means the three-month period commencing on a
Quarterly Payment Date and ending on the day prior to the next Quarterly Payment
Date.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Performance Tests" means the Performance Tests as defined and
required under the Construction Contracts.
"Permit" means any action, approval, consent, waiver, exemption,
variance, franchise, order, permit, authorization, right or license of or from a
Governmental Authority.
"Permitted Debt" means (a) Debt incurred under the Credit Documents,
(b) Debt incurred by a Project Company pursuant to the terms of a Project
Document (but not for borrowed money), either not more than 90 days past due or
being contested in good faith, (c) trade or other similar Debt incurred by a
Project Company in the ordinary course of business (but not for borrowed money),
either not more than 90 days past due or being contested in good faith, (d)
contingent liabilities of Borrower and the Project Companies, to the extent
otherwise constituting Debt, including those relating to (i) the acquisition of
goods, supplies or merchandise in the normal course of business or normal trade
credit, (ii) the endorsement of negotiable instruments received in the normal
course of its business, and (iii) contingent
28
liabilities incurred with respect to any Applicable Permit or Operative
Document, (e) purchase money obligations incurred by a Project Company to
finance the purchase price of discrete items of equipment not comprising an
integral part of a Project that extend only to the equipment being financed in
an aggregate amount of secured principal and capital lease obligations not
exceeding $1,000,000 at any one time outstanding, (f) obligations of a Project
Company in respect of surety bonds or similar instruments in an aggregate amount
not exceeding $1,000,000 at any one time outstanding, (g) Debt incurred to
finance an expansion of either Project in accordance with Section 11.24 of the
Credit Agreement and (h) Debt incurred by Borrower in connection with the
purchase of two Siemens 501F combustion turbines from CCMCI, as evidenced by the
Subordinated Note.
"Permitted Investments" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having a maturity not exceeding
one year from the date of issuance, (b) interest-bearing deposit accounts,
including time deposits and certificates of deposit, of any Lender or any
domestic or foreign commercial bank whose outstanding long-term debt is rated at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's having capital and surplus in excess of $500,000,000 having a
maturity not exceeding 90 days from the date of acquisition, (c) commercial
paper issued by any domestic corporation rated at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's and, in each
case, having a maturity not exceeding 90 days from the date of acquisition, (d)
fully secured repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any bank meeting the qualifications established in clause (b) above, (e)
high-grade corporate bonds rated at least AA or the equivalent thereof by S&P or
at least Aa2 or the equivalent thereof by Moody's having a maturity not
exceeding 90 days from the date of acquisition, (f) banker's acceptances drawn
on and accepted by any domestic or foreign commercial bank whose long-term
senior unsecured debt is rated at least A or the equivalent thereof by S&P or at
least A2 or the equivalent thereof by Moody's, (g) money market mutual funds
whose investment criteria are substantially similar to items (a) through (f) of
this definition, (h) instruments issued by an investment company rated at least
A or the equivalent thereof by S&P or at least A2 or the equivalent thereof by
Moody's having a portfolio consisting of 95% or more of the securities described
in items (a) through (g) of this definition, and (i) investment contracts
pursuant to which moneys are deposited (to bear interest at an agreed rate) with
a bank, insurance company or other financial institution whose long-term senior
unsecured debt is rated at least A or the equivalent thereof by S&P or at least
A2 or the equivalent thereof by Moody's.
"Permitted Liens" means (a) the rights and interests of Collateral
Agent and any other Secured Party in Borrower, FEC-GP, FEC-LP, the Project
Companies and their respective assets as provided in the Credit Documents, (b)
Liens of Borrower and the Project Companies for any tax, assessment or other
governmental charge, either secured by a bond or other security reasonably
acceptable to Administrative Agent or not yet due or being contested in good
faith and by appropriate proceedings, so long as (i) such proceedings shall not
involve any substantial danger of the sale, forfeiture or loss of the Projects,
the Sites or any Easements, or ownership
29
interest in either Project Company, as the case may be, title thereto or any
interest therein and shall not interfere in any material respect with the use or
disposition of the Projects, the Sites or any Easements, or ownership interest
in either Project Company, (ii) a bond or other security reasonably acceptable
to Administrative Agent has been posted or provided in such manner and amount as
to assure Administrative Agent that any taxes, assessments or other charges
determined to be due will be promptly paid in full when such contest is
determined, or (iii) adequate cash reserves have been provided therefor, (c)
materialmen's, mechanics', workers', repairmen's, employees' or other like Liens
of the Project Companies, arising in the ordinary course of business or in
connection with the construction of the Projects, either for amounts not yet due
or for amounts being contested in good faith and by appropriate proceedings, so
long as (i) such proceedings shall not involve any substantial danger of the
sale, forfeiture or loss of the Projects, the Sites or any Easements, or
ownership interest in either Project Company, as the case may be, title thereto
or any interest therein and shall not interfere in any material respect with the
use or disposition of the Projects, the Sites or any Easements, or ownership
interest in either Project Company, (ii) a bond or other security reasonably
acceptable to Administrative Agent has been posted or provided in such manner
and amount as to assure Administrative Agent that any amounts determined to be
due will be promptly paid in full when such contest is determined, or (iii)
adequate cash reserves have been provided therefor, (d) Liens of Borrower and
the Project Companies arising out of judgments or awards so long as an appeal or
proceeding for review is being prosecuted in good faith and for the payment of
which adequate reserves, bonds or other security reasonably acceptable to
Administrative Agent have been provided or are fully covered by insurance, (e)
Title Exceptions with respect to the Project Companies, (f) Liens, deposits or
pledges of the Project Companies to secure statutory obligations or performance
of bids, tenders, contracts (other than for the repayment of borrowed money) or
leases, or for purposes of like general nature in the ordinary course of its
business, not to exceed $500,000 in the aggregate at any time, and with any such
Lien to be released as promptly as practicable, (g) other Liens of the Project
Companies incident to the ordinary course of business that are not incurred in
connection with the obtaining of any loan, advance or credit and that do not in
the aggregate materially impair the use of the property or assets of Borrower or
the value of such property or assets for the purposes of such business, (h)
involuntary Liens of Borrower or the Project Companies as contemplated by the
Operative Documents (including a lien of an attachment, judgment or execution)
securing a charge or obligation, on any of the applicable Borrower Party's
property, either real or personal, whether now or hereafter owned in the
aggregate sum of less than $500,000, (i) the rights and interests of NSP in MEC
as provided under the NSP Subordinated Mortgage (as supplemented by the NSP
Acknowledgement of Subordination), and (j) Liens created to secure Debt incurred
pursuant to clause (g) of the definition of Permitted Debt.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, Governmental Authority or any other entity
whether acting in an individual, fiduciary or other capacity.
"Plans and Specifications" means the plans and specifications for
the construction and design of each Project as set forth in the applicable
Construction Contracts and, in the case
30
of FEC, the Dow Agreements, as updated from time to time, and any other similar
design, engineering or technical documents referred to in such Construction
Contracts.
"Power Market Consultant" means Pace Global Energy Services.
"Power Purchase Agreement" means the Purchased Power Agreement,
dated as of March 11, 2004, between NSP and MEC.
"Principal Repayment Dates" means (a) the Initial Principal
Repayment Date and each three month anniversary thereof until the Term Loan
Maturity Date, and (b) the Term Loan Maturity Date.
"Project Budget" has the meaning given in Section 3.1.18 of the
Credit Agreement.
"Project Commercial Operation Date" has the meaning given in the
Capacity Sales Agreement.
"Project Companies" has the meaning given in the Recitals of the
Credit Agreement.
"Project Company Guaranties" means the FEC Guaranty and the MEC
Guaranties.
"Project Costs" means, other than as set forth in the proviso below,
all costs associated with the development, design, engineering, construction,
testing, installation, equipping, assembly, inspection, completion, and start-up
of the Projects incurred prior to the Term Period Commencement Date, including:
(a) all amounts payable under the Construction Contracts, any state taxes on
equipment, site acquisition and preparation costs, any interconnection costs
payable by MEC pursuant to the Interconnection Agreement, any interconnection
costs payable by FEC pursuant to, or in connection with the FEC Interconnection
Agreement, all water and wastewater disposal interconnection and pumping station
or water well costs by FEC or MEC, (b) financing, advisory, legal and other
fees, (c) all other Project-related costs and other development costs, insurance
costs, management services fees and expenses and expenses to complete the
development, design, construction and financing of both Projects, (d)
contingency funds, start-up costs and initial working capital costs, (e) O&M
Costs due and payable prior to Term-Conversion, (f) interest and fees incurred
on or in respect of any Construction Loan or the Construction Loan Commitment
pursuant to the Credit Agreement prior to Term-Conversion, (g) payments and fees
under the Interest Rate Agreements payable prior to Term-Conversion, (h) amounts
necessary to fund the Debt Service Reserve Account up to 50% of the DSR Minimum
Balance as of the Term Period Commencement Date (i) costs incurred with
purchasing spare parts, and (j) amounts funded by each Project to its working
capital reserve as required under the applicable Depositary Agreement; provided,
that Project Costs shall not include (i) Subordinated Payments, and (ii) costs
and fees associated with the maintenance of the Undertaking Support LCs and any
Collateral Replacement LCs.
31
"Project Document Modification" has the meaning given in Section
6.12.1 of the Credit Agreement.
"Project Documents" means, without duplication, the FEC Project
Documents and the MEC Project Documents.
"Project Revenues" means, without duplication, all income and cash
receipts of Borrower Parties derived from the ownership or operation of the
Projects, including payments received by Borrower under either Completion
Undertaking Agreement, MEC under the Power Purchase Agreement, the MEC
Construction Contract, the MEC Construction Contract Guaranty and the MEC O&M
Agreement, and payments received by FEC under the Capacity Sales Agreement, the
FEC Construction Contracts, the FEC Construction Contract Guaranty, the FEC O&M
Agreement, proceeds of any delay in start up or business interruption or
liability insurance (to the extent such liability insurance proceeds represent
reimbursement of third party claims previously paid by Borrower Parties), income
derived from the sale or use of electric capacity, energy or related products
transmitted or distributed or ancillary services or other related products
produced by the Projects, payments for remarketing of fuel or transportation
rights relating thereto and investment income on amounts in the Accounts (solely
to the extent deposited in the applicable Account), but excluding (a) net
payments, if any, received by Borrower Parties under Hedge Transactions, as
determined in conformity with cash accounting principles, (b) any receipts
derived from the sale of any property pertaining to the Projects or incidental
to the operation of the Projects, as determined in conformity with cash
accounting principles, (c) proceeds of casualty insurance, (d) performance
liquidated damages under the Construction Contracts or the Completion
Undertaking Agreements, (e) the proceeds of any condemnation awards relating to
the Projects, (f) proceeds from the Collateral Documents, and (g) any liquidated
damages under the Major Equipment Contracts, to the extent applied as a setoff
against amounts owed to the applicable Project Company by the Construction
Contractor.
"Project Schedule" means the schedule for construction and
completion of the Projects as set forth in the schedule attached as Exhibit G-4
to the Credit Agreement.
"Projects" has the meaning given in the Recitals of the Credit
Agreement.
"Proportionate Share" means (a) in the context of voting in matters
requiring the vote of all or a percentage of the Lenders and indemnification
obligations of the Lenders under Section 9.5 of the Credit Agreement, with
respect to each Lender (including without duplication, to the extent provided
herein, each Hedge Bank in its capacity as a Lender under Section 5.21.3 of the
Credit Agreement) at any time, a percentage equal to the quotient of (i) the sum
of (A) the percentage interest of such Lender in the Total Construction Loan
Commitment (or, after Term-Conversion, the Total Term Loan Commitment), as set
forth on Exhibit H to the Credit Agreement (as may be amended pursuant to
Article 9 of the Credit Agreement), multiplied by the Total Construction Loan
Commitment (or, after Term-Conversion, the Total Term Loan Commitment) plus (B)
the percentage interest of such Lender in the Interest Rate Agreements, as set
forth on Exhibit H to the Credit Agreement, multiplied by the Hedge Breaking
Fees actually payable (and not on a "marked to market" basis) at such time
(determined upon the close of the applicable voting period), divided by (ii) the
sum of (A) the Total Construction Loan
32
Commitment (or, after Term-Conversion, the Total Term Loan Commitment) plus (B)
the Hedge Breaking Fees actually payable (and not on a "marked to market" basis)
at such time (determined upon the close of the applicable voting period), and
(b) with respect to each Lender at any time in the context of funding
Construction Loans or Term Loans, the percentage participation of such Lender in
the Total Construction Loan Commitment or Total Term Loan Commitment,
respectively, as set forth on Exhibit H to the Credit Agreement (as may be
amended pursuant to Article 9 of the Credit Agreement). Upon any transfer by a
Lender of all or part of its Commitments, Administrative Agent shall revise
Exhibit H to reflect the Lenders' Proportionate Shares after giving effect to
such transfer.
"Prudent Utility Practices" means those practices, methods,
equipment, specifications and standards of safety and performance, as the same
may change from time to time, as are commonly used by electric generation
stations in Texas (in the case of the Freeport Project) or Minnesota (in the
case of the Mankato Project) of a type and size similar to the Projects as good,
safe and prudent engineering practices in connection with the design,
construction, operation, maintenance, repair and use of electrical and other
equipment, facilities and improvements of such electrical station, with
commensurate standards of safety, performance, dependability, efficiency and
economy, provided however, that, so long as the FEC O&M Agreement remains in
full force and effect, "Prudent Utility Practices" means, for FEC, the O&M
Standards (as such term is defined in the FEC O&M Agreement). "Prudent Utility
Practices" does not necessarily mean one particular practice, method, equipment
specification or standard in all cases, but is instead intended to encompass a
broad range of acceptable practices, methods, equipment specifications and
standards.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"Punchlist" means work under the applicable Construction Contracts,
the failure of which to be completed does not, whether individually or in the
aggregate, have, or otherwise cause, a Material Adverse Effect.
"Punchlist Drawing" has the meaning given in Section 3.3.3(a) of the
Credit Agreement.
"Purchase Option" has the meaning given in the Capacity Sales
Agreement.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.
"Put Option" has the meaning given in the Capacity Sales Agreement.
"Qualified Letter of Credit" means one or more unconditional,
irrevocable letters of credit on terms and conditions, and in form and
substance, reasonably satisfactory to Administrative Agent and shall (a) name
Administrative Agent on behalf of the Secured Parties as the beneficiary
thereof, (b) have an aggregate amount available to be drawn at all times greater
than or equal to the amount being secured by such letter of credit, (c) be
issued from a bank, banks, trust company or trust companies not a party to the
Credit Agreement (and otherwise reasonably acceptable to Administrative Agent)
which bank, banks, trust company or
33
trust companies shall have a combined capital and surplus of at least
$1,000,000,000 and whose long-term senior unsecured indebtedness is rated at
least A by S&P and A2 by Moody's, (d) not be secured by any of the Collateral,
and (e) not impose on any Borrower Party any obligation to reimburse drawing
payments thereunder; provided that such letter of credit shall provide that it
shall (i) automatically renew upon the expiration thereof unless, at least 60
days prior to such expiration, the issuer thereof shall provide Administrative
Agent with a notice of non-renewal of such letter of credit, (ii) have an
initial expiration date of at least one year after issuance, and (iii) have a
stated amount equal from time to time to (or, to the extent of cash deposited,
less than) amounts required to be issued as set forth in the Credit Documents.
"Qualifying Facility" means a "qualifying facility" within the
meaning of PURPA and FERC's implementing regulations pertaining thereto.
"Quarterly Payment Date" means the last Banking Day of each calendar
quarter.
"Rate Margin" means, for Construction Loans, 1.75%, and for Term
Loans, the applicable rate set forth below:
TERM PERIOD RATE MARGIN
- ----------- -----------
Years 1-2 1.750%
Years 3-4 1.875%
Year 5 2.000%
"Register" has the meaning given in Section 2.1.8 of the Credit
Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System (or any successor).
"Regulatory Change" means any change after the Closing Date in
federal, state, local or foreign laws, regulations, Legal Requirements or
requirements under Applicable Permits, or the adoption or making after such date
of any interpretations, directives or requests of or under any federal, state,
local or foreign laws, regulations, Legal Requirements or requirements under
Applicable Permits (whether or not having the force of law) by any Governmental
Authority charged with the interpretation or administration thereof.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, pumping, pouring, emitting, escaping, emptying,
seeping, placing or the like, into or upon any land or water or air, or
otherwise entering into the environment.
"Remedial Plan" has the meaning given in Section 5.4.18 of the
Credit Agreement.
"Rentech" means Rentech Boiler Systems, Inc, a state of Texas C
corporation.
34
"Replacement Obligor" means (a) with respect to any Person party to
a Major Project Document in effect on the Closing Date, any Person satisfactory
to Administrative Agent acting at the direction of the Required Lenders, or (b)
with respect to any Person party to an Additional Project Document, any Person
satisfactory to Administrative Agent acting at the direction of the Required
Lenders, as the case may be, applying the approval standards set forth in
Section 6.18 of the Credit Agreement as would otherwise be applied to an
Additional Project Document, and in each case, having credit, or acceptable
credit support, equal to or greater than that of the replaced Person (or
otherwise acceptable to Administrative Agent, or Administrative Agent acting at
the direction of the Required Lenders, as the case may be, in its sole
discretion) on the date that the applicable Major Project Document was entered
into who, pursuant to any definitive agreement, definitive guarantee or
definitive backup arrangement, in each case reasonably satisfactory to
Administrative Agent or Administrative Agent acting at the direction of the
Required Lenders, as the case may be, assumes the obligation of providing the
services and products on terms and conditions no less favorable to such
applicable Borrower Party than those which such Person is obligated to provide
pursuant to the applicable Major Project Document.
"Reportable Event" means any of the events set forth in Section
4043(b) or (c) of ERISA for which notice to the PBGC has not been waived.
"Required Lenders" means, at any time, Lenders having Proportionate
Shares which in the aggregate equal or exceed 66-2/3%.
"Reserve Requirement" means, for LIBOR Loans, the maximum rate
(expressed as a percentage) at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during the
Interest Period therefor under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding $1,000,000,000 against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the LIBO Rate or LIBOR Loans is to be determined,
(b) any category of liabilities or extensions of credit or other assets which
include LIBOR Loans, or (c) any category of liabilities or extensions of credit
which are considered irrevocable commitments to lend.
"Responsible Officer" means, as to any Person, its president, chief
executive officer, any vice president, treasurer, or secretary or any natural
Person who is a managing general partner or manager or managing member of a
limited liability company (or any of the preceding with regard to any such
managing general partner, manager or managing member).
"Restricted Payment Conditions" has the meaning given in Section
6.6.2 of the Credit Agreement.
"Revenue Accounts" means the Borrower Revenue Account, the FEC
Revenue Account and the MEC Revenue Account.
35
"Rights of Way" has the meaning given in Section 3.1.23 of the
Credit Agreement.
"S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.
"Secured Parties" means Administrative Agent, the Lead Arrangers,
the Collateral Agent, the Depositary Agent, any Lender (or Affiliate of any
Lenders) which is a counterparty to an Interest Rate Agreement entered into by
Borrower in accordance with the Credit Agreement, each Lender and each of their
respective successors, transferees and assigns; provided, that no Affiliate of
Sponsor shall be a "Secured Party" hereunder or under any other Credit Document.
"Security Agreement" means the Security Agreement, dated as of the
Closing Date, in substantially the form of Exhibit D-3 to the Credit Agreement,
between Borrower and Collateral Agent.
"Security Fund" has the meaning given in Section 11.1 of the Power
Purchase Agreement.
"Security Fund LC" has the meaning given in Section 2.2.1 of the
Credit Agreement.
"Security Fund LC Cash Collateral Account" has the meaning given in
the Borrower Depositary Agreement.
"Security Fund LC Commitment" means, at any time with respect to
each Lender, such Lender's Proportionate Share of the Total Security Fund LC
Commitment at such time.
"Security Fund LC Fee" has the meaning given in Section 2.5.1 of the
Credit Agreement.
"Security Fund LC Loan" has the meaning given in Section 2.2.2 of
the Credit Agreement.
"Security Fund LC Loan Note" has the meaning given in Section 2.1.4
of the Credit Agreement.
"Settlement Amount" has the meaning given in Section 5.11.6(b) of
the Credit Agreement.
"Siemens Turbines" has the meaning given in the Borrower Security
Agreement.
"Site" means the FEC Site and the MEC Site.
"Site Services Agreement" means the Site Services Agreement, dated
as of May 27, 2004 between FEC and Dow.
36
"SPC" has the meaning given in Section 9.13.2 of the Credit
Agreement.
"Sponsor" means Calpine Corporation, a Delaware corporation.
"Stated Amount" means with respect to the Security Fund LC, the
total amount available to be drawn thereunder at the time in question in
accordance with the terms of the Security Fund LC.
"Subject Claims" has the meaning given in Section 5.11.1(a) of the
Credit Agreement.
"Subordinated Notes" means each of the Subordinated Demand
Promissory Notes, dated as of February 25, 2005, issued by Borrower to
Construction Contractor in the original principal amount of $44,070,758.00 and
$43,971,622.00, respectively.
"Subordinated Payments" means any fees, bonuses, profits and any
other amounts payable by either Project Company to any Affiliate under any
Project Document and which are subject to subordination under a Subordination
Agreement.
"Subordination Agreements" means the COSCI Subordination Agreement,
the CCMCI Subordination Agreement and any other subordination agreement
substantially in the form of Exhibit D-7 to the Credit Agreement which is
approved by the Majority Lenders pursuant to Section 6.8 of the Credit
Agreement.
"Subsidiary" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which such Person: (a) owns 10% or
more of the shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity
and/or (b) controls the management, directly or indirectly through one or more
intermediaries. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of a Person.
"Target Debt to Equity Ratio" means a Debt to Equity Ratio equal to
(a) $466,500,000 divided by (b) the sum of (i) $96,249,010.70 and (ii) the Dow
Change Order Drawing (the amount in this clause (ii) expressed as a negative
number).
"Taxes" has the meaning, with respect to the Loans, given in Section
2.6.4(a) of the Credit Agreement.
"Template Operating Report" means an operating report required by
Section 5.8.2 of the Credit Agreement, in substantially the form of Exhibit G-8
to the Credit Agreement.
"Term-Conversion" means satisfaction or waiver of the conditions set
forth in Section 3.3 of the Credit Agreement, causing conversion of Construction
Loans to Term Loans. "Term-Convert" is the verb form of "Term-Conversion."
37
"Term Loan" has the meaning given in Section 2.1.2(a) of the Credit
Agreement.
"Term Loan Commitment" means, at any time with respect to each
Lender, such Lender's Proportionate Share of the Total Term Loan Commitment at
such time.
"Term Loan Maturity Date" means the earlier of (a) December 31,
2011, and (b) the date on which the entire outstanding principal balance of the
Term Loans, together with all unpaid interest, fees, charges and costs, becomes
due and payable under the Credit Agreement.
"Term Note" has the meaning given in Section 2.1.4 of the Credit
Agreement.
"Term Period Commencement Date" has the meaning given in Section 3.3
of the Credit Agreement.
"Term Title Policy" has the meaning given in Section
6.6.2(h)(ii)(B).
"Title Exception" means those exceptions to coverage listed on
Schedule B-II of the Title Policy, other than the standard printed exceptions
contained therein.
"Title Insurer" means Stewart Title Guaranty Company.
"Title Policies" means those certain policies of title insurance
issued by the Title Insurer dated as of the Closing Date, as provided in Section
3.1.22 of the Credit Agreement, including all amendments thereto, endorsements
thereof and substitutions or replacements therefor.
"Total Construction Loan Commitment" has the meaning given in
Section 2.3.2(a)(ii) of the Credit Agreement.
"Total Security Fund LC Commitment" means $36,500,000.
"Total Term Loan Commitment" has the meaning given in Section
2.3.2(b) of the Credit Agreement.
"True-Up Drawing" has the meaning given in Section 3.3.3(d) of the
Credit Agreement.
"Type" means the type of Loan, whether a Base Rate Loan or LIBOR
Loan.
"UCC" means the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the perfection or
priority of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New York
the term "UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof and of the other Credit
Documents relating to such perfection or priority and for purposes of
definitions related to such provisions.
38
"Undertaking Support LCs" means the letters of credit provided to
Borrower pursuant to Section 2.2(a) of the respective Completion Undertaking
Agreements.
"Underwriters" means CoBank, ACB, Calyon New York Branch, UFJ Bank
Limited, HSH Nordbank AG and Bayerische HYPO- Und Verinsbank AG, New York
Branch, each acting in its capacity as underwriters for the Lenders under the
Credit Agreement.
"Unsatisfied Condition" means a condition in a Permit that has not
been satisfied and that either (a) must be satisfied before such Permit can be
come effective, (b) must be satisfied as of the date on which a representation
is made or a condition precedent must be satisfied under the Credit Agreement,
or (c) must be satisfied as of a future date but with respect to which facts or
circumstances exist which, to Borrower's knowledge, could reasonably be expected
to result in a failure to satisfy such Permit condition.
"Unutilized Security Fund LC Commitment" means $18,250,000 minus any
increases in the Stated Amount of the Security Fund LC pursuant to Sections
2.2.1 and/or 2.2.4 of the Credit Agreement.
"Upfront Fee Letter" means that certain letter agreement regarding
fees, dated as of the Closing Date, by and between Lead Arrangers and Borrower.
"Variable O&M Costs" means, with respect to MEC, those O&M Costs
described in the line-items of the Base Case Project Projections entitled
"Reverse Osmosis - Water Treatment", "Demineralizer/EDI/Polishing - Water
Treatment", "Boiler/Steam Chemicals - Water Treatment", "Cooling Tower - Water
Treatment", "Gas Turbine Gases/Chemicals", "Waste Water Disposal", "Ammonia
(SCR)" and "Electricity Usage Cost."
"Waterfall Levels" means the Borrower Waterfall Levels, the MEC
Waterfall Levels and the FEC Waterfall Levels.
"Water Services Agreement" means the Water Services Agreement, dated
November 10, 2004, between MEC and the City of Mankato, Minnesota.
39
RULES OF INTERPRETATION
1. The singular includes the plural and the plural includes the singular.
2. "or" is not exclusive.
3. A reference to a Governmental Rule includes any amendment or
modification to such Governmental Rule, and all regulations, rulings and other
Governmental Rules promulgated under such Governmental Rule.
4. A reference to a Person includes its permitted successors, permitted
replacements and permitted assigns.
5. Accounting terms have the meanings assigned to them by GAAP, as applied
by the accounting entity to which they refer.
6. The words "include", "includes" and "including" are not limiting.
7. A reference in a document to an Article, Section, Exhibit, Schedule,
Annex or Appendix is to the Article, Section, Exhibit, Schedule, Annex or
Appendix of such document unless otherwise indicated. Exhibits, Schedules,
Annexes or Appendices to any document shall be deemed incorporated by reference
in such document. In the event of any conflict between the provisions of the
Credit Agreement (exclusive of the Exhibits, Schedules, Annexes and Appendices
thereto) and any Exhibit, Schedule, Annex or Appendix thereto, the provisions of
the Credit Agreement shall control.
8. References to any document, instrument or agreement (a) shall include
all exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, amended and restated, modified and supplemented
from time to time and in effect at any given time.
9. The words "hereof", "herein" and "hereunder" and words of similar
import when used in any document shall refer to such document as a whole and not
to any particular provision of such document.
10. References to "days" shall mean calendar days, unless the term
"Banking Days" shall be used. References to a time of day shall mean such time
in New York, New York, unless otherwise specified.
11. If, at any time after the Closing Date, Moody's or S&P shall change
its respective system of classifications, then any Moody's or S&P "rating"
referred to herein shall be considered to be at or above a specified level if it
is at or above the new rating which most closely corresponds to the specified
level under the old rating system.
12. The Credit Documents are the result of negotiations between, and have
been reviewed by Borrower, each Affiliate of Borrower party thereto,
Administrative Agent, the Lead
40
Arrangers, each Lender and their respective counsel. Accordingly, the Credit
Documents shall be deemed to be the product of all parties thereto, and no
ambiguity shall be construed in favor of or against Borrower, any Affiliate of
Borrower party thereto, Administrative Agent or any Lender solely as a result of
any such party having drafted or proposed the ambiguous provision.
41