FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of May 9, 2002 (herein
called this "Amendment"), is entered into by and among CALPINE CORPORATION, a
Delaware corporation (herein called the "Company"), the various financial
institutions listed on the signature page hereof (the "Lenders") THE BANK OF
NOVA SCOTIA ("Scotiabank"), as joint administrative agent and funding agent (in
such capacity, the "Agent") and CITICORP USA, INC. ("CUSA"), as Joint
Administrative Agents (in such capacity, together with Scotiabank, the
"Administrative Agents").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, the Lenders and the Administrative Agents have
heretofore entered into a certain Credit Agreement, dated as of March 8, 2002
(herein called the "Credit Agreement"); and
WHEREAS, the Company, the Lenders and the Administrative Agents now desire
to amend the Credit Agreement in certain respects, as hereinafter provided,
WHEREAS, the Company has requested that the Lenders consent to certain
corporate mergers, and subject to the terms and provisions hereinafter set
forth, the Lenders have agreed to do so;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Company, the Lenders and the Administrative Agents hereby
agree as follows:
SECTION 1. The Administrative Agents and the Required Lenders do hereby
consent to the corporate reorganizations described on Schedule 1.1 hereto.
SECTION 2. The Credit Agreement is hereby amended as follows:
(a) The following definitions contained in Section 1.1 of the Credit
Agreement are hereby amended and restated in their entirety as follows:
"Applicable Margin" means, in the case of any Base Rate Loan, LIBO
Rate Loan or L/C Advance maintained under the Revolving Loan Commitment, a
rate per annum determined by reference to the Borrower's Credit Rating as
follows:
Revolving Loans
Applicable Base Applicable LIBO
Borrower's Credit Rating Rate Margin Rate Margin
Level 1 1.50% 2.50%
Level 2 1.75% 2.75%
Level 3 2.00% 3.00%
Level 4 2.25% 3.25%
Level 5 2.75% 3.75%
The applicable Level for the Borrower shall be determined by reference to
the definition of the term "Borrower's Credit Rating." The Applicable
Margin for any Term B Loan maintained as a LIBO Rate Loan shall be 3.75%
and the Applicable Margin for any Term B Loan maintained as a Base Rate
Loan shall be 2.75%. Notwithstanding anything to the contrary herein, if at
the time of the Borrowing of Term B Loans hereunder, the Applicable Margin
for any Term B Loan shall have been increased or decreased from the rates
set forth in the preceding sentence in accordance with Section 11.1, the
Applicable Margin for Revolving Loans as set forth above shall be increased
or decreased by a corresponding amount.
"Asset Sale" means any sale, transfer, lease or other disposition
described in Section 8.2.10(c).
"Available Investment and Leaseback Basket" means, as of any date, an
amount equal to 3% of the consolidated tangible assets of the Borrower and
its Subsidiaries as of the end of the most recent fiscal quarter.
"CNGC" means, prior to the CNGC Restructuring, Calpine Natural Gas
Company LP, a Delaware limited partnership, and after the CNGC
Restructuring, Calpine Natural Gas Company, a Delaware corporation.
"CNGH" means, prior to the CNGC Restructuring, Calpine Natural Gas
Holdings, Inc., a Delaware corporation, and after the CNGC Restructuring,
Calpine Natural Gas Holdings, LLC, a Delaware limited liability company,
and in either case, a direct, Wholly-Owned Subsidiary of the Borrower.
"Dedicated Assets" means, collectively, the Domestic Gas Reserves, the
Canadian Gas Reserves, all property owned by Calpine Holdings and any of
its Subsidiaries, all property owned by CCEC and any of its Subsidiaries
(other than Calpine Canada Power Holdings Ltd. and its Subsidiaries), all
property owned by the Incremental Pledged Subsidiaries and any of their
Subsidiaries, the final 25% of the Borrower's indirect equity ownership
interest in the holding company which owns the Whitbey Energy Centre, the
Island Energy Centre and the Calgary Energy Centre, the property subject to
the Pledge Agreements, the First Amendment Pledge Agreements, the Note
Pledge Agreement, the Deeds of Trust, the Assignment Agreement, and all
other property and interests pledged as collateral security for the
Obligations. The Dedicated Assets shall be ratably available under the
Pledge Agreement, the First Amendment Pledge Agreements, the Note Pledge
Agreement, the Deeds of Trust and the Assignment Agreement to secure the
Obligations under this Agreement and the Existing Credit Agreement.
"Dedicated Subsidiary" means CCEC and each of its Subsidiaries,
Calpine Holdings (and any successor thereto) and each of its Subsidiaries,
CNGH and each of its Subsidiaries, and each of the Incremental Pledged
Subsidiaries and each of their respective Subsidiaries.
"Loan Document" means this Agreement, the Notes, the Pledge
Agreements, the First Amendment Pledge Agreements, the Note Pledge
Agreement, the Guaranty, the Deeds of Trust, the Assignment Agreement, the
Hazardous Materials Indemnity, the Fee Letter, and each other relevant
agreement, document or instrument delivered in connection therewith.
"Required Lenders" means, at any time, Lenders owed or holding (a) if
the Revolving Loan Commitments shall not have been terminated, at least 51%
of the aggregate of all Term B Loans then outstanding, all unfunded Term B
Loan Commitments, all Revolving Loans then outstanding, all Letter of
Credit Outstandings on such date, and all unfunded Revolving Loan
Commitments or (b) if the Revolving Loan Commitments shall have been
terminated, at least 51% of the aggregate amount of all Loans and L/C
Advances then outstanding.
"Term B Loan Commitment Termination Date" means the earliest of
(a) June 8, 2002;
(b) the date on which the Term B Loan Commitments of the Term B
Lenders are terminated in full or reduced to zero in accordance with
Section 2.2; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described above, the Term B Loan
Commitments shall terminate automatically and without further action.
(b) There shall be added to Section 1.1 of the Credit Agreement, the
following terms in appropriate alphabetical sequence:
"CES" means Calpine Energy Services, L.P., a Delaware limited
partnership.
"CNGC Restructuring" means the series of transactions described on
Schedule 1.1 hereof, pursuant to which the assets of CNGC will be merged
with and into the Borrower.
"First Amendment Pledge Agreements" means the pledge agreements
executed and delivered pursuant to the First Amendment to Credit Agreement
dated as of May 9, 2002, among the parties hereto, as such agreements may
be amended, supplemented, restated or otherwise modified from time to time,
which will cover all equity interests in each of the Incremental Pledged
Subsidiaries held by the Borrower.
"Incremental Dedicated Assets" all property owned by any of the
Incremental Pledged Subsidiaries and by each of their respective
Subsidiaries. The Incremental Dedicated Assets shall be available under the
First Amendment Pledge Agreements to secure the Obligations under this
Agreement and the Existing Credit Agreement, and all Net Cash Proceeds
therefrom shall be applied as provided in Sections 3.1.1 and 3.1.2.
"Incremental Pledged Subsidiaries" means each of the Subsidiaries
listed on Section A of Schedule III hereof.
"Note Pledge Agreement" means the pledge agreement executed and
delivered by the Borrower pursuant to the First Amendment to Credit
Agreement dated as of May 9, 2002 among the parties hereto, as such
agreement may be amended, supplemented, restated or otherwise modified from
time to time, which will pledge to the Agent the promissory notes described
in Section 8.1.10.
"Permitted Sale" means any individual sale, transfer, lease,
contribution or conveyance of a portion of the Domestic Gas Reserves
(together with related tangible personal property) having a value,
according to the most recent, year-end report evaluating the Domestic Gas
Reserves prepared by an independent petroleum engineer acceptable to the
Agent (an "Engineering Report"), of less than $5,000,000; provided however,
that the aggregate value of all Permitted Sale(s) in any one calendar year
shall not exceed five percent (5%) of the value, according to the most
recent Engineering Report, of all proven categories of oil and gas reserves
then comprising the Domestic Gas Reserves. Solely for purposes of the
preceding sentence, the value of such oil and gas reserves shall be
determined using net future cash flow, discounted at ten percent (10%),
using the forward strip, NYMEX pricing as of December 31, 2001 for
Permitted Sales for the calendar year ending December 31, 2002, and the
forward strip, NYMEX pricing as of each succeeding calendar year end for
Permitted Sales in the immediately succeeding calendar year, and in each
case other assumptions reasonably acceptable to the Agent.
(c) Section 2.1.1 of the Credit Agreement is hereby amended and restated to
read in its entirety as follows:
Section 2.1.1. Term B Loan Commitment. On not more than three dates
prior to the Term B Loan Commitment Termination Date, each Term B Lender
severally will make loans in U.S. Dollars (relative to such Lender, its
"Term B Loan") to the Borrower equal to such Lender's Term Percentage of
the aggregate amount of the Borrowing of Term B Loans requested by the
Borrower to be made on such day. The Commitment of each Term B Lender
described in this Section 2.1.1 is herein referred to as its "Term B Loan
Commitment". On the Term B Commitment Termination Date, the Term B Loan
Commitment shall terminate, and any portion of the Term B Loan Commitment
Amount that is not borrowed on such date shall be extinguished. No amounts
paid or prepaid with respect to Term B Loans may be reborrowed.
(d) Section 2.1.2 of the Credit Agreement is hereby amended by inserting
the following sentence immediately following the first sentence thereof:
"The Commitment of each Revolving Lender described in this Section 2.1.2 to
make Revolving Loans is herein referred to as its "Revolving Loan
Commitment".
(e) Clause (a) of Section 2.2.2 of the Credit Agreement is hereby amended
by inserting the phrase "(other than Incremental Dedicated Assets)" after the
words "Dedicated Assets" in the fourth line thereof and by replacing the
reference therein to Section 8.2.10(b) with a reference to Section 8.2.10(c).
(f) Clause (e) of Section 3.1.1 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
"(e) shall, upon the receipt of Net Available Cash from an Asset Sale
of any Incremental Dedicated Asset, make a written offer to the Term B
Lenders to prepay the Term B Loans (and reduce the Term B Loan Commitment
Amount) by an amount equal to one hundred percent (100%) of such Net
Available Cash; provided, however, that the Borrower may, at its discretion
retain (and as a consequence of such retention, there shall be excluded
from such mandatory offer) up to an aggregate of $300,000,000 of such Net
Available Cash from the sale of uninstalled turbines and equipment and
provided, further, that the Borrower may, at its discretion retain (and as
a consequence of such retention, there shall be excluded from such
mandatory offer) an additional amount of such Net Available Cash equal to
(w) the Net Available Cash from the sale of the De Pere project in
Wisconsin and of the Borrower's minority interest in the Lockport energy
project in New York plus (x) the Net Available Cash realized from the
transactions described in Section C1 of Schedule III (other than any Net
Available Cash realized from any transaction among or between the Borrower
and any Affiliates thereof or among or between any of the Borrower's
Affiliates) plus (y) the Available Investment and Lease Basket minus the
aggregate amount of all obligations of each Incremental Subsidiary and each
Subsidiary thereof permitted by clause (y) of the last sentence of Section
8.2.3 and then outstanding, to the extent (and only to the extent) that an
amount equal to such retained Net Available Cash is reinvested (i) in power
projects directly owned by the Borrower or a Dedicated Subsidiary or (ii)
in oil or gas reserves directly owned by the Borrower or a Dedicated
Subsidiary within 365 days of such asset sale. Such offer shall be
transmitted by facsimile and by overnight courier to each Term B Lender and
shall be deemed received on the Business Day following transmittal. Each
Term B Lender shall have three Business Days following its receipt of such
offer to submit a written response to the Borrower's prepayment offer, and
if any Term B Lender shall not have responded by the close of business on
the third Business Day, it shall be deemed to have accepted such offer.
Payment shall be made to all Term B Lenders that have accepted the
prepayment offer on the fourth Business Day following their receipt of the
offer from the Borrower. If any Term B Lender elects not to accept its pro
rata share of the proceeds from a particular Asset Sale of Incremental
Dedicated Assets, such proceeds shall be applied to ratably prepay the
Revolving Loans and the loans under the Existing Credit Agreement (without
any corresponding reduction of the Revolving Commitment Amount, the
Revolving Loan Commitments or the commitments under the Existing Credit
Agreement). Upon the repayment in full of all Term B Loans, all Net
Available Cash from any Asset Sale of any Incremental Dedicated Assets
shall be applied to ratably prepay the Revolving Loans and the loans under
the Existing Credit Agreement (without any corresponding reduction of the
Revolving Commitment Amount, the Revolving Loan Commitments or the
commitments under the Existing Credit Agreement). Upon the conversion of
any non-cash proceeds realized from any Asset Sale of Incremental Dedicated
Assets (whether received by the Borrower or any Subsidiary) to cash, the
principal amount of such cash proceeds and any interest attributable
thereto shall be deemed to be Net Available Cash from Incremental Dedicated
Assets and applied by the Agent as provided in this clause (e);
(g) Clause (f) of Section 3.1.1 of the Credit Agreement is hereby amended
by inserting the phrase "(other than Incremental Dedicated Assets)" after the
words "Dedicated Assets" and by replacing the period at the end thereof with ";
and".
(h) There shall be added to the Credit Agreement a new clause (g) to
Section 3.1.1 reading in its entirety as follows:
"(g) shall, if a debt rating of BB- or better has not been given to
the Loans by S&P on or before May 30, 2002, prepay all Term B Loans then
outstanding on June 1, 2002."
(i) The reference in the final sentence of Section 4.5 to "Section
8.2.10(b)(iii)" is hereby deleted and a reference to "Section 8.2.10(c)" is
substituted therefor.
(j) Section 6.2 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
SECTION 6.2. Term B Loan Borrowing. The obligations of the Term B
Lenders to fund each Borrowing of the Term B Loans shall be subject to the
prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 6.2; provided, that on the Term B Loan Commitment
Termination Date, the Term B Loan Commitments shall expire.
(k) Subsection (a) of Section 6.3.1 of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
(a) the representations and warranties set forth in Article VII
(excluding, however, those contained in Section 7.7) and in each other Loan
Document (excluding the representations and warranties set forth in the
Deeds of Trust except to the extent that a breach thereof would reasonably
be expected to cause a Material Adverse Effect) shall be true and correct
in all material respects with the same effect as if then made (unless
stated to relate solely to an early date, in which case such
representations and warranties shall be true and correct as of such earlier
date);
(l) Clause (c) of Section 8.1.1 of the Credit Agreement is hereby amended
by adding the following clause immediately prior to the end thereof: "and a
certificate, executed by an Authorized Officer of the Borrower, showing a
computation of the amounts described in clauses (w), (x) and (y) and subsections
(i) and (ii) of Section 3.1.1(e) and in clauses (x) and (y) of the last sentence
of Section 8.2.3 as of the end of such period."
(m) Section 8.1.4 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
Section 8.1.4 Insurance.
(a) Except as provided in Section 8.1.4(b), the Borrower will, and
will cause each of its Subsidiaries to, maintain or cause to be maintained
with responsible insurance companies insurance with respect to its
properties and business (including business interruption insurance) against
such casualties and contingencies and of such types and in such amounts as
is customary in the case of similar businesses and will, upon request of
the Agent, furnish to each Lender at reasonable intervals a certificate of
an Authorized Officer of the Borrower setting forth the nature and extent
of all insurance maintained by the Borrower and its Subsidiaries in
accordance with this Section.
(b) With respect to the Domestic Gas Reserves, the Borrower will, and
will cause each of its Subsidiaries to, maintain or cause to be maintained
the insurance required by the Deeds of Trust.
(n) Section 8.1.10 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
SECTION 8.1.10. Intercompany Notes. On or before the tenth day
following the initial funding of Term B Loans, the Borrower shall cause all
Indebtedness then owing from any of its Dedicated Subsidiaries to be
evidenced by a non-recourse secured promissory note and pledged to the
Agent, pursuant to the Note Pledge Agreement, as collateral security for
the Obligations, and the Borrower will, promptly upon the creation of any
additional Indebtedness owing from any of its Dedicated Subsidiaries that
has not been evidenced by a non-recourse secured note pledged to the Agent,
cause such Indebtedness to be evidenced by a promissory note and pledged to
the Agent, pursuant to the Note Pledge Agreement, as collateral security
for the Obligations. It is understood and agreed that (i) upon the
conversion to equity of all Indebtedness owing from a Dedicated Subsidiary
to the Borrower or the repayment of all Indebtedness from a Dedicated
Subsidiary to the Borrower, the promissory note of such Dedicated
Subsidiary shall be released from the Note Pledge Agreement and cancelled
and (ii) subject to the approval of the Agent (not to be unreasonably
withheld), the Borrower may substitute new non-recourse secured promissory
notes for promissory notes previously pledged to the Agent. If all of the
Indebtedness owing from a Dedicated Subsidiary to the Borrower shall be
converted to equity, not later than ten days thereafter the Borrower shall
pledge to the Agent such equity interest and deliver to the Agent the stock
certificate, if any, evidencing such interest together with duly executed
stock powers, in blank.
(o) Section 8.1.11 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
SECTION 8.1.11 Ownership Interests. CNGH shall at all times directly
or indirectly own 100% of all equity interests of CCEC, which shall, in
turn, directly or indirectly own 100% of the equity interests in Calpine
Canada Natural Gas Partnership and Calpine Saltend Energy Centre, PLC.
Calpine Canada Natural Gas Partnership shall at all times own all of the
Canadian Gas Reserves. The Borrower shall at all times own 100% of the
equity interests of CNGH. After the completion of the transactions
described in Section 8.1.9, CNGH shall at all times own 100% of the equity
interests of Calpine Holdings. Calpine Holdings shall at all times own 100%
of the equity interests of CCFCI.
(p) There shall be added to the Credit Agreement a new Section 8.1.12
reading in its entirety as follows:
SECTION 8.1.12 Incremental Domestic Gas Reserves. The Borrower shall
cause all acquisitions of additional Domestic Gas Reserves after May 1,
2002 to be made by the Borrower or by a Dedicated Subsidiary.
(q) Clause (a) of Section 8.2.2 of the Credit Agreement is hereby amended
by adding the following immediately prior to the end thereof: "and any
Indebtedness evidenced by promissory notes pledged to the Agent pursuant to the
Note Pledge Agreement".
(r) Clause (e) of Section 8.2.2 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
"(e) Indebtedness of one or more Subsidiaries of the Borrower incurred
solely to finance the development, construction or purchase of, or repairs,
expansions, enhancements, improvements or additions to, the assets of one
or more Subsidiaries so long as (i) the principal amount of any such
Indebtedness (x) for development of existing gas reserves does not exceed
an aggregate of $50,000,000 for any such existing reserves or (y) for
expansions, enhancements, improvements or additions to an existing asset
which has already achieved commercial operation does not exceed an
aggregate of $60,000,000 for any single financing or series of related
financings for such asset (exclusive of up to $250,000,000 of Indebtedness
for the expansion of the energy center at Zion, Illinois) and (ii) recourse
for any such Indebtedness is limited solely (A) to the asset or assets
being financed or to the assets of CES, (B) to such Subsidiaries
themselves, where the asset or assets being financed constitute all or
substantially all of the assets of such Subsidiaries (each, a "Special
Purpose Subsidiary"), and/or (C) to the stock or other direct or indirect
ownership interests in such Special Purpose Subsidiaries;"
(s) The penultimate sentence of Section 8.2.2 of the Credit Agreement is
hereby amended by adding the following proviso immediately prior to the end
thereof:
"and provided further that in no event shall any Incremental Pledged
Subsidiary or any Subsidiary thereof incur any Indebtedness of the type
permitted by clause (f) of this Section 8.2.2 after May 1, 2002."
(t) The last sentence of Section 8.2.3 of the Credit Agreement is hereby
amended by adding the following clause immediately prior to the end thereof:
"and in no event shall any Incremental Pledged Subsidiary or any Subsidiary
thereof create any Liens of the type permitted by clause (m) of this
Section 8.2.3 after May 1, 2002 other than (x) Liens incurred in connection
with transactions described in Section C1 of Schedule III and (y) Liens
securing obligations to the extent of the Available Investment and
Leaseback Basket minus the aggregate amount retained by the Borrower
pursuant to clause (y) of the second proviso of the carry-over sentence in
Section 3.1.1(e)."
(u) Subsection (c) of Section 8.2.5 of the Credit Agreement is hereby
amended by adding the following immediately prior to the end thereof: "and
Investments by the Borrower of the assets of CES in Persons that are neither
Subsidiaries of the Borrower nor Investment Joint Ventures of the Borrower in
connection with the establishment of a trading joint venture or similar
arrangement".
(v) Subsection (i) of clause (b) of Section 8.2.6 of the Credit Agreement
is hereby amended and restated in its entirety to read as follows:
(i) make any payment or prepayment of principal of, or make any
payment of interest on, any Senior Notes or any Subordinated Debt on any
day other than the stated date for such payment or prepayment set forth in
the documents and instruments memorializing any Senior Notes or such
Subordinated Debt, or which would violate the subordination provisions of
any such Subordinated Debt; provided, that the Borrower may so pay or
prepay all or a portion of the Senior Notes if either (A) both before and
after giving effect thereto, no Default shall have occurred or be
continuing and there are no Loans outstanding hereunder or (B) both before
and after giving effect thereto, no Default shall have occurred and be
continuing and the aggregate amount of all such prepayments shall not
exceed 50% of aggregate Net Equity Proceeds received by the Borrower from
and after March 8, 2002.
(w) Subsection (b) of Section 8.2.9 of the Credit Agreement is hereby
amended by adding the following proviso at the end thereof:
"provided, further, that if any Dedicated Subsidiary shall merge with any
other Subsidiary, such Dedicated Subsidiary shall be the continuing Person
following such merger; and provided further, that if any Dedicated
Subsidiary shall liquidate or dissolve voluntarily into, or merge into, the
Borrower, the assets or stock of such Dedicated Subsidiary shall be pledged
by the Borrower as collateral security for the Obligations and the
obligations of the Borrower under the Existing Credit Agreement".
(x) Subsection (d) of Section 8.2.9 of the Credit Agreement is hereby
amended by deleting the period at the end thereof and by adding the following at
the end of such subsection:
"provided, however, that if any Dedicated Subsidiary shall merge with any
Restricted Subsidiary that is not a Dedicated Subsidiary, such Dedicated
Subsidiary shall be the continuing Person following such merger; and
(y) Section 8.2.9 of the Credit Agreement is hereby further amended by
adding a new subsection (e) thereto as follows:
"(e) a Subsidiary may consolidate with, or merge into or with, another
Person to the extent otherwise permitted under Section 8.2.10."
(z) Section 8.2.10 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
SECTION 8.2.10. Asset Dispositions, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other rights
with respect to, all or any substantial part of its assets (including
accounts receivable and capital stock of Subsidiaries) to any Person other
than to the Borrower or a Restricted Subsidiary, unless
(a) such sale, transfer, lease, contribution or conveyance is (i) in
the ordinary course of its business, (ii) permitted by Section 8.2.9 or
(iii) of CES or its Subsidiaries or any of their respective assets; or
(b) in the event such sale, transfer, lease, contribution or
conveyance involves the Domestic Gas Reserves, such sale, transfer, lease,
contribution or conveyance is, individually and taken together with all
prior sales, transfers, leases, contributions or conveyances within the
same calendar year, a Permitted Sale; or
(c) such sale, transfer, lease, contribution or conveyance is not
covered by clauses (a) or (b) above and (i) the Borrower or its Subsidiary
receives consideration at the time of such sale, transfer, lease,
contribution or conveyance at least equal to the fair market value of
assets being sold, transferred, leased, contributed or conveyed, (ii) at
least sixty percent (60%) of the consideration received by the Borrower or
such Subsidiary is in the form of cash or cash equivalents, (iii) in the
case of any such sale, transfer, lease, contribution or conveyance by a
Subsidiary that is not an Incremental Pledged Subsidiary, an amount equal
to 100% of Net Available Cash therefrom is either reinvested in Additional
Assets of a Dedicated Subsidiary within 365 days of such Asset Sale or
applied by the Borrower as provided herein to prepay the Loans and the
loans outstanding under the Existing Credit Agreement, so long as any Net
Available Cash from Dedicated Assets (other than Incremental Dedicated
Assets) is applied by the Borrower as provided in Section 2.2.2 and (iv) in
the case of any such sale, transfer, lease, contribution or conveyance by
an Incremental Pledged Subsidiary, an amount equal to 100% of Net Available
Cash therefrom is applied by the Borrower as provided in Section 3.1.1(e).
(aa) There shall be added to the Credit Agreement a new Section 10.9
reading in its entirety as follows:
SECTION 10.9 Collateral Matters. The Lenders irrevocably authorize the
Agent, at its option and in its discretion, to release any Lien on any
property granted to or held by the Agent under any Loan Document (i) upon
termination of the Commitments and payment in full of all Obligations
(other than contingent indemnification obligations) and the expiration or
termination of all Letters of Credit, (ii) that is sold or to be sold as
part of or in connection with any sale permitted hereunder or under any
other Loan Document, or (iii) subject to Section 11.1, if approved,
authorized or ratified in writing by the Required Lenders. Upon request by
the Agent at any time, the Required Lenders will instruct the Agent to
release its interest in particular types or items of property, pursuant to
this Section 10.9.
(bb) Clause (g) of Section 11.1 of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
"(g) release any Lien created by a Loan Document shall be effective
without the consent of Lenders having at least 75% of the aggregate of all
Term B Loans then outstanding, all unfunded Term B Loan Commitments, all
Revolving Loans then outstanding, all Letter of Credit Outstandings on such
date, and all unfunded Revolving Loan Commitments, except that no such
consent shall be required to the extent that the sale or other disposition
of the asset subject to the Lien is permitted hereunder and the proceeds
thereof are applied as required by this Agreement;"
(cc) Item 7.12 ("Environmental Matters") of the Disclosure Schedule is
hereby amended by adding thereto those items set forth on Schedule 7.12 attached
hereto.
(dd) There shall be added to the Credit Agreement a new Schedule 1.1 in the
form of Schedule 1.1 attached hereto.
(ee) There shall be added to the Credit Agreement a new Schedule III in the
form of Schedule III attached hereto.
SECTION 3. By their execution hereof, each of the undersigned Lenders
hereby waives the conditions precedent set forth in Section 6.2.1, 6.2.4 and
6.2.5 of the Credit Agreement with respect to the initial funding of the Term B
Loans to the extent, but only to the extent, that that such funding shall have
occurred on or before May 10, 2002. If the initial funding of the Term B Loans
shall not have occurred by May 10, 2002, the waivers granted herein shall
terminate at 12:00 midnight, eastern daylight time, on such date.
SECTION 4. To induce the Lenders and the Administrative Agents to enter
into this Amendment, the Company hereby reaffirms, as of the date hereof, its
representations and warranties contained in Article VII of the Credit Agreement
(except to the extent such representations and warranties relate solely to an
earlier date) and additionally represents and warrants as follows: (i) The
execution and delivery of this Amendment, and the performance by the Company of
its obligations hereunder, are within the Company's corporate powers, have been
duly authorized by all necessary action, have received all necessary
governmental approval (if any shall be required), and do not and will not
contravene or conflict with any provision of law or of the charter or by-laws of
the Company or of any agreement binding upon the Company;
(ii) As of the date of this Amendment, the Company owns all of the
equity interests in Calpine Holdings and CNGH and CNGH owns all of the
equity interests in CNGC;
(iii) This Amendment is the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms; and
(iv) No Default has occurred and is continuing and no Default will
result from the execution and delivery of this Amendment.
SECTION 5. The effectiveness of this Amendment is conditioned upon receipt
by the Administrative Agents of all the following documents, each in form and
substance satisfactory to the Administrative Agents:
(i) This Amendment duly executed by the Company and the Required
Lenders;
(ii) The First Amendment Pledge Agreements duly executed and delivered
by the Company to pledge the shares of the corporations described on
Section A of Schedule III owned by the Company and the membership interests
of CNGH and the other limited liability companies described on Section A of
Schedule III owned by the Company;
(iii) Documentation sufficient to satisfy the Administrative Agent
that the corporate reorganization described on Schedule 1.1 is complete;
(iv) The Agent shall have received confirmation that all of the
Domestic Gas Reserves shall have been transferred to the Borrower and that
the other requirements of Section 8.1.8 shall have been satisfied on or
before the date of the requested Borrowing;
(v) The Note Pledge Agreement duly executed by the Borrower to pledge
the intercompany notes described in Section 8.1.10 of the Credit Agreement;
(vi) The Agent and Term B Lead Arrangers shall have received
confirmation that the debt rating given to the Loans and then in effect
from Moody's shall be Ba3 or better;
(vii) The Agent shall have received opinions, dated the date of the
Effective Date and addressed to the Agent and all Lenders, from Lisa
Bodensteiner, Esq., general counsel of the Borrower, and Covington &
Burling, special counsel to the Borrower, substantially in the form of
Exhibits B-1 and B-2; and
(viii) The Agent shall have received such other documents as the
Administrative Agents shall have reasonably requested.
SECTION 6. This Amendment shall be deemed to be an amendment to the Credit
Agreement, and the Credit Agreement, as amended hereby, is hereby ratified,
approved and confirmed in each and every respect. All references to the Credit
Agreement in any other document, instrument, agreement or writing shall
hereafter be deemed to refer to the Credit Agreement as amended hereby.
SECTION 7. Unless otherwise defined herein or the context otherwise
requires, terms used in this Amendment, including its preamble and recitals,
have the meanings provided in the Credit Agreement.
SECTION 8. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. All
obligations of the Company and rights of the Lenders and the Administrative
Agents expressed herein shall be in addition to and not in limitation of those
provided by applicable law. Whenever possible each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment.
SECTION 9. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any party hereto may execute this Amendment by signing one or more counterparts.
SECTION 10. This Amendment shall be binding upon the Company, the Lenders
and the Administrative Agents and their respective successors and assigns, and
shall inure to the benefit of the Company, the Lenders and the Administrative
Agents and the successors and assigns of the Lenders and the Administrative
Agents.
SECTION 11. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AMENDMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AMENDMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CALPINE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
THE BANK OF NOVA SCOTIA, as
Administrative Agent and Lender
By:____________________________________
Name:__________________________________
Title:_________________________________
CITICORP USA, INC.,
as Administrative Agent and Lender
By:____________________________________
Name:__________________________________
Title:_________________________________
BAYERISCHE LANDESBANK GIROZENTRALE
By:____________________________________
Name:__________________________________
Title:_________________________________
By:____________________________________
Name:__________________________________
Title:_________________________________
BANK OF AMERICA, NATIONAL ASSOCIATION.
By:____________________________________
Name:__________________________________
Title:_________________________________
CREDIT SUISSE FIRST BOSTON, CAYMAN
ISLANDS BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
TORONTO DOMINION (TEXAS) INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
DEUTSCHE BANK TRUST COMPANY AMERICAS
By:_____________________________________
Name:___________________________________
Title:__________________________________
ING CAPITAL LLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
SCHEDULE 1.1
STEP 1
Calpine Corporation
("Calpine")
1,000 Shares of 1,000 Shares of
Common Stock Common Stock
Calpine Natural Calpine Natural
Gas GP, Inc., Gas Holdings, Inc.
("Calpine GP") ("Holdings")
1% GP Interest 99% LP Interest
Calpine Natural Gas Company, L.P.
("CNGC")
CNGC will convert from a Delaware limited partnership to a Delaware corporation
("Conversion #1") and will change its name to Calpine Natural Gas Company.
Conversion #1 will be effective at 11:57 p.m., Eastern Time ("ET"), on the date
of the Conversion (the "Conversion Date"). By virtue of Conversion #1, the 1%
general partner interest (the "GP Interest") held by Calpine GP and the 99%
limited partner interest (the "LP Interest") held by Holdings will be converted
into 10 shares of common stock and 990 shares of common stock in the converted
corporation, respectively.
STEP 2
Calpine
1,000 Shares of 1,000 Shares of
Common Stock Common Stock
Calpine GP Holdings
10 Shares of 990 shares of
Common Stock Common Stock
CNGC
Holdings will convert from a Delaware corporation to a Delaware limited
liability company ("Conversion #2") and will change its name to Calpine Natural
Gas Holdings, LLC. Conversion #2 will be effective at 11:57 p.m., ET, on the
Conversion Date. By virtue of Conversion #2, the 1,000 shares of common stock
held by Calpine (the "Holdings Stock") will be converted into 100% of the
limited liability company interest in the converted LLC (the "Membership
Interest").
STEP 3
Calpine
100% 100%
Common Stock Membership Interest
Merger #1
Calpine GP Holdings
10 Shares of 990 shares of
Common Stock Common Stock
CNGC
Calpine GP will merge with and into Calpine ("Merger #1"), with Calpine
acquiring in Merger #1 the 10 shares of CNGC stock held by Calpine GP. Merger #1
will be effective at 11:58 p.m., ET, on the Conversion Date.
STEP 4
Calpine
10 Shares of 100%
Common Stock Membership Interest
Stock
Distribution
Holdings
990 shares of
Common Stock
CNGC
To avoid having to obtain Calpine stockholder approval for Merger #2 in Step 5,
Holdings will distribute its 990 shares of CNGC stock to Calpine. The stock
distribution will be effective at 11:58 p.m., ET, on the Conversion Date.
STEP 5
Calpine
Merger #2
1,000 Shares of 100%
Common Stock Membership Interest
CNGC Holdings
In order to move the assets held by CNGC to Calpine by operation of law rather
than assignment, CNGC will merge with and into Calpine ("Merger #2"). Merger #2
will be effective at 11:59 p.m., ET, on the Conversion Date.
STEP 6
Calpine
100%
Membership
Interest
Holdings
Calpine Corporation will enter into the 2002 credit restructuring, under which
it will mortgage the assets it receives from Calpine Natural Gas Company in
Merger #2.
SCHEDULE III
A. Direct Subsidiaries to be pledged.
1. Calpine CCFC II Holdings, Inc.
2. Calpine Central, Inc.
3. Calpine Eastern Corporation
4. Calpine Dighton, Inc.
5. CPN Auburndale, Inc.
6. Calpine Auburndale, Inc.
7. Calpine Gordonsville, Inc.
8. Calpine Rumford, Inc.
9. Calpine Rumford I, Inc.
10. Calpine Tiverton, Inc.
11. Calpine Tiverton I, Inc.
12. Calpine Northeast Marketing, Inc.
13. Calpine Marketing, LLC
14. Venture Acquisition Company
15. Calpine Northbrook Energy Corporation of Maine, Inc.
16. Androscoggin Energy, Inc.
17. Calpine Project Holdings, Inc.
18. Calpine Sumas, Inc.
19. Northwest Cogeneration, Inc.
20. Calpine King City 1, Inc.
21. Calpine King City 2, Inc.
22. Calpine Gilroy 1, Inc.
23. Calpine Gilroy 2, Inc.
24. Sutter Dryers, Inc.
25. Anacapa Land Company LLC
26. Calpine Metcalf EPC, Inc.
27. Goldendale Energy, Inc.
28. CPN MEC Holdings, LLC
29. Bellingham Cogen, Inc.
30. GATX/Calpine-Agnews, Inc.
31. Calpine Agnews, Inc.
32. Calpine Pittsburgh, LLC
33. CPN Blue Spruce Holdings, LLC
34. Calpine Power Company
35. Calpine Vapor, Inc.
36. Modoc Power, Inc.
37. Santa Rosa Energy Company
38. Geysers Finance Company
39. Calpine Thermal Power, Inc.
40. Calpine Calistoga Holdings, LLC
41. Calpine Operations Management Company, Inc.
42. Calpine Fuels Corporation
43. CPN Pipeline Company
44. Calpine Sonoran Pipeline LLC
45. Calpine c*Power, Inc.
46. WRMS Engineering, Inc.
47. Calpine Cogeneration Corporation (80% ownership interest) -- see
Section B below
48. Chippokes Energy Center, LLC
49. Palmetto Energy Center, LLC
50. Warnerville Energy Center, LLC
51. CPN Cascade, Inc.
52. CPN Telephone Flat, Inc.
53. Anderson Springs Energy Company
54. Calpine Sonoma, Inc.
55. South Point Energy Center LLC
56. Los Esteros Critical Energy Center, LLC
57. Calpine California Holdings, Inc.
58. Calpine Eastern Holdings, Inc.
B. Restrictions on Calpine Corporation's Ability to Pledge. Calpine
Cogeneration Corporation - pledge of shares comprising Calpine
Corporation's 80% ownership interest would require prior consent of the
owner of the shares comprising the remaining 20% interest (NRG); such
consent is not to be unreasonably withheld. Calpine shall use commercially
reasonable efforts to obtain such consent and pledge its 80% ownership
interest and shall, in any event, execute such pledge documentation by
December 20, 2002.
C. Subsidiaries that may be released.
1. To the extent the shares (or other indicia of ownership) of the
following Subsidiaries have been pledged by the Company, such shares
will be released upon the completion of financing or sale/leaseback
transactions in connection with the projects owned by such
Subsidiaries:
CPN Acadia, Inc., subsidiary of Calpine Central, Inc. Zion Energy
Center LLC, subsidiary of Calpine CCFCII Holdings, Inc. Calpine Oneta
Power, LP, subsidiary of Calpine CCFCII Holdings, Inc. Calpine King
City Cogen, LLC, subsidiary of Calpine King City 1, Inc. and Calpine
King City 2, Inc. Calpine California Holdings, Inc. Auburndale Peaker
Energy Center, LLC, subsidiary of Calpine Eastern Corp. CPN Bethpage
3rd Turbine, Inc., subsidiary of Calpine Eastern Corp.
It is understood that the shares of the foregoing Subsidiaries may,
with prior written notice to the Administrative Agents, be transferred
to another Incremental Pledged Subsidiary to facilitate the completion
of any such financing or sale/leaseback transaction.
2. The shares of Calpine GP, Inc. (general partner of Calpine Natural Gas
Company LP) will be released upon the closing of the First Amendment
to the Credit Agreement.
3. The shares of Calpine Natural Gas Holdings, Inc. (limited partner of
Calpine Natural Gas Company, LP) will be released upon the closing of
the First Amendment to the Credit Agreement.
4. On or before June 8, 2002, the stock of Calpine CCFC Holdings, Inc.
shall be transferred to Calpine Natural Gas Holdings, LLC.
SCHEDULE 7.12
1. Alvin, Texas -- A horizontal separator tank ruptured in July 2001,
resulting in a personal injury claim filed by Alonzo Cruz, one of the GT
Oilfield Repair employees injured in the incident. Named Defendants are Calpine
Natural Gas Company L.P. and Dickey Cox (d/b/a Cox Gauging Service). It is
alleged that Cox was negligent in the operation of a pressure valve at the
facility, and that Calpine Natural Gas Company L.P. failed to maintain a safe
work environment. Both GT Oilfield Repair and Cox Gauging were independent
contractors at the site. Calpine Natural Gas Company L.P. is being defended and
indemnified by GT Oilfield Repair, pursuant to a contractual indemnity. At this
juncture, there is no workers' compensation lien against Calpine Natural Gas
Company L.P.
Mortgagor has to date spent $600,000 total on this site ($300,000 on
replacement of damaged equipment and $300,000 on environmental containment,
removal, and remediation). There is a gas well that is currently shut-in that
needs to be redrilled (estimated cost $1,000,000) or plugged and abandoned
(estimated cost $200,000). The property itself is bordered on two sides by
residential areas.
2. ARCO plant site, South Texas -- This property was acquired by Mortgagor
pursuant to an acquisition of Pioneer assets. Mortgagor has to date spent
$180,000 to remediate the contaminated soil and pond water, with the possibility
of an additional $70,000 needed to complete the work.
3. Westfield, New York -- This involves a 2500 sq. ft tract, to which
Mortgagor holds title. The estimated cost to excavate and remove the
contaminated soil is $25,000. Mortgagor will then attempt to sell the remediated
tract to the buyer that previously purchased the surrounding property from TGX
(n/k/a Mortgagor).
4. West Drakes Bay, Louisiana -- Mortgagor is currently in negotiations
with a potential buyer for this property, which is currently not producing. If
the property is not sold, there will be plugging and abandonment costs of
approximately $200,000 for the well and platform.
5. San Juan Basin, New Mexico -- Mortgagor acquired some open pits in
connection with an acquisition from Robert L. Bayless Producer, LLC. This should
be resolved completely in the near future for a minimal amount. The bedrock in
the area is close to the surface, with the result that the borderline
contamination is well contained. Mortgagor has the full support of local
environmental authorities.
6. Rio Vista Field, California -- Schuler Homes has made a claim against
Mortgagor for excavation and disposal of contaminated soil near an old open sump
pit. Representatives from Mortgagor met with Amerada Hess, who accepted its
contractual responsibility and is currently handling the claim.
7. Clayton Field, Texas -- Pursuant to a pending sale by Kinder Morgan to
Kopono Energy of an easement, due diligence uncovered a two feet deep plume of
old condensate on top of groundwater. Initial sampling revealed that the plume
did not extend to property owned by Mortgagor. Recent tests confirm that it is
remote that Mortgagor has any potential responsibility for this plume. In the
unlikely event that Mortgagor does bear some liability, it is unknown at this
time what the remediation costs would be.
8. Rio Vista Field, California -- Pursuant to an acquisition of Vintage
Petroleum, Inc., Mortgagor sublet a field office back to Vintage. This field
office was allegedly surrounded by arsenic contaminated rock. An investigation
was conducted by Entrix in March 2001. Chevron (a former property owner) hired
Entrix, and appears to be accepting responsibility for any contamination.
Mortgagor has not been informed of the test results.
Additionally at this site, there are several dozen joints of pipe that
contain an asbestos coating that are segregated on a pipe rack. The asbestos
coating is in a nonfriable state, and does not pose any environmental risk at
this time. The estimated cost for moving this pipe to an approved offsite
landfill is $7- $10,000, which will be accomplished shortly.