EXHIBIT 10.2
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MASTER TRANSACTION AGREEMENT
by and among
Calpine Corporation,
a Delaware corporation
as "Calpine"
Calpine Merchant Services Company, Inc.,
a Delaware corporation
as "CMSC"
and
Calpine Energy Services, L.P.,
a Delaware limited partnership
as "CES"
and
The Bear Stearns Companies Inc.,
a Delaware corporation
as "Bear Stearns"
and
CalBear Energy LP,
a Delaware limited partnership
as "CalBear"
Dated: September 7, 2005
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS......................................................................................2
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1.1 Defined Terms...................................................................................2
1.2 Construction...................................................................................15
ARTICLE II. FORMATION TRANSACTIONS; EFFECTIVE DATE.........................................................16
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2.1 Pre-Formation Transactions.....................................................................16
2.2 Formation Transactions.........................................................................16
2.3 Effective Date.................................................................................17
ARTICLE III. RELATIONSHIP OF THE PARTIES...................................................................17
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3.1 CalBear Business...............................................................................17
3.2 Exclusivity....................................................................................17
3.3 Certain Restrictions on Sales by Calpine of Equity Securities and Assets of CMSC...............18
3.4 Certain Restrictions on Sales by Bear Stearns of Equity Securities and Assets of CalBear.......21
3.5 No Joint Venture or Partnership Created........................................................24
3.6 Conflicts of Interest; Non-Discrimination......................................................25
3.7 Non-Solicitation of Bear Stearns Employees.....................................................25
3.8 Non-Solicitation of Calpine Employees..........................................................26
3.9 Confidential Information.......................................................................27
3.10 Netting........................................................................................29
3.11 Acknowledgements...............................................................................29
3.12 CMSC Board Representation......................................................................30
3.13 Performance of Financial Obligations of CalBear................................................30
3.14 [*]............................................................................................30
3.15 Fiscal Year of CalBear.........................................................................30
3.16 Interest on Overdue Amounts....................................................................31
ARTICLE IV. CALPINE GUARANTEE..............................................................................31
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4.1 Calpine Guarantee..............................................................................31
4.2 Calpine May Consolidate, etc., on Certain Terms................................................32
4.3 Release........................................................................................32
ARTICLE V. BEAR STEARNS GUARANTEE..........................................................................33
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5.1 Bear Stearns Guarantee.........................................................................33
5.2 Bear Stearns May Consolidate, etc., on Certain Terms...........................................34
5.3 Release........................................................................................34
ARTICLE VI. REGULATORY MATTERS.............................................................................35
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6.1 Regulatory Matters With Respect to Calpine.....................................................35
6.2 Regulatory Matters With Respect to Bear Stearns................................................35
6.3 Regulatory Matters With Respect to CalBear and CMSC............................................35
ARTICLE VII. NOTICES, RECORDS, MEETINGS, AUDITS AND AVAILABILITY...........................................36
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7.1 Notices........................................................................................36
7.2 Books and Records..............................................................................38
7.3 Meetings.......................................................................................38
7.4 Audits.........................................................................................39
7.5 Availability of Parties........................................................................40
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES OF THE PARTIES................................................40
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8.1 Organization...................................................................................40
8.2 Authorization..................................................................................40
8.3 No Similar Business............................................................................40
8.4 Accuracy of Information Furnished..............................................................41
ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF CALPINE......................................................41
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9.1 Calpine and Calpine Transaction Parties........................................................41
9.2 No Conflict or Violation.......................................................................41
9.3 Sufficiency of Assets..........................................................................41
9.4 Permits........................................................................................42
9.5 Litigation.....................................................................................42
9.6 Compliance with Law............................................................................42
9.7 Insurance......................................................................................42
9.8 Adequate Capital...............................................................................43
9.9 SEC Filings; Financial Statements..............................................................43
9.10 Regulation.....................................................................................43
9.11 Due Consideration..............................................................................44
9.12 Operations of CMSC.............................................................................44
9.13 Material Contracts of CMSC.....................................................................44
ARTICLE X. REPRESENTATIONS AND WARRANTIES OF BEAR STEARNS..................................................44
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10.1 Bear Stearns and CalBear.......................................................................44
10.2 No Conflict or Violation.......................................................................44
10.3 Sufficiency of Assets..........................................................................45
10.4 Permits........................................................................................45
10.5 Litigation.....................................................................................45
10.6 Compliance with Law............................................................................45
10.7 Insurance......................................................................................45
10.8 Adequate Capital...............................................................................46
10.9 SEC Filings; Financial Statements..............................................................46
10.10 Regulation.....................................................................................46
10.11 Operations of CalBear..........................................................................47
ARTICLE XI. PRE-EFFECTIVE DATE COVENANTS OF THE PARTIES....................................................47
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11.1 Notification of Certain Matters................................................................47
11.2 Consents and Commercially Reasonable Efforts...................................................47
11.3 Other Transaction Documents....................................................................48
ARTICLE XII. CONDITIONS TO CALPINE'S OBLIGATIONS...........................................................48
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12.1 Representations, Warranties and Covenants......................................................48
12.2 No Proceedings or Litigation...................................................................48
12.3 Bankruptcy.....................................................................................49
12.4 Effective Date Deliveries......................................................................49
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12.5 Transaction Documents..........................................................................49
12.6 Pre-Formation Transactions.....................................................................49
12.7 Corporate Proceedings..........................................................................49
12.8 Regulatory Approvals...........................................................................49
12.9 Opinion of Counsel to Bear Stearns.............................................................49
ARTICLE XIII. CONDITIONS TO BEAR STEARNS' OBLIGATIONS......................................................50
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13.1 Representations, Warranties and Covenants......................................................50
13.2 No Proceedings or Litigation...................................................................50
13.3 Bankruptcy.....................................................................................50
13.4 Effective Date Deliveries......................................................................50
13.5 Transaction Documents..........................................................................51
13.6 Pre-Formation Transactions.....................................................................51
13.7 Corporate Proceedings..........................................................................51
13.8 Regulatory Approvals...........................................................................51
13.9 Opinion of Counsel to Calpine..................................................................51
ARTICLE XIV. CERTAIN ACTIONS AFTER THE EFFECTIVE DATE......................................................51
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14.1 Survival of Representations, etc...............................................................51
14.2 No Conflict or Violation.......................................................................52
14.3 Sufficiency of Assets..........................................................................52
14.4 Permits........................................................................................52
14.5 Insurance......................................................................................52
14.6 Adequate Capital...............................................................................53
14.7 Further Assurances.............................................................................53
14.8 Litigation Support.............................................................................53
14.9 Organizational Documents of CMSC and CalBear...................................................53
ARTICLE XV. INDEMNIFICATION................................................................................53
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15.1 General Indemnification........................................................................53
15.2 Right of Offset................................................................................60
15.3 Payment........................................................................................60
15.4 Right to Indemnification Not Affected by Knowledge or Presumption..............................60
ARTICLE XVI. TERM; EVENTS OF DEFAULT AND TERMINATION.......................................................60
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16.1 Term...........................................................................................60
16.2 Renewal........................................................................................60
16.3 Certain Matters with Respect to Renewal........................................................62
16.4 Calpine Events of Default......................................................................62
16.5 Bear Stearns Events of Default.................................................................63
16.6 Termination; Liquidation Date; Transfer of Final Third Party Master Agreements.................63
ARTICLE XVII. LIMITATION OF LIABILITY......................................................................69
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17.1 Limitation of Remedies.........................................................................69
17.2 Limitation of Monetary Damages.................................................................70
17.3 Limitation of Non-Monetary Damages.............................................................70
17.4 Limitation of Consequential Damages, Etc.......................................................70
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17.5 Liability for Acts or Omissions of Other Persons...............................................71
17.6 Survival of Limitations........................................................................71
ARTICLE XVIII. MISCELLANEOUS...............................................................................71
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18.1 Assignment.....................................................................................71
18.2 Notices........................................................................................71
18.3 Choice of Law; Service of Process; Venue; Jury Trial Waiver....................................76
18.4 Dispute Resolution; Arbitration................................................................77
18.5 Continued Performance..........................................................................79
18.6 Regulatory Event...............................................................................79
18.7 Forward Contracts..............................................................................79
18.8 Effectiveness; Entire Agreement; Amendments and Waivers........................................79
18.9 Multiple Counterparts..........................................................................80
18.10 Invalidity.....................................................................................80
18.11 Titles; Currency; Schedules....................................................................80
18.12 Payments.......................................................................................80
18.13 Publicity......................................................................................80
18.14 Fees and Expenses..............................................................................81
18.15 Specific Performance; Remedies Cumulative......................................................81
18.16 Representation of Counsel; Mutual Negotiation..................................................81
18.17 Knowledge......................................................................................81
18.18 No Third Party Beneficiaries...................................................................81
18.19 Time of Essence................................................................................82
18.20 Force Majeure..................................................................................82
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EXHIBITS
Exhibit A..................................Form of Agency and Services Agreement
Exhibit B.......................................Form of Trading Master Agreement
Exhibit C.......................................Organizational Documents of CMSC
Exhibit D....................................Organizational Documents of CalBear
Exhibit E.............................Form of Signature Page of CMSC and CalBear
Exhibit F.................................................Form of Renewal Notice
SCHEDULES
Schedule 1.1(a)......................................Calpine Existing Indentures
Schedule 1.1(b)...................................Calpine Restricted Transferees
Schedule 1.1(c)..............................Bear Stearns Restricted Transferees
Schedule 1.1(d).........................................Significant Subsidiaries
Schedule 3.7(a)........................................Employees of Bear Stearns
Schedule 3.8(a).............................................Employees of Calpine
Schedule 9.1.............................Calpine and Calpine Transaction Parties
Schedule 9.2..........................Calpine Conflicts, Violations and Consents
Schedule 10.1...........................................Bear Stearns and CalBear
Schedule 10.2....................Bear Stearns Conflicts, Violations and Consents
Schedule 12.9................................Opinions of Counsel to Bear Stearns
Schedule 13.9.....................................Opinions of Counsel to Calpine
Schedule 18.17.........................................................Knowledge
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MASTER TRANSACTION AGREEMENT
THIS MASTER TRANSACTION AGREEMENT (this "Agreement"), dated as of
September 7, 2005, is made by and among Calpine Corporation, a Delaware
corporation ("Calpine"), Calpine Energy Services, L.P., a Delaware limited
partnership ("CES") and The Bear Stearns Companies Inc., a Delaware corporation
("Bear Stearns") and, on and after the Effective Date (as defined herein)
Calpine Merchant Services Company, Inc., a Delaware corporation ("CMSC") and
CalBear Energy LP, a Delaware limited partnership ("CalBear"). Each of Calpine,
CES and Bear Stearns and, on and after the Effective Date, CMSC and CalBear, are
sometimes hereinafter individually referred to as a "Party", and together
referred to as the "Parties".
RECITALS
WHEREAS, the Calpine Transaction Parties (as defined herein) and
CalBear desire to enter into a mutually beneficial arrangement to facilitate the
Calpine Transaction Parties, on the one hand, and CalBear, on the other hand,
trading in physical and financial gas and electric power with Third Parties (as
defined herein), and engaging in certain energy management services, including
power and gas transportation and transmission services (the "Transaction");
WHEREAS, Calpine and its Affiliates (as defined herein) will generally
obtain more favorable terms for their purchases and sales of gas and power
through the Transaction than the terms that are otherwise currently available to
Calpine and its Affiliates for such purchases and sales;
WHEREAS, CalBear desires CMSC to provide the Services (as defined
herein) to CalBear, including acting as agent for CalBear with respect to
certain Trades, all in accordance with the terms of the Agency and Services
Agreement (as defined herein);
WHEREAS, CMSC is willing to provide the Services to CalBear on the
terms set forth in the Agency and Services Agreement and in this Agreement;
WHEREAS, Calpine and Bear Stearns desire to guarantee certain
obligations of CMSC and CES, on the one hand, and CalBear, on the other hand,
respectively;
WHEREAS, the Parties view the Transaction as one transaction, and none
of the Parties would enter into any of the Transaction Documents (as defined
herein) without entering into all of the Transaction Documents; and
WHEREAS, the Parties desire to enter into this Agreement in order to
more fully set forth certain rights and obligations with respect to the CalBear
Business (as defined herein) and the Transaction and certain related matters.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and promises contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings:
"AAA" shall have the meaning given to such term in Section 18.4(b).
"Action" shall mean, with respect to any Person, any outstanding
action, order, writ, injunction, judgment, determination or decree or any claim,
suit, litigation, proceeding, appeal, arbitration, mediation, tax audit or
governmental investigation of any kind involving such Person or its business or
Assets.
"Affiliate" shall mean, with respect to any Person (the "referent
person"), any Person that, directly or indirectly, controls the referent person,
any Person that the referent Person controls, or any Person that, directly or
indirectly, is under common control with the referent person. For purposes of
the preceding sentence, the term "control" shall mean the power, direct or
indirect, to direct or cause the direction of the management and policies of a
Person through voting securities, by contract or otherwise. Any Subsidiary shall
be deemed to be an "Affiliate". Neither Calpine nor any Calpine Transaction
Party is, or shall be deemed to be, an "Affiliate" of Bear Stearns or CalBear.
Neither Bear Stearns nor CalBear is, or shall be deemed to be, an "Affiliate" of
Calpine or any Calpine Transaction Party.
"Agency and Services Agreement" shall mean that certain Agency and
Services Agreement, substantially in the form attached hereto as Exhibit A, to
be dated on or about the Effective Date, by and between CMSC and CalBear,
pursuant to which, among other matters, CalBear appoints CMSC as its agent to
transact CalBear Business on behalf of CalBear.
"Applicable Agency Law" shall mean any federal, state or local laws
(including common law and criminal law), codes, statutes, directives,
ordinances, by-laws, regulations, rules, judgments, consent orders, settlements,
and agreements with Governmental Authorities, proclamations or delegated or
subordinated legislation of any Governmental Authority governing the
relationships and related duties of agents or attorneys-in-fact to their
principals, such as any of the foregoing providing for duties of good faith,
fair dealing, loyalty or due care of agents or attorneys-in-fact to principals.
"Applicable Law" shall mean any federal, state or local laws
(including common law and criminal law), codes, statutes, directives,
ordinances, by-laws, regulations, rules, judgments, consent orders, settlements
and agreements with Governmental Authorities, proclamations or delegated or
subordinated legislation of any Governmental Authority that are applicable to
this Agreement, the other Transaction Documents, the transactions contemplated
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hereby or thereby, Calpine, the Calpine Transaction Parties, Bear Stearns,
CalBear, the Services or the CalBear Trades, in each case other than Applicable
Agency Law.
"Arbitration Panel" shall have the meaning given to such term in
Section 18.4(c).
"Assets" shall mean, with respect to any Person, all of such Person's
right, title and interest in and to all properties, assets and rights of any
kind, now owned or hereafter acquired, whether tangible or intangible, real or
personal, wherever located.
"Bankruptcy" or "Bankruptcy Event" shall mean, 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 an involuntary case
thereunder against it; or such Person shall file a petition or consent or
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 Law and (a) the
petition commencing the involuntary case or similar proceeding is not timely
controverted, (b) the petition commencing the involuntary case or similar
proceeding is not dismissed within thirty (30) 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 thirty (30) 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" shall mean Title 11, U.S. Code or any similar federal
or state law for the relief of debtors, as amended, and all rules and
regulations promulgated thereunder.
"Bankruptcy Remote" shall mean, with respect to a Person that is an
Affiliate of Calpine, that such Person has implemented governance procedures,
organizational structure or other arrangements designed to make such Person less
likely to become the subject of a Bankruptcy Event or to become consolidated
into a Bankruptcy of Calpine or its Affiliates; provided that if such Person has
at least two (2) directors or persons in similar governance functions designated
by Bear Stearns that have the right to veto any voluntary and veto any consent
to any involuntary bankruptcy filing, and all of such Persons' Contracts and
arrangements with Affiliates are substantially similar to the Contracts and
arrangements existing on the date of this Agreement or substantially as
advantageous to such Person as the Contracts and arrangements which such Person
would obtain in a comparable arm's length transaction, such Person shall be
deemed to be Bankruptcy Remote.
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"Bear Stearns Assets" shall mean the Assets of Bear Stearns, its
Subsidiaries and their Affiliates (other than CalBear).
"Bear Stearns Claim" shall have the meaning given to such term in
Section 15.1(a)(i).
"Bear Stearns Event of Default" shall have the meaning given to such
term in Section 16.5.
"Bear Stearns Guarantee" shall have the meaning given to such term in
Section 5.1(a).
"Bear Stearns Party" shall have the meaning given to such term in
Section 15.1(a)(i).
"Bear Stearns SEC Filings" shall have the meaning given to such term
in Section 10.9(a).
"Bonus Amount" shall have the meaning given to such term in the Agency
and Services Agreement.
"Books and Records" shall mean, with respect to any Person, all books,
records, lists, ledgers, financial data, files, reports, product and design
manuals, plans, drawings, technical manuals and operating records of every kind
pertaining to such Person, any of its Subsidiaries or the Assets or the
customers, suppliers, distributors or personnel of such Person or any of its
Subsidiaries, in whatever form, including all (a) corporate books and records of
such Person or any of its Subsidiaries, (b) disk or tape files, printouts, runs
or other computer-based information and such Person's, or its applicable
Subsidiary's, interest in all computer programs required to access, and the
equipment containing, all such computer-based information, (c) product, business
and marketing plans, (d) environmental control records, (e) sales, customer
maintenance, distributor, supplier and production records including sales and
promotional literature, and (f) personnel records and information.
"Business Day" shall mean any day on which Federal Reserve member
banks in New York City are open for business.
"CalBear Business" shall have the meaning given to such term in
Section 3.1(a).
"CalBear Default Option" shall have the meaning given to such term in
Section 16.6(d)(iii).
"CalBear Governance Operations" shall have the meaning given to such
term in the Agency and Services Agreement.
"CalBear Information" shall mean the terms of, or other information
relating to, this Agreement, any other Transaction Document, the transactions
4
entered into hereunder or thereunder or contemplated hereby or thereby, the
Services, the CalBear Trades, the CalBear Business or any related information.
"CalBear Name" shall have the meaning given to such term in Section
16.6(c)(i).
"CalBear Referral Business" shall have the meaning given to such term
in Section 3.1(a).
"CalBear Termination Option" shall have the meaning given to such term
in Section 16.6(d)(ii).
"CalBear Trades" shall have the meaning given to such term in the
Agency and Services Agreement.
"Calpine Assets" shall mean the Assets of Calpine, its Subsidiaries
and their Affiliates.
"Calpine Claim" shall have the meaning given to such term in Section
15.1(b)(i).
"Calpine Event of Default" shall have the meaning given to such term
in Section 16.4.
"Calpine Existing Indentures" shall mean the indentures listed on
Schedule 1.1(a).
"Calpine Guarantee" shall have the meaning given to such term in
Section 4.1(a).
"Calpine Party" shall have the meaning given to such term in Section
15.1(b)(i).
"Calpine SEC Filings" shall have the meaning given to such term in
Section 9.9(a).
"Calpine Transaction Parties" shall mean each of CMSC and CES.
"Capital Stock" shall mean (a) in the case of a corporation, corporate
stock, (b) in the case of a partnership or limited liability company,
partnership or membership interests or units (whether general or limited), and
(c) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distribution of assets of, the
issuing entity.
"CEA" shall mean the Commodity Exchange Act, as amended, and all rules
and regulations promulgated thereunder.
"CET ISDA Agreement" shall have the meaning given to such term in the
Trading Master Agreement.
"CFTC" shall mean the Commodity Futures Trading Commission and its
successors.
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"Chairman" shall have the meaning given to such term in Section
18.4(c).
"Claim" shall mean a claim, counterclaim, Action, inquiry,
investigation, demand, charge, complaint, information or subpoena.
"Claim Notice" shall have the meaning given to such term in Section
15.1(c)(i).
"Confidential Information" shall mean, as to any Person, all
proprietary and confidential financial, marketing, operational, organizational,
know-how, personnel, customer, vendor, technical and other data relating to the
business of such Person, in any form, whether oral or written, including all
correspondence, memoranda, notes, summaries, analyses, compilations, forecasts,
studies, models, extracts of and documents and records reflecting, based upon or
derived from Confidential Information, regardless of who prepares it, as well as
all copies and other reproductions thereof, whether in writing or stored or
maintained in or by electronic, magnetic or other means, media or devices.
"Contract" shall mean, with respect to any Person, any agreement,
contract, lease, sublease, note, loan, evidence of indebtedness, indenture,
guarantee, letter of credit, franchise agreement, undertaking, covenant not to
compete, employment agreement, license, sublicense, instrument, obligation,
commitment, purchase and/or sales order, quotation and other executory
commitment to which such Person is a party or that relates to the businesses of
such Person or its Assets, whether oral or written, express or implied, and that
pursuant to its terms has not expired, terminated or been fully performed by the
parties thereto.
"Credit Enhancement Trade" shall have the meaning given to such term
in the Trading Master Agreement.
"Cumulative Net Trading Profits" shall have the meaning given to such
term in the Agency and Services Agreement.
"Damages" shall have the meaning given to such term in Section
15.1(a)(i).
"Default Purchase Right" shall have the meaning given to such term in
Section 16.6(d)(iii).
"Default Sale Right" shall have the meaning given to such term in
Section 16.6(d)(iii).
"Default Termination Notice" shall have the meaning given to such term
in Section 16.6(d)(iii).
"Defaulting Parties" means Calpine and each Calpine Transaction Party,
in respect of Calpine Events of Default, and Bear Stearns and CalBear, in
respect of Bear Stearns Events of Default.
"Defaulting Termination Parties" shall mean (i) if the Liquidation
Date occurs pursuant to Section 16.6(b)(iv) or (v), the applicable Defaulting
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Parties, (ii) if the Liquidation Date occurs pursuant to Section 16.6(b)(vi) or
16.6(b)(vii), the Parties other than the Party that terminated any of the other
Transaction Documents in accordance with its terms, and its Affiliates, and
(iii) if the Liquidation Date occurs pursuant to Section 16.6(b)(viii), Bear
Stearns and CalBear.
"Designated CMSC Board Member" shall have the meaning given to such
term in Section 3.12.
"Effective Date" shall have the meaning given to such term in Section
2.3.
"Election Notice" shall have the meaning given to such term in Section
3.3(c).
"Elective Non-Terminating Parties" shall mean the Parties other than
the Elective Terminating Parties.
"Elective Terminating Parties" shall mean the Party delivering the
Termination Notice pursuant to Section 16.6(b)(iii) or Section 16.6(b)(ix) and
its Affiliates that are Parties.
"Encumbrance" shall mean any claim, lien, judgment, pledge, escrow,
option, liability, charge, easement, restrictive covenant, security interest,
deed of trust, right of first refusal, mortgage, right-of-way, encroachment,
building or use restriction, encumbrance or other right of third parties,
whether voluntarily incurred or arising by operation of law, and shall include
any agreement to give any of the foregoing in the future, and any contingent or
conditional sales agreement or other title retention agreement or lease in the
nature thereof or the filing of, or agreement to give any financing statement,
under the laws of any jurisdiction.
"Equity Securities" shall mean (i) shares of Capital Stock or other
equity securities, (ii) subscriptions, calls, warrants, options or commitments
of any kind or character relating to, or entitling any Person to purchase or
otherwise acquire, any Capital Stock or other equity securities, and (iii)
securities convertible into or exercisable or exchangeable for shares of Capital
Stock or other equity securities.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Facilities" shall mean, collectively, Power generating facilities
that are located in the United States of America, Canada or Mexico.
"FERC" means the Federal Energy Regulatory Commission and its
successors.
"Final Third Party Master Agreements" shall have the meaning given to
such term in Section 16.6(d)(i).
"Fiscal Quarter" shall have the meaning given to such term in the
Agency and Services Agreement.
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"Fiscal Year" shall mean a fiscal year of CalBear, which as of the
date of this Agreement commences on December 1 of each calendar year and ends on
November 30 of the following calendar year, subject to revision in accordance
with Section 3.15; provided that (x) the first Fiscal Year shall commence on the
date of this Agreement and end the earlier of (1) November 30, 2005 and (2) the
Termination Date, and (y) the last Fiscal Year shall end on the Termination
Date.
"Force Majeure" shall mean an event or circumstance which prevents one
Party from performing its obligations under the Transaction Documents, which
event or circumstance was not anticipated as of the date the applicable
obligation was agreed to, which is not within the reasonable control of, or the
result of the negligence of, the Party claiming the Force Majeure, and which, by
the exercise of commercially reasonable efforts, such Party is unable to
overcome or avoid or cause to be avoided, including acts of God, acts of the
public enemy including terrorism, unexpected delay by any Governmental
Authority, and any change in Applicable Law. Force Majeure shall exclude any
event or circumstance if its sole effect on a Party is economic, including
economic effects that prevent Payment.
"Formation Transactions" shall have the meaning given to such term in
Section 2.2.
"Forward" shall have the meaning given to such term in the Trading
Master Agreement.
"FPA" shall mean the Federal Power Act, as amended, and all rules and
regulations promulgated thereunder.
"GAAP" shall mean accounting principles generally accepted in the
United States of America. The term, "GAAP," when used herein, shall mean the
accounting principles generally accepted by the Securities Exchange Commission
as reflected in Regulation S-X promulgated under the Exchange Act. The term
"GAAP," when used herein with respect to CalBear or the CalBear Trades, shall
mean GAAP as applied consistently by Bear Stearns from time to time.
"Gas" shall mean physical or financial natural gas unless otherwise
agreed upon between the Parties.
"Gas Trade" shall mean any purchase or sale or hedge of Gas, or the
transportation, transmission or storage of Gas, all on a world-wide basis.
"Governmental Authority" shall mean any federal, state, local or
municipal government, governmental department, commission, board, bureau, agency
or instrumentality, any RTO/ISO control area or SRO, or any judicial,
regulatory, administrative or quasi-governmental court, panel or other body,
having or asserting jurisdiction as to the matter in question.
"Hard Covenants" shall mean Section 4.2(b) of the Agency and Services
Agreement (to the extent of the prohibition therein with respect to entering
8
into Trades directly with Calpine or any of its Affiliates), Sections 4.17(a),
(b), (c) and (e) of the Agency and Services Agreement, and Section 3.13 of this
Agreement.
"Initial Notice" shall have the meaning given to such term in Section
3.3(a).
"Initial Period" shall have the meaning given to such term in Section
3.3(b).
"Initial Term" shall mean the period commencing on the Effective Date
and ending on November 30, 2006.
"ISO" shall mean any FERC-authorized independent system operator.
"Latest Renewal Period" shall have the meaning given to such term in
Section 16.2(a)(ii).
"Liabilities" shall mean any liability, indebtedness, obligation,
co-obligation, commitment, expense, claim, deficiency, guaranty or endorsement
of or by any Person of any nature (whether direct or indirect, known or unknown,
absolute or contingent, liquidated or unliquidated, due or to become due,
accrued or unaccrued, matured or unmatured).
"Liquidation" shall have the meaning given to such term in the Agency
and Services Agreement.
"Liquidation Date" shall mean the date on which Liquidation shall
begin.
"Material Adverse Effect" or "Material Adverse Change" shall mean,
with respect to any Person, any change, circumstance, event or effect that,
individually or in the aggregate with such other changes, circumstances, events
or effects, is or is reasonably likely to constitute, a material adverse change
in, or have a material adverse effect on (a) the business, operations, assets,
liabilities, foreseeable prospects, financial condition or results of operations
of such Person and its Subsidiaries, taken as a whole, or (b) the right or
ability of such Person to consummate the transactions, taken as a whole,
contemplated hereby and by the other Transaction Documents.
"Misconduct" shall mean, with respect to any Person: (a) any
nonfulfillment, nonperformance, nonobservance or other breach or violation of,
or default under, any provision of any Transaction Document by such Person,
through any act or omission, if (i) such act or omission was taken or not taken
with the intent to take or not take the same by the individual acting on behalf
of such Person, (ii) such individual knew that such act or omission constituted
a breach or violation of the Transaction Documents or the policies of such
Person or such individual had previously taken, or omitted to take, such act and
had been warned that such act or omission constituted a breach or violation of
the Transaction Documents or the policies of such Person, and (iii) at the time
of such act or omission, an officer (or with respect to CMSC, prior to January
1, 2006, an officer seconded to CMSC under the applicable transition services
agreement with an Affiliate of Calpine) of such Person knew or should have known
that such act or omission was being taken or omitted to be taken, (b) any fraud
by such Person with respect to the Transaction Documents or the matters covered
thereby, and (c) any nonfulfillment, nonperformance, nonobservance or other
9
breach or violation of, or default under any provision of any Transaction
Document by such Person through any act or omission if such act or omission
constituted gross negligence in the scheduling of physical Trades.
"Month" shall mean a calendar month.
"MW" shall mean megawatt, or one million (1,000,000) watts of Power.
"MWh" shall mean megawatt-hour, or one million watts (1,000,000) of
Power for one (1) hour.
"Non-Compete Defaulting Termination Parties" shall mean (i) if the
Liquidation Date occurs pursuant to Section 16.6(b)(iv) or (v), the applicable
Defaulting Parties, (ii) if the Liquidation Date occurs pursuant to Section
16.6(b)(vi) (except for an occurrence of the Liquidation Date as a result of a
termination of the Agency and Services Agreement pursuant to Section 7.1(a)(iii)
thereof) or 16.6(b)(vii) (except for an occurrence of the Liquidation Date as a
result of a termination of the Agency and Services Agreement pursuant to Section
7.1(a)(iv) thereof), the Parties other than the Party that terminated any of the
other Transaction Documents in accordance with its terms, and its Affiliates,
and (iii) if the Liquidation Date occurs pursuant to Section 16.6(b)(viii), Bear
Stearns and CalBear.
"Non-Compete Period" [*]
"Non-Defaulting Termination Parties" shall mean the Parties other than
the Defaulting Termination Parties.
"Non-Renewal Purchase Notice" shall have the meaning given to such
term in Section 16.6(d)(i).
"Non-Renewal Purchase Right" shall have the meaning given to such term
in Section 16.6(d)(i).
"Non-Renewing Parties" shall have the meaning given to such term in
Section 16.2(d).
"Offer" shall have the meaning given to such term in Section 3.3(b).
"Offer Notice" shall have the meaning given to such term in Section
3.3(b).
"Offer Period" shall have the meaning given to such term in Section
3.3(b).
"Ordinary Losses" shall mean (a) any Claims or Damages with respect to
the actual or prospective operations or economic results of CalBear, including
losses (i) on CalBear Trades where delivery of Gas or Power or determination of
price has occurred, (ii) on Forward CalBear Trades, and (iii) with respect to
lost CalBear Trades, profits or opportunities, and (b) any other Claims or
Damages, excluding in each case under clauses (a) and (b), Third Party Losses.
10
"Organizational Documents" shall mean the articles of incorporation,
by-laws, articles of organization, limited liability company agreement,
partnership agreement, formation agreement, joint venture agreement or other
similar organizational documents of any Person other than any individual, as
applicable with respect to such Person.
"Party Arbitrator" shall have the meaning given to such term in
Section 18.4(c).
"Payment" shall mean any payment, repayment, return, refund, transfer,
deposit, funding, posting or other type of payment or provision of an amount or
collateral (including provision of letters of credit), whether as a payment or
provision for services or property, capital contribution, loan, guarantee,
advance, cure of default, collateral, margin, credit support or any other form
of security or any other amount.
"Permits" shall mean, with respect to any Person, all licenses,
permits, franchises, approvals, authorizations, certifications, consents,
orders, settlements, exemptions or similar items of, or filings, reports,
notifications or similar items submitted to or granted by, any Governmental
Authority, whether foreign, federal, state or local or otherwise, under
Applicable Law, necessary for the past, present or anticipated conduct of, or
relating to the operation of the businesses of or the ownership of the Assets
of, such Person.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
limited liability company or Governmental Authority or other entity.
"Power" shall mean physical or financial electric capacity as measured
in MWs, physical or financial electric energy as measured in MWh, and/or any
other electricity related products or services available for sale, including
reserves and other ancillary services needed to support the transmission and
distribution of Power from a point of generation to a delivery point, as such
services are defined in applicable FERC-filed tariffs.
"Power Trade" shall mean any purchase or sale or hedge of Power, or
the transportation or transmission of Power, all on a world-wide basis.
"Pre-Formation Transactions" shall have the meaning given to such term
in Section 2.1.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended, and all rules and regulations promulgated thereunder.
"Regulatory Approval" shall mean all Permits that are necessary for
the entering into and performance of CalBear Trades, this Agreement, the other
Transaction Documents, or the transactions contemplated hereby or thereby.
"Regulatory Event" shall have the meaning given to such term in
Section 18.6.
"Remedial Parties" shall have the meaning given to such term in
Section 17.1.
11
"Renewal Notice" shall have the meaning given to such term in Section
16.2(a)(i).
"Renewal Period" shall have the meaning given to such term in Section
16.1.
"Renewing Parties" shall have the meaning given to such term in
Section 16.2(d).
"Reports" shall have the meaning given to such term in the Agency and
Services Agreement.
"Representative" shall mean, with respect to any Person, any officer,
director, principal, attorney, employee, agent, consultant, accountant or other
representative of such Person.
"Restricted Transferees" shall mean, with respect to Calpine, the
Calpine Transaction Parties and their Affiliates, the Persons listed in Schedule
1.1(b), and with respect to Bear Stearns, CalBear and their Affiliates, the
Persons listed in Schedule 1.1(c).
"Returns" shall mean, with respect to any Person, any and all returns,
reports, declarations, documents and information statements with respect to
Taxes required to be filed by or on behalf of such Person with any governmental
authority or Tax authority or agency, whether domestic or foreign, including
consolidated, combined and unitary returns and all amendments thereto or thereof
and any documents with respect to or accompanying requests for the extension of
time in which to file any such returns, reports, declarations, documents and
information statements.
"Risk Policy" shall have the meaning given to such term in the Agency
and Services Agreement.
"RTO" shall mean any FERC-authorized regional transmission
organization.
"Securities Act" shall mean the U.S. Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"Service Fee" shall have the meaning given to such term in the Agency
and Services Agreement.
"Service Fee Return" shall have the meaning given to such term in the
Agency and Services Agreement.
"Service Fee Return Refund" shall have the meaning given to such term
in the Agency and Services Agreement.
"Services" shall have the meaning given to such term in the Agency and
Services Agreement.
"Significant Subsidiary" shall mean (a) in the case of Calpine, the
Subsidiaries of Calpine listed on Schedule 1.1(d), their successors, if such
successors are Affiliates of Calpine, and assigns of all or substantially all of
12
their assets, if such assigns are Affiliates of Calpine and (b) in the case of
Bear Stearns, the Subsidiaries of Bear Stearns listed on Schedule 1.1(d), their
successors, if such successors are Affiliates of Bear Stearns, and assigns of
all or substantially all of their assets, if such assigns are Affiliates of Bear
Stearns.
"Soft Covenants" shall mean Sections 3.1 and 3.14 of this Agreement
and Sections 4.1(b), (c) and (e), and 4.4(a) of the Agency and Services
Agreement.
"Specified Risk Limits" shall have the meaning given to such term in
the Agency and Services Agreement.
"SRO" shall mean any applicable self-regulatory organization,
including CFTC-designated contract markets.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other business entity, whether or not incorporated, of which at least a
majority of the securities or interests having, by their terms, ordinary voting
power to elect members of the board of directors, managing members, or other
persons performing similar functions with respect to such entity, is held,
directly or indirectly, by such Person.
"Tax(es)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, and other like charges, including any interest,
fines, penalties, additions to tax or additional amounts that have or may become
payable in respect thereof, imposed by any foreign, federal, state or local
government or taxing authority, whether computed on a separate, consolidated,
unitary, combined or any other basis, which taxes shall include all income
taxes, service, license and net worth taxes, payroll and employee withholding
taxes, unemployment insurance, retirement, social security, sales and use taxes,
value-added taxes, excise taxes, franchise taxes, gross receipts taxes,
occupation taxes, real and personal property taxes, stamp taxes, transfer and
recording taxes, workers' compensation and other obligations of the same or of a
similar nature.
"Termination Amount" shall have the meaning given to such term in
Section 16.6(d)(ii).
"Termination Date" shall have the meaning given to such term in
Section 16.1.
"Termination Fee" shall have the meaning given to such term in Section
16.6(d)(ii).
"Termination Notice" shall mean an irrevocable notice delivered by a
Party, on behalf of itself and its Affiliates that are Parties and in any manner
set forth in Section 18.2, to any of the Parties that are not Affiliates of such
Party, stating the intent of such Party to cause a Liquidation Date in
accordance with Section 16.6(b)(iii) or Section 16.6(b)(ix) and setting forth
(a) a Termination Amount, (b)(i) in the case of such notice by Calpine or any
Calpine Transaction Party, (A) Calpine's or such Calpine Transaction Party's
binding offer, irrevocable by its terms for two (2) Business Days following
receipt of the Termination Notice by Bear Stearns or CalBear, to either (x)
purchase the Final Third Party Master Agreements, in accordance with Section
13
16.6(d)(v) (including the last sentence thereof), from CalBear for the
Termination Amount or (y) receive from Bear Stearns or CalBear the Termination
Fee, and (B) that Bear Stearns or CalBear shall elect within such two (2)
Business Day period to either sell the Final Third Party Master Agreements or
pay the Termination Fee in accordance with the immediately preceding clause (A),
or (ii) in the case of such notice by Bear Stearns or CalBear, (A) Bear Stearns'
or CalBear's binding offer, irrevocable by its terms for two (2) Business Days
following receipt of the Termination Notice by Calpine or any Calpine
Transaction Party, to either (x) sell the Final Third Party Master Agreements,
in accordance with Section 16.6(d)(v) (including the last sentence thereof) to
Calpine or any Calpine Transaction Party for the Termination Amount or (y) pay
to Calpine or any Calpine Transaction Party the Termination Fee and (B) that
Calpine or any Calpine Transaction Party shall elect within such two (2)
Business Day period to either purchase the Final Third Party Master Agreements
or pay the Termination Fee in accordance with the immediately preceding clause
(A).
"Termination Purchase Right" shall have the meaning given to such term
in Section 16.6(d)(ii).
"Termination Sale Right" shall have the meaning given to such term in
Section 16.6(d)(ii).
"Third Party" shall mean, with respect to any Person, any other Person
that is not an Affiliate of such Person, including any Governmental Authority.
For purposes of this Agreement and the other Transaction Documents, none of
Calpine or any Calpine Transaction Party shall be deemed to be a "Third Party"
with respect to Bear Stearns or CalBear and neither Bear Stearns nor CalBear
shall be deemed to be a "Third Party" with respect to Calpine or any Calpine
Transaction Party.
"Third Party Claim" shall have the meaning given to such term in
Section 15.1(c)(i).
"Third Party Losses" shall mean any Claims or Damages arising out of
or resulting from (i) a Third Party Claim, including any such Claim by a
Governmental Authority or (ii) actions taken to investigate, prevent or mitigate
a potential Third Party Claim, to the extent such actions (A) are taken by
Calpine or any Calpine Transaction Party or (B) are reasonable actions taken by
CalBear or any of its Affiliates to investigate, prevent or mitigate potential
Third Party Claims arising out of or resulting from a violation of Applicable
Law by Calpine or any Calpine Transaction Party for which indemnification would
be available under Section 15.1(a)(i)(A), (B), or (E), if after notice of such
violation by CalBear or any of its Affiliates, neither Calpine nor any Calpine
Transaction Party takes timely, reasonable actions to investigate, prevent or
mitigate such potential Third Party Claims.
"Third Party Master Agreement" shall have the meaning given to such
term in the Agency and Services Agreement.
"Third Party Service Transaction" shall mean any arrangement to
provide a set of services to a Third Party related to Power or Gas contract
management or physical or financial optimization activities of a counterparty,
14
to the extent that such services are related to Power generation or Gas
production, purchases, sales, transmission, transportation, dispatch,
scheduling, nomination, injection, withdrawal, storage, ancillary services or
related physical or financial services and products.
"Threshold" shall have the meaning given to such term in Section
15.1(a)(iv)(B).
"Trades" shall mean any and all Gas Trades and Power Trades.
"Trading Master Agreement" shall mean that certain Trading Master
Agreement, substantially in the form attached hereto as Exhibit B, to be dated
on or about the Effective Date, by and between CES, CMSC and CalBear, governing,
among other matters, Credit Enhancement Trades.
"Trading Volume" shall mean a volume of Power equal to the aggregate
volume of Power (measured in MWhs) traded in any calendar year by (a) Calpine,
in the CES discretionary program, and (b) CalBear.
"Transaction Documents" shall mean (a) this Agreement, (b) the Agency
and Services Agreement, (c) the Trading Master Agreement, and (d) the CET ISDA
Agreement.
"Transaction Parties" shall mean the Calpine Transaction Parties and
CalBear, collectively.
"Transfer" shall have the meaning given to such term in Section
3.3(a).
1.2 Construction.
(a) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender, (ii) words using the singular or plural
number also include the plural or singular number, respectively, (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement, (iv) the terms "modified" and "amended" and derivative or
similar words shall mean amended, supplemented, waived or otherwise modified,
(v) the terms "Article" or "Section" refer to the specified Article or Section
of this Agreement, (vi) the word "including" shall mean "including, without
limitation," whether or not so specified, and (vii) the word "or" shall be
disjunctive but not exclusive.
(b) References to agreements and other documents shall be deemed to
include all subsequent modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
15
(e) The annexes, schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of this Agreement.
(f) Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified.
(g) Whenever this Agreement refers to a right, obligation, act or
omission of CalBear, the same shall mean a right, obligation, act or omission of
CalBear itself, and not of CalBear through CMSC as agent or attorney-in-fact for
or on behalf of or in the name of CalBear, unless the applicable provision of
this Agreement expressly states otherwise.
ARTICLE II.
FORMATION TRANSACTIONS; EFFECTIVE DATE
2.1 Pre-Formation Transactions. As soon as reasonably practicable
following the date hereof:
(a) CES Marketing VII, LLC shall be converted from a limited liability
company to a corporation under the laws of the State of Delaware and its name
shall be changed to Calpine Merchant Services Company, Inc., and Calpine shall
enter into, or cause to be entered into, amended and restated Organizational
Documents of CMSC, substantially in the form attached hereto as Exhibit C;
(b) Arroyo Energy LP's name shall be changed to CalBear Energy LP and
Bear Stearns or its Affiliates shall enter into amended and restated
Organizational Documents of CalBear, substantially in the form attached hereto
as Exhibit D;
(c) Calpine and the Calpine Transaction Parties shall take
commercially reasonable actions to obtain any Regulatory Approvals necessary or
advisable in order for CMSC to perform the Services; and
(d) CalBear shall take commercially reasonable actions to obtain any
Regulatory Approvals necessary or advisable in order for CalBear to execute any
CalBear Trades.
The transactions described in this Section 2.1 shall be referred to
herein as the "Pre-Formation Transactions."
2.2 Formation Transactions. Upon the terms and subject to the conditions
set forth in this Agreement, on or prior to the Effective Date:
(a) Calpine shall cause CMSC and Bear Stearns shall cause CalBear to
become a Party to this Agreement by executing an additional signature page to
this Agreement, substantially in the form of Exhibit E hereto, and, following
such execution each of CMSC and CalBear shall be a party to, shall be bound by
the obligations of, and shall receive the benefits of this Agreement and shall
be "CMSC" and "CalBear", respectively, and a "Party", in each case as defined
herein, for all purposes hereunder; and
16
(b) CalBear and the applicable Calpine Transaction Parties shall enter
into the Agency and Services Agreement, the Trading Master Agreement and the CET
ISDA Agreement.
The transactions described in this Section 2.2 shall be
referred to herein as the "Formation Transactions."
2.3 Effective Date. Unless this Agreement shall have been terminated
pursuant to Section 16.6(a) hereof, the consummation of the transactions
contemplated herein to be consummated on the Effective Date shall take place at
10:00 a.m. New York time at the offices of Latham & Watkins LLP, at 885 Third
Avenue, New York, NY 10022, on the third (3rd) Business Day following the
satisfaction or waiver of all of the conditions precedent to the obligations of
the Parties set forth in Article XII and Article XIII (other than conditions
which are not capable of being satisfied until the Effective Date), or such
other date as the Parties hereto agree (the "Effective Date").
ARTICLE III.
RELATIONSHIP OF THE PARTIES
Each of the Parties covenant and agree with each other as follows:
3.1 CalBear Business[*]
(b) Notwithstanding any other provision of this Agreement, the sole
and exclusive remedy for any breach of this Section 3.1 shall be, in the event
of a breach by Calpine or the Calpine Transaction Parties, on the one hand, or
Bear Stearns, on the other hand, the termination of this Agreement pursuant to
Section 16.6(b)(iii) hereof.
3.2 Exclusivity.
(a) Except as may otherwise be specifically provided in this
Agreement, including Sections 3.2(b), (c) and (d), or the other Transaction
Documents, from the date hereof through the earlier of (i) the date of
termination of this Agreement, if this Agreement is terminated prior to the
Effective Date, or (ii) in all other cases, the last day of the Non-Compete
Period, neither Calpine or any of the Calpine Transaction Parties, on the one
hand, nor Bear Stearns or CalBear, on the other hand, will, directly or
indirectly, through one or more of their respective Affiliates or otherwise,
engage in any business arrangement with a Third Party, whether structured as a
strategic alliance, joint venture, partnership, co-ownership, contractual
relationship, agency relationship, or otherwise, which, when taken as a whole,
substantially replicates the substance of the business arrangement under the
Transaction Documents, taken as a whole, and in connection therewith provides
for the sharing of the profits (whether through the ownership of Equity
Securities, contractually, or otherwise) of such business with the Third Party,
in each case, in any state, possession, territory or other political subdivision
of the United States, Canada or Mexico.
(b) The foregoing Section 3.2(a) shall not prohibit any business of
Calpine or any Calpine Transaction Party with a Third Party if the primary
business of such Third Party and its Affiliates, taken as a whole, is the
17
ownership, operation or management of one or more Facilities or gas or electric
loads or the purchase, sale, trading or transmission of Power or Gas.
(c) Nothing in this Agreement shall prohibit (x) Calpine or the
Calpine Transaction Parties or any of their Affiliates, on the one hand, or Bear
Stearns or CalBear or any of their Affiliates, on the other hand, from having
passive investments of less than five (5) percent in the aggregate of the
outstanding Equity Securities of any entity listed for trading on a national
stock exchange (as defined in the Exchange Act) or any recognized automatic
quotation system, (y) Calpine, the Calpine Transaction Parties or any of their
Affiliates, on the one hand, or Bear Stearns or CalBear or any of their
Affiliates, on the other hand, from entering into any financing or credit
enhancement transaction, including any transaction similar to a transactions
contemplated by the Trading Master Agreement (provided that the other aspects of
such transaction do not result in the engagement in a business that would
otherwise violate this Section 3.2), or (z) Bear Stearns, CalBear or any of
their Affiliates from acting as an underwriter, initial purchaser, lender or
otherwise with respect to any debt, equity or other financing of any Person, or
purchasing, owning, holding, trading or selling any security or other interest
in any Person (provided that such activity or the related transactions, when
taken as a whole, does not result in the engagement in a business that would
otherwise violate this Section 3.2).
(d) Nothing in this Agreement shall prohibit Calpine or the Calpine
Transaction Parties or any of their Affiliates, on the one hand, or Bear Stearns
or any of its Affiliates (other than CalBear), on the other hand, from engaging
in any transaction that has been proposed to CalBear by Calpine or its
Affiliates, on the one hand, or Bear Stearns or its Affiliates, on the other
hand, in accordance with the terms of the Transaction Documents, if CalBear has
elected not to pursue such transaction and such transaction has ceased to be
CalBear Referral Business in accordance with Section 3.1(a) above.
3.3 Certain Restrictions on Sales by Calpine of Equity Securities and
Assets of CMSC.
(a) Calpine and each of the Calpine Transaction Parties hereby agrees
that it shall not, and shall cause its Affiliates not to, directly or indirectly
(through the sale of Equity Securities in an Affiliate or otherwise), sell,
assign, transfer, convey, pledge, mortgage, hypothecate or otherwise encumber or
dispose of (in each case, a "Transfer") any Equity Securities of, or all or
substantially all of the Assets of, CMSC, except in compliance with this Section
3.3. If Calpine, any of the Calpine Transaction Parties, or any of their
Affiliates wishes to Transfer any such Assets or Equity Securities, Calpine
shall first deliver to Bear Stearns a letter (the "Initial Notice") signed by
Calpine (and any such Calpine Transaction Party or Affiliate, if applicable)
setting forth the Equity Securities and/or Assets proposed to be Transferred and
the material terms of the proposed Transfer other than the price.
(b) Upon receipt of an Initial Notice, Bear Stearns and its Affiliates
shall have forty five (45) days (the "Initial Period") to submit a binding
letter (the "Offer Notice") signed by Bear Stearns (and any such Affiliate, if
applicable) setting forth (A) a proposed purchase price with respect to the
Equity Securities and/or Assets proposed to be Transferred and (B) Bear Stearns'
(or such Affiliate's) offer (irrevocable by its terms for five (5) Business Days
18
(such five (5) day period, the "Offer Period")) to purchase from Calpine or such
Calpine Transaction Party or any of their Affiliates the Equity Securities
and/or Assets described in the Initial Notice, on the terms and conditions
described in the Initial Notice and for the purchase price set forth in the
Offer Notice (an "Offer"). If an Offer Notice is delivered prior to the end of
the Initial Period, the Initial Period shall end on the date of delivery of such
Offer Notice and the Offer Period shall commence on such date. If neither Bear
Stearns nor any of its Affiliates delivers an Offer Notice to Calpine within the
Initial Period, Calpine or its Affiliate may, during the period beginning on the
forty-sixth (46th) day following the receipt of the Initial Notice by Bear
Stearns and ending on the ninetieth (90th) day following the receipt of the
Initial Notice by Bear Stearns, Transfer to a Third Party all (but not less than
all) of the Equity Securities and/or Assets covered by the Initial Notice, for a
purchase price negotiated between Calpine or such Affiliate and such Third Party
and on other terms and conditions at least as favorable to Calpine as those
contained in the Initial Notice; provided that if a Third Party transferee has
accepted such offer, Calpine shall have completed such Transfer within an
additional one hundred eighty (180) days from the end of such ninety (90) day
period; and provided, further, that, with respect to any such Transfer that is
not completed within the time periods set forth in this Section 3.3(b), Calpine
shall not complete any such Transfer without again complying with each provision
of this Section 3.3, as applicable.
(c) Upon receipt of an Offer Notice, Calpine and its Affiliates shall
have the option to sell the Equity Securities and/or Assets described in the
Initial Notice to Bear Stearns (or its Affiliate, as applicable) at the purchase
price and upon the terms and conditions specified in the Offer. If Calpine or
any of its Affiliates desires to exercise the option set forth in the preceding
sentence, it shall deliver a notice (an "Election Notice") to Bear Stearns at
any time during the Offer Period, which Election Notice shall specify that
Calpine or any of its Affiliates has elected to exercise its option to accept
the Offer and sell the Equity Securities and/or Assets described in the Initial
Notice to Bear Stearns (or its Affiliate, as applicable) on the terms set forth
in the Offer. If Calpine or any of its Affiliates delivers an Election Notice
during the Offer Period, then Bear Stearns (or its Affiliates, as applicable)
shall be obligated to purchase and Calpine (or such Affiliate, as applicable)
shall be obligated to sell, the Equity Securities and/or Assets described in the
Initial Notice at the purchase price and on the other terms and conditions
indicated in the Offer. The closing of such purchase and sale shall occur on a
closing date selected by Bear Stearns or such Affiliate, as applicable;
provided, however, that such closing date shall be not less than ten (10) days
nor more than ninety (90) days following the date of the Election Notice, unless
more time is required to obtain any applicable regulatory or other approvals. If
neither Calpine nor any of its Affiliates delivers an Election Notice to Bear
Stearns (or its Affiliate, as applicable) within the Offer Period, the Offer
shall automatically expire at the end of the Offer Period and neither Bear
Stearns nor any of its Affiliates shall have any obligation to purchase the
Equity Securities and/or Assets described in the Initial Notice.
(d) If Bear Stearns or one of its Affiliates delivers an Offer Notice
to Calpine within the Initial Period, but neither Calpine nor any of its
Affiliates delivers an Election Notice to Bear Stearns during the Offer Period,
Calpine or its Affiliate may, during the period beginning on the sixth (6th) day
following the receipt of the Offer Notice by Calpine and ending on the fiftieth
(50th) day following the receipt of the Offer Notice by Calpine, Transfer to a
Third Party all (but not less than all) of the Equity Securities and/or Assets
covered by the Initial Notice, (x) for the purchase price and on the other terms
19
and conditions contained in the Offer Notice or (y) for a purchase price more
favorable financially to Calpine, and on other terms at least as favorable to
Calpine, as those contained in the Offer Notice; provided that if a Third Party
transferee has accepted such offer, Calpine shall have completed such Transfer
within an additional one hundred eighty (180) days from the end of such fifty
(50) day period; and provided, further, that, with respect to any such Transfer
that is not completed within the time periods set forth in this Section 3.3(d),
Calpine shall not complete such Transfer without again complying with each
provision of this Section 3.3, as applicable.
(e) In addition to the foregoing restrictions, Calpine (or the
applicable Calpine Transaction Party or Affiliate) shall not complete any
Transfer pursuant to Section 3.3(b) or Section 3.3(d) without receiving the
prior consent of Bear Stearns to the transferee of such Transfer, such consent
with respect to any proposed Third Party transferee not to be unreasonably
withheld or delayed after Calpine's (or the applicable Calpine Transaction
Party's or Affiliate's) request for such consent (and in no event shall such
consent take more than the longer of ten (10) Business Days following receipt of
such request by Bear Stearns or the time remaining until the end of the Initial
Period or the Offer Period, as applicable); provided that Bear Stearns may give
or withhold such consent in its sole and absolute discretion with respect to any
proposed Transfers to a Restricted Transferee. Calpine may make the request for
such consent at any time following delivery of an Initial Notice, including
contemporaneously with the applicable Initial Notice; provided that Calpine must
provide the identity of any proposed Third Party transferee (as well as the
identity of the ultimate operating and holding company parent, if any, of each
proposed Third Party transferee, if the identity of such Person(s) is not
readily apparent) in each request for consent, and otherwise comply with this
Section 3.3. Any consent given to a Transfer pursuant to this Section 3.3(e)
shall expire (i) if no proposed Third Party transferee mentioned in a request
for consent and approved by Bear Stearns has accepted Calpine's offer to
Transfer the Equity Securities and/or Assets covered by the Initial Notice in
accordance with Section 3.3(b) or Section 3.3(d) by the end of the ninety (90)
day period set forth in Section 3.3(b) or the fifty (50) day period set forth in
Section 3.3(d), respectively, at the end of such period, or (ii) if a proposed
Third Party transferee approved by Bear Stearns has accepted such offer, if
Calpine's Transfer to such Third Party transferee has not been completed within
an additional one hundred eighty (180) days from the end of the ninety (90) day
period set forth in Section 3.3(b) or the fifty (50) day period set forth in
Section 3.3(d), as applicable.
(f) Calpine further agrees that in connection with any Transfer
subject to this Section 3.3 consented to by Bear Stearns, Calpine shall, if
requested by Bear Stearns, deliver to Bear Stearns an opinion of external
counsel in form and substance reasonably satisfactory to Bear Stearns and
counsel for Bear Stearns, to the effect that the Transfer is not in violation of
this Agreement, and, with respect to a Transfer of any Equity Security, is not
in violation of the Securities Act or the securities laws of any State. Any
purported Transfer in violation of the provisions of this Section 3.3, including
any Transfer to a Third Party made without Bear Stearns' prior consent, shall be
null and void and shall have no force or effect.
(g) Notwithstanding anything herein to the contrary, this Section 3.3
shall not apply to (i) a Transfer to Calpine or any of its Affiliates, provided
that if such Transfer is a Transfer of (A) Assets from CMSC, such Transfer is to
20
an Affiliate of Calpine that is Bankruptcy Remote, or (B) Equity Securities of
CMSC, following such Transfer CMSC is Bankruptcy Remote, (ii) a Transfer to Bear
Stearns or any of its Affiliates, or (iii) a Transfer to any Person or such
Person's Subsidiaries if such Person or its Subsidiaries merge with Calpine or
purchase all or substantially all of the Equity Securities or Assets of Calpine.
(h) In addition to the restrictions set forth elsewhere in this
Agreement, in the event of a proposed Transfer to a Third Party by Calpine or
any of its Affiliates of Equity Securities and/or Assets of CMSC pursuant to
this Section 3.3, Bear Stearns' consent to such Transfer shall not be deemed
unreasonably withheld if such Third Party does not agree to become bound in
writing at the closing of such Transfer by the terms and conditions of this
Agreement and the other Transaction Documents and agree to assume the rights and
obligations of Calpine and all of the Calpine Transaction Parties hereunder and
thereunder pursuant to one or more instruments of assumption reasonably
satisfactory in form and substance to Bear Stearns. Notwithstanding the other
provisions of this Section 3.3, unless expressly waived by Bear Stearns, any
otherwise permitted Transfer shall be null and void ab initio if Bear Stearns
does not receive written instruments with respect to such Transfer (including
copies of any instruments of assumption and the Third Party transferee's consent
to be bound by this Agreement and the other Transaction Documents, as
applicable) that are in a form reasonably satisfactory in form and substance to
Bear Stearns. Upon the execution of such instruments of assumption by such Third
Party, such Third Party shall be deemed to be Calpine and the Calpine
Transaction Parties for all purposes of this Agreement.
3.4 Certain Restrictions on Sales by Bear Stearns of Equity Securities and
Assets of CalBear.
(a) Bear Stearns hereby agrees that it shall not, and shall cause its
Affiliates not to, directly or indirectly (through the sale of Equity Securities
in an Affiliate or otherwise), Transfer any Equity Securities of, or all or
substantially all of the Assets of, CalBear, except in compliance with this
Section 3.4. If Bear Stearns or any of its Affiliates wishes to Transfer any
such Assets or Equity Securities, Bear Stearns shall first deliver to Calpine an
Initial Notice signed by Bear Stearns (and any such Affiliate, if applicable)
setting forth the Equity Securities and/or Assets proposed to be Transferred and
the material terms of the proposed Transfer other than the price.
(b) Upon receipt of an Initial Notice, Calpine and its Affiliates
shall have the Initial Period to submit an Offer Notice signed by Calpine (and
any such Affiliate, if applicable) setting forth (A) a proposed purchase price
with respect to the Equity Securities and/or Assets proposed to be Transferred
and (B) Calpine's (or such Affiliate's) offer (irrevocable by its terms for the
Offer Period) to purchase from Bear Stearns or any of its Affiliates the Equity
Securities and/or Assets described in the Initial Notice, on the terms and
conditions described in the Initial Notice and for the purchase price set forth
in the Offer Notice. If an Offer Notice is delivered prior to the end of the
Initial Period, the Initial Period shall end on the date of delivery of such
Offer Notice and the Offer Period shall commence on such date. If neither
Calpine nor any of its Affiliates delivers an Offer Notice to Bear Stearns
within the Initial Period, Bear Stearns or its Affiliate may, during the period
beginning on the forty-sixth (46th) day following the receipt of the Initial
Notice by Calpine and ending on the ninetieth (90th) day following the receipt
21
of the Initial Notice by Calpine, Transfer to a Third Party all (but not less
than all) of the Equity Securities and/or Assets covered by the Initial Notice,
for a purchase price negotiated between Bear Stearns or such Affiliate and such
Third Party and on other terms and conditions at least as favorable to Bear
Stearns as those contained in the Initial Notice; provided that if a Third Party
transferee has accepted such offer, Bear Stearns shall have completed such
Transfer within an additional one hundred eighty (180) days from the end of such
ninety (90) day period; and provided, further, that, with respect to any such
Transfer that is not completed within the time periods set forth in this Section
3.4(b), Bear Stearns shall not complete any such Transfer without again
complying with each provision of this Section 3.4, as applicable.
(c) Upon receipt of an Offer Notice, Bear Stearns and its Affiliates
shall have the option to sell the Equity Securities and/or Assets described in
the Initial Notice to Calpine (or its Affiliate, as applicable) at the purchase
price and upon the terms and conditions specified in the Offer. If Bear Stearns
or any of its Affiliates desires to exercise the option set forth in the
preceding sentence, it shall deliver an Election Notice to Calpine at any time
during the Offer Period, which Election Notice shall specify that Bear Stearns
or any of its Affiliates has elected to exercise its option to accept the Offer
and sell the Equity Securities and/or Assets described in the Initial Notice to
Calpine (or its Affiliate, as applicable) on the terms set forth in the Offer.
If Bear Stearns or any of its Affiliates delivers an Election Notice during the
Offer Period, then Calpine (or its Affiliates, as applicable) shall be obligated
to purchase and Bear Stearns (or such Affiliate, as applicable) shall be
obligated to sell, the Equity Securities and/or Assets described in the Initial
Notice at the purchase price and on the other terms and conditions indicated in
the Offer. The closing of such purchase and sale shall occur on a closing date
selected by Calpine or such Affiliate, as applicable; provided, however, that
such closing date shall be not less than ten (10) days nor more than ninety (90)
days following the date of the Election Notice, unless more time is required to
obtain any applicable regulatory or other approvals. If neither Bear Stearns nor
any of its Affiliates delivers an Election Notice to Calpine (or its Affiliate,
as applicable) within the Offer Period, the Offer shall automatically expire at
the end of the Offer Period and neither Calpine nor any of its Affiliates shall
have any obligation to purchase the Equity Securities and/or Assets described in
the Initial Notice.
(d) If Calpine or one of its Affiliates delivers an Offer Notice to
Bear Stearns within the Initial Period, but neither Bear Stearns nor any of its
delivers an Election Notice to Calpine during the Offer Period, Bear Stearns or
its Affiliate may, during the period beginning on the sixth (6th) day following
the receipt of the Offer Notice by Bear Stearns and ending on the fiftieth
(50th) day following the receipt of the Offer Notice by Bear Stearns, Transfer
to a Third Party all (but not less than all) of the Equity Securities and/or
Assets covered by the Initial Notice, (x) for the purchase price and on the
other terms and conditions contained in the Offer Notice or (y) for a purchase
price more favorable financially to Bear Stearns, and on other terms at least as
favorable to Bear Stearns, as those contained in the Offer Notice; provided that
if a Third Party transferee has accepted such offer, Bear Stearns shall have
completed such Transfer within an additional one hundred eighty (180) days from
the end of such fifty (50) day period; and provided, further, that, with respect
to any such Transfer that is not completed within the time periods set forth in
this Section 3.4(d), Bear Stearns shall not complete such Transfer without again
complying with each provision of this Section 3.4, as applicable.
22
(e) In addition to the foregoing restrictions, Bear Stearns (or the
applicable Affiliate) shall not complete any Transfer pursuant to Section 3.4(b)
or Section 3.4(d) without receiving the prior consent of Calpine to the
transferee of such Transfer, such consent with respect to any proposed Third
Party transferee not to be unreasonably withheld or delayed after Bear Stearns'
(or the applicable Affiliate's) request for such consent (and in no event shall
such consent take more than the longer of ten (10) Business Days following
receipt of such request by Calpine or the time remaining until the end of the
Initial Period or the Offer Period, as applicable); provided that Calpine may
give or withhold such consent in its sole and absolute discretion with respect
to any proposed Transfers to a Restricted Transferee. Bear Stearns may make the
request for such consent at any time following delivery of an Initial Notice,
including contemporaneously with the applicable Initial Notice; provided that
Bear Stearns must provide the identity of any proposed Third Party transferee
(as well as the identity of the ultimate operating and holding company parent,
if any, of each proposed Third Party transferee, if the identity of such
Person(s) is not readily apparent) in each request for consent, and otherwise
comply with this Section 3.4. Any consent given to a Transfer pursuant to this
Section 3.4(e) shall expire (i) if no proposed Third Party transferee mentioned
in a request for consent and approved by Calpine has accepted Bear Stearns'
offer to Transfer the Equity Securities and/or Assets covered by the Initial
Notice in accordance with Section 3.4(b) or Section 3.4(d) by the end of the
ninety (90) day period set forth in Section 3.4(b) or the fifty (50) day period
set forth in Section 3.4(d), respectively, at the end of such period, or (ii) if
a proposed Third Party transferee approved by Calpine has accepted such offer,
if Bear Stearns' Transfer to such Third Party transferee has not been completed
within an additional one hundred eighty (180) days from the end of the ninety
(90) day period set forth in Section 3.4(b) or the fifty (50) day period set
forth in Section 3.4(d), as applicable.
(f) Bear Stearns further agrees that in connection with any Transfer
subject to this Section 3.4 consented to by Calpine, Bear Stearns shall, if
requested by Calpine, deliver to Calpine an opinion of external counsel in form
and substance reasonably satisfactory to Calpine and counsel for Calpine, to the
effect that the Transfer is not in violation of this Agreement, and is not in
violation of the Securities Act or the securities laws of any State. Any
purported Transfer in violation of the provisions of this Section 3.4, including
any Transfer to a Third Party made without Calpine's prior consent, shall be
null and void and shall have no force or effect.
(g) Notwithstanding anything herein to the contrary, this Section 3.4
shall not apply to (i) a Transfer to Bear Stearns or any of its Affiliates, (ii)
a Transfer to Calpine or any of its Affiliates, including any such Transfer
pursuant to Section 16.6(d), or (iii) a Transfer to any Person or such Person's
Subsidiaries if such Person or its Subsidiaries merge with Bear Stearns or
purchase all or substantially all of the Equity Securities or Assets of Bear
Stearns.
(h) In addition to the restrictions set forth elsewhere in this
Agreement, in the event of a proposed Transfer to a Third Party by Bear Stearns
or any of its Affiliates of Equity Securities and/or Assets of CalBear pursuant
to this Section 3.4, Calpine's consent to such Transfer shall not be deemed
unreasonably withheld if such Third Party does not agree to become bound in
writing at the closing of such Transfer by the terms and conditions of this
Agreement and the other Transaction Documents and agree to assume the rights and
obligations of Bear Stearns and CalBear hereunder and thereunder pursuant to one
23
or more instruments of assumption reasonably satisfactory in form and substance
to Calpine. Notwithstanding the other provisions of this Section 3.4, unless
expressly waived by Calpine, any otherwise permitted Transfer shall be null and
void ab initio if Calpine does not receive written instruments with respect to
such Transfer (including copies of any instruments of assumption and the Third
Party transferee's consent to be bound by this Agreement and the other
Transaction Documents, as applicable) that are in a form reasonably satisfactory
in form and substance to Calpine. Upon the execution of such instruments of
assumption by such Third Party, such Third Party shall be deemed to be Bear
Stearns and CalBear for all purposes of this Agreement.
(i) In addition to the restrictions set forth elsewhere in this
Agreement, in the event of a proposed Transfer to a Third Party by Bear Stearns
or any of its Affiliates of Equity Securities and/or Assets of CalBear pursuant
to this Section 3.4, Calpine's consent to such Transfer shall not be deemed
unreasonably withheld if such Third Party does not have, at the time of the
transfer, a credit rating by (i) Standard & Poors Ratings Group of at least BBB+
and (ii) Moody's Investor Services of at least Baa1.
3.5 No Joint Venture or Partnership Created.
(a) Calpine and the Calpine Transaction Parties, on the one hand, and
Bear Stearns and CalBear, on the other hand, are independent contractors.
Neither Calpine or any Calpine Transaction Party, on the one hand, nor Bear
Stearns or CalBear, on the other hand, is an agent (except as specifically
provided in the Agency and Services Agreement), representative or partner of
Bear Stearns or CalBear, or Calpine or any Calpine Transaction Party,
respectively, and each of Calpine and the Calpine Transaction Parties and Bear
Stearns and CalBear agrees that the Transaction, this Agreement, the other
Transaction Documents and the transactions contemplated hereby and thereby are
not intended to create, and shall not be interpreted, construed or deemed to
create in any respect an association, joint venture, co-ownership,
co-authorship, or partnership, whether general, limited or otherwise, between
Calpine or any Calpine Transaction Party, on the one hand, and Bear Stearns or
CalBear, on the other hand, or to impose any partnership obligation or
partnership liability between Calpine or any Calpine Transaction Party, on the
one hand, and Bear Stearns or CalBear, on the other hand. None of Calpine or any
Calpine Transaction Party, on the one hand, nor Bear Stearns or CalBear, on the
other hand, shall have any right, power or authority to negotiate, execute,
authenticate or deliver any Contract for or on behalf of or in the name of, or
to incur any Liability for, or to otherwise bind, Bear Stearns or Calpine,
respectively, or bind CalBear or any of the Calpine Transaction Parties,
respectively, except as specifically set forth in the Agency and Services
Agreement or the Trading Master Agreement, in each case with respect to CalBear
and CMSC. Calpine and the Calpine Transaction Parties, on the one hand, and Bear
Stearns and CalBear, on the other hand, agree that they are not, and shall not
be, and shall not hold Bear Stearns or CalBear, or Calpine or the Calpine
Transaction Parties, respectively, out to be, co-employers.
(b) The Parties will determine a public description of the Transaction
mutually satisfactory to Calpine and Bear Stearns. Calpine and Bear Stearns
shall not, and shall cause their Affiliates not to, make any press release that
is materially inconsistent with such public description. Reference is made to
Section 18.13 for other agreements with respect to press releases.
24
3.6 Conflicts of Interest; Non-Discrimination.
(a) Conflicts of Interest. Calpine, CMSC, Bear Stearns and CalBear
acknowledge that CMSC is providing the Services to CalBear and that Calpine (a)
indirectly owns a one hundred percent (100%) equity interest in CMSC and (b)
either directly or indirectly through one or more of its wholly-owned
Subsidiaries, including CES or CMSC, is conducting for its own account a
business similar to the CalBear Referral Business. Accordingly, Calpine, CMSC,
Bear Stearns and CalBear acknowledge and agree that conflicts may arise from
time to time between the interests of CalBear, on the one hand, and CMSC, CES
and Calpine's other Affiliates, on the other hand. In addition, Calpine, CMSC,
Bear Stearns and CalBear acknowledge and agree that CMSC may provide services
similar to the Services with respect to transactions entered into by Third
Parties or for or on behalf of Third Parties by CMSC. The Parties acknowledge
that Section 4.2 of the Agency and Services Agreement contains certain covenants
of CMSC representing the sole and exclusive agreement of the Parties with
respect to such conflicts of interest.
(b) Non-Discrimination. Calpine agrees that it shall, and shall cause
its Affiliates to, cause CMSC to comply with its obligations pursuant to Section
4.2 of the Agency and Services Agreement. Calpine agrees that it shall not, and
shall cause its Affiliates not to, take any action or enter into any agreement,
transaction or arrangement with the purpose of avoiding CMSC's obligations under
Section 4.2 of the Agency and Services Agreement, including by providing
services substantially similar to the Services through Calpine or any of its
Affiliates other than CES or CMSC with the purpose of avoiding CMSC's
obligations under Section 4.2 of the Agency and Services Agreement.
3.7 Non-Solicitation of Bear Stearns Employees.
(a) Prior to the termination of this Agreement and for a period of one
(1) year following the date of termination of this Agreement, each of Calpine
and the Calpine Transaction Parties shall not, and shall cause their Affiliates
not to, directly or indirectly, for itself or on behalf of any other Person, (i)
hire any employee of Bear Stearns or CalBear who is involved in the transactions
contemplated hereby or by the other Transaction Documents or the CalBear Trades
and who is listed on Schedule 3.7(a) (provided that Schedule 3.7(a) shall not
initially include more than [*] employees) (A) while such employee is employed
by Bear Stearns or CalBear, or (B) in the event of a voluntary resignation from
Bear Stearns or CalBear of an employee listed on Schedule 3.7(a) at the time of
such resignation, for a period of (60) days following such resignation, or (ii)
solicit, induce or attempt to solicit or induce any employee of Bear Stearns or
CalBear listed on Schedule 3.7(a) to leave his or her employment with Bear
Stearns or CalBear, as applicable; provided that a general solicitation or an
employment agency solicitation that is not directed to specifically target any
such employee shall not be deemed to violate this Section 3.7(a)(ii) so long as
Calpine, the Calpine Transaction Parties and their Affiliates do not hire any
such employee as a result of such solicitation or inducement.
(b) Once each calendar year, commencing with calendar year 2006, Bear
Stearns may modify Schedule 3.7(a) to (i) increase the number of employees
listed on Schedule 3.7(a) up to the number of employees that Calpine includes on
Schedule 3.8(a), and/or (ii) remove employees from Schedule 3.7(a); provided
25
that if Bear Stearns modifies Schedule 3.7(a) to remove any employee therefrom,
Section 3.7(a) shall no longer apply with respect to such employee; and
provided, further, that such modifications to Schedule 3.7(a) shall not be
effective until Bear Stearns provides a copy of such modified Schedule 3.7(a)
(highlighting any modifications thereto) to Calpine in accordance with Section
18.2. In addition, after (i) the dismissal or termination of any employee listed
on Schedule 3.7(a) or (ii) sixty (60) days have elapsed following a voluntary
resignation of an employee listed on Schedule 3.7(a), Schedule 3.7(a) shall
automatically be modified to remove the name of such employee, and Bear Stearns
shall promptly provide a copy of such modified Schedule 3.7(a) to Calpine in
accordance with Section 18.2.
(c) Notwithstanding the provisions of Section 3.7(a), none of Calpine,
the Calpine Transaction Parties or their Affiliates shall be deemed to have
violated Section 3.7(a) until Bear Stearns provides notice to Calpine of the
hiring and/or solicitation of any employee of Bear Stearns or CalBear in
violation of Section 3.7(a) (which notice contains the name, title and position
of the employee hired in violation of Section 3.7(a) or details concerning the
solicitation violating Section 3.7(a)) and Bear Stearns has provided Calpine the
opportunity to cure such violation in accordance with this Section 3.7(c).
During the period commencing on the date of receipt of any such notice and
ending on the thirtieth (30th) day thereafter (subject to an extension for any
retention period or other period required by Applicable Law), Calpine shall be
entitled to cure any violation of Section 3.7(a) by dismissing the employee
named in the notice (on terms determined by Calpine in its discretion, but
subject to the length of the cure period described above) or ceasing the
activity causing the solicitation described in the notice, as applicable.
3.8 Non-Solicitation of Calpine Employees.
(a) Prior to the termination of this Agreement and for a period of one
(1) year following the date of termination of this Agreement, each of Bear
Stearns and CalBear shall not, and shall cause their Affiliates not to, directly
or indirectly, for itself or on behalf of any other Person, (i) hire any
employee of Calpine or any Calpine Transaction Party who is involved in the
transactions contemplated hereby or by the other Transaction Documents or the
CalBear Trades or the Services and who is listed on Schedule 3.8(a) (provided
that Schedule 3.8(a) shall not initially include more than [*] employees) (A)
while such employee is employed by Calpine or any Calpine Transaction Party, or
(B) in the event of a voluntary resignation from Calpine or any Calpine
Transaction Party of an employee listed on Schedule 3.8(a) at the time of such
resignation, for a period of (60) days following such resignation, or (ii)
solicit, induce or attempt to solicit or induce any employee of Calpine or any
Calpine Transaction Party listed on Schedule 3.8(a) to leave his or her
employment with Calpine or any Calpine Transaction Party, as applicable;
provided that a general solicitation or an employment agency solicitation that
is not directed to specifically target any such employee shall not be deemed to
violate this Section 3.8(a)(ii) so long as Bear Stearns and CalBear and their
Affiliates do not hire any such employee as a result of such solicitation or
inducement.
(b) Once each calendar year, commencing with calendar year 2006,
Calpine may modify Schedule 3.8(a) to (i) proportionally increase the number of
employees listed on Schedule 3.8(a) to reflect increases in the number of
26
employees of CMSC, and/or (ii) remove employees from Schedule 3.8(a); provided
that if Calpine modifies Schedule 3.8(a) to remove any employee therefrom,
Section 3.8(a) shall no longer apply with respect to such employee; and
provided, further, that such modifications to Schedule 3.8(a) shall not be
effective until Calpine provides a copy of such modified Schedule 3.8(a)
(highlighting any modifications thereto) to Bear Stearns in accordance with
Section 18.2. In addition, after (i) the dismissal or termination of any
employee listed on Schedule 3.8(a) or (ii) sixty (60) days have elapsed
following a voluntary resignation of an employee listed on Schedule 3.8(a),
Schedule 3.8(a) shall automatically be modified to remove the name of such
employee, and Calpine shall promptly provide a copy of such modified Schedule
3.8(a) to Bear Stearns in accordance with Section 18.2.
(c) Notwithstanding the provisions of Section 3.8(a), none of Bear
Stearns, CalBear or their Affiliates shall be deemed to have violated Section
3.8(a) until Calpine provides notice to Bear Stearns of the hiring and/or
solicitation of any employee of Calpine or any Calpine Transaction Party in
violation of Section 3.8(a) (which notice contains the name, title and position
of the employee hired in violation of Section 3.8(a) or details concerning the
solicitation violating Section 3.8(a)) and Calpine has provided Bear Stearns the
opportunity to cure such violation in accordance with this Section 3.8(c).
During the period commencing on the date of receipt of any such notice and
ending on the thirtieth (30th) day thereafter (subject to an extension for any
retention period or other period required by Applicable Law), Bear Stearns shall
be entitled to cure any violation of Section 3.8(a) by dismissing the employee
named in the notice (on terms determined by Bear Stearns in its discretion, but
subject to the length of the cure period described above) or ceasing the
activity causing the solicitation described in the notice, as applicable.
3.9 Confidential Information.
(a) Prior to the termination of this Agreement and for a period of one
(1) year following the termination of this Agreement, the Parties shall, and
shall cause their respective Affiliates and Representatives to, (i) maintain in
strict confidence any and all Confidential Information concerning the Parties
and the CalBear Business (including the CalBear Information) and not disclose to
any Third Party any such Confidential Information and (ii) restrict the use of
Confidential Information to prevent anticompetitive use of such information in
violation of antitrust laws, including with respect to Confidential Information
regarding trading positions, pricing models, projected trades and other
commercial information related to the Power and Gas trading markets developed by
CMSC, with respect to compliance by Bear Stearns and CalBear, or CalBear, with
respect to compliance by Calpine and the Calpine Transaction Parties; provided
that the foregoing obligations shall not apply to Calpine or the Calpine
Transaction Parties in connection with a disclosure by Calpine or the Calpine
Transaction Parties of the aggregate net portfolio positions of CES, but, for
the avoidance of doubt, shall apply with respect to any individual Credit
Enhancement Trade or any disclosure that, directly or indirectly, would allow a
Third Party to identify or otherwise directly determine the terms of any Credit
Enhancement Trade. It is understood that the Parties shall not have any
liability hereunder with respect to information that (i) is, or through no fault
of the Parties or any of their respective Affiliates or Representatives becomes,
generally available to the public, (ii) is received from a Third Party and is
27
not subject to any confidentiality obligation between the receiving Party or
Parties and such Third Party, (iii) is independently developed by a Party
without the use of the Confidential Information, (iv) the Parties or their
respective Affiliates or Representatives are legally required to disclose, or
that is the subject of any disclosure request made by any Governmental Authority
or by any Third Party pursuant to Applicable Law, or (v) is necessary in
connection with the defense or prosecution of any Action.
(b) In the event that a Party or any of its Affiliates or
Representatives is required or requested to disclose any Confidential
Information pursuant to Section 3.9(a)(iv) or (v), such Party shall, unless
prohibited or otherwise required by Applicable Law, if an Affiliate of Calpine,
promptly notify Bear Stearns, or if an Affiliate of Bear Stearns, promptly
notify Calpine, so that the Parties may cooperate in seeking a protective order
and/or other motion, at the expense of the Party seeking such protective order
and/or other motion, to prevent or limit the production or disclosure of such
Confidential Information. If such protective order is not obtained or such
motion has been denied, then the Person required or requested to disclose such
Confidential Information may disclose only that portion of such Confidential
Information which, based on the advice of such Person's outside legal counsel,
is required by Applicable Law or requested by a Governmental Authority to be
disclosed (provided that the Person required or requested to disclose such
information shall use all reasonable efforts to preserve the confidentiality of
the remainder of such Confidential Information). Such Person shall continue to
be bound by its obligations pursuant to this Section 3.9 for any Confidential
Information that is not required or requested to be disclosed, or that has been
afforded protective treatment, pursuant to such order or motion.
(c) Notwithstanding the provisions of Section 3.9(a) above,
disclosures of Confidential Information may be made (i) in the ordinary course
of CalBear's business, but only to the extent reasonably necessary to conduct
such business, (ii) to each Party's advisors, auditors, legal counsel and
insurers and lenders who reasonably need to have access to such Confidential
Information in connection with the performance of their work, (iii) to
Representatives of Calpine and its Affiliates who reasonably need to have access
to such Confidential Information in connection with the performance of their
work, (iv) to Representatives of Bear Stearns and its Affiliates who reasonably
need to have access to such Confidential Information in connection with the
performance of their work, (v) to bona fide potential Third Party purchasers of
an interest in any Party or its Subsidiaries, but in each case only to the
extent required in connection with such transaction; provided that any such
Third Party receiving any Confidential Information agrees to maintain the
confidentiality of such Confidential Information in accordance with the terms
hereof, and (vi) by any Party or any of their respective Affiliates at any time
in connection with any reporting requirements of such Person under any
Applicable Law, any bona fide debt or equity financing of such Person, any bona
fide merger or sale of such Person, or any bona fide sale of all or
substantially all of such Person's Assets, but in each case only to the extent
reasonably necessary in connection with such transaction, and such Confidential
Information may be included in any financial statements, schedules or
information, any diligence materials or any prospectus, offering memorandum,
information statement or proxy statement provided to any Person in connection
therewith (provided that any such disclosure pursuant to this clause (vi) shall
not include the terms of any individual CalBear Trade or any disclosure that,
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directly or indirectly, would allow a Third Party to identify or otherwise
directly determine the terms of any individual CalBear Trade, without prior
notice to each Party that is not an Affiliate of the disclosing Party unless
prohibited by Applicable Law).
3.10 Netting. Except as expressly set forth in Section 4.4(e) of the Agency
and Services Agreement, in the event that, at any time, Calpine or any Calpine
Transaction Party, on the one hand, or Bear Stearns or CalBear, on the other
hand, is required, pursuant to this Agreement, the other Transaction Documents,
the transactions contemplated hereby or thereby, the Services or the CalBear
Trades, to make any Payment to Bear Stearns or CalBear, on the one hand, or
Calpine or any Calpine Transaction Party, on the other hand, respectively, then
in each case the amounts of such Payments between or among Calpine, the Calpine
Transaction Parties, Bear Stearns and CalBear, as applicable, may be aggregated
and Calpine and the Calpine Transaction Parties, on the one hand, or Bear
Stearns and CalBear, on the other hand, as applicable, may discharge their
obligations to make such Payments through netting, in which case the Party (or
Calpine and the Calpine Transaction Parties or Bear Stearns and CalBear, in each
case as a group), if any, owing the greater aggregate amount to any other Party
(or Calpine and the Calpine Transaction Parties or Bear Stearns and CalBear, in
each case as a group), may pay to the Party (or such group of Parties) to which
the applicable Payment or Payments are owed the difference between the amounts
owed. For the avoidance of doubt, this Section 3.10 is intended to permit
netting of all amounts due among the Parties hereto or the parties to any other
Transaction Documents to the fullest extent possible. Each Party reserves to
itself all rights, setoffs, counterclaims and other remedies and defenses
consistent with Article XVII (to the extent not expressly herein waived or
denied) which each such Party is or may be entitled to arising from or out of
this Agreement and the other Transaction Documents. All outstanding CalBear
Trades, Services and obligations to make Payment in connection therewith under
this Agreement and the other Transaction Documents may be offset against each
other, set off or recouped therefrom. Except as provided in this Agreement or
the other Transaction Documents, upon the termination of this Agreement or any
other Transaction Document, the Parties shall continue to net all amounts due
among them arising under this Agreement or the other Transaction Documents.
3.11 Acknowledgements. Each Party acknowledges that, in view of the nature
of the Transaction and the CalBear Business, and the consideration given by the
Parties therefore, the restrictions contained in Sections 3.2, 3.3, 3.4, 3.5,
3.6, 3.7, 3.8, 3.9, 3.12, and 3.15 are reasonably necessary to protect the
legitimate business interests of the Parties and that any violation of such
restrictions will result in irreparable injury to the Parties, the Transaction
and the CalBear Business for which damages will not be an adequate remedy. Each
Party therefore acknowledges that, if any such restrictions are violated by it,
each other Party that is not an Affiliate of such Party shall be entitled to
preliminary and injunctive relief or other equitable remedies. Each Party has
independently consulted with its counsel and after such consultation agrees that
the covenants set forth in Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9,
3.12, and 3.15 are reasonable and appropriate. If the final judgment of a court
or arbitration body of competent jurisdiction declares that any term or
provision of Sections 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.12, and 3.15 is
invalid or unenforceable, the Parties agree that the court or arbitration body
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
29
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment or determination may be
appealed.
3.12 CMSC Board Representation. CalBear shall be entitled to designate up
to two (2) members of the board of directors of CMSC (each, a "Designated CMSC
Board Member"); provided that each such Designated CMSC Board Member shall be
either (a) a professional independent director compensated by Bear Stearns or
its Affiliates (other than CalBear) and reasonably acceptable to Calpine, or (b)
an employee of Bear Stearns or its Affiliates with a title of Managing Director
or equivalent or a more senior title. CalBear shall be entitled to designate a
replacement for any Designated CMSC Board Member at any time, whether upon the
death, removal or resignation of such Designated CMSC Board Member or otherwise.
If CalBear designates any Designated CMSC Board Member at any time, Calpine and
each of the Calpine Transaction Parties agrees, and agrees to cause its
Affiliates to (a) vote for, elect or appoint each such Designated CMSC Board
Member designated by CalBear to the board of directors of CMSC promptly
following such designation, (b) vote for, elect or appoint any replacement
Designated CMSC Board Member designated by CalBear to the board of directors of
CMSC promptly following such designation, and (c) unless otherwise requested by
Bear Stearns, maintain the Designated CMSC Board Members (as replaced by CalBear
from time to time) as directors of CMSC at all times prior to the termination of
this Agreement. CMSC's Organizational Documents shall provide that any decision
of the board of directors of CMSC shall require the consent of the Designated
CMSC Board Members, if any, to (i) initiate a voluntary Bankruptcy Event, (ii)
consent to an involuntary Bankruptcy Event, or (iii) modify the Organizational
Documents of CMSC to eliminate or otherwise alter the voting rights of the
Designated CMSC Board Members or CalBear's right to designate, or Calpine and
its Affiliates duty to appoint, such Designated CMSC Board Members. CMSC's
Organizational Documents shall also provide that the Designated CMSC Board
Members shall not be entitled to vote with respect to any matter presented to
the board of directors of CMSC other than the matters listed in the preceding
sentence.
3.13 Performance of Financial Obligations of CalBear.
Bear Stearns shall provide to CalBear all funds and collateral
necessary for CalBear to perform its obligations under the Third Party Master
Agreements, and the CalBear Trades, and to pay the amounts required to be paid
by CalBear pursuant to Section 4.17 of the Agency and Services Agreement, and
shall itself or shall cause CalBear to perform CalBear's Payment obligations
under the Third Party Master Agreements and the CalBear Trades, and to pay the
amounts required to be paid by CalBear pursuant to Section 4.17 of the Agency
and Services Agreement, in each case in accordance with such Section.
3.14 [*]3.15 Fiscal Year of CalBear. CalBear shall not change its Fiscal
Year without the prior consent of Calpine, such consent not to be unreasonably
withheld; provided that Calpine's consent shall not be required in the event
that such change is made to conform CalBear's fiscal year to Bear Stearns'
fiscal year in connection with a change of Bear Stearns' fiscal year; and
provided, further, that in connection with any change in the Fiscal Year of
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CalBear, the provisions of the Transaction Documents shall be adjusted as
applicable to conform to such adjusted fiscal year and shall also be adjusted to
the extent necessary to give effect to the original intent of the provisions of
the Transaction Documents, as if such change in the Fiscal Year of CalBear had
not occurred, including appropriate proration or other adjustment of any
Payments paid pursuant to the Transaction Documents.
3.16 Interest on Overdue Amounts. In the event that, at any time, Calpine
or any Calpine Transaction Party, on the one hand, or Bear Stearns or CalBear,
on the other hand, fails to make any Payment when due to Bear Stearns or
CalBear, on the one hand, or Calpine or any Calpine Transaction Party, on the
other hand, then the outstanding principal amount of such overdue Payment shall
bear interest at the lesser of (a) a rate equal to LIBOR [*](or shall bear
additional interest at a rate equal to the existing interest rate on such
overdue Payment [*], if such overdue Payment already bears interest; provided
that any overdue Payment already bearing default or additional interest shall
not bear further interest pursuant to this Section 3.16) or (b) the highest rate
permitted by law, until such overdue Payment plus all accumulated but unpaid
interest (and additional interest, if applicable) thereon is paid in full, and
the Party making such overdue Payment shall pay all accumulated but unpaid
interest (and additional interest, if applicable) on the amount of such overdue
Payment at the time the principal of such overdue Payment is paid.
ARTICLE IV.
CALPINE GUARANTEE
Calpine covenants and agrees with Bear Stearns and CalBear that from
and after the Effective Date:
4.1 Calpine Guarantee.
(a) Subject to the terms of this Article IV, in consideration of each
of Bear Stearns and CalBear entering into the Transaction Documents, Calpine
hereby unconditionally and irrevocably guarantees, as primary obligor and not as
surety (the "Calpine Guarantee"), to each of Bear Stearns and CalBear, and their
respective successors and assigns:
(i) the prompt payment in full when due of all amounts owed by
and due from any Calpine Transaction Party to Bear Stearns or CalBear pursuant
to the terms of the Transaction Documents, including all amounts owed by and due
from any Calpine Transaction Party to Bear Stearns or CalBear pursuant to
Section 15.1(a) and pursuant to Section 6.3 of the Trading Master Agreement; and
(ii) that in case of any extension of time of payment of any of
such obligations, such obligations will be promptly paid in full when due in
accordance with the terms of the extension.
Failing payment when due of any amount so guaranteed for any reason whatsoever,
Calpine will promptly pay the same on the date such payment is due. The Parties
agree that this is a guarantee of payment and not a guarantee of collection or
performance.
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(b) Calpine hereby agrees that its obligations under this Calpine
Guarantee are absolute, irrevocable and unconditional, irrespective of the
validity, regularity or enforceability of this Agreement or the other
Transaction Documents, the absence of any Action to enforce the same, any waiver
or consent by Bear Stearns or CalBear, any course of dealings among the Parties
with respect to any provisions hereof or thereof, the recovery of any judgment
against any Calpine Transaction Party, any Action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge of defense of Calpine. Calpine hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of any Bankruptcy
of Calpine or any Calpine Transaction Party, any right to require a proceeding
first against any Calpine Transaction Party, protest, notice and all demands
whatsoever and covenants that this Calpine Guarantee will not be discharged
except by complete performance and payment of the obligations contained in this
Agreement and the other Transaction Documents.
(c) If Bear Stearns or CalBear is required by any Governmental
Authority or otherwise to return to Calpine or any Calpine Transaction Party or
any custodian, trustee, liquidator or other similar official acting in relation
to Calpine or any Calpine Transaction Party, any amount paid by them to Bear
Stearns or CalBear, this Calpine Guarantee, to the extent theretofore
discharged, will be reinstated in full force and effect with respect to such
amount.
(d) Calpine agrees that it will not be entitled to any right of
subrogation in relation to Bear Stearns or CalBear in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Calpine further agrees that, as between Calpine, on the one hand, and Bear
Stearns or CalBear, on the other hand, (i) the maturity of any obligations
guaranteed hereby that may be accelerated pursuant to the terms of the
Transaction Documents, may be so accelerated for the purposes of this Calpine
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby and (ii) in
the event of any declaration of acceleration of such obligations as provided in
the Transaction Documents, such obligations (whether or not due and payable)
will forthwith become due and payable by Calpine for the purpose of this Calpine
Guarantee. Calpine will have the right to seek contribution from any non-paying
Calpine Transaction Party so long as the exercise of such right does not impair
the rights of Bear Stearns or CalBear under this Calpine Guarantee.
4.2 Calpine May Consolidate, etc., on Certain Terms. Calpine may not sell
or otherwise dispose of all or substantially all of its Assets to, or
consolidate with or merge with or into (whether or not Calpine is the surviving
Person) another Person unless the Person acquiring the property in any such sale
or disposition or the Person formed by or surviving any such consolidation or
merger unconditionally assumes all the obligations of Calpine under this
Agreement, the Calpine Guarantee and the other Transaction Documents. Except as
set forth in this Section 4.2, nothing contained in this Agreement will prevent
any consolidation or merger of Calpine or any sale or conveyance of all or
substantially all of the property of Calpine.
4.3 Release.
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Upon termination of this Agreement in accordance with Section 16.6 and
full and final discharge of all obligations of Calpine and the Calpine
Transaction Parties under the Transaction Documents, Calpine shall be fully and
unconditionally released and relieved from any obligation under the Calpine
Guarantee; provided that if, following such discharge, Bear Stearns or CalBear
is required by any Governmental Authority or otherwise to return to Calpine or
any Calpine Transaction Party or any custodian, trustee, liquidator or other
similar official acting in relation to Calpine or any Calpine Transaction Party,
any amount paid by them to Bear Stearns or CalBear, the Calpine Guarantee, to
the extent theretofore released, relieved or otherwise discharged, will be
reinstated in full force and effect.
ARTICLE V.
BEAR STEARNS GUARANTEE
Bear Stearns covenants and agrees with Calpine and each of the Calpine
Transaction Parties that from and after the Effective Date:
5.1 Bear Stearns Guarantee.
(a) Subject to the terms of this Article V, in consideration of
Calpine and the Calpine Transaction Parties entering into the Transaction
Documents, Bear Stearns hereby unconditionally and irrevocably guarantees, as
primary obligor and not as surety (the "Bear Stearns Guarantee"), to each of
Calpine and the Calpine Transaction Parties, and their respective successors and
assigns:
(i) the prompt payment in full when due of all amounts owed by
and due from CalBear to Calpine or any Calpine Transaction Party pursuant to the
terms of the Transaction Documents, including all amounts owed by and due from
CalBear to Calpine or any Calpine Transaction Party pursuant to Section 15.1(b);
and
(ii) that in case of any extension of time of payment of any of
such obligations, such obligations will be promptly paid in full when due in
accordance with the terms of the extension.
Failing payment when due of any amount so guaranteed for any reason whatsoever,
Bear Stearns will promptly pay the same on the date such payment is due. The
Parties agree that this is a guarantee of payment and not a guarantee of
collection or performance.
(b) Bear Stearns hereby agrees that its obligations under this Bear
Stearns Guarantee are absolute, irrevocable and unconditional, irrespective of
the validity, regularity or enforceability of this Agreement or the other
Transaction Documents, the absence of any Action to enforce the same, any waiver
or consent by Calpine or any Calpine Transaction Party, any course of dealings
among the Parties with respect to any provisions hereof or thereof, the recovery
of any judgment against CalBear, any Action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge of
defense of Bear Stearns. Bear Stearns hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of any Bankruptcy
of Bear Stearns or CalBear, any right to require a proceeding first against
CalBear, protest, notice and all demands whatsoever and covenants that this Bear
33
Stearns Guarantee will not be discharged except by complete performance and
payment of the obligations contained in this Agreement and the other Transaction
Documents.
(c) If Calpine or any Calpine Transaction Party is required by any
Governmental Authority or otherwise to return to Bear Stearns or CalBear or any
custodian, trustee, liquidator or other similar official acting in relation to
Bear Stearns or CalBear, any amount paid by them to Calpine or any Calpine
Transaction Party, this Bear Stearns Guarantee, to the extent theretofore
discharged, will be reinstated in full force and effect with respect to such
amount.
(d) Bear Stearns agrees that it will not be entitled to any right of
subrogation in relation to Calpine or the Calpine Transaction Parties in respect
of any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Bear Stearns further agrees that, as between Bear Stearns, on
the one hand, and Calpine or the Calpine Transaction Parties, on the other hand,
(i) the maturity of any obligations guaranteed hereby that may be accelerated
pursuant to the terms of the Transaction Documents, may be so accelerated for
the purposes of this Bear Stearns Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby and (ii) in the event of any declaration of
acceleration of such obligations as provided in the Transaction Documents, such
obligations (whether or not due and payable) will forthwith become due and
payable by Bear Stearns for the purpose of this Bear Stearns Guarantee. Bear
Stearns will have the right to seek contribution from CalBear so long as the
exercise of such right does not impair the rights of Calpine or the Calpine
Transaction Parties under this Bear Stearns Guarantee.
5.2 Bear Stearns May Consolidate, etc., on Certain Terms. Bear Stearns may
not sell or otherwise dispose of all or substantially all of its Assets to, or
consolidate with or merge with or into (whether or not Bear Stearns is the
surviving Person) another Person unless the Person acquiring the property in any
such sale or disposition or the Person formed by or surviving any such
consolidation or merger unconditionally assumes all the obligations of Bear
Stearns under this Agreement, the Bear Stearns Guarantee and the other
Transaction Documents. Except as set forth in this Section 5.2, nothing
contained in this Agreement will prevent any consolidation or merger of Bear
Stearns or any sale or conveyance of all or substantially all of the property of
Bear Stearns.
5.3 Release.
Upon termination of this Agreement in accordance with Section 16.6 and
full and final discharge of all obligations of Bear Stearns and CalBear under
the Transaction Documents, Bear Stearns shall be fully and unconditionally
released and relieved from any obligation under the Bear Stearns Guarantee;
provided that if, following such discharge, Calpine or any Calpine Transaction
Party is required by any Governmental Authority or otherwise to return to Bear
Stearns or CalBear or any custodian, trustee, liquidator or other similar
official acting in relation to Bear Stearns or CalBear, any amount paid by them
to Calpine or any Calpine Transaction Party, the Bear Stearns Guarantee, to the
extent theretofore released, relieved or otherwise discharged, will be
reinstated in full force and effect.
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ARTICLE VI.
REGULATORY MATTERS
6.1 Regulatory Matters With Respect to Calpine.
(a) Calpine and each of the Calpine Transaction Parties hereby
covenant and agree from and after the Effective Date that they shall take all
necessary or appropriate actions to maintain exemption from material regulatory
restrictions under PUHCA (other than Section 9(a)(2) of PUHCA).
(b) CES and CMSC hereby covenant and agree from and after the
Effective Date that they shall take or cause to be taken all necessary or
appropriate actions to maintain for CES and CMSC, respectively, FERC
authorization to sell Power at wholesale at market-based rates and, to the
extent necessary, any other FERC approval required under the FPA to sell Power
at wholesale, in each case to the extent necessary to permit ongoing performance
by CES and CMSC under the Transaction Documents.
(c) Calpine and the Calpine Transaction Parties hereby covenant and
agree from and after the Effective Date to (i) obtain all material Regulatory
Approvals, and (ii) comply with all material applicable federal and state
energy, and federal commodity, regulatory laws, including all material notices,
filings, reports, consents, authorizations or exemptions from registration
required or permitted under the FPA, PUHCA, CEA and state utility laws and
regulations, in each case to the extent necessary to permit ongoing performance
by Calpine and the Calpine Transaction Parties under the Transaction Documents.
6.2 Regulatory Matters With Respect to Bear Stearns.
(a) Bear Stearns and CalBear hereby covenant and agree from and after
the Effective Date that they shall take all necessary or appropriate actions to
maintain exemption from material regulatory restrictions under PUHCA (other than
Section 9(a)(2) of PUHCA).
(b) CalBear hereby covenants and agrees from and after the Effective
Date that it shall take or cause to be taken all necessary or appropriate
actions to maintain for CalBear FERC authorization to sell Power at wholesale at
market-based rates and, to the extent necessary, any other FERC approval
required under the FPA to sell Power at wholesale, in each case to the extent
necessary to permit ongoing performance by CalBear under the Transaction
Documents.
(c) Subject to compliance with Section 4.1(n) of the Agency and
Services Agreement by CMSC, Bear Stearns and CalBear covenant and agree from and
after the Effective Date to (i) obtain all material Regulatory Approvals, and
(ii) comply with all material applicable federal and state energy regulatory
laws, including all material notices, filings, reports, consents or
authorizations or exemptions from registration required or permitted under the
FPA, PUHCA and state utility laws and regulations, in each case to the extent
necessary to permit ongoing performance by Bear Stearns and CalBear under the
Transaction Documents.
6.3 Regulatory Matters With Respect to CalBear and CMSC. From and after
the date of this Agreement, each Party covenants and agrees that it shall
35
cooperate with the other Parties to take or cause to be taken all necessary or
appropriate actions to prepare and file all documents necessary for (i) CES,
(ii) CMSC's predecessor CES Marketing VII, LLC, and (iii) CalBear's predecessor
Arroyo Energy LP, to obtain FERC approval under Section 203 of the FPA for (A)
an internal corporate restructuring of the upstream ownership of Arroyo Energy
LP, (B) the performance of the Services by CMSC, (C) the provision of energy
related services by CMSC to CES, and any notice filings or other approvals, as
needed under Section 203 of the FPA in respect of the Transaction. With respect
to these filings, the Parties shall cooperate and use commercially reasonable
efforts to share and develop information necessary for such filings and drafts
of such filings and shall give each other reasonable opportunity to comment on
and to revise such draft filings before such filings are submitted to FERC.
ARTICLE VII.
NOTICES, RECORDS, MEETINGS, AUDITS AND AVAILABILITY
Each of the Parties covenants and agrees with each other that from and
after the Effective Date, subject to the confidentiality obligations contained
in Section 3.9:
7.1 Notices.
(a) Notice from Calpine. Anything herein to the contrary
notwithstanding, Calpine and the Calpine Transaction Parties shall promptly,
upon obtaining knowledge thereof, submit notice to Bear Stearns and CalBear of:
(i) any Actions pending or, to the knowledge of Calpine or the
Calpine Transaction Parties, threatened in writing or filed by any Person,
concerning the CalBear Business, the CalBear Trades, this Agreement, the other
Transaction Documents or the transactions contemplated hereby or thereby;
(ii) any refusal or, to the knowledge of Calpine or the Calpine
Transaction Parties, refusal threatened in writing to grant, renew or extend, or
any Action pending or threatened in writing that would reasonably be expected to
affect, the granting, renewal or extension of any material Regulatory Approval,
including CES', CMSC's or CalBear's FERC-granted market-based rate
authorization;
(iii) any material dispute with any Governmental Authority
relating to the CalBear Trades, the Transaction Documents, the CalBear Business
or Calpine's and the Calpine Trading Parties' ability to perform their
obligations under the Transaction Documents;
(iv) any Bankruptcy Event with respect to Calpine, any of the
Calpine Transaction Parties or any Significant Subsidiary of Calpine;
(v) any Material Adverse Change with respect to Calpine or any of
the Calpine Transaction Parties;
(vi) all material penalties or notices of violation issued or
threatened by any Governmental Authority or other Person relating to the CalBear
Trades or the Services;
36
(vii) the violation by Calpine or any Calpine Transaction Party
in any material respect of any Applicable Law relating to the Services, the
CalBear Trades, the Transaction Documents or the CalBear Business;
(viii) the failure by Calpine or any Calpine Transaction Party to
perform any covenant or agreement of Calpine or such Calpine Transaction Party,
respectively, set forth in this Agreement or any other Transaction Document,
which failure constitutes a material breach of this Agreement or such other
Transaction Document; provided that any breach of this clause (viii) shall be
deemed to be cured upon cure of the underlying failure to perform; or
(ix) any other event or circumstance that would be reasonably
likely to materially adversely affect Calpine's or any Calpine Transaction
Party's ability to engage in Trades, perform Services or otherwise perform its
obligations under the Transaction Documents.
(b) Notice from Bear Stearns. Anything herein to the contrary
notwithstanding, Bear Stearns and CalBear shall promptly, upon obtaining
knowledge thereof, submit notice to Calpine and the Calpine Transaction Parties
of:
(i) any Actions pending or, to the knowledge of Bear Stearns or
CalBear, threatened in writing or filed by any Person, concerning the CalBear
Business, the CalBear Trades, this Agreement, the other Transaction Documents or
the transactions contemplated hereby or thereby;
(ii) any refusal or, to the knowledge of Bear Stearns or CalBear,
refusal threatened in writing to grant, renew or extend, or any Action pending
or threatened in writing that would reasonably be expected to affect, the
granting, renewal or extension of any material Regulatory Approval, including
CalBear's FERC-granted market-based rate authorization;
(iii) any material dispute with any Governmental Authority
relating to the CalBear Trades, the Transaction Documents, the CalBear Business
or Bear Stearns' and CalBear's ability to perform their obligations under the
Transaction Documents;
(iv) any Bankruptcy Event with respect to Bear Stearns, CalBear
or any Significant Subsidiary of Bear Stearns;
(v) any Material Adverse Change with respect to Bear Stearns or
CalBear;
(vi) all material penalties or notices of violation issued or
threatened by any Governmental Authority or other Person relating to the CalBear
Trades or the Services;
(vii) the violation by Bear Stearns or CalBear in any material
respect of any Applicable Law relating to the CalBear Trades, the Transaction
Documents or the CalBear Business;
37
(viii) the failure by Bear Stearns or CalBear to perform any
covenant or agreement of Bear Stearns or CalBear, respectively, set forth in
this Agreement or any other Transaction Document, which failure constitutes a
material breach of this Agreement or such other Transaction Document; provided
that any breach of this clause (viii) shall be deemed to be cured upon cure of
the underlying failure to perform;
(ix) any downgrade of the credit rating assigned to Bear Stearns
by (i) Standard & Poors Ratings Group below BBB+ or (ii) Moody's Investor
Services below Baa1;
(x) any change of Bear Stearns' fiscal year from a November 30
year-end; or
(xi) any other event or circumstance that would be reasonably
likely to materially adversely affect Bear Stearns' or CalBear's ability to
engage in Trades or otherwise perform its obligations under the Transaction
Documents.
7.2 Books and Records.
(a) Books and Records of Calpine Transaction Parties. The Calpine
Transaction Parties shall maintain in good order all Books and Records relating
to the CalBear Trades, any Services and the CalBear Business, including general
ledgers, risk systems and related data storage, and each Calpine Transaction
Party shall retain related written records for a minimum period of seven (7)
years and related oral records including tapes in accordance with such Calpine
Transaction Party's internal policy and, in each case, as otherwise required by
Applicable Law and Regulatory Approvals. Where Books and Records relate to
Actions or the settlement of claims arising out of the performance of this
Agreement, the other Transaction Documents, or any related documents or
agreements, the Calpine Transaction Parties shall maintain such Books and
Records until the later of (x) three (3) years after the final resolution of the
matter giving rise to the Action or dispute or (y) the end of the retention
periods otherwise set forth in this Section 7.2(a).
(b) Books and Records of CalBear. CalBear shall maintain in good order
all Books and Records relating to (i) the CalBear Trades, any Services and the
CalBear Business to the extent CalBear (A) produces Books and Records with
respect thereto or (B) receives copies of any Books and Records with respect
thereto from CMSC and (ii) CalBear Governance Operations, and CalBear shall
retain related written records for a minimum period of seven (7) years and
related oral records including tapes in accordance with CalBear's internal
policy and, in each case, as otherwise required by Applicable Law and Regulatory
Approvals. Where Books and Records relate to Actions or the settlement of claims
arising out of the performance of this Agreement, the other Transaction
Documents, or any related documents or agreements, CMSC, on behalf of CalBear,
and CalBear shall maintain such Books and Records until the later of (x) three
(3) years after the final resolution of the matter giving rise to the Action or
dispute or (y) the end of the retention periods otherwise set forth in this
Section 7.2(b).
7.3 Meetings. Representatives of Calpine, the Calpine Transaction Parties,
Bear Stearns and/or CalBear shall meet in person or by conference call or video
conference at such reasonable times as any of them may request (provided that in
38
no event shall Representatives of any Party or its Affiliates (other than CMSC
and CalBear) be required to attend more than two (2) such meetings in any given
Month). During such meetings, the Representatives of any Party may provide any
information concerning the CalBear Business, the Trades, the Services or the
Transaction to the Representatives of any other Party for discussion, and each
Party shall provide any other information reasonably related to the CalBear
Business, the CalBear Trades or the Transaction that is reasonably requested in
advance by the Representatives of any other Party, to the extent the requested
information is required to be maintained for or provided to the requesting Party
under other provisions of the Transaction Documents and subject to Section 3.9
and confidentiality duties owed to Third Parties.
7.4 Audits. Each of the Calpine Transaction Parties and CalBear shall
comply with the following audit provisions:
(a) Subject to Section 3.9, Calpine and each Calpine Transaction
Party, on the one hand, and Bear Stearns and CalBear, on the other hand, or any
of their respective Representatives, has the right, in its sole discretion and
at its sole expense and upon at least five (5) Business Days advance notice and
during normal working hours, to examine and copy the Books and Records of
CalBear or any Calpine Transaction Party, respectively, to the extent necessary
to verify compliance with the provisions of this Agreement, the other
Transaction Documents, any related documents and agreements and the transactions
contemplated hereby and thereby (other than verifying compliance with provisions
regarding general financial condition or solvency of Calpine or CES), and the
accuracy of any Report or information, daily or Monthly settlement, Payment,
charge or computation made or provided pursuant to the provisions of this
Agreement, the other Transaction Documents, any related documents and agreements
or the transactions contemplated hereby and thereby, the Trades and the
Services.
(b) If any audit conducted under Section 7.4(a) above reveals any
inaccuracy in any Report, daily or Monthly settlement or Payment, the necessary
adjustments in such settlement and the Payments thereof will be promptly made
and this provision shall survive any termination of this Agreement for the
purpose of such daily or Monthly settlement and Payment objections. Each
Transaction Party shall preserve all applicable records held by it for the time
periods set forth in Section 7.2, as applicable, following the termination of
this Agreement, or such longer period as may be required by Applicable Law.
Information obtained by any Party's Representatives in examining any other
Party's applicable Books and Records to verify such settlements, Payments and
billings and Gas and Power delivery data shall not be disclosed to Third Parties
except as provided in Section 3.9. The audit rights contained in this Section
7.4 shall survive the termination of this Agreement.
(c) Subject to Section 3.9, Bear Stearns or CalBear shall have the
right, in its sole discretion and at its sole expense and during normal working
hours, to examine, at any time and from time to time, CES' and/or CMSC's risk
management protocols and procedures in a location reasonably determined by CES
or CMSC, as applicable, to the extent necessary to verify compliance with the
provisions of this Agreement, the other Transaction Documents, any related
documents and agreements and the transactions contemplated hereby and thereby,
and the accuracy of any Reports, daily or Monthly settlement, Payment, charge or
39
computation made pursuant to the provisions of this Agreement, the other
Transaction Documents, any related documents and agreements or the transactions
contemplated hereby and thereby, the CalBear Trades or the Services.
7.5 Availability of Parties.
Each Calpine Transaction Party and CalBear shall make itself
reasonably available to CalBear and the Calpine Transaction Parties,
respectively, through telephone, voicemail, e-mail and/or facsimile during
normal business hours, and by telephone, mobile telephone and/or pager during
non-business hours. CMSC shall make itself available to CalBear through its
24-hour Power trading desk.
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
As an inducement to enter into this Agreement, each Party hereby
represents and warrants to each other Party, as of the date hereof (other than
with respect to CMSC and CalBear) and as of the Effective Date the following:
8.1 Organization. Such Party is duly organized, validly existing and in
good standing as a corporation or other entity under the laws of the state of
its organization and has full organizational power and authority to own, lease
and operate its Assets and to conduct its business as it is now conducted and
presently proposed to be conducted.
8.2 Authorization. Such Party has the requisite organizational power and
authority to, and has taken all organizational action necessary to, execute and
deliver this Agreement and each other Transaction Document to which it is or
will be a party, to consummate the transactions contemplated hereby and thereby
and to perform its obligations contained herein and therein, and no other
organizational proceedings on the part of such Party are necessary to authorize
this Agreement, each other Transaction Document to which it is or will be a
party and the consummation of the transactions contemplated hereby and thereby.
This Agreement has been duly executed and delivered by such Party and is a valid
and binding obligation of such Party, enforceable against such Party in
accordance with its terms, except as the enforceability thereof may be limited
by (a) applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors rights generally or (b)
general principles of equity, whether considered in a proceeding at law or in
equity. Each Transaction Document (other than this Agreement) to which such
Party is or will be a party has been or will be duly executed and delivered by
such Party, as applicable, and is or will be a valid and binding obligation of
such Party, enforceable against such Party in accordance with its terms, except
as the enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors rights generally or (b) general principles of
equity, whether considered in a proceeding at law or in equity.
8.3 No Similar Business. Neither such Party nor any of its respective
Affiliates is currently engaged in any business relationship with any Third
Party pursuant to which such Party or its Affiliates, on the one hand, and such
40
Third Party, on the other hand, engage in any business which, when taken as a
whole, would be in violation of Section 3.2.
8.4 Accuracy of Information Furnished. With respect to such Party and its
Affiliates, the information contained in this Agreement, any other Transaction
Document, and the exhibits, schedules, certificates, documents, written
information or lists attached hereto or thereto or specifically referred to
herein or therein that has been delivered by or on behalf of such Party or any
of its Affiliates pursuant to this Agreement or any other Transaction Document
or otherwise in connection with the transactions contemplated hereby or thereby
does not, to the knowledge of such Party, contain any untrue statement of a
material fact, or omit to state any material fact that is necessary to make the
statements contained herein and therein, taken as a whole, not misleading.
ARTICLE IX.
REPRESENTATIONS AND WARRANTIES OF CALPINE
As an inducement to enter into this Agreement, each of Calpine and the
Calpine Transaction Parties hereby represents and warrants to Bear Stearns and
CalBear, as of the date hereof (other than with respect to CMSC) and as of the
Effective Date, and except as otherwise disclosed in the Calpine SEC Filings,
the following:
9.1 Calpine and Calpine Transaction Parties. Schedule 9.1 lists the name,
type of entity and jurisdiction of organization of Calpine and each of the
Calpine Transaction Parties. Calpine owns, directly or indirectly, all of the
outstanding Equity Securities of each of the Calpine Transaction Parties.
9.2 No Conflict or Violation. None of the execution, delivery and
performance of this Agreement or any other Transaction Documents, the
consummation of the transactions contemplated hereby and thereby, compliance
with any of the provisions hereof or thereof, the consummation of any CalBear
Trades or the provision of the Services, by Calpine or any of the Calpine
Transaction Parties will result in (a) a violation of or a conflict with any
provision of the Organizational Documents of Calpine or any of the Calpine
Transaction Parties, (b) a violation of, a conflict with, a breach of, or a
default under (with or without notice or passage of time), the termination or
acceleration of the performance required by, or the creation of any right of any
party to accelerate, modify, terminate or cancel, any material term or provision
of any material Contract to which Calpine or such Calpine Transaction Party is a
party or by which any of its Assets are bound, (c) a violation or breach in any
material respect of any Applicable Law applicable to Calpine or such Calpine
Transaction Party or (d) Calpine or such Calpine Transaction Party being
required to obtain any material consent, waiver, agreement, Permit or approval
or material authorization of, or material declaration, filing, notice or
registration to or with, or material assignment by, any Third Party or
Governmental Authority, except, in each case, as set forth on Schedule 9.2.
9.3 Sufficiency of Assets. The Calpine Transaction Parties own, license,
lease or otherwise have a right to use or have contracted for all Assets
materially necessary and sufficient for the performance of the Services and
their other obligations under the Transaction Documents, and their Assets in the
41
aggregate are materially in such operating condition and repair (subject to
normal wear and tear) as is necessary and sufficient for the performance of such
Services and obligations.
9.4 Permits. Except as set forth on Schedule 9.2, the Calpine Transaction
Parties have all material Permits necessary for (i) the conduct of their
businesses as now being conducted and as proposed to be conducted as
contemplated in this Agreement and the other Transaction Documents and (ii) the
performance of the Services and their other obligations under the Transaction
Documents, and own or possess such Permits free and clear of any material
Encumbrances. All such Permits are valid and in full force and effect in all
material respects.
9.5 Litigation. There is no Action pending or, to the knowledge of the
Calpine Transaction Parties, threatened in writing against, relating to or
affecting Calpine or the Calpine Transaction Parties or any of their properties,
rights or Assets (a) that, if pending, involves the risk of criminal liability
or, if threatened, could reasonably be expected to involve the risk of criminal
liability, (i) for any Calpine Transaction Party or (ii) for Calpine and its
Affiliates; provided, in the case of clause (ii), such Action is material to
Calpine and its Affiliates, taken as a whole, (b) that relates to the
transactions contemplated by this Agreement or by the other Transaction
Documents, or (c) with respect to which there is a reasonable likelihood of a
determination which would prevent or delay Calpine or any of the Calpine
Transaction Parties from consummating the transactions contemplated hereby or by
the other Transaction Documents in any material respect or performing any
material obligations hereunder or thereunder, in any court or other tribunal or
before any arbitrator, mediator, authority or Governmental Authority.
9.6 Compliance with Law. None of Calpine or the Calpine Transaction
Parties has violated any Applicable Laws, and each of Calpine and the
Calpine Transaction Parties is in compliance with all Applicable Laws, except
to the extent that any such violations or failures to comply, individually or in
the aggregate, have not had a Material Adverse Effect on Calpine or any Calpine
Transaction Party. None of Calpine or the Calpine Transaction Parties has
received any written notice to the effect that, and the Calpine Transaction
Parties do not have any knowledge that, (a) any investigation or review by any
Governmental Authority related to this Agreement, the other Transaction
Documents, the transactions contemplated hereby or thereby, Calpine, the Calpine
Transaction Parties, the Services or the CalBear Trades is pending or threatened
in writing, or (b) any currently existing circumstances are likely to result in
a failure of any of Calpine or the Calpine Transaction Parties to comply with,
or a violation by any of Calpine or the Calpine Transaction Parties of, any
Applicable Laws, in either case which such failure to comply or violation would
be reasonably expected to have a Material Adverse Effect on Calpine or any
Calpine Transaction Party.
9.7 Insurance. The Calpine Transaction Parties have insurance policies,
binders or other forms of insurance that provide, and during their term have
provided, coverage to the extent and in the manner (a) adequate for the Calpine
Transaction Parties and their Assets, businesses and operations and the risks
insured against in connection therewith and (b) as may be or may have been
required by material Applicable Law and by any material Contracts to which any
42
Calpine Transaction Party is or has been a party, except, in either case, as
would not have a Material Adverse Effect on any Calpine Transaction Party.
9.8 Adequate Capital. Neither Calpine nor any of the Calpine Transaction
Parties is insolvent or will be insolvent after giving effect to the
transactions contemplated by this Agreement and the other Transaction Documents,
as the term insolvent is used in applicable state and federal fraudulent
conveyance or transfer laws.
9.9 SEC Filings; Financial Statements.
(a) Calpine has filed all registration statements, prospectuses, forms
and reports required to be filed by it under the Securities Act or the Exchange
Act, as the case may be, since January 1, 2003 (collectively, the "Calpine SEC
Filings"). Each Calpine SEC Filing, as amended or supplemented, complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, with respect to such Calpine SEC Filing. Each Calpine
SEC Filing, as amended or supplemented, if applicable, did not (as so amended or
supplemented) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Except as may be indicated in the notes thereto and, in the case
of unaudited quarterly financial statements, except as permitted by Form 10-Q
under the Exchange Act, each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Calpine SEC
Filings was prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated, and, at the time such consolidated financial
statements were filed and at the time they were amended or supplemented, if
applicable, each fairly presented in all material respects the consolidated
financial position of Calpine and its subsidiaries as of the respective dates
thereof and for the respective periods indicated therein (subject, in the case
of unaudited statements, to normal, recurring year-end adjustments which did not
have a Material Adverse Effect on Calpine).
9.10 Regulation.
(a) Neither Calpine nor any of the Calpine Transaction Parties is
subject to regulation as an "electric utility company," a "gas utility company"
a "public-utility company," or a "holding company," under PUHCA or any
regulation promulgated thereunder. Neither Calpine nor any of the Calpine
Transaction Parties is subject to material regulatory restrictions under PUHCA
(other than Section 9(a)(2) of PUHCA).
(b) CES and CMSC each have validly issued final orders authorizing CES
and CMSC, respectively, to engage in Power sales at wholesale at market-based
rates. CES and CMSC are in compliance with all FERC reporting and other
requirements generally imposed on entities authorized to engage in wholesale
sales of Power at market-based rates, including requirements to file electronic
quarterly transaction reports, triennial market-power updates and changes in
status, except to the extent that non-compliance could not reasonably be
expected to cause a Material Adverse Effect with respect to CES or CMSC.
43
9.11 Due Consideration. Calpine and the Calpine Transaction Parties
acknowledge that they will generally obtain more favorable terms for Trades
through the Transaction than the terms that are currently available to them for
similar transactions with Third Parties and Calpine and the Calpine Transaction
Parties desire Bear Stearns to provide financial support as part of the
Transaction in order to enhance the credit of certain Gas and Power trades made
by CalBear and CES and in order to otherwise support certain Gas and Power
trading activities of the Calpine Transaction Parties. Calpine and the Calpine
Transaction Parties have received due and adequate consideration and fair and
equivalent value for their agreements and obligations under this Agreement and
the other Transaction Documents as determined in good faith, in each case within
the meaning of applicable state and federal fraudulent conveyance laws.
9.12 Operations of CMSC. CMSC has not taken any action that would have
violated Section 4.1(m) of the Agency and Services Agreement had it been subject
to such Section 4.1(m) on the Effective Date. Except in connection with the
transactions contemplated by the Transaction Documents or the provision of
energy related services to CES, CMSC does not have any Contracts with, or
Liabilities to, Third Parties or its Affiliates.
9.13 Material Contracts of CMSC. At least ten (10) days prior to the
Effective Date, CMSC has provided to Bear Stearns and CalBear copies of all
material Contracts to which CMSC is a party and copies of all Contracts listed
on Schedules 4.1(m) to the Agency and Services Agreement.
ARTICLE X.
REPRESENTATIONS AND WARRANTIES OF BEAR STEARNS
As an inducement to enter into this Agreement, each of Bear Stearns
and CalBear hereby represents and warrants to Calpine and each of the Calpine
Transaction Parties, as of the date hereof (other than with respect to CalBear)
and as of the Effective Date, and except as otherwise disclosed in the Bear
Stearns SEC Filings, the following:
10.1 Bear Stearns and CalBear. Schedule 10.1 lists the name, type of entity
and jurisdiction of organization of Bear Stearns and CalBear. Bear Stearns owns,
directly or indirectly, all of the outstanding Equity Securities of CalBear.
10.2 No Conflict or Violation. None of the execution, delivery and
performance of this Agreement or any other Transaction Documents, the
consummation of the transactions contemplated hereby and thereby, compliance
with any of the provisions hereof or thereof, or the consummation of any CalBear
Trades, by Bear Stearns or CalBear will result in (a) a violation of or a
conflict with any provision of the Organizational Documents of Bear Stearns or
CalBear, (b) a violation of, a conflict with, a breach of, or a default under
(with or without notice or passage of time), the termination or acceleration of
the performance required by, or the creation of any right of any party to
accelerate, modify, terminate or cancel, any material term or provision of any
material Contract to which Bear Stearns or CalBear is a party or by which any of
its Assets are bound, (c) a violation or breach in any material respect of any
Applicable Law applicable to Bear Stearns or CalBear or (d) subject to
compliance with Section 4.1(n) of the Agency and Services Agreement by CMSC,
44
Bear Stearns or CalBear being required to obtain any material consent, waiver,
agreement, Permit or approval or material authorization of, or material
declaration, filing, notice or registration to or with, or material assignment
by, any Third Party or Governmental Authority, except, in each case, as set
forth on Schedule 10.2.
10.3 Sufficiency of Assets. CalBear owns, licenses, leases or otherwise has
a right to use or has contracted for all Assets materially necessary and
sufficient for the performance of its obligations under the Transaction
Documents, and its Assets in the aggregate are materially in such operating
condition and repair (subject to normal wear and tear) as is necessary and
sufficient for the performance of such obligations.
10.4 Permits. Except as set forth on Schedule 10.2, CalBear has all
material Permits necessary for (i) the conduct of its business as now being
conducted and as proposed to be conducted as contemplated in this Agreement and
the other Transaction Documents and (ii) the performance of its obligations
under the Transaction Documents, and owns or possesses such Permits free and
clear of any material Encumbrances. All such Permits are valid and in full force
and effect in all material respects.
10.5 Litigation. There is no Action pending or, to the knowledge of
CalBear, threatened in writing against, relating to or affecting Bear Stearns or
CalBear or any of their properties, rights or Assets (a) that, if pending,
involves the risk of criminal liability or, if threatened, could reasonably be
expected to involve the risk of criminal liability, (i) for CalBear or (ii) for
Bear Stearns and its Affiliates; provided, in the case of clause (ii), such
Action is material to Bear Stearns and its Affiliates, taken as a whole, (b)
that relates to the transactions contemplated by this Agreement or by the other
Transaction Documents, or (c) with respect to which there is a reasonable
likelihood of a determination which would prevent or delay Bear Stearns or
CalBear from consummating the transactions contemplated hereby or by the other
Transaction Documents in any material respect or performing any material
obligations hereunder or thereunder, in any court or other tribunal or before
any arbitrator, mediator, authority or Governmental Authority.
10.6 Compliance with Law. Neither Bear Stearns nor CalBear has violated any
Applicable Laws, and each of Bear Stearns and CalBear is in compliance with all
Applicable Laws, except to the extent that any such violations or failures to
comply, individually or in the aggregate, have not had a Material Adverse Effect
on Bear Stearns or CalBear. Neither Bear Stearns nor CalBear has received any
written notice to the effect that, and CalBear do not have any knowledge that,
(a) any investigation or review by any Governmental Authority related to this
Agreement, the other Transaction Documents, the transactions contemplated hereby
or thereby, CalBear, Bear Stearns, the Services or the CalBear Trades is pending
or threatened in writing, or (b) any currently existing circumstances are likely
to result in a failure of Bear Stearns or CalBear to comply with, or a violation
by Bear Stearns or CalBear of, any Applicable Laws, in either case which such
failure to comply or violation would be reasonably expected to have a Material
Adverse Effect on Bear Stearns or CalBear.
10.7 Insurance. CalBear has insurance policies, binders or other forms of
insurance that provide, and during their term have provided, coverage to the
extent and in the manner (a) adequate for CalBear and its Assets, businesses and
operations and the risks insured against in connection therewith and (b) as may
45
be or may have been required by material Applicable Law and by any material
Contracts to which CalBear is or has been a party, except, in either case, as
would not have a Material Adverse Effect on CalBear.
10.8 Adequate Capital. CalBear is not insolvent and will not be insolvent
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents, as the term insolvent is used in applicable state
and federal fraudulent conveyance or transfer laws.
10.9 SEC Filings; Financial Statements.
(a) Bear Stearns has filed all registration statements, prospectuses,
forms and reports required to be filed by it under the Securities Act or the
Exchange Act, as the case may be, since January 1, 2003 (collectively, the "Bear
Stearns SEC Filings"). Each Bear Stearns SEC Filing, as amended or supplemented,
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, with respect to such Bear Stearns SEC
Filing. Each Bear Stearns SEC Filing, as amended or supplemented, if applicable,
did not (as so amended or supplemented) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Except as may be indicated in the notes thereto and, in the case
of unaudited quarterly financial statements, except as permitted by Form 10-Q
under the Exchange Act, each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Bear Stearns SEC
Filings was prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated, and, at the time such consolidated financial
statements were filed and at the time they were amended or supplemented, if
applicable, each fairly presented in all material respects the consolidated
financial position of Bear Stearns and its subsidiaries as of the respective
dates thereof and for the respective periods indicated therein (subject, in the
case of unaudited statements, to normal, recurring year-end adjustments which
did not have a Material Adverse Effect on Bear Stearns).
10.10 Regulation.
(a) Neither Bear Stearns nor CalBear is subject to regulation as an
"electric utility company," a "gas utility company" a "public-utility company,"
or a "holding company," under PUHCA or any regulation promulgated thereunder.
Neither Bear Stearns nor CalBear is subject to material regulatory restrictions
under PUHCA (other than Section 9(a)(2) of PUHCA).
(b) CalBear has validly issued final orders authorizing CalBear to
engage in Power sales at wholesale at market-based rates. CalBear is in
compliance with all FERC reporting and other requirements generally imposed on
entities authorized to engage in wholesale sales of Power at market-based rates,
including requirements to file electronic quarterly transaction reports,
triennial market-power updates and changes in status, except to the extent that
non-compliance could not reasonably be expected to cause a Material Adverse
Effect with respect to CalBear.
46
10.11 Operations of CalBear. CalBear has not taken any action that would
have violated Section 4.4(f) of the Agency and Services Agreement had it been
subject to such Section 4.4(f) on the Effective Date. Except in connection with
the transactions contemplated by the Transaction Documents, CalBear does not
have any Contracts with, or Liabilities to, Third Parties or its Affiliates.
ARTICLE XI.
PRE-EFFECTIVE DATE COVENANTS OF THE PARTIES
From the date hereof through the Effective Date:
11.1 Notification of Certain Matters. Calpine and the Calpine Transaction
Parties, on the one hand, and Bear Stearns and CalBear, on the other hand, shall
promptly following knowledge thereof give notice to each other of (a) the
occurrence, or failure to occur, of any event, which occurrence or failure could
reasonably be expected to cause any representation or warranty of such Party or
any of its Affiliates contained in this Agreement or in any exhibit, schedule,
certificate, document or written instrument attached hereto to be untrue or
inaccurate in any material respect, (b) any Material Adverse Change with respect
to such Party or its Assets or the businesses of such Party, or any development
that occurs before the Effective Date (including the commencement of any
proceeding relating to the Bankruptcy of any such Party) that has a Material
Adverse Effect with respect to such Party or its Assets or business, (c) any
Bankruptcy of such Party or any of its Significant Subsidiaries, (d) the failure
by such Party to perform any covenant or agreement of such Party set forth in
this Agreement or any other Transaction Document, which failure constitutes a
material breach of this Agreement or such other Transaction Document; provided
that any breach of this clause (d) shall be deemed to be cured upon the cure of
the underlying failure to perform, (e) any material notice or other written
communication from any Person alleging that the consent of such Person is or may
be required in connection with the execution, delivery or performance of this
Agreement, any Transaction Document or the transactions contemplated herein and
therein, and (f) any material notice or other written communication from any
Governmental Authority in connection with this Agreement, any Transaction
Document or the transactions contemplated herein and therein; provided, in each
case, that such disclosure shall not be deemed to cure, or to relieve any Party
of any Liability or obligation with respect to, any breach of or failure to
satisfy any representation, warranty, covenant or agreement or to satisfy any
condition hereunder.
11.2 Consents and Commercially Reasonable Efforts. Each of the Transaction
Parties covenants and agrees, upon the terms and conditions contained herein, to
(a) cooperate with the other Transaction Parties hereto and to pursue diligently
and in good faith and use all commercially reasonable efforts to take, or cause
to be taken, all actions necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby and by the other Transaction
Documents and (b) execute any documents, instruments or conveyances of any kind
that may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereby and by the other Transaction Documents. Without
limiting the generality of the foregoing, each Transaction Party shall use all
commercially reasonable best efforts to obtain at the earliest practicable date
all consents, approvals, Permits, authorizations, exemptions and waivers from
Governmental Authorities and other Persons (including all FERC approvals and
47
authorizations under Section 6.1(c), Section 6.2(c) and Section 6.3) required to
be obtained by it and necessary or advisable to authorize, approve or permit the
performance by such Transaction Party of its obligations hereunder and under
each other agreement and instrument referred to herein or contemplated hereby,
including all such consents, approvals, authorizations, exemptions and waivers
listed on Schedules 9.2 and 10.2.
11.3 Other Transaction Documents. On or prior to the Effective Date, the
Calpine Transaction Parties and CalBear, respectively, shall enter into the
Transaction Documents (other than this Agreement), as applicable, and shall
provide each other with original copies thereof.
ARTICLE XII.
CONDITIONS TO CALPINE'S OBLIGATIONS
The obligation of Calpine and each of the Calpine Transaction Parties
to perform its obligations under this Agreement that are to be performed from
and after the Effective Date and to consummate any transactions contemplated
under this Agreement to be consummated on or after the Effective Date are
subject to the satisfaction, on or prior to the Effective Date, of each of the
following conditions, any of which may be waived by Calpine and the Calpine
Transaction Parties:
12.1 Representations, Warranties and Covenants. All representations and
warranties of Bear Stearns and CalBear contained in this Agreement and qualified
by the words "material," "Material Adverse Effect," "Material Adverse Change"
and similar phrases shall be true and correct in all respects, and all
representations and warranties of Bear Stearns and CalBear contained in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case, at and as of the date of this Agreement and at and as of
the Effective Date, except for those representations and warranties that speak
as of a particular date, which shall be true and correct as of such date, and
Bear Stearns and CalBear shall have performed and satisfied in all material
respects all agreements and covenants required to be performed by it hereunder
prior to or on the Effective Date.
12.2 No Proceedings or Litigation. No Action by any Governmental Authority
or any other Person shall have been instituted or threatened in writing for the
purpose of enjoining or preventing, or which questions the validity or legality
of, the transactions contemplated hereby and by the other Transaction Documents
and which could reasonably be expected to damage Calpine or any Calpine
Transaction Party materially if Calpine and each Calpine Transaction Party were
to perform its obligations that are to be performed hereunder from and after the
Effective Date or were to consummate any transactions that are to be consummated
hereunder or under any of the other Transaction Documents on or after the
Effective Date. Since the date of this Agreement, no Applicable Law shall have
been enacted that makes performance of this Agreement or any of the other
Transaction Documents by Calpine or any of the Calpine Transaction Parties
illegal or otherwise prohibited or that otherwise has a Material Adverse Effect
on Calpine or any of the Calpine Transaction Parties.
48
12.3 Bankruptcy. Since the date of this Agreement, there shall not have
been any Bankruptcy Event with respect to Bear Stearns, CalBear or any
Significant Subsidiary of Bear Stearns.
12.4 Effective Date Deliveries. Calpine and the Calpine Transaction Parties
shall have received from Bear Stearns and CalBear, at or prior to the Effective
Date, the following:
(a) a copy of each of the Transaction Documents (other than this
Agreement), duly executed by CalBear;
(b) a certificate executed by an officer of Bear Stearns certifying
that, as of the Effective Date, the conditions set forth in Section 12.1 and
Section 12.3 have been satisfied; and
(c) a certificate of an officer of CalBear, certifying the existence
of CalBear and the authority of CalBear to enter into the Transaction Documents
to which CalBear is a party, in form reasonably satisfactory to Calpine.
12.5 Transaction Documents. Each of the Transaction Documents (other than
this Agreement) shall have been executed and delivered by each party thereto
other than the Calpine Transaction Parties. All of the conditions precedent to
the obligations of the parties to each of the Transaction Documents (other than
this Agreement) shall have been satisfied or waived by the party or parties for
whose benefit they were established.
12.6 Pre-Formation Transactions. The Pre-Formation Transactions shall have
been completed.
12.7 Corporate Proceedings. All corporate proceedings of Bear Stearns and
CalBear that are required in connection with the Pre-Formation Transactions, the
Formation Transactions or the transactions contemplated by this Agreement and by
the other Transaction Documents shall be reasonably satisfactory in form and
substance to Calpine and its counsel.
12.8 Regulatory Approvals. FERC shall have issued a final order pursuant to
Section 203 of the FPA, not undergoing rehearing or appeal, authorizing the
internal reorganization of the upstream ownership of CalBear's predecessor,
Arroyo Energy LP, and providing the authorizations required for the provision of
the Services by CMSC to CalBear and the provision of energy related services by
CMSC to CES.
12.9 Opinion of Counsel to Bear Stearns. Calpine shall have received (a)
opinions, dated as of the Effective Date, in form and substance reasonably
satisfactory to Calpine, of Latham & Watkins LLP, internal counsel to Bear
Stearns and/or other counsel to Bear Stearns reasonably acceptable to Calpine,
with respect to the matters set forth on Schedule 12.9 and (b) copies of any
officer's certificates or other certificates, in form and substance reasonably
satisfactory to Calpine, referred to in such opinions.
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ARTICLE XIII.
CONDITIONS TO BEAR STEARNS' OBLIGATIONS
The obligation of each of Bear Stearns and CalBear to perform its
obligations under this Agreement that are to be performed from and after the
Effective Date and to consummate any transactions contemplated under this
Agreement to be consummated on or after the Effective Date are subject to the
satisfaction, on or prior to the Effective Date, of each of the following
conditions, any of which may be waived by Bear Stearns and CalBear:
13.1 Representations, Warranties and Covenants. All representations and
warranties of Calpine and of each Calpine Transaction Party contained in this
Agreement and qualified by the words "material," "Material Adverse Effect,"
"Material Adverse Change" and similar phrases shall be true and correct in all
respects, and all representations and warranties of Calpine and of each Calpine
Transaction Party contained in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case, at and as of the date
of this Agreement and at and as of the Effective Date, except for those
representations and warranties that speak as of a particular date, which shall
be true and correct as of such date, and Calpine and each Calpine Transaction
Party shall have performed and satisfied in all material respects all agreements
and covenants required to be performed by it hereunder prior to or on the
Effective Date.
13.2 No Proceedings or Litigation. No Action by any Governmental Authority
or any other Person shall have been instituted or threatened in writing for the
purpose of enjoining or preventing, or which questions the validity or legality
of, the transactions contemplated hereby and by the other Transaction Documents
and which could reasonably be expected to damage Bear Stearns or CalBear
materially if each of Bear Stearns and CalBear were to perform its obligations
that are to be performed hereunder from and after the Effective Date or were to
consummate any transactions that are to be consummated hereunder or under any of
the other Transaction Documents on or after the Effective Date. Since the date
of this Agreement, no Applicable Law shall have been enacted that makes
performance of this Agreement or any of the other Transaction Documents by Bear
Stearns or CalBear illegal or otherwise prohibited or that otherwise has a
Material Adverse Effect on Bear Stearns or CalBear.
13.3 Bankruptcy. Since the date of this Agreement, there shall not have
been any Bankruptcy Event with respect to Calpine, any of the Calpine
Transaction Parties or any Significant Subsidiary of Calpine.
13.4 Effective Date Deliveries. Bear Stearns and CalBear shall have
received from Calpine and the Calpine Transaction Parties, at or prior to the
Effective Date, the following:
(a) a copy of each of the Transaction Documents (other than this
Agreement), duly executed by each Calpine Transaction Party that is a party
thereto;
(b) a certificate executed by an officer of Calpine certifying that,
as of the Effective Date, the conditions set forth in Section 13.1 and Section
13.3 have been satisfied; and
(c) a certificate of an officer of each Calpine Transaction Party,
certifying the existence of such Calpine Transaction Party, as applicable, and
the authority of such Calpine Transaction Party, as applicable, to enter into
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the Transaction Documents to which such Calpine Transaction Party is a party, in
form reasonably satisfactory to Bear Stearns.
13.5 Transaction Documents. Each of the Transaction Documents (other than
this Agreement) shall have been executed and delivered by each party thereto
other than CalBear. All of the conditions precedent to the obligations of the
parties to each of the Transaction Documents (other than this Agreement) shall
have been satisfied or waived by the party or parties for whose benefit they
were established.
13.6 Pre-Formation Transactions. The Pre-Formation Transactions shall have
been completed.
13.7 Corporate Proceedings. All corporate proceedings of Calpine and the
Calpine Transaction Parties that are required in connection with the
Pre-Formation Transactions, the Formation Transactions or the transactions
contemplated by this Agreement and by the other Transaction Documents shall be
reasonably satisfactory in form and substance to Bear Stearns and its counsel.
13.8 Regulatory Approvals. FERC shall have issued a final order pursuant to
Section 203 of the FPA, not undergoing rehearing or appeal, authorizing the
internal reorganization of the upstream ownership of CMSC's predecessor, CES
Marketing VII, LLC, and providing the authorizations required for the provision
of the Services by CMSC to CalBear and the provision of energy related services
by CMSC to CES.
13.9 Opinion of Counsel to Calpine. Bear Stearns shall have received (a)
opinions, dated as of the Effective Date, in form and substance reasonably
satisfactory to Bear Stearns, of Bracewell & Giuliani LLP, internal counsel to
Calpine and/or other counsel to Calpine reasonably acceptable to Bear Stearns,
with respect to the matters set forth on Schedule 13.9 and (b) copies of any
officer's certificates or other certificates, in form and substance reasonably
satisfactory to Bear Stearns, referred to in such opinions.
ARTICLE XIV.
CERTAIN ACTIONS AFTER THE EFFECTIVE DATE
Each of the Parties, with respect to itself only, covenants and agrees
with each of the other Parties that from and after the Effective Date:
14.1 Survival of Representations, etc. The representations and warranties
of each Party contained herein shall survive for one (1) year after the date on
which such representations and warranties are made, unless another Party
notifies such Party prior to such date of any specific claim or claims for
alleged breach of any such representation or warranty, in which case such
representation or warranty shall survive with respect to such claim until the
later of (a) final resolution by settlement, Action or otherwise of any such
claim or (b) the end of such one (1) year period. No investigation made by any
Party (whether prior to, on or after the date of this Agreement) shall in any
way limit the representations and warranties of the Parties. The covenants and
agreements of the Parties contained herein shall survive the termination of this
51
Agreement only to the extent expressly set forth herein, including as set forth
in Section 16.6(c)(ii).
14.2 No Conflict or Violation.
(a) Each of CMSC and CalBear shall operate their businesses in a
manner that will not result in (i) a violation of or a conflict with any
provision of the Organizational Documents of such Transaction Party or (ii) a
violation of or a breach or default under, the termination or acceleration of
the performance required by, or the creation of any right of any party to
accelerate, modify, terminate or cancel, any material term or provision of any
material Contract related to the Transaction to which such Transaction Party is
a party or by which any of its material Assets are bound, or (iii) a violation
or breach in any material respect of any Applicable Law applicable to such
Transaction Party and, in the case of CMSC, applicable to CalBear.
(b) CES shall operate its businesses with respect to the Trading
Master Agreement and this Agreement in a manner that will not result in (i) a
violation of or a conflict with any provision of the Organizational Documents of
CES or (ii) a violation of or a breach or default under, the termination or
acceleration of the performance required by, or the creation of any right of any
party to accelerate, modify, terminate or cancel, any material term or provision
of any material Contract relating to any Credit Enhancement Trade or the
Transaction to which CES is a party or by which any of its material Assets are
bound, or (iii) a violation or breach in any material respect of any Applicable
Law applicable to CES.
14.3 Sufficiency of Assets. Each of the Calpine Transaction Parties and
CalBear shall continue to own, license, lease or otherwise have a right to use
or have contracted for all Assets materially necessary and sufficient for the
performance of its obligations under the Transaction Documents, and will
maintain its Assets in the aggregate materially in such operating condition and
repair (subject to normal wear and tear) as is necessary and sufficient for the
performance of such obligations.
14.4 Permits. Subject to Section 4.1(n) of the Agency and Services
Agreement, each of Calpine, the Calpine Transaction Parties, Bear Stearns and
CalBear shall maintain and keep in full force and effect all material Permits
needed for the performance of its obligations under the Transaction Documents,
and each such Party shall continue to own or possess such Permits free and clear
of any material Encumbrances.
14.5 Insurance. Each of the Calpine Transaction Parties and CalBear shall
maintain and keep in full force and effect insurance policies, binders or other
forms of insurance that provide coverage in connection with its obligations
under the Transaction Documents and the Transaction to the extent and in the
manner adequate for such Person and its material Assets, businesses and
operations and the risks insured against in connection therewith, except as
would not have a Material Adverse Effect.
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14.6 Adequate Capital. Each of Calpine, the Calpine Transaction Parties,
Bear Stearns and CalBear shall operate and maintain its businesses such that at
all times it is not insolvent, as such term is used in applicable state and
federal fraudulent conveyance or transfer laws.
14.7 Further Assurances. The Transaction Parties shall use commercially
reasonable efforts to take all actions and to do all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement and by the other Transaction Documents. Following the Effective Date,
each Transaction Party agrees to execute such documents or instruments and take
such actions as may be reasonably requested by the other Transaction Parties,
and otherwise cooperate in a reasonable manner with the other Transaction
Parties and their respective Affiliates and their respective Representatives in
connection with any action that may be necessary, proper or advisable to carry
out the provisions hereof or transactions contemplated hereby and by the other
Transaction Documents.
14.8 Litigation Support. In the event and for so long as any Party is
actively contesting or defending against any Action or Claim in connection with
(a) any transaction contemplated under this Agreement or the other Transaction
Documents or (b) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction involving the CalBear Business, the Trades or the Services, each
other Party that is not an Affiliate of such Party, will use reasonable efforts
to cooperate with such Party and its counsel in the contest or defense, make
available its Representatives, and provide such testimony and access to its
Books and Records as shall be reasonably necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification hereunder). The covenant contained in this Section 14.8 shall
not apply if Calpine or any Calpine Transaction Party has an adverse Action or
Claim against Bear Stearns or CalBear and shall not apply if Bear Stearns or
CalBear has an adverse Action or Claim against Calpine or any Calpine
Transaction Party, but shall apply equally with respect to any other Transaction
Documents and shall not be in lieu of or otherwise limit the indemnification
obligations of the Parties pursuant to Article XV hereof.
14.9 Organizational Documents of CMSC and CalBear.
(a) Calpine shall not, and shall cause its Affiliates not to, modify
the Organizational Documents of CMSC, or any provision thereof, without the
prior consent of Bear Stearns, not to be unreasonably withheld.
(b) Bear Stearns shall not, and shall cause its Affiliates not to,
modify the Organizational Documents of CalBear, or any provision thereof,
without the prior consent of Calpine, not to be unreasonably withheld.
ARTICLE XV.
INDEMNIFICATION
15.1 General Indemnification.
(a) By CMSC and CES.
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(i) Subject to Section 14.1 and the limitations set forth in this
Article XV and Article XVII, the Calpine Transaction Parties, jointly and
severally, shall indemnify, save and hold harmless Bear Stearns, CalBear, each
of their Affiliates, and each of their respective directors, officers,
employees, successors, transferees and assignees (each, a "Bear Stearns Party"),
from and against any and all costs, losses, charges, liabilities, obligations,
damages, Actions (including response Actions, removal Actions and remedial
Actions), judgments, deficiencies, demands, fees, settlements and expenses,
including interest, fines, penalties, costs of mitigation and cover (to the
extent, but only to the extent, such costs are provided for in the definition of
Third Party Losses), attorneys' fees and expenses, all amounts paid in the
investigation, defense or settlement of any of the foregoing and costs of
enforcing the applicable indemnity (collectively, "Damages") arising out of or
resulting from:
(A) any untruth, inaccuracy or incorrectness of, or other
breach of, any representation or warranty of Calpine or any Calpine
Transaction Party in or pursuant to this Agreement or any of the other
Transaction Documents;
(B) any nonfulfillment, nonperformance, nonobservance or
other breach or violation of, or default under, any covenant or
agreement made by Calpine or any Calpine Transaction Party in or
pursuant to this Agreement or any of the other Transaction Documents;
(C) any Misconduct of Calpine or any of the Calpine
Transaction Parties or any of their Affiliates or their respective
Representatives;
(D) any Liability of Calpine, any Calpine Transaction Party
or any of their Affiliates for any finder's fee, brokerage fee or
commission or similar Payment in connection with the transactions
contemplated hereby and by the other Transaction Documents; or
(E) any violation of Applicable Law by Calpine or any of the
Calpine Transaction Parties or any of their Affiliates or their
respective Representatives, in each case to the extent that the
Damages to a Bear Stearns Party arose out of or resulted from the
transactions contemplated by the Transaction Documents or the fact
that Bear Stearns or CalBear are parties to the Transaction Documents;
provided that this clause (E) shall not apply to any violations of
Applicable Law indemnified under clauses (A), (B) or (C) above or any
violations of Applicable Law not indemnified pursuant to such clauses
(A), (B) or (C) as a result of materiality, knowledge, Material
Adverse Effect and similar qualifiers in the applicable provisions of
this Agreement and the other Transaction Documents;
(each claim for indemnity by a Bear Stearns Party pursuant to this Section
15.1(a), a "Bear Stearns Claim").
(ii) The indemnity provided for in this Section 15.1(a) is not
limited to Third Party Claims against any Bear Stearns Party, but includes Bear
Stearns Claims incurred or sustained by any Bear Stearns Party in the absence of
54
Third Party Claims. With respect to any Third Party Claims against any Bear
Stearns Party covered by the indemnity provided in this Section 15.1(a), such
indemnification shall include coverage of any consequential, indirect, special,
punitive, exemplary or incidental damages included in such Third Party Claims.
(iii) The indemnity provided for in this Section 15.1(a) shall
not apply to Claims or Damages arising out of or resulting from any
nonfulfillment, nonperformance, nonobservance or other breach or violation of or
default under, or any Misconduct related to, Soft Covenants, for which the sole
and exclusive rights and remedies are described in Clause (a) of Section 17.3 of
this Agreement.
(iv) The indemnity set forth in clauses (A) and (B) of Section
15.1(a)(i) is subject to the following additional limitations:
(A) such indemnity shall not apply to Claims or Damages
constituting Ordinary Losses, except to the extent such Ordinary
Losses are not consequential, indirect, special, punitive, exemplary
or incidental Claims or Damages and arise out of or result from (I)
any nonfulfillment, nonperformance, nonobservance or other breach or
violation of or default under Hard Covenants, (II) Misconduct of
Calpine or any Calpine Transaction Party or any other matters
indemnified in clauses (C) through (E) above, (III) any
nonfulfillment, nonperformance, nonobservance or other breach or
violation of or default under any provisions of any Transaction
Document arising out of or resulting from the gross negligence of
Calpine or any Calpine Transaction Party (except to the extent covered
in the definition of "Misconduct" or limited by paragraph (v) below),
to the extent that such Ordinary Losses covered under this clause
(III) incurred in the same Fiscal Year in the aggregate exceed $[*]
million (provided that the occurrence of losses or gains on CalBear
Trades does not by itself represent the presence or absence of,
respectively, gross negligence) or (IV) the failure of Calpine or a
Calpine Transaction Party to make any Payment to Bear Stearns or
CalBear specifically provided for pursuant to the terms of the
Transaction Documents; and
(B) such indemnity shall not apply to Claims or Damages
constituting Third Party Losses, unless and until such Claims or
Damages covered under such indemnity incurred in the same Fiscal Year
in the aggregate exceed $[*] million (the "Threshold"), in which case
such indemnity shall apply to all such Claims or Damages covered under
such indemnity during such Fiscal Year whether or not the same exceed
the Threshold, provided that this Section 15.1(a)(iv)(B) shall not
apply to Claims or Damages arising out of or resulting from (I) any
nonfulfillment, nonperformance, nonobservance or other breach or
violation of or default under Hard Covenants, (II) Misconduct of
Calpine or any Calpine Transaction Party or any other matters
indemnified in clauses (C) through (E) above, (III) the failure of
Calpine or a Calpine Transaction Party to make any Payment to Bear
55
Stearns or CalBear specifically provided for pursuant to the terms of
the Transaction Documents, or (IV) indemnification obligations under
Section 4.4(e)(iv) of the Agency and Services Agreement.
(v) No Bear Stearns Party shall have the right to indemnification
for any Ordinary Losses resulting from or arising out of the gross negligence of
Calpine or any Calpine Transaction Party to the extent that Bear Stearns or
CalBear actually knew of such gross negligence and did not promptly, after
obtaining such knowledge, inform Calpine or a Calpine Transaction Party of (A)
its intent to preserve any claim for indemnification under this Section 15.1(a)
with respect to such gross negligence and (B) the facts, events or conditions
constituting such gross negligence, to the extent then known.
(b) By CalBear.
(i) Subject to Section 14.1 and the limitations set forth in this
Article XV and Article XVII, CalBear shall indemnify, save and hold harmless
Calpine, each Calpine Transaction Party, each of their Affiliates, and each of
their respective directors, officers, employees, successors, transferees and
assignees (each, a "Calpine Party"), from and against any and all Damages
arising out of or resulting from:
(A) any untruth, inaccuracy or incorrectness of, or other
breach of, any representation or warranty of Bear Stearns or CalBear
in or pursuant to this Agreement or any of the other Transaction
Documents;
(B) any nonfulfillment, nonperformance, nonobservance or
other breach or violation of, or default under, any covenant or
agreement made by Bear Stearns or CalBear in or pursuant to this
Agreement or any of the other Transaction Documents;
(C) any Misconduct of Bear Stearns or CalBear or any of
their Affiliates or their respective Representatives;
(D) any Liability of Bear Stearns, CalBear or any of their
Affiliates for any finder's fee, brokerage fee or commission or
similar Payment in connection with the transactions contemplated
hereby and by the other Transaction Documents; or
(E) any violation of Applicable Law by CalBear or any of its
Affiliates or their respective Representatives, in each case to the
extent that the Damages to a Calpine Party arose out of or resulted
from the transactions contemplated by the Transaction Documents or the
fact that Calpine and the Calpine Transaction Parties are parties to
the Transaction Documents; provided that this clause (E) shall not
apply to any violations of Applicable Law indemnified under clauses
(A), (B) or (C) above or any violations of Applicable Law not
indemnified pursuant to such clauses (A), (B) or (C) as a result of
materiality, knowledge, Material Adverse Effect and similar qualifiers
in the applicable provisions of this Agreement and the other
Transaction Documents;
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(each claim for indemnity by a Calpine Party pursuant to this Section 15.1(b), a
"Calpine Claim"); provided that in no event shall CalBear be obligated to
indemnify any Calpine Party for Damages to the extent such Damages arose out of
or resulted from CMSC's performance of or failure to perform any of its
obligations as agent or attorney-in-fact for CalBear under the Agency and
Services Agreement.
(ii) The indemnity provided for in this Section 15.1(b) is not
limited to Third Party Claims against any Calpine Party, but includes Calpine
Claims incurred or sustained by any Calpine Party in the absence of Third Party
Claims. With respect to any Third Party Claims against any Calpine Party covered
by the indemnity provided in this Section 15.1(b), such indemnification shall
include coverage of any consequential, indirect, special, punitive, exemplary or
incidental damages included in such Third Party Claims.
(iii) The indemnity provided for in this Section 15.1(b) shall
not apply to Claims or Damages arising out of or resulting from any
nonfulfillment, nonperformance, nonobservance or other breach or violation of or
default under, or any Misconduct related to, Soft Covenants, for which the sole
and exclusive rights and remedies are described in Clause (a) of Section 17.3 of
this Agreement.
(iv) The indemnity set forth in clauses (A) and (B) of Section
15.1(b)(i) is subject to the following additional limitations:
(A) such indemnity shall not apply to Claims or Damages
constituting Ordinary Losses, except to the extent such Ordinary
Losses are not consequential, indirect, special, punitive, exemplary
or incidental Claims or Damages and arise out of or result from (I)
any nonfulfillment, nonperformance, nonobservance or other breach or
violation of or default under Hard Covenants, (II) Misconduct of Bear
Stearns or CalBear or any other matters indemnified in clauses (C)
through (E) above, (III) any nonfulfillment, nonperformance,
nonobservance or other breach or violation of or default under any
provisions of any Transaction Document arising out of or resulting
from the gross negligence of Bear Stearns or CalBear (except to the
extent covered in the definition of "Misconduct" or limited by
paragraph (v) below), to the extent that such Ordinary Losses covered
under this clause (III) incurred in the same Fiscal Year in the
aggregate exceed $[*] million or (IV) the failure of Bear Stearns or
CalBear to make any Payment to a Calpine Transaction Party
specifically provided for pursuant to the terms of the Transaction
Documents; and
(B) such indemnity shall not apply to Claims or Damages
constituting Third Party Losses, unless and until such Claims or
Damages covered under such indemnity incurred in the same Fiscal Year
in the aggregate exceed the Threshold, in which case such indemnity
shall apply to all such Claims or Damages covered under such indemnity
during such Fiscal Year whether or not the same exceed the Threshold,
provided that this Section 15.1(b)(iv)(B) shall not apply to Claims or
Damages arising out of or resulting from (I) any nonfulfillment,
nonperformance, nonobservance or other breach or violation of or
57
default under Hard Covenants, (II) Misconduct of Bear Stearns or
CalBear or any other matters indemnified in clauses (C) through (E)
above or (III) the failure of Bear Stearns or CalBear to make any
Payment to Calpine or any of the Calpine Transaction Parties
specifically provided for pursuant to the terms of the Transaction
Documents.
(v) No Calpine Party shall have the right to indemnification for
any Ordinary Losses resulting from or arising out of the gross negligence of
Bear Stearns or CalBear to the extent that Calpine or any Calpine Transaction
Party actually knew of such gross negligence and did not promptly, after
obtaining such knowledge, inform Bear Stearns or CalBear of (A) its intent to
preserve any claim for indemnification under this Section 15.1(b) with respect
to such gross negligence and (B) the facts, events or conditions constituting
such gross negligence, to the extent then known.
(c) Defense of Claims.
(i) If a Claim is to be made by a Person entitled to
indemnification hereunder (without regard to any thresholds), the Person
claiming such indemnification shall give written notice (a "Claim Notice") to
the indemnifying Person (A) as soon as practicable after the Person entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section 15.1
and (B) in the case of the assertion of a Claim (whether pursuant to a legal
Action or otherwise) or the commencement of any Action by a Third Party other
than directors, officers, employees, successors, transferees or assignees of, or
other Representatives of, Calpine, any Calpine Transaction Party or their
Affiliates or Bear Stearns, CalBear or their Affiliates (together, a "Third
Party Claim"), promptly upon receipt of written notice of the Third Party Claim.
The failure of any indemnified Person to give timely notice hereunder shall not
affect rights to indemnification hereunder, except and only to the extent that
the indemnifying Person demonstrates actual prejudice caused by such failure.
(ii) In the case of a Third Party Claim, if the indemnifying
Person shall acknowledge in writing to the indemnified Person that the
indemnifying Person shall be obligated to indemnify the indemnified Person under
the terms of its indemnity hereunder in connection with such Third Party Claim,
then the indemnifying Person shall be entitled and, if it so elects, shall be
obligated at its own cost, risk and expense, to participate in or take control
of the defense and investigation of such Third Party Claim, and to pursue the
defense thereof in good faith by appropriate actions or proceedings promptly
taken or instituted and diligently pursued, including to employ and engage
attorneys of its own choice reasonably acceptable to the indemnified Person to
handle and defend the same, compromise or settle such Third Party Claim subject
to Sections 15.1(c)(iii) and 15.1(c)(iv); provided that the indemnifying Person
shall not be entitled to take control of the defense or investigation of a Third
Party Claim, if (x) the indemnifying Person is also a party to such Third Party
Claim and the indemnified Person determined in good faith, upon the advice of
outside counsel, that a conflict of interest exists between the indemnified
Person and the indemnifying Person with respect to such Third Party Claim, (y)
the indemnifying Person fails to demonstrate to the reasonable satisfaction of
the indemnified Person its financial capacity to defend such Third Party Claim
58
and provide indemnification with respect to such Third Party Claim or (z) such
Third Party Claim is a Claim by a Governmental Authority.
(iii) In the event the indemnifying Person elects to assume
control of the defense and investigation of such Third Party Claim in accordance
with Section 15.1(c)(ii), the indemnified Person may, at its own cost and
expense, participate in the investigation, trial, and defense of such Third
Party Claim; provided that, if (x) the named persons to an Action resulting from
such Third Party Claim include both the indemnifying Person and the indemnified
Person and the indemnified Person has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified Person
that are different from or additional to those available to the indemnifying
person or that a conflict of interest exists between the indemnified Person and
the indemnifying Person with respect to such Third Party Claim, or (y) such
Third Party Claim is a Claim by a Governmental Authority, the indemnified Person
shall be entitled, at the indemnifying person's cost, risk and expense, to
reasonable fees and disbursements of separate counsel of its own choosing. In
the event the indemnifying Person assumes the defense of the Third Party Claim,
the indemnifying Person shall keep the indemnified Person reasonably informed of
the progress of any such defense, compromise or settlement. The indemnifying
Person shall not have the power to compromise or settle such Third Party Claim,
except with the written consent of the indemnified Person, such consent not to
be unreasonably withheld or delayed (it being understood that the failure of the
indemnified Person to give such consent shall not be considered unreasonable in
respect of any compromise or settlement that (A) does not include an
unconditional release of such indemnified Person from all liabilities arising
out of, or that may arise out of, such Third Party Claim or (B) includes a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of such indemnified Person).
(iv) If the indemnifying Person fails to notify the indemnified
Person in writing of its election to assume the defense of such Third Party
Claim in accordance with this Section 15.1(c) within ten (10) calendar days
after receipt of the Claim Notice, or if the indemnifying person is not
permitted to assume the defense of such Third Party Claim in accordance with
this Section 15.1(c), the indemnified Person against which such Third Party
Claim has been asserted shall have the right to undertake, at the indemnifying
Person's cost, risk and expense, the defense, compromise and settlement of such
Third Party Claim on behalf of and for the account of the indemnifying Person;
provided that the indemnifying Person shall not be liable for costs of
settlement of such Third Party Claim if such Third Party Claim is compromised or
settled without the written consent of the indemnifying Person (which consent
shall not be unreasonably withheld or delayed).
(d) Loss Calculation.
The amount of Claims or Damages to which an indemnity provided for in
this Section 15.1 applies shall be determined after giving effect to all
provisions of the Transaction Documents other than this Section 15.1 the
operation of which mitigates or compensates for such Claims or Damages (to the
extent such terms are given full force and effect), including (as applicable)
any reductions in the Service Fee, Service Fee Return Refund or Bonus Amount
59
payable under the Agency and Services Agreement on account or in respect of such
Claims and Damages.
15.2 Right of Offset. Each Party may, to the extent set forth in Section
3.10 hereof, withhold and set off against any and all amounts due to any other
Party any and all amounts as to which the other Party is obligated to indemnify
such Party pursuant to any provision of this Article XV.
15.3 Payment. With respect to Third Party Claims for which indemnification
is payable hereunder, the indemnifying Person will pay the indemnified Person
promptly after the earlier of (a) the entry of judgment against the indemnified
Person and the expiration of any applicable appeal period, (b) the entry of a
non-appealable judgment or final appellate decision against the indemnified
person, or (c) the execution of any settlement agreement referred to in Section
15.1. Notwithstanding the foregoing, expenses of the indemnified Person for
which the indemnifying Person is responsible (including reasonable fees and
disbursements of counsel) shall be reimbursed on a current basis by the
indemnifying Person.
15.4 Right to Indemnification Not Affected by Knowledge or Presumption.
(a) Except as otherwise specifically provided herein, the right to
indemnification based upon breach of representations, warranties, covenants,
agreements or obligations will not be affected by any investigation conducted
with respect to, or knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Effective Date, whether as a result of disclosure by a Party hereto pursuant
to Section 11.1 or otherwise, with respect to the accuracy or inaccuracy of or
compliance with any such representation, warranty, covenant, agreement or
obligation.
(b) The satisfaction of any condition based on the presumed accuracy
of any representation or warranty, or on the presumed performance of or
compliance with any covenant, agreement or obligation, will not affect the right
to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, agreements and obligations.
ARTICLE XVI.
TERM; EVENTS OF DEFAULT AND TERMINATION
16.1 Term. The term of this Agreement shall commence on the date hereof
and, subject to the other provisions of this Agreement, the Liquidation Date
shall occur on (a) November 30, 2006, and (b) on each February 28 (or February
29, in the event of a leap year), May 31, August 31 and November 30 thereafter
(each three (3) Month period ending on each such date, a "Renewal Period"),
unless, in each case, this Agreement is renewed or otherwise stays in effect in
accordance with Section 16.2 below. This Agreement shall terminate immediately
upon completion of Liquidation (the "Termination Date").
16.2 Renewal.
(a) (i) If any Party wishes to renew this Agreement so that it shall
continue after the end of the Initial Term through the end of the Renewal Period
commencing on December 1, 2006, Calpine or any Calpine Transaction Party, on the
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one hand, or Bear Stearns or CalBear, on the other hand, shall deliver a notice
setting forth the intention of such Party and its Affiliates that are Parties to
renew this Agreement (the "Renewal Notice") through the Renewal Period ending
February 28, 2007, which Renewal Notice shall be delivered on or before August
31, 2006.
(ii) If this Agreement has been renewed so that it continues
after the end of the Initial Term, and if any Party wishes to renew this
Agreement so that it shall continue after the end of the latest Renewal Period
for which this Agreement has previously been renewed (the "Latest Renewal
Period"), then Calpine or any Calpine Transaction Party, on the one hand, or
Bear Stearns or CalBear, on the other hand, shall deliver a Renewal Notice
setting forth the intention of such Party and its Affiliates that are Parties to
renew this Agreement through the end of the Renewal Period immediately following
the Latest Renewal Period, which notice shall be given on or before the day
immediately preceding the first day of the Latest Renewal Period.
(iii) A Renewal Notice may set forth the intention of Calpine or
any Calpine Transaction Party, on the one hand, or Bear Stearns or CalBear, on
the other hand, to renew this Agreement for any number of Renewal Periods
following the end of the Initial Term or the end of the Latest Renewal Period,
as applicable (and, in such case, such Renewal Notice shall serve as the Renewal
Notice for each such Renewal Period, unless such Renewal Notice is withdrawn
with respect to any Renewal Period (and all subsequent Renewal Periods contained
in such Renewal Notice, if any) on or prior to the date such Renewal Notice
would otherwise be due for such Renewal Period, except as set forth in Section
16.3(a) below), as determined by the Party delivering such notice in its sole
discretion. A form of Renewal Notice is attached hereto as Exhibit F. Each
Renewal Notice shall be delivered in any manner provided in Section 18.2.
(b) If both Calpine or any Calpine Transaction Party, on the one hand,
and Bear Stearns or CalBear, on the other hand, deliver a Renewal Notice with
respect to an Applicable Renewal Period as specified in Section 16.2(a), this
Agreement shall continue in full force and effect at least until the end of such
Applicable Renewal Period, unless otherwise terminated pursuant to the terms
hereof.
(c) If none of Calpine, any Calpine Transaction Party, Bear Stearns or
CalBear delivers a Renewal Notice with respect to an Applicable Renewal Period
as specified in Section 16.2(a), the Liquidation Date shall occur at the end of
the Initial Term or the end of the Renewal Period immediately preceding such
Applicable Renewal Period, as applicable, in accordance with Section 16.6(b)(i).
(d) If either Calpine or any Calpine Transaction Party, on the one
hand, or Bear Stearns or CalBear, on the other hand, delivers a Renewal Notice
with respect to an Applicable Renewal Period as specified in Section 16.2(a)
(such Party, together with its Affiliates, the "Renewing Parties") but neither
of Bear Stearns nor CalBear, on the one hand, or none of Calpine or the Calpine
Transaction Parties, on the other hand, respectively, delivers a Renewal Notice
with respect to such Applicable Renewal Period (such Parties, together with
their Affiliates, the "Non-Renewing Parties"), the Liquidation Date shall occur
61
at the end of the Initial Term or the end of the Renewal Period immediately
preceding such Applicable Renewal Period, as applicable, in accordance with
Section 16.6(b)(ii).
16.3 Certain Matters with Respect to Renewal.
(a) Notwithstanding anything herein to the contrary, if a Bankruptcy
Event has occurred with respect to any Party, neither such Party nor any of its
Affiliates that are Parties shall have a right to send any Renewal Notice with
respect to any Applicable Renewal Period, unless such Party and all of its
Affiliates that are Parties have (i) "assumed", within the meaning of the
Bankruptcy Law, this Agreement and the other Transaction Documents prior to such
time and (ii) complied with all of their obligations hereunder and under the
other Transaction Documents prior to such time.
(b) Notwithstanding anything herein to the contrary, in no event shall
delivery of a Renewal Notice or a renewal of this Agreement in accordance with
Section 16.2 result in, or be deemed to, or cause, the waiver of any rights of
the Renewing Parties under this Agreement, the Transaction Documents, or
otherwise.
16.4 Calpine Events of Default.
The occurrence of any one or more of the following events shall
constitute a Calpine Event of Default ("Calpine Event of Default") under this
Agreement and the other Transaction Documents:
(a) the failure by any Calpine Transaction Party to make any Payment
required under this Agreement or any of the other Transaction Documents which
failure continues unremedied (i) if notice of such failure was given in
accordance with the applicable notice provisions by Bear Stearns or CalBear to
Calpine or any such Calpine Transaction Party prior to 4:30 p.m. New York City
time on a Business Day, at the end of the Business Day following the day such
notice was given, or (ii) if notice of such default was given by Bear Stearns or
CalBear after 4:30 p.m. New York City time on any Business Day, or on any day
that is not a Business Day, at the end of the second (2nd) Business Day
following the day such notice was given;
(b) the failure by Calpine or any Calpine Transaction Party to perform
any covenant or agreement of Calpine or such Calpine Transaction Party,
respectively, set forth in this Agreement or any other Transaction Document
(other than as described in Sections 16.4(a), 16.4(c) and 16.4(d)), which
failure constitutes a material breach of this Agreement or such other
Transaction Document or would have a Material Adverse Effect on the Transaction,
and which failure is not cured within (i) any applicable cure period with
respect to such failure set forth in this Agreement or any other Transaction
Document, if any, or, (ii) in the event that there is no such applicable cure
period with respect to such failure, ten (10) Business Days after notice thereof
is given to Calpine or such Calpine Transaction Party, respectively, by Bear
Stearns or CalBear in accordance with Section 18.2;
(c) a Bankruptcy Event shall have occurred with respect to Calpine, a
Calpine Transaction Party or a Significant Subsidiary of Calpine; or
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(d) any representation or warranty of Calpine or any Calpine
Transaction Party hereunder proves to have been incorrect in any material
respect as of the date such representation or warranty was made; provided that a
Calpine Event of Default shall not arise under this Section 16.4(d) following
the expiration of the survival period with respect to such representation or
warranty set forth in Section 14.1.
16.5 Bear Stearns Events of Default.
The occurrence of any one or more of the following events shall
constitute a Bear Stearns Event of Default ("Bear Stearns Event of Default")
under this Agreement and the other Transaction Documents:
(a) the failure by CalBear to make any Payment required under this
Agreement or any of the other Transaction Documents which failure continues
unremedied (i) if notice of such failure was given in accordance with the
applicable notice provisions by Calpine or a Calpine Transaction Party to Bear
Stearns or CalBear prior to 4:30 p.m. New York City time on a Business Day, at
the end of the Business Day following the day such notice was given, or (ii) if
notice of such default was given by Calpine or a Calpine Transaction Party after
4:30 p.m. New York City time on any Business Day, or on any day that is not a
Business Day, at the end of the second (2nd) Business Day following the day such
notice was given;
(b) the failure by Bear Stearns or CalBear to perform any covenant or
agreement of Bear Stearns or CalBear, respectively, set forth in this Agreement
or any other Transaction Document (other than as described in Sections 16.5(a),
16.5(c) and 16.5(d)), which failure constitutes a material breach of this
Agreement or such other Transaction Document or would have a Material Adverse
Effect on the Transaction, and which failure is not cured within (i) any
applicable cure period with respect to such failure set forth in this Agreement
or any other Transaction Document, if any, or (ii) in the event that there is no
such applicable cure period with respect to such failure, ten (10) Business Days
after notice thereof is given to Bear Stearns or CalBear, respectively, by
Calpine or a Calpine Transaction Party in accordance with Section 18.2;
(c) a Bankruptcy Event shall have occurred with respect to Bear
Stearns, CalBear or a Significant Subsidiary of Bear Stearns; or
(d) any representation or warranty of Bear Stearns or CalBear
hereunder proves to have been incorrect in any material respect as of the date
such representation or warranty was made; provided that a Bear Stearns Event of
Default shall not arise under this Section 16.5(d) following the expiration of
the survival period with respect to such representation or warranty set forth in
Section 14.1.
16.6 Termination; Liquidation Date; Transfer of Final Third Party Master
Agreements.
(a) Termination Prior to the Effective Date. This Agreement may be
terminated, and the transactions contemplated hereby abandoned, prior to the
Effective Date as follows:
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(i) by mutual consent of the Parties at any time;
(ii) by Bear Stearns or CalBear, on the one hand, or Calpine or
the Calpine Transaction Parties, on the other hand, upon notice, if the
Effective Date shall not have occurred on or before December 31, 2005, except
that neither Bear Stearns or CalBear, on the one hand, nor Calpine or the
Calpine Transaction Parties, on the other hand, may terminate this Agreement if
the failure of the Effective Date to occur is due to the failure of any such
Party or its Affiliates to perform in all material respects each of its
obligations required to be performed under this Agreement at or prior to the
Effective Date;
(iii) by Bear Stearns or CalBear, upon notice to Calpine or the
Calpine Transaction Parties, if an event or events shall occur which render
compliance with one or more of the conditions set forth in Article XIII
impossible and such condition (or conditions) is not waived by Bear Stearns or
CalBear; provided that neither Bear Stearns nor CalBear is in breach in any
material respect of its representations, warranties, covenants or agreements
contained in this Agreement; or
(iv) by Calpine or the Calpine Transaction Parties, upon notice
to Bear Stearns or CalBear, if an event or events shall occur which render
compliance with one or more of the conditions set forth in Article XII
impossible, and such condition (or conditions) is not waived by Calpine or the
Calpine Transaction Parties, provided that none of Calpine or the Calpine
Transaction Parties is in breach in any material respect of its representations,
warranties, covenants or agreements contained in this Agreement.
(b) Liquidation Date and Termination Following the Effective Date.
Following the occurrence of the Effective Date, and, subject to the other
provisions of this Agreement, this Agreement and the other Transaction Documents
shall be automatically terminated, without any further action by any Party, and
the transactions contemplated hereby and thereby abandoned, immediately upon
completion of Liquidation. The Liquidation Date shall occur and the Liquidation
shall commence:
(i) as determined by mutual consent of the Parties at any time
(provided that if none of the Parties delivers a Renewal Notice in accordance
with Section 16.2(a) of this Agreement, the Parties shall be deemed to have
mutually consented to a Liquidation Date immediately following the end of the
Initial Term or the applicable Renewal Period, as applicable);
(ii) in accordance with Section 16.2(d) of this Agreement,
automatically upon the end of the Initial Term or the applicable Renewal Period,
as applicable, if only Bear Stearns or CalBear, on the one hand, or Calpine or
any Calpine Transaction Party, on the other hand, but not both, delivers a
Renewal Notice with respect to the end of the Initial Term or such Renewal
Period, as applicable;
(iii) following the end of the Initial Term, ninety (90) days
after the delivery of a Termination Notice by any Party (or, in the event of a
delivery of a Termination Notice by Calpine following a breach of Section
3.14(b) by Bear Stearns, on the one hand, or by Bear Stearns following a breach
64
of Section 3.14(a) by Calpine, on the other hand, fifty (50) days after delivery
of such Termination Notice); provided that a Termination Notice may not be
delivered by any Party if the Liquidation Date has occurred or will occur as a
result of non-renewal of this Agreement or an Event of Default, or otherwise in
accordance with this Section 16.6(b) (and, for the avoidance of doubt, if a
Liquidation Date occurs before the end of the ninety (90) day period following
the delivery of a Termination Notice in accordance with this Section 16.6(b),
Liquidation shall commence and this Agreement shall terminate in accordance with
such Liquidation Date and the applicable Termination Notice shall be of no
further force and effect); provided, further, that, in the event of a breach of
Section 3.1 or Section 3.14 by Calpine or a Calpine Transaction Party, on the
one hand, or Bear Stearns or CalBear, on the other hand, Bear Stearns or
CalBear, on the one hand, or Calpine or any Calpine Transaction Party, on the
other hand, may deliver a Termination Notice pursuant to this Section
16.6(b)(iii) at any time following the Effective Date; and provided, further,
that if Calpine or any Calpine Transaction Party, on the one hand, and Bear
Stearns and CalBear, on the other hand, deliver Termination Notices to each
other nearly simultaneously (and in such a manner that it is reasonably unlikely
that either Termination Notice was sent following receipt of the other
Termination Notice), the Liquidation Date shall occur ninety (90) days after the
delivery of such Termination Notices pursuant to Section 16.6(b)(i) and the
Parties shall be deemed to have mutually consented to the occurrence of such
Liquidation Date;
(iv) upon a Calpine Event of Default, if so elected by Bear
Stearns or CalBear;
(v) upon a Bear Stearns Event of Default, if so elected by
Calpine or a Calpine Transaction Party;
(vi) automatically, following a termination of any Transaction
Document (other than this Agreement) by Calpine or a Calpine Transaction Party
in accordance with the terms thereof, unless otherwise agreed by Calpine or a
Calpine Transaction Party prior to such time;
(vii) automatically, following a termination of any Transaction
Document (other than this Agreement) by Bear Stearns or CalBear in accordance
with the terms thereof, unless otherwise agreed by Bear Stearns or CalBear prior
to such time;
(viii) following a downgrade of the credit rating assigned to
Bear Stearns by (i) Standard & Poors Ratings Group below BBB+ or (ii) Moody's
Investor Services below Baa1, if terminated in writing by Calpine or a Calpine
Transaction Party; or
(ix) by Bear Stearns or CalBear, following the end of the Initial
Term, ninety (90) days after the delivery of a Termination Notice, if the
Trading Volume for a calendar year during the term of this Agreement is less
than [*]MWh.
(c) Conduct Of Business Following Liquidation Date; Termination;
Survival Following Termination.
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(i) Conduct of Business Following Liquidation Date and
Termination. Immediately following the occurrence of a Liquidation Date, (1) the
Liquidation shall commence and (2) pending completion of the Liquidation and
subject to Section 7.1(b) of the Agency and Services Agreement, the Parties
shall continue to have the benefit of, and be bound by, their applicable rights
and obligations under the Transaction Documents. Following the Termination Date,
(i) Bear Stearns and CalBear shall, or shall cause their Affiliates to, change
the name of CalBear to another name not including the phrase "CalBear" and (ii)
the Parties shall not, and shall cause their Affiliates not to, transact
business under the name "CalBear Energy LP", "CalBear", or any other name
containing the word "CalBear" (the "CalBear Name"). Without limitation of the
foregoing, as soon as practicable following the Termination Date, but not later
than ninety (90) days after such date, the Parties shall, and shall cause their
respective Affiliates to, remove and change signage, change and substitute
promotional or advertising material in whatever medium, change stationery and
packaging and take all such other steps as may be required or appropriate to
cease use of the CalBear Name; provided, however, that no Party shall be deemed
to have violated this Section 16.6(c)(i) by reason of (i) the appearance of the
CalBear Name in or on any equipment, manuals, work sheets, risk policies,
operating procedures, other written materials or other Assets of such Party or
its Affiliates that are used for internal purposes only in connection with the
Transaction or CalBear's business; provided that the such Party and its
Affiliates shall endeavor to remove such appearances of the CalBear Name as soon
as reasonably practicable in the ordinary course of business, (ii) the
appearance of the CalBear Name in or on any Third Party's publications,
marketing materials, brochures, instruction sheets, equipment or products that
any Party or its Affiliates distributed in the ordinary course of business or in
connection with the Transaction or CalBear's business prior to the Termination
Date, and that generally are in the public domain, or any other similar uses by
any such Third Party over which such Party has no control, or (iii) the use by
any Party or its Affiliates of the CalBear Name for purposes of conveying to
customers or the general public that the name of CalBear has changed or the
change in ownership or historical origins or historical business of CalBear,
including the use by any Party or its Affiliates of the CalBear Name in (A) any
legally required disclosure, (B) response to any disclosure request made by any
Governmental Authority, (C) connection with the defense or prosecution of any
Action, (D) connection with any reporting requirements of such Party or its
Affiliates under any Applicable Law, and (E) any financial statements, schedules
or information.
(ii) Survival of Certain Obligations Following Termination.
Following the Termination Date, all rights and obligations of the Parties under
this Agreement shall terminate, except for (i) rights and obligations accrued
prior to the Termination Date, including rights and obligations with respect to
a breach or violation of or default under any provision of this Agreement that
occurred prior to the Termination Date (unless the survival period for such
right or obligation has otherwise expired pursuant to Section 14.1), (ii) rights
and obligations under Articles IV, Article V, Article XV and Article XVII and
Sections 3.2, 3.5, 3.7, 3.8, 3.9, 3.10, 3.11, 3.16, 7.2, 7.4(a), 7.4(b), 14.1,
14.8, this Section 16.6(c), Section 16.6(d) and Sections 18.1 through 18.4 and
18.6 through 18.20, (iii) rights and obligations under other provisions of this
Agreement to the extent the same expressly survive termination of this
Agreement, and (iv) rights and obligations under provisions of this Agreement
necessary for the operation of effective provisions of the other Transaction
Documents that reference such provisions in this Agreement.
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(d) Transfer of Final Third Party Master Agreements Following
Termination Date.
(i) Transfer of Final Third Party Master Agreements Following
Non-Renewal. In the event that the Liquidation Date occurs pursuant to
16.6(b)(ii) and Calpine and the Calpine Transaction Parties are the Renewing
Parties, subject to clause (iv) below, the Renewing Parties shall have the right
(but not the obligation), exercisable within two (2) Business Days following the
date that the applicable Renewal Notice was due from CalBear, to acquire, or
cause any of their respective Affiliates to acquire, for a purchase price of
[*], the Third Party Master Agreements to which CalBear is a party at such time
(collectively, the "Final Third Party Master Agreements"), in accordance with
Section 16.6(d)(v) (including the last sentence thereof), following completion
of Liquidation (the "Non-Renewal Purchase Right"). Calpine or any of the Calpine
Transaction Parties may exercise the Non-Renewal Purchase Right by delivering a
notice (the "Non-Renewal Purchase Notice") to Bear Stearns or CalBear within
such two (2) Business Day period, in any applicable manner provided in Section
18.2, setting forth Calpine's or such Calpine Transaction Party's election to
exercise its Non-Renewal Purchase Right. For the avoidance of doubt, in the
event that the Liquidation Date occurs pursuant to Section 16.6(b)(ii) after the
Non-Renewing Parties fail to deliver a Renewal Notice and if Bear Stearns and
CalBear are the Renewing Parties, Bear Stearns and CalBear shall retain the
Final Third Party Master Agreements following completion of Liquidation and
Calpine and the Calpine Transaction Parties shall not have any right to
purchase, or any other right with respect to, the Final Third Party Master
Agreements.
(ii) Transfer of Final Third Party Master Agreements Following
Elective Termination. In the event that the Liquidation Date occurs pursuant to
Section 16.6(b)(iii) or Section 16.6(b)(ix), following delivery of the
Termination Notice by an Elective Terminating Party, subject to clause (iv)
below, the Elective Non-Terminating Parties shall have the right and the
obligation (the "CalBear Termination Option"), exercisable within two (2)
Business Days following such delivery of a Termination Notice, to (A) if the
Elective Non-Terminating Parties are Calpine and the Calpine Transaction
Parties, either (1) elect to acquire the Final Third Party Master Agreements, in
accordance with Section 16.6(d)(v) (including the last sentence thereof), for
the amount set forth in the applicable Termination Notice (the "Termination
Amount") or (2) elect to receive a termination fee in an amount equal to the
Termination Amount from CalBear (the "Termination Fee"), or (B) if the Elective
Non-Terminating Parties are Bear Stearns and CalBear, to either (1) sell the
Final Third Party Master Agreements, in accordance with Section 16.6(d)(v)
(including the last sentence thereof), to the Elective Terminating Parties for
the Termination Amount or (2) elect to pay the Termination Fee to Elective
Terminating Parties (either of clause (A)(1) or (B)(2), a "Termination Purchase
Right" and either of clause (A)(2) or (B)(1), a "Termination Sale Right"), in
each case following completion of Liquidation. Any Elective Non-Terminating
Party shall exercise the CalBear Termination Option by delivering a notice, in
any manner provided in Section 18.2, setting forth such Elective Non-Terminating
Party's election to exercise either its Termination Purchase Right or its
Termination Sale Right within the applicable two (2) Business Day period.
(iii) Transfer of Final Third Party Master Agreements Following
Event of Default or Termination. In the event that the Liquidation Date occurs
pursuant to Section 16.6(b)(iv) through (viii), subject to clause (iv) below,
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the Defaulting Termination Parties shall deliver to the Non-Defaulting
Termination Parties, within two (2) Business Days following the occurrence of
the Liquidation Date and in any manner provided in Section 18.2, an irrevocable
notice (the "Default Termination Notice") setting forth (A) a Termination Amount
and (B) a binding offer, irrevocable by its terms for two (2) Business Days
following receipt of the Default Termination Notice by the Non-Defaulting
Termination Parties (the "CalBear Default Option"), (1) if the Defaulting
Termination Parties are Calpine and the Calpine Transaction Parties, to either
(x) purchase the Final Third Party Master Agreements, in accordance with Section
16.6(d)(v) (including the last sentence thereof), from Bear Stearns and CalBear
for the Termination Amount or (y) receive from Bear Stearns and CalBear the
Termination Fee, or (2) if the Defaulting Termination Parties are Bear Stearns
and CalBear, to either (x) sell the Final Third Party Master Agreements, in
accordance with Section 16.6(d)(v) (including the last sentence thereof), to
Calpine and the Calpine Transaction Parties for the Termination Amount or (y)
pay to Calpine and the Calpine Transaction Parties the Termination Fee (either
of clause (1)(x) or (2)(y), a "Default Purchase Right" and either of clause
(1)(y) or (2)(x), a "Default Sale Right"), in each case following completion of
Liquidation. Any of the Non-Defaulting Termination Parties shall exercise the
CalBear Default Option by delivering a notice, in the manner provided in Section
18.2, setting forth such Non-Defaulting Termination Party's election to exercise
either its Default Purchase Right or its Default Sale Right within such two (2)
Business Day period. If the Defaulting Termination Parties are Calpine and the
Calpine Transaction Parties and the Defaulting Termination Parties fail to (A)
deliver the Default Termination Notice or (B) comply with their obligation to
purchase Final Third Party Master Agreements following exercise of the Default
Sale Right by the Non-Defaulting Termination Parties, CalBear shall retain the
Final Third Party Master Agreements following completion of Liquidation and
Calpine and the Calpine Transaction Parties shall not have any right to
purchase, or any other right with respect to, the Final Third Party Master
Agreements. If the Defaulting Termination Parties are Bear Stearns and CalBear
and the Defaulting Termination Parties fail to (A) deliver the Default
Termination Notice, (B) comply with their obligation to sell Final Third Party
Master Agreements following exercise of the Default Purchase Right by the
Non-Defaulting Termination Parties, or (C) comply with their obligation to pay
the Termination Fee following exercise of the Default Sale Right by the
Non-Defaulting Termination Parties, Calpine and the Calpine Transaction Parties
shall have the right (but not the obligation), exercisable within ten (10) days
following such failure to comply, to purchase for [*], the Final Third Party
Master Agreements, in accordance with Section 16.6(d)(v) (including the last
sentence thereof), following the completion of Liquidation.
(iv) Payment of Termination Amount. Promptly following exercise
of the Termination Purchase Right, the Termination Sale Right, the Default
Purchase Right or the Default Sale Right, as applicable, the Parties responsible
for payment of the Termination Amount with respect to such exercise shall pay
the Termination Amount in cash by wire transfer of immediately available funds
to an account designated by (A) Calpine or a Calpine Transaction Party, in the
case of a payment of the Termination Amount by Bear Stearns or CalBear, or (B)
Bear Stearns or CalBear, in the case of a payment of the Termination Amount by
Calpine or a Calpine Transaction Party.
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(v) Obligation to Transfer Final Third Party Master Agreements.
The Parties shall cooperate with each other and take any actions reasonably
necessary to cause the consummation of the Non-Renewal Purchase Right and, in
the event that the Termination Purchase Right, the Termination Sale Right, the
Default Purchase Right or the Default Sale Right requires a transfer of the
Final Third Party Master Agreements, the consummation of the Termination
Purchase Right, the Termination Sale Right, the Default Purchase Right or the
Default Sale Right, as applicable, including by cooperating in obtaining any
applicable Regulatory Approvals and any Third Party consents or releases.
Notwithstanding anything to the contrary contained in this Section 16.6(d),
CalBear shall not be required to transfer any Third Party Master Agreement
pursuant to this Section 16.6(d) (A) if and until Calpine or a Calpine
Transaction Party has paid the Termination Amount in accordance with Section
16.6(d)(iv) or (B) if such Third Party Master Agreement (1) requires consent to
transfer from a Third Party and such consent has not been received by Bear
Stearns within one hundred eight (180) days following the exercise by Calpine or
any of the Calpine Transaction Parties of their right to purchase, or the
exercise by Bear Stearns or CalBear of their right to sell, as applicable, the
Final Third Party Master Agreements pursuant to this Section 16.6(d) or (2) does
not provide for the unconditional release of Bear Stearns and its Affiliates
from any obligation to guarantee or otherwise provide credit support for any
transaction under such Third Party Master Agreement, unless such unconditional
release of such obligation is received by Bear Stearns within one hundred eight
(180) days following the exercise by Calpine or any of the Calpine Transaction
Parties of their right to purchase, or the exercise by Bear Stearns or CalBear
of their right to sell, as applicable, the Final Third Party Master Agreements
pursuant to this Section 16.6(d). If CalBear is not required to transfer any
Third Party Master Agreement as a result of clause (B) in the immediately
preceding sentence, (x) each of Bear Stearns and CalBear shall not, and Bear
Stearns shall cause its Affiliates not to, following the Termination Date,
transact any business pursuant to such Third Party Master Agreement, (y) CalBear
shall, following the expiration of any applicable consent and/or release period
set forth in the immediately preceding sentence, reasonably promptly terminate
such Third Party Master Agreement in accordance with the terms thereof (provided
that CalBear shall not be required to terminate any such Third Party Master
Agreement in a manner that results in Damages owed by CalBear to a Third Party
under such Third Party Master Agreement), and (z) CalBear shall deliver written
evidence of such termination to Calpine.
(vi) Closing of Transfer of Final Third Party Master Agreements.
The purchase and sale of the Final Third Party Master Agreements, if any, in
accordance with this Section 16.6(d) pursuant to any exercised Non-Renewal
Purchase Right, Termination Purchase Right, Termination Sale Right, Default
Purchase Right or Default Sale Right, as applicable, shall take place as soon as
reasonably practicable, but in any event following the completion of Liquidation
and the receipt of any applicable Regulatory Approvals and Third Party consents
and releases.
ARTICLE XVII.
LIMITATION OF LIABILITY
17.1 Limitation of Remedies.
69
NOTWITHSTANDING ANY PROVISION OF THE TRANSACTION DOCUMENTS TO THE CONTRARY,
THE RIGHTS, REMEDIES, CLAIMS AND DAMAGES OF CALPINE, THE CALPINE TRANSACTION
PARTIES AND THE OTHER CALPINE PARTIES, AND BEAR STEARNS, CALBEAR AND THE OTHER
BEAR STEARNS PARTIES (COLLECTIVELY, FOR THE PURPOSES OF THIS ARTICLE XVII, THE
"REMEDIAL PARTIES"), IN CONNECTION WITH, ARISING OUT OF, RESULTING FROM OR
RELATING OR INCIDENT TO, WHETHER DIRECTLY OR INDIRECTLY, THE TRANSACTION
DOCUMENTS, PERFORMANCE OR NONPERFORMANCE UNDER THE TRANSACTION DOCUMENTS, ANY
CALPINE EVENT OF DEFAULT OR BEAR STEARNS EVENT OF DEFAULT, ANY MATTER DESCRIBED
IN SECTION 15.1, OR ANY OTHER RIGHT OR DUTY RELATED TO ANY OF THE FOREGOING,
WHETHER ARISING UNDER CONTACT, TORT, COMMON LAW, STATUTE OR AT LAW OR IN EQUITY,
OR RELATED TO ANY FAULT, NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY, FRAUD
OR MISCONDUCT, SHALL BE LIMITED TO THE EXTENT SET FORTH IN THIS ARTICLE XVII (IN
ADDITION TO ANY OTHER APPLICABLE LIMITATIONS IN THE TRANSACTION DOCUMENTS).
17.2 Limitation of Monetary Damages.
(A) THE INDEMNIFICATION RIGHTS PROVIDED TO THE REMEDIAL PARTIES
PURSUANT TO ARTICLE XV OF THIS AGREEMENT AND SECTION 6.3 OF THE TRADING MASTER
AGREEMENT, (B) ANY LIQUIDATED DAMAGES EXPRESSLY PROVIDED FOR IN THE TRANSACTION
DOCUMENTS, AND (C) ANY OTHER EXPRESS RIGHTS TO RECEIVE PAYMENT OR INTEREST IN
THE TRANSACTION DOCUMENTS; SHALL BE THE SOLE AND EXCLUSIVE MONETARY REMEDIES OF
THE REMEDIAL PARTIES, IN LIEU OF ANY OTHER RIGHT TO MONETARY DAMAGES.
17.3 Limitation of Non-Monetary Damages.
IN THE EVENT THAT MONETARY REMEDIES FOR ANY APPLICABLE BREACH,
VIOLATION OR DAMAGE ARE NOT PROVIDED FOR IN SECTION 17.2, THE SOLE AND EXCLUSIVE
REMEDIES OF THE REMEDIAL PARTIES SHALL BE (A) TERMINATION OF THIS AGREEMENT AND
THE TRANSACTION DOCUMENTS PURSUANT TO THE APPLICABLE PROVISIONS OF SECTION 16.6
OF THIS AGREEMENT OR (B) EQUITABLE REMEDIES TO THE EXTENT AVAILABLE TO THE
APPLICABLE REMEDIAL PARTY UNDER THE CIRCUMSTANCES UNDER SECTION 18.15.
17.4 Limitation of Consequential Damages, Etc.
EXCEPT WITH RESPECT TO THIRD PARTY CLAIMS IN SECTION 15.1(a)(ii) AND
SECTION 15.1(b)(ii) OF THIS AGREEMENT AND THE LAST SENTENCE OF SECTION 6.3 OF
THE TRADING MASTER AGREEMENT, NONE OF THE REMEDIAL PARTIES SHALL BE LIABLE FOR
OR ENTITLED TO ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR
INCIDENTAL DAMAGES.
70
17.5 Liability for Acts or Omissions of Other Persons.
BEAR STEARNS OR CALBEAR SHALL NOT BE DEEMED TO HAVE VIOLATED OR BE IN
BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT CONTAINED IN THIS
AGREEMENT OR IN ANY OF THE OTHER TRANSACTION DOCUMENTS TO THE EXTENT SUCH
VIOLATION OR BREACH RESULTS FROM OR ARISES OUT OF ANY ACT OF CALPINE OR ANY
CALPINE TRANSACTION PARTY OR OMISSION BY CALPINE OR ANY CALPINE TRANSACTION
PARTY, IN EACH CASE CONSTITUTING A VIOLATION OR BREACH OF THE TRANSACTION
DOCUMENTS. CALPINE OR ANY CALPINE TRANSACTION PARTY SHALL NOT BE DEEMED TO HAVE
VIOLATED OR BE IN BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT
CONTAINED IN THIS AGREEMENT OR IN ANY OF THE OTHER TRANSACTION DOCUMENTS IF SUCH
VIOLATION OR BREACH RESULTS FROM OR ARISES OUT OF ANY ACT OF BEAR STEARNS OR
CALBEAR OR OMISSION BY BEAR STEARNS OR CALBEAR, IN EACH CASE CONSTITUTING A
VIOLATION OR BREACH OF THE TRANSACTION DOCUMENTS.
17.6 Survival of Limitations.
THE LIMITATIONS, RELEASES, WAIVERS AND DISCLAIMERS OF REMEDIES AND
LIABILITIES EXPRESSED IN THIS AGREEMENT SHALL SURVIVE TERMINATION OR EXPIRATION
OF THE TRANSACTION DOCUMENTS.
ARTICLE XVIII.
MISCELLANEOUS
8.1 Assignment. Except as provided in Section 3.3 or Section 3.4, as
applicable, neither this Agreement nor any of the rights or obligations
hereunder may be assigned by Calpine or any Calpine Transaction Party without
the prior consent of Bear Stearns and CalBear, or by Bear Stearns or CalBear
without the prior consent of Calpine and each Calpine Transaction Party;
provided that in the event of an assignment by a Party of this Agreement and all
of its rights and obligations hereunder to an Affiliate of such Party, such
consent shall not be unreasonably withheld. Except as provided in Section 3.3 or
Section 3.4, as applicable, none of the Transaction Documents other than this
Agreement, nor any of the rights or obligations thereunder, may be assigned by
any Calpine Transaction Party without the prior consent of Bear Stearns, or by
CalBear without the prior consent of Calpine; provided that in the event of an
assignment by a Transaction Party of a Transaction Document other than this
Agreement and all of its rights and obligations thereunder to an Affiliate of
such Party, such consent shall not be unreasonably withheld. This Agreement
shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and assigns, and no other Person shall have any right,
benefit or obligation hereunder, except as specifically set forth in Section
18.18 hereof.
18.2 Notices.
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All notices, consents, waivers, requests, demands and other
communications which are required or may be given under this Agreement and:
(a) concern (i) modifications of this Agreement, including pursuant to
Section 18.8, or (ii) Article XV, Article XVI (other than Section 16.4(a) and
Section 16.5(a)), or Section 18.4, shall be in writing and shall be deemed to
have been duly given in writing when received if personally delivered, or, if
sent to the mailing address set forth below with respect to notices delivered
pursuant to this Section 18.2(a) for any Party, the Business Day after it is
sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express);
(b) concern Payments (other than communications that are given
pursuant to Section 18.2(a) and also concern Payments), including Section
16.4(a) or Section 16.5(a), shall be in writing and shall be deemed to have been
duly given in writing when transmitted if transmitted (A) to CalBear by telecopy
to the notice address set forth below for Bear Stearns or CalBear with respect
to notices delivered pursuant to this Section 18.2(b) or (B) to CMSC by
electronic mail (including in portable document format by electronic mail) to
the notice address set forth below for Calpine or a Calpine Transaction Party
with respect to notices delivered pursuant to this Section 18.2(b); and
(c) concern any matter not specifically addressed in Section 18.2(a)
or Section 18.2(b) shall be in writing and shall be deemed to have been duly
given in writing when received if personally delivered, or, if sent to the
notice address set forth below with respect to notices delivered pursuant to
this Section 18.2(c) for any Party, when transmitted if transmitted by
electronic mail (including in portable document format by electronic mail);
provided, that, in the case of Section 18.2(b) and Section 18.2(c), if any such
communication is transmitted by telecopy or electronic mail, as applicable,
after 4:30 p.m. New York City time on any day, or at any time on a day that is
not a Business Day, such communication shall be deemed to have been transmitted
at 9:00 a.m. New York City time on the following Business Day; and provided,
further, that, in the case of Section 18.2(b), if the sender of the electronic
mails with respect to such communication receives an "out-of-office" or similar
notice with respect thereto from each addressee thereof, such communication
shall nonetheless be deemed to be duly given in writing; and provided, further,
that, in the case of Section 18.2(b) (except as provided in the immediately
preceding proviso) and Section 18.2(c), if all telecopies or electronic mails
with respect to such communication are returned to the sender as undeliverable
or the sender receives an "out-of-office" or similar notice with respect
thereto, such transmission shall not be deemed to be duly given in writing until
(i) delivered to an alternate recipient in compliance with the provisions of
Section 18.2(b) or Section 18.2(c), as applicable, or (ii) received if
personally delivered, or, if sent to the applicable mailing address set forth
below with respect to notices delivered pursuant Section 18.2(b) or Section
18.2(c), as applicable, for any Party, the Business Day after it is sent, if
sent for next day delivery to a domestic address by recognized overnight
delivery service (e.g., Federal Express).
Communications to Calpine or a Calpine Transaction Party pursuant to
Section 18.2(a) shall be addressed to:
72
Calpine Corporation
717 Texas Avenue
Houston, TX 77002
Tel: (713) 830-8649
Fax: (713) 570-4725
Attention: Andrew Slocum
E-mail: aslocum@calpine.com
In each case, with a copy to:
Calpine Corporation
50 West San Fernando Street
San Jose, CA 95113
Tel: (408) 792-1226
Fax: (408) 794-2434
Attention: Lisa Bodensteiner, Executive Vice President and
General Counsel
E-mail: lisab@calpine.com
and with a copy to:
- --------------------------------------------------------------------------------
Paul Posoli Rodney Malcolm
Executive Vice President Senior Vice President
Calpine Corporation Calpine Corporation
717 Texas Avenue 717 Texas Avenue
Houston, TX 77002 Houston, TX 77002
Tel: (713) 830-8663 Tel: (713) 570-4816
Fax: (713) 570-4725 Fax: (713) 570-4725
E-mail: paulp@calpine.com E-mail: rodneym@calpine.com
- --------------------------------------------------------------------------------
Communications to Calpine or a Calpine Transaction Party pursuant to
Section 18.2(b) shall be addressed to:
73
- --------------------------------------------------------------------------------
Andrew Slocum Janet Dixon
Vice President Risk Operations Calpine Merchant Services Company, Inc.
Calpine Merchant Services Company, Inc. 717 Texas Avenue
717 Texas Avenue Houston, TX 77002
Houston, TX 77002 Tel: (713) 830-8835
Tel: (713) 830-8649 Fax: (713) 570-4725
Fax: (713) 570-4725 E-mail: jdixon@calpine.com
E-mail: aslocum@calpine.com
- --------------------------------------------------------------------------------
Randy Kruger Josh Pesikoff
Calpine Merchant Services Company, Inc. Calpine Merchant Services Company, Inc.
717 Texas Avenue 717 Texas Avenue
Houston, TX 77002 Houston, TX 77002
Tel: (713) 570-4811 Tel: (713) 570-4782
Fax: (713) 570-4725 Fax: (713) 570-4725
E-mail: rkruger@calpine.com E-mail: jpesikoff@calpine.com
- --------------------------------------------------------------------------------
Communications to Calpine or a Calpine Transaction Party pursuant to
Section 18.2(c) shall be addressed to:
- --------------------------------------------------------------------------------
Paul Posoli Rodney Malcolm
Executive Vice President Senior Vice President
Calpine Corporation Calpine Corporation
717 Texas Avenue 717 Texas Avenue
Houston, TX 77002 Houston, TX 77002
Tel: (713) 830-8663 Tel: (713) 570-4816
Fax: (713) 570-4725 Fax: (713) 570-4725
E-mail: paulp@calpine.com E-mail: rodneym@calpine.com
- --------------------------------------------------------------------------------
Lisa Bodensteiner
Executive Vice President and
General Counsel
Calpine Corporation
50 West San Fernando Street
San Jose, CA 95113
Tel: (408) 792-1226
Fax: (408) 794-2434
E-mail: lisab@calpine.com
- --------------------------------------------------------------------------------
Communications to Bear Stearns or CalBear pursuant to Section 18.2(a)
shall be addressed to:
The Bear Stearns Companies Inc.
383 Madison Avenue
74
New York, NY 10179
Tel: (212) 272-4653
Fax: (212) 272-8976
Attention: Andrew Kittell
E-mail: akittell@bear.com
and with a copy to:
The Bear Stearns Companies Inc.
383 Madison Avenue
New York, NY 10179
Tel: (212) 272-7850
Fax: (917) 849-1072
Attention: Michael Solender, General Counsel
E-mail: msolender@bear.com
and with a copy to:
Latham & Watkins LLP
885 Third Avenue
Suite 1000
New York, NY 10022
Tel:(212) 906-1200
Fax:(212) 751-4864
Attention: Steven Della Rocca
E-mail: steven.della.rocca@lw.com
and with a copy to:
- --------------------------------------------------------------------------------
Francis Dunleavy Eli Wachtel
Senior Managing Director Senior Managing Director
Bear, Stearns & Co. Inc. Bear, Stearns & Co. Inc.
383 Madison Avenue 383 Madison Avenue
New York, NY 10179 New York, NY 10179
Tel: (212) 272-5141 Tel: (212) 272-4808
Fax: (212) 272-8976 Fax: (212) 272-5681
E-mail: fdunleavy@bear.com E-mail: ewachtel@bear.com
- --------------------------------------------------------------------------------
Communications to Bear Stearns or CalBear pursuant to Section 18.2(b)
shall be addressed to:
- --------------------------------------------------------------------------------
Bill Hamilton Chip Steppacher
Bear, Stearns & Co. Inc. Bear, Stearns & Co. Inc.
383 Madison Avenue 383 Madison Avenue
New York, NY 10179 New York, NY 10179
75
Tel: (212) 272-6918 Tel: (212) 272-2050
Fax: (212) 272-5921 Fax: (212) 272-5921
E-mail: whamilton@bear.com E-mail: csteppacher@bear.com
- --------------------------------------------------------------------------------
Andrew Kittell Brian Anast
Bear, Stearns & Co. Inc. Bear, Stearns & Co. Inc.
383 Madison Avenue 383 Madison Avenue
New York, NY 10179 New York, NY 10179
Tel: (212) 272-4653 Tel: (212) 272-4654
Fax: (212) 272-8976 Fax: (212) 272-8976
E-mail: akittell@bear.com E-mail: banast@bear.com
- --------------------------------------------------------------------------------
Kristen Reifsnyder
Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, NY 10179
Tel: (212) 272-6417
Fax: (212) 272-8888
E-mail: kreifsnyder@bear.com
- --------------------------------------------------------------------------------
Communications to Bear Stearns or CalBear pursuant to Section 18.2(c)
shall be addressed to:
- --------------------------------------------------------------------------------
Francis Dunleavy Eli Wachtel
Senior Managing Director Senior Managing Director
Bear, Stearns & Co. Inc. Bear, Stearns & Co. Inc.
383 Madison Avenue 383 Madison Avenue
New York, NY 10179 New York, NY 10179
Tel: (212) 272-5141 Tel: (212) 272-4808
Fax: (212) 272-8976 Fax: (212) 272-5681
E-mail: fdunleavy@bear.com E-mail: ewachtel@bear.com
- --------------------------------------------------------------------------------
or, in each case, to such other place and with such other copies as any Party
may designate as to itself and its Representatives by notice to the other
Parties that are not Affiliates of such Party.
18.3 Choice of Law; Service of Process; Venue; Jury Trial Waiver.
(a) Each of the Parties agrees that this Agreement and each of the
other Transaction Documents to which it is a party (including any claim or
controversy arising out of or relating to this Agreement or such other
Transaction Document) shall be construed and interpreted and the rights of the
Parties determined in accordance with the internal laws of the State of New York
without giving effect to any choice or conflict of law provision, principle or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York. Each of the Parties irrevocably consents to the service of any and all
76
process in any Action arising out of or relating to this Agreement, the other
Transaction Documents to which it is a party or the transactions contemplated
hereby or thereby by the registered or certified mailing of copies of such
process to the addresses of such Party specified in Section 18.2. Each of the
Parties consents and voluntarily submits to personal jurisdiction in the State
of New York and in the courts in such state located in New York County and the
United States District Court for the Southern District of New York in any
proceedings arising out of or relating to this Agreement, the other Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby and, subject to the arbitration provisions set out in Section 18.4,
agrees that all claims in respect of any such proceeding may be heard and
determined in any such court and that all claims shall, in respect of any such
proceeding, be brought, prior to appeal beyond such courts, in such courts. Each
Party irrevocably and unconditionally waives and agrees not to plead, to the
fullest extent permitted by law, any objection that they may now or hereafter
have to the laying of venue or the convenience of the forum of any Action with
respect to this Agreement, the other Transaction Documents to which it is a
party and the transactions contemplated hereby and thereby, in the United States
District Court for the Southern District of New York and the courts of the State
of New York located in New York County. Each Party agrees that a final judgment,
subject to appeal rights, in any proceeding so brought shall be conclusive and
may be enforced by suit on the judgment in any court or in any other manner
provided by law or in equity.
(b) Subject to the arbitration provisions set out in Section 18.4,
each of the Parties agrees to commence any proceeding arising out of or relating
to this Agreement, the other Transaction Documents to which it is a party or the
transactions contemplated hereby or thereby in the United States District Court
for the Southern District of New York or the courts of the State of New York
located in New York County and that any claims shall, in respect of any such
proceeding, initially be brought in such courts.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
18.4 Dispute Resolution; Arbitration.
(a) In an effort to resolve informally and amicably any dispute or
Action that might arise between the Parties or their respective Affiliates
hereunder or under any of the other Transaction Documents, Calpine or Bear
Stearns may by providing notice to the other refer any matter in dispute for
resolution to Paul J. Posoli and Francis Dunleavy, respectively. Calpine or Bear
Stearns may change the designation of the applicable aforementioned individual
established by the previous sentence by notice to Bear Stearns or Calpine,
respectively. If settlement is not thereafter reached through their efforts
within twenty (20) days following such referral, or such longer time period as
the Parties may agree, then any Party may initiate arbitration proceedings as
set forth below to resolve the matter.
77
(b) Each of the Parties agrees that, notwithstanding anything herein
to the contrary, any dispute or Action not otherwise resolved pursuant to
Section 18.4(a) shall be resolved by binding arbitration proceedings in
accordance with this Section 18.4. Any dispute not otherwise resolved may be
submitted for arbitration hereunder by any Party delivering to the other Parties
that are not its Affiliates a notice demanding arbitration of the dispute in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA") then in effect. To the extent that such provisions are not
inconsistent with such rules, the remaining provisions of this Section 18.4
shall also apply to such proceedings.
(c) Each of Calpine and Bear Stearns, within thirty (30) days of
delivery of the notice demanding arbitration, shall select an arbitrator (each,
a "Party Arbitrator"). The Party Arbitrators shall select, within ten (10) days,
one neutral arbitrator, who shall serve as the Chairman ("Chairman") (together
with the Party Arbitrators, the "Arbitration Panel"). In the absence of
agreement between the Party Arbitrators on selection of the Chairman, the
Chairman shall be selected by the AAA.
(d) No member of the Arbitration Panel may have a direct or indirect
interest in any Party or the subject of the arbitration; provided however that
each of Calpine and Bear Stearns may communicate ex parte with its respective
Party Arbitrator, but not the Chairman.
(e) The place of the arbitration shall be a place mutually agreed upon
by the Parties at a site chosen by the Arbitration Panel or, in the absence of
agreement among the Arbitration Panel, at a site chosen by the Chairman;
provided, however, that if the Parties are not able to mutually agree upon the
place of arbitration, such place shall be New York, New York.
(f) The Arbitration Panel shall determine the rules of procedure or,
in the absence of agreement among the Arbitration Panel, the Federal Rules of
Civil Procedure shall govern the procedure for discovery as well as presentation
of the evidence. In any event, the Arbitration Panel or, in the absence of
agreement among the Arbitration Panel, the Chairman, shall have the right to
impose reasonable restrictions on the taking of discovery, including limitations
on the number of and length of depositions of witnesses.
(g) The Arbitration Panel shall render a reasoned decision in writing
within thirty (30) days of the close of evidence. Any award issued as a result
of such arbitration shall be final and binding between the parties thereto and
judgment upon the award rendered by the arbitration panel may be entered, and
shall be enforceable, by any Governmental Authority having jurisdiction over the
party against whom enforcement is sought.
(h) During the course of the arbitration, each Party shall pay its and
its Affiliates' own fees, costs and expenses (including attorneys' fees) and
Calpine, on the one hand, and Bear Stearns, on the other hand, shall each pay
one-half of any fees, costs and expenses of the Arbitration Panel; provided,
however that the Arbitration Panel shall in no way award damages for any Claim
of a type that are not permitted for such Claim under New York law and the
provisions of the Transaction Documents or that exceed the limits, if any, on
damages afforded by New York law and the provisions of the Transaction
Documents, particularly Article XVII.
78
(i) Calpine and Bear Stearns may mutually agree, each in their sole
discretion, to reduce any time periods specified in this Section 18.4 to resolve
any dispute or controversy on an expedited basis.
18.5 Continued Performance. Each of the Parties agrees that it shall, and
shall cause each of its Affiliates that is a Party to, continue to perform under
this Agreement and the other Transaction Documents to which it is a party during
the pendency of any dispute, arbitration or other Action hereunder or
thereunder. For the avoidance of doubt, this Section 18.5 shall not prevent or
restrict the termination of, or limit the right of any Party to terminate or the
effect of the termination of, this Agreement or any other Transaction Document
in accordance with the terms hereof or thereof.
18.6 Regulatory Event. Any provision of this Agreement or the other
Transaction Documents declared or rendered unlawful by any Governmental
Authority or deemed unlawful because of a statutory or regulatory change or
interpretation (individually or collectively, such events referred to as a
"Regulatory Event") will not otherwise affect the remaining lawful obligations
that arise under this Agreement and the other Transaction Documents. Further, if
a Regulatory Event occurs, the Parties shall use their commercially reasonable
efforts to modify this Agreement and the other Transaction Documents, as
applicable, in order to give effect to the original intention of the Parties in
a manner consistent with the Regulatory Event.
18.7 Forward Contracts. The Parties acknowledge and agree that all CalBear
Trades, other than CalBear Trades with a maturity date less than two days after
the date the CalBear Trade is executed, constitute "forward contracts" within
the meaning of the United States Bankruptcy Code. The Parties acknowledge and
agree that CalBear is a "forward contract merchant" within the meaning of the
United States Bankruptcy Code.
18.8 Effectiveness; Entire Agreement; Amendments and Waivers. This
Agreement shall become binding upon each Party hereto when such Party has
executed and delivered this Agreement. This Agreement, and all exhibits and
schedules hereto, constitutes the entire agreement among the Parties pertaining
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties; provided that the forms of agreements attached hereto as exhibits shall
be superseded by the copies of such agreements executed and delivered by the
respective parties thereto, the execution and delivery of such agreements by the
parties thereto to be conclusive evidence of such parties' approval of any
modification therein. Except as otherwise expressly set forth in this Agreement,
no amendment, supplement, waiver or other modification of this Agreement shall
be binding unless agreed in writing by each Party hereto indicating its
intention to modify this Agreement; provided that any waiver of a right under
this Agreement shall be binding if agreed in writing by the Party against whom
enforcement of such waiver is sought. Neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement or the
other Transaction Documents will operate as a waiver of any right, power or
privilege under this Agreement or the other Transaction Documents, and no waiver
of any of the provisions of this Agreement or the other Transaction Documents
shall be deemed or shall constitute a waiver of any other provision hereof or
thereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided in such waiver. In addition, no
79
notice to or demand on one Party will be deemed a waiver of any obligation of
such Party or of the right of the Party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
other Transaction Documents. Notwithstanding the foregoing, (a) Bear Stearns, in
its sole discretion, may modify Schedule 3.7(a) in accordance with Section
3.7(a), and (b) Calpine, in its sole discretion, may modify Schedule 3.8(a) in
accordance with Section 3.8(a).
8.9 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement and the
signature pages hereto may be delivered by telecopy or other electronic or
digital transmission method.
18.10 Invalidity. In addition to, and not in limitation of, Section 18.6,
in the event that any one or more of the provisions contained in this Agreement
or in any other instrument referred to herein, shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
8.11 Titles; Currency; Schedules. The titles, captions or headings of the
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement. Unless otherwise specified, all references contained in this
Agreement or in any other Transaction Document to dollars or "$" will mean
United States Dollars. Disclosure of any item in any section or part of this
Agreement or the schedules hereto will not constitute disclosure of such item in
any other section or part of this Agreement or the schedules hereto, whether or
not the existence of the item or its contents should be or is relevant to any
other section or part of this Agreement or the schedules, unless such relevance
is reasonably apparent on its face.
18.12 Payments. Unless otherwise specified, all Payment due pursuant to the
terms of this Agreement shall be due by 4:00 p.m. New York City time on the date
they are due pursuant to the terms hereof.
18.13 Publicity. No Party shall, and each Party shall cause its Affiliates
and their Representatives not to, issue any press release regarding the
transactions contemplated hereby or by the other Transaction Documents or
consummated hereunder or thereunder without the prior approval of, in the case
of Calpine or any Calpine Transaction Party, Bear Stearns, and in the case of
Bear Stearns or CalBear, Calpine, in each case such approval not to be
unreasonably withheld. Notwithstanding the foregoing, nothing herein shall be
deemed to prohibit any Party from making any disclosure which its counsel deems
reasonably necessary in order to fulfill such Party's disclosure obligations
imposed by Applicable Law; provided that each such Party shall, to the extent
reasonably practicable, afford, in the case of Calpine or any Calpine
Transaction Party, Bear Stearns, or in the case of Bear Stearns or CalBear,
Calpine, the opportunity to review and comment on the proposed disclosure in
advance of such issuance; provided, further, that in the event that it is not
reasonably practicable, such Party shall provide Bear Stearns or Calpine, as
80
applicable, a copy promptly thereafter. Reference is made to Section 3.5(b) for
other agreements with respect to press releases.
18.14 Fees and Expenses.
(a) Calpine. Subject to the provisions of Article XV and Section 18.4
hereof, unless otherwise specifically provided in this Agreement or in any other
Transaction Document, Calpine and the Calpine Transaction Parties shall pay all
of the fees, costs and expenses incurred by Calpine or any Calpine Transaction
Party incident to or in connection with the negotiation, preparation, execution
and delivery of this Agreement.
(b) Bear Stearns. Subject to the provisions of Article XV and Section
18.4 hereof, unless otherwise specifically provided in this Agreement or in any
other Transaction Document, Bear Stearns and CalBear shall pay all of the fees,
costs and expenses incurred by Bear Stearns or CalBear incident to or in
connection with the negotiation, preparation, execution and delivery of this
Agreement.
18.15 Specific Performance; Remedies Cumulative. In the event of any actual
or threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement or the other Transaction Documents (other than Soft
Covenants), any Party who is or is to be thereby aggrieved will have the right
of specific performance and injunctive relief giving effect to its rights under
this Agreement and the other Transaction Documents to the extent permitted by
Applicable Law. Except as otherwise set forth herein, all rights and remedies
under this Agreement and the other Transaction Documents will be cumulative, and
the exercise of one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
18.16 Representation of Counsel; Mutual Negotiation. Each Party has been
represented by counsel of its choice in negotiating this Agreement. This
Agreement shall therefore be deemed to have been negotiated and prepared at the
request, direction and construction of each of the Parties, at arm's length,
with the advice and participation of counsel, and will be interpreted in
accordance with its terms without favor to any Party.
18.17 Knowledge. Whenever used in this Agreement or any Transaction
Documents, "to the knowledge of" or a similar phrase shall mean the actual
knowledge of (i) if a specified individual or individuals are referred to in any
provision of this Agreement or any Transaction Documents, such individual or
individuals, or (ii) if no such individual or individuals are specified, any of
the individual Representatives of the applicable Party or its Affiliates listed
on Schedule 18.17, in each case after such individuals undertook a reasonable
investigation.
18.18 No Third Party Beneficiaries. This Agreement shall be binding upon
and inure solely to the benefit of each Party, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including by way of subrogation, except as
specifically set forth in Article XV hereof.
81
18.19 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
18.20 Force Majeure. In the event of a Force Majeure with respect to a
Party, if such Party gives notice and details of the Force Majeure to the other
Party or Parties to whom performance is owed as soon as practicable, then the
Party claiming the Force Majeure shall be excused from the performance of its
obligations to the extent and for the period affected by the Force Majeure. The
Party claiming the Force Majeure shall remedy the Force Majeure in a
commercially reasonable manner as promptly as possible.
[signature page follows]
82
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first above written.
CALPINE CORPORATION
By: /s/ ERIC PRYOR
Name: Eric Pryor
------------------------------------------
Title: Executive Vice President
------------------------------------------
CALPINE ENERGY SERVICES, L.P.
By: /s/ PAUL POSOLI
Name: Paul Posoli
------------------------------------------
Title: President
------------------------------------------
THE BEAR STEARNS COMPANIES INC.
By: /s/ WARREN J. SPECTOR
Name: Warren J. Spector
------------------------------------------
Title: President, Co-Chief Operating Officer
and Director
------------------------------------------
EXHIBITS
TO THE
MASTER TRANSACTION AGREEMENT
Exhibit A
---------
Form of Agency and Services Agreement
Exhibit B
---------
Form of Trading Master Agreement
Exhibit C
---------
Organizational Documents of CMSC
Exhibit D
---------
Organizational Documents of CalBear
Exhibit E
---------
Form of CMSC and CalBear Signature Page
SIGNATURE PAGE
TO THE
MASTER TRANSACTION AGREEMENT
By execution of this signature page, each of Calpine Merchant Services
Company, Inc., a Delaware corporation ("CMSC") and CalBear Energy LP, a Delaware
limited partnership ("CalBear"), in accordance with the terms of the Master
Transaction Agreement (as defined below), in consideration of the premises,
mutual covenants and promises contained in the Master Transaction Agreement, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, hereby agrees to become party to, to be bound by the
obligations of, and to receive the benefits of, that certain Master Transaction
Agreement, dated as of September 7, 2005, by and among Calpine Corporation, a
Delaware corporation, Calpine Energy Services, L.P., a Delaware limited
partnership, and The Bear Stearns Companies Inc., a Delaware corporation, as
modified from time to time thereafter (the "Master Transaction Agreement"), and
each of CMSC and CalBear acknowledges and agrees that it shall be "CMSC" or
"CalBear", respectively, and a "Party", in each case as defined in the Master
Transaction Agreement, for all purposes thereunder.
Dated: [________], 2005
[signature page follows]
CALPINE MERCHANT SERVICES COMPANY, INC.,
a Delaware corporation
By:_______________________________
Name:
Title:
CALBEAR ENERGY LP, a Delaware limited
partnership
By: [________]
Its: General Partner
By: [________]
Its: Managing Member
By:_______________________________
Name:
Title:
Exhibit F
---------
Form of Renewal Notice
RENEWAL NOTICE
PURSUANT TO SECTION 16.2(A)
OF THE
MASTER TRANSACTION AGREEMENT
[NAME OF PARTY], together with its Affiliates that are Parties to that
certain Master Transaction Agreement (as defined below) hereby deliver this
Renewal Notice to [BEAR STEARNS OR CALPINE, AS APPLICABLE] and renew the Master
Transaction Agreement pursuant to Section 16.2(a) of the Master Transaction
Agreement, for [each of] the Renewal Period(s) commencing:
[August 31, [____], [____] and [____];]
[November 30, [____], [____] and [____];]
[February 28 (or February 29, in the event of a leap year), [____],
[____] and [____]; and]
[May 31, [____], [____] and [____].]
until the end of [the last] such Renewal Period.
Capitalized terms used but not defined in this Renewal Notice shall
have the meaning given to them in that certain Master Transaction Agreement,
dated as of September 7, 2005, by and among Calpine Corporation, a Delaware
corporation, Calpine Energy Services, L.P., a Delaware limited partnership, and
The Bear Stearns Companies Inc., a Delaware corporation, as modified from time
to time thereafter (the "Master Transaction Agreement").
Dated: [________]
[NAME OF PARTY], a [TYPE OF ENTITY]
By:_______________________________
Name:
Title:
SCHEDULES
TO THE
MASTER TRANSACTION AGREEMENT
Schedule 1.1(a)
---------------
Calpine Existing Indentures
1. Indenture, dated as of May 16, 1996, as supplemented by the First
Supplemental Indenture, dated as of August 1, 2000, and the Second
Supplemental Indenture, dated as of April 26, 2004, between the Company and
State Street Bank and Trust Company (as successor to Fleet National Bank),
as Trustee, relating to $180,000,000 in aggregate principal amount of the
Company's 10-1/2% Senior Notes due 2006.
2. Indenture, dated as of July 8, 1997, as supplemented by the First
Supplemental Indenture, dated as of September 10, 1997, the Second
Supplemental Indenture, dated as of July 31, 2000, and the Third
Supplemental Indenture, dated as of April 26, 2004, between the Company and
The Bank of New York, as Trustee, relating to $275,000,000 in aggregate
principal amount of the Company's 8-3/4% Senior Notes due 2007.
3. Indenture, dated as of March 31, 1998, as supplemented by the First
Supplemental Indenture, dated as of July 24, 1998, the Second Supplemental
Indenture, dated as of July 31, 2000, and the Third Supplemental Indenture,
dated as of April 26, 2004, between the Company and The Bank of New York,
as Trustee, relating to $400,000,000 in aggregate principal amount of the
Company's 7-7/8% Senior Notes due 2008.
4. Indenture, dated as of March 29, 1999, as supplemented by the First
Supplemental Indenture, dated as of July 31, 2000, and the Second
Supplemental Indenture, dated as of April 26, 2004, between the Company and
The Bank of New York, as Trustee, relating to $250,000,000 in aggregate
principal amount of the Company's 7-5/8% Senior Notes due 2006.
5. Indenture, dated as of March 29, 1999, as supplemented by the First
Supplemental Indenture, dated as of July 31, 2000, and the Second
Supplemental Indenture, dated as of April 26, 2004, between the Company and
The Bank of New York, as Trustee, relating to $350,000,000 in aggregate
principal amount of the Company's 7-3/4% Senior Notes due 2009.
6. Indenture, dated as of August 10, 2000, as supplemented by the First
Supplemental Indenture, dated as of September 28, 2000 and the Second
Supplemental Indenture, dated as of September 30, 2004, between the Company
and Wilmington Trust Company, as Trustee, relating to $250,000,000 in
aggregate principal amount of the Company's 8-1/4% Senior Notes due 2005,
$750,000,000 in aggregate principal amount of the Company's 8-5/8% Senior
Notes due 2010, $2,000,000,000 in aggregate principal amount of the
Company's 8-1/2% Senior Notes due 2011, $1,200,000,000 in aggregate
principal amount of the Company's 4% Convertible Senior Notes due 2006 and
$725,000,000 in aggregate principal amount of the Company's Contingent
Convertible Notes due 2014.
7. Amended and Restated Indenture, dated as of March 12, 2004, between the
Company and Wilmington Trust Company, as Trustee, relating to $900,000,000
in aggregate principal amount of the Company's 4.75% Contingent Senior
Notes due 2023.
8. Indenture, dated as of July 16, 2003, between the Company and Wilmington
Trust Company, as Trustee, relating to $500,000,000 in aggregate principal
amount of the Company's Second Priority Senior Secured Floating Rate Notes
due 2007.
9. Indenture, dated as of July 16, 2003, between the Company and Wilmington
Trust Company, as Trustee, relating to $1,150,000,000 in aggregate
principal amount of the Company's 8.500% Second Priority Senior Secured
Notes due 2010.
10. Indenture, dated as of July 16, 2003, between the Company and Wilmington
Trust Company, as Trustee, relating to $1,150,000,000 in aggregate
principal amount of the Company's 8.750% Second Priority Senior Secured
Notes due 2013.
11. Indenture, dated as of November 18, 2003, between the Company and
Wilmington Trust Company, as Trustee, relating to $400,000,000 in aggregate
principal amount of the Company's 9.875% Second Priority Senior Secured
Notes due 2011.
12. Indenture, dated as of September 30, 2004, between the Company and
Wilmington Trust Company, as Trustee, relating to $785,000,000 in aggregate
principal amount of the Company's 9.625% First Priority Senior Secured
Notes due 2014.
Schedule 1.1(b)
---------------
Calpine Restricted Transferees
[*] and their respective Affiliates.
Schedule 1.1(c)
---------------
Bear Stearns Restricted Transferees
[*] and their respective Affiliates.
Schedule 1.1(d)
---------------
Calpine Significant Subsidiaries
Calpine Generating Company, LLC
Calpine Power Company
Calpine Central, Inc.
Bear Stearns Significant Subsidiaries
Bear, Stearns & Co. Inc.
Bear, Stearns Securities International Limited
Bear, Stearns International Limited
Schedule 3.7(a)
---------------
Employees of Bear Stearns
[*]
Schedule 3.8(a)
---------------
Employees of Calpine
[*]
Schedule 9.1
------------
Calpine and Calpine Transaction Parties
Name Type of Entity Jurisdiction of Organization
Calpine Corporation Corporation Delaware
CES Marketing VII, LLC Limited Liability Delaware
(to be known as Calpine Company
Merchant Services
Company, Inc.)
Calpine Energy Services, L.P. Limited Partnership Delaware
Schedule 9.2
------------
Calpine Conflicts, Violations and Consents
Any notice filings or other approvals, as needed under the FPA, for CMSC to
receive FERC approval under Section 203 of the FPA for the performance of the
Services by CMSC in accordance with CalBear's FERC-jurisdictional rate
schedules, for the provision of energy related services by CMSC to CES, for the
transfer of interests in CMSC's predecessor, CES Marketing VII, LLC, among
Affiliates of Calpine, and for the name change from CES Marketing VII, LLC to
Calpine Merchant Services Company, Inc. and any other notice filings or other
approvals required under the FPA.
Any material consent, waiver, agreement, Permit or approval or authorization of,
or material declaration, filing, notice or registration to or with, or material
assignment by, any Person or Governmental Authority, that may be required in
connection with any specific CalBear Trade, including any RTO registrations.
Schedule 10.1
-------------
Bear Stearns and CalBear
Name Type of Entity Jurisdiction of Organization
The Bear Stearns
Companies Inc. Corporation Delaware
Arroyo Energy LP Limited partnership Delaware
(to be known as CalBear
Energy LP)
Schedule 10.2
-------------
Bear Stearns Conflicts, Violations and Consents
Any notice filings or other approvals, as needed under the FPA, for CalBear to
receive FERC approval under Section 203 of the FPA for the performance of the
Services by CMSC in accordance with CalBear's FERC-jurisdictional rate
schedules, for the transfer of interests in CalBear's predecessor, Arroyo Energy
LP, among Affiliates of Bear Stearns, and for the name change from Arroyo Energy
LP to CalBear Energy LP and any other notice filings or other approvals required
under the FPA.
Any material consent, waiver, agreement, Permit or approval or authorization of,
or material declaration, filing, notice or registration to or with, or material
assignment by, any Person or Governmental Authority, that may be required in
connection with any specific CalBear Trade, including any RTO registrations.
Schedule 12.9
-------------
Opinions of Counsel to Bear Stearns
[*]
Schedule 13.9
-------------
Opinions of Counsel to Calpine
[*]
Schedule 18.17
--------------
Knowledge
Representatives of Bear Stearns and CalBear
[*]
Representatives of Calpine, CMSC and CES
[*]