Exhibit 10.2.1.7
WAIVER AGREEMENT
THIS WAIVER AGREEMENT (this "Agreement") is entered into as of the
9th day of June, 2006, by and among CALPINE CONSTRUCTION FINANCE COMPANY, L.P.,
a Delaware limited partnership (the "Borrower"), CALPINE HERMISTON, LLC, a
Delaware limited liability company ("Calpine LLC"), CPN HERMISTON, LLC, a
Delaware limited liability company ("CPN LLC"), and HERMISTON POWER PARTNERSHIP,
an Oregon general partnership (the "Hermiston Partnership" and, together with
Calpine LLC and CPN LLC, the "Guarantors"), the lenders party hereto (the
"Lenders"), and GOLDMAN SACHS CREDIT PARTNERS L.P., as administrative agent
(together with its successors in such capacity, the "Administrative Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders, the
Administrative Agent and the Sole Lead Arranger entered into a Credit and
Guarantee Agreement, dated as of August 14, 2003 (as amended on September 12,
2003, January 13, 2004, March 5, 2004, and March 15, 2006, and as may be further
amended from time to time, the "Credit Agreement"), pursuant to which the
Borrower borrowed, on a non-recourse basis as described in the Credit Agreement,
$385,000,000 in aggregate principal amount of First Priority Senior Secured
Institutional Term Loans due 2009 (the "Term Loans");
WHEREAS, on December 20, 2005, Calpine Corporation ("Calpine") and
certain of its controlled subsidiaries, including, among others, Calpine
Operating Services Company, Inc. and Calpine Energy Services, L.P. ("CES"),
filed a voluntary proceeding for relief under Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the Southern
District of New York (the "Proceeding");
WHEREAS, CES, the Borrower and certain of the Borrower's
subsidiaries are parties to the Index Based Gas Sale and Power Purchase
Agreement dated as of August 14, 2003, as amended (the "PPA"), pursuant to which
the Borrower purchases natural gas from CES for its power generating facilities,
and CES purchases power generated by the facilities from the Borrower;
WHEREAS, on November 1, 2005, as permitted under the Credit
Agreement, the Borrower used net proceeds of approximately $212.0 million from
the sale of one of its facilities to make a prepayment to CES for gas under the
PPA (the "Gas Prepay Transaction");
WHEREAS, ordinarily under the PPA, the cost of gas consumed by the
Borrower's facilities is offset against the cost of power generated by the
facilities, with CES paying the Borrower only the net amount due, such payments
generally being made on the 25th of each month for services provided during the
prior month; however, due to the Gas Prepay Transaction, CES was obligated for a
period of time to pay the full cost for the power under the PPA, without offset,
which resulted in larger than usual payments owing to the Borrower under the
PPA;
WHEREAS, CES failed to timely make a number of payments owing to
the Borrower under the PPA, including in respect of gas deliveries during
February 2006, approximately $18.5 million due on March 27, 2006 (the "March PPA
Payment" );
WHEREAS, the failure by CES to timely make the March PPA Payment
constitutes an Event of Default under the Credit Agreement (the "March PPA
Payment Default");
WHEREAS, the Borrower has failed to timely provide to the Lenders a
financial report for the periods ended December 31, 2005 and March 31, 2006 (the
"Financial Reports") as required to be provided to them pursuant to Section
5.01(a) of the Credit Agreement;
WHEREAS, the failure by the Borrower to timely provide the
Financial Reports constitutes a Default (the "Reporting Default, " and together
with the March PPA Payment Default, the "Specified Defaults");
WHEREAS, pursuant to a waiver request, commenced as of June 6, 2006
and completed as of June 9, 2006 (the "Waiver Request"), the Borrower has asked
the Lenders to waive the Specified Defaults; and
WHEREAS, the Lenders, on the terms and subject to the conditions
hereinafter provided, are willing to waive the Specified Defaults.
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms
used herein that are not otherwise defined herein shall have the respective
meanings assigned to such terms in the Credit Agreement
2. Waiver.
(a) Upon satisfaction of the conditions set forth in Section 3
of this Agreement, the Lenders, pursuant to the terms of Section 7.04 of the
Credit Agreement, hereby waive application of Sections 7.01(d) and 7.01(i) of
the Credit Agreement (the "Waiver") solely to the extent applicable to the
Specified Defaults, such Waiver being effective on the first date that all of
the conditions set forth in Section 3 of this Agreement shall have been
satisfied (the "Waiver Effective Date").
(b) Except for the Waiver expressly set forth above in
subsection (a), the Administrative Agent and the Lenders reserve each and every
right and remedy they may have under the Credit Agreement and the Security
Documents (the "Term Loan Documents") and under applicable law with respect to
any Default or Event of Default.
3. Conditions. The effectiveness of Section 2(a)of this Agreement
is subject to the satisfaction of the following conditions precedent (unless
specifically waived in writing by the Requisite Lenders):
2
(a) the Borrower and the Guarantors named as signatories hereto
and the Requisite Lenders shall have executed and delivered to the
Administrative Agent their respective counterparts of this Agreement;
(b) the Borrower shall have paid to the Administrative Agent,
in cash or other immediately available funds, reimbursement of all outstanding
fees and expenses of the Administrative Agent owing under Section 13.02 of the
Credit Agreement as well as all other fees owing to the Administrative Agent
arising under this Agreement, the Credit Agreement or any other agreement; and
(c) a waiver agreement (in form and substance reasonably
acceptable to the Administrative Agent) with the Holders of Notes (the "Waiver
Under Indenture") shall have been negotiated and shall become effective
concurrently with this Agreement, provided, that any conditions to effectiveness
or consideration made available to the Holders of Notes for such agreement shall
be made available to the Administrative Agent and the Lenders as conditions to
effectiveness of, or as consideration for, this Agreement.
4. The PPA. Notwithstanding the occurrence of the Waiver Effective
Date, this Waiver shall cease to be effective if (i) the Borrower, the Lenders
and the Administrative Agent (if required under the terms of the Term Loan
Documents) shall not have reached agreement regarding the assumption, whether on
amended terms or otherwise, of the PPA in the Proceeding on or before August 4,
2006 or (ii) the Borrower shall not have delivered to the financial advisor
specified in Section 11(b) below, subject to execution of an appropriate and
mutually agreed upon confidentiality agreement, on or prior to June 19, 2006,
the analysis of cash flows for the Borrower's facilities under the PPA prepared
by PA Consulting Group, Inc.
5. Representations and Warranties. The Borrower and each Guarantor
hereby represents and warrants to each Lender and the Administrative Agent that
(a) this Agreement has been duly authorized, executed and delivered by the
Borrower or Guarantor, as applicable, and constitutes its valid and legally
binding obligation, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of generally applicability relating to or affecting creditors'
rights and to general equity principles; (b) the execution and delivery of this
Agreement (i) does not require any consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court, except such as
have been obtained or made and are in full force and effect as of the date
hereof and (ii) will not violate any applicable law or regulation or the
charter, by-laws or other organizational documents of the Borrower or Guarantor,
as applicable, or any order of any governmental agency or body, or breach or
conflict with any material agreement to which the Borrower or Guarantor, as
applicable, is a party or by which the Borrower or Guarantor, as applicable, is
bound; and (c) except for the Specified Defaults, no Default or Event of Default
under the Credit Agreement exists and is continuing.
6. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which when taken together shall constitute but one and the same
instrument.
3
7. Continuing Effect of the Credit Agreement. Except as expressly
set forth herein, this Agreement shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
the Lenders, the Administrative Agent, the Borrower or the Guarantors under the
Credit Agreement and shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect. Nothing herein shall be deemed to
entitle the Borrowers or the Guarantors to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement in similar or
different circumstances. This Agreement shall apply and be effective only with
respect to the provisions of the Credit Agreement specifically referred to
herein. After the Waiver Effective Date, any reference to the Credit Agreement
shall mean the Credit Agreement as amended and modified hereby.
8. Applicable Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and shall be construed and enforced
in accordance with, the laws of the State of New York without regard to conflict
of laws principles thereof.
9. Headings. Headings herein are include herein for convenience of
reference only and shall not constitute a part hereof for any other purpose or
be given any substantive effect.
10. Administrative Agent's Expense. Without limiting any of the
Administrative Agent's rights, or any of the Borrower's obligations under
Section 13.02 of the Credit Agreement, the Borrower hereby agrees to promptly
reimburse the Administrative Agent for all reasonable out-of-pocket expenses,
including, without limitation, attorneys' and paralegals fees, it has heretofore
or hereafter incurred or incurs in connection with the preparation, negotiation
and execution of this Agreement or any document, instrument, agreement delivered
pursuant to this Agreement.
11. Legal Expenses; Financial Advisor.
(a) Without limiting any of the Administrative Agent's rights,
or any of the Borrower's obligations under, Section 13.02 of the Credit
Agreement, the Borrower hereby agrees to promptly reimburse to the Lenders and
the Administrative Agent all reasonable attorney and paralegal fees and related
expenses of Latham & Watkins LLP relating to (i) analysis of issues relating to
the PPA, including the analysis done by PA Consulting Group, Inc., and the
impact of the PPA on the Borrower's business and (ii) the assumption or
rejection of the PPA in the Proceeding and any matters related thereto that
affect the rights of the Lenders or the Administrative Agent under the Credit
Agreement.
(b) In addition to the rights provided in paragraph (a) above,
the Borrower shall cause to be provided to the Administrative Agent and the
Lenders the work product of the financial advisor to be engaged pursuant to
Section 2.5 of the Waiver Under Indenture in the same manner as provided to the
holders of the Notes.
12. Proof of Claim. The Borrower shall include in its proof of
claim against CES in the Proceeding, the amount of the unpaid March PPA Payment.
4
13. Preservation of Prior Representations. Notwithstanding anything
herein to the contrary, all agreements, admissions, affirmations,
representations, ratifications and releases by the Borrower and each Guarantor
made in the Waiver Agreement dated March 15, 2006, including, but not limited
to, those in Sections 6 and 8 thereof, are expressly confirmed and preserved.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first written above.
CALPINE CONSTRUCTION FINANCE COMPANY, L.P.
By: /s/ Charles B. Clark, Jr.
-------------------------------------------
Name: Charles B. Clark
Title: Chief Financial Officer
CALPINE HERMISTON, LLC
By: /s/ Charles B. Clark, Jr.
-------------------------------------------
Name: Charles B. Clark
Title: Chief Financial Officer
CPN HERMISTON, LLC
By: /s/ Charles B. Clark, Jr.
-------------------------------------------
Name: Charles B. Clark
Title: Chief Financial Officer
HERMISTON POWER PARTNERSHIP
By: /s/ Charles B. Clark, Jr.
-------------------------------------------
Name: Charles B. Clark
Title: Chief Financial Officer
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Administrative Agent, Sole Lead Arranger,
Syndication Agent and a Lender
By: /s/ Stephen King
-------------------------------------------
Name: Stephen King
Title: Authorized Signatory
6
CONSENTING LENDER:
-----------------------------------------------
By:
-------------------------------------------
Name:
Title:
7