EXHIBIT 1.3
CALPINE CORPORATION
$725,000,000 Principal Amount at Maturity of Contingent Convertible Notes Due
2014
UNDERWRITING AGREEMENT
September 28, 2004
Deutsche Bank Securities Inc.
60 Wall Street
New York, New York 10005
Dear Sirs:
1. Introductory. Calpine Corporation, a Delaware corporation (the
"COMPANY"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Deutsche Bank Securities Inc. ("DEUTSCHE BANK", or the
"UNDERWRITER") $725,000,000 aggregate principal amount at maturity of the
Company's Contingent Convertible Notes due 2014 (the "FIRM SECURITIES"), which
are convertible into cash and shares of the Company's common stock, par value
$.001 per share (the "STOCK"), upon the occurrence of certain circumstances
under the terms of a supplemental indenture (the "SUPPLEMENTAL INDENTURE"), to
be dated as of the First Closing Date (as defined herein), to the Indenture (the
"BASE INDENTURE") dated August 10, 2000, and amended as of September 28, 2000,
between the Company and Wilmington Trust Company, as trustee (the "TRUSTEE").
The Supplemental Indenture and the Base Indenture are hereinafter together
called the "INDENTURE". The Company also proposes to issue and sell to Deutsche
Bank, at its option, up to $108,750,000 aggregate principal amount at maturity
of additional Contingent Convertible Notes due 2014 (the "OPTION SECURITIES")
solely to cover over-allotments. The Firm Securities and the Option Securities
(to the extent the aforementioned option is exercised) are herein collectively
called the "SECURITIES."
The Company has filed with the Securities and Exchange Commission
(the "COMMISSION") a registration statement (No. 333-76880), including a
prospectus (the "BASE PROSPECTUS"), relating to various securities of the
Company (including the Securities) and has filed with, or transmitted for filing
to, or shall promptly hereafter file with or transmit for filing to, the
Commission a prospectus supplement (the "PROSPECTUS SUPPLEMENT") specifically
relating to the Securities pursuant to Rule 424 under the Securities Act of
1933, as amended (the "SECURITIES ACT"). The term "Registration Statement" means
the registration statement (No. 333-76880), including the exhibits thereto, as
amended to the date of this Agreement. The term "PROSPECTUS" means the Base
Prospectus together with the Prospectus Supplement. The term "PRELIMINARY
PROSPECTUS" means a preliminary prospectus supplement specifically relating to
the Securities, together with the Base Prospectus. As used herein, the terms
"Base Prospectus," "Prospectus" and "Preliminary Prospectus" shall include in
each case the documents, if any, incorporated by reference therein. The terms
"supplement," "amendment" and "amend" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Base Prospectus by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT").
The Company agrees with the Underwriter as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the knowledge of
the Company, threatened by the Commission. No document has been or will be
prepared or distributed in reliance on Rule 434 under the Securities Act.
(b) On the effective date of the Registration Statement, such
Registration Statement conformed in all material respects to the requirements of
the Securities Act, the Trust Indenture Act of 1939 ("TRUST INDENTURE ACT") and
the rules and regulations of the Commission thereunder ("RULES AND REGULATIONS")
and did not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and on the date hereof, the Registration Statement and
Prospectus conform in all material respects to the requirements of the
Securities Act, the Trust Indenture Act and the Rules and Regulations, and
neither of such documents includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, except that the foregoing does not apply to (A)
statements in or omissions from any of such documents based upon written
information furnished to the Company by the Underwriter specifically for use
therein, it being understood and agreed that the only such information is that
described as such in Section 8 of this Agreement or (B) to that part of the
Registration Statement that constitutes the Statement of Eligibility (Form T-1)
under the Trust Indenture Act.
(c) Each Preliminary Prospectus complied when filed in all
material respects with the Securities Act and the Rules and Regulations.
(d) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Registration Statement and the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such qualification.
(e) Each subsidiary of the Company listed on Schedule A hereto
(the "SCHEDULED SUBSIDIARIES") (x) other than those Scheduled Subsidiaries
specified in clause (y) of this subparagraph, has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus; or (y) that
is not a corporation is a limited liability company, has been duly formed and is
validly existing as a limited liability company in good standing under the laws
of the jurisdiction of its formation, and has full power and authority to own
its properties and conduct its business as described in the Prospectus. Each
Scheduled Subsidiary is duly qualified to do business as a foreign corporation
or limited liability company in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification. All of the issued and outstanding capital stock or
membership interests of each Scheduled Subsidiary has been duly authorized and
validly issued, with respect to Scheduled Subsidiaries that are corporations,
and is fully paid and nonassessable, except as set forth on Schedule B hereto.
The capital stock and membership interests of each Scheduled Subsidiary owned by
the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects; and the Company is not a general partner in any
partnership. For purposes of this agreement, "SUBSIDIARY" means, as applied to
any person, any corporation, limited or general partnership, trust, association
or other business entity of which an aggregate of at least 50% of the
outstanding Voting Shares or an equivalent controlling interest therein, of such
person is, at any time, directly or indirectly, owned by such person and/or one
or more subsidiaries of such person, including with respect to the Company. For
purposes of the definition of "SUBSIDIARY," "VOTING SHARES" means with respect
to any corporation, the capital stock having the general voting
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power under ordinary circumstances to elect at least a majority of the board of
directors (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
(f) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued and outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the shares of Stock initially issuable upon conversion of
the Securities under the terms of the Indenture have been duly authorized and
reserved for issuance upon such conversion and, when issued and delivered in
accordance with the provisions of the Securities and the Indenture, will be
validly issued, fully paid and non-assessable, free and clear of any liens or
preemptive rights or any similar rights, and will conform in all material
respects to the description of the Stock contained in the Prospectus; and all of
the issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued in accordance with the
organizational documents of such subsidiary, and the ownership interests of each
subsidiary owned by the Company, directly or indirectly, are fully paid and
non-assessable and (except for (i) directors' qualifying shares, if applicable,
and (ii) unissued shares of Stock underlying unvested stock options granted to
its employees) are owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims (except for such liens,
encumbrances, equities or claims that are disclosed in the Prospectus).
(g) The Supplemental Indenture has been duly authorized by the
Company and, when executed and delivered by the Company and the Trustee, the
Supplemental Indenture and the Base Indenture will both constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles. The
Indenture conforms, and the Supplemental Indenture when executed and delivered
will conform, to the descriptions thereof contained in the Prospectus.
(h) The Securities have been duly authorized by the Company
and, when executed and issued by the Company, authenticated by the Trustee in
accordance with the terms of the Indenture and delivered to and paid for by the
Underwriter pursuant to this Agreement on the applicable Closing Date (as
defined below), the Securities will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles, and will be
entitled to the benefits of the Indenture. The Securities, when executed, issued
and delivered, will be convertible into Stock in accordance with the Indenture
and will conform to the description thereof contained in the Prospectus.
(i) Except as shall be disclosed in the Prospectus, there are
no contracts, agreements or understandings between the Company and any person
that would give rise to a valid claim against the Company or the Underwriter for
a brokerage commission, finder's fee or other like payment in connection with
this offering.
(j) Except as (i) set forth on Schedule B hereto and (ii)
provided for in this Agreement, there are no contracts, agreements or
understandings between the Company and any person granting such person the right
to require the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities with any other
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.
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(k) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement or the Indenture
or otherwise in connection with the issuance and sale of the Securities by the
Company, except (i) such consents, approvals, authorizations and orders as have
already been obtained under the Securities Act or the Trust Indenture Act, (ii)
such consents, approvals, authorizations and orders as may be required under
state securities or Blue Sky laws, and (iii) such other consents, approvals,
authorizations and orders, of which the failure to obtain or file would not, in
the aggregate, have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company and its
subsidiaries taken as a whole (any such event, a "MATERIAL ADVERSE EFFECT").
(l) The execution, delivery and performance of this Agreement
and the Indenture by the Company; the issuance and sale of the Securities by the
Company and the issuance of the Stock by the Company under the terms of the
Indenture; and the compliance with the terms and provisions of each of the
foregoing by the Company and the consummation by the Company of the transactions
contemplated herein and therein will not result in a breach or violation of any
of the terms and provisions of, or conflict with or constitute a default under,
or result in the imposition or creation of (or the obligation to create or
impose) a lien under, (i) any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any Scheduled Subsidiary or any of their
properties, or (ii) any agreement or instrument to which the Company or any such
Scheduled Subsidiary is a party or by which the Company or any such Scheduled
Subsidiary is bound or to which any of the properties of the Company or any such
Scheduled Subsidiary is subject, or (iii) the charter, by-laws or other
organizational document of the Company or any Scheduled Subsidiary, except, in
the case of (i) and (ii) above, as would not have a Material Adverse Effect, and
the Company has full power and authority to authorize, issue and sell the
Securities as contemplated by this Agreement.
(m) This Agreement has been duly authorized, executed and
delivered by the Company.
(n) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all other
properties and assets owned by them, in each case free from liens, encumbrances
and defects except (i) such as do not materially affect the value thereof or
materially interfere with the use made or to be made thereof by them or (ii)
such as would not, individually or in the aggregate, have a Material Adverse
Effect; and except as shall be disclosed in the Prospectus, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions to the Company's title to its leasehold
interests except (i) such as do not materially interfere with the use made or to
be made thereof by them or (ii) such as would not, individually or in the
aggregate, have a Material Adverse Effect.
(o) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by them as described in
the Prospectus, except where the failure to possess the same would not
reasonably be expected to have a Material Adverse Effect, and have not received
any written notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or any of its subsidiaries, would, individually or in the aggregate,
have a Material Adverse Effect.
(p) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that would
reasonably be expected to have a Material Adverse Effect.
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(q) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential information, and
other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct the business now operated by them, or presently employed by
them, and have not received any notice of infringement of or conflict with
asserted rights of others with respect to any intellectual property rights that,
if determined adversely to the Company or any of its subsidiaries, would,
individually or in the aggregate, have a Material Adverse Effect.
(r) Except as shall be disclosed in the Prospectus, neither
the Company nor any of its subsidiaries (i) is in violation of any statute, any
rule, regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), (ii) owns or operates any real property
contaminated with any substance that is subject to any Environmental Laws, (iii)
is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or (iv) is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would,
individually or in the aggregate, have a Material Adverse Effect; and the
Company is not aware of any pending investigation which might lead to such a
claim.
(s) Except as shall be disclosed in the Prospectus, there are
no pending actions, suits or proceedings against or affecting the Company, any
of its subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would, individually or in
the aggregate, have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under, or
contemplated by, this Agreement or the Indenture or which are otherwise material
in the context of the sale of the Securities; and, to the knowledge of the
Company, no such actions, suits or proceedings are threatened.
(t) The financial information included in the Prospectus will
present fairly in all material respects the financial position of the Company
and its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, in each case, on a consolidated
basis, and, except as otherwise shall be disclosed in the Prospectus, such
financial statements shall have been prepared in conformity with generally
accepted accounting principles in the United States applied on a consistent
basis throughout the periods covered thereby; and the assumptions used in
preparing the pro forma financial information and the related notes thereto
included in the Prospectus shall provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, and will be prepared in accordance with the rules and
guidelines of the Commission with respect to pro forma financial statements, and
will be properly compiled on the bases described therein; and the adjustments
used therein shall be appropriate to give effect to the transactions and
circumstances referred to therein.
(u) The statistical and market-related data (other than
market-related data and statistical data provided by the Company) included in
the Registration Statement, any Preliminary Prospectus and the Prospectus shall
be based on or derived from sources which the Company believes to be reliable
and accurate, it being understood, however, that the Company has conducted no
independent investigation of the accuracy thereof.
(v) Except as shall be disclosed in the Prospectus, since the
date of the latest audited financial statements that shall be included or
incorporated by reference in the Prospectus there shall have been no material
adverse change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business, properties or
results of operations of the Company and its subsidiaries taken as a whole, and,
except as disclosed in or contemplated by the
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Prospectus, since the date of the June 30, 2004 unaudited
financial statements that are incorporated by reference in the Prospectus, there
has been no change in the capital stock of the Company or long-term debt of the
Company or any of its consolidated subsidiaries other than (a) issues of capital
stock pursuant to equity incentive plans and (b) the repurchase of, or the
exchange of capital stock for, outstanding indebtedness in an aggregate
principal amount not in excess of $60 million, and no dividend or distribution
of any kind has been declared, paid or made by the Company on any class of its
capital stock.
(w) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act of 1940, as amended
(the "INVESTMENT COMPANY ACT"); the Company is not and, after giving effect to
the offering, the sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, and the consummation of the transactions
contemplated by this Agreement or the Indenture, will not be an "investment
company" as defined in the Investment Company Act.
(x) Neither the Company nor any "subsidiary company", as that
term is defined in the Public Utility Holding Company Act of 1935 ("PUHCA"), of
the Company is, or after giving effect to the issuance and sale of the
Securities, will be, subject to regulation as a "holding company," a "subsidiary
company" of a holding company or a "public-utility company," as those terms are
defined in PUHCA (except that Androscoggin Energy LLC, which is a QF (as defined
herein) and Acadia Power Partners, LLC, which is an EWG (as defined herein) are
"subsidiary companies" of holding companies).
(y) Each of the power generation projects in which the Company
or its subsidiaries has an interest which is subject to the requirements of the
Public Utility Regulatory Policies Act of 1978, as amended ("PURPA"), and the
regulations of the Federal Energy Regulatory Commission ("FERC") promulgated
thereunder, as amended from time to time, necessary to be a "qualifying
cogeneration facility" and/or a "qualifying small power production facility"
("QF") meets such requirements, except where the failure to meet such
requirements would not have a Material Adverse Effect.
(z) Each of the Company's subsidiaries that is a public
utility under the Federal Power Act, as amended ("FPA"), has validly-issued
orders from the FERC, not subject to any pending challenge, investigation, or
proceeding (i) authorizing such subsidiary to engage in wholesale sales of
electricity, ancillary services and, to the extent permitted under its
market-based rate tariff, other services at market-based rates, and (ii)
granting such waivers and blanket authorizations as are customarily granted to
entities with market-based rate authority, except where the failure to have such
orders would not have a Material Adverse Effect.
(aa) With respect to each of the Company's subsidiaries that
is a public utility under the FPA, the FERC has not imposed any rate caps or
mitigation measures other than rate caps and mitigation measures generally
applicable to similarly situated marketers or generators selling electricity,
ancillary services or other services at wholesale in the geographic market where
such subsidiary conducts its business.
(bb) Each of the Company's subsidiaries that owns and/or
operates an Eligible Facility within the meaning of Section 32 of PUHCA, has
received a determination from FERC, not subject to any pending challenge or
appeal, that it is an Exempt Wholesale Generator ("EWG"), within the meaning of
Section 32 of PUHCA.
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(cc) Each of the Company's subsidiaries providing retail
electric service in the Electric Reliability Council of Texas, Inc. ("ERCOT")
has validly issued orders from the Texas Public Utilities Commission ("TPUC"),
not subject to any pending challenge, investigation, or proceeding, authorizing
such subsidiary to engage in sales of electricity at retail under the laws of
the State of Texas, except where the failure to have such orders would not have
a Material Adverse Effect. Each of the Company's subsidiaries that is
participating in the Texas wholesale electric market has registered with the
TPUC and the TPUC has not imposed on any such subsidiary any specific rate cap
or mitigation measures.
(dd) Each of the Company's subsidiaries providing retail
energy services has full authorization to provide retail energy services to
retail industrial, commercial and residential customers in its applicable states
under the applicable Energy Laws, except as would not have a Material Adverse
Effect. "ENERGY LAWS" shall mean any state and local energy laws and
regulations, in each of the states, regions or other applicable jurisdictions in
which the Company and its subsidiaries are organized or otherwise conduct
business, applicable to: (i) the ownership, operation, or control of electric
generation, transmission, and distribution facilities; (ii) the purchase, sale,
transmission, distribution, marketing or trading of electric energy; and (iii)
organizational, financial and rate regulation of entities engaged in (i) and
(ii) above.
(ee) Except as disclosed in the Prospectus, there are no
material pending complaints filed with the FERC seeking abrogation or
modification, or otherwise investigating the terms of a contract for the sale of
power by the Company or any of its subsidiaries.
(ff) The Company is subject to Section 13 or 15(d) of the
Exchange Act.
(gg) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act, or any regulation promulgated thereunder, including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal Reserve System.
(hh) Prior to the date hereof, neither the Company nor any of
its affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company in
connection with the offering of the Securities.
(ii) Neither the Company nor any of the Scheduled Subsidiaries
is (i) in violation of its Certificate of Incorporation or By-laws or (ii) in
default in the performance or observance of any material obligation, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other material agreement or instrument to which it is a party or by
which it or any of its properties may be bound, except, in relation to this
clause (ii), as would not have a Material Adverse Effect.
(jj) The statements set forth in the Prospectus under the
captions "Description of Other Indebtedness," "Description of the Notes" and
"Description of Capital Stock" insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate, complete
and fair in all material respects.
(kk) Deloitte & Touche LLP and PricewaterhouseCoopers LLP, who
have expressed an opinion as to certain financial statements of the Company and
its consolidated subsidiaries, are each independent public accountants as
required by the Act and the rules and regulations of the Commission thereunder.
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(ll) Each of Netherland, Sewell & Associates Inc. and Gilbert
Laustsen Jung Associates Ltd. is an independent petroleum engineering firm and
nothing has come to the Company's attention to cause it to believe that either
such firm is not qualified to pass on questions relating to the reserves and
production of the Company's oil and gas properties as set forth or incorporated
by reference in the Prospectus.
(mm) The present fair saleable value of the assets of the
Company and each of the Scheduled Subsidiaries exceeds the amount required to
pay the probable liability on its and their existing debts, respectively
(whether matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent), as they become absolute and matured, and as a result of
consummation of the transactions contemplated herein and in the Prospectus, will
continue to exceed such amount.
(nn) The Company, does not, and, as a result of consummation
of the transactions contemplated herein and in the Prospectus, will not, have
unreasonably small capital for it to carry on its business as proposed to be
conducted.
(oo) Neither the Company nor any of the Scheduled Subsidiaries
are incurring obligations or making transfers under any evidence of indebtedness
with the intent to hinder, delay or defraud any entity to which it is or will
become indebted.
3. Purchase, Sale and Delivery of Securities. Subject to the terms
and conditions herein set forth, (a) the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees, to purchase from the Company, at a
purchase price of 80.9% of the principal amount thereof, all of the Firm
Securities and (b) in the event and to the extent that Deutsche Bank shall
exercise its election to purchase Option Securities as provided below, the
Company agrees to issue and sell to Deutsche Bank, and Deutsche Bank agrees to
purchase from the Company, at the same purchase price set forth in clause (a) of
this Section 3, that portion of the Option Securities as to which such election
shall have been exercised (to be adjusted by you so as to eliminate fractions of
$1,000).
The Company hereby grants to Deutsche Bank the right to purchase at
its option, on any one or more occasions, up to $108,750,000 aggregate principal
amount at maturity of Option Securities, at the purchase price set forth in
clause (a) of the first paragraph of this Section 3, only for the sole purpose
of covering over-allotments made in connection with the sale of the Firm
Securities. No Option Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold and delivered. Any
such election to purchase Option Units may be exercised by written notice (the
"OPTION SECURITIES EXERCISE NOTICE") from Deutsche Bank to the Company, given
within a period of 30 calendar days after the date of the Prospectus, setting
forth the aggregate principal amount of Option Securities to be purchased and
the date on which such Option Securities are to be delivered, as determined by
you but in no event earlier than the First Closing Date (as defined below), or,
unless Deutsche Bank and the Company otherwise agree in writing, later than five
business days after the date of such Option Securities Exercise Notice.
The Company will deliver against payment of the purchase price the
Securities in the form of one or more global Securities in definitive form (the
"GLOBAL SECURITIES") deposited by or on behalf of the Company with The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any Global Securities will be held only in
book-entry form through DTC, except in the limited circumstances that shall be
described in the Prospectus and the Indenture.
Payment for the Firm Securities shall be made by the Underwriter in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to the Underwriter drawn to the order of Calpine
Corporation at the office of Covington & Burling, 1330
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Avenue of the Americas, New York, New York, at 10:00 A.M. (New York time), on
September 30, 2004, or at such other time thereafter as the Underwriter and the
Company may agree upon in writing, such time being herein referred to as the
"FIRST CLOSING DATE," against delivery to the Trustee as custodian for DTC of
the Global Securities representing all of the Firm Securities. The Global
Securities representing the Firm Securities will be made available for checking
at the above office of Covington & Burling (or such other location as the
Underwriter may direct) at least 24 hours prior to the First Closing Date.
In the event Deutsche Bank exercises its election to purchase Option
Securities pursuant to an Option Securities Exercise Notice as provided above,
payment for the Option Securities shall be made by Deutsche Bank in Federal
(same day) funds by official bank check or checks or wire transfer to an account
at a bank acceptable to Deutsche Bank drawn to the order of Calpine Corporation
at the location specified in the preceding paragraph (or at such other place as
shall be determined by agreement between Deutsche Bank and the Company) at 10:00
A.M. (New York time) on the delivery date specified in the Option Securities
Exercise Notice, such time being herein referred to as the "OPTION CLOSING
DATE," against delivery to the Trustee as custodian for DTC of the Global
Securities representing the Option Securities so purchased. The Global
Securities representing the Option Securities will be made available for
checking at the above office of Covington & Burling (or such other location as
Deutsche Bank may direct) at least 24 hours prior to the Option Closing Date.
The First Closing Date and any Option Closing Date are herein each referred to
as a "CLOSING DATE."
4. Certain Agreements of the Company. The Company agrees with the
Underwriter that:
(a) The Company will file the Prospectus Supplement with the
Commission pursuant to and in accordance with Rule 424(b)(2) (or, if applicable
and if consented to by the Underwriter, subparagraph (5) thereof) not later than
the second business day following the date of this Agreement.
(b) So long as a prospectus relating to the Securities is
required to be delivered under the Securities Act in connection with sales of
the Securities by the Underwriter or any dealer, the Company will advise the
Underwriter promptly of any proposal to amend or supplement the Registration
Statement or the Prospectus and will afford the Underwriter a reasonable
opportunity to comment on any proposed amendment or supplement thereto; and the
Company will advise the Underwriter promptly of the effectiveness of any such
amendment or supplement and of the institution by the Commission of any stop
order proceedings in respect of a Registration Statement or of any part thereof
and will use its best efforts to prevent the issuance of any such stop order and
to obtain as soon as possible its lifting, if issued. If, at any time when a
prospectus relating to the Securities is required to be delivered under the
Securities Act in connection with sales of the Securities by the Underwriter or
any dealer, any event occurs as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the
Securities Act, the Company promptly will notify the Underwriter of such event
and promptly will prepare and file with the Commission, at its own expense, an
amendment or supplement which will correct such statement or omission or effect
such compliance. Neither the Underwriter's consent to, nor the Underwriter's
delivery to offerees or investors of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 5.
(c) The Company will furnish to the Underwriter copies of the
Registration Statement (two of which will be signed and will include all
exhibits), any related Preliminary Prospectus, the Prospectus and all amendments
and supplements to such documents, in each case in such quantities as
9
the Underwriter requests, so long as a prospectus relating to the Offered
Securities is required to be delivered under the Securities Act in connection
with sales of the Securities by the Underwriter or any dealer. The Prospectus
shall be so furnished on or prior to 3:00 P.M., New York time, on the business
day following the date of this Agreement. All other documents shall be so
furnished as soon as available. The Company will pay the expenses of printing
and distributing to the Underwriter all such documents.
(d) The Company will arrange for the qualification of the
Securities and the shares of Stock issuable upon conversion of the Securities
under the terms of the Indenture for sale and the determination of their
eligibility for investment under the laws of such jurisdictions as the
Underwriter designates and will continue such qualifications in effect so long
as required for the distribution of the Securities, provided that the Company
will not be required (i) to qualify as a foreign corporation, (ii) to file a
general consent to service of process in any such state or (iii) to take any
action that would subject itself to taxation in any jurisdiction if it is not
otherwise so subject.
(e) During the period of two years hereafter, the Company will
furnish to the Underwriter as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and the Company
will furnish to the Underwriter (i) as soon as available, a copy of each such
report and any definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to stockholders, and (ii) from time
to time, such other information concerning the business and financial condition
of the Company as the Underwriter may reasonably request.
(f) During the period of two years after the First Closing
Date, the Company will not be or become an open-end investment company or unit
investment trust or face amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act.
(g) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) all expenses
in connection with the execution, issue, authentication, packaging and initial
delivery of the Securities, the preparation and printing of this Agreement, the
Securities and amendments and supplements thereto, and any other document
relating to the issuance, offer, sale and delivery of the Securities; (ii) any
expenses (including fees and disbursements of counsel) incurred in connection
with qualification of the Securities for sale under the laws of such
jurisdictions in the United States and Canada as the Underwriter designates and
the printing of memoranda relating thereto; (iii) any fees charged by investment
rating agencies for the rating of the Securities; (iv) expenses incurred in
distributing the Prospectus and the Preliminary Prospectus (including any
amendments and supplements thereto) to the Underwriter; (v) the fees and
expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; (vi) the cost of registering and qualifying the Stock for
trading on The New York Stock Exchange or other applicable exchange; and (vii)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section 4.
The Company will reimburse the Underwriter for all travel expenses of the
Underwriter and the Company's officers and employees and any other expenses of
the Underwriter and the Company in connection with attending or hosting meetings
with prospective purchasers of the Securities.
(h) In connection with the offering, until the Underwriter
shall have notified the Company of the completion of the distribution of the
Securities, neither the Company nor any of its affiliates has or will, either
alone or with one or more other persons, bid for or purchase for any account in
which it or any of its affiliates has a beneficial interest, or attempt to
induce any person to purchase, the Company's common stock; and neither it nor
any of its affiliates will make bids or purchases for the purpose of creating
actual, or apparent, active trading in, or of raising the price of, the
Securities or the Company's common stock; it being understood and agreed that
the concurrent offering of the Company's
10
common stock as described in the Prospectus under the caption "Concurrent
Transactions -- Offering of Shares of Our Common Stock and Share Lending
Agreement" shall not result in a breach of this Section 4(h).
(i) As soon as practicable, but not later than 16 months,
after the date hereof, the Company will make generally available to their
security holders an earnings statement covering a period of at least 12 months
beginning after the later of (i) the effective date of the Registration
Statement relating to the Securities, (ii) the effective date of the most recent
post-effective amendment to the Registration Statement to become effective prior
to the date hereof, and (iii) the date of the Company's most recent Annual
Report on Form 10-K (or Form 10-K/A) filed with the Commission prior to date
hereof, which will satisfy the provisions of Section 11(a) of the Act.
(j) Between the date hereof and the First Closing Date, the
Company shall not do or authorize any act or thing that would have resulted in
an adjustment of the conversion price of the Securities if the Securities had
been issued on the date hereof.
(k) The Company shall reserve and keep available at all times,
free of preemptive rights, sufficient shares of Stock for the purpose of
enabling the Company to satisfy any obligations to issue shares of its Stock
upon conversion of the Securities under the terms of the Indenture.
(l) The Company will use its best efforts to list, subject to
notice of issuance, the shares of Stock issuable upon conversion of the
Securities under the terms of the Indenture on The New York Stock Exchange.
(m) The Company will use the net proceeds received by it from
the sale of the Securities pursuant to this Agreement in the manner specified in
the Prospectus under the caption "Use of Proceeds."
(n) During the period from the date hereof to 90 days after
the First Closing Date (the "COMPANY LOCK-UP PERIOD"), the Company will not sell
or cause to be offered, sold or contracted to sell, or otherwise dispose of,
except as provided hereunder, any Stock or convertible securities that are
convertible into shares of Stock without the prior written consent of Deutsche
Bank (which consent shall be in its sole discretion), except that no such
consent shall be necessary for (i) grants of employee stock options or other
stock awards pursuant to the terms of Company option plans existing on the date
of this Agreement or hereafter (provided that, during the Company Lock-Up
Period, any change to such plans does not provide for an increase in the
aggregate number of shares of Stock available for grant thereunder) and
issuances of shares of Stock pursuant to the exercise of such options, (ii)
issuances of shares of Stock pursuant to the terms of the Company's employee
stock purchase plan existing on the date of this Agreement or hereafter
(provided that, during the Company Lock-Up Period, any change to such plans does
not provide for an increase in the aggregate number of shares of Stock available
to be issued thereunder), (iii) issuances of shares of Stock pursuant to the
exercise of any other employee stock options outstanding as of the date of this
Agreement, (iv) issuances of shares of Stock upon the conversion or exchange of
convertible or exchangeable securities of the Company outstanding as of the date
of this Agreement, and (v) issuances of shares of Stock upon the conversion of
the Securities under the terms of the Indenture. Notwithstanding the foregoing,
it is understood that the Company may (A) issue shares of Stock in connection
with the Stock Loan Agreement dated September 27, 2004 between the Company and
Deutsche Bank as to which the consent of Deutsche Bank shall not be required,
(B) issue shares of Stock or securities convertible into Stock pursuant to
Section 3(a)(9) of the Securities Act in connection with the exchange of Stock
or securities convertible into Stock for the Company's outstanding High Tides
III, as described in the Prospectus (except that during the first 30 days of the
Company Lock-Up Period, such issuances are limited to an aggregate of 10 million
shares of Stock
11
issued or issuable upon conversion), as to which the consent of Deutsche Bank
shall not be required and (C) issue additional shares of Stock or securities
convertible into Stock in such amounts as to which Deutsche Bank provides its
prior written consent, which consent shall not be unreasonably withheld.
5. Conditions of the Obligations of the Underwriter. The obligation
of the Underwriter to purchase and pay for the Securities on the applicable
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein on the date hereof and on the
applicable Closing Date, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions
precedent:
(a) The Underwriter shall have received on each of the date
hereof and the applicable Closing Date "comfort" letters, in form and substance
satisfactory to the Underwriter, from each of Deloitte & Touche LLP (with
respect to periods ending on or before December 31, 2002) and
PricewaterhouseCoopers LLP (with respect to the period beginning after December
31, 2002). The comfort letter delivered by PricewaterhouseCoopers LLP shall
include, among other items, a SAS No. 100 review of the three-month and
six-month periods ended June 30, 2004 and customary "tick mark" procedures
addressing numbers included in or incorporated by reference in the Prospectus,
including the Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2003, filed with the Commission on September 22, 2004 (the
"10-K/A") and the Company's quarterly report on Form 10-Q/ for the period ending
June 30, 2004 (the "10-Q"), included or incorporated by reference therein.
(b) The Prospectus shall have been filed with the Commission
in accordance with the Rules and Regulations and Section 4(a) of this Agreement.
No stop order suspending the effectiveness of the Registration Statement or of
any part thereof shall have been issued and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Company or any
Underwriter, shall be contemplated by the Commission.
(c) The Chief Financial Officer of the Company shall have
furnished a certificate, dated the applicable Closing Date, in form and
substance satisfactory to the Underwriter, stating to the effect that:
(i) The Company does not intend to or believe that it has
incurred or will incur debts that will be beyond its ability to pay as they
mature;
(ii) The present fair saleable value of the assets of the
Company exceeds the amount that will be required to pay the probable liability
on its existing debts (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) as they become absolute and matured;
(iii) The Company does not have unreasonably small capital
for it to carry on its businesses as proposed to be conducted; and
(iv) The Company is not incurring obligations or making
transfers under any evidence of indebtedness with the intent to hinder, delay or
defraud any entity to which it is or will become indebted.
(d) Subsequent to the execution and delivery of this Agreement
and prior to the applicable Closing Date, there shall not have occurred (i) any
change, or any development or event involving a prospective change, in the
condition (financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole which, in the judgment of the
12
Underwriter, is material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and payment for
the Securities; (ii) any downgrading in the current rating accorded any debt
securities or preferred stock of the Company; (iii) any suspension or material
limitation of trading in securities generally on The New York Stock Exchange, or
any setting of minimum prices for trading on such exchange, or any suspension of
trading of any securities of the Company on any exchange or in the
over-the-counter market; (iv) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities or a
material disruption in commercial banking or securities settlement or clearance
services in the United States which, in the judgment of the Underwriter, makes
it impracticable or inadvisable to proceed with the completion of the offering
of the Securities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or any
other substantial national or international calamity or emergency if, in the
judgment the Underwriter, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with the completion of the offering or the sale of and payment for the
Securities.
(e) The Underwriter shall have received an opinion, in form
and substance reasonably satisfactory to the Underwriter, dated such Closing
Date, of Covington & Burling, counsel for the Company, to the effect that:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to (a) own its properties, and conduct its
business as described in the Prospectus, and (b) issue the Securities and the
shares of Stock issuable upon conversion of the Securities;
(ii) All conditions precedent (including any covenants the
compliance with which constitutes a condition precedent) provided for in the
Indenture with respect to the authentication and delivery of the Securities have
been complied with, the form and terms of the Securities have been established
in conformity with the provisions of the Indenture, and the Securities will be
entitled to the benefits of the Indenture;
(iii) (A) the Company has duly authorized, executed and
delivered the Underwriting Agreement, the Securities and the Indenture
(collectively, the "COMPANY AGREEMENTS") and the Indenture has been duly
qualified under the Trust Indenture Act; (B) the Securities and the Indenture
conform in all material respects to the respective descriptions thereof
contained in the Prospectus; and (C) the Indenture constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms,
and, when executed, authenticated, issued and delivered in the manner provided
in the Indenture, the Securities will constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, in each
case subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(iv) The Securities will be convertible into shares of Stock
in accordance with the terms of the Securities and the Indenture. The shares of
Stock initially issuable upon such conversion have been duly authorized and
reserved for issuance upon such conversion by the Company and, when issued upon
such conversion in accordance with the terms of the Securities and the
Indenture, will be validly issued, fully paid and non-assessable. The shares of
Stock issued upon such conversion will not be subject to any preemptive rights,
or to such counsel's knowledge any similar rights, under the law of the State of
New York, the Federal law of the United States of America or the Company's
certificate of incorporation or by-laws;
13
(v) Except as set forth on Schedule B hereto, there are no
contracts, agreements or understandings known to such counsel between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require the
Company to include such securities in any other registration statement filed by
the Company under the Securities Act;
(vi) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" within the
meaning of the Investment Company Act;
(vii) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required for the
consummation by the Company of the transactions contemplated by the Company
Agreements in connection with the issuance or sale of the Securities by the
Company, except for (a) such as have been obtained and made under the Securities
Act and the Trust Indenture Act and the respective rules and regulations
thereunder and (b) any of the foregoing as may be required under State
securities or blue sky laws and the rules and regulations promulgated
thereunder;
(viii) Except such as are set forth in the Prospectus, to
such counsel's knowledge, there are no pending or threatened actions, suits or
proceedings against or affecting the Company, any Scheduled Subsidiary or any of
their respective properties that, if determined adversely to the Company or any
such Scheduled Subsidiary, would individually or in the aggregate have a
Material Adverse Effect or would materially and adversely affect the ability of
the Company to perform its obligations under the Company Agreements;
(ix) The execution, delivery and performance by the Company
of the Company Agreements; the issuance and sale of the Securities; and the
consummation of the transactions contemplated hereby and thereby, will not (A)
violate or conflict with any law of the State of New York, the Delaware General
Corporation Law, or any Federal law of the United States of America having
applicability to the Company or the Scheduled Subsidiaries, or any rule,
regulation or order known to such counsel of any governmental body or any court
having jurisdiction over the Company, any Scheduled Subsidiary or any of their
respective properties, (B) to such counsel's knowledge, and except as set forth
in the Prospectus, breach the provisions of, or cause a default, or result in
the imposition or creation of (or the obligation to create or impose) a lien
under any agreement or instrument listed in Schedule D hereto, which agreements
the Company has certified to such counsel are the only agreements of the Company
which are material to the Company and its subsidiaries on a consolidated basis
taken as a whole, or (C) violate any provision of the charter, by-laws or any
other constitutive document of the Company or any such Scheduled Subsidiary;
(x) The statements in the Prospectus under the captions
"Description of the Notes," "Description of Capital Stock," "Description of
Share Lending Agreement" and "Material United States Federal Income Tax
Consequences," insofar as such statements constitute summaries of the laws,
regulations, legal matters, agreements or other legal documents referred to
therein, are accurate in all material respects and fairly summarize the matters
referred to therein; and
(xi) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion, the
Prospectus was filed with
14
the Commission pursuant to the subparagraph of Rule 424(b) specified in such
opinion on the date specified therein, and, to the best of the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, and the Registration Statement, as of its effective date, and the
Prospectus, as of its date, complied as to form in all material respects with
the requirements of the Securities Act and the Rules and Regulations (except
that such counsel need express no opinion or belief as to the financial
statements and the notes related thereto and other financial data included or
incorporated by reference in the Registration Statement or the Prospectus, or to
that part of the Registration Statement that constitutes the Statement of
Eligibility (Form T-1) under the Trust Indenture Act).
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, based on the procedures set forth in
said opinion, nothing which came to such counsel's attention in the course of
such procedures, considered in the light of such counsel's understanding of the
applicable law and the experience gained by such counsel through its practice
under the Federal securities laws, has caused such counsel to believe that the
Registration Statement, as of its effective date, contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date and as of the applicable Closing Date, contained or
contains any untrue statement of a material fact or omitted or omits to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that such
counsel need express no opinion or belief as to the financial statements and the
notes thereto and other financial data included or incorporated by reference in
the Registration Statement or the Prospectus, or to that part of the
Registration Statement that constitutes the Statement of Eligibility (Form T-1)
under the Trust Indenture Act).
(f) The Underwriter shall have received an opinion, in form
and substance reasonably satisfactory to the Underwriter, dated such Closing
Date, of senior in-house counsel of the Company, to the effect that:
(i) The Company has an authorized capitalization as set
forth in the Prospectus, and all shares of capital stock of the Company issued
under the terms of the Indenture have been duly authorized and validly issued
and are fully paid and non-assessable;
(ii) Each Scheduled Subsidiary of the Company (x) other than
those Scheduled Subsidiaries specified in clause (y) below has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, and has corporate power and
authority to own its property and to conduct its business as described in the
Prospectus (y) that is not a corporation is a limited liability company, has
been duly formed and is validly existing as a limited liability company in good
standing under the laws of the jurisdiction of its formation, and has full power
and authority to own its property and to conduct its business as described in
the Prospectus;
(iii) The Company and each of the Scheduled Subsidiaries
possess adequate certificates, authorities, licenses or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business as
now operated by them as described in the Prospectus, except where the failure to
possess the same would not reasonably be expected to have a Material Adverse
Effect, and such counsel is not aware of the receipt of any notice of
proceedings relating to the revocation or modification of any such certificate,
authority, license or permit that, if determined adversely to the Company or any
of the Scheduled Subsidiaries, would individually or in the aggregate have a
Material Adverse Effect;
15
(iv) The contracts and agreements of the Company and the
Scheduled Subsidiaries and affiliates incorporated by reference in the
Prospectus (including in the Exchange Act Reports incorporated by reference in
the Prospectus) conform in all material respects to the descriptions thereof
contained in the Prospectus (or such Exchange Act Reports), and the statements
under the captions "Summary -- Recent Developments" in the Prospectus and
"Business -- Recent Developments," "Legal Proceedings," "Executive
Compensation," "Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters" and "Certain Relationships and Related
Transactions" in the 10-K/A, insofar as such statements constitute summaries of
the legal matters, documents and governmental proceedings referred to therein,
are accurate in all material respects and fairly summarize and present the
information referred to therein;
(v) To such counsel's knowledge, the Company and each of its
subsidiaries (i) is in material compliance with any and all applicable
Environmental Laws, (ii) has received all permits, licenses or other approvals
required of it under applicable Environmental Laws to conduct its business and
(iii) is in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a Material Adverse Effect;
(vi) To such counsel's knowledge, based on the conduct of
the Company's businesses described in the Prospectus, neither the Company nor
any "subsidiary company," as that term is defined in PUHCA, of the Company is
(i) a "holding company" or a "subsidiary company" of a holding company or a
"public utility company" under Section 2(a) of PUHCA (except that Androscoggin
Energy LLC, which is a QF, and Arcadia Power Partners, which is an EWG, are
subsidiary companies of holding companies;
(vii) Each of the power generation projects in which the
Company or its subsidiaries has an interest which is subject to the requirements
of PURPA and the regulations of the FERC promulgated thereunder, as amended from
time to time, necessary to be a "qualifying cogeneration facility" and/or a
"qualifying small power production facility" meets such requirements, except
where the failure to meet such requirements would not have a Material Adverse
Effect.
(viii) Each of the Company's subsidiaries that is a public
utility under the FPA has validly-issued orders from the FERC, not subject to
any pending challenge, investigation, or proceeding, (i) authorizing such
subsidiary to engage in wholesale sales of electricity, ancillary services and,
to the extent permitted under its market-based rate tariff, other services at
market-based rates, and (ii) granting such waivers and blanket authorizations as
are customarily granted to entities with market-based rate authority, except
where the failure to have such orders would not have a Material Adverse Effect.
(ix) With respect to each of the Company's subsidiaries that
is a public utility under the FPA, the FERC has not imposed any rate caps or
mitigation measures other than rate caps and mitigation measures generally
applicable to similarly situated marketers or generators selling electricity,
ancillary services or other services at wholesale in the geographic market where
such subsidiary conducts its business.
(x) Each of the Company's subsidiaries that owns and/or
operates an Eligible Facility within the meaning of Section 32 of PUHCA, has
received a
16
determination from FERC, not subject to any pending challenge or appeal, that it
is an EWG within the meaning of Section 32 of PUHCA.
(xi) Each of the Company's subsidiaries providing retail
electric service in the ERCOT has validly issued orders from the TPUC, not
subject to any pending challenge, investigation, or proceeding, authorizing such
subsidiary to engage in sales of electricity at retail under the laws of the
State of Texas, except where the failure to have such orders would not have a
Material Adverse Effect. Each of the Company's subsidiaries that is
participating in the Texas wholesale electric market has registered with the
TPUC and the TPUC has not imposed on any such subsidiary any specific rate cap
or mitigation measures.
(xii) The execution, delivery and performance of this
Agreement and the Indenture and the issuance and sale of the Securities and the
Stock contingently issuable upon conversion thereof, and compliance by the
Company with the terms and provisions hereof and thereof, and the consummation
of the transactions contemplated hereby and thereby, will not (A) violate any
statute, rule, regulation or order of which such counsel is aware of any
governmental agency or body or any court having jurisdiction over the Company or
any Scheduled Subsidiary of the Company or any of their respective properties,
(B) to such counsel's knowledge, breach the provisions of, or cause a default,
or result in the imposition or creation of (or the obligation to create or
impose) a lien under any agreement or instrument to which the Company or any
such Scheduled Subsidiary is a party or by which the Company or any such
Scheduled Subsidiary is bound or to which any of the properties of the Company
or any such Scheduled Subsidiary is subject, or (C) violate any provision of the
charter, by-laws or any other constitutive document of the Company or any such
Scheduled Subsidiary.
In giving such opinion, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of
California, the federal law of the United States and the corporate law of the
State of Delaware, upon opinions of other counsel, who shall be counsel
reasonably satisfactory to counsel for the Underwriter, in which case the
opinion of such other counsel shall also be addressed to the Underwriter.
(g) The Underwriter shall have received from Davis Polk &
Wardwell, special counsel to the Underwriter, and Latham & Watkins LLP, special
counsel to the Underwriter, such letters or opinions, dated such Closing Date,
with respect to such matters as the Underwriter may require, and the Company
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(h) The Underwriter shall have received a certificate, dated
the Closing Date, of the President or any Vice President or a principal
financial or accounting officer of the Company in which such officer, to the
best of his or her knowledge after reasonable investigation, shall state that
the representations and warranties of the Company in this Agreement are true and
correct as of the Closing Date; the Company has complied with all agreements and
satisfied all conditions on their part to be performed or satisfied hereunder at
or prior to the Closing Date; and, subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material adverse
change, nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties or results
of operations of the Company and its subsidiaries taken as a whole, whether or
not arising in the ordinary course of business, except as set forth in or
contemplated by the Prospectus or as described in such certificate. In addition,
the Chief Financial Officer of the Company shall have furnished a confirmation,
in form and substance satisfactory to the Underwriter, of the Company's
compliance with the debt incurrence provisions of its existing indentures,
attaching an analysis of the calculations, set forth in reasonable detail, used
in providing such confirmation.
17
(i) The shares of Stock initially issuable upon conversion of
the Securities under the terms of the Indenture shall have been duly listed,
subject to notice of issuance, on The New York Stock Exchange.
(j) The Company shall have delivered executed copies of the
Company Agreements to the Underwriter, in each case in form and substance
reasonably satisfactory to the Company and the Underwriter.
(k) The Underwriter shall have received letters, in the Form
of Annex I hereto, dated no later than the date hereof from the persons
specified in Schedule C hereto.
(l) The Company will furnish the Underwriter with conformed
copies of such other opinions and certificates, letters and documents as the
Underwriter reasonably requests. The Underwriter may in its sole discretion
waive compliance with any conditions to the obligations of the Underwriter
hereunder.
6. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless the Underwriter, its affiliates participating in the
distribution of the Securities, its partners, directors and officers and each
person, if any, who controls the Underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which the Underwriter may
become subject, under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related Preliminary
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and will reimburse the Underwriter for any
legal or other expenses reasonably incurred by the Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such documents
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter specifically for use therein.
(b) The Underwriter will indemnify and hold harmless the
Company and its directors, officers and trustees and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which the Company may become subject, under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related Preliminary Prospectus or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such loss, claim, damage, liability or action as such expenses are incurred.
18
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under subsection (a) or (b) above. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement (i)
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action and (ii) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company, on the one hand, and the Underwriter, on the other, from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Underwriter, on
the other, in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriter, on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total discounts and commissions received by the
Underwriter from the Company under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities purchased by it were resold exceeds the amount of any damages
which the Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and
19
conditions, to each person, if any, who controls the Underwriter within the
meaning of the Securities Act or the Exchange Act; and the obligations of the
Underwriter under this Section shall be in addition to any liability which the
Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act.
7. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or their officers and of the Underwriter set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of the Underwriter and the Company or any of their respective
officers or directors or any controlling person, and will survive delivery of
and payment for the Securities. If for any reason the purchase of the Securities
by the Underwriter is not consummated, the Company shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 4 and the
respective obligations of the Company and the Underwriter pursuant to Section 6
shall remain in effect, and if any Securities have been purchased hereunder the
representations and warranties in Section 2 and all obligations under Section 4
shall also remain in effect. If the purchase of the Securities by the
Underwriter is not consummated for any reason other than solely because of the
termination of this Agreement pursuant to a default by the Underwriter, the
Company will reimburse the Underwriter for all out-of-pocket expenses (including
fees and disbursements of counsel) reasonably incurred by them in connection
with the offering of the Securities.
8. Information Supplied by the Underwriter. The statements set forth
in (i) the final paragraph on the cover page appearing directly above the name
of the Underwriter, (ii) the third sentence under "Risk Factors -- If an active
trading market does not develop for these notes you may not be able to resell
them," (iii) the fourth sentence under "Risk Factors -- The effect of the
issuance of our shares of common stock pursuant to the share lending agreement
and upon conversion of the notes, including sales of our common stock in short
sale transactions by purchasers of the notes may lower the market price of our
common stock, which may prevent you from exercising your conversion option on
the notes," and (iv) paragraphs 2, 4, 5, 7, 12, 13 and 15 under the heading
"Underwriting" in the Prospectus (to the extent such statements relate to the
Underwriter) constitute the only information furnished by the Underwriter to the
Company for the purposes of Section 2(b) and Section 6 hereof.
9. Notices. All communications hereunder will be in writing and, if
sent to the Underwriter, will be mailed, delivered, telegraphed and confirmed or
faxed and confirmed to Deutsche Bank Securities Inc., 60 Wall Street, New York,
New York 10005, Attention: Syndicate Desk; or, if sent to the Company, will be
mailed, delivered, telegraphed and confirmed or faxed and confirmed to it at
Calpine Corporation, 50 West San Fernando Street, San Jose, California 95113,
Attention: General Counsel.
10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 6, and no other
person will have any right or obligation hereunder.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
12. Applicable Law. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
20
NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
[Signature page follows.]
21
If the foregoing is in accordance with the Underwriter's
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the Underwriter in accordance with its terms.
Very truly yours,
CALPINE CORPORATION
By: /s/ Michael Thomas
--------------------------------
Name: Michael Thomas
------------------------------
Title: Senior Vice President
-----------------------------
S-1
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
DEUTSCHE BANK SECURITIES INC.
By: /s/ Thomas P. Lynch
-------------------------------
Name: Thomas P. Lynch
Title: Managing Director
By: /s/ Donald Sung
-------------------------------
Name: Donald Sung
Title: Managing Director
S-2
SCHEDULE A
SCHEDULED SUBSIDIARIES
- - Androscoggin Energy, Inc.
- - Calpine Administrative Services, Inc.
- - Calpine International Holdings, Inc.
- - Calpine Finance Company
- - Calpine Fuels Corporation
- - Calpine Energy Services Holdings, Inc.
- - Calpine Northbrook Corporation of Maine, Inc.
- - Calpine Operating Management Company, Inc.
- - Calpine Power Company
- - Quintana Canada Holdings LLC
SCHEDULE B
CAPITAL STOCK MATTERS
I. Encumbrances, Liens and Defects.
Permitted Liens (as defined in the indentures governing the
Company's second-priority senior secured notes) and liens granted pursuant to
the issuance of the Company's $785 million aggregate principal amount of first
priority senior secured notes due 2014.
II. Registration Rights.
1. Stockholder Rights Agreement, dated as of October 12, 2000, among
the Company and the parties listed therein, executed pursuant to the Stock and
Note Purchase Agreement, dated as of June 23, 2000, among the Company, Michael
P. Polsky, the Alan S. Polsky and Gabriel S. Polsky Trusts, Polsky Energy
Corporation and SkyGen Energy Holdings LLC.
2. Amended and Restated Rights Agreement, dated as of September 19,
2001, as amended on September 28, 2004 between the Company and Equiserve Trust
Company, N.A., as rights agent, related to the grant of preferred stock purchase
rights in connection with the Company's 1996 Stock Incentive Plan and 2000
Employee Stock Purchase Plan
3. Registration Rights Agreement, dated November 14, 2003, between
the Company and Deutsche Bank in connection with the offering of 4.75%
Contingent Convertible Notes due 2023.
4. Share Lending Agreement, dated the date hereof, between the
Company and Deutsche Bank AG London, acting through Deutsche Bank.
SCHEDULE C
PERSONS SUBJECT TO LOCK-UP AGREEMENT
Directors and principal executive officers
- - Richard Barraza
- - Bulent A. Berligen
- - Lisa Bodensteiner
- - Peter Cartwright
- - Charles B. Clark
- - Ann B. Curtis
- - Kenneth Derr
- - Jeffrey E. Garten
- - Gerald Greenwald
- - Robert D. Kelly
- - E. James Macias
- - Thomas R. Mason
- - Eric N. Pryor
- - Susan C. Schwab
- - George J. Stathakis
- - Ron A. Walter
- - Susan Wang
- - John O. Wilson
SCHEDULE D
MATERIAL AGREEMENTS
1. The documents identified by the following numbers on the Company's Annual
Report on Form 10-K/A for the year ended December 31, 2003 (filed with the
Commission on September 22, 2004): 4.1.1 through 4.25.38 inclusive;
10.1.3; and 10.2.1 through 10.2.4 inclusive.
2. The documents identified by the following numbers on the Company's
Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2004
(filed with the Commission on September 13, 2004): 4.1.1 through 4.10
inclusive; 10.1.1; and 10.3.1 through 10.5 inclusive.
3. The documents identified by the following numbers on the Company's
Quarterly Report on Form 10-Q for the Quarter ended June 30, 2004 (filed
with the Commission on August 9, 2004): 4.1.1 through 4.6 inclusive.
4. 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.
5. Letter of Credit Agreement, dated as of September 30, 2004, between the
Company, as borrower, and Bayerische Landesbank, as issuer.
6. Amendment, dated as of September 30, 2004, to the Letter of Credit
Agreement, dated as of July 16, 2003, among the Company, as borrower,
certain commercial lending institutions, as lenders, and The Bank of Nova
Scotia, as administrative agent.
ANNEX 1
CALPINE CORPORATION
LOCK-UP AGREEMENT
September 27, 2004
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Deutsche Bank Securities Inc.
60 Wall Street
New York, NY 10005-2858
Ladies and Gentlemen:
The undersigned understands that Deutsche Bank Securities Inc. ("DBSI" or
the "Underwriter"), have entered into an Underwriting Agreement dated September
27, 2004 (the "Underwriting Agreement") with Calpine Corporation (the
"Company"), providing for the offering of the Company's Contingent Convertible
Notes due 2014 (the "Securities"), convertible into cash and shares of the
Company's common stock, par value $0.001 per share (the "Common Stock").
In consideration of the agreement by the Underwriter to purchase and
resell the Securities, and of other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the undersigned will not,
directly or indirectly offer, sell, pledge, contract to sell, (including any
short sale), grant any option to purchase or otherwise dispose of any shares of
Common Stock (including, without limitation, shares of Common Stock which may be
deemed to be beneficially owned by the undersigned on the date hereof in
accordance with the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock which may be issued upon exercise of a stock
option or warrant and any other security convertible into or exchangeable for
Common Stock) or enter into any Hedging Transaction (as defined below) relating
to the Common Stock (each of the foregoing referred to as a "Disposition") for a
period from the date of the Underwriting Agreement until and including the date
that is 90 days after the date of the prospectus relating to the Securities (the
"Lock-Up Period"). The foregoing restriction is expressly intended to preclude
the undersigned from engaging in any Hedging Transaction or other transaction
which is designed to or reasonably expected to lead to or result in a
Disposition during the Lock-Up Period even if the securities would be disposed
of by someone other than the undersigned. "Hedging Transaction" means any short
sale (whether or not against the box) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to
any security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from the Common Stock.
Notwithstanding the foregoing, the undersigned may offer, sell, pledge,
contract to sell, (including any short sale), grant any option to purchase or
otherwise dispose of or enter into Hedging Transactions in respect of (a) shares
of Common Stock acquired in open market transactions by the undersigned after
the date of the prospectus relating to the Securities, and (b) any or all of the
shares of Common Stock or other Company securities if the transfer is by (i)
gift, will or intestacy, or (ii) distribution to partners, members or
shareholders of the undersigned; provided, however, that in the case of a
transfer pursuant to clause (c) above, it shall be a condition to the transfer
that the transferee execute an agreement stating that the transferee
is receiving and holding the securities subject to the provisions of this letter
agreement. In addition, notwithstanding the foregoing, the undersigned may
offer, sell, pledge, contract to sell, (including any short sale), grant any
option to purchase or otherwise dispose of any shares of Common Stock or enter
into any Hedging Transaction pursuant to plans under Rule 10b5-1 of the
Securities Exchange Act of 1934.
The undersigned (i) agrees and consents that with respect to any shares of
Common Stock for which the undersigned is the record holder, stop transfer
instructions may be entered with the Company's transfer agent with respect to
such Common Stock on the transfer books and records of the Company and (ii) with
respect to any shares of Common Stock for which the undersigned is the
beneficial holder but not the record holder, hereby instructs the record holder
of such securities to cause the transfer agent for the Company to note stop
transfer instructions with respect to such securities on the transfer books and
records of the Company.
The undersigned hereby agrees that, to the extent that the terms of this
letter agreement conflict with or are in any way inconsistent with any
registration rights agreement to which the undersigned and the Company are a
party during the Lock-Up Period, this letter agreement supersedes such
registration rights agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this letter agreement. All authority
herein conferred or agreed to be conferred shall survive the death or incapacity
of the undersigned and any obligations of the undersigned shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Notwithstanding anything herein to the contrary, if the closing of the
above referenced offering has not occurred prior to September 30, 2004, this
agreement shall be of no further force or effect.
Signature:
--------------------------------
Print Name:
--------------------------------