PREFERRED SECURITIES GUARANTEE AGREEMENT
CALENERGY COMPANY, INC.
Dated as of April 10, 1996
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of April 10, 1996, is executed and delivered
by CalEnergy Company, Inc., a Delaware corporation (the "Guarantor"), and The
Bank of New York, a New York banking corporation, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of CalEnergy
Capital Trust, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of April 4, 1996, among the trustees of the
Issuer named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Issuer, the Issuer
is issuing on the date hereof 2,000,000 Preferred Securities, having an
aggregate stated liquidation preference of $100,000,000, designated the 6 1/4%
Convertible Preferred Securities (plus up to an additional 240,000 Preferred
Securities, having an aggregate liquidation preference of $12,000,000, to
cover over-allotments) (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth
herein; and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein) except that if an Event of Default (as
defined in the Indenture (as defined herein)), has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments
under the Common Securities Guarantee are subordinated to the rights of
Holders of Preferred Securities to receive Guarantee Payments under this
Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Preferred Securities Guarantee, unless the context
otherwise requires:
(a) Capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Preferred
Securities Guarantee has the same meaning
throughout;
(c) all references to "the Preferred Securities Guarantee" or
"this Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(d) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee unless
otherwise defined in this Preferred Securities Guarantee or
unless the context otherwise requires; and
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(f) a reference to the singular includes the
plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Person" of a Person means any Person that is authorized
to bind such Person provided, however that the Authorized Officer signing an
Officer's Certificate given pursuant to Section 314(a)(4) of the Trust
Indenture Act shall be the principal executive, financial or accounting
officer of such Person.
"Common Securities" means the convertible common securities
representing common undivided beneficial interests in the assets of the
Issuer.
"Covered Person" means any Holder or beneficial
owner of Preferred Securities.
"Debentures" means the series of convertible junior subordinated
debt securities of the Guarantor designated the 6 1/4% Convertible Junior
Subordinated Deferrable Interest Debentures Due 2016 held by the Property
Trustee of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent
not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Preferred
Securities to the extent the Issuer shall have funds available therefore, (ii)
the amount payable upon redemption to the extent the Issuer has funds
available therefor, with respect to any Preferred Securities called for
redemption by the Issuer, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Debentures to the Holders in exchange for Preferred
Securities as provided
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in the Declaration), the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid Distributions on the Preferred
Securities to the date of payment, to the extent the Issuer shall have funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders upon liquidation of the Issuer (in
either case, the "Liquidation Distribution"). If an event of default under the
Indenture has occurred and is continuing, the rights of holders of the Common
Securities to receive payments under the Common Securities Guarantee are
subordinated to the rights of Holders of Preferred Securities to receive
Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agents of the
Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of April 1, 1996, among
the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee,
and any indenture supplemental thereto pursuant to which the Debentures are to
be issued to the Property Trustee of the Issuer.
"Majority in liquidation preference of the Securities" means,
except as provided by the Trust Indenture Act, Holder(s) of Preferred
Securities, voting separately as a class, representing more than 50% of the
stated liquidation preference (including the stated amount that would be paid
on redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all Preferred
Securities.
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"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that the officer signing the
Certificate has read the covenant or condition and the
definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken upon which the statements or opinions contained in
such Certificate are based;
(c) a statement that, in such officer's opinion, such officer has
made or caused to be made such examination or investigation as is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred
Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, the chairman of the board of directors, the president, any
vice president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant
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treasurer, any trust officer or assistant trust officer or any other officer
of the Preferred Guarantee Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Successor Preferred Guarantee Trustee" means a
successor Preferred Guarantee Trustee possessing the qualifications to act as
Preferred Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee, which are incorporated by reference hereto,
and shall, to the extent applicable, be governed by such provisions; and
(b) if and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control;
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred Guarantee Trustee (i)
within 14 days after January 1 and June 30 of each year, a list, in such form
as the Preferred Guarantee Trustee may reasonably require, of the names and
addresses of the Holders of the Preferred Securities ("List of Holders") as of
such date, and (ii) at any other time, within 30 days of receipt by the
Guarantor of a written request for a List of Holders as
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of a date no more than 14 days before such List of Holders is given to the
Preferred Guarantee Trustee, provided that the Guarantor shall not be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Preferred
Guarantee Trustee by the Guarantor or the Preferred Securities are represented
by one or more Global Securities (as defined in the Indenture). The Preferred
Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture
Act.
SECTION 2.3 Reports by the Preferred
Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Preferred Securities such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Preferred Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred
Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
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SECTION 2.5 Evidence of Compliance with
Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee which relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
The Holders of a Majority in liquidation preference of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every
purpose of this Preferred Securities Guarantee, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 2.7 Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default known to the Preferred Guarantee Trustee, unless such defaults have
been cured before the giving of such notice, provided, that, the Preferred
Guarantee Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers of the Preferred Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests
of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Preferred
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Guarantee Trustee shall have received written notice or a Responsible Officer
charged with the administration of the Declaration shall have obtained actual
knowledge.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifically described in
this Preferred Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee.
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except a Holder of Preferred Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor
Preferred Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Preferred Guarantee
Trustee. The right, title and interest of the Preferred Guarantee Trustee
shall automatically vest in any Successor Preferred Guarantee Trustee, and
such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Preferred Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee
for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are
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specifically set forth in this Preferred Securities Guarantee, and no implied
covenants shall be read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.6), the Preferred Guarantee
Trustee shall exercise such of the rights and powers vested in it by this
Preferred Securities Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions of this
Preferred Securities Guarantee, and the Preferred Guarantee Trustee
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Preferred Securities
Guarantee, and no implied covenants or obligations shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in the case of
any such certificates or opinions that by any provision hereof are
specifically
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required to be furnished to the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Preferred
Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee
Trustee was negligent in ascertaining the per-
tinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation preference of the Preferred Securities at the
time outstanding, relating to the time, method and place of conducting
any proceeding for any remedy available to the Preferred Guarantee
Trustee, or exercising any trust or power conferred upon the Preferred
Guarantee Trustee under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its own funds
or otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers, if
the Preferred Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Preferred Securities
Guarantee or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred
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Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may rely and shall be
fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Preferred Securities
Guarantor contemplated by this Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel
of its selection, and the advice or opinion of such counsel with respect
to legal matters shall be full and complete authorization and protection
in respect of any action taken, suffered or
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omitted by it hereunder in good faith and in accordance with such advice
or opinion. Such counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of the Guarantor's employees. The
Preferred Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent jurisdiction.
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such adequate security and indemnity reasonably
satisfactory to the Preferred Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Preferred
Guarantee Trustee; provided that nothing contained in this Section
3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Preferred
Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the
trusts or powers
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hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the Preferred
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care
by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred Securities, and
the signature of the Preferred Guarantee Trustee or its agents alone
shall be sufficient and effective to perform any such action. No third
party shall be required to inquire as to the authority of the Preferred
Guarantee Trustee to so act or as to its compliance with any of the terms
and provisions of this Preferred Securities Guarantee, both of which
shall be conclusively evidenced by the Preferred Guarantee Trustee's
or its agent's taking such action; and
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of the Preferred
Securities or the Guarantor, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are
received, and (iii) shall be protected in acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it, in any jurisdiction in which it shall be illegal,
or in which the Preferred Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or
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authority available to the Preferred Guarantee Trustee shall be construed
to be a duty.
SECTION 3.3. Not Responsible for Recitals
or Issuance of Guarantee.
The recitals contained in this Preferred Securities Guarantee shall
be taken as the statements of the Guarantor, and the Preferred Guarantee
Trustee does not assume any responsibility for their correctness. The
Preferred Guarantee Trustee makes no representations as to the validity or
sufficiency of this Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guar-
antor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Securities and Exchange Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the
purposes of this Section 4.1(a)(ii), the combined capital and surplus of
such corporation shall be deemed to be its combined
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capital and surplus as set forth in its most recent report of condition
so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation
of Preferred Guarantee Trustee.
(a) Subject to ss. 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with ss. 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.
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(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery of an instrument of removal or resignation, the Preferred
Guarantee Trustee resigning or being removed may petition any court of
competent jurisdiction for appointment of a Successor Preferred Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as
it may deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee
all amounts accrued and payable to the Preferred Guarantee Trustee to the date
of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full
to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Subordination
If an Event of Default (as defined in the Indenture), has occurred
and is continuing, the rights of Holders of the Common Securities to receive
Guarantee Payments under the Common Securities Guarantee are subordinated to
the rights of Holders of Preferred
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Securities to receive Guarantee Payments under this Preferred Securities
Guarantee.
SECTION 5.3 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.4 Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by
reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions, the amount payable upon redemption,
Liquidation Distribution or any other sums payable under the terms of the
Preferred Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of Distributions, the
amount payable upon redemption, Liquidation Distribution or other sum payable
that results from the extension of any interest payment period on the
Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the
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Preferred Securities, or any action on the part of the Issuer granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency
in the Preferred Securities;
(f) the settlement or compromise of any obli-
gation guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.4 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other Person to
give notice to, or obtain consent of, the Guarantor with respect to the
happening of any of the foregoing.
SECTION 5.5 Rights of Holders.
(a) The Holders of a Majority in liquidation preference of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may directly institute a
legal proceeding against the Guarantor to enforce the payment obligations of
the Guarantor under this Preferred Securities Guarantee without first
instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee or any other Person.
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(c) If an Event of Default with respect to the Debentures (an
"Indenture Event of Default"), constituting the failure to pay interest or
principal on the Debentures on the date such interest or principal is
otherwise payable (or in the case of any redemption, the redemption date) has
occurred and is continuing, then a Holder of Preferred Securities may
directly, at any time, institute a proceeding for enforcement of payment to
such Holder of the principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such Holder on or after the respective due date (or redemption
date) specified in the Debentures.
SECTION 5.6 Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of payment
and not of collection.
SECTION 5.7 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Preferred Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Preferred Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.8 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the
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terms of this Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (g), inclusive, of Section
5.4 hereof.
SECTION 5.9 Conversion
The Guarantor acknowledges its obligation to issue and deliver
common stock upon the conversion of the Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if at such
time (i) the Guarantor has exercised its option to defer interest payments on
the Debentures and such deferral is continuing, (ii) the Guarantor
shall be in default with respect to its payment or other obligations under
this Preferred Securities Guarantee or (iii) there shall have occurred and be
continuing any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Indenture, then the
Guarantor (a) shall not declare or pay any dividend on, or make any
distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than
stock dividends paid by the Guarantor which consist of the stock of the same
class as that on which the dividend is being paid), (b) shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Guarantor after the date hereof that
ranks pari passu with or junior to the Debentures and (c) shall not make any
guarantee payments with respect to the foregoing (other than pursuant to this
Preferred Securities Guarantee).
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SECTION 6.2 Ranking.
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right
of payment to all other liabilities of the Guarantor, except any liabilities
that may be made pari passu expressly by their terms, (ii) pari passu with the
most senior preferred or preference stock issued by the Guarantor after the
date hereof and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred or preference stock or Preferred
Security of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination.
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the amount payable upon redemption of all Preferred Securities,
(ii) the distribution of the Guarantor's common stock to the Holders in
respect of the conversion of the Preferred Securities into the Guarantor's
common stock or the dis-
tribution of the Debentures to the Holders of all of the Preferred Securities
or (iii) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing,
this Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred
Securities or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.
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(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except
that an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence
and amount of assets from which Distributions to Holders of Preferred
Securities might properly be paid.
SECTION 8.2 Indemnification.
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(a) The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability or expense including taxes (other than taxes based on the income of
such Indemnified Person) incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration or the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of
this Preferred Securities Guarantee.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees and expenses) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if
it shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.2(a).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit of the
Holders of the Preferred Securities then outstanding. Except in connection
with any merger or consolidation of the Guarantor with or into another entity
or any sale, transfer or lease of all or substantially all of the Guarantor's
assets to another entity as permitted under Article Eight of the Indenture,
the Guarantor may not assign its rights or delegate its obligations under the
Preferred Securities Guarantee without the prior approval
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of the Holders of a Majority in liquidation preference of the Preferred
Securities then outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation preference (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all the outstanding Preferred Securities. The provisions of
Section 12.2 of the Declaration with respect to meetings of Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Preferred Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
The Bank of New York
101 Barclay Street
21 West
Attention: Corporate Trust
Trustee Administration
New York, New York 10286
(b) If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
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Omaha, Nebraska 68131
Attention: Chief Financial Officer
with a copy to: General Counsel
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Preferred Securities Guarantee is solely for the benefit of
the Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
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THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and
year first above written.
CALENERGY COMPANY, INC.,
as Guarantor
By: /s/ Steven A. McArthur
---------------------------
Name: Steven A. McArthur
Title: Senior Vice
President and
General Counsel
THE BANK OF NEW YORK, as
Preferred Guarantee Trustee
By: /s/ Byron Merino
---------------------------
Name: Byron Merino
Title: Assistant Treasurer