AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997
REGISTRATION NO. 333-32821
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CALENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2213782
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CALENERGY CAPITAL TRUST IV
(Exact name of registrant as specified in its charter)
DELAWARE [APPLICATION PENDING]
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CALENERGY CAPITAL TRUST V
(Exact name of registrant as specified in its charter)
DELAWARE [APPLICATION PENDING]
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
CALENERGY CAPITAL TRUST VI
(Exact name of registrant as specified in its charter)
DELAWARE [APPLICATION PENDING]
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NE 68131
(402) 341-4500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALENERGY COMPANY, INC.
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NE 68131
(402) 341-4500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
PETER J. HANLON, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NY 10022-4669
(212) 821-8000
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|__________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(1)(2) PRICE (2) FEE(2)
------------- ------------- --------- ------
Senior Debt Securities and Subordinated Debt
Securities (collectively, "Debt Securities")
of CalEnergy Company, Inc.(3)..................... - - - -
Preferred Stock of CalEnergy Company, Inc.
("Preferred Stock")(4)............................ - - - -
Common Stock of CalEnergy Company, Inc. ("Common
Stock")(5)........................................ - - - -
Convertible Junior Subordinated Debentures of
CalEnergy Company, Inc. for issuance directly or
to CalEnergy Capital Trust IV, CalEnergy Capital
Trust V and CalEnergy Capital Trust VI ("Junior
Subordinated Debentures")(6)...................... - - - -
Convertible Preferred Securities of CalEnergy
Capital Trust IV, CalEnergy Capital Trust V and
CalEnergy Capital Trust VI ("Convertible Preferred
Securities")(6)................................... - - - -
Guarantees of Convertible Preferred Securities of
CalEnergy Capital Trust IV, CalEnergy Capital
Trust V and CalEnergy Capital Trust VI by
CalEnergy Company, Inc.(7)........................ - - - -
Total............................................. $1,500,000,000 100% - $454,545(8)
===========================================================================================================================
(1) In no event will the aggregate maximum offering price of all securities
issued, from time to time, pursuant to this Registration Statement exceed
$1,500,000,000. The proposed maximum offering price per unit will be
determined, from time to time, by the Registrants in connection with the
issuance by the Registrants of the securities registered hereunder. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder. The securities may be sold in U.S.
dollars or the equivalent thereof denominated in one or more foreign
currencies or currency units or composite securities.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
Pursuant to Rule 457(o), which permits the registration fee to be
calculated on the basis of the maximum offering price of all the
securities listed, the table does not specify by each class information
as to the amount to be registered, proposed maximum offering price per
unit or proposed maximum aggregate offering price. The proposed maximum
offering price may be omitted pursuant to General Instruction II-D of
Form S-3 under the Securities Act of 1933, as amended.
(3) Such indeterminate amount of Debt Securities as may from time to time be
issued at indeterminate prices or issuable upon conversion of other Debt
Securities or Preferred Stock registered hereunder.
(4) Such indeterminate number of shares of Preferred Stock as may from time
to time be issued at indeterminate prices or issuable upon conversion of
Debt Securities or other class or series of Preferred Stock registered
hereunder. Shares of Preferred Stock may be issued from time to time in
one or more classes or series.
(5) Such indeterminate number of shares of Common Stock as may from time to
time be issued at indeterminate prices or issuable upon conversion of
Debt Securities, Preferred Stock or Convertible Preferred Securities
registered hereunder, as the case may be.
(6) Such indeterminate amount or number of Convertible Junior Subordinated
Debentures of CalEnergy Company, Inc. and Convertible Preferred
Securities of CalEnergy Capital Trust IV, CalEnergy Capital Trust V and
CalEnergy Capital Trust VI as may from time to time be issued at
indeterminate prices. Convertible Junior Subordinated Debentures may be
issued and sold to CalEnergy Capital Trust IV, CalEnergy Capital Trust V
and CalEnergy Capital Trust VI, in which event such Convertible Junior
Subordinated Debentures may later be distributed to the holders of
Convertible Preferred Securities upon a dissolution of CalEnergy Capital
Trust IV CalEnergy Capital Trust V and CalEnergy Capital Trust VI,
respectively, and the distribution of the assets thereof.
(7) Includes the rights of holders of the Convertible Preferred Securities of
CalEnergy Capital Trust IV, CalEnergy Capital Trust V and CalEnergy
Capital Trust VI under the related Guarantee and back-up undertakings,
consisting of obligations by CalEnergy Company, Inc. to provide certain
indemnities in respect of, and pay and be responsible for certain
expenses, costs, liabilities, and debt of, as applicable, CalEnergy
Capital Trust IV, CalEnergy Capital Trust V and CalEnergy Capital Trust
VI and such other obligations of CalEnergy Company, Inc. set forth in the
related
Amended and Restated Declaration of Trust, the Convertible Junior
Subordinated Debentures Indenture and Supplemental Indentures thereto,
in each case as further described in the Registration Statement. No
separate consideration will be received for any Guarantees of any
back-up undertakings.
(8) Previously paid.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- -------------------------------------------------------------------------------
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses to be
used in connection with offerings of the following securities:
(1) Debt Securities (consisting of Senior Debt Securities and
Subordinated Debt Securities), Preferred Stock and Common
Stock.
(2) Convertible Preferred Securities of CalEnergy Capital Trust
IV, CalEnergy Capital Trust V and CalEnergy Capital Trust
VI, the Convertible Junior Subordinated Debentures of
CalEnergy Company, Inc. and Guarantees by CalEnergy Company,
Inc. of Convertible Preferred Securities issued by CalEnergy
Capital Trust IV, CalEnergy Capital Trust V and CalEnergy
Capital Trust VI.
Each offering of securities made under this Registration Statement
will be made pursuant to one of these Prospectuses, with the specific terms of
the securities to be offered thereby set forth in an accompanying Prospectus
Supplement.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOME
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
Subject to Completion, dated September 18, 1997
PROSPECTUS
$1,500,000,000
CALENERGY COMPANY, INC.
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
CalEnergy Company, Inc. (the "Company") may from time to time offer,
together or separately, (i) shares of its common stock, par value $.0675 per
share ("Common Stock"), (ii) shares of its preferred stock, no par value
("Preferred Stock"), (iii) senior debt securities ("Senior Debt Securities")
and (iv) subordinated debt securities ("Subordinated Debt Securities" and
together with Senior Debt Securities, the "Debt Securities"). The Common
Stock, the Preferred Stock and the Debt Securities are collectively referred
to herein as the "Securities." The Securities in respect of which this
Prospectus is being delivered (the "Offered Securities") may be offered,
separately or together, in separate series, in amounts, at prices and on terms
to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
By separate prospectus, the form of which is included in the
Registration Statement of which this Prospectus forms a part, three Delaware
statutory business trusts (individually, a "CalEnergy Trust" and collectively,
the "CalEnergy Trusts"), which are wholly owned subsidiaries of the Company,
may from time to time severally offer preferred securities guaranteed by the
Company to the extent set forth therein and the Company may offer from time to
time junior subordinated debt securities either directly or to a CalEnergy
Trust. The aggregate public offering price of the securities to be offered by
this Prospectus and such other prospectus shall not exceed $1,500,000,000 (or
its equivalent in one or more foreign currencies, currency units or composite
currencies).
Specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an applicable Prospectus
Supplement, that includes, where applicable, the following: (i) in the case of
Common Stock, the specific designation, number of shares, purchase price and
the rights and privileges thereof, together with any qualifications or
restrictions thereon and any listing on a securities exchange; (ii) in the
case of Preferred Stock, the specific designation, number of shares, purchase
price and the rights, preferences and privileges thereof and any
qualifications or restrictions thereon (including dividends, liquidation
value, voting rights, terms for the redemption, conversion or exchange thereof
and any other specific terms of the Preferred Stock) and any listing on a
securities exchange; and (iii) in the case of the Debt Securities, the
specific designation, aggregate principal amount, authorized denomination,
maturity, premium, or discount, if any, exchangeability, redemption,
conversion, prepayment or sinking fund provisions, if any, interest rate
(which may be fixed or variable), if any, method, if any, of calculating
interest payments and dates for payment thereof, dates on which premium, if
any, will be payable, the right of the Company, if any, to defer payment of
interest on the Debt Securities and the maximum length of such deferral
period, the initial public offering price, any listing on a securities
exchange and other specific terms of the offering. Unless otherwise indicated
in the Prospectus Supplement, the Company does not intend to list any of the
Securities other than the Common Stock on a national securities exchange. Any
Prospectus Supplement relating to any series of Offered Securities will
contain information, where applicable, concerning certain United States
federal income tax considerations for the Offered Securities.
The Common Stock and Preferred Stock and Debt Securities offered
pursuant to this Prospectus may be denominated in U.S. dollars or one or more
foreign currencies, currency units or composite securities to be determined at
or prior to the time of any offering. The Debt Securities offered pursuant to
this Prospectus may consist of bonds, debentures, notes or other evidences of
indebtedness in one or more series and in amounts, at prices and on terms to
be determined at or prior to the time of any such offering. Unless otherwise
disclosed in a Prospectus Supplement, the Company's obligations under the
Senior Debt Securities will be unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest and with all other
existing and future unsecured obligations of the Company. If security for the
Debt Securities is to be provided it will be described in an applicable
Prospectus Supplement. The Company's obligations under the Subordinated Debt
Securities will be subordinated in right of payment to the prior payment in
full of all Senior Debt.
The Offered Securities may be offered directly, through agents
designated from time to time, to or through dealers or to or through
underwriters. Such agents or underwriters may act alone or with other agents
or underwriters. Any such agents, dealers or underwriters will be set forth in
a Prospectus Supplement. If an agent of the Company, or a dealer or
underwriter, is involved in the offering of the Offered Securities, the
agent's commission, dealer's purchase price, underwriter's discount and net
proceeds to the Company, as the case may be, will be set forth in, or may be
calculated from, the Prospectus Supplement. Any underwriters, dealers or
agents participating in the offering may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
FACTORS THAT PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN
ANY OF THE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Offered
Securities unless accompanied by a Prospectus Supplement. Any statement
contained in this Prospectus will be deemed to be modified or superseded by
any inconsistent statement contained in an accompanying Prospectus Supplement.
The date of this Prospectus is , 1997.
-2-
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy and information statements and other information filed by the
Company with the SEC can be inspected and copied at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the SEC's
Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. This Web
site can be accessed at http://www.sec.gov. Such reports, proxy and
information statements and other information can also be inspected at the
offices of the New York Stock Exchange Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the SEC a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules related thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the SEC. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof. Statements contained in this
Prospectus as to the contents of any documents referred to are not necessarily
complete and, in each such instance, are qualified in all respects by
reference to the applicable documents filed with the SEC.
This Prospectus and the periodic filings of the Company under the
Exchange Act contain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). These
forward-looking statements express the beliefs and expectations of management
regarding the Company's future results and performance.
Such statements are based on current expectation and involve a number
of known and unknown risks and uncertainties that could cause the actual
results, performance and/or other achievements of the Company to differ
materially from any expected future results, performance or achievements,
expressed or implied by the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements and any such
statement is qualified by reference to the following cautionary statements. In
connection with the safe harbor provisions of the Reform Act, the Company's
management has identified important factors that could cause actual results to
differ materially from management's expectations. Reference is made to the
Company's Current Report on Form 8-K dated February 25, 1997, incorporated
herein by reference. The Company is not required to publicly release any
changes to these forward-looking statements for events occurring after the
date thereof or to reflect any other unanticipated events.
-3-
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC (File No. 1-9874) are
incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended by the Form 10-K/A filed on April 30, 1997);
(ii) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997 and June 30, 1997;
(iii) the Company's Current Reports on Form 8-K dated December 24,
1996 (as amended by Form 8-K/A dated February 18, 1997), February 25, 1997,
February 26, 1997, March 28, 1997, May 7, 1997, May 19, 1997, July 7, 1997,
July 15, 1997, July 22, 1997, August 6, 1997, August 8, 1997, August 18, 1997,
August 28, 1997, September 9, 1997 and September 16, 1997; and
(iv) the description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed under the Exchange Act and
any amendments or reports filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document which is also incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except
as so modified or superseded.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, on the written or
oral request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated into this Prospectus
by reference, other than exhibits to such documents. Requests for such copies
should be directed to Investor Relations, CalEnergy Company, Inc., 302 South
36th Street, Suite 400, Omaha, Nebraska 68131, telephone number (402)
341-4500.
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus or a Prospectus Supplement, in connection with the offering
contemplated hereby and thereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. This Prospectus and a Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any Securities other than the Securities to which they relate and do not
constitute an offer to sell or a solicitation of an offer to buy any
Securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus or a Prospectus Supplement, nor any sale made hereunder or
thereunder, shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof or
thereof or that the information contained or incorporated by reference herein
or therein is correct as of any time subsequent to such date.
-4-
RISK FACTORS
Prospective investors should carefully consider the risk factors set
forth below, in addition to the other information appearing in or incorporated
by reference in this Prospectus. This Prospectus contains or incorporates by
reference forward-looking statements which involve risks and uncertainties.
The Company's actual results in the future could differ significantly from the
results discussed or implied in the forward-looking statements. Factors that
could cause or contribute to such a difference include, but are not limited
to, the following risk factors and risk factors described in the documents
incorporated herein by reference. The term "Company" refers to CalEnergy
Company, Inc. and its operating subsidiaries, unless the context otherwise
requires.
ACQUISITIONS. The Company's recent growth has been achieved, in part,
through strategic acquisitions in the energy industry which complement and
diversify the Company's existing business. The Company intends to continue to
pursue an aggressive acquisition strategy for the foreseeable future. The
Company has recently completed several major acquisitions, including the
acquisition of Magma Power Company ("Magma"), Falcon Seaboard Resources, Inc.
("Falcon Seaboard") and Northern Electric plc ("Northern"). The Company has
successfully integrated Magma and Falcon Seaboard and is in the process of
integrating Northern. See "The Company." The Company's ability to pursue
acquisition opportunities successfully will depend on many factors, including,
among others, the Company's ability to (i) identify suitable acquisition
opportunities, (ii) consummate the acquisition, including obtaining any
necessary financing, and (iii) successfully integrate acquired businesses. The
integration of acquired businesses entails numerous risks, including, among
others, the risk of diverting management's attention from the day-to-day
operations of the Company, the risk that the acquired businesses will require
substantial capital and financial investments and the risk that the
investments will fail to perform in accordance with expectations. There can be
no assurance that acquisition opportunities, if any, can be consummated on
favorable terms or that the Company's integration efforts will be successful.
HOLDING COMPANY STRUCTURE. As a holding company, the Company is
dependent on the earnings and cash flows of, and dividends from, its
subsidiaries and joint ventures to generate the funds necessary to meet its
obligations, including the payment of principal, interest and premium, if any,
on the Debt Securities. The availability of distributions from the Company's
subsidiaries and projects is subject to the satisfaction of various covenants
and conditions contained in the applicable subsidiaries' and joint ventures'
financing documents and to certain utility regulatory restrictions.
Furthermore, the Company is structuring other project financing arrangements
containing, and anticipates that future project level financings will contain,
certain conditions and similar restrictions on the distribution of cash to the
Company.
The Company's subsidiaries, partnerships and joint ventures are separate and
distinct legal entities and have no obligation, contingent or otherwise, to
pay any amounts due pursuant to the Debt Securities or to make any funds
available therefor, whether by dividends, loans or other payments, and do not
guarantee the payment of interest on, premium, if any, or principal of the
Debt Securities. Any right of the Company to receive any assets of any of its
subsidiaries or other affiliates upon any liquidation or reorganization of the
Company (and the consequent right of the holders of the Debt Securities to
participate in the distribution of, or to realize proceeds from, those assets)
will be effectively subordinated to the claims of any such subsidiary's or
other affiliate's creditors (including trade creditors and holders of debt
issued by such subsidiary or other affiliate). At June 30, 1997 the Company
had approximately $3,230.4 million of total consolidated indebtedness, which
included approximately $2,276.5 million of the Company's proportionate share
of joint venture and subsidiary debt, which would be effectively senior to the
Debt Securities, substantially all of which would have been secured by the
assets of such joint ventures and subsidiaries, and $283.9 million of
subordinated debt issued in connection with Capital Trust Convertible
Preferred Securities. As of June 30, 1997, on a pro forma basis, after giving
effect to the consummation of the August 1997 offering of another series of
Capital Trust Convertible Preferred Securities, there would have been
approximately $3,230.4 million of total consolidated indebtedness, which
included approximately $2,276.5 million of the Company's proportionate share
of joint venture and subsidiary debt,
-5-
which would be effectively senior to the Company's Debt Securities.
LEVERAGE. The Company is substantially leveraged. At June 30, 1997,
the Company's total consolidated liabilities were $4,796.8 million (excluding
deferred income), its obligations in respect of the Trust Convertible
Preferred Securities and the TIDES Securities were $283.9 million, its total
consolidated assets were $6,275.1 million and its total stockholders' equity
was $917.9 million. As of such date, on a pro forma basis, after giving effect
to the consummation of the August 1997 offering of the 6 1/2% Convertible
Preferred Securities, the Company's total consolidated liabilities would have
been $4,796.8 million (excluding deferred income), its obligations in respect
of the Trust Convertible Preferred Securities, the TIDES Securities and the 6
1/2% Convertible Preferred Securities would have been $553.9 million, its
total consolidated assets would have been $6,545.1 million and its
stockholders' equity would have been $917.9 million. The Company's leverage
level presents the risk that the Company might not generate sufficient cash to
service the Company's indebtedness, including the Debt Securities or Preferred
Stock, or that its leveraged capital structure could limit its ability to
finance future acquisitions, develop additional projects, compete effectively
and operate successfully under adverse economic conditions. The Company is
also a holding company which derives substantially all of its operating income
from its subsidiaries and joint ventures. Distributions from such entities are
restricted under various covenants and conditions contained in financing
documents by which they are bound and the stock or assets of substantially all
of such entities is directly or indirectly pledged, to secure various of such
financings or such entities are otherwise subject to regulatory restrictions.
See "Risk Factors--Holding Company Structure."
NORTHERN'S REGULATORY ENVIRONMENT. Northern's electricity
distribution and supply are subject to extensive regulation in the United
Kingdom.
Price Regulation of Distribution. Revenue from Northern's
distribution business is controlled by a formula (the "Distribution Price
Control Formula") which determines the maximum average price per unit of
electricity (expressed in kilowatt ("kW") hours, a "unit") that a regional
electricity company (a "REC") in the United Kingdom may charge. The
Distribution Price Control Formula is expected to have a five year duration
and is subject to review by the Director General of Electricity Supply (the
"Regulator") at the end of each five-year period and at other times in the
discretion of the Regulator. At each review, the Regulator can propose
adjustments to the Distribution Price Control Formula. In July 1994, a review
resulted in a 17% reduction in allowed distribution income compared to the
original formula, before allowing for inflation, effective April 1, 1995. In
July 1995, a further review of distribution prices was concluded by the
Regulator for fiscal years 1997 to 2000. As a result of this further review,
Northern's allowed distribution from income was reduced by a further 11%,
before allowing for inflation, effective April 1, 1996. There can be no
assurance that any further price reviews by the Regulator will not have a
material adverse effect on the Company's results of operations.
Competition in Supply. Northern's supply business is also subject to
price control and is being progressively opened to competition. Northern
currently has an exclusive right, subject to price cap regulation, to supply
customers in its authorized area with a maximum demand of not more than 100 kW
("Franchise Supply Customers"). The market for customers with a maximum demand
above 1 megawatt ("MW") has been open to competition for suppliers of
electricity since privatization while the market for customers with a maximum
demand above 100 kW ("Non-Franchise Supply Customers") became competitive in
April 1994. The final stage of this process is expected to occur on March 31,
1998, when the exclusive right to supply Franchise Supply Customers is
scheduled to end. There can be no assurance that competition among suppliers
of electricity will not have a material adverse effect on the Company's
results of operations.
Pool Purchase Price Volatility. Northern's supply business to
Non-Franchise Supply Customers generally involves entering into fixed price
contracts to supply electricity to its customers. Northern obtains the
electricity to satisfy its obligations under such contracts primarily by
purchases from the wholesale trading
-6-
market for electricity in England and Wales (the "Pool"). Because the price of
electricity purchased from the Pool can be volatile, to the extent that
Northern purchases electricity from the Pool, Northern is exposed to risk
arising from differences between the fixed price at which it sells and the
fluctuating prices at which it purchases electricity, unless it can
effectively hedge such exposure. Northern's ability to manage such risk at
acceptable levels will depend, in part, on the specifics of the supply
contracts that Northern enters into, Northern's ability to implement and
manage an appropriate hedging strategy and the development of an adequate
market for hedging instruments. There can be no assurance that this risk will
be effectively mitigated.
Change in Government Policy. In the general election held in the
United Kingdom on May 1, 1997, the Labour Party won a majority of seats in the
United Kingdom Parliament. On July 31, 1997, the United Kingdom Parliament
passed the windfall tax to be levied on privatized utilities which will result
in a third quarter charge to net income of approximately $136 million. See the
Company's Current Report on Form 8-K dated July 7, 1997, incorporated herein
by reference. There can be no assurance that other possible changes in tax or
utility regulation by the United Kingdom government, by whichever party it is
controlled, would not have a material adverse effect on the Company's results
of operations.
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new energy projects, both domestically and
internationally, the completion of any of which is subject to substantial
risk. Development can require the Company to expend significant sums for
preliminary engineering, permitting, fuel supply, resource exploration, legal
and other expenses in preparation for competitive bids which the Company may
not win or before it can be determined whether a project is feasible,
economically attractive or capable of being financed. Successful development
and construction is contingent upon, among other things, negotiation on terms
satisfactory to the Company of engineering, construction, fuel supply and
power sales contracts with other project participants, receipt of required
governmental permits and consents and timely implementation of construction.
Further, there can be no assurance that the Company, which is substantially
leveraged, will obtain access to the substantial debt and equity capital
required to continue to develop and construct electric power projects or to
refinance projects. The future growth of the Company is dependent, in large
part, upon the demand for significant amounts of additional energy and the
Company's ability to obtain contracts to supply portions of this demand. There
can be no assurance that development efforts on any particular project, or the
Company's efforts generally, will be successful. In this regard, reference is
made to certain uncertainties associated with the Company's Casecnan Project
as described in the Company's Current Reports on Form 8-K dated May 20, 1997
and August 14, 1997, incorporated herein by reference.
UNCERTAINTIES RELATED TO DOING BUSINESS OUTSIDE THE UNITED STATES.
The Company has various projects under construction outside the United States
and a number of projects under award outside the United States. The financing
and development of projects outside the United States entail significant
political and financial risks (including, without limitation, uncertainties
associated with privatization efforts in the countries involved, currency
exchange rate fluctuations, currency repatriation restrictions, changes in
law or regulation, change in government policy, political instability, civil
unrest and expropriation) and other structuring issues that have the potential
to cause substantial delays in respect of or material impairment of the value
of the project being developed, which the Company may not be capable of fully
insuring against. The uncertainty of the legal environment in certain foreign
countries in which the Company is developing and may develop or acquire
projects could make it more difficult for the Company to enforce its rights
under agreements relating to such projects. In addition, the laws and
regulations of certain countries may limit the ability of the Company to hold
a majority interest in some of the projects that it may develop or acquire.
The Company's international projects may, in certain cases, be terminated by
the applicable foreign governments. Furthermore, the central bank of any such
country may have the authority in certain circumstances to suspend, restrict
or otherwise impose conditions on foreign exchange transactions or to approve
distributions to foreign investors. Although the Company may structure certain
power purchase agreements and other project revenue agreements to provide for
payments to be made in, or indexed to, United States dollars or a currency
freely convertible into United States dollars, there can be no assurance that
the Company will be able to achieve this structure in all cases or that a power
purchaser or other customer will be able to obtain sufficient dollars or other
hard currency or that available dollars will be allocated to pay such
obligations. In addition, the Company's investment in Northern and any
dividends or
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distributions of earnings in respect of such investment, may be significantly
affected by fluctuations in the exchange rate between the United States dollar
and the British pound. Although the Company expects to enter into certain
transactions to hedge risks associated with exchange rate fluctuations, there
can be no assurance that such transactions will be successful in reducing such
risks.
EXPLORATION, DEVELOPMENT AND OPERATION UNCERTAINTIES OF GEOTHERMAL
RESOURCES. Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the
geographic area and sustainable output of geothermal reservoirs can only be
estimated and cannot be definitively established. There is, accordingly, a
risk of an unexpected decline in the capacity of geothermal wells and a risk
of geothermal reservoirs not being sufficient for sustained generation of the
electrical power capacity desired. In addition, geothermal power production
poses unusual risks of seismic activity. Accordingly, there can be no
assurance that earthquake, property damage or business interruption insurance
will be adequate to cover all potential losses sustained in the event of
serious seismic disturbances or that such insurance will be available on
commercially reasonable terms. The success of a geothermal project depends on
the quality of the geothermal resource and operational factors relating to the
extraction of the geothermal fluids involved in such project. The quality of a
geothermal resource is affected by a number of factors, including the size of
the reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of
lower-temperature fluid into the producing zone. An incorrect estimate by the
Company of the quality of a geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company's results of operations.
In addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of resource
operating factors. Production and injection wells can require frequent
maintenance or replacement. Corrosion caused by high-temperature and
high-salinity geothermal fluids may compel the replacement or repair of
certain equipment, vessels or pipelines. New production and injection wells
may be required for the maintenance of operating levels, thereby requiring
substantial capital expenditures.
GENERAL OPERATING UNCERTAINTIES. The operation of a power plant
involves many risks, including the breakdown or failure of power generation
equipment, pipelines, transmission lines or other equipment or processes, fuel
interruption, and performance below expected levels of output or efficiency.
Each facility may depend on a single or limited number of entities to purchase
electricity or thermal energy, to supply water, to supply gas, to transport
gas, to dispose of wastes or to wheel electricity. The failure of any such
purchasing utility, steam host, water or gas supplier, gas transporter,
wheeling utility or other relevant project participant to fulfill its
contractual obligations could have a material adverse impact on the Company.
FUEL SUPPLY OPERATIONS. The primary fuel source for certain of the
Company's projects is natural gas and a substantial portion of the operating
expenses of such facilities consists of the costs of obtaining natural gas
through gas supply agreements and transporting that gas to the projects under
gas transportation agreements. Although the Company believes that it has
contracted for natural gas supply and transportation in sufficient quantities
to satisfy the needs of its projects, the gas suppliers are not required in
all cases to provide dedicated reserves in support of their contractual
obligations. Unless the gas projects were able to obtain substitute volumes of
natural gas including the requisite transportation services, for such volumes
at a price not materially higher than the sum of the contract price under the
existing gas supply agreements and any damages paid by the supplier for
failure to deliver, the sustained failure of a supplier to deliver natural gas
in accordance with its contract could have a material adverse effect on the
cash flows to the Company. In addition, under certain gas supply contracts the
Company is obligated to pay for a certain minimum quantity of natural gas even
if it cannot utilize it. The Company intends to manage its requirements for
contract volumes under the gas supply agreements so as to meet the minimum
take requirements through a combination of utilization of nominated volumes in
operations and resales of the remainder of the volumes to third-party
customers, if necessary.
-8-
Finally, the state, federal and Canadian regulatory authorities that have
jurisdiction over natural gas transportation have the right to modify aspects
of the rates, terms and conditions of those contracts. It is possible that
such a modification could materially increase the fuel transportation costs of
the projects or give the transporter a right to terminate or suspend or
decrease its performance under its contract.
PRESENT DEPENDENCE ON LARGE CUSTOMER; CONTRACT UNCERTAINTIES. The
Company currently relies on long-term power purchase "Standard Offer No. 4"
contracts (each, an "SO4 Agreement") with a large customer, Southern
California Edison Company ("Edison"), to generate a substantial portion of its
operating revenues. Any material failure by Edison to fulfill its contractual
obligations under such contracts is likely to have a material adverse effect
on the Company's results of operations. Each of the Company's SO4 Agreements
provides for both capacity payments and energy payments for a term of between
20 and 30 years. During the first ten years after achieving firm operation,
energy payments under each SO4 Agreement are based on a pre-set schedule.
Thereafter, while the basis for the capacity payment remains the same, the
required energy payment is Edison's then-current published avoided cost of
energy ("Avoided Cost of Energy") as determined by the California Public
Utility Commission ("CPUC"). The initial ten-year period expires in August
1997 for the Company's Navy I Project, March 1999 for its BLM Project and
January 2000 for its Navy II Project, which three projects comprise the Coso
Project in California (the "Coso Project"). Such ten-year period expired in
1996 with respect to one of the eight geothermal plants in the Imperial Valley
in California ("Imperial Valley Projects") and expires in 1999 for three of
its Imperial Valley Projects and in 2000 for the remaining two Imperial Valley
Projects that operate under SO4 Agreements.
Estimates of Edison's future Avoided Cost of Energy vary
substantially in any given year. The Company cannot predict the likely level
of Avoided Cost of Energy prices under its SO4 Agreements with Edison at the
expiration of the fixed-price periods. Edison's Avoided Cost of Energy as
determined by the CPUC is currently substantially below the current scheduled
energy prices under the Company's respective SO4 Agreements and is currently
expected to remain so. For the year ended December 31, 1996, the time
period-weighted average of Edison's Avoided Cost of Energy was 2.5 cents per
kWh, compared to the time period-weighted average for the year ended December
31, 1996 selling prices for energy of approximately 11.3 cents per kWh for the
Company. Thus, the revenues generated by each of the Company's facilities
operating under SO4 Agreements are likely to decline significantly after the
expiration of the applicable fixed price period.
COMPETITION AND DOMESTIC DEREGULATION; INDUSTRY RESTRUCTURING. The
international power production market is characterized by numerous strong and
capable competitors, many of which have more extensive and more diversified
developmental or operating experience (including international experience) and
greater financial resources than the Company. Many of these competitors also
compete in the domestic market. Further, in recent years, the domestic power
production industry has been characterized by strong and increasing
competition with respect to the industry's efforts to obtain new power sales
agreements, which has contributed to a reduction in prices offered to
utilities. In that regard, many utilities often engage in "competitive bid"
solicitations to satisfy new capacity demands. In the domestic market,
competition is expected to increase as the electric utility industry becomes
deregulated. In addition, recent deregulation and industry restructuring
activity may cause certain utilities or other contract parties to attempt to
renegotiate contracts or otherwise fail to perform their contractual
obligations, which in turn could adversely affect the Company's results of
operations. In particular, the state of California has adopted a bill to
restructure the electric industry by providing for a phased-in competitive
power generation industry, with a power pool and an independent system
operator, and for direct access to generation for all power purchasers outside
the power exchange under certain circumstances. Although the bill contemplates
that existing qualifying facility power sales contracts will be honored, and
all of the Company's California projects are qualifying facilities, until the
new system is fully implemented, it is impossible to predict what impact, if
any, it may have on the operations of those projects.
IMPACT OF ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS. The Company is
subject to a number of environmental and other laws and regulations affecting
many aspects of its present and future operations, including the disposal of
various forms of waste, the construction or permitting of new facilities, and
the drilling
-9-
and operation of new and existing wells. Such laws and regulations generally
require the Company to obtain and comply with a wide variety of licenses,
permits and other approvals. The Company also remains subject to a number of
complex and stringent laws and regulations that both public officials and
private individuals may seek to enforce. There can be no assurance that
existing regulations will not be revised or that new regulations will not be
adopted or become applicable to the Company which could have an adverse impact
on its operations. The implementation of regulatory changes imposing more
comprehensive or stringent requirements on the Company, which would result in
increased compliance costs, could have a material adverse effect on the
Company's results of operations. In addition, regulatory compliance for the
construction of new facilities is a costly and time-consuming process, and
intricate and rapidly changing environmental regulations may require major
expenditures for permitting and create the risk of expensive delays or
material impairment of project value if projects cannot function as planned
due to changing regulatory requirements or local opposition.
The Public Utility Regulatory Policies Act of 1978, as amended
("PURPA"), and the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), are two of the laws (including the regulations thereunder) that
affect the Company's operations. PURPA provides to qualifying facilities
("QFs") certain exemptions from federal and state laws and regulations,
including organizational, rate and financial regulation. PUHCA regulates
public utility holding companies and their subsidiaries. The Company is not
and will not be subject to regulation as a holding company under PUHCA as long
as the domestic power plants it owns are QFs under PURPA or are exempted as
exempt wholesale generators ("EWGs"), and so long as its foreign utility
operations are exempted as EWGs or foreign utility companies or are otherwise
exempted under PUHCA. QF status is conditioned on meeting certain criteria,
and would be jeopardized, for example, in the case of the Company's
cogeneration facilities, by the loss of a steam customer or reduction of steam
purchases below the amount required by PURPA. The Company's four cogeneration
facilities have steam sales agreements with existing industrial hosts which
agreements must be maintained in effect or replaced in order to maintain QF
status. In the event the Company were unable to avoid the loss of such status
for one of its facilities, such an event could result in termination of a
given project's power sales agreement and a default under the project
subsidiary's project financing agreements.
Currently, Congress is considering proposed legislation that would
amend PURPA by eliminating the requirement that utilities purchase electricity
from qualifying facilities at prices based on Avoided Cost of Energy. The
Company does not know whether such legislation will be passed or what form it
may take. The Company believes that if any such legislation is passed, it
would apply to new projects only and thus, although potentially impacting the
Company's ability to develop new domestic projects, it would not affect the
Company's existing qualifying facilities. There can be no assurance, however,
that any legislation passed would not adversely impact the Company's existing
domestic projects.
In addition, many states are implementing or considering regulatory
initiatives designed to increase competition in the domestic power generation
industry and increase access to electric utilities' transmission and
distribution systems for independent power producers and electricity
consumers. On September 1, 1997, the California legislature adopted an
industry restructuring bill that would provide for a phased-in competitive
power generation industry with a power pool and independent system operator
and also would permit direct access to generation for all power purchasers
outside the power exchange under certain circumstances. Under the bill,
consistent with the requirements of PURPA, existing qualifying facilities
power sales agreements would be honored. The Company cannot predict the final
form or timing of the proposed industry restructuring or the results of its
operations.
The structure of such federal and state energy regulations have in
the past, and may in the future, be the subject of various challenges and
restructuring proposals by utilities and other industry participants. The
implementation of regulatory changes in response to such changes or
restructuring proposals, or otherwise imposing more comprehensive or stringent
requirements on the Company, which would result in increased compliance costs,
could have a material adverse effect on the Company's results of operations.
-10-
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the
Company's 1996 Stock Option Plan (the "1996 Plan"), as of June 30, 1997, the
Company had outstanding various options to its officers, directors and
employees for the purchase of 4,859,668 shares of Common Stock. All of the
shares of Common Stock issuable upon exercise of said options have been
registered pursuant to registration statements on Form S-8, and, when fully
vested, are available for immediate resale. Sales of substantial amounts of
Common Stock or the availability of Common Stock for sale, could have an
adverse impact on the market price of the Common Stock and on the Company's
ability to raise additional capital through the sale of Common Stock.
LACK OF PUBLIC MARKET FOR THE DEBT SECURITIES AND THE PREFERRED
STOCK. There is no existing public trading market for the Debt Securities and
the Preferred Stock and there can be no assurance regarding the future
development of a market for either the Debt Securities or the Preferred Stock,
or the ability of holders of such securities to sell their Debt Securities
and/or Preferred Stock or the price at which such holders may be able to sell
their Securities. If such a market were to develop, the Debt Securities and/or
Preferred Stock could trade at prices that may be higher or lower than their
initial offering price depending on many factors, including prevailing
interest rates, the price of Common Stock, the Company's operating results and
the market for similar securities. Historically, the market for non-investment
grade debt has demonstrated substantial volatility in the prices of securities
similar to the Debt Securities. There can be no assurance that the future
market for the Debt Securities will not be subject to similar volatility.
-11-
THE COMPANY
GENERAL
CalEnergy Company, Inc. (the "Company") is a fast-growing global
power company whose goal is to be one of the leading providers of low cost
energy services throughout the world as electricity and gas markets privatize
or deregulate. The Company was founded in 1971 and, through its subsidiaries,
manages and owns interests in over 6,000 MW of power generation facilities in
operation, construction and development worldwide, currently operates 20
generating facilities and also supplies and distributes electricity to 1.5
million customers. In addition, through its recently acquired subsidiary,
Northern Electric plc ("Northern"), the Company is engaged in the distribution
and supply of electricity to approximately 1.5 million customers primarily in
northeast England as well as the generation and supply of electricity
(together with other related business activities) throughout England and
Wales.
The Company's Common Stock is traded on the New York, Pacific and
London Stock Exchanges. As of June 30, 1997, PKS was an approximate 27%
stockholder of the Company (on a fully diluted basis). PKS is a large
employee-owned construction, mining and telecommunications company with
approximately $3.0 billion in revenues in 1996. PKS is one of the largest
construction companies in North America and has been in the construction
business since 1884.
------------------------------------------------------
The principal executive offices of the Company are located at 302
South 36th Street, Suite 400, Omaha, Nebraska 68131 and its telephone number
is (402) 341-4500. The Company was incorporated in 1971 under the laws of the
State of Delaware.
-12-
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to
fixed charges on a historical basis for each of the five years in the period
ended December 31, 1996 and for the six months ended June 30, 1996 and 1997.
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to
Fixed Charges......................... 3.2 2.8 1.7 1.5 1.6 1.4 1.7
For purposes of computing historical ratios of earnings to fixed
charges, earnings are divided by fixed charges. "Earnings" represent the
aggregate of (a) the pre-tax income of the Company, including its
proportionate share of the pre-tax income of the Coso Project and excluding
the equity in loss of a non-consolidated subsidiary, and (b) fixed charges,
less capitalized interest. "Fixed charges" represent interest (whether
expensed or capitalized), amortization of deferred financing and bank fees,
and the portion of rentals considered to be representative of the interest
factor (one-third of lease payments) and preferred stock dividend requirements
of majority owned subsidiaries.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement
accompanying this Prospectus, proceeds from the sale of the Offered Securities
ultimately will be used by the Company to make equity investments in future
domestic and international energy projects, to fund possible project or
Company acquisitions, for the repayment of debt or for other general corporate
purposes, and initially may be temporarily invested in short-term securities.
-13-
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject
to, and qualified in its entirety by, the Company's Restated Certificate of
Incorporation, as amended (the "Restated Certificate of Incorporation"), and
the Company's By-Laws, as amended (the "By-Laws"), and by the provisions of
applicable law. The authorized capital stock of the Company consists of
180,000,000 shares of Common Stock, par value $0.0675 per share, and 2,000,000
shares of Preferred Stock, no par value. This summary contains a description
of certain general terms of the Common Stock and the Preferred Stock to which
any Prospectus Supplement may relate. Certain terms of any Common Stock or any
series of Preferred Stock offered by a Prospectus Supplement will be described
in the Prospectus Supplement relating thereto, including the number of shares,
offered, any initial offering price, and market price and dividend
information. If so indicated in the Prospectus Supplement, the terms of any
series may differ from the terms set forth below.
COMMON STOCK
At June 30, 1997, there were 63,668,907 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders.
Holders of the Common Stock vote together as a single class on all matters.
Subject to preferences that may be applicable to any outstanding Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. The outstanding shares of Common Stock are fully
paid and nonassessable. The Common Stock will, when issued against payment
therefor, be fully paid and nonassessable.
On December 1, 1988, the Company distributed a dividend of one
Preferred Share Purchase Right (a "Right") for each outstanding share of
Common Stock. The Rights are not exercisable until ten days after a person or
group, without prior Board approval, acquires, or has the right to acquire,
beneficial ownership of 20% or more of the Common Stock or announces a tender
or exchange offer for 30% or more of the Common Stock. Each Right entitles the
holder to purchase one one-hundredth of a share of Series A Junior Preferred
Stock, no par value ("Series A Preferred Stock"), for $52. The Rights may be
redeemed by the Board of Directors up to ten days after an event triggering
the distribution of certificates for the Rights. The Rights will expire,
unless previously redeemed or exercised, on November 30, 1998. The Rights are
automatically attached to, and trade with, each share of Common Stock.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,000,000
shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series, without any further
action by the stockholders. The issuance of shares of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of shares of
Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. The Company has no present plans to issue any additional
shares of Preferred Stock. See "Description of Preferred Stock."
RESTATED CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS AFFECTING CHANGE
IN CONTROL
The Restated Certificate of Incorporation and the By-Laws include
certain provisions that are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and that may have
the effect of delaying, deterring or preventing a future takeover or change in
control of the Company, unless such takeover or change in control is approved
by the Board of Directors. Such provisions may also
-14-
render the removal of the directors and management more difficult. Such
provisions include a classified Board of Directors divided into three classes
serving staggered three-year terms, prohibit stockholders of the Company from
taking action by written consent, require the affirmative vote of at least
66-2/3% of the outstanding shares of stock of the Company entitled to vote
thereon to adopt, repeal, alter, amend or rescind the By-Laws, and require
that special meetings of stockholders be called only by the Board of Directors
or the Chief Executive Officer. In addition to the foregoing, the Board of
Directors has adopted a Stockholder Rights Plan, which provided for a dividend
of one Right for each outstanding share of Common Stock. See "--Common Stock."
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law ("Section 203"). Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that
such stockholder became an interested stockholder, unless (i) the corporation
has elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction
in which the stockholder became an interested stockholder or the business
combination was approved by the board of directors of the corporation before
the other party to the business combination became an interested stockholder,
(iii) upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the commencement of the transaction
(excluding voting stock owned by directors who are also officers or held in
employee benefit plans in which the employees do not have a confidential right
to tender or vote stock held by the plan) or (iv) the business combination was
approved by the board of directors of the corporation and ratified by
two-thirds of the voting stock which the interested stockholder did not own.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an "interested stockholder's" percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with its affiliates and associates, owns (or, within three years prior, did
own) 15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.
-15-
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the shares of Preferred
Stock that may be offered by the Company sets forth certain general terms and
provisions of the Preferred Stock to which any Prospectus Supplement may
relate. Certain other terms of any series of Preferred Stock and the terms of
any related option, put or right of the Company to require the holder of any
other Security offered to also acquire shares of Preferred Stock will be
specified in the applicable Prospectus Supplement. If so specified in the
applicable Prospectus Supplement, the terms of any series of Preferred Stock
may differ from the terms set forth below. The description of the terms of the
Preferred Stock set forth below and in any Prospectus Supplement is
necessarily a summary thereof and is qualified in its entirety by reference to
the Certificate of Designation relating to the applicable series of Preferred
Stock, which Certificate of Designation will be filed as an exhibit to or
incorporated by reference in the Registration Statement of which this
Prospectus forms a part.
GENERAL
Pursuant to the Restated Certificate of Incorporation and the
Delaware General Corporation Law, the Board of Directors of the Company has
the authority, without further stockholder action, to issue from time to time
up to a maximum of up to 2,000,000 shares of Preferred Stock, in one or more
series and for such consideration as may be fixed from time to time by the
Board of Directors of the Company and to fix before the issuance of any shares
of Preferred Stock of a particular series, the designation of such series, the
number of shares to comprise such series, the dividend rate or rates payable
with respect to the shares of such series, the redemption price or prices, if
any, and the terms and conditions of any redemption, the voting rights, any
sinking fund provisions for the redemption or purchase of the shares of such
series, the terms and conditions upon which the shares are convertible or
exchangeable, if they are convertible or exchangeable, and any other relative
rights, preferences and limitations pertaining to such series.
Reference is made to the Prospectus Supplement relating to the
particular series of Preferred Stock offered thereby for specific terms,
including: (i) the designation, stated value and liquidation preference of
such Preferred Stock and the number of shares offered; (ii) the initial public
offering price at which such shares will be issued; (iii) the dividend rate or
rates (or method of calculation), the dividend periods, the date or dates on
which dividends shall be payable and whether such dividends shall be
cumulative or noncumulative and, if cumulative, the dates from which dividends
shall commence to cumulate; (iv) any redemption or sinking fund provisions;
(v) any conversion or exchange provisions; (vi) the procedures for any auction
and remarketing, if any, of such Preferred Stock; (vii) whether interests in
Preferred Stock will be represented by depositary shares; and (viii) any
additional dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock will, when issued against payment therefor, be
fully paid and nonassessable. Holders of Preferred Stock will have no
preemptive rights to subscribe for any additional securities which may be
issued by the Company.
Because the Company is a holding company, its rights and the rights
of holders of its securities, including the holders of Preferred Stock, to
participate in the distribution of assets of any subsidiary of the Company
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors and preferred stockholders, except to
the extent the Company may itself be a creditor with recognized claims against
such subsidiary or a holder of preferred stock of such subsidiary.
DIVIDENDS
The holders of the Preferred Stock will be entitled to receive, when
and as declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends at such rates and on such dates as will be
specified in the applicable Prospectus Supplement. Such rates may be fixed or
variable or both. If variable, the formula used for determining the dividend
rate for each dividend period will be specified in the
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applicable Prospectus Supplement. Dividends will be payable to the holders of
record as they appear on the stock books of the Company on such record dates
as will be fixed by the Board of Directors of the Company. Dividends may be
paid in the form of cash, Preferred Stock (of the same or a different series)
or Common Stock of the Company, in each case as specified in the applicable
Prospectus Supplement.
Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
Preferred Stock for which dividends are noncumulative ("Noncumulative
Preferred Stock"), then the holders of such Preferred Stock will have no right
to receive a dividend in respect of the dividend period relating to such
dividend payment date, and the Company will have no obligation to pay the
dividend accrued for such period, whether or not dividends on such Preferred
Stock are declared or paid on any future dividend payment dates.
The Company shall not declare, pay or set apart for payment any
dividends on any series of its Preferred Stock ranking, as to dividends, on a
parity with or junior to the outstanding Preferred Stock of any series unless
(i) if such series of Preferred Stock has a cumulative dividend ("Cumulative
Preferred Stock"), full cumulative dividends have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on such Preferred Stock for all past dividend
periods and the then current dividend period, or (ii) if such series of
Preferred Stock is Noncumulative Preferred Stock, full dividends for the then
current dividend period on such Preferred Stock have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment. When dividends are not paid in full upon Preferred
Stock of any series and any other shares of Preferred Stock of the Company
ranking on a parity as to dividends with such Preferred Stock, all dividends
declared upon such Preferred Stock and any other Preferred Stock of the
Company ranking on a parity as to dividends with such Preferred Stock shall be
declared pro rata so that the amount of dividends declared per share on such
Preferred Stock and such other shares of Preferred Stock shall in all cases
bear to each other the same ratio that the accrued dividends per share on such
Preferred Stock (which shall not, if such Preferred Stock is Noncumulative
Preferred Stock, include any accumulation in respect of unpaid dividends for
prior dividend periods) and such other shares of Preferred Stock bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on Preferred Stock of such series
which may be in arrears.
Except as set forth in the preceding sentence, unless (i) full
dividends on the outstanding Cumulative Preferred Stock of any series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period or (ii) full dividends for the
then current dividend period on the outstanding Noncumulative Preferred Stock
of any series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment, no
dividends (other than in Common Stock of the Company or other shares of the
Company ranking junior to such Preferred Stock as to dividends and upon
liquidation) shall be declared or paid or set aside for payment, nor shall any
other distribution be made, on the Common Stock of the Company or on any other
shares of the Company ranking junior to or on a parity with such Preferred
Stock as to dividends or upon liquidation.
Unless (i) full dividends on the Cumulative Preferred Stock of any
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period or (ii) full dividends
for the then current dividend period on the Noncumulative Preferred Stock of
any series have been declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment, no Common Stock or any other
shares of the Company ranking junior to or on a parity with such Preferred
Stock as to dividends or upon liquidation shall be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid or made
available for a sinking fund for the redemption of any such shares) by the
Company or any subsidiary of the Company except by conversion into or exchange
for shares of the Company ranking junior to such Preferred Stock as to
dividends and upon liquidation. Any dividend payment made on shares of
Cumulative Preferred
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Stock of any series shall first be credited against the earliest accrued but
unpaid dividend due with respect to shares of such series which remains
unpaid.
REDEMPTION
Preferred Stock may be redeemable, in whole or in part, at the option
of the Company, out of funds legally available therefor, and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise, in each case
upon terms, at the times and at the redemption prices specified, in the
applicable Prospectus Supplement. Preferred Stock redeemed by the Company will
be restored to the status of authorized but unissued shares of Preferred
Stock.
The Prospectus Supplement relating to a series of Preferred Stock
that is subject to mandatory redemption will specify the number of shares of
such Preferred Stock that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such Preferred Stock is Noncumulative Preferred
Stock, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is
payable only from the net proceeds of the issuance of capital stock of the
Company, the terms of such Preferred Stock may provide that, if no such
capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price
then due, such Preferred Stock shall automatically and mandatorily be
converted into shares of the applicable capital stock of the Company pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) full dividends on the
Cumulative Preferred Stock of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period or (ii) full dividends for the then current dividend period on the
Noncumulative Preferred Stock of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment, no shares of Preferred Stock of such series shall be
redeemed unless all outstanding shares of Preferred Stock of such series are
simultaneously redeemed, and the Company shall not purchase or otherwise
acquire any shares of Preferred Stock of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of Preferred Stock
of such series pursuant to a purchase or exchange offer provided such offer is
made on the same terms to all holders of the Preferred Stock of such series.
Notice of redemption shall be given by mailing the same to each
record holder of the Preferred Stock to be redeemed, not less than 30 nor more
than 60 days prior to the date fixed for redemption thereof, at the address of
such holder as the same shall appear on the stock books of the Company. Each
notice shall state: (i) the redemption date; (ii) the number of shares and
series of the Preferred Stock to be redeemed; (iii) the redemption price; (iv)
the place or places where certificates for such Preferred Stock are to be
surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi)
the date upon which the holder's conversion or exchange rights, if any, as to
such shares shall terminate. If fewer than all the shares of Preferred Stock
of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of shares of Preferred Stock to be
redeemed from each such holder.
If fewer than all the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Board of Directors of the Company and such shares may be
redeemed pro rata from the holders of record of such shares in proportion to
the number of such shares held by such holders (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the Board
of Directors of the Company.
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If notice of redemption of any shares of Preferred Stock has been
given and if the funds necessary for such redemption have been set aside by
the Company, separate and apart from its other funds, in trust for the pro
rata benefit of holders of any shares of Preferred Stock so called for
redemption, then from and after the redemption date for such shares, dividends
on such shares shall cease to accrue and such shares shall no longer be deemed
to be outstanding, and all rights of the holders thereof as stockholders of
the Company (except the right to receive the redemption price) shall cease.
Upon surrender, in accordance with such notice, of the certificates
representing any such shares (properly endorsed or assigned for transfer, if
the Board of Directors of the Company shall so require and the notice shall so
state), the redemption price set forth above shall be paid out of the funds
provided by the Company. If fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
CONVERSION OR EXCHANGE RIGHTS
The Prospectus Supplement relating to a series of Preferred Stock
that is convertible or exchangeable will state the terms on which shares of
such series are convertible or exchangeable into Common Stock, another series
of Preferred Stock or Debt Securities.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the holders of each series of Preferred Stock
shall be entitled to receive out of the assets of the Company legally
available for distribution to stockholders, before any distribution of assets
is made to holders of Common Stock or any other class or series of capital
stock ranking junior to such Preferred Stock upon liquidation, liquidating
distributions in the amount of the liquidation preference of such Preferred
Stock plus all accrued and unpaid dividends thereon (which shall not, in the
case of Noncumulative Preferred Stock, include any accumulation in respect of
unpaid dividends for prior dividend periods). If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to Preferred Stock of any series and any other shares of
Preferred Stock of the Company ranking as to any such distribution on a parity
with such Preferred Stock are not paid in full, the holders of such Preferred
Stock and of such other shares of Preferred Stock will share ratably in any
such distribution of assets of the Company in proportion to the full
respective preferential amounts to which they are entitled. After payment of
the full amount of the liquidating distribution to which they are entitled,
the holders of Preferred Stock of any series Will not be entitled to any
further participation in any distribution of assets by the Company.
VOTING RIGHTS
Except as indicated below or in the applicable Prospectus Supplement,
or except as expressly required by applicable law, the holders of Preferred
Stock will not be entitled to vote.
If the Company fails to pay dividends on any shares of Preferred
Stock for six consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of the Company at a special meeting called by the holders of record
of at least 10% of such Preferred Stock or the next annual meeting of
stockholders and at each subsequent meeting until (i) all dividends
accumulated on shares of Cumulative Preferred Stock for the past dividend
periods and the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment or
(ii) four consecutive quarterly dividends on shares of Noncumulative Preferred
Stock shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment. In such case, the entire Board of
Directors of the Company will be increased by two directors.
So long as any shares of Preferred Stock remain outstanding, the
Company shall not, without the affirmative vote of the holders of at least
two-thirds of each series of Preferred Stock outstanding at the time,
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given in person or by proxy, at a meeting (voting separately as a class): (i)
authorize, create or issue, or increase the authorized or issued amount of,
any class or series of capital stock ranking prior to such series of Preferred
Stock with respect to payment of dividends or distribution of assets upon
liquidation, dissolution or winding up, or reclassify any capital stock into
any such shares, or authorize, create or issue any obligation or security
convertible into, exchangeable for or evidencing the right to purchase any
such shares or (ii) amend, alter or repeal the provisions of the Restated
Certificate of Incorporation, including the Certificate of Designation
relating to such series of Preferred Stock, whether by merger, consolidation,
or otherwise, so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, that any increase in the amount of the authorized
Preferred Stock or any outstanding series of Preferred Stock or any other
capital stock of the Company, or the creation and issuance of any other series
of Preferred Stock or of any other capital stock of the Company, in each case
ranking on a parity with or junior to the Preferred Stock of such series with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of such series of Preferred Stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities may consist of Senior Debt Securities or
Subordinated Debt Securities. The Senior Debt Securities will be issued under
an indenture (the "Senior Debt Indenture") between the Company, as issuer, and
one or more trustees (each a "Trustee") meeting the requirements of a trustee
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The Subordinated Debt Securities will be issued under an indenture (the
"Subordinated Debt Indenture") between the Company, as issuer, and a Trustee.
Forms of the Indentures have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. The Indentures are
subject to and governed by the Trust Indenture Act. The following summaries of
certain provisions of the Indentures do not purport to be complete, and where
reference is made to particular provisions of the Indentures, such provisions,
including definitions of certain terms, are incorporated by reference as a
part of such summaries or terms, which are qualified in their entirety by such
reference. The Indentures are substantially identical except for provisions
relating to subordination.
The Debt Securities may be issued in one or more series. The
particular terms of each series of Debt Securities, as well as any
modifications of or additions to the general terms of the Debt Securities as
described herein that may be applicable in the case of a particular series of
Debt Securities, will be described in the Prospectus Supplement relating to
such series of Debt Securities. Accordingly, for a description of the terms of
a particular series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of Debt Securities
set forth in this Prospectus.
GENERAL
Neither of the Indentures limits the amount of Debt Securities that
may be issued thereunder. Each Indenture provides that Debt Securities
issuable thereunder may be issued up to the aggregate principal amount which
may be authorized from time to time by the Company. Reference is made to the
Prospectus Supplement for the following terms of the Debt Securities (to the
extent such terms are applicable to such Debt Securities) in respect of which
this Prospectus is being delivered (the "Offered Debt Securities"):
(i) the title of the Offered Debt Securities and whether the Offered
Debt Securities are Senior Debt Securities or Subordinated Debt Securities;
(ii) the aggregate principal amount of the Offered Debt Securities
and any limit on such aggregate principal amount;
(iii) the date or dates, or the method for determining such date or
dates, on which the principal of the Offered Debt Securities will be payable;
(iv) the rate or rates (which may be fixed or variable), or the
method by which such rate or rates shall be determined, at which the Offered
Debt Securities will bear interest, if any;
(v) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which any such date shall be
determined, the person to whom such interest shall be payable, and the basis
upon which interest shall be calculated if other than that of a 360-day year
of twelve 30-day months;
(vi) the place or places where the principal of (and premium, if any)
and interest, if any, on such Offered Debt Securities will be payable, such
Offered Debt Securities may be surrendered for conversion or registration of
transfer or exchange and notices or demands to or upon the Company in respect
of such Offered Debt Securities and the applicable Indenture may be served;
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(vii) the period or periods within which, the price or prices at
which and the terms and conditions upon which the Offered Debt Securities may
be redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(viii) the denominations of the Offered Debt Securities if other than
$1,000 and any integral multiple thereof;
(ix) if other than the principal amount thereof, the portion of the
principal amount of the Offered Debt Securities payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of the Offered Debt Securities which is convertible into
Common Stock or Preferred Stock, or the method by which any such portion shall
be determined;
(x) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on the Offered Debt Securities may be determined
with reference to an index, formula or other method (which index, formula or
method may, but need not be, based on one or more currencies, currency units,
composite currencies, commodities, equity indicies or other indicies) and the
manner in which such amounts shall be determined;
(xi) any additions to, modifications of or deletions from the terms
of the Offered Debt Securities with respect to the Events of Default or
covenants set forth in the applicable Indenture;
(xii) provisions, if any, granting special rights to the Holders of
the Offered Debt Securities upon the occurrence of such events as may be
specified;
(xiii) whether any of the Offered Debt Securities are to be issuable
initially in temporary global form and whether any of the Offered Debt
Securities are to be issuable in permanent global form and, if so, whether
beneficial owners of interests in any such permanent global Security may
exchange such interests for Debt Securities of such series and of like tenor
of any authorized form and denomination and the circumstances under which any
such exchanges may occur, if other than in the manner provided in the
applicable Prospectus Supplement, and, if the Offered Debt Securities are to
be issuable as a global Security, the identity of the depositary for the
Offered Debt Securities;
(xiv) the date as of which any temporary global Security representing
outstanding Offered Debt Securities shall be dated if other than the date of
original issuance of the first Offered Debt Security to be issued;
(xv) the Person to whom any interest on any Offered Debt Security
shall be payable, if other than the Person in whose name that Offered Debt
Security is registered, and the extent to which, or the manner in which, any
interest payable on a temporary global Security on an Interest Payment Date
will be paid if other than in the manner provided in the applicable Prospectus
Supplement;
(xvi) the applicability, if any, of defeasance and covenant
defeasance provisions of the applicable Indenture and any provisions in
modification of, in addition to or in lieu of any such defeasance or covenant
defeasance provisions;
(xvii) if the Offered Debt Securities are to be issuable in
definitive form (whether upon original issue or upon exchange of a temporary
Offered Debt Security) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, then the form and/or terms of
such certificates, documents or conditions;
(xviii) if the Offered Debt Securities are to be issued upon the
exercise of warrants, the time, manner and place for such Offered Debt
Securities to be authenticated and delivered;
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(xix) the terms, if any, upon which the Offered Debt Securities may
be convertible into Common Stock or Preferred Stock of the Company and the
terms and conditions upon which such conversion will be effected, including,
without limitation, the initial conversion price or rate and the conversion
period as well as any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock into which the Offered
Debt Securities are convertible; and
(xx) any other terms of the Offered Debt Securities not inconsistent
with the provisions of the applicable Indenture.
As described in each Prospectus Supplement relating to any particular
series of Debt Securities offered thereby, the Indenture under which such Debt
Securities are issued may contain covenants limiting: (i) the incurrence of
debt by the Company; (ii) the incurrence of debt by subsidiaries of the
Company; (iii) the making of certain payments by the Company and its
subsidiaries; (iv) business activities of the Company and its subsidiaries;
(v) the issuance of preferred stock of subsidiaries; (vi) asset dispositions;
(vii) transactions with affiliates; (viii) liens; and (ix) mergers and
consolidations involving the Company.
SENIOR DEBT SECURITIES
The payment of principal of, premium, if any, and interest on the
Senior Debt Securities will, to the extent and in the manner set forth in the
Senior Debt Indenture, rank pari passu in right of payment with all other
existing and future unsecured and unsubordinated obligations of the Company.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The Subordinated Debt Indenture provides that the Subordinated Debt
Securities are subordinate and junior in right of payment to all Senior
Indebtedness of the Company as provided in the Subordinated Debt Indenture. No
payment of principal of (including redemption payments), or interest on, the
Subordinated Debt Securities may be made (i) if any Senior Indebtedness is not
paid when due, any applicable grace period with respect to a default
thereunder has ended and such default has not been cured or waived, or (ii) if
the maturity of any Senior Indebtedness has been accelerated because of a
default. Upon any distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all principal of, and premium, if any, and interest due or to become due on,
all Senior Indebtedness must be paid in full before the holders of the
Subordinated Debt Securities are entitled to receive or retain any payment. In
the event that, notwithstanding the foregoing, any payment or distribution of
cash, property or securities shall be received or collected by a holder of the
Subordinated Debt Securities in contravention of the foregoing provisions,
such payment or distribution shall be held for the benefit of and shall be
paid over to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under which
any instrument evidencing Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay in full all
Senior Indebtedness then due, after giving effect to any concurrent payment to
the holders of Senior Indebtedness. Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Subordinated Debt
Securities will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on the Subordinated Debt Securities are
paid in full.
The term "Senior Indebtedness" shall mean in respect of the Company
(i) the principal, premium, if any, and interest in respect of (A)
indebtedness of such obligor for money borrowed and (B) indebtedness evidenced
by securities, bonds or other similar instruments issued by such obligor, (ii)
all capital lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade accounts
payable and other similar obligations arising in the ordinary course of
business), (iv) all obligations of such obligor for the reimbursement of any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction, (v) all obligations of the type referred to in
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clauses (i) through (iv) above of other persons for the payment of which such
obligor is responsible or liable as obligor, guarantor or otherwise, and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1)
any such indebtedness issued after the date of original issuance of the
Subordinated Debt Securities that is by its terms subordinated to or pari
passu with the Subordinated Debt Securities and (2) any indebtedness
(including all other debt securities and guarantees in respect of those debt
securities) initially issued to any other trust, or a trustee of such trust,
partnership or other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing Entity") in
connection with the issuance by such Financing Entity of Convertible Preferred
Securities or other similar securities. Such Senior Indebtedness shall
continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior
Indebtedness the Company may issue.
CERTAIN COVENANTS
Unless otherwise provided in a Prospectus Supplements with respect to
a particular series of Offered Debt Securities, each of the Indentures will
contain certain covenants, including the ones summarized below, which
covenants will be applicable (unless they are waived or amended or unless the
Debt Securities are defeased, see "Defeasance" below) so long as any of the
Debt Securities are outstanding.
Limitation on Debt
The Company will not Incur any Debt, including Acquisition Debt,
unless, after giving effect to the incurrence of such Debt and the receipt and
application of the proceeds therefrom, the Fixed Charge Ratio (as defined in
the Indenture) of the Company would be equal to or greater than 2.0 to 1.
Notwithstanding the foregoing, the Company may Incur each and all of
the following: (i) Company Refinancing Debt, (ii) Debt of the Company to any
of its Restricted Subsidiaries or any Eligible Joint Venture that is expressly
subordinated in right of payment to the Senior Debt Securities of all series,
in the case of the Senior Debt Indenture or the Subordinated Debt Securities
of all series in the case of the Subordinated Debt Indenture, provided that
any transfer of such Debt by a Restricted Subsidiary or an Eligible Joint
Venture (other than to another Restricted Subsidiary or another Eligible Joint
Venture), or any transfer of the Company's ownership interest, or a portion
thereof, in such Restricted Subsidiary or such Eligible Joint Venture or the
interest, or a portion thereof, of Kiewit in a Permitted Joint Venture or an
Eligible Joint Venture (which transfer has the effect of causing such
Restricted Subsidiary or such Eligible Joint Venture to cease to be a
Restricted Subsidiary or an Eligible Joint Venture, as the case may be), will
be deemed to be an Incurrence of Debt that is subject to the provisions of
this covenant other than this clause (ii), (iii) Debt in an aggregate
principal amount not to exceed $100 million outstanding at any one time may be
issued under or in respect of Permitted Working Capital Facilities, (iv)
Non-Recourse Debt Incurred in respect of one or more Permitted Facilities in
which the Company has a direct or indirect interest, (v) Debt in respect of
Currency Protection Agreements or Interest Rate Protection Agreements, (vi)
Purchase Money Debt, provided that the amount of such Debt (net of any
original issue discount) does not exceed 90% of the fair market value of the
Property acquired, (vii) the Debt Securities and other Debt outstanding as of
the date of original issuance of any series of the Debt Securities (other than
Debt to the extent that it is extinguished, retired, defeased or repaid in
connection with the original issuance of any series of the Debt Securities),
including Debt that is Incurred in respect of interest or discount on such
Debt (or Redeemable Stock issued as dividends in respect of Redeemable Stock)
pursuant to the terms of the agreement or instrument that governs such Debt
(or such Redeemable Stock) as in effect on the date of original issuance of
any series of the Debt Securities and (viii) Debt in an aggregate principal
amount not to exceed $75 million outstanding at any one time.
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Limitation on Subsidiary Debt
The Company will not permit any of its Restricted Subsidiaries or any
Eligible Joint Venture, to Incur any Debt.
Notwithstanding the foregoing, each and all of the following Debt may
be Incurred by a Restricted Subsidiary or an Eligible Joint Venture: (i) Debt
outstanding as of the date of original issuance of any series of the Debt
Securities, (ii) Debt owed by a Restricted Subsidiary or an Eligible Joint
Venture to the Company or another Restricted Subsidiary of the Company or
another Eligible Joint Venture that either directly or indirectly owns all or
a portion of the Company's interest in, or directly or indirectly is owned by,
such Restricted Subsidiary, or such Eligible Joint Venture, as the case may
be, (iii) Non-Recourse Debt Incurred in respect of one or more Permitted
Facilities, provided that such Restricted Subsidiary or such Eligible Joint
Venture has a direct or an indirect interest (which may include Construction
Financing provided by the Company to the extent permitted under the covenant
described under "Limitation on Restricted Payments" below as a "Permitted
Investment") in one or more of such Permitted Facilities in respect of which
one or more Restricted Subsidiaries or Eligible Joint Ventures shall have a
direct or indirect interest, (iv) Subsidiary Refinancing Debt, (v) Acquired
Debt, (vi) Debt in respect of Currency Protection Agreements or Interest Rate
Protection Agreements, (vii) Permitted Funding Company Loans and (viii)
Permitted Facilities Debt, provided that at the time of Incurrence thereof and
after giving effect to the application of the proceeds thereof, the aggregate
principal amount of Permitted Facilities Debt shall not exceed 15% of total
consolidated Debt of the Company computed in accordance with GAAP.
Limitation on Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, make
any Restricted Payment unless at the time of such Restricted Payment and after
giving effect thereto (a) no Event of Default and no event that, after the
giving of notice or lapse of time or both, would become an Event of Default,
has occurred and is continuing, (b) the Company could Incur at least $1 of
Debt under the provision described in the first paragraph of "Limitation on
Debt" above and (c) the aggregate amount of all Restricted Payments made by
the Company, its Restricted Subsidiaries and the Eligible Joint Ventures (the
amount so made, if other than in cash, to be determined in good faith by the
Chief Financial Officer, as evidenced by an Officers' Certificate, or, if more
than $30 million, by the Board of Directors, as evidenced by a Board
resolution) after March 24, 1994, is less than the sum (without duplication)
of (i) 50% of the Adjusted Consolidated Net Income of the Company for the
period (taken as one accounting period) beginning on the first day of the
first fiscal quarter that begins after March 24, 1994 and ending on the last
day of the fiscal quarter immediately prior to the date of such calculation,
provided that if throughout any fiscal quarter within such period the Ratings
Categories applicable to the Debt Securities are rated Investment Grade by
Standard & Poor's Corporation and Moody's Investors Service, Inc. (or if both
do not make a rating of the Debt Securities publicly available, an equivalent
Rating Category is made publicly available by another Rating Agency), then
100% (instead of 50%) of the Adjusted Consolidated Net Income (if more than
zero) with respect to such fiscal quarter will be included pursuant to this
clause (i), and provided further that if Adjusted Consolidated Net Income for
such period is less than zero, then minus 100% of the amount of such net loss,
plus (ii) 100% of the aggregate net cash proceeds received by the Company from
and after March 24, 1994 from (A) the issuance and sale (other than to a
Restricted Subsidiary or an Eligible Joint Venture) of its Capital Stock
(excluding Redeemable Stock, but including Capital Stock other than Redeemable
Stock issued upon conversion of, or in exchange for Redeemable Stock or
securities other than its Capital Stock), (B) the issuance and sale or the
exercise of warrants, options and rights to purchase its Capital Stock (other
than Redeemable Stock) and (C) the issuance and sale of convertible Debt upon
the conversion of such convertible Debt into Capital Stock (other than
Redeemable Stock), but excluding the net proceeds from the issuance, sale,
exchange, conversion or other disposition of its Capital Stock (I) that is
convertible (whether at the option of the Company or the holder thereof or
upon the happening of any event) into (x) any security other than its Capital
Stock or (y) its Redeemable Stock or (II) that is Capital Stock referred to in
clauses (ii) and (iii) of the definition of "Permitted Payment", plus (iii)
the net reduction in Investments of the types specified in clauses (iv) and
(v) of the definition of "Restricted Payment" that result from payments of
interest on Debt, dividends, or repayment of
-25-
loans or advances, the proceeds of the sale or disposition of the Investment
or other return of the amount of the original Investment to the Company, the
Restricted Subsidiary or the Eligible Joint Venture that made the original
Investment from the Person in which such Investment was made, provided that
(x) the aggregate amount of such payments will not exceed the amount of the
original Investment by the Company or such Restricted Subsidiary that reduced
the amount available pursuant to this clause (c) for making Restricted
Payments and (y) such payments may be added pursuant to this clause (iii) only
to the extent such payments are not included in the calculation of Adjusted
Consolidated Net Income, provided further that if Investments of the types
specified in clauses (iv) and (v) of the Definition of "Restricted Payment"
have been made in any Person and such Person thereafter becomes a Restricted
Subsidiary or an Eligible Joint Venture, then the aggregate amount of such
Investment (to the extent that it has reduced the amount available pursuant to
this clause (c) for making Restricted Payments), net of the amounts previously
added pursuant to this clause (iii), may be added to the amount available for
making Restricted Payments, plus (iv) an amount equal to the principal amount
of Debt of the Company extinguished in connection with the conversion into
Common Stock of the Company of the Company's 5% Convertible Subordinated
Debentures due 2000 and its 9.5% Convertible Subordinated Debenture due 2003.
The foregoing clause (c) will not prevent the payment of any dividend within
60 days after the date of its declaration if such dividend could have been
made on the date of its declaration without violation of the provisions of
this covenant.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Venture will be deemed to have made an Investment at the time
that a Person that is a Restricted Subsidiary of the Company or an Eligible
Joint Venture ceases to be a Restricted Subsidiary or an Eligible Joint
Venture (other than as a result of being designated as an Unrestricted
Subsidiary), although any subsequent Investment made by the Company, its
Restricted Subsidiaries and Eligible Joint Ventures in such Person will be
Investments that will be subject to the foregoing paragraph unless and until
such time as such Person becomes a Restricted Subsidiary or an Eligible Joint
Venture. Notwithstanding the foregoing, (i) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary, in the manner provided in the
definition of "Unrestricted Subsidiary," will be an Investment that will be
subject to the foregoing paragraph and (ii) the transfer of the Company's
interest (or any portion thereof) in an entity that has been deemed to be an
Eligible Joint Venture, directly or indirectly, to an Unrestricted Subsidiary
will be an Investment (to the extent of the interest transferred) that will be
subject to the foregoing paragraph.
Restricted Payments are defined in the Indentures to exclude
Permitted Payments, which include Permitted Investments. See "Certain
Definitions" below.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, create or cause to become, or
as a result of the acquisition of any Person or Property, or upon any Person
becoming a Restricted Subsidiary or an Eligible Joint Venture, remain subject
to, any consensual encumbrance or consensual restriction of any kind on the
ability of any Restricted Subsidiary or any Eligible Joint Venture to (a) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary or such Eligible Joint Venture
owned by the Company, any other Restricted Subsidiary or any other Eligible
Joint Venture, (b) make payments in respect of any Debt owed to the Company,
any other Restricted Subsidiary of the Company or any Eligible Joint Venture,
(c) make loans or advances to the Company or to any other Restricted
Subsidiary of the Company or any other Eligible Joint Venture that is directly
or indirectly owned by such Restricted Subsidiary or such Eligible Joint
Venture or (d) transfer any of its Property to the Company or to any other
Restricted Subsidiary or any other Eligible Joint Venture that directly or
indirectly owns or is owned by such Restricted Subsidiary or such Eligible
Joint Venture, other than those encumbrances and restrictions created or
existing (i) on the date of the original issuance of any series of Debt
Securities, (ii) pursuant to the Indenture, (iii) in connection with the
Incurrence of any Debt permitted under the provisions described in clause
(iii) of the second paragraph of "Limitation on Subsidiary Debt" above,
provided that, in the case of Debt owed to Persons other than the Company, its
Restricted Subsidiaries and any Eligible Joint Venture, the Chief Executive
Officer or the Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such encumbrances or
restrictions are required to
-26-
effect such financing and are not materially more restrictive, taken as a whole,
on the ability of the applicable Restricted Subsidiary or the applicable
Eligible Joint Venture to make the payments, distributions, loans, advances or
transfers referred to in clauses (a) through (d) above than encumbrances and
restrictions, taken as a whole, customarily accepted (or, in the absence of
any industry custom, reasonably acceptable) in comparable financings or
comparable transactions in the applicable jurisdiction, (iv) in connection
with the execution and delivery of an electric power or thermal energy
purchase contract, or other contract related to the output or product of, or
services rendered by one or more Permitted Facilities to which such Restricted
Subsidiary or such Eligible Joint Venture is a supplying party or other
contracts with customers, suppliers and contractors to which such Restricted
Subsidiary or such Eligible Joint Venture is a party and where such Restricted
Subsidiary or such Eligible Joint Venture is engaged, directly or indirectly,
in the development, design, engineering, procurement, construction,
acquisition, ownership, management or operation of one or more of such
Permitted Facilities, provided that the Chief Executive Officer or the Chief
Financial Officer of the Company determines in good faith, as evidenced by an
Officers' Certificate, that such encumbrances or restrictions are required to
effect such contracts and are not materially more restrictive, taken as a
whole, on the ability of the applicable Restricted Subsidiary or the
applicable Eligible Joint Venture to make the payments, distributions, loans,
advances or transfers referred to in clauses (a) through (d) above than
encumbrances and restrictions, taken as a whole, customarily accepted (or, in
the absence of any industry custom, reasonably acceptable) in comparable
financings or comparable transactions in the applicable jurisdiction, (v) in
connection with any Acquired Debt, provided that such encumbrance or
restriction was not incurred in contemplation of such Person becoming a
Restricted Subsidiary or an Eligible Joint Venture and provided further that
such encumbrance or restriction does not extend to any other Property of such
Person at the time it became a Restricted Subsidiary or an Eligible Joint
Venture, (vi) in connection with the Incurrence of any Debt permitted under
clause (iv) of the provision described in the second paragraph of "Limitation
on Subsidiary Debt" above, provided that, in the case of Debt owed to Persons
other than the Company and its Restricted Subsidiaries, the Chief Executive
Officer or the Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such encumbrances or
restrictions taken as a whole are not materially more restrictive than the
encumbrances and restrictions applicable to the Debt and/or equity being
exchanged or refinanced, (vii) customary non-assignment provisions in leases
or other contracts entered into in the ordinary course of business of the
Company, any Restricted Subsidiary or any Eligible Joint Venture, (viii) any
restrictions imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or Property of
any Restricted Subsidiary or Joint Venture that apply pending the closing of
such sale or disposition, (ix) in connection with Liens on the Property of
such Restricted Subsidiary or such Eligible Joint Venture that are permitted
by the covenant described under "Limitation on Liens" below but only with
respect to transfers referred to in clause (d) above, (x) in connection with
the Incurrence of any Debt permitted under clause (ii) of the provisions
described in the second paragraph of "Limitation on Subsidiary Debt" above or
(xi) in connection with the Incurrence of any Permitted Facilities Debt
permitted under clause (viii) of the provisions described in the second
paragraph of "Limitation on Subsidiary Debt" above, provided that any such
encumbrance or restriction relates only to those Restricted Subsidiaries or
Eligible Joint Ventures having a direct or indirect interest in the Permitted
Facilities in respect of which such Permitted Facilities Debt was Incurred.
Limitation on Dispositions
Subject to the covenant described under "Mergers, Consolidations and
Sales of Assets" below, the Company will not make, and will not permit any of
its Restricted Subsidiaries or any Eligible Joint Venture to make, any Asset
Disposition unless (i) the Company, the Restricted Subsidiary or the Eligible
Joint Venture, as the case may be, receives consideration at the time of each
such Asset Disposition at least equal to the fair market value of the Property
or securities sold or otherwise disposed of (to be determined in good faith by
the Chief Financial Officer, as evidenced by an Officers' Certificate, or, if
more than $30 million, by the Board of Directors, as evidenced by a Board
resolution), (ii) at least 85% of such consideration is received in cash or
Cash Equivalents or if less than 85%, the remainder of such consideration
consists of Property related to the business of the Company as described in
the first sentence of the covenant described under "Limitation on Business"
below, and (ii) unless otherwise required under the terms of Senior Debt, at
the Company's election, the Net Cash Proceeds are either (A) invested in the
business of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture or (B) applied to the payment of any Debt of the Company or any
of its Restricted
-27-
Subsidiaries or any Eligible Joint Venture (or as otherwise required under the
terms of such Debt), provided that, no such payment of Debt (x) under
Permitted Working Capital Facilities or any other revolving credit agreement
will count for this purpose unless the related loan commitment, standby
facility or the like will be permanently reduced by an amount equal to the
principal amount so repaid or (y) owed to the Company, a Restricted Subsidiary
thereof or an Eligible Joint Venture will count for this purpose, provided
further that such investment or such payment, as the case may be, must be made
within 365 days from the later of the date of such Asset Disposition or the
receipt by the Company, such Restricted Subsidiary or such Eligible Joint
Venture of the Net Cash Proceeds related thereto. Any Net Cash Proceeds from
Asset Dispositions that are not applied as provided in clause (A) or (B) of
the preceding sentence will constitute "Excess Proceeds." Excess Proceeds will
be applied, as described below, to make an offer (an "Offer") to purchase any
series of Debt Securities at a purchase price equal to 100% of the principal
thereof, plus accrued interest, if any, to the date of purchase.
Notwithstanding anything in the foregoing to the contrary, the
Company, its Restricted Subsidiaries and the Eligible Joint Ventures may
exchange with other Persons (i) Property that constitutes a Restricted
Subsidiary or an Eligible Joint Venture for Property that constitutes a
Restricted Subsidiary or an Eligible Joint Venture, (ii) Property that
constitutes a Restricted Subsidiary or an Eligible Joint Venture for Property
that does not constitute a Restricted Subsidiary or an Eligible Joint Venture,
(iii) Property that does not constitute a Restricted Subsidiary or an Eligible
Joint Venture for Property that does not constitute a Restricted Subsidiary or
an Eligible Joint Venture and (iv) Property that does not constitute a
Restricted Subsidiary or an Eligible Joint Venture for Property that
constitutes a Restricted Subsidiary or an Eligible Joint Venture, provided
that in each case the fair market value of the Property received is at least
equal to the fair market value of the Property exchanged as determined in good
faith by the Chief Financial Officer, as evidenced by an Officers'
Certificate, or, if more than $25 million, by the Board of Directors, as
evidenced by a Board resolution, provided that the Investment in the Property
received in the exchanges described in clauses (ii) and (iii) of the prior
sentence will be subject to the covenant described under "Limitation on
Restricted Payments" above. Notwithstanding anything in the foregoing to the
contrary, the Company may not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, make an Asset Disposition of
any of their interest in, or Property of, any of the Coso Project other than
for consideration consisting solely of cash.
To the extent that any or all of the Net Cash Proceeds of any Foreign
Asset Disposition are prohibited from (or delayed in) being repatriated to the
United States by applicable local law, the portion of such Net Cash Proceeds
so affected will not be required to be applied at the time provided above but
may be retained by any Restricted Subsidiary or any Eligible Joint Venture so
long, but only so long, as the applicable local law does not permit (or
delays) repatriation to the United States. If such Net Cash Proceeds are
transferred by the Restricted Subsidiary or Eligible Joint Venture that
conducted the Foreign Asset Disposition to another Restricted Subsidiary or
Eligible Joint Venture, the Restricted Subsidiary or Eligible Joint Venture
receiving such Net Cash Proceeds must not be directly or indirectly obligated
on any Debt owed to any Person other than the Company. The Company will take
or cause such Restricted Subsidiary or such Eligible Joint Venture to take all
actions required by the applicable local law to permit such repatriation
promptly. Once repatriation of any of such Net Cash Proceeds is permitted
under the applicable local law, repatriation will be effected immediately and
the repatriated Net Cash Proceeds will be applied in the manner set forth in
this covenant as if such Asset Disposition had occurred on the date of such
repatriation. In addition, if the Chief Financial Officer determines, in good
faith, as evidenced by an Officers' Certificate, that repatriation of any or
all of the Net Cash Proceeds of any Foreign Asset Disposition would have a
material adverse tax consequence to the Company, the Net Cash Proceeds so
affected may be retained outside of the United States by the applicable
Restricted Subsidiary or the applicable Eligible Joint Venture for so long as
such material adverse tax consequence would continue. Notwithstanding the
foregoing provisions of this paragraph to the contrary, if applicable local
law prohibits (or delays) the repatriation of Net Cash Proceeds of a Foreign
Asset Disposition but such local law does not prohibit the application of such
Net Cash Proceeds pursuant to the first sentence of the first paragraph of
this covenant, the Company may apply such Net Cash Proceeds pursuant to such
provision.
If the series of Debt Securities tendered pursuant to an Offer have
an aggregate purchase price that is less than the Excess Proceeds available
for the purchase of such Debt Securities, the Company may use the
-28-
remaining Excess Proceeds for general corporate purposes without regard to the
provisions of this covenant. The Company will not be required to make an Offer
pursuant to this covenant if the Excess Proceeds available therefor are less
than $10 million, provided that the lesser amounts of such Excess Proceeds
will be carried forward and cumulated for each 36 consecutive month period for
purposes of determining whether an Offer is required with respect to any
Excess Proceeds of any subsequent Asset Dispositions. Any such lesser amounts
so carried forward and cumulated need not be segregated or reserved and may be
used for general corporate purposes, provided that such use will not reduce
the amount of cumulated Excess Proceeds or relieve the Company of its
obligation hereunder to make an Offer with respect thereto.
The Company will make an Offer by mailing to each Holder, with a copy
to the Trustee, within 30 days after the receipt of Excess Proceeds that cause
the cumulated Excess Proceeds to exceed $10 million, a written notice that
will specify the purchase date, which will not be less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date"), that will
contain certain information concerning the business of the Company that the
Company believes in good faith will enable the Holders to make an informed
decision and that will contain information concerning the procedures
applicable to the Offer (including, without limitation, the right of
withdrawal) and the effect of such Offer on the Debt Securities tendered.
Holders that elect to have their Debt Securities purchased will be required to
surrender such Debt Securities at least one Business Day prior to the Purchase
Date. If at the expiration of the Offer period the aggregate purchase price of
the series of Debt Securities properly tendered by Holders pursuant to the
Offer exceeds the amount of such Excess Proceeds, such series of Debt
Securities or portions of Debt Securities to be accepted for purchase will be
selected by the Trustee in such manner as the Trustee deems to be fair and
appropriate in the circumstances.
If the Company is prohibited by applicable law from making the Offer
or purchasing Debt Securities of any series thereunder, the Company need not
make an Offer pursuant to this covenant for so long as such prohibition is in
effect.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with an Offer.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, directly or indirectly, conduct
any business or enter into or permit to exist any transaction or series of
related transactions (including, but not limited to, the purchase, sale or
exchange of Property, the making of any Investment, the giving of any
Guarantee or the rendering of any service) with any Affiliate of the Company,
such Restricted Subsidiary or such Eligible Joint Venture, as the case may be,
unless (i) such business, transaction or series of related transactions is in
the best interest of the Company, such Restricted Subsidiary or such Eligible
Joint Venture, (ii) such business, transaction or series of related
transactions is on terms no less favorable to the Company, such Restricted
Subsidiary or such Eligible Joint Venture than those that could be obtained in
a comparable arm's length transaction with a Person that is not such an
Affiliate and (iii) with respect to such business, transaction or series of
related transactions that has a fair market value or involves aggregate
payments equal to, or in excess of, $10 million, such business, transaction or
series of transactions is approved by a majority of the Board of Directors
(including a majority of the disinterested directors), which approval is set
forth in a Board resolution delivered to the Trustee certifying that, in good
faith, the Board of Directors believes that such business, transaction or
series of transactions complies with clauses (i) and (ii) above.
Limitation on Liens
The Company may not Incur any Debt that is secured, directly or
indirectly, with, and the Company will not, and will not permit any of its
Restricted Subsidiaries or an Eligible Joint Venture to, grant a Lien on the
Property of the Company, its Restricted Subsidiaries or any Eligible Joint
Venture now owned or hereafter acquired unless contemporaneous therewith or
prior thereto the Debt Securities are equally and ratably secured
-29-
except for (i) any such Debt secured by Liens existing on the Property of any
entity at the time such Property is acquired by the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture, whether by merger,
consolidation, purchase of such Property or otherwise, provided that such
Liens (x) are not created, incurred or assumed in contemplation of such
Property being acquired by the Company, any of its Restricted Subsidiaries or
any Eligible Joint Venture and (y) do not extend to any other Property of the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture,
(ii) any other Debt that is required by the terms thereof to be equally and
ratably secured as a result of the Incurrence of Debt that is permitted to be
secured pursuant to another clause of this covenant, (iii) Liens that are
granted in good faith to secure Debt (A) contemplated by clause (iv) of the
covenant described under "Limitation on Debt" above or (B) contemplated by
clauses (ii), (iii), (vi) and (viii) of the covenant described under
"Limitation on Subsidiary Debt" above, provided that, in the case of Debt owed
to a Person other than the Company or a Restricted Subsidiary, the Chief
Executive Officer or Chief Financial Officer of the Company determines in good
faith, as evidenced by an Officers' Certificate, that such Liens are required
in order to effect such financing and are not materially more restrictive,
taken as a whole, than Liens, taken as a whole, customarily accepted (or in
the absence of industry custom, reasonably acceptable) in comparable
financings or comparable transactions in the applicable jurisdiction, (iv)
Liens existing on the date of the original issuance of any series of the Debt
Securities, (v) Liens incurred to secure Debt incurred by the Company as
permitted by clause (vi) of the covenant described under "Limitation on Debt"
above, provided that such Liens may not cover any Property other than that
being purchased and improvements and additions thereto, (vi) Liens on any
Property of the Company securing Permitted Working Capital Facilities,
Guarantees thereof and any Interest Rate Protection Agreements or Currency
Protection Agreements, provided that such Liens may not extend to the Capital
Stock owned by the Company in any Restricted Subsidiary of the Company or any
Eligible Joint Venture, (vii) Liens in respect of extensions, renewals,
refundings or refinancings of any Debt secured by the Liens referred to in the
foregoing clauses, provided that the Liens in connection with such renewal,
extension, refunding or refinancing will be limited to all or part of the
specific property that was subject to the original Lien, (viii) Liens incurred
to secure obligations in respect of letters of credit, bankers' acceptances,
surety, bid, operating and performance bonds, performance guarantees or other
similar instruments or obligations (or reimbursement obligations with respect
thereto) (in each case, to the extent incurred in the ordinary course of
business), (ix) any Lien arising by reason of (A) any judgment, decree or
order of any court, so long as such Lien is being contested in good faith and
is appropriately bonded, and any appropriate legal proceedings that may have
been duly initiated for the review of such judgment, decree or order have not
been finally terminated or the period within which such proceedings may be
initiated has not expired, (B) taxes, duties, assessments, imposts or other
governmental charges that are not yet delinquent or are being contested in
good faith, (C) security for payment of worker's compensation or other
insurance, (D) security for the performance of tenders, contracts (other than
contracts for the payment of money) or leases, (E) deposits to secure public
or statutory obligations, or to secure permitted contracts for the purchase or
sale of any currency entered into in the ordinary course of business, (F) the
operation of law in favor of carriers, warehousemen, landlords, mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums that are not yet delinquent or are being contested in
good faith by negotiations or by appropriate proceedings that suspend the
collection thereof, (G) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects that do not
in the aggregate materially interfere with the ordinary conduct of the
business of the Company, any of its Restricted Subsidiaries or any Eligible
Joint Venture or (H) leases and subleases of real property that do not
interfere with the ordinary conduct of the business of the Company, any of its
Restricted Subsidiaries or any Eligible Joint Venture and that are made on
customary and usual terms applicable to similar properties, or (x) Liens, in
addition to the foregoing, that secure obligations not in excess of $5 million
in the aggregate.
Purchase of Debt Securities Upon a Change of Control
Upon the occurrence of a Change of Control, each Holder of the Debt
Securities of each series will have the right to require that the Company
repurchase such Holder's Debt Securities of such series at a purchase price in
cash equal to 101% of the principal thereof on the date of purchase plus
accrued interest, if any, to the date of purchase.
-30-
The Change of Control provisions may not be waived by the Trustee or
by the Board of Directors, and any modification thereof must be approved by
each Holder. Nevertheless, the Change of Control provisions will not
necessarily afford protection to Holders, including protection against an
adverse effect on the value of the Debt Securities of any series, in the event
that the Company or its Subsidiaries Incur additional Debt, whether through
recapitalizations or otherwise.
Within 30 days following a Change of Control, the Company will mail a
notice to each Holder of the Debt Securities of each series, with a copy to
the Trustee, stating (1) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase such Holder's Debt
Securities at the purchase price described above (the "Change of Control
Offer"), (2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of Control),
(3) the purchase date (which will be not earlier than 30 days nor later than
60 days from the date such notice is mailed) (the "Purchase Date"), (4) and
thereafter interest on and such Debt Security will continue to accrue, (5) any
Debt Security properly tendered pursuant to the Change of Control Offer will
cease to accrue interest after the Purchase Date (assuming sufficient moneys
for the purchase thereof are deposited with the Trustee), (6) that Holders
electing to have a Debt Security of any series purchased pursuant to a Change
of Control Offer will be required to surrender the Debt Security of such
series, with the form entitled "Option of Holder To Elect Purchase" on the
reverse of the Debt Security completed, to the paying agent at the address
specified in the notice prior to the close of business on the fifth Business
Day prior to the Purchase Date, (7) that a Holder will be entitled to withdraw
such Holder's election if the paying agent receives, not later than the close
of business on the third Business Day (or such shorter periods as may be
required by applicable law) preceding the Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Debt Securities of such series the Holder delivered for
purchase, and a statement that such Holder is withdrawing his election to have
such Debt Securities of such series purchased and (8) that Holders that elect
to have their Debt Securities of any series purchased only in part will be
issued new Debt Securities having a principal amount equal to the portion of
the Debt Securities of the series that were surrendered but not tendered and
purchased.
On the Purchase Date, the Company will (i) accept for payment all
Debt Securities of any series or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Trustee money sufficient to pay
the purchase price of all Debt Securities of such series or portions thereof
so tendered for purchase and (iii) deliver or cause to be delivered to the
Trustee the Debt Securities of such series properly tendered together with an
Officers' Certificate identifying the Debt Securities of such series or
portions thereof tendered to the Company for purchase. The Trustee will
promptly mail, to the Holders of the Debt Securities of such series properly
tendered and purchased, payment in an amount equal to the purchase price, and
promptly authenticate and mail to each Holder a new Debt Security of the same
series having a principal amount equal to any portion of such Holder's Debt
Securities of such series that were surrendered but not tendered and
purchased, the Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Purchase Date.
If the Company is prohibited by applicable law from making the Change
of Control Offer or purchasing Debt Securities of any series thereunder, the
Company need not make a Change of Control Offer pursuant to this covenant for
so long as such prohibition is in effect.
The Company will comply with all applicable tender offer rules,
including, without limitation, Rule 14e-1 under the Exchange Act, in
connection with a Change of Control Offer.
Limitation on Business
The Company will, and will cause its Restricted Subsidiaries and the
Eligible Joint Ventures to, engage only in (i) the ownership, design,
engineering, procurement, construction, development, acquisition, operation,
servicing, management or disposition of Permitted Facilities, (ii) the
ownership, creation, development, acquisition, servicing, management or
disposition of Restricted Subsidiaries and Joint Ventures that own,
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construct, develop, design, engineer, procure, acquire, operate, service,
manage or dispose of Permitted Facilities, (iii) obtaining, arranging or
providing financing incident to any of the foregoing and (iv) other related
activities incident to any of the foregoing. The Company will not, and will
not permit any of its Restricted Subsidiaries or any Eligible Joint Venture
to, make any Investment or otherwise acquire any Property that is not directly
related to the business of the Company as described in the preceding sentence
(collectively, the "Ineligible Investments") other than as a part of an
Investment or an acquisition of Property that is predominantly and directly
related to the business of the Company as described above, and if the
aggregate fair market value of such Ineligible Investments in the aggregate
exceeds 20% (the "Percentage Limit") of the total assets of the Company and
its consolidated Restricted Subsidiaries (as determined in accordance with
GAAP) as determined in good faith by the Chief Financial Officer, as evidenced
by an Officers' Certificate, the Company, its Restricted Subsidiaries and the
Eligible Joint Ventures must cease acquiring any additional Ineligible
Investments and, within 18 months of the acquisition that caused the
Ineligible Assets to exceed the Percentage Limit, must return to compliance
with the Percentage Limit by disposing of Ineligible Assets or otherwise,
provided that such 18-month period may be extended up to an additional six
months if, despite the Company's active efforts during such 18-month period to
dispose of such Ineligible Investments or to otherwise come into compliance
with such Percentage Limit, the Company is unable to do so because of
regulatory restrictions or delays or adverse market conditions.
Limitation on Certain Sale-Leasebacks
The Company will not, and will not permit any of its Restricted
Subsidiaries or any Eligible Joint Venture to, Incur or otherwise become
obligated with respect to any sale-leaseback (other than a sale-leaseback with
respect to a Permitted Facility that is Non-Recourse) unless, (i) (a) if
effected by the Company, the Company would be permitted to Incur such
obligation under the covenant described under "Limitation on Debt" above or,
(b) if effected by a Restricted Subsidiary or an Eligible Joint Venture, such
Restricted Subsidiary or such Eligible Joint Venture would be permitted to
Incur such obligation under the covenant described under "Limitation on
Subsidiary Debt" above, assuming for the purpose of this covenant and the
covenants described under "Limitation on Debt" and "Limitation on Subsidiary
Debt" that (x) the obligation created by such sale-leaseback is a Capitalized
Lease and (y) the Capitalized Lease Obligation with respect thereto is the
Attributable Value thereof, (ii) the Company, such Restricted Subsidiary or
such Eligible Joint Venture is permitted to grant a Lien with respect to the
property that is the subject of such sale-leaseback under the covenant
described under "Limitation on Liens" above, (iii) the proceeds of such
sale-leaseback are at least equal to the fair market value of the property
sold (determined in good faith as evidenced by an Officers' Certificate
delivered to the Trustee in respect of a transaction involving less than $25
million, or, if equal to or in excess of $25 million, by the Board of
Directors, as evidenced by a Board resolution) and (iv) the Net Cash Proceeds
of the sale-leaseback are applied pursuant to the covenants described under
"Limitation on Dispositions" above.
Limitation on Sale of Subsidiary Preferred Stock
The Company will not permit any of its Restricted Subsidiaries or any
Eligible Joint Venture to create, assume or otherwise cause or suffer to exist
any Preferred Stock except: (i) Preferred Stock outstanding on the date of the
Indentures, including Preferred Stock issued as dividends in respect of such
Preferred Stock pursuant to the terms of the agreement or instrument that
governs such Preferred Stock as in effect on the date of original issuance of
the Debt Securities, (ii) Preferred Stock held by the Company, a Restricted
Subsidiary of the Company or an Eligible Joint Venture, (iii) Preferred Stock
issued by a Person prior to the time (a) such Person becomes a Restricted
Subsidiary or an Eligible Joint Venture, (b) such Person merges with or into
another Restricted Subsidiary or another Eligible Joint Venture or (c) a
Restricted Subsidiary, or an Eligible Joint Venture merges with or into such
Person (in a transaction in which such Person becomes a Restricted Subsidiary
or an Eligible Joint Venture), provided that such Preferred Stock was not
issued in anticipation of such Person becoming a Restricted Subsidiary or an
Eligible Joint Venture or of such merger, (iv) Preferred Stock issued or
agreed to be issued by a Restricted Subsidiary or an Eligible Joint Venture in
connection with the financing of the construction, design, engineering,
procurement, equipping, developing, operation, ownership, management,
servicing or acquisition of one or more Permitted Facilities in which the
Company or one or more Restricted Subsidiaries or Eligible Joint Ventures has
a direct or indirect interest or the retirement of Debt or Preferred
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Stock secured by any such Permitted Facility or in order to enhance the
repatriation of equity, advances or income or the increase of after-tax funds
available for distribution to the owners of any such Permitted Facility, (v)
Preferred Stock issued or agreed to be issued by a Restricted Subsidiary or an
Eligible Joint Venture in satisfaction of legal requirements applicable to a
Permitted Facility or to maintain the ordinary course of conduct of such
Restricted Subsidiary's or such Eligible Joint Venture's business in the
applicable jurisdiction and (vi) Preferred Stock that is exchanged for, or the
proceeds of which are used to refinance, any Preferred Stock permitted to be
outstanding pursuant to clauses (i) through (v) hereof (or any extension,
renewal or refinancing thereof), having a liquidation preference not to exceed
the liquidation preference of the Preferred Stock so exchanged or refinanced
and having a redemption period no shorter than the redemption period of the
Preferred Stock so exchanged or refinanced.
EVENTS OF DEFAULT
An Event of Default, as defined in each of the Indentures and
applicable to any particular series of Debt Securities issued under such
Indenture is defined as being: (i) default as to the payment of principal, or
premium, if any, on any Debt Security of that series or as to any payment
required in connection with a Change of Control or an Asset Disposition, (ii)
default as to the payment of interest on any Debt Security of that series for
30 days after payment is due, (iii) failure to make an offer required under
either of the covenants described under "Limitation on Dispositions" or
"Purchase of Debt Securities Upon a Change of Control" above or a failure to
purchase Debt Securities of that series tendered in respect of such offer,
(iv) default in the performance, or breach, of any covenant, agreement or
warranty contained in the Indentures and the Debt Securities of that series
and such failure continues for 30 days after written notice is given to the
Company by the Trustee or the Holders of at least 25% in principal amount
outstanding of the Debt Securities of that series issued under such Indenture,
as provided in such Indenture, (v) default on any other Debt of the Company or
any Significant Subsidiary (other than Non-Recourse Debt of Significant
Subsidiaries) if either (x) such default results from failure to pay principal
of such Debt in excess of $25 million when due after any applicable grace
period or (y) as a result of such default, the maturity of such Debt has been
accelerated prior to its scheduled maturity and such default has not been
cured within the applicable grace period, and such acceleration has not been
rescinded, and the principal amount of such Debt, together with the principal
amount of any other Debt of the Company and its Significant Subsidiaries (not
including Non-Recourse Debt of the Significant Subsidiaries) that is in
default as to principal, or the maturity of which has been accelerated,
aggregates $25 million or more, (vi) the entry by a court of one or more
judgments or orders against the Company or any Significant Subsidiary for the
payment of money that in the aggregate exceeds $25 million (excluding the
amount thereof covered by insurance or by a bond written by a Person other
than an Affiliate of the Company), which judgments or orders have not been
vacated, discharged or satisfied or stayed pending appeal within 60 days from
the entry thereof, provided that such a judgment or order will not be an Event
of Default if such judgment or order does not require any payment by the
Company or any Significant Subsidiary, except to the extent that such judgment
is only against Property that secures Non-Recourse Debt that was permitted
under the Indentures, and the Company could, at the expiration of the
applicable 60 day period, after giving effect to such judgment or order and
the consequences thereof, Incur at least $1 of Debt under the provisions
described in the first paragraph of "Limited on Debt" above, and (vii) certain
events involving bankruptcy, insolvency or reorganization of the Company or
any of its Significant Subsidiaries.
The Indentures provide that the Trustee may withhold notice to the
Holders of any default (except in payment of principal of, premium, if any, or
interest on any series of Debt Securities and any payment required in
connection with a Change of Control or an Asset Disposition) if the Trustee
considers it in the interest of Holders to do so.
The Indentures provide that if an Event of Default with respect to
Debt Securities of any series at the time outstanding (other than an event of
bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary) has occurred and is continuing, either the Trustee or the Holders
of not less than 25% in principal amount of the Debt Securities of that series
issued under such Indenture then outstanding may declare the Default Amount of
all Debt Securities of that series to be due and payable immediately, but upon
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certain conditions such declaration may be annulled and past defaults (except,
unless theretofore cured, a default in payment of principal of, premium, if
any, or interest on the Debt Securities of that series or any payment required
in connection with a Change of Control or an Asset Disposition, as the case
may be) may be waived by the Holders of a majority in principal amount of the
Debt Securities of that series then outstanding. If an Event of Default due to
the bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary occurs, the Indenture provides that the Default Amount of all Debt
Securities of that series will become immediately due and payable.
The Holders of a majority in principal amount of the Debt Securities
of any series issued under such Indenture then outstanding will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the Indenture with respect to the Debt
Securities of such series, subject to certain limitations specified in the
Indenture, provided that the Holders of Debt Securities of such series must
have offered to the Trustee reasonable indemnity against expenses and
liabilities. Each Indenture requires the annual filing by the Company with the
Trustee of a written statement as to compliance with the principal covenants
contained in the Indentures.
MODIFICATION
Each of the Indentures contains provisions permitting the Company and
the Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Debt Securities at the time outstanding, to modify
such Indenture or any supplemental indenture or the rights of the Holders of
the series of Debt Securities issued under such Indenture, except that no such
modification may (i) extend the final maturity of any of the Debt Securities,
reduce the principal amount thereof, reduce any amount payable on redemption
or purchase thereof or impair the right of any Holder to institute suit for
the payment thereof or make any change in the covenants regarding a Change of
Control or an Asset Disposition or the related definitions without the consent
of the Holder of each of the series of Debt Securities so affected or (ii)
reduce the percentage of any series of Debt Securities, the consent of the
Holders of which is required for any such modification, without the consent of
the Holders of all series of Debt Securities issued under such Indenture then
outstanding.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
The Company may not consolidate with, merge with or into, or transfer
all or substantially all its Property (as an entirety or substantially an
entirety in one transaction or a series of related transactions), to any
Person unless: (i) the Company will be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the Property of the Company is transferred will
be a corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and will expressly assume in
writing all the obligations of the Company, under the Indenture and the Debt
Securities, (ii) immediately after giving effect to such transaction, no Event
of Default and no event or condition that through the giving of notice or
lapse of time or both would become an Event of Default will have occurred and
be continuing, (iii) immediately after giving effect to such transaction on a
pro forma basis, the Company or the surviving entity would be able to Incur at
least $1 of Debt under the provision described in the first paragraph of
"Limitation on Debt" above and (iv) the Net Worth of the Company or the
surviving entity, as the case may be, on a pro forma basis after giving effect
to such transaction (without giving effect to the fees and expenses incurred
in respect of such transaction), is not less than the Net Worth of the Company
immediately prior to such transaction.
None of the Company, any of its Restricted Subsidiaries or any
Eligible Joint Ventures may merge with or into, or be consolidated with, an
Unrestricted Subsidiary of the Company, except to the extent that such
Unrestricted Subsidiary has been designated a Restricted Subsidiary as
provided in the Indenture in advance of or in connection with such merger.
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DEFEASANCE AND DISCHARGE
Legal Defeasance
Each of the Indentures provides that the Company will be deemed to
have paid and will be discharged from any and all obligations in respect of
the Debt Securities of or within any series, on the 123rd day after the
deposit referred to below has been made (or immediately if an Opinion of
Counsel is delivered to the effect described in clause (B)(iii)(y) below), and
the provisions of such Indenture will cease to be applicable with respect to
such Debt Securities of such series (except for, among other matters, certain
obligations to register the transfer or exchange of such Debt Securities of
such series, to replace stolen, lost or mutilated Debt Securities of such
series, to maintain paying agencies and to hold monies for payment in trust)
if, among other things, (A) the Company has deposited with the Trustee, in
trust, money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if
any, and accrued interest on the applicable Debt Securities, on the respective
Stated Maturities of the Debt Securities or, if the Company makes arrangements
satisfactory to the Trustee for the redemption of the Debt Securities prior to
their Stated Maturity, on any earlier redemption date in accordance with the
terms of such Indenture and the applicable Debt Securities, (B) the Company
has delivered to the Trustee (i) either (x) an Opinion of Counsel to the
effect that Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred and the Company had paid or redeemed such Debt
Securities on the applicable dates, which Opinion of Counsel must be based
upon a ruling of the Internal Revenue Service to the same effect or a change
in applicable federal income tax law or related Treasury regulations after the
date of the Indentures or (y) a ruling directed to the Trustee or the Company
received from the Internal Revenue Service to the same effect as the
aforementioned Opinion of Counsel, (ii) an Opinion of Counsel to the effect
that the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and (iii) an Opinion of Counsel to the effect that either
(x) after the passage of 123 days following the deposit, the trust fund will
not be subject to the effect of Section 547 or 548 of the U.S. Bankruptcy Code
or Section 15 of the New York Debtor and Creditor Law or (y) based upon
existing precedents, if the matter were properly briefed, a court should hold
that the deposit of moneys and/or U.S. Government Obligations as provided in
clause (A) would not constitute a preference voidable under Section 547 or 548
of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law, (C) immediately after giving effect to such deposit on a pro forma basis,
no Event of Default, or event that after the giving of notice or lapse of time
or both would become an Event of Default, will have occurred and be continuing
on the date of such deposit or (unless an Opinion of Counsel is delivered to
the effect described in clause (B)(iii)(y) above) during the period ending on
the 123rd day after the date of such deposit and the deposit will not result
in a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which the
Company is bound and (D) if at such time the Debt Securities are listed on a
national securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Debt Securities will not be delisted
as a result of such deposit, defeasance and discharge.
Covenant Defeasance
The Indentures further provide that the provisions of clause (iii)
under "Mergers, Consolidations and Sales of Assets" and all the covenants
described herein under "Certain Covenants," clause (iv) under "Events of
Default" with respect to such covenants and with respect to clause (iii) under
"Mergers, Consolidations and Sales of Assets," clauses (i) and (iii) with
respect to certain offers for any series of Debt Securities required by
certain covenants and clauses (v) and (vi) under "Events of Default" will
cease to be applicable to the Company, its Restricted Subsidiaries and its
Eligible Joint Ventures upon the satisfaction of the provisions described in
clauses (A), (B)(ii) and (iii), (C) and (D) of the preceding paragraph and the
delivery by the Company to the Trustee of an Opinion of Counsel to the effect
that, among other things, the Holders of such Debt Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and the defeasance of certain covenants and Events of Default and
will be subject to federal income tax on the same amount and in
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the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and the Company had paid or redeemed
such Debt Securities on the applicable dates.
Defeasance and Certain Other Events of Default
If the Company exercises its option to omit compliance with certain
covenants and provisions of the Indentures with respect to the Debt Securities
of any series as described in the immediately preceding paragraph and any
series of Debt Securities are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity or scheduled redemption, but may not be sufficient to pay
amounts due on such Debt Securities at the time of acceleration resulting from
such Event of Default. The Company will remain liable for such payments.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and
construed in accordance with, the law of the State of New York, including
Section 5-1401 of the New York General Obligations Law, but otherwise without
regard to conflict of laws rules.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of each of the Indentures. Reference is
made to the Indentures for the full definitions of all such terms as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" is defined to mean Debt Incurred by a Person prior to
the time (i) such Person becomes a Restricted Subsidiary of the Company or an
Eligible Joint Venture, (ii) such Person merges with or into a Restricted
Subsidiary of the Company or an Eligible Joint Venture, or (iii) a Restricted
Subsidiary of the Company or an Eligible Joint Venture merges with or into
such Person (in a transaction in which such Person becomes a Restricted
Subsidiary of the Company or an Eligible Joint Venture), provided that, after
giving effect to such transaction, any Non-Recourse Debt of such Person could
have been Incurred pursuant to clause (iii) of the provision described under
"Limitation on Subsidiary Debt", any Permitted Facilities Debt of such Person
could have been Incurred pursuant to clause (viii) of the provision described
under "Limitation on Subsidiary Debt" and would not otherwise violate any
other provision of the applicable Indenture, and all the other Debt of such
Person could have been Incurred by the Company at the time of such merger or
acquisition pursuant to the provision described in the first paragraph of
"Limitation on Debt" above, and provided further that such Debt was not
Incurred in connection with, or in contemplation of, such merger or such
Person becoming a Restricted Subsidiary of the Company or an Eligible Joint
Venture.
"Acquisition Debt" is defined to mean Debt of any Person existing at
the time such Person is merged into the Company or assumed in connection with
the acquisition of Property from any such Person (other than Property acquired
in the ordinary course of business), including Debt Incurred in connection
with, or in contemplation of, such Person being merged into the Company (but
excluding Debt of such Person that is extinguished, retired or repaid in
connection with such merger or acquisition).
"Adjusted Consolidated Net Income" is defined to mean for any period,
for any Person (the "Referenced Person") the aggregate Net Income (or loss) of
the Referenced Person and its consolidated Subsidiaries for such period
determined in conformity with GAAP, provided that the following items will be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the Net Income (or loss) of any other Person (other than a Subsidiary of
the Referenced Person) in which any third Person has an interest, except to
the extent of the amount of dividends or other distributions actually paid in
cash to the Referenced Person during such period, or after such period and on
or before the date of determination, by such Person in which the interest is
held, which dividends and distributions will be included in such computation,
(ii) solely for
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the purposes of calculating the amount of Restricted Payments that may be
made pursuant to the provision described in clause (c) of the first paragraph
of "Limitation on Restricted Payments" above (and in such case, except to the
extent includable pursuant to clause (i) above), the Net Income (if positive)
of any other Person accrued prior to the date it becomes a Subsidiary of the
Referenced Person or is merged into or consolidated with the Referenced Person
or any of its Subsidiaries or all or substantially all the Property of such
other Person is acquired by the Referenced Person or any of its Subsidiaries,
(iii) the Net Income (if positive) of any Subsidiary of the Referenced Person
to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary to such Person or to any other Subsidiary of
such Net Income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary, (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales (except, solely for
the purposes of calculating the amount of Restricted Payments that may be made
pursuant to the provision described in clause (c) of the first paragraph of
"Limitation on Restricted Payments" above, any gains or losses of the Company
and any of its Restricted Subsidiaries from Asset Sales of Capital Stock of
Unrestricted Subsidiaries), (v) the cumulative effect of a change in
accounting principles and (vi) any amounts paid or accrued as dividends on
Preferred Stock of any Subsidiary of the Referenced Person that is not held by
the Referenced Person or another Subsidiary thereof. When the "Referenced
Person" is the Company, the foregoing references to "Subsidiaries" will be
deemed to refer to "Restricted Subsidiaries."
"Affiliate" of any Person is defined to mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") when used with respect to any
Person means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. For the
purpose of the covenant described under "Limitation on Transactions with
Affiliates" above, the term "Affiliate" will be deemed to include only Kiewit,
any entity owning beneficially 10% or more of the Voting Stock of the Company
and their respective Affiliates other than the Restricted Subsidiaries and the
Eligible Joint Ventures and the other equity investors in the Restricted
Subsidiaries and the Eligible Joint Ventures (solely on account of their
investments in the Restricted Subsidiaries and the Eligible Joint Ventures),
and for such purpose such term also will be deemed to include the Unrestricted
Subsidiaries.
"Asset Acquisition" is defined to mean (i) an investment by the
Company, any of its Subsidiaries or any Joint Venture in any other Person
pursuant to which such Person will become a direct or indirect Subsidiary of
the Company or a Joint Venture or will be merged into or consolidated with the
Company, any of its Subsidiaries or any Joint Venture or (ii) an acquisition
by the Company, any of its Subsidiaries or any Joint Venture of the Property
of any Person other than the Company, any of its Subsidiaries or any Joint
Venture that constitutes substantially all of an operating unit or business of
such Person.
"Asset Disposition" is defined to mean any sale, transfer,
conveyance, lease or other disposition (including by way of merger,
consolidation or sale-leaseback) by the Company, any of its Restricted
Subsidiaries or any Eligible Joint Venture to any Person (other than to the
Company, a Restricted Subsidiary of the Company or an Eligible Joint Venture
and other than in the ordinary course of business) of any Property of the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture
other than any shares of Capital Stock of the Unrestricted Subsidiaries.
Notwithstanding the foregoing to the contrary, the term "Asset Disposition"
will include the sale, transfer, conveyance or other disposition of any shares
of Capital Stock of any Unrestricted Subsidiary to the extent that the Company
or any of its Restricted Subsidiaries or Eligible Joint Ventures made an
Investment in such Unrestricted Subsidiary pursuant to clause (vii) of the
definition of "Permitted Payment," and the Company will, and will cause each
of its Restricted Subsidiaries and Eligible Joint Ventures to, apply pursuant
to the covenant described under "Limitation on Dispositions" that portion of
the Net Cash Proceeds from the sale, transfer, conveyance or other disposition
of such Unrestricted Subsidiary that is equal to the portion of the total
Investment in such Unrestricted Subsidiary that is represented by the
Investment that was made pursuant to clause (vii) of the definition of
"Permitted Payment." For purposes of this
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definition, any disposition in connection with directors' qualifying shares or
investments by foreign nationals mandated by applicable law will not
constitute an Asset Disposition. In addition, the term "Asset Disposition"
will not include (i) any sale, transfer, conveyance, lease or other
disposition of the Capital Stock or Property of Restricted Subsidiaries or
Eligible Joint Ventures pursuant to the terms of any power sales agreements or
steam sales agreements to which such Restricted Subsidiaries or such Eligible
Joint Ventures are parties on the date of the original issuance of any series
of the Debt Securities or pursuant to the terms of any power sales agreements
or steam sales agreements, or other agreements or contracts that are related
to the output or product of, or services rendered by, a Permitted Facility as
to which such Restricted Subsidiary or such Eligible Joint Venture is the
supplying party, to which such Restricted Subsidiaries or such Eligible Joint
Ventures become a party after such date if the Chief Executive Officer or
Chief Financial Officer of the Company determines in good faith (evidenced by
an Officers' Certificate) that such provisions are customary (or, in the
absence of any industry custom, reasonably necessary) in order to effect such
agreements and are reasonable in light of comparable transactions in the
applicable jurisdiction, (ii) any sale, transfer, conveyance, lease or other
disposition of Property governed by the covenant described under "Mergers,
Consolidations and Sales of Assets" above, (iii) any sale, transfer,
conveyance, lease or other disposition of any Cash Equivalents, (iv) any
transaction or series of related transactions consisting of the sale,
transfer, conveyance, lease or other disposition of Capital Stock or Property
with a fair market value aggregating less than $5 million and (v) any
Permitted Payment or any Restricted Payment that is permitted to be made
pursuant to the covenant described under "Limitation on Restricted Payments"
above. The term "Asset Disposition" also will not include (i) the grant of or
realization upon a Lien permitted under the covenant described under
"Limitation on Liens" above or the exercise of remedies thereunder, (ii) a
sale-leaseback transaction involving substantially all the Property
constituting a Permitted Facility pursuant to which a Restricted Subsidiary of
the Company or an Eligible Joint Venture sells the Permitted Facility to a
Person in exchange for the assumption by that Person of the Debt financing the
Permitted Facility and the Restricted Subsidiary or the Eligible Joint Venture
leases the Permitted Facility from such Person, (iii) dispositions of Capital
Stock, contract rights, development rights and resource data made in
connection with the initial development of Permitted Facilities, or the
formation or capitalization of Restricted Subsidiaries or Eligible Joint
Ventures in respect of the initial development of Permitted Facilities, in
respect of which only an insubstantial portion of the prospective Construction
Financing that would be required to commence commercial operation has been
funded or (iv) transactions determined in good faith by the Chief Financial
Officer, as evidenced by an Officers' Certificate, made in order to enhance
the repatriation of Net Cash Proceeds for a Foreign Asset Disposition or in
order to increase the after-tax proceeds thereof available for immediate
distribution to the Company. Any Asset Disposition that results from the bona
fide exercise by any governmental authority of its claimed or actual power of
eminent domain need not comply with the provisions of clauses (i) and (ii) of
the covenant described under "Limitation on Dispositions" above. Any Asset
Disposition that results from a casualty loss need not comply with the
provisions of clause (i) of the covenant described under "Limitation on
Dispositions" above.
"Asset Sale" is defined to mean the sale or other disposition by the
Company, any of its Subsidiaries or any Joint Venture (other than to the
Company, another Subsidiary of the Company or another Joint Venture) of (i)
all or substantially all of the Capital Stock of any Subsidiary of the Company
or any Joint Venture or (ii) all or substantially all of the Property that
constitutes an operating unit or business of the Company, any of its
Subsidiaries or any Joint Venture.
"Attributable Value" means, as to a Capitalized Lease Obligation
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the capitalized amount thereof that would
appear on the face of a balance sheet of such Person in accordance with GAAP.
"Average Life" is defined to mean, at any date of determination with
respect to any Debt security or Preferred Stock, the quotient obtained by
dividing (i) the sum of the product of (A) the number of years from such date
of determination to the dates of each successive scheduled principal or
involuntary liquidation value payment of such Debt security or Preferred
Stock, respectively, multiplied by (B) the amount of such principal or
involuntary liquidation value payment by (ii) the sum of all such principal or
involuntary liquidation value payments.
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"Board of Directors" is defined to mean either the Board of Directors
of the Company or any duly authorized committee of such Board.
"Business Day" is defined to mean a day that, in the city (or in any
of the cities, if more than one) where amounts are payable in respect of the
Debt Securities, is neither a legal holiday nor a day on which banking
institutions are authorized or required by law, regulation or executive order
to close.
"Capital Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) in, or interests (however
designated) in, the equity of such Person that is outstanding or issued on or
after the date of Indenture, including, without limitation, all Common Stock
and Preferred Stock and partnership and joint venture interests in such
Person.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any Property of which the discounted present value of the rental
obligations of such Person as lessee, in conformity with GAAP, is required to
be capitalized on the balance sheet of such Person, and "Capitalized Lease
Obligation" means the rental obligations, as aforesaid, under such lease.
"Cash Equivalent" is defined to mean any of the following: (i)
securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), (ii) time deposits and certificates of deposit of any commercial
bank organized in the United States having capital and surplus in excess of
$500,000,000 or any commercial bank organized under the laws of any other
country having total assets in excess of $500,000,000 with a maturity date not
more than two years from the date of acquisition, (iii) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clauses (i) or (v) that was entered into with any bank meeting
the qualifications set forth in clause (ii) or another financial institution
of national reputation, (iv) direct obligations issued by any state or other
jurisdiction of the United States of America or any other country or any
political subdivision or public instrumentality thereof maturing, or subject
to tender at the option of the holder thereof, within 90 days after the date
of acquisition thereof and, at the time of acquisition, having a rating of A
from Standard & Poor's Corporation ("S&P") or A-2 from Moody's Investors
Service, Inc. ("Moody's") (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally recognized rating
service acceptable to the Trustee), (v) commercial paper issued by (a) the
parent corporation of any commercial bank organized in the United States
having capital and surplus in excess of $500,000,000 or any commercial bank
organized under the laws of any other country having total assets in excess of
$500,000,000, and (b) others having one of the two highest ratings obtainable
from either S&P or Moody's (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally recognized rating
service acceptable to the Trustee) and in each case maturing within one year
after the date of acquisition, (vi) overnight bank deposits and bankers'
acceptances at any commercial bank organized in the United States having
capital and surplus in excess of $500,000,000 or any commercial bank organized
under the laws of any other country having total assets in excess of
$500,000,000, (vii) deposits available for withdrawal on demand with any
commercial bank organized in the United States having capital and surplus in
excess of $500,000,000 or any commercial bank organized under the laws of any
other country having total assets in excess of $500,000,000, (viii)
investments in money market funds substantially all of whose assets comprise
securities of the types described in clauses (i) through (vi) and (ix), and
(ix) auction rate securities or money market preferred stock having one of the
two highest ratings obtainable from either S&P or Moody's (or, if at any time
neither S&P nor Moody's may be rating such obligations, then from another
nationally recognized rating service acceptable to the Trustee).
"Change of Control" is defined to mean the occurrence of one or more
of the following events:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than Kiewit, is or becomes the
beneficial owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under the
Exchange Act), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of the Company (for the purposes of
this clause (i), any person will be deemed to beneficially own any
Voting Stock of any
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corporation (the "specified corporation") held by any other
corporation (the "parent corporation"), if such person "beneficially
owns" (as so defined), directly or indirectly, more than 35% of the
voting power of the Voting Stock of such parent corporation) and
Kiewit "beneficially owns" (as so defined), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the
Voting Stock of the Company and does not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company;
(ii) during any one-year period, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new directors elected by such Board of
Directors or nominated for election by the shareholders of the
Company by a vote of at least a majority of the directors of the
Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office, unless a majority
of such new directors were elected or appointed by Kiewit; or
(iii) the Company or its Restricted Subsidiaries sell,
convey, assign, transfer, lease or otherwise dispose of all or
substantially all the Property of the Company and the Restricted
Subsidiaries taken as a whole;
provided that with respect to the foregoing subparagraphs (i), (ii) and (iii),
a Change of Control will not be deemed to have occurred unless and until a
Rating Decline has occurred as well.
"Common Stock" is defined to mean with respect to any Person, Capital
Stock of such Person that does not rank prior, as to the payment of dividends
or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Company Refinancing Debt" is defined to mean Debt issued in exchange
for, or the proceeds of which are used to refinance (including to purchase),
outstanding Debt Securities or other Debt of the Company Incurred pursuant to
clauses (i), (iv), and (vii) of "Limitation on Debt" and Debt Incurred
pursuant to the first paragraph under "Limitation on Debt" in an amount (or,
if such new Debt provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or refinanced
(plus accrued interest and all fees, premiums (in excess of the accreted
value) and expenses related to such exchange or refinancing), for which
purpose the amount so exchanged or refinanced will be deemed to equal the
lesser of (x) the principal amount of the Debt so exchanged or refinanced and
(y) if the Debt being exchanged or refinanced was issued with an original
issue discount, the accreted value thereof (as determined in accordance with
GAAP) at the time of such exchange or refinancing, provided that (A) such Debt
will be subordinated in right of payment to the Senior Debt Securities in the
case of the Senior Debt Indenture and the Subordinated Debt Securities in the
case of the Subordinated Debt Indenture at least to the same extent, if any,
as the Debt so exchanged or refinanced is subordinated to the Senior Debt
Securities in the case of the Senior Debt Indenture and the Subordinated Debt
Securities in the case of the Subordinated Debt Indenture, (B) such Debt win
be Non-Recourse if the Debt so exchanged or refinanced is Non-Recourse, (C)
the Average Life of the new Debt will be equal to or greater than the Average
Life of the Debt to be exchanged or refinanced and (D) the final Stated
Maturity of the new Debt will not be sooner than the earlier of the final
Stated Maturity of the Debt to be exchanged or refinanced or six months after
the final Stated Maturity of the Debt Securities, provided that if such new
Debt refinances any series of the Debt Securities in part only, the final
Stated Maturity of such new Debt must be at least six months after the final
Stated Maturity of such series of Debt Securities.
"Consolidated EBITDA" of any Person for any period is defined to mean
the Adjusted Consolidated Net Income of such Person, plus, only to the extent
deducted in computing Adjusted Consolidated Net Income and without
duplication, (i) income taxes, excluding income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
Asset Sales, all determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP, (ii) Consolidated Fixed
Charges, (iii)
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depreciation and amortization expense, all determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP and
(iv) all other non-cash items reducing Adjusted Consolidated Net Income for
such period, all determined on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP, and less all non-cash items
increasing Adjusted Consolidated Net Income during such period, provided that
depreciation and amortization expense of any Subsidiary of such Person and any
other non-cash item of any Subsidiary of such Person that reduces Adjusted
Consolidated Net Income will be excluded (without duplication) in computing
Consolidated EBITDA, except to the extent that the positive cash flow
associated with such depreciation and amortization expense and other non-cash
items is actually distributed in cash to such Person during such period,
provided further that as applied to the Company, cash in respect of
depreciation and amortization and other non-cash items of Restricted
Subsidiaries and Eligible Joint Ventures may be deemed to have been
distributed or paid to the Company to the extent that such cash (I) is or was
under the exclusive dominion and control of such Restricted Subsidiary or such
Eligible Joint Venture and is or was free and clear of the Lien of any other
Person, (II) is or was immediately available for distribution and (III) could
be or could have been repatriated to the United States by means that are both
lawful and commercially reasonable, provided that the amount of the cash
deemed by this sentence to have been distributed or paid will be reduced by
the amount of tax that would have been payable with respect to the
repatriation thereof, provided further that any cash that enables the
recognition of depreciation and amortization and other non-cash items pursuant
to this sentence may not be used to enable the recognition of depreciation and
amortization and other non-cash items with respect to any prior or subsequent
period, regardless of whether such cash is distributed to the Company, and
provided further that the recognition of any depreciation and amortization and
other non-cash items as a result of this sentence will be determined in good
faith by the Chief Financial Officer, as evidenced by an Officers' Certificate
that will set forth in reasonable detail the relevant facts and assumptions
supporting such recognition. When the "Person" referred to above is the
Company, the foregoing references to "Subsidiaries" will be deemed to refer to
"Restricted Subsidiaries."
"Consolidated Fixed Charges" of any Person is defined to mean, for
any period, the aggregate of (i) Consolidated Interest Expense, (ii) the
interest component of Capitalized Leases, determined on a consolidated basis
for such Person and its consolidated Subsidiaries in accordance with GAAP,
excluding any interest component of Capitalized Leases in respect of that
portion of a Capitalized Lease Obligation of a Subsidiary that is Non-Recourse
to such Person, and (iii) cash and non-cash dividends due (whether or not
declared) on the Preferred Stock of any Subsidiary of such Person held by any
Person other than such Person and any Redeemable Stock of such Person or any
Subsidiary of such Person. When the "Person" referred to above is the Company,
the foregoing references to "Subsidiaries" will be deemed to refer to
"Restricted Subsidiaries."
"Consolidated Interest Expense" of any Person is defined to mean, for
any period, the aggregate interest expense in respect of Debt (including
amortization of original issue discount and non-cash interest payments or
accruals) of such Person and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, including all commissions,
discounts, other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs associated with Interest Rate
Protection Agreements and Currency Protection Agreements and any amounts paid
during such period in respect of such interest expense, commissions,
discounts, other fees and charges that have been capitalized, provided that
Consolidated Interest Expense of the Company will not include any interest
expense (including all commissions, discounts, other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs associated with Interest Rate Protection Agreements or Currency
Protection Agreements) in respect of that portion of any Debt that is
Non-Recourse, and provided further that Consolidated Interest Expense of the
Company in respect of a Guarantee by the Company of Debt of another Person
will be equal to the commissions, discounts, other fees and charges that would
be due with respect to a hypothetical letter of credit issued under a bank
credit agreement that can be drawn by the beneficiary thereof in the amount of
the Debt so guaranteed if (i) the Company is not actually making directly or
indirectly interest payments on such Debt and (ii) GAAP does not require the
Company on an unconsolidated basis to record such Debt as a liability of the
Company. When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" will be deemed to refer to "Restricted
Subsidiaries."
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"Construction Financing" is defined to mean the debt and/or equity
financing provided (over and above the owners' equity investment) to permit
the acquisition, development, design, engineering, procurement, construction
and equipping of a Permitted Facility and to enable it to commence commercial
operations, provided that Construction Financing may remain outstanding after
the commencement of commercial operations of a Permitted Facility, without any
increase in the amount of such financing, and such Construction Financing will
not cease to be Construction Financing.
"Currency Protection Agreement" is defined to mean, with respect to
any Person, any foreign exchange contract, currency swap agreement or other
similar agreement or arrangement intended to protect such Person against
fluctuations in currency values to or under which such Person is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"Debt" is defined to mean, with respect to any Person, at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit, bankers' acceptances, surety, bid,
operating and performance bonds, performance guarantees or other similar
instruments or obligations (or reimbursement obligations with respect thereto)
(except, in each case, to the extent incurred in the ordinary course of
business), (iv) all obligations of such Person to pay the deferred purchase
price of property or services, except Trade Payables, (v) the Attributable
Value of all obligations of such Person as lessee under Capitalized Leases,
(vi) all Debt of others secured by a Lien on any Property of such Person,
whether or not such Debt is assumed by such Person, provided that, for
purposes of determining the amount of any Debt of the type described in this
clause, if recourse with respect to such Debt is limited to such Property, the
amount of such Debt will be limited to the lesser of the fair market value of
such Property or the amount of such Debt, (vii) all Debt of others Guaranteed
by such Person to the extent such Debt is Guaranteed by such Person, (viii)
all Redeemable Stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends and (ix) to the
extent not otherwise included in this definition, all net obligations of such
Person under Currency Protection Agreements and Interest Rate Protection
Agreements.
For purposes of determining any particular amount of Debt that is or
would be outstanding, Guarantees of, or obligations with respect to letters of
credit or similar instruments supporting (to the extent the foregoing
constitutes Debt), Debt otherwise included in the determination of such
particular amount will not be included. For purposes of determining compliance
with the Indenture, in the event that an item of Debt meets the criteria of
more than one of the types of Debt described in the above clauses, the
Company, in its sole discretion, will classify such item of Debt and only be
required to include the amount and type of such Debt in one of such clauses.
"Default Amount" is defined to mean the principal amount plus
accrued interest.
"Eligible Joint Venture" is defined to mean a Joint Venture (other
than a Subsidiary) (i) that is or will be formed with respect to the
construction, development, acquisition, servicing, ownership, operation or
management of one or more Permitted Facilities and (ii) in which the Company
and Kiewit together, directly or indirectly, own at least 50% of the Capital
Stock therein (of which the Company must own at least half (in any event not
less than 25% of the total outstanding Capital Stock)) and (iii) in respect of
which the Company alone or in combination with Kiewit, directly or indirectly,
(a) controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement
or otherwise, the management and operation of the Joint Venture or any
Permitted Facilities of the Joint Venture or (b) otherwise has significant
influence over the management or operation of the Joint Venture or any
Permitted Facility of the Joint Venture in all material respects (significant
influence includes, without limitation, the right to control or veto any
material act or decision) in connection with such management or operation. Any
Joint Venture that is an Eligible Joint Venture pursuant to this definition
because of the ownership of Capital Stock therein by Kiewit will cease to be
an Eligible Joint Venture if (x) Kiewit disposes of any securities issued by
the Company and, as a result of such disposition, Kiewit becomes the
beneficial owner (as such term is defined under Rule 13d-3 or
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any successor rule or regulation promulgated under the Exchange Act) of less
than 25% of the outstanding shares of Voting Stock of the Company or (y) (I)
as a result of any action other than a disposition of securities by Kiewit,
Kiewit becomes the beneficial owner of less than 25% of the outstanding shares
of Voting Stock of the Company and (II) thereafter Kiewit disposes of any
securities issued by the Company as a result of which the beneficial ownership
by Kiewit of the outstanding Voting Stock of the Company is further reduced,
provided that thereafter such Joint Venture may become an Eligible Joint
Venture if Kiewit becomes the beneficial owner of at least 25% of the
outstanding shares of Voting Stock of the Company and the other conditions set
forth in this definition are fulfilled.
"Fixed Charge Ratio" is defined to mean the ratio, on a pro forma
basis, of (i) the aggregate amount of Consolidated EBITDA of any Person for
the Reference Period immediately prior to the date of the transaction giving
rise to the need to calculate the Fixed Charge Ratio (the "Transaction Date")
to (ii) the aggregate Consolidated Fixed Charges of such Person during such
Reference Period, provided that for purposes of such computation, in
calculating Consolidated EBITDA and Consolidated Fixed Charges, (1) the
Incurrence of the Debt giving rise to the need to calculate the Fixed Charge
Ratio and the application of the proceeds therefrom (including the retirement
or defeasance of Debt) will be assumed to have occurred on the first day of
the Reference Period, (2) Asset Sales and Asset Acquisitions that occur during
the Reference Period or subsequent to the Reference Period and prior to the
Transaction Date (but including any Asset Acquisition to be made with the Debt
Incurred pursuant to (1) above) and related retirement of Debt pursuant to an
Offer (in the amount of the Excess Proceeds with respect to which such Offer
has been made or would be made on the Transaction Date if the purchase of Debt
Securities pursuant to such Offer has not occurred on or before the
Transaction Date) will be assumed to have occurred on the first day of the
Reference Period, (3) the Incurrence of any Debt during the Reference Period
or subsequent to the Reference Period and prior to the Transaction Date and
the application of the proceeds therefrom (including the retirement or
defeasance of other Debt) will be assumed to have occurred on the first day of
such Reference Period, (4) Consolidated Interest Expense attributable to any
Debt (whether existing or being Incurred) computed on a pro forma basis and
bearing a floating interest rate will be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period
unless the obligor on such Debt is a party to an Interest Rate Protection
Agreement (that will remain in effect for the twelve month period after the
Transaction Date) that has the effect of fixing the interest rate on the date
of computation, in which case such rate (whether higher or lower) will be used
and (5) there will be excluded from Consolidated Fixed Charges any
Consolidated Fixed Charges related to any amount of Debt that was outstanding
during or subsequent to the Reference Period but is not outstanding on the
Transaction Date, except for Consolidated Fixed Charges actually incurred with
respect to Debt borrowed (as adjusted pursuant to clause (4)) (x) under a
revolving credit or similar arrangement to the extent the commitment
thereunder remains in effect on the Transaction Date or (y) pursuant to the
provision described in clause (iii) in the second paragraph of "Limitation on
Debt" above. For the purpose of making this computation, Asset Sales and Asset
Acquisitions that have been made by any Person that has become a Restricted
Subsidiary of the Company or an Eligible Joint Venture or been merged with or
into the Company or any Restricted Subsidiary of the Company or an Eligible
Joint Venture during the Reference Period, or subsequent to the Reference
Period and prior to the Transaction Date, will be calculated on a pro forma
basis, as will be all the transactions contemplated by the calculations
referred to in clauses (1) through (5) above with respect to the Persons or
businesses that were the subject of such Asset Sales and Asset Dispositions,
assuming such Asset Sales or Asset Acquisitions occurred on the first day of
the Reference Period.
"Foreign Asset Disposition" means an Asset Disposition in respect of
the Capital Stock or Property of a Restricted Subsidiary of the Company or an
Eligible Joint Venture to the extent that the proceeds of such Asset
Disposition are received by a Person subject in respect of such proceeds to
the tax laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"GAAP" is defined to mean generally accepted accounting principles in
the U.S. as in effect as of the date of the Indenture, applied on a basis
consistent with the principles, methods, procedures and practices employed in
the preparation of the Company's audited financial statements, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board
-43-
or in such other statements by such other entity as approved by a significant
segment of the accounting profession.
"Guarantee" is defined to mean any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any Debt
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt of such other Person (whether arising by virtue of partnership
arrangements (other than solely by reason of being a general partner of a
partnership), or by agreement to keep-well, to purchase assets, goods,
securities or services or to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Debt of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part), provided
that the term "Guarantee" will not include endorsements for collection or
deposit in the ordinary course of business or the grant of a Lien in
connection with any Non-Recourse Debt. The term "Guarantee" used as a verb has
a corresponding meaning.
"Holder", "holder of Debt Securities" and other similar terms are
defined to mean the registered holder of any Debt Security.
"Incur" is defined to mean with respect to any Debt, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Debt, provided that neither the accrual of interest (whether
such interest is payable in cash or kind) nor the accretion of original issue
discount will be considered an Incurrence of Debt. The term "Incurrence" has a
corresponding meaning.
"Interest Rate Protection Agreement" is defined to mean, with respect
to any Person, any interest rate protection agreement, interest rate future
agreement, interest rate option agreement, interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
hedge agreement or other similar agreement or arrangement intended to protect
such Person against fluctuations in interest rates to or under which such
Person or any of its Subsidiaries is a party or a beneficiary on the date of
the Indenture or becomes a party or a beneficiary thereafter.
"Investment" in a Person is defined to mean any investment in, loan
or advance to, Guarantee on behalf of, directly or indirectly, or other
transfer of assets to such Person (other than sales of products and services
in the ordinary course of business).
"Investment Grade" is defined to mean with respect to the Debt
Securities, (i) in the case of S&P, a rating of at least BBB-, (ii) in the
case of Moody's, a rating of at least Baa3, and (iii) in the case of a Rating
Agency other than S&P or Moody's, the equivalent rating, or in each case, any
successor, replacement or equivalent definition as promulgated by S&P, Moody's
or other Rating Agency as the case may be.
"Joint Venture" is defined to mean a joint venture, partnership or
other similar arrangement, whether in corporate, partnership or other legal
form.
"Kiewit" is defined to mean and include Kiewit Energy Company and any
other Subsidiary of Peter Kiewit Sons', Inc., Kiewit Construction Group Inc.
or Kiewit Diversified Group, Inc.
"Lien" is defined to mean, with respect to any Property, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such Property, but will not include any partnership, joint
venture, shareholder, voting trust or other similar governance agreement with
respect to Capital Stock in a Subsidiary or Joint Venture. For purposes of the
Indentures, the Company will be deemed to own subject to a Lien any Property
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such Property.
-44-
"Net Cash Proceeds" from an Asset Disposition is defined to mean cash
payments received (including any cash payments received by way of a payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received (including any cash received upon sale or disposition of
any such note or receivable), excluding any other consideration received in
the form of assumption by the acquiring Person of Debt or other obligations
relating to the Property disposed of in such Asset Disposition or received in
any form other than cash) therefrom, in each case, net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses of any
kind (including consent and waiver fees and any applicable premiums, earn-out
or working interest payments or payments in lieu or in termination thereof)
incurred, (ii) all federal, state, provincial, foreign and local taxes and
other governmental charges required to be accrued as a liability under GAAP
(a) as a consequence of such Asset Disposition, (b) as a result of the
repayment of any Debt in any jurisdiction other than the jurisdiction where
the Property disposed of was located or (c) as a result of any repatriation of
any proceeds of such Asset Disposition, (iii) a reasonable reserve for the
after-tax cost of any indemnification payments (fixed and contingent)
attributable to seller's indemnities to the purchaser undertaken by the
Company, any of its Restricted Subsidiaries or any Eligible Joint Venture in
connection with such Asset Disposition (but excluding any payments that by the
terms of the indemnities will not, under any circumstances, be made during the
term of the Debt Securities), (iv) all payments made on any Debt that is
secured by such Property, in accordance with the terms of any Lien upon or
with respect to such Property, or that must by its terms or by applicable law
or in order to obtain a required consent or waiver be repaid out of the
proceeds from or in connection with such Asset Disposition, and (v) all
distributions and other payments made to holders of Capital Stock of
Restricted Subsidiaries or Eligible Joint Ventures (other than the Company or
its Restricted Subsidiaries) as a result of such Asset Disposition.
"Net Income" of any Person for any period is defined to mean the net
income (loss) of such Person for such period, determined in accordance with
GAAP, except that extraordinary and non-recurring gains and losses as
determined in accordance with GAAP will be excluded.
"Net Worth" of any Person is defined to mean, as of any date, the
aggregate of capital, surplus and retained earnings (including any cumulative
currency translation adjustment) of such Person and its consolidated
Subsidiaries as would be shown on a consolidated balance sheet of such Person
and its consolidated Subsidiaries prepared as of such date in accordance with
GAAP When the "Person" referred to above is the Company, the foregoing
references to "Subsidiaries" will be deemed to refer to "Restricted
Subsidiaries."
"Non-Recourse", as applied to any Debt or any sale-leaseback, is
defined to mean any project financing that is or was Incurred with respect to
the development, acquisition, design, engineering, procurement, construction,
operation, ownership, servicing or management of one or more Permitted
Facilities in respect of which the Company or one or more Restricted
Subsidiaries or Eligible Joint Ventures has a direct or indirect interest,
provided that such financing is without recourse to the Company, any
Restricted Subsidiary or any Eligible Joint Venture other than any Restricted
Subsidiary or any Eligible Joint Venture that does not own any Property other
than one or more of such Permitted Facilities or a direct or indirect interest
therein, provided further that such financing may be secured by a Lien on only
(i) the Property that constitutes such Permitted Facilities, (ii) the income
from and proceeds of such Permitted Facilities, (iii) the Capital Stock of,
and other Investments in, any Restricted Subsidiary or Eligible Joint Venture
that owns the Property that constitutes any such Permitted Facility, and (iv)
the Capital Stock of, and other Investments in, any Restricted Subsidiary or
Eligible Joint Venture obligated with respect to such financing and of any
Subsidiary or Joint Venture (that is a Restricted Subsidiary or an Eligible
Joint Venture) of such Person that owns a direct or indirect interest in any
such Permitted Facility, and provided further that an increase in the amount
of Debt with respect to one or more Permitted Facilities pursuant to the
financing provided pursuant to the terms of this definition (except for the
first refinancing of Construction Financing) may not be Incurred to fund or
enable the funding of any dividend or other distribution in respect of Capital
Stock. The fact that a portion of financing with respect to a Permitted
Facility is not Non-Recourse will not prevent other portions of the financing
with respect to such Permitted Facility from constituting Non-Recourse Debt if
the foregoing requirements of this definition are fulfilled with respect to
such other portions.
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"Officers' Certificate" is defined to mean a certificate signed by
the Chairman of the Board of Directors, the Chief Executive Officer or any
Vice President and by the Chief Financial Officer, the Treasurer, an Assistant
Treasurer, the Controller, the Assistant Controller, the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee. Each such
certificate will comply with Section 314 of the Trust Indenture Act and
include the statements provided for in the Indenture if and to the extent
required thereby.
"Opinion of Counsel" is defined to mean an opinion in writing signed
by legal counsel who may be an employee of or counsel to the Company or who
may be other counsel satisfactory to the Trustee. Each such opinion will
comply with Section 314 of the Trust Indenture Act and include the statements
provided for in the Indenture, if and to the extent required thereby.
"Permitted Facility" is defined to mean (i) an electric power or
thermal energy generation or cogeneration facility or related facilities
(including residual waste management and facilities that use thermal energy
from a cogeneration facility), and its or their related electric power
transmission, fuel supply and fuel transportation facilities, together with
its or their related power supply, thermal energy and fuel contracts and other
facilities, services or goods that are ancillary, incidental, necessary or
reasonably related to the marketing, development, construction, management,
servicing, ownership or operation of the foregoing, owned by a utility or
otherwise, as well as other contractual arrangements with customers, suppliers
and contractors or (ii) any infrastructure facilities related to (A) the
treatment of water for municipal and other uses, (B) the treatment and/or
management of waste water, (C) the treatment, management and/or remediation of
waste, pollution and/or potential pollutants and (D) any other process or
environmental purpose.
"Permitted Facilities Debt" is defined to mean any Debt that is or
was Incurred with respect to the direct or indirect development, acquisition,
design, engineering, procurement, construction, operation, ownership,
servicing or management of one or more Permitted Facilities (x) currently in
development by the Company (directly or indirectly) or which are hereafter
acquired or developed by the Company (directly or indirectly) and (y) in which
the Company or one or more Restricted Subsidiaries or Eligible Joint Ventures
has a direct or indirect interest.
"Permitted Funding Company Loans" is defined to mean (a) Debt of a
Restricted Subsidiary, all the Capital Stock of which is owned, directly or
indirectly, by the Company and that (x) does not own any direct or indirect
interest in a Permitted Facility and (y) is not directly or indirectly
obligated on any Debt owed to any Person other than the Company, a Restricted
Subsidiary or an Eligible Joint Venture (a "Funding Company"), owed to a
Restricted Subsidiary or an Eligible Joint Venture that is not directly or
indirectly obligated on any Debt owed to any Person other than the Company, a
Restricted Subsidiary or an Eligible Joint Venture (except to the extent that
it has pledged the Capital Stock of its Subsidiaries and Joint Ventures to
secure Non-Recourse Debt) (a "Holding Company"), provided that such Debt (i)
does not require that interest be paid in cash at any time sooner than six
months after the final Stated Maturity of any series of Debt Securities, (ii)
does not require any payment of principal at any time sooner than six months
after the final Stated Maturity of any series of Debt Securities, (iii) is
subordinated in right of payment to all other Debt of such Restricted
Subsidiary other than Debt Incurred pursuant to clause (vii) of the covenant
described under "Limitation on Subsidiary Debt," all of which will be pari
passu and (iv) is evidenced by a subordinated note in the form attached to the
Indenture, and (b) Debt of a Holding Company to a Funding Company.
"Permitted Investment" is defined to mean any Investment that is made
directly or indirectly by the Company and its Restricted Subsidiaries in (i) a
Restricted Subsidiary or Eligible Joint Venture (excluding for the purpose of
this clause (i) any Construction Financing) that, directly or indirectly, is
or will be engaged in the construction, development, acquisition, operation,
servicing, ownership or management of a Permitted Facility or in any other
Person as a result of which such other Person becomes such a Restricted
Subsidiary or an Eligible Joint Venture, provided that at the time that any of
the foregoing Investments is proposed to be made, no Event of Default or event
that, after giving notice or lapse of time or both, would become an Event of
Default, will have occurred and be continuing, (ii) Construction Financing
provided by the Company (A) to any of its Restricted Subsidiaries (other than
an Eligible Joint Venture) up to 100% of the Construction
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Financing required by such Restricted Subsidiary and (B) to any Eligible Joint
Venture a portion of the Construction Financing required by such Eligible
Joint Venture that does not exceed the ratio of the Capital Stock in such
Eligible Joint Venture that is owned directly or indirectly by the Company to
the total amount of the Capital Stock in such Eligible Joint Venture that is
owned directly and indirectly by the Company and Kiewit together (provided
that the Company may provide such Construction Financing to such Eligible
Joint Venture only if Kiewit provides the balance of such Construction
Financing or otherwise causes it to be provided), if, in either case, (x) the
aggregate proceeds of all the Construction Financing provided is not more than
85% of the sum of the aggregate proceeds of all the Construction Financing and
the aggregate owners' equity investment in such Restricted Subsidiary or such
Eligible Joint Venture, as the case may be, (y) the Company receives a pledge
or assignment of all the Capital Stock of such Restricted Subsidiary or such
Eligible Joint Venture, as the case may be, that is owned by a
non-governmental Person (other than the Company, its Subsidiaries or the
Eligible Joint Ventures) that is permitted to be pledged for such purpose
under applicable law and (z) neither the Company nor Kiewit reduces its
beneficial ownership in such Restricted Subsidiary or such Eligible Joint
Venture, as the case may be, prior to the repayment in full of the Company's
portion of the Construction Financing, (iii) any Cash Equivalents, (iv)
prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits in
the ordinary course of business consistent with past practice, (v) loans and
advances to employees made in the ordinary course of business and consistent
with past practice, (vi) Debt incurred pursuant to Currency Protection
Agreements and Interest Rate Protection Agreements as otherwise permitted by
the Indenture, (vii) bonds, notes, debentures or other debt securities and
instruments received as a result of Asset Dispositions to the extent permitted
by the covenants described under "Limitation on Dispositions" above and
"Limitation on Business" above, (viii) any Lien permitted under the provisions
described under "Limitation on Liens" above, (ix) bank deposits and other
Investments (to the extent they do not constitute Cash Equivalents) required
by lenders in connection with any Non-Recourse Debt, provided that the Chief
Executive Officer or the Chief Financial Officer of the Company determines in
good faith, as evidenced by an Officers' Certificate, that such bank deposits
or Investments are required to effect such financings and are not materially
more restrictive, taken as a whole, than comparable requirements, if any, in
comparable financings in the applicable jurisdiction or (x) any Person to the
extent made with Capital Stock (other than Redeemable Stock) of the Company
(whether by way of purchase, merger, consolidation or otherwise) to the extent
permitted by the covenants described under "Limitation on Business" above.
"Permitted Joint Venture" is defined to mean a Joint Venture (i) that
is or will be formed with respect to the construction, development,
acquisition, servicing, ownership, operation or management of one or more
Permitted Facilities and (ii) in which (A) the Company or (B) the Company and
Kiewit together, directly or indirectly, own at least 70% of the Capital Stock
therein (of which the Company must own at least half (in any event not less
than 35% of the total outstanding Capital Stock)), provided that if applicable
non-U.S. law restricts the amount of Capital Stock that the Company may own,
the Company must own at least 70% of the amount of Capital Stock that it may
own pursuant to such law, which in any event must be not less than 35% of the
total outstanding Capital Stock therein and (iii) in respect of which the
Company alone or in combination with Kiewit, directly or indirectly, (a)
controls, by voting power, board or management committee membership, or
through the provisions of any applicable partnership, shareholder or other
similar agreement or under an operating, maintenance or management agreement
or otherwise, the management and operation of the Joint Venture or any
Permitted Facilities of the Joint Venture or (b) otherwise has significant
influence over the management or operation of the Joint Venture or any
Permitted Facility of the Joint Venture in all material respects (significant
influence includes, without limitations, the right to control or veto any
material act or decision) in connection with such management or operation. Any
Joint Venture that is a Permitted Joint Venture pursuant to this definition
because of the ownership of Capital Stock therein by Kiewit will cease to be a
Permitted Joint Venture if (x) Kiewit disposes of any securities issued by the
Company and, as a result of such disposition, Kiewit becomes the beneficial
owner (as such term is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of less than 25% of the
outstanding shares of Voting Stock of the Company or (y) (I) as a result of
any action other than a disposition of securities by Kiewit, Kiewit becomes
the beneficial owner of less than 25% of the outstanding shares of Voting
Stock of the Company and (II) thereafter Kiewit disposes of any securities
issued by the Company as a result of which the beneficial ownership by Kiewit
of the outstanding Voting Stock of the Company is further reduced, provided
that thereafter such Joint Venture may become a Permitted Joint Venture if
Kiewit becomes the beneficial owner of
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at least 25% of the outstanding shares of Voting Stock of the Company and the
other conditions set forth in this definition are fulfilled.
"Permitted Payments" is defined to mean, with respect to the Company,
any of its Restricted Subsidiaries or any Eligible Joint Venture, (i) any
dividend on shares of Capital Stock of the Company payable (or to the extent
paid) solely in Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Redeemable
Stock) of the Company and any distribution of Capital Stock (other than
Redeemable Capital Stock) of the Company in respect of the exercise of any
right to convert or exchange any instrument (whether Debt or equity and
including Redeemable Capital Stock) into Capital Stock (other than Redeemable
Capital Stock) of the Company, (ii) the purchase or other acquisition or
retirement for value of any shares of the Company's Capital Stock, or any
option, warrant or other right to purchase shares of the Company's Capital
Stock with additional shares of, or out of the proceeds of a substantially
contemporaneous issuance of, Capital Stock other than Redeemable Stock, (iii)
any defeasance, redemption, purchase or other acquisition for value of any
Debt that by its terms ranks subordinate in right of payment to the Debt
Securities with the proceeds from the issuance of (x) Debt that is subordinate
to the Debt Securities at least to the extent and in the manner as the Debt to
be defeased, redeemed, purchased or otherwise acquired is subordinate in right
of payment to the Debt Securities, provided that such subordinated Debt
provides for no mandatory payments of principal by way of sinking fund,
mandatory redemption or otherwise (including defeasance) by the Company
(including, without limitation at the option of the holder thereof other than
an option given to a holder pursuant to a "change of control" or an "asset
disposition" covenant that is no more favorable to the holders of such Debt
than comparable covenants for the Debt being defeased, redeemed, purchased or
acquired or, if none, the covenants described under "Limitation on
Dispositions" and "Purchase of Debt Securities Upon a Change of Control" above
and such Debt is not in an amount (net of any original issue discount) greater
than, any Stated Maturity of the Debt being replaced and the proceeds of such
subordinated Debt are utilized for such purpose within 45 days of issuance or
(y) Capital Stock (other than Redeemable Stock), (iv) Restricted Payments in
an amount not to exceed $75 million in the aggregate provided that no payment
may be made pursuant to this clause (iv) if an Event of Default, or an event
that, after giving notice or lapse of time or both, would become an Event of
Default, has occurred and is continuing, (v) any payment or Investment
required by applicable law in order to conduct business operations in the
ordinary course, (vi) a Permitted Investment and (vii) Investments in
Unrestricted Subsidiaries and other Persons that are not Restricted
Subsidiaries or Eligible Joint Ventures in an amount not to exceed $100
million in the aggregate, provided that no payment or Investment may be made
pursuant to this clause (vii) if an Event of Default, or an event that, after
giving notice or lapse of time or both, would become an Event of Default, has
occurred and is continuing. Notwithstanding the foregoing, the amount of
Investments that may be made pursuant to clauses (iv) or (vii), as the case
may be, may be increased by the net reduction in Investments of the type made
previously pursuant to clauses (iv) or (vii), as the case may be, that result
from payments of interest on Debt, dividends, or repayment of loans or
advances, the proceeds of the sale or disposition of the Investment or other
return of the amount of the original Investment to the Company, the Restricted
Subsidiary or the Eligible Joint Venture that made the original Investment
from the Person in which such Investment was made or any distribution or
payment of such Investment to the extent that such distribution or payment
constituted either a Restricted Payment or a Permitted Payment, provided that
(x) the aggregate amount of such payments will not exceed the amount of the
original Investment by the Company, such Restricted Subsidiary or Eligible
Joint Venture that reduced the amount available pursuant to clause (iv) or
clause (vii), as the case may be, for making Restricted Payments and (y) such
payments may be added pursuant to this proviso only to the extent such
payments are not included in the calculation of Adjusted Consolidated Net
Income.
"Permitted Working Capital Facilities" is defined to mean one or more
loan or credit agreements providing for the extension of credit to the Company
for the Company's working capital purposes, which credit agreements will be
ranked pari passu with or subordinate to the Debt Securities in right of
payment and may be secured or unsecured.
"Person" is defined to mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
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"Preferred Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) or preferred or preference stock of
such Person that is outstanding or issued on or after the date of original
issuance of any series of Debt Securities.
"Property" of any Person is defined to mean all types of real,
personal, tangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
GAAP.
"Purchase Money Debt" means Debt representing, or Incurred to
finance, the cost of acquiring any Property, provided that (i) any Lien
securing such Debt does not extend to or cover any other Property other than
the Property being acquired and (ii) such Debt is Incurred, and any Lien with
respect thereto is granted, within 18 months of the acquisition of such
Property.
"Rating Agencies" is defined to mean (i) S&P and (ii) Moody's or
(iii) if S&P or Moody's or both do not make a rating of the Debt Securities
publicly available, a nationally recognized securities rating agency or
agencies, as the case may be, selected by the Company, which will be
substituted for S&P, Moody's or both, as the case may be.
"Rating Category" is defined to mean (i) with respect to S&P, any of
the following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories), (ii) with respect to Moody's, any of the following categories:
Ba, B, Caa, Ca, C and D (or equivalent successor categories) and (iii) the
equivalent of any such category of S&P or Moody's used by another Rating
Agency. In determining whether the rating of the Debt Securities has decreased
by one or more gradations, gradations within Rating Categories (+ and - for
S&P, 1, 2 and 3 for Moody's or the equivalent gradations for another Rating
Agency) will be taken into account (e.g., with respect to S&P, a decline in a
rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease
of one gradation).
"Rating Decline" is defined to mean the occurrence of the following
on, or within 90 days after, the earlier of (i) the occurrence of a Change of
Control and (ii) the date of public notice of the occurrence of a Change of
Control or of the public notice of the intention of the Company to effect a
Change of Control (the "Rating Date") which period will be extended so long as
the rating of the Debt Securities is under publicly announced consideration
for possible downgrading by any of the Rating Agencies: (a) in the event that
any series of the Debt Securities are rated by either Rating Agency on the
Rating Date as Investment Grade, the rating of such Debt Securities by both
such Rating Agencies will be reduced below Investment Grade, or (b) in the
event the Debt Securities are rated below Investment Grade by both such Rating
Agencies on the Rating Date, the rating of such Debt Securities by either
Rating Agency will be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of any series of the Debt Securities,
(ii) redeemable at the option of the holder of such class or series of Capital
Stock at any time prior to the Stated Maturity of any series of Debt
Securities or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Debt having a scheduled maturity
prior to the Stated Maturity of any series of Debt Securities, provided that
any Capital Stock that would not constitute Redeemable Stock but for
provisions thereof giving holders thereof the right to require the Company to
purchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or a "change of control" occurring prior to the Stated Maturity of any series
of Debt Securities will not constitute Redeemable Stock if the "asset sale" or
"change of control" provision applicable to such Capital Stock is no more
favorable to the holders of such Capital Stock than the provisions contained
in the covenants described under "Limitation on Dispositions" and "Purchase of
Debt Securities Upon a Change of Control" above and such Capital Stock
specifically provides that the Company will not purchase or redeem any such
Capital Stock pursuant to such covenants prior to the Company's purchase of
Debt Securities required to be purchased by the Company under the covenants
described under "Limitation on Dispositions" and "Purchase of Debt Securities
Upon a Change of Control" above.
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"Reference Period" is defined to mean the four most recently
completed fiscal quarters for which financial information is available
preceding the date of a transaction giving rise to the need to make a
financial calculation.
"Restricted Payment" is defined to mean (i) any dividend or other
distribution on any shares of the Company's Capital Stock, provided that a
dividend or other distribution consisting of the Capital Stock of an
Unrestricted Subsidiary will not constitute a Restricted Payment except to the
extent of the portion thereof that is equal to the portion of the total
Investment in such Unrestricted Subsidiary that is represented by the
Investment that was made pursuant to clause (vii) of the definition of
"Permitted Payment," (ii) any payment on account of the purchase, redemption,
retirement or acquisition for value of the Company's Capital Stock, (iii) any
defeasance, redemption, purchase or other acquisition or retirement for value
prior to the scheduled maturity of any Debt ranked subordinate in right of
payment to the Senior Debt Securities in the case of the Senior Debt Indenture
and the Subordinated Debt Securities other than repayment of Debt of the
Company to a Restricted Subsidiary or an Eligible Joint Venture, (iv) any
Investment made in a Person (other than the Company or any Restricted
Subsidiary or any Eligible Joint Venture) and (v) designating a Restricted
Subsidiary as an Unrestricted Subsidiary (the Restricted Payment made upon
such a designation to be determined as the fair market value of the Capital
Stock of such Restricted Subsidiary owned directly or indirectly by the
Company at the time of the designation). Notwithstanding the foregoing,
"Restricted Payment" will not include any Permitted Payment, except that any
payment made pursuant to clauses (iv) and (v) of the definition of "Permitted
Payment" will be counted in the calculation set forth in clause (c) of the
covenant described under "Limitation on Restricted Payments."
"Restricted Subsidiary" is defined to mean any Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"Senior Debt" is defined to mean the principal of and interest on all
Debt of the Company whether created, Incurred or assumed before, on or after
the date of original issuance of any series of Debt Securities (other than the
Debt Securities), provided that Senior Debt will not include (i) Debt that,
when Incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code, was without recourse to the Company, (ii) Debt
of the Company to any Affiliate and (iii) any Debt of the Company that, by the
terms of the instrument creating or evidencing the same, is specifically
designated as being junior in right of payment to the Debt Securities or any
other Debt of the Company.
"Significant Subsidiary" is defined to mean a Restricted Subsidiary
that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
S-X under the Securities Act and the Exchange Act.
"Stated Maturity" is defined to mean, with respect to any debt
security or any installment of interest thereon, the date specified in such
debt security as the fixed date on which any principal of such debt security
or any such installment of interest is due and payable.
"Subsidiary" is defined to mean, with respect to any Person
including, without limitation, the Company and its Subsidiaries, (i) any
corporation or other entity of which such Person owns, directly or indirectly,
a majority of the Capital Stock or other ownership interests and has ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions, and (ii) with respect to the Company and, as
appropriate, its Subsidiaries, any Permitted Joint Venture, including, without
limitation, Coso Land Company Joint Venture, Coso Finance Partners, Coso
Energy Developers and Coso Power Developers, provided that in respect of any
Subsidiary that is not a Permitted Joint Venture, the Company must exercise
control over such Subsidiary and its Property to the same extent as a
Permitted Joint Venture.
"Subsidiary Refinancing Debt" is defined to mean Debt issued in
exchange for, or the proceeds of which are used to refinance (including to
purchase), outstanding Debt of a Restricted Subsidiary or an Eligible Joint
Venture, including, without limitation, Construction Financing, in amount (or,
if such new Debt provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or refinanced
(plus accrued interest
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or dividends and all fees, premiums (in excess of accreted value) and expenses
related to such exchange or refinancing), for which purpose the amount so
exchanged or refinanced will not exceed, in the case of Debt, the lesser of
(x) the principal amount of the Debt so exchanged or refinanced and (y) if the
Debt being exchanged or refinanced was issued with an original issue discount,
the accreted value thereof (as determined in accordance with GAAP) at the time
of such exchange or refinancing, and, in the case of an equity investment made
in lieu of or as part of Construction Financing, Debt, in an amount not to
exceed the capital and surplus shown on the balance sheet of such Restricted
Subsidiary or Eligible Joint Venture, provided that (A) such Debt will be
Non-Recourse if the Debt so exchanged or refinanced is Non-Recourse and (B)
the Average Life of the new Debt will be equal to or greater than the Average
Life of the Debt to be exchanged or refinanced, provided further that upon the
first refinancing of any Construction Financing of a Restricted Subsidiary or
an Eligible Joint Venture, (i) the amount of the Subsidiary Refinancing Debt
issued in exchange for or to refinance such Construction Financing will not be
limited by this provision and (ii) the Subsidiary Refinancing Debt issued in
exchange for or to refinance such Construction Financing will not be subject
to the provisions of the foregoing clause (B) of this provision.
"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors Incurred, created, assumed or Guaranteed by such Person or any of
its Subsidiaries or Joint Ventures arising in the ordinary course of business.
"Unrestricted Subsidiary" is defined to mean any Subsidiary of the
Company that becomes an Unrestricted Subsidiary in accordance with the
requirements set forth in the next sentence. The Company may designate any
Restricted Subsidiary as an Unrestricted Subsidiary if (a) such designation is
in compliance with the first paragraph of the covenant described under
"Limitation on Restricted Payments" above and (b) after giving effect to such
designation, such Subsidiary does not own, directly or indirectly, a majority
of the Capital Stock or the Voting Stock of any other Restricted Subsidiary
unless such other Restricted Subsidiary is designated as an Unrestricted
Subsidiary at the same time. Any such designation will be effected by filing
with the Trustee an Officers' Certificate certifying that such designation
complies with the requirements of the immediately preceding sentence. No Debt
or other obligation of an Unrestricted Subsidiary may be with recourse to the
Company, any of its Restricted Subsidiaries, any Eligible Joint Venture or any
of their respective Property except to the extent otherwise permitted by the
provisions of the Indenture. An Unrestricted Subsidiary may be designated as a
Restricted Subsidiary if (i) all the Debt of such Unrestricted Subsidiary
could be Incurred under the provision described under "Limitation on
Subsidiary Debt" above or (ii) any portion of such Debt could not be Incurred
under such provision, if the Company could borrow all such remaining Debt
under the provision described in the first paragraph under "Limitation on
Debt" above.
"U.S. Government Obligations" is defined to mean securities that are
(i) direct obligations of the U.S. for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the U.S., the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
U.S., that, in either case are not callable or redeemable at the option of the
issuer thereof, and will also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government
Obligations or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of the holder of
a depository receipt, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest
on or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" is defined to mean, with respect to any Person,
Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors (or persons fulfilling similar responsibilities) of such
Person.
As more fully described in the Prospectus Supplement, each of the
Indentures also provides for defeasance of certain covenants.
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CERTIFICATED SECURITIES
Except as may be set forth in a Prospectus Supplement, Debt
Securities will not be issued in certificated form. If, however, Debt
Securities of any series are to be issued in certificated form, no service
charge will be made for any transfer or exchange of any such Debt Securities,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
BOOK-ENTRY SYSTEM
If so specified in any accompanying Prospectus Supplement relating to
Debt Securities of any series, Debt Securities of or within such series may be
issued under a book-entry system in the form of one or more global securities
(each, a "Global Security"). Each Global Security will be deposited with, or
on behalf of, a depositary, which, unless otherwise specified in the
accompanying Prospectus Supplement, will be The Depository Trust Company, New
York, New York (the "Depositary"). The Global Securities will be registered in
the name of the Depositary or its nominee.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. The Depositary is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the Depositary system is also available to others such as securities
brokers and dealers, banks, and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to the Depositary
and its Participants are on file with the SEC.
Purchases of the Offered Securities under the Depositary system must
be made by or through Direct Participants, which will receive a credit for the
Securities on the Depositary's records. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Securities, except in
the event that use of the book-entry system for the Securities is
discontinued.
To facilitate subsequent transfers, all Securities deposited by
Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Securities with
the Depositary and their registration in the name of Cede & Co. effect no
change in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Securities; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners
-52-
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Securities. Under its usual procedures, the Depositary mails an
Omnibus Proxy to the Company as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Securities will be made to the
Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payable date in accordance with their respective holdings
shown on the Depositary's records unless the Depositary has reason to believe
that it will not receive payment on the payable date. Payments by Participants
to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of the Depositary, agent, or the Company, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to the Depositary is the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
The Depositary may discontinue providing its services as securities
depository with respect to the Securities at any time by giving reasonable
notice to the Company. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to
be printed and delivered. The Company may decide to discontinue use of the
system of book-entry transfers through the Depositary (or a success securities
depository). In that event, Security certificates will be printed and
delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
A Global Security of any series may not be transferred except as a
whole by the Depositary to a nominee or successor of the Depositary or by a
nominee of the Depositary to another nominee of the Depositary. A Global
Security representing all but not part of an offering of Offered Debt
Securities hereby is exchangeable for Debt Securities in definitive form of
like tenor and terms if (i) the Depositary notified the Company that it is
unwilling or unable to continue as depositary for such Global Security or if
at any time the Depositary is no longer eligible to be or in good standing as
a clearing agency registered under the Exchange Act, and in either case, a
successor depositary is not appointed by the Company within 90 days of receipt
by the Company of such notice or of the Company becoming aware of such
ineligibility, or (ii) the Company in its sole discretion at any time
determines not to have all of the Debt Securities represented in an offering
of Offered Debt Securities by a Global Security and notifies the Trustee
thereof. A Global Security exchangeable pursuant to the preceding sentence
shall be exchangeable for Debt Securities registered in such names and in such
authorized denominations as the Depositary of such Global Security shall
direct.
-53-
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities in any of the following
ways (or in any combination thereof): (i) through underwriters or dealers;
(ii) directly to a limited number of purchasers or to a single purchaser; or
(iii) through agents. The Prospectus Supplement with respect to any Offered
Securities will set forth the terms of the offering of such Offered
Securities, including the name or names of any underwriters, dealers or agents
and the respective amounts of such Offered Securities underwritten or
purchased by each of them, the initial public offering price of such Offered
Securities and the proceeds to the Company from such sale, any discounts,
commissions or other items constituting compensation from the Company and any
discounts, commissions or concessions allowed or reallowed or paid to dealers
and any securities exchanges on which such Offered Securities may be listed.
If underwriters are used in the sale of any Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Such Offered Securities may be either offered
to the public through underwriting syndicates represented by managing
underwriters, or directly by underwriters.
Offered Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will
authorize underwriters, dealers or agents to solicit offers by certain
purchasers to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those conditions set forth
in the Prospectus Supplement.
Agents, dealers and underwriters may be entitled under agreements
entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments which the agents or underwriters may
be required to make in respect thereof.
-54-
LEGAL MATTERS
Certain legal matters (including the validity of the Securities) will
be passed upon for the Company by Steven A. McArthur, Senior Vice President
and General Counsel of the Company and by Willkie Farr & Gallagher. As of
August 31, 1997, Mr. McArthur beneficially owned 123,542 shares of Common
Stock.
EXPERTS
The consolidated financial statements and financial statement
schedules of the Company and its subsidiaries incorporated by reference in
this Registration Statement by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
With respect to the Company's unaudited interim financial information
for the periods ended March 31, 1997 and 1996 and June 30, 1997 and 1996,
incorporated herein by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June
30, 1997, and incorporated by reference herein, they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
in light of the limited nature of the review procedures applied. Deloitte &
Touche LLP are not subject to the liability provisions of Section 11 of the
Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
Registration Statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of Northern Electric plc as of
March 31, 1996 and 1995, and for each of the three years in the period ended
March 31, 1996, appearing in the Company's Report on Form 8-K/A dated February
18, 1997, have been audited by Ernst & Young, chartered accountants, as stated
in their report which is included therein and incorporated herein by
reference. Such financial statements have been incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
With respect to Northern's unaudited condensed consolidated financial
statements at September 30, 1996, and for the six months ended September 30,
1996 and 1995, incorporated by reference in this Prospectus, Ernst & Young,
chartered accountants, have reported that they have applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate report, included in the Company's Current Report on
Form 8-K/A dated February 18, 1997, and incorporated herein by reference,
states that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. Ernst & Young are not subject to the
liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated statements of operations, changes in stockholders'
equity, and cash flows of Magma Power Company, and subsidiaries for the year
ended December 31, 1994, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
-55-
===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS OR A PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF ITS AGENTS. NEITHER
THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT CONSTITUTES AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY Common Stock
OF THE SECURITIES OFFERED HEREBY OR Preferred Stock
THEREBY IN ANY JURISDICTION TO ANY Senior Debt Securities
PERSON TO WHOM IT IS UNLAWFUL TO MAKE Subordinated Debt Securities
SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY PROSPECTUS CALENERGY COMPANY, INC.
SUPPLEMENT NOR ANY SALE MADE HEREUNDER
OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF [LOGO]
OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
- ---------------------------
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION...............................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....4
RISK FACTORS........................................5
THE COMPANY........................................12
RATIO OF EARNINGS TO FIXED CHARGES.................13
USE OF PROCEEDS....................................13 PROSPECTUS
DESCRIPTION OF CAPITAL STOCK.......................14
DESCRIPTION OF PREFERRED STOCK.....................16
DESCRIPTION OF DEBT SECURITIES.....................21
PLAN OF DISTRIBUTION...............................54
LEGAL MATTERS......................................55
EXPERTS............................................55
===============================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1997
CONVERTIBLE PREFERRED SECURITIES
CALENERGY CAPITAL TRUST IV
CALENERGY CAPITAL TRUST V
CALENERGY CAPITAL TRUST VI
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AND CONVERTIBLE INTO THE COMMON STOCK OF
CALENERGY COMPANY, INC.
--------------------
CalEnergy Capital Trust IV, CalEnergy Capital Trust V and CalEnergy
Capital Trust VI (each an "Issuer" and collectively, the "Issuers"), each a
statutory business trust formed under the laws of the State of Delaware, may
offer and sell, from time to time, Convertible Preferred Securities (the
"Convertible Preferred Securities"), which represent undivided beneficial
ownership interests in the assets of the respective Issuers. The Convertible
Preferred Securities are convertible into shares of the common stock, par value
$.0675 per share ("Common Stock"), of CalEnergy Company, Inc., a Delaware
corporation ("CalEnergy" or the "Company"). The Company directly or indirectly
owns all of the common securities issued by each of the Issuers (the "Common
Securities" and together with the Convertible Preferred Securities, the "Trust
Securities"). The Issuers were formed for the sole purpose of issuing the Trust
Securities and using the proceeds thereof to purchase from the Company
Convertible Junior Subordinated Debentures (the "Convertible Junior
Subordinated Debentures," and together with the Convertible Preferred
Securities, the "Offered Securities"). The holders of Convertible Preferred
Securities will have a preference with respect to cash distributions and
amounts payable upon liquidation, redemption or otherwise over the holders of
the Common Securities of the respective Issuers. The Offered Securities may be
offered, in separate series, in amounts, at prices and on terms to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
Specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in an applicable Prospectus
Supplement, that will include, where applicable, the following: the specific
designation, aggregate principal amount, authorized denomination, maturity,
redemption, conversion, interest rate, method of calculating interest payments
and dates for payment thereof, the right of the Company to defer payment of
interest on the Convertible Preferred Securities or the Convertible Junior
Subordinated Debentures and the maximum length of such deferral period, the
public offering price, voting rights and other specific terms of the offering.
Unless otherwise indicated in a Prospectus Supplement, the Company does not
intend to list any of the Offered Securities on a national securities exchange.
Holders of the Convertible Preferred Securities are entitled to
receive cumulative cash distributions as set forth in a Prospectus Supplement.
The payment of distributions and payments on liquidation of an Issuer or the
redemption of Convertible Preferred Securities, as described below (but only to
the extent of funds of the applicable Issuer available therefor), are
guaranteed by the Company to the extent described herein (the "Guarantees").
The Company's obligations under the Guarantees are subordinate and junior to
all other liabilities of the Company, except any liabilities that may be made
pari passu expressly by their terms and certain other guarantees, but are pari
passu with the most senior preferred stock issued, from time to time, if any,
by the Company. If the Company fails to make interest payments on the
Convertible Junior Subordinated Debentures, the applicable Issuers will have
insufficient funds to pay distributions on the Convertible Preferred
Securities. The Guarantees do not cover payment of distributions when an Issuer
does not have sufficient funds to pay such distributions. The Guarantees, when
taken together with the Company's obligations under the Convertible Junior
Subordinated Debentures and the Indenture (as defined herein) and its
obligations under each Declaration (as defined herein), including its
obligation to pay costs, expenses, debts and other obligations of the Issuer
(other than with respect to the Trust Securities), provide a full and
unconditional guarantee of amounts due on the Convertible Preferred Securities.
The obligations of the Company under the Convertible Junior Subordinated
Debentures are subordinate and junior in right of payment to Senior
Indebtedness (as defined herein) of the Company.
The Company has the right under the Indenture to defer the interest
payments due from time to time on the Convertible Junior Subordinated
Debentures for successive periods not exceeding 20 consecutive quarters for
each such period, and, as a consequence, quarterly distributions on the
Convertible Preferred Securities would be deferred by the applicable Issuers
(but would continue to accumulate quarterly and accrue interest) until the end
of any such interest deferral period.
In the event of the liquidation of an Issuer, the holders of the
Convertible Preferred Securities of such Issuer will be entitled to receive for
each of the Convertible Preferred Securities a liquidation preference set forth
in a Prospectus Supplement plus accrued and unpaid distributions thereon to the
date of payment, unless, in connection with such liquidation, Convertible
Junior Subordinated Debentures are distributed to the holders of the
Convertible Preferred Securities. In addition, upon the occurrence of certain
events arising from a change in law or a change in legal interpretation, the
Company (i) will shorten the maturity of the Convertible Junior Subordinated
Debentures to a date not earlier than fifteen years from the date of their
issuance, or (ii) cause the redemption of the Convertible Preferred Securities
in whole at the liquidation preference set forth in the applicable Prospectus
Supplement plus accrued and unpaid distributions.
Any Prospectus Supplement relating to the Offered Securities will
contain information concerning certain United States federal income tax
considerations applicable to the Offered Securities. By separate prospectus,
the form of which is included in the Registration Statement of which this
Prospectus is a part, the Company may offer from time to time Common Stock,
Preferred Stock or Senior or Subordinated Debt Securities. The aggregate
initial public offering price of the securities to be offered by this
Prospectus and such other prospectus shall not exceed $1,500,000,000.
The Offered Securities may be offered directly, through agents
designated from time to time, to or through dealers or to or through
underwriters. Such agents or underwriters may act alone or with other agents or
underwriters. Any such agents, dealers or underwriters will be set forth in a
Prospectus Supplement. If an agent of the Company, or a dealer or underwriter,
is involved in the offering of the Offered Securities, the agent's commission,
dealer's purchase price, underwriter's discount and net proceeds to the
Company, as the case may be, will be set forth in, or may be calculated from,
the Prospectus Supplement. Any underwriters, dealers or agents participating in
the offering may be deemed "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
See "Risk Factors" beginning on page 5 for a discussion of certain
factors that prospective investors should consider prior to an investment in
the Offered Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Offered
Securities unless accompanied by a Prospectus Supplement. Any statement
contained in this Prospectus will be deemed to be modified or superseded by any
inconsistent statement contained in an accompanying Prospectus Supplement.
The date of this Prospectus is _______, 1997
2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy and information statements and other information filed by the
Company with the SEC can be inspected and copied at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
SEC maintains a Web site that contains reports, proxy and information
statements and other materials that are filed through the SEC's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. This Web site can be
accessed at http:/www.sec.gov. Such reports, proxy and information statements
and other information can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the SEC a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules related thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the SEC. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof. Statements contained in this
Prospectus as to the contents of any documents referred to are not necessarily
complete and, in each such instance, are qualified in all respects by reference
to the applicable documents filed with the SEC.
No separate financial statements of the Issuers have been included
herein. The Company does not consider that such financial statements would be
material to holders of the Convertible Preferred Securities because (i) all of
the voting securities of the Issuers will be owned, directly or indirectly, by
the Company, a reporting company under the Exchange Act, (ii) the Issuers will
have no independent operations but will exist for the sole purpose of issuing
securities representing undivided beneficial interests in the assets of the
applicable Issuer and investing the proceeds thereof in Convertible Junior
Subordinated Debentures issued by the Company and (iii) the obligations of the
applicable Issuer under the Trust Securities will be fully and unconditionally
guaranteed by the Company to the extent that the applicable Issuer has funds
available to meet such obligations. See "Description of the Convertible Junior
Subordinated Debentures" and "Description of the Guarantee."
This Prospectus, any Prospectus Supplement and the periodic filings of
the Company under the Exchange Act contain forward-looking statements as
defined by the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). These forward-looking statements express the beliefs and expectations of
management regarding the Company's future results and performance.
Such statements are based on current expectation and involve a number
of known and unknown risks and uncertainties that could cause the actual
results, performance and/or other achievements of the Company to differ
materially from any expected future results, performance or achievements,
expressed or implied by the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements and any such
statement is qualified by reference to the following cautionary statements. In
connection with the safe harbor provisions of the Reform Act, the Company's
management has identified important factors that could cause actual results to
differ materially from management's expectations. Reference is made to the
Company's Current Report on Form 8-K dated February 25, 1997, incorporated
herein by reference. The Company is not required to publicly release any
changes to these forward-looking statements for events occurring after the date
thereof or to reflect any other unanticipated events.
3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC (File No. 1-9874) are
incorporated by reference into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended by the Form 10-K/A filed on April 30, 1997);
(ii) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997 and June 30, 1997;
(iii) the Company's Current Reports on Form 8-K dated December 24,
1996 (as amended by Form 8-K/A filed on February 18, 1997), February 25, 1997,
February 26, 1997, March 28, 1997, May 7, 1997, May 19, 1997, July 7, 1997,
July 15, 1997, July 22, 1997, August 6, 1997, August 8, 1997, August 18, 1997,
August 28, 1997, September 9, 1997 and September 16, 1997; and
(iv) the description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed under the Exchange Act and
any amendments or reports filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein, or in any other subsequently
filed document which is also incorporated herein by reference, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus except as so modified or
superseded.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated into this Prospectus by reference,
other than exhibits to such documents. Requests for such copies should be
directed to Investor Relations, CalEnergy Company, Inc., 302 South 36th Street,
Suite 400, Omaha, Nebraska 68131, telephone number (402) 341-4500.
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus or a Prospectus Supplement, in connection with the offering
contemplated hereby and thereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. This Prospectus and a Prospectus
Supplement do not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities to which they relate and do not
constitute an offer to sell or a solicitation of an offer to buy any securities
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus or a
Prospectus Supplement, nor any sale made hereunder or thereunder, shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or thereof or that the information
contained or incorporated by reference herein or therein is correct as of any
time subsequent to such date.
4
RISK FACTORS
Prospective investors should carefully consider the risk factors set
forth below, in addition to the other information appearing in or incorporated
by reference in this Prospectus. This Prospectus contains or incorporates by
reference forward-looking statements which involve risks and uncertainties. The
Company's actual results in the future could differ significantly from the
results discussed or implied in the forward-looking statements. Factors that
could cause or contribute to such a difference include, but are not limited to,
the following risk factors. The term "Company" refers to CalEnergy Company,
Inc. and its operating subsidiaries, unless the context otherwise requires.
ACQUISITIONS. The Company's recent growth has been achieved, in part,
through strategic acquisitions in the energy industry which complement and
diversify the Company's existing business. The Company intends to continue to
pursue an aggressive acquisition strategy for the foreseeable future. The
Company has recently completed several major acquisitions, including the
acquisition of Magma Power Company ("Magma"), Falcon Seaboard Resources, Inc.
("Falcon Seaboard") and Northern Electric plc ("Northern"). The Company has
successfully integrated Magma and Falcon Seaboard and is in the process of
integrating Northern. See "The Company". The Company's ability to pursue
acquisition opportunities successfully will depend on many factors, including,
among others, the Company's ability to (i) identify suitable acquisition
opportunities, (ii) consummate the acquisition, including obtaining any
necessary financing, and (iii) successfully integrate acquired businesses. The
integration of acquired businesses entails numerous risks, including, among
others, the risk of diverting management's attention from the day-to-day
operations of the Company, the risk that the acquired businesses will require
substantial capital and financial investments and the risk that the investments
will fail to perform in accordance with expectations. There can be no assurance
that acquisition opportunities, if any, can be consummated on favorable terms
or that the Company's integration efforts will be successful.
HOLDING COMPANY STRUCTURE. As a holding company, the Company is
dependent on the earnings and cash flows of, and dividends from, its
subsidiaries and joint ventures to generate the funds necessary to meet its
obligations, including the payment of principal, interest and premium, if any,
on the Convertible Junior Subordinated Debentures. The availability of
distributions from the Company's subsidiaries and projects is subject to the
satisfaction of various covenants and conditions contained in the applicable
subsidiaries' and joint ventures' financing documents and to certain utility
regulatory restrictions. Furthermore, the Company is structuring other project
financing arrangements containing, and anticipates that future project level
financings will contain, certain conditions and similar restrictions on the
distribution of cash to the Company.
The Company's subsidiaries, partnerships and joint ventures are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Convertible Junior
Subordinated Debentures or to make any funds available therefor, whether by
dividends, loans or other payments, and do not guarantee the payment of
interest on, premium, if any, or principal of the Convertible Junior
Subordinated Debentures. Any right of the Company to receive any assets of any
of its subsidiaries or other affiliates upon any liquidation or reorganization
of the Company (and the consequent right of the holders of the Convertible
Junior Subordinated Debentures to participate in the distribution of, or to
realize proceeds from, those assets) will be effectively subordinated to the
claims of any such subsidiary's or other affiliate's creditors (including trade
creditors and holders of debt issued by such subsidiary or other affiliate). At
June 30, 1997 the Company had approximately $3,230.4 million of total
consolidated indebtedness, which included approximately $2,276.5 million of the
Company's proportionate share of joint venture and subsidiary debt,
which would be effectively senior to the Convertible Junior Subordinated
Debentures, substantially all of which is secured by the assets
of such joint ventures and subsidiaries, and $283.9 million of subordinated
debt issued in connection with Capital Trust Convertible Preferred Securities.
As of June 30, 1997, on a pro forma basis, after giving effect to the
consummation of the August 1997 offering of another series of Capital Trust
Convertible Preferred Securities, there would have been approximately $3,230.4
million of total consolidated indebtedness, which included approximately
$2,276.5 million of the Company's proportionate share of joint venture and
5
subsidiary debt, which would be effectively senior to Convertible Junior
Subordinated Debentures, substantially all of which is secured by the assets
of such joint ventures and subsidiaries, and $553.9 million of the three series
of the Capital Trust Securities. See "Description of the Convertible Junior
Subordinated Debentures--Subordination."
DEPENDENCE ON CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES PAYMENTS;
LEVERAGE. The ability of an Issuer to pay amounts due on the Convertible
Preferred Securities is wholly dependent upon the Company making payments on
the Convertible Junior Subordinated Debentures. The Company is substantially
leveraged. At June 30, 1997, the Company's total consolidated liabilities were
$4,796.8 million (excluding deferred income), its obligations in respect of the
6 1/4% Convertible Preferred Securities and TIDES Securities were $283.9
million, its total consolidated assets were $6,275.1 million and its total
stockholders' equity was $917.9 million. As of such date, on a pro forma basis,
after giving effect to the consummation of the August 1997 offering of the 6
1/2% Convertible Preferred Securities, the Company's total consolidated
liabilities would have been $4,796.8 million (excluding deferred income), its
obligations in respect of the 6 1/4% Convertible Preferred Securities, the 1996
TIDES and the 6 1/2% Convertible Preferred Securities would have been $553.9
million, its total consolidated assets would have been $6,545.1 million and its
stockholders' equity would have been $917.9 million. The Company's leverage
level presents the risk that the Company might not generate sufficient cash to
service the Company's indebtedness, including the Convertible Junior
Subordinated Debentures, or that its leveraged capital structure could limit
its ability to finance future acquisitions, develop additional projects,
compete effectively and operate successfully under adverse economic conditions.
If the Company were unable to make payments on the Convertible Junior
Subordinated Debentures or the Guarantees, the Issuers would be unable to make
payments on the Convertible Preferred Securities as and when required. The
Company is also a holding company which derives substantially all of its
operating income from its subsidiaries and joint ventures. Distributions from
such entities are restricted under various covenants and conditions contained
in financing documents by which they are bound and the stock or assets of
substantially all of such entities is directly or indirectly pledged, to secure
various of such financings or such entities are otherwise subject to regulatory
restrictions. See "--Holding Company Structure."
NORTHERN'S REGULATORY ENVIRONMENT. Northern's electricity distribution
and supply are subject to extensive regulation in the United Kingdom.
Price Regulation of Distribution. Revenue from Northern's distribution
business is controlled by a formula (the "Distribution Price Control Formula")
which determines the maximum average price per unit of electricity (expressed
in kilowatt ("KW") hours, a "unit") that a regional electricity company (a
"REC") in the United Kingdom may charge. The Distribution Price Control Formula
is expected to have a five year duration and is subject to review by the
Director General of Electricity Supply (the "Regulator") at the end of each
five-year period and at other times in the discretion of the Regulator. At each
review, the Regulator can propose adjustments to the Distribution Price Control
Formula. In July 1994, a review resulted in a 17% reduction in allowed
distribution income compared to the original formula, before allowing for
inflation, effective April 1, 1995. In July 1995, a further review of
distribution prices was concluded by the Regulator for fiscal years 1997 to
2000. As a result of this further review, Northern's allowed distribution from
income was reduced by a further 11%, before allowing for inflation, effective
April 1, 1996. There can be no assurance that any further price reviews by the
Regulator will not have a material adverse effect on the Company's results of
operations.
Competition in Supply. Northern's supply business is also subject to
price control and is being progressively opened to competition. Northern
currently has an exclusive right, subject to price cap regulation, to supply
customers in its authorized area with a maximum demand of not more than 100 kW
("Franchise Supply Customers"). The market for customers with a maximum demand
above 1 megawatt ("MW") has been open to competition for suppliers of
electricity since privatization while the market for customers with a maximum
demand above 100 kW ("Non-Franchise Supply Customers") became competitive in
April 1994. The final stage of this process is expected to occur on March 31,
1998, when the exclusive right to supply Franchise Supply Customers is
scheduled to end. There can be no assurance that competition among suppliers of
electricity will not have a material adverse effect on the Company's results of
operations.
6
Pool Purchase Price Volatility. Northern's supply business to
Non-Franchise Supply Customers generally involves entering into fixed price
contracts to supply electricity to its customers. Northern obtains the
electricity to satisfy its obligations under such contracts primarily by
purchases from the wholesale trading market for electricity in England and
Wales (the "Pool"). Because the price of electricity purchased from the Pool
can be volatile, to the extent that Northern purchases electricity from the
Pool, Northern is exposed to risk arising from differences between the fixed
price at which it sells and the fluctuating prices at which it purchases
electricity, unless it can effectively hedge such exposure. Northern's ability
to manage such risk at acceptable levels will depend, in part, on the specifics
of the supply contracts that Northern enters into, Northern's ability to
implement and manage an appropriate hedging strategy and the development of an
adequate market for hedging instruments. There can be no assurance that this
risk will be effectively mitigated.
Change in Government Policy. In the general election held in the
United Kingdom on May 1, 1997, the Labour Party won a majority of seats in the
United Kingdom Parliament. On July 31, 1997, the United Kingdom Parliament
passed the windfall tax to be levied on privatized utilities, which will result
in a third quarter charge to net income of approximately $136 million. See the
Company's Current Report on Form 8-K dated July 7, 1997, incorporated herein by
reference. There can be no assurance that other possible changes in tax or
utility regulation by the United Kingdom government, by whichever party it is
controlled, would not have a material adverse effect on the Company's results
of operations.
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new energy projects, both domestically and
internationally, the completion of any of which is subject to substantial risk.
Development can require the Company to expend significant sums for preliminary
engineering, permitting, fuel supply, resource exploration, legal and other
expenses in preparation for competitive bids which the Company may not win or
before it can be determined whether a project is feasible, economically
attractive or capable of being financed. Successful development and
construction is contingent upon, among other things, negotiation on terms
satisfactory to the Company of engineering, construction, fuel supply and power
sales contracts with other project participants, receipt of required
governmental permits and consents and timely implementation of construction.
Further, there can be no assurance that the Company, which is substantially
leveraged, will obtain access to the substantial debt and equity capital
required to continue to develop and construct electric power projects or to
refinance projects. The future growth of the Company is dependent, in large
part, upon the demand for significant amounts of additional energy and the
Company's ability to obtain contracts to supply portions of this demand. There
can be no assurance that development efforts on any particular project, or the
Company's efforts generally, will be successful. In this regard, reference is
made to certain uncertainties associated with the Company's Casecnan project,
as described in the Company's Current Reports on Form 8-K dated May 20, 1997
and August 14, 1997, incorporated herein by reference.
UNCERTAINTIES RELATED TO DOING BUSINESS OUTSIDE THE UNITED STATES. The
Company has various projects under construction outside the United States and a
number of projects under award outside the United States. The financing and
development of projects outside the United States entail significant political
and financial risks (including, without limitation, uncertainties associated
with privatization efforts in the countries involved, currency exchange rate
fluctuations, currency repatriation restrictions, changes in law or regulation,
changes in government policy, political instability, civil unrest and
expropriation) and other structuring issues that have the potential to cause
substantial delays in respect of or material impairment of the value of the
project being developed, which the Company may not be capable of fully insuring
against. The uncertainty of the legal environment in certain foreign countries
in which the Company is developing and may develop or acquire projects could
make it more difficult for the Company to enforce its rights under agreements
relating to such projects. In addition, the laws and regulations of certain
countries may limit the ability of the Company to hold a majority interest in
some of the projects that it may develop or acquire. The Company's
international projects may, in certain cases, be terminated by the applicable
foreign governments. Furthermore, the central bank of any such country
may have the authority in certain circumstances to suspend, restrict or
otherwise impose conditions on foreign exchange transactions or to
approve distributions to foreign investors. Although the Company may structure
certain power purchase agreements and other project revenue agreements to
provide for payments to be made in, or indexed to, United States dollars or a
currency freely convertible into United States dollars, there can be no
7
assurance that the Company will be able to achieve this structure in all cases
or that a power purchaser or other customer will be able to obtain sufficient
dollars or other hard currency or that available dollars will be allocated to
pay such obligations. In addition, the Company's investment in Northern and any
dividends or distributions of earnings in respect of such investment, may be
significantly affected by fluctuations in the exchange rate between the United
States dollar and the British pound. Although the Company expects to enter into
certain transactions to hedge risks associated with exchange rate fluctuations,
there can be no assurance that such transactions will be successful in reducing
such risks.
EXPLORATION, DEVELOPMENT AND OPERATION UNCERTAINTIES OF GEOTHERMAL
RESOURCES. Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the geographic
area and sustainable output of geothermal reservoirs can only be estimated and
cannot be definitively established. There is, accordingly, a risk of an
unexpected decline in the capacity of geothermal wells and a risk of geothermal
reservoirs not being sufficient for sustained generation of the electrical
power capacity desired. In addition, geothermal power production poses unusual
risks of seismic activity. Accordingly, there can be no assurance that
earthquake, property damage or business interruption insurance will be adequate
to cover all potential losses sustained in the event of serious seismic
disturbances or that such insurance will be available on commercially
reasonable terms. The success of a geothermal project depends on the quality of
the geothermal resource and operational factors relating to the extraction of
the geothermal fluids involved in such project. The quality of a geothermal
resource is affected by a number of factors, including the size of the
reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of
lower-temperature fluid into the producing zone. An incorrect estimate by the
Company of the quality of a geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company's results of operations. In
addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of resource
operating factors. Production and injection wells can require frequent
maintenance or replacement. Corrosion caused by high-temperature and
high-salinity geothermal fluids may compel the replacement or repair of certain
equipment, vessels or pipelines. New production and injection wells may be
required for the maintenance of operating levels, thereby requiring substantial
capital expenditures.
GENERAL OPERATING UNCERTAINTIES. The operation of a power plant
involves many risks, including the breakdown or failure of power generation
equipment, pipelines, transmission lines or other equipment or processes, fuel
interruption, and performance below expected levels of output or efficiency.
Each facility may depend on a single or limited number of entities to purchase
electricity or thermal energy, to supply water, to supply gas, to transport
gas, to dispose of wastes or to wheel electricity. The failure of any such
purchasing utility, steam host, water or gas supplier, gas transporter,
wheeling utility or other relevant project participant to fulfill its
contractual obligations could have a material adverse impact on the Company.
FUEL SUPPLY OPERATIONS. The primary fuel source for certain of the
Company's projects is natural gas and a substantial portion of the operating
expenses of such facilities consists of the costs of obtaining natural gas
through gas supply agreements and transporting that gas to the projects under
gas transportation agreements. Although the Company believes that it has
contracted for natural gas supply and transportation in sufficient quantities
to satisfy the needs of its projects, the gas suppliers are not required in all
cases to provide dedicated reserves in support of their contractual
obligations. Unless the gas projects were able to obtain substitute volumes of
natural gas, including the requisite transportation services, for such volumes
at a price not materially higher than the sum of the contract price under the
existing gas supply agreements and any damages paid by the supplier for failure
to deliver, the sustained failure of a supplier to deliver natural gas in
accordance with its contract could have a material adverse effect on the cash
flows to the Company. In addition, under certain gas supply contracts the
Company is obligated to pay for a certain minimum quantity of natural gas even
if it cannot
8
utilize it. The Company intends to manage its requirements for
contract volumes under the gas supply agreements so as to meet the minimum take
requirements through a combination of utilization of nominated volumes in
operations and resales of the remainder of the volumes to third-party
customers, if necessary. Finally, the state, federal and Canadian regulatory
authorities that have jurisdiction over natural gas transportation have the
right to modify aspects of the rates, terms and conditions of those contracts.
It is possible that such a modification could materially increase the fuel
transportation costs of the projects or give the transporter a right to
terminate or suspend or decrease its performance under its contract.
PRESENT DEPENDENCE ON LARGE CUSTOMER; CONTRACT UNCERTAINTIES. The
Company currently relies on long-term power purchase "Standard Offer No. 4"
contracts (each, an "SO4 Agreement") with a large customer, Southern California
Edison Company ("Edison"), to generate a substantial portion of its operating
revenues. Any material failure by Edison to fulfill its contractual obligations
under such contracts is likely to have a material adverse effect on the
Company's results of operations. Each of the Company's SO4 Agreements provides
for both capacity payments and energy payments for a term of between 20 and 30
years. During the first ten years after achieving firm operation, energy
payments under each SO4 Agreement are based on a pre-set schedule. Thereafter,
while the basis for the capacity payment remains the same, the required energy
payment is Edison's then-current published avoided cost of energy ("Avoided
Cost of Energy") as determined by the California Public Utility Commission
("CPUC"). The initial ten-year period expires in August 1997 for the Company's
Navy I Project, March 1999 for its BLM Project and January 2000 for its Navy II
Project, which three projects comprise the Coso Project in California (the
"Coso Project"). Such ten-year period expired in 1996 with respect to one of
the eight geothermal plants in the Imperial Valley in California ("Imperial
Valley Projects") and expires in 1999 for three of its Imperial Valley Projects
and in 2000 for the remaining two Imperial Valley Projects that operate under
SO4 Agreements.
Estimates of Edison's future Avoided Cost of Energy vary substantially
in any given year. The Company cannot predict the likely level of Avoided Cost
of Energy prices under its SO4 Agreements with Edison at the expiration of the
fixed-price periods. Edison's Avoided Cost of Energy as determined by the CPUC
is currently substantially below the current scheduled energy prices under the
Company's respective SO4 Agreements and is currently expected to remain so. For
the year ended December 31, 1996, the time period-weighted average of Edison's
Avoided Cost of Energy was 2.5 cents per kWh, compared to the time
period-weighted average for the year ended December 31, 1996 selling prices for
energy of approximately 11.3 cents per kWh for the Company. Thus, the revenues
generated by each of the Company's facilities operating under SO4 Agreements
are likely to decline significantly after the expiration of the applicable
fixed price period.
COMPETITION AND DOMESTIC DEREGULATION; INDUSTRY RESTRUCTURING. The
international power production market is characterized by numerous strong and
capable competitors, many of which have more extensive and more diversified
developmental or operating experience (including international experience) and
greater financial resources than the Company. Many of these competitors also
compete in the domestic market. Further, in recent years, the domestic power
production industry has been characterized by strong and increasing competition
with respect to the industry's efforts to obtain new power sales agreements,
which has contributed to a reduction in prices offered to utilities. In that
regard, many utilities often engage in "competitive bid" solicitations to
satisfy new capacity demands. In the domestic market, competition is expected
to increase as the electric utility industry becomes deregulated. In addition,
recent deregulation and industry restructuring activity may cause certain
utilities or other contract parties to attempt to renegotiate contracts or
otherwise fail to perform their contractual obligations, which in turn could
adversely affect the Company's results of operations. In particular, the state
of California has adopted a bill to restructure the electric industry by
providing for a phased-in competitive power generation industry, with a power
pool and an independent system operator, and for direct access to generation
for all power purchasers outside the power exchange under certain
circumstances. Although the bill contemplates that existing qualifying facility
power sales contracts will be honored, and all of the Company's California
projects are qualifying facilities, until the new system is fully implemented,
it is impossible to predict what impact, if any, it may have on the operations
of those projects.
9
IMPACT OF ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS. The Company is
subject to a number of environmental and other laws and regulations affecting
many aspects of its present and future operations, including the disposal of
various forms of waste, the construction or permitting of new facilities, and
the drilling and operation of new and existing wells. Such laws and regulations
generally require the Company to obtain and comply with a wide variety of
licenses, permits and other approvals. The Company also remains subject to a
number of complex and stringent laws and regulations that both public officials
and private individuals may seek to enforce. There can be no assurance that
existing regulations will not be revised or that new regulations will not be
adopted or become applicable to the Company which could have an adverse impact
on its operations. The implementation of regulatory changes imposing more
comprehensive or stringent requirements on the Company, which would result in
increased compliance costs, could have a material adverse effect on the
Company's results of operations. In addition, regulatory compliance for the
construction of new facilities is a costly and time-consuming process, and
intricate and rapidly changing environmental regulations may require major
expenditures for permitting and create the risk of expensive delays or material
impairment of project value if projects cannot function as planned due to
changing regulatory requirements or local opposition.
The Public Utility Regulatory Policies Act of 1978, as amended
("PURPA"), and the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), are two of the laws (including the regulations thereunder) that
affect the Company's operations. PURPA provides to qualifying facilities
("QFs") certain exemptions from federal and state laws and regulations,
including organizational, rate and financial regulation. PUHCA regulates public
utility holding companies and their subsidiaries. The Company is not and will
not be subject to regulation as a holding company under PUHCA as long as the
domestic power plants it owns are QFs under PURPA or are exempted as exempt
wholesale generators ("EWGs"), and so long as its foreign utility operations
are exempted as EWGs or foreign utility companies or are otherwise exempted
under PUHCA. QF status is conditioned on meeting certain criteria, and would be
jeopardized, for example, in the case of the Company's cogeneration facilities,
by the loss of a steam customer or reduction of steam purchases below the
amount required by PURPA. The Company's four cogeneration facilities have steam
sales agreements with existing industrial hosts which agreements must be
maintained in effect or replaced in order to maintain QF status. In the event
the Company were unable to avoid the loss of such status for one of its
facilities, such an event could result in termination of a given project's
power sales agreement and a default under the project subsidiary's project
financing agreements.
Currently, Congress is considering proposed legislation that would
amend PURPA by eliminating the requirement that utilities purchase electricity
from qualifying facilities at prices based on Avoided Cost of Energy. The
Company does not know whether such legislation will be passed or what form it
may take. The Company believes that if any such legislation is passed, it
would apply to new projects only and thus, although potentially impacting the
Company's ability to develop new domestic projects, it would not affect the
Company's existing qualifying facilities. There can be no assurance, however,
that any legislation passed would not adversely impact the Company's existing
domestic project.
In addition, many states are implementing or considering regulatory
initiatives designed to increase competition in the domestic power generation
industry and increase access to electric utilities' transmission and
distribution systems for independent power producers and electricity consumers.
On September 1, 1997, the California legislature adopted an industry
restructuring bill that would provide for a phased-in competitive power
generation industry with a power pool and independent system operator and also
would permit direct access to generation for all power purchasers outside the
power exchange under certain circumstances. Under the bill, consistent with the
requirements of PURPA, existing qualifying facilities power sales agreements
would be honored. The Company cannot predict the final form or timing of the
proposed industry restructuring or the results of its operations.
The structure of such federal and state energy regulations have in the
past, and may in the future, be the subject of various challenges and
restructuring proposals by utilities and other industry participants. The
implementation of regulatory changes in response to such changes or
restructuring proposals, or otherwise imposing more comprehensive or stringent
requirements on the Company, which
10
would result in increased compliance costs, could have a material advise
effect on the Company's results of operations.
SUBORDINATION OF GUARANTEE AND CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES. The Company's obligations under the Guarantee are subordinate and
junior in right of payment to all other liabilities of the Company, with
certain limited exceptions. The obligations of the Company under the
Convertible Junior Subordinated Debentures are subordinate and junior in right
of payment to Senior Indebtedness (as defined herein) of the Company. No
payment of principal (including redemption payments, if any), premium, if any,
or interest on the Convertible Junior Subordinated Debentures may be made if
(i) any Senior Indebtedness is not paid when due and any applicable grace
period with respect to such default has ended with such default not having been
cured or waived or ceasing to exist, or (ii) the maturity of any Senior
Indebtedness has been accelerated because of a default. At June 30, 1997, on a
pro forma basis, after giving effect to the consummation of the August 1997
offering of the 6 1/2% Convertible Preferred Securities, there would have been
approximately $953.8 million principal amount of borrowed money included in
Senior Indebtedness (of which $200 million had a "Recourse Amount" to the
Company (as defined in the applicable indenture) of zero). Neither the
Convertible Preferred Securities, the Convertible Junior Subordinated
Debentures nor the Guarantees limit the Company's ability to incur additional
indebtedness or liabilities, including indebtedness or liabilities that would
rank senior to the Convertible Junior Subordinated Debentures and the
Guarantees. See "Description of the Guarantee--Status of the Guarantee;
Subordination" and "Description of the Convertible Junior Subordinated
Debentures--Subordination." The Convertible Junior Subordinated Debentures are
also effectively subordinate to all existing and future liabilities, including
trade payables, of the Company's subsidiaries, joint ventures and affiliates.
See "--Holding Company Structure."
RIGHTS UNDER THE GUARANTEE. Each Guarantee Trustee (as defined herein)
will hold the respective Guarantees for the benefit of the holders of the
Convertible Preferred Securities. Each Guarantee guarantees to the applicable
holders of the Convertible Preferred Securities the payment (but not the
collection) of (i) any accrued and unpaid distributions on the Convertible
Preferred Securities to the extent the applicable Issuer has funds available
therefor, (ii) the amount payable upon redemption, including all accrued and
unpaid distributions, of the Convertible Preferred Securities called for
redemption by an Issuer, to the extent such Issuer has funds available
therefor, and (iii) upon a voluntary or involuntary dissolution, winding up or
termination of an Issuer (other than in connection with a redemption of all of
the Issuer's Convertible Preferred Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Convertible Preferred Securities to the date of payment to the extent such
Issuer has funds available therefor and (b) the amount of assets of such Issuer
remaining available for distribution to holders of the Convertible Preferred
Securities upon the liquidation of such Issuer. The holders of a majority in
liquidation amount of an Issuer's Convertible Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the applicable Guarantee Trustee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the applicable
Guarantee. In the event of a payment default on an Issuer's Convertible
Preferred Securities, any holder of such Convertible Preferred Securities may
institute a legal proceeding directly against the Company to enforce such
holder's rights in respect thereof under the Guarantee without first
instituting a legal proceeding against the applicable Issuer, Guarantee
Trustee, or any other person or entity. If the Company were to default on its
obligations under the Convertible Junior Subordinated Debentures, the Issuers
would lack available funds for the payment of distributions or amounts payable
on redemption of the Convertible Preferred Securities or otherwise, and in such
event, the holders of the Convertible Preferred Securities would not be able to
rely upon the Guarantees for payment of such amounts. Instead, holders of the
Convertible Preferred Securities would rely on the enforcement (1) by the
Trustee (as defined herein) of its rights, as registered holder of the
Convertible Junior Subordinated Debentures, against the Company pursuant to the
terms of the Convertible Junior Subordinated Debentures or (2) by such holder
of its right of direct action against the Company to enforce payments on the
Convertible Junior Subordinated Debentures. See "Description of the
Guarantee--Status of the Guarantee; Subordination" and "Description of the
Convertible Junior Subordinated Debentures--Subordination" herein and any
accompanying Prospectus Supplement relating to Convertible Preferred
Securities. Each Declaration provides that each holder of Convertible Preferred
Securities by acceptance
11
thereof agrees to the provisions of the Guarantee (including the subordination
provisions thereof) and the Indenture.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES. The
Company has the right under the Indenture to defer interest payments from time
to time on the respective Convertible Junior Subordinated Debentures for
successive periods not exceeding 20 consecutive quarters for each such period.
Upon the termination of any Deferral Period and the payment of all amounts then
due, the Company may select a new Deferral Period, subject to the requirements
described herein. As a consequence, during any such Deferral Period, quarterly
distributions on the Convertible Preferred Securities would be deferred (but
would continue to accrue with interest thereon) by the applicable Issuer. In
the event that the Company exercises this right, during such period the Company
(i) shall not declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than (A) purchases or acquisitions of shares of
Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans, (B) as a result of a
reclassification of capital stock of the Company or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of capital stock of the Company, (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or the security
being converted or exchanged or (D) stock dividends paid by the Company which
consist of stock of the same class as that on which the dividend is being
paid), (ii) shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company after the date of initial issuance of the Convertible Junior
Subordinated Debentures that rank pari passu with or junior to the Convertible
Junior Subordinated Debentures, and (iii) shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Guarantee). Prior to
the termination of any such Deferral Period, the Company may further extend the
Deferral Period; provided that such Deferral Period, together with all previous
and further extensions thereof, may not exceed 20 consecutive quarters and that
such Deferral Period may not extend beyond the maturity date of the Convertible
Junior Subordinated Debentures or any earlier redemption date. The Company has
no current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Convertible Junior Subordinated
Debentures. However, if the Company should determine to exercise its deferral
right in the future, the market price of the Convertible Preferred Securities
is likely to be adversely affected. See "Description of the Convertible
Preferred Securities--Distributions" and "Description of the Convertible Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
Should a Deferral Period occur, a holder of Convertible Preferred
Securities will continue to accrue interest income for United States federal
income tax purposes. As a result, such a holder will be required to include
such interest in gross income for United States federal income tax purposes in
advance of the receipt of cash, and such holder will not receive the cash from
the Issuer related to such income if such holder disposes of or converts its
Convertible Preferred Securities prior to the record date for payment of
distributions. See "Description of the Convertible Preferred
Securities--Distributions" and "Description of the Convertible Junior
Subordinated Debentures--Option to Extend Interest Payment Period."
TAX EVENT AND REDEMPTION INVESTMENT COMPANY EVENT DISTRIBUTION. Upon
the occurrence of an Investment Company Event (as defined herein), the Company
will, except in certain limited circumstances, cause the Company Trustees (as
defined herein) to liquidate the applicable Issuer and cause Convertible Junior
Subordinated Debentures to be distributed pro rata to the holders of
Convertible Preferred Securities. Upon the occurrence of a Tax Event (as
defined herein) in certain circumstances, the Company will have the right, if
certain conditions are met, (i) to shorten the maturity of the Convertible
Junior Subordinated Debentures to a date not earlier than fifteen years from
the date of their original issuance, or (ii) to redeem the Convertible Junior
Subordinated Debentures, in whole (but not in part), at 100% of the principal
amount plus accrued and unpaid interest, in lieu of a distribution of the
Convertible Junior Subordinated Debentures, in which event the Convertible
Preferred Securities will be redeemed in whole at the liquidation preference
set forth in the applicable Prospectus Supplement per each of the Convertible
Preferred Securities plus accrued and unpaid distributions. In the case of a
Tax Event, the Company may also elect to cause the Convertible Preferred
12
Securities to remain outstanding and pay Additional Interest (as defined
herein) on the Convertible Junior Subordinated Debentures. See "Description of
the Convertible Preferred Securities--Conditional Right to Shorten Maturity;
Tax Event Redemption and Investment Company Event Distribution," "Description
of the Convertible Junior Subordinated Debentures--General" and any
accompanying Prospectus Supplement relating to Convertible Preferred
Securities.
Under current United States federal income tax law, a distribution of
the Convertible Junior Subordinated Debentures would not be a taxable event to
holders of the Convertible Preferred Securities. However, if the relevant
Special Event (as defined herein) is a Tax Event which results in the Issuer
being treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to holders of the Convertible Preferred
Securities.
SHORTENING OF STATED MATURITY OF CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES. Upon the occurrence of a Tax Event, the Company in certain
circumstances will have the right to shorten the maturity of the Convertible
Junior Subordinated Debentures to a date not earlier than fifteen years from
the date of their original issuance and thereby cause the Convertible Preferred
Securities to be redeemed on such earlier date. See "Description of the
Convertible Preferred Securities--Conditional Right to Shorten Maturity; Tax
Event Redemption and Investment Company Event Distribution."
EXCHANGE OF CONVERTIBLE PREFERRED SECURITIES FOR CONVERTIBLE JUNIOR
SUBORDINATED DEBENTURES. The Company, the holder of all of the outstanding
Common Securities of an Issuer, will have the right at any time to terminate an
Issuer and, after satisfaction of liabilities to creditors of such Issuer as
provided by applicable law, cause the Convertible Junior Subordinated
Debentures to be distributed to the holders of the applicable Convertible
Preferred Securities and Common Securities in liquidation of the Issuer. See
"Description of the Convertible Preferred Securities--Liquidation Distribution
Upon Dissolution."
Under current United States federal income tax law and
interpretations, and assuming, as expected, that each Issuer will not be
taxable as a corporation, a distribution of the Convertible Junior Subordinated
Debentures upon a liquidation of an Issuer will not be a taxable event to
holders of the Convertible Preferred Securities. However, if a Tax Event were
to occur that would cause an Issuer to be subject to United States federal
income tax with respect to income received or accrued on the Convertible Junior
Subordinated Debentures, a distribution of the Convertible Junior Subordinated
Debentures by such CalEnergy could be a taxable event to the Issuer and the
holders of the Convertible Preferred Securities. See "United States
Taxation--Receipt of Convertible Junior Subordinated Debentures or Cash Upon
Liquidation of the Issuer."
LIMITED VOTING RIGHTS. Except in the limited circumstances described
herein, holders of Convertible Preferred Securities will have no voting rights.
See "Description of the Convertible Preferred Securities--Voting Rights" and
any accompanying Prospectus Supplement relating to Convertible Preferred
Securities.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the
Company's 1996 Stock Option Plan (the "1996 Plan"), as of June 30, 1997, the
Company had outstanding various options to its officers, directors and
employees for the purchase of 4,859,668 shares of Common Stock. All of the
shares of Common Stock issuable upon exercise of said options have been
registered pursuant to registration statements on Form S-8, and, when fully
vested, are available for immediate resale. Sales of substantial amounts of
Common Stock or the availability of Common Stock for sale, could have an
adverse impact on the market price of the Common Stock and on the Company's
ability to raise additional capital through the sale of Common Stock.
13
TRADING CHARACTERISTICS OF THE CONVERTIBLE PREFERRED SECURITIES. The
Convertible Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid distributions. A holder who disposes of
its Convertible Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest
on the Convertible Junior Subordinated Debentures through the date of
disposition in income as ordinary income (i.e., original issue discount), and
to add such amount to its adjusted tax basis in its pro rata share of the
underlying Convertible Junior Subordinated Debentures deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of original issue discount, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See any accompanying Prospectus
Summary relating to Convertible Preferred Securities.
LACK OF PUBLIC MARKET FOR THE CONVERTIBLE PREFERRED SECURITIES. There
is no existing public trading market for the Convertible Preferred Securities,
and there can be no assurance regarding the future development of a market for
the Convertible Preferred Securities, or the ability of holders of the
Convertible Preferred Securities to sell their Convertible Preferred Securities
or the price at which such holders may be able to sell their Convertible
Preferred Securities. If such a market were to develop, the Convertible
Preferred Securities could trade at prices that may be higher or lower than
their initial offering price depending on many factors, including prevailing
interest rates, the price of the Common Stock, the Company's operating results
and the market for similar securities.
14
THE ISSUERS
Each of CalEnergy Capital Trust IV, CalEnergy Capital Trust V and
CalEnergy Capital Trust VI (each, an "Issuer" or a "Issuer" and collectively,
the "Issuers" of the "Issuers") is a statutory business trust formed under
Delaware law pursuant to (i) a declaration of trust (the "Declaration")
executed by the Company, as sponsor of such Issuer, and the trustees of each
Issuer (the "Issuer Trustees") and (ii) the filing of a certificate of trust
with the Secretary of State of the State of Delaware. For each Issuer, the
Company will own, directly or indirectly, Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of such Issuer. The Common
Securities will rank pari passu, and payment will be made thereon pro rata,
with the Convertible Preferred Securities, except that, upon the occurrence and
during the continuance of an event of default under the Declaration, the rights
of the holders of the Common Securities to payment in respect of distributions
and payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the Convertible Preferred Securities. The assets
of each Issuer will consist principally of the Convertible Junior Subordinated
Debentures. Each Issuer exists for the exclusive purpose of (i) issuing the
Trust Securities representing undivided beneficial interests in the assets of
such Issuer, (ii) investing the gross proceeds of the Trust Securities in the
Convertible Junior Subordinated Debentures and (iii) engaging in only those
other activities necessary or incidental thereto.
Pursuant to each Declaration, the number of Issuer Trustees for each
Issuer initially will be five. Three of the Issuer Trustees (the "Company
Trustees") will be individuals who are employees or officers of or who are
affiliated with the Company. The fourth trustee will be a financial institution
that is unaffiliated with the Company (the "Trustee"). The fifth trustee will
be an entity which maintains its principal place of business in the State of
Delaware (the "Delaware Trustee"). Initially, The Bank of New York, a New York
banking corporation, will act as Trustee and its affiliate, The Bank of New
York (Delaware), a Delaware banking corporation, will act as Delaware Trustee
until, in each case, removed or replaced by the holder of the Common
Securities. The Bank of New York also will act as indenture trustee under the
Guarantee (the "Guarantee Trustee") and under the Indenture (the "Indenture
Trustee"). See "Description of the Guarantee" and "Description of the
Convertible Preferred Securities."
Each Trustee will hold title to the Convertible Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities of such
Issuer and the Trustee will have the power to exercise all rights, powers and
privileges under the Indenture (as defined herein) as the holder of the
Convertible Junior Subordinated Debentures. In addition, each Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the
Convertible Junior Subordinated Debentures for the benefit of the applicable
holders of the Trust Securities. With respect to each Issuer, the Company, as
the direct or indirect holder of all the Common Securities, will have the right
to appoint, remove or replace any of the Issuer Trustees and to increase or
decrease the number of trustees, provided that the number of trustees shall be
at least three, a majority of which shall be Company Trustees. The Company will
pay all fees and expenses related to each Issuer and the offering of the
Convertible Preferred Securities. See "Description of the Convertible Junior
Subordinated Debentures."
The rights of the holders of the Convertible Preferred Securities,
including economic rights, rights to information and voting rights, if any, are
as set forth in the Declaration and the Delaware Business Trust Act, as amended
(the "Trust Act"). See "Description of the Convertible Preferred Securities."
The Declaration, the Indenture and the Guarantee also incorporate by reference
the terms of the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Declaration, the Indenture and the Guarantee will be qualified under
the Trust Indenture Act. The place of business and the telephone number of the
Trust are the principal executive offices and telephone number of the Company.
See "The Company."
This description summarizes the material terms of the Declarations and
is qualified in its entirety by reference to the Declarations which have been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part, and the Trust Indenture Act.
15
THE COMPANY
GENERAL
CalEnergy Company, Inc. (the "Company") is a fast-growing-based global
power company whose goal is to be one of the leading providers of low cost
energy services located throughout the world as electricity and gas markets
privatize or deregulate. The Company was founded in 1971 and, through its
subsidiaries, manages and owns interests in over 6,000 MW of power generation
facilities in operation, construction and development worldwide, currently
operates 20 generating facilities and also supplies and distributes electricity
to 1.5 million customers. In addition, through its recently acquired
subsidiary, Northern Electric plc ("Northern"), the Company is engaged in the
distribution and supply of electricity to approximately 1.5 million customers
primarily in northeast England as well as the generation and supply of
electricity (together with other related business activities) throughout
England and Wales.
The Company's Common Stock is traded on the New York, Pacific and
London Stock Exchanges. As of June 30, 1997, PKS was an approximate 27%
stockholder of the Company (on a fully diluted basis). PKS is a large
employee-owned construction, mining and telecommunications company with
approximately $3.0 billion in revenues in 1996. PKS is one of the largest
construction companies in North America and has been in the construction
business since 1884.
-------------------------
The principal executive offices of the Company are located at 302
South 36th Street, Suite 400, Omaha, Nebraska 68131 and its telephone number is
(402) 341-4500. The Company was incorporated in 1971 under the laws of the
State of Delaware.
16
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to
fixed charges on a historical basis for each of the five years in the period
ended December 31, 1996 and for the six months ended June 30, 1996 and 1997.
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- -------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to
Fixed Charges............................. 3.2 2.8 1.7 1.5 1.6 1.4 1.7
For purposes of computing historical ratios of earnings to fixed
charges, earnings are divided by fixed charges. "Earnings" represent the
aggregate of (a) the pre-tax income of the Company, including its proportionate
share of the pre-tax income of the Coso Project and excluding the equity in
loss of a non-consolidated subsidiary, and (b) fixed charges, less capitalized
interest. "Fixed charges" represent interest (whether expensed or capitalized),
amortization of deferred financing and bank fees, the portion of rentals
considered to be representative of the interest factor (one-third of lease
payments) and preferred stock dividend requirements of majority owned
subsidiaries.
ACCOUNTING TREATMENT
The financial statements of the Issuers will be reflected in the
Company's consolidated financial statements with the Convertible Preferred
Securities shown as Company-obligated mandatorily redeemable convertible
preferred securities of subsidiary trusts.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement
accompanying this Prospectus, proceeds from the sale of the Convertible
Preferred Securities ultimately will be used by the Company to make equity
investments in future domestic and international energy projects, to fund
possible project or Company acquisitions, for the repayment of debt or for
other general corporate purposes, and initially may be temporarily invested in
short-term securities.
17
DESCRIPTION OF THE CONVERTIBLE PREFERRED SECURITIES
The following summary of the material terms and provisions of the
Convertible Preferred Securities is subject to, and qualified in its entirety
by reference to, the Declaration for each of the Issuers, which have been filed
as exhibits to this Registration Statement of which this Prospectus is a part,
and the Trust Indenture Act. Capitalized terms not otherwise defined herein
have the meanings assigned to them in the form of Declaration.
GENERAL
Upon issuance of any Convertible Preferred Securities by an Issuer,
such Convertible Preferred Securities will be issued in fully registered form
without interest coupons. Bearer Convertible Preferred Securities will not be
issued.
Upon issuance, the Convertible Preferred Securities will represent
undivided beneficial ownership interests in the assets of the applicable Issuer
and entitle the holders thereof to a preference in certain circumstances with
respect to distributions and amounts payable on redemption or liquidation over
the Common Securities, as well as other benefits as described in the applicable
Declaration.
Upon issuance, all of the Common Securities will be owned, directly or
indirectly, by the Company. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Convertible Preferred
Securities except as described under "--Subordination of Common Securities."
When issued, the Convertible Junior Subordinated Debentures will be owned by
the Trustee and held for the benefit of the holders of the Trust Securities.
Each Declaration does not permit the issuance by an Issuer of any securities
other than the Trust Securities or the incurrence of any indebtedness by such
Issuer.
The particular terms of each of the Issuer's Convertible Preferred
Securities, as well as any modifications of or additions to the general terms
of the Convertible Preferred Securities as described herein that may be
applicable in the case of Convertible Preferred Securities issued by a
particular Issuer, will be described in the Prospectus Supplement relating to
such Convertible Preferred Securities. Accordingly, for a description of the
terms of Convertible Preferred Securities issued by a particular Issuer,
reference must be made to both the Prospectus Supplement relating thereto and
the description of Convertible Preferred Securities set forth in this
Prospectus.
DISTRIBUTIONS
Pursuant to each Declaration, the distributions payable on each of the
Convertible Preferred Securities will be fixed at a rate per annum set forth in
a Prospectus Supplement. Deferred distributions (and interest thereon) will
accrue interest (compounded quarterly) at the same rate. The term
"distributions" as used herein includes any such distributions payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Convertible Preferred Securities will be
cumulative, accrue from the date of initial issuance and will be payable
quarterly in arrears on each March 1, June 1, September 1 and December 1
(unless otherwise set forth in a Prospectus Supplement), commencing on the date
set forth in the applicable Prospectus Supplement, when, as and if available.
The Company will have the right under the Indenture to defer interest payments
from time to time on the Convertible Junior Subordinated Debentures for
successive periods not exceeding 20 consecutive quarters for each such period,
and, as a consequence, quarterly distributions on the Convertible Preferred
Securities would be deferred by an Issuer (but would continue to accrue with
interest) during any such Deferral Period. In the event that the Company
exercises this right, during such period the Company (i) shall not declare or
pay dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock (other than (A) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of
18
its obligations under any employee benefit plans, (B) as a result of a
reclassification of capital stock of the Company or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of capital stock of the Company, (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or the security
being converted or exchanged or (D) stock dividends paid by the Company which
consist of stock of the same class as that on which the dividend is being
paid), (ii) shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company after the date of original issuance of the Convertible Junior
Subordinated Debentures that rank pari passu with or junior to the Convertible
Junior Subordinated Debentures, and (iii) shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the
Guarantees). Prior to the termination of any Deferral Period, the Company may
further extend such Deferral Period; provided that such Deferral Period
together with all previous and further deferrals thereof may not exceed 20
consecutive quarters. Upon the termination of any Deferral Period, the Company
will be required to pay all amounts then due and, upon such payment, the
Company may select a new Deferral Period, subject to the above requirements.
In no event shall any Deferral Period extend beyond the maturity of the
Convertible Junior Subordinated Debentures or any earlier Redemption Date. See
"Description of the Convertible Junior Subordinated Debentures--Interest" and
"--Option to Extend Interest Payment Period."
Pursuant to each Declaration, distributions on the Convertible
Preferred Securities must be paid quarterly on the dates payable to the extent
of funds of each Issuer available for the payment of such distributions.
Amounts available to each Issuer for distribution to the holders of the
Convertible Preferred Securities will be limited to payments under the
Convertible Junior Subordinated Debentures in which the Issuer will invest the
proceeds from the issuance and sale of the Trust Securities. See "Description
of the Convertible Junior Subordinated Debentures." The payment of
distributions, to the extent of funds of each Issuer available therefor, are
guaranteed by the Company, as set forth under "Description of the Guarantee."
Pursuant to each Declaration, distributions on the Convertible
Preferred Securities will be payable to the holders thereof as they appear on
the books and records of each Issuer on the relevant record dates, which will
be fifteen days prior to the relevant payment dates. Subject to any applicable
laws and regulations and the provisions of each Issuer's Declaration, each such
payment will be made as described under "--Payment and Paying Agency" below. In
the event that any date on which distributions are payable on the Convertible
Preferred Securities is not a Business Day, payment of the distribution payable
on such date will be made on the next succeeding day which is a Business Day
(without any distribution or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a day on which banking institutions in The City of New
York or Wilmington, Delaware are authorized or required by law to close.
CONVERSION RIGHTS
General. Upon issuance, Convertible Preferred Securities of an Issuer
will be convertible at any time beginning 60 days following the first date of
original issuance of such Issuer's Convertible Preferred Securities through the
close of business on the date stated for maturity of the Convertible Preferred
Securities in the applicable Prospectus Supplement (the "Stated Maturity")
(except in the case of Convertible Preferred Securities called for redemption
which shall be convertible at any time prior to the close of business on the
Business Day prior to the redemption date), at the option of the holder thereof
and in the manner described below, into shares of the Common Stock at the
initial conversion rate of shares of Common Stock for each Convertible
Preferred Security set forth in the applicable Prospectus Summary, subject to
adjustment as described under "Conversion Price Adjustments" below. Each Issuer
will covenant in its Declaration not to convert Convertible Junior Subordinated
Debentures held by it except pursuant to a notice of conversion delivered to
the Conversion Agent by a holder of Convertible Preferred Securities. A holder
of Convertible Preferred Securities wishing to exercise its conversion right
will have to deliver an irrevocable conversion notice, together, if such
Convertible Preferred Securities is a Certificated Security (as
19
defined herein), with such Certificated Security, to the Conversion Agent
which shall, on behalf of such holder, exchange such of the Convertible
Preferred Securities for a portion of the Convertible Junior Subordinated
Debentures and immediately convert such Convertible Junior Subordinated
Debentures into Common Stock. Holders may obtain copies of the required form
of the conversion notice from the Conversion Agent.
Holders of Convertible Preferred Securities at the close of business
on a distribution record date will be entitled to receive the distribution
payable on such Convertible Preferred Securities on the corresponding
distribution payment date notwithstanding the conversion of such Convertible
Preferred Securities following such distribution record date but prior to such
distribution payment date. Except as provided in the immediately preceding
sentence, neither the Issuer nor the Company will make, or be required to make,
any payment, allowance or adjustment for accumulated and unpaid distributions,
whether or not in arrears, on converted Convertible Preferred Securities. The
Company will make no payment or allowance for distributions on the shares of
Common Stock issued upon such conversion, except to the extent that such shares
of Common Stock are held of record on the record date for any such
distributions, except in certain limited circumstances. Each conversion will be
deemed to have been effected immediately prior to the close of business on the
day on which the related conversion notice was received by the applicable
Issuer.
No fractional shares of the Common Stock will be issued as a result of
conversion, but in lieu thereof such fractional interest will be paid by the
Company in cash.
Conversion Price Adjustments--General. The conversion price will be
subject to adjustment in certain events including, without duplication: (a) the
issuance of shares of Common Stock as a dividend or a distribution with respect
to Common Stock, (b) subdivisions, combinations and reclassification of Common
Stock, (c) the issuance to all holders of Common Stock of rights or warrants
entitling them (for a period not exceeding 45 days) to subscribe for shares of
Common Stock at less than the current market price, (d) the distribution to
holders of Common Stock of evidences of indebtedness of the Company, securities
or capital stock, cash or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above and dividends
paid exclusively in cash), (e) declaration and payment of a cash dividend on
the Common Stock in a per share amount which exceeds the greater of (A) the per
share amount of the immediately preceding quarterly cash dividend on its Common
Stock and (B) 15% of the current market price of the Common Stock as of the
trading day immediately preceding the date of declaration of such dividend, and
(f) payment to holders of Common Stock in respect of a tender or exchange offer
by the Company or any subsidiary for Common Stock (other than an odd lot tender
offer) at a price in excess of 110% of the current market price of Common Stock
as of the trading day next succeeding the last date tenders or exchanges may be
made pursuant to such tender or exchange offer.
The Company from time to time may reduce the conversion price of the
Convertible Junior Subordinated Debentures (and thus the conversion price of
the Convertible Preferred Securities) by any amount selected by the Company for
any period of at least 20 days, in which case the Company shall give at least
15 days' notice of such reduction. The Company may, at its option, make such
reductions in the conversion price, in addition to those set forth above, as
the Company's Board of Directors deems advisable to avoid or diminish any
income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
No adjustment of the conversion price will be made upon the issuance
of any shares of Common Stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of Common
Stock under any such plan. No adjustment in the conversion price will be
required unless such adjustment would require a change of at least one percent
(1%) in the price then in effect; provided, however, that any adjustment that
would not be required to be made shall be carried forward and taken into
account in any subsequent adjustment. If any action would require adjustment of
the conversion price pursuant to more than one of the provisions described
above, only one adjustment shall be made and such adjustment shall be the
amount of adjustment that has the highest absolute value to the holder of the
Convertible Preferred Securities.
20
Conversion price adjustments or omissions in making such adjustments
may, under certain circumstances, be deemed to be distributions that could be
taxable as dividends to holders of the Convertible Preferred Securities or to
the holders of Common Stock.
Conversion Adjustments--Merger, Consolidation or Sale of Assets of the
Company. In the event that the Company shall be a party to any transaction
(including, without limitation, and with certain exceptions), (a)
recapitalization or reclassification of the Common Stock, (b) consolidation of
the Company with, or merger of the Company into, any other person, or any
merger of another person into the Company, (c) any sale, transfer or lease of
all or substantially all of the assets of the Company or (d) any compulsory
share exchange) pursuant to which the Common Stock is converted into the right
to receive other securities, cash or other property (each of the foregoing
being referred to as a "Transaction"), then the holders of the Convertible
Preferred Securities then outstanding shall have the right to convert the
Convertible Preferred Securities into the kind and amount of securities, cash
or other property receivable upon the consummation of such Transaction by a
holder of the number of shares of Common Stock issuable upon conversion of such
Convertible Preferred Securities immediately prior to such Transaction.
In the case of a Transaction, each of the Convertible Preferred
Securities then outstanding would become convertible into the securities, cash
or property receivable by a holder of the number of shares of the Common Stock
into which such Convertible Preferred Securities was convertible immediately
prior to such Transaction. This change could substantially lessen or eliminate
the value of the conversion privilege associated with the Convertible Preferred
Securities in the future. For example, if the Company were acquired in a cash
merger, each of the Convertible Preferred Securities would become convertible
solely into cash and would no longer be convertible into securities whose value
would vary depending on the future prospects of the Company and other factors.
OPTIONAL REDEMPTION
The Company will be permitted to redeem the Convertible Junior
Subordinated Debentures as described herein under "Description of the
Convertible Junior Subordinated Debentures--Optional Redemption," in whole or
in part, from time to time, on terms described in each supplemental Indenture.
Upon any redemption in whole or in part of the Convertible Junior Subordinated
Debentures at the option of the Company, the applicable Issuer will, to the
extent of the proceeds of such redemption, redeem Convertible Preferred
Securities and Common Securities at the Redemption Price. In the event that
fewer than all the outstanding Convertible Preferred Securities are to be so
redeemed, the Convertible Preferred Securities to be redeemed will be selected
as described under "--Form, Denomination and Registration--Global Certificate;
Book-Entry Form" below.
In the event of any redemption in part, an Issuer shall not be
required to (i) issue, register the transfer of or exchange any of the
Convertible Preferred Securities during a period beginning at the opening of
business 15 days before any selection for redemption of Convertible Preferred
Securities and ending at the close of business on the earliest date in which
the relevant notice of redemption is deemed to have been given to all holders
of Convertible Preferred Securities to be so redeemed and (ii) register the
transfer of or exchange any Convertible Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Convertible Preferred Securities being redeemed in part. See "--Redemption
Procedures."
CONDITIONAL RIGHT TO SHORTEN MATURITY; TAX EVENT REDEMPTION AND
INVESTMENT COMPANY EVENT DISTRIBUTION
If a Tax Event (as defined herein) shall occur and be continuing and
in the opinion of counsel to the Company experienced in such matters, there
would in all cases, after effecting the termination of the applicable Issuer
and the distribution of the Convertible Junior Subordinated Debentures to the
holders of the Convertible Preferred Securities in exchange therefor, be more
than an insubstantial risk that an
21
Adverse Tax Consequence (as defined under "Tax Event" below) would continue to
exist, then the Company shall have the right:
(a) to shorten the Stated Maturity of the Junior Subordinated
Debentures to the minimum extent required, but in any event to a date
not earlier than fifteen years from the first date of original
issuance of such Junior Subordinated Debentures (the action referred
to in this clause (a) being referred to herein as a "Maturity
Advancement"), such that, in the opinion of counsel to the Company
experienced in such matters, after advancing the Stated Maturity,
interest paid on the Junior Subordinated Debentures will be deductible
for federal income tax purposes, provided, however, that there shall
be delivered to the Trustees an opinion of counsel (which counsel
shall be satisfactory to the Trustees) that such change in maturity
will not (i) cause the Trust to fail to be classified as a grantor
trust or (ii) result in a taxable event to the holder, or
(b) if in the opinion of counsel to the Company experienced
in such matters, there would in all cases, after effecting a Maturity
Advancement, be more than an insubstantial risk that an Adverse Tax
Consequence would continue to exist, to redeem the Junior
Subordinated Debentures, prior to a date set forth in the applicable
Prospectus Supplement, in whole but not in part for cash, upon not
less than 30 nor more than 60 days' notice and within 90 days
following the occurrence of the Tax Event, at 100% of the principal
amount thereof plus accrued and unpaid interest and, following such
redemption, all the Convertible Preferred Securities will be redeemed
by the Issuer at the liquidation preference date set forth in the
applicable Prospectus Supplement per each Convertible Preferred
Security plus accrued and unpaid distributions. See "--Mandatory
Redemption."
In lieu of the foregoing options, the Company will also have the
option of causing the Convertible Preferred Securities to remain outstanding
and pay Additional Interest (as defined herein) on the Convertible Junior
Subordinated Debentures. See "Description of the Convertible Junior
Subordinated Debentures--Additional Interest."
Holders of Convertible Preferred Securities should consult their own
tax advisors regarding the tax consequences to them of a Maturity Advancement.
"Tax Event" means that the Company shall have obtained an opinion of
nationally recognized independent tax counsel (reasonably acceptable to the
Company Trustees) experienced in such matters to the effect that, as a result
of (a) any amendment to or change (including any announced prospective change)
in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any
amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of
any judicial decision or regulatory determination on or after the date of the
applicable Prospectus Supplement), which amendment or change is effective, is
enacted or which interpretation or pronouncement is announced on or after the
date of the applicable Prospectus Supplement (collectively, a "Change In Tax
Law"), there is more than an insubstantial risk that (i) the Issuer is or will
be subject to United States federal income tax with respect to interest
received on the Convertible Junior Subordinated Debentures, (ii) interest
payable to the Issuer on the Convertible Junior Subordinated Debentures is not
or will not be deductible for United States federal income tax purposes or
(iii) the Issuer is or will be subject to more than a de minimis amount of
other taxes, duties, assessments or other governmental charges of whatever
nature imposed by the United States, or any other taxing authority (each of the
circumstances referred to in clauses (i), (ii) and (iii) being referred to
herein as an "Adverse Tax Consequence"). Notwithstanding anything in the
previous sentence to the contrary, a Tax Event shall not include any Change in
Tax Law that requires the Company for United States federal income tax purposes
to defer taking a deduction for any original issue discount ("OID") that
accrues with respect to the Convertible Junior Subordinated Debentures until
the interest payment related to such OID is paid by the Company in money
provided that such Change in Tax Law does not create more than an insubstantial
risk that the Company will be prevented from taking a deduction for OID
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accruing with respect to the Convertible Junior Subordinated Debentures at a
date that is no later than the date the interest payment related to such OID is
actually paid by the Company in money.
If an Investment Company Event (as defined herein) shall occur and be
continuing, the Company shall cause the Company Trustees to dissolve and
liquidate each Issuer involved and cause the Convertible Junior Subordinated
Debentures, subject to the rights of creditors under applicable law, to be
distributed to the holders of the Convertible Preferred Securities in
liquidation of such Issuer within 90 days following the occurrence of such
Investment Company Event.
The distribution by the Company of the Convertible Junior Subordinated
Debentures will effectively result in the cancellation of the Convertible
Preferred Securities.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that an Issuer is or will
be considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change
in 1940 Act Law becomes effective on or after the date of the applicable
Prospectus Supplement.
A "Special Event" means either an Investment Company Event or a Tax
Event.
After the date fixed for any distribution of Convertible Junior
Subordinated Debentures (i) the Convertible Preferred Securities will no longer
be deemed to be outstanding, (ii) The Depository Trust Company ("DTC") or its
nominee, as the record holder of the Global Certificates, will receive a
registered global certificate or certificates representing the Convertible
Junior Subordinated Debentures to be delivered upon such distribution and (iii)
any certificates representing Convertible Preferred Securities not held by DTC
or its nominee will be deemed to represent Convertible Junior Subordinated
Debentures having a principal amount equal to the aggregate of the stated
liquidation preference of such Convertible Preferred Securities, with accrued
and unpaid interest equal to the amount of accrued and unpaid distributions on
such Convertible Preferred Securities, until such certificates are presented to
the Company or its agent for transfer or reissuance.
MANDATORY REDEMPTION
The Convertible Junior Subordinated Debentures will mature on or may
be redeemed, in whole or in part, on the dates set forth in each supplemental
Indenture or at any time in certain circumstances upon the occurrence of a Tax
Event. Upon the repayment or payment of the Convertible Junior Subordinated
Debentures, whether at maturity or upon redemption or otherwise, the proceeds
from such repayment or redemption shall simultaneously be applied to redeem
Trust Securities having an aggregate liquidation amount equal to the
Convertible Junior Subordinated Debentures so repaid or redeemed at the
applicable redemption price together with accrued and unpaid distributions
through the date of redemptions provided that holders of the Trust Securities
shall be given not less than 30 nor more than 60 days' notice of such
redemption. See "--Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Convertible Junior Subordinated
Debentures--General" and "--Optional Redemption." Upon the repayment of the
Convertible Junior Subordinated Debentures at maturity or upon any
acceleration, earlier redemption or otherwise, the proceeds from such repayment
will be applied to redeem the Convertible Preferred Securities and Common
Securities, in whole, upon not less than 30 nor more than 60 days' notice.
REDEMPTION PROCEDURES
The Convertible Preferred Securities will not be redeemed unless all
accrued and unpaid distributions have been paid on all Convertible Preferred
Securities for all quarterly distribution periods terminating on or prior to
the date of redemption.
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If an Issuer gives a notice of redemption in respect of Convertible
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, such Issuer will irrevocably deposit
with DTC funds sufficient to pay the amount payable on redemption and will give
DTC irrevocable instructions and authority to pay such amount in respect of
Convertible Preferred Securities represented by the Global Certificates and
will irrevocably deposit with the paying agent for the Convertible Preferred
Securities funds sufficient to pay such amount in respect of any Certificated
Securities and will give such paying agent irrevocable instructions and
authority to pay such amount to the holders of Certificated Securities upon
surrender of their certificates. Notwithstanding the foregoing, distributions
payable on or prior to the redemption date for any Convertible Preferred
Securities called for redemption shall be payable to the holders of such
Convertible Preferred Securities on the relevant record dates for the related
distribution dates. If notice of redemption shall have been given and funds are
deposited as required, then upon the date of such deposit, all rights of
holders of such Convertible Preferred Securities so called for redemption will
cease, except the right of the holders of such Convertible Preferred Securities
to receive the redemption price, but without interest on such redemption price.
In the event that any date fixed for redemption of Convertible Preferred
Securities is not a Business Day, then payment of the amount payable on such
date will be made on the next succeeding day which is a Business Day (without
any interest or other payment in respect of any such delay), except that, if
such Business Day falls in the next calendar year, such payment will be made on
the immediately preceding Business Day. In the event that payment of the
redemption price in respect of Convertible Preferred Securities is improperly
withheld or refused, and not paid either by such Issuer or by the Company
pursuant to the Guarantee described under "Description of the Guarantee,"
distributions on such Convertible Preferred Securities will continue to accrue
at the then applicable rate, from the original redemption date to the date of
payment, in which case the actual payment date will be considered the date
fixed for redemption for purposes of calculating the amount payable upon
redemption (other than for purposes of calculating any premium).
Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Company or its
subsidiaries may at any time and from time to time purchase outstanding
Convertible Preferred Securities by tender, in the open market or by private
agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the amount payable upon redemption
of, the Trust Securities, as applicable, shall be made pro rata based on the
liquidation preference of the Trust Securities; provided, however, that, if on
any distribution date or redemption date a Declaration Event of Default (as
defined below under "--Declaration Events of Default") under the applicable
Declaration shall have occurred and be continuing, no payment of any
distribution on, or amount payable upon redemption of, any Common Security, and
no other payment on account of the redemption, liquidation or other acquisition
of Common Securities, shall be made unless payment in full in cash of
accumulated and unpaid distributions on all outstanding Convertible Preferred
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the amount payable upon redemption of the Convertible
Preferred Securities, the full amount of such amount in respect of all
outstanding Convertible Preferred Securities, shall have been made or provided
for, and all funds available to the Trustee shall first be applied to the
payment in full in cash of all distributions on, or the amount payable upon
redemption of, Convertible Preferred Securities then due and payable.
In the case of any Declaration Event of Default, the holder of Common
Securities will be deemed to have waived any such Declaration Event of Default
until all such Declaration Events of Default with respect to the Convertible
Preferred Securities have been cured, waived or otherwise eliminated. Until any
such Declaration Events of Default with respect to the Convertible Preferred
Securities have been so cured, waived or otherwise eliminated, the Trustee
shall act solely on behalf of the holders of the Convertible Preferred
Securities and not the holder of the Common Securities, and only the holders of
the Convertible Preferred Securities will have the right to direct the Trustee
to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
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The holder of all of the outstanding Common Securities of an Issuer
(i.e., the Company) has the right at any time to terminate such Issuer and,
after satisfaction of liabilities to creditors of the Issuer as provided by
applicable law, cause the applicable Convertible Junior Subordinated Debentures
to be distributed to the holders of the Convertible Preferred Securities and
Common Securities in liquidation of the Issuer. Such right is subject to the
Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Convertible Preferred
Securities.
In the event of any voluntary or involuntary liquidation, dissolution,
winding up or termination of an Issuer, the holders of the Convertible
Preferred Securities at the time will be entitled to receive out of the assets
of the Issuer available for distribution to holders of Trust Securities after
satisfaction of liabilities of creditors of the applicable Issuer, before any
distribution of assets is made to the holders of the Common Securities, an
amount equal to the aggregate of the stated liquidation preference of each of
the Convertible Preferred Securities and accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such liquidation, dissolution, winding up or termination,
Convertible Junior Subordinated Debentures in an aggregate principal amount
equal to the Liquidation Distribution have been distributed on a pro rata basis
to the holders of the Trust Securities.
Pursuant to each Declaration, each Issuer shall be dissolved and its
affairs shall be wound up upon the earliest to occur of the following: (i) the
expiration of the term of an Issuer, (ii) the bankruptcy of the Company, (iii)
the filing of a certificate of dissolution or its equivalent with respect to
the Company or the approval of the filing of a certificate of cancellation with
respect to an Issuer, by the holders of at least a majority in liquidation
amount of the outstanding Convertible Preferred Securities as described under
"--Modification of the Declaration," or the revocation of the Company's charter
and the expiration of 90 days after the date of notice to the Company of such
revocation without a reinstatement of its charter, (iv) the distribution of all
the assets of an Issuer, (v) the entry of a decree of a judicial dissolution of
the Company, (vi) the redemption of all of an Issuer's Trust Securities or
(vii) the conversion of all outstanding Convertible Preferred Securities into
Common Stock.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE ISSUER
An Issuer may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity or person,
except as described below. An Issuer may, without the consent of the holders of
the Convertible Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by, a trust organized as such under the laws of any state
of the United States of America; provided that (i) if such Issuer is not the
survivor, such successor entity either (x) expressly assumes all of the
obligations of the Issuer under the Convertible Preferred Securities or (y)
substitutes for the Convertible Preferred Securities other securities having
substantially the same terms as the Convertible Preferred Securities (the
"Successor Securities") as long as the Successor Securities rank the same as
the Convertible Preferred Securities with respect to distributions, assets and
payments upon liquidation, redemption and otherwise, (ii) the Company expressly
acknowledges a trustee of the successor entity that possesses the same powers
and duties as the Trustee as the holder of the Convertible Junior Subordinated
Debentures, (iii) the Convertible Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Convertible Preferred Securities are then listed,
(iv) such merger, consolidation, amalgamation or replacement does not cause the
Convertible Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Convertible
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Issuer, (vii) the Company has provided a guarantee to the holders
of the Successor Securities with respect to such Successor entity having
substantially the same terms as the applicable Guarantee, and (viii) prior to
such merger, consolidation, amalgamation or replacement, the Company has
received an opinion of nationally recognized independent counsel (reasonably
acceptable to the Trustee) to the Issuer experienced in such matters to the
effect that (x) such successor entity
25
will be treated as a grantor trust for United States federal income tax
purposes, (y) following such merger, consolidation, amalgamation or
replacement, neither the Company nor such successor entity will be required to
register as an investment company under the 1940 Act and (z) such merger,
consolidation, amalgamation or replacement will not adversely affect the
rights, preferences and privileges of the holders of the Convertible Preferred
Securities in any material respect. Notwithstanding the foregoing, an Issuer
shall not, except with the consent of holders of 100% in liquidation amount of
the Common Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause such Issuer or the Successor
Entity to be classified as other than a grantor trust for United States
federal income tax purposes.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Event of Default") or a
default by the Company under a Guarantee will constitute an event of default
under the applicable Declaration with respect to the Trust Securities (a
"Declaration Event of Default"); provided that, pursuant to each Declaration,
the holder of the Common Securities will be deemed to have waived any
Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Convertible Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Convertible Preferred
Securities have been so cured, waived or otherwise eliminated, the Trustee will
be deemed to be acting solely on behalf of the holders of the Convertible
Preferred Securities and only the holders of the Convertible Preferred
Securities will have the right to direct the Trustee with respect to certain
matters under the applicable Declaration and, therefore, the Indenture.
If a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Convertible Junior Subordinated Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Convertible Preferred Securities may
directly institute a proceeding (a "Direct Action") for enforcement of payment
to such holder of the principal of or interest on the Convertible Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Convertible Preferred Securities of such holder on or
after the respective due date specified in the Convertible Junior Subordinated
Debentures. In addition, if the Trustee fails to enforce its rights under the
Convertible Junior Subordinated Debentures (other than rights arising from a
Declaration Event of Default described in the immediately preceding sentence)
after any holder of Preferred Securities shall have made a written request to
the Trustee to enforce such rights, such holder of Convertible Preferred
Securities may, to the fullest extent permitted by law, thereafter institute a
Direct Action to enforce the Trustee's rights as holder of the Convertible
Junior Subordinated Debentures, without first instituting any legal proceeding
against the Trustee or any other person. In connection with such Direct Action,
the Company will be subrogated to the rights of such holder of Convertible
Preferred Securities under the Declaration to the extent of any payment made by
the Company to such holder of Convertible Preferred Securities in such Direct
Action. The holders of Convertible Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Convertible
Junior Subordinated Debentures.
Upon the occurrence of a Declaration Event of Default, the Trustee as
the sole holder of the Convertible Junior Subordinated Debentures will have the
right under the Indenture to declare the principal of and interest on the
Convertible Junior Subordinated Debentures to be immediately due and payable.
The Company and the Trust are each required to file annually with the Property
Trustee an officer's certificate as to its compliance with all conditions and
covenants under each Declaration.
VOTING RIGHTS
Except as described herein, any Prospectus Supplement, under the Trust
Act, the Trust Indenture Act and under "Description of the
Guarantees--Amendments and Assignments," and as otherwise required by law
26
and each Declaration, the holders of the Convertible Preferred Securities will
have no voting rights.
Subject to the requirement of the Trustee obtaining a tax opinion in
certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or direct
the exercise of any trust or power conferred upon the Trustee under each
Declaration, including the right to direct the Trustee, as holder of the
Convertible Junior Subordinated Debentures, to (i) exercise the remedies
available under the Indenture with respect to the Convertible Junior
Subordinated Debentures, (ii) waive any past Event of Default that is waiveable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Convertible Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification, or
termination of the Indenture or the Convertible Junior Subordinated Debentures
where such consent shall be required; provided, however, that, where a consent
or action under the Indenture would require the consent or act of the holders
of more than a majority of the aggregate principal amount of Convertible Junior
Subordinated Debentures affected thereby, only the holders of the percentage of
the aggregate stated liquidation preference of the Convertible Preferred
Securities which is at least equal to the percentage required under the
Indenture may direct the Trustee to give such consent or take such action. If a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Convertible Junior Subordinated Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption on the redemption
date), then a holder of Convertible Preferred Securities may institute a Direct
Action for enforcement of payment to such holder of the principal of or
interest on the Convertible Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Convertible Preferred
Securities of such holder on or after the respective due date specified in the
Convertible Junior Subordinated Debentures. In addition, if the Trustee fails
to enforce its rights under the Convertible Junior Subordinated Debentures
(other than rights arising from a Declaration Event of Default described in the
immediately preceding sentence) after any holder of Convertible Preferred
Securities shall have made a written request to the Trustee to enforce such
rights, such holder of Convertible Preferred Securities may, to the fullest
extent permitted by law, thereafter institute a Direct Action to enforce the
Trustee's rights as holder of the Convertible Junior Subordinated Debentures,
without first instituting any legal proceeding against the Trustee or any other
person. The Trustee shall notify all holders of the Convertible Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Convertible Junior Subordinated Debentures. Such notice shall
state that such Event of Default also constitutes a Declaration Event of
Default. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Trustee shall not take any of the
actions described in clause (i), (ii) or (iii) above unless the Trustee has
obtained an opinion of tax counsel to the effect that, as a result of such
action, the applicable Issuer will not fail to be classified as a grantor trust
for United States federal income tax purposes.
In the event the consent of the Trustee, as the holder of the
Convertible Junior Subordinated Debentures, is required under the Indenture
with respect to any amendment, modification or termination of the Indenture,
the Trustee shall request the direction of the holders of the affected Trust
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that, where a consent under the
Indenture would require the consent of the holders of more than a majority of
the aggregate principal amount of the Convertible Junior Subordinated
Debentures, the Trustee may only give such consent at the direction of the
holders of at least the same proportion in aggregate stated liquidation
preference of the Trust Securities. The Trustee shall not take any such action
in accordance with the directions of the holders of the Trust Securities unless
the Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the applicable Issuer will not be
classified as other than a grantor trust.
A waiver of an Event of Default under the Indenture will constitute a
waiver of the corresponding Declaration Event of Default.
Any required approval or direction of holders of Convertible Preferred
Securities may be given at a
27
separate meeting of holders of Convertible Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities of such
Issuer or pursuant to written consent. The Company Trustees will cause a
notice of any meeting at which holders of Convertible Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be mailed to each holder of record of
Convertible Preferred Securities. Each such notice will include a statement
setting forth the following information: (i) the date of such meeting or the
date by which such action is to be taken; (ii) a description of any resolution
proposed for adoption at such meeting on which such holders are entitled to
vote or of such matter upon which written consent is sought; and (iii)
instructions for the delivery of proxies or consents. No vote or consent of
the holders of Convertible Preferred Securities will be required for an Issuer
to redeem and cancel Convertible Preferred Securities or distribute
Convertible Junior Subordinated Debentures in accordance with its Declaration.
Notwithstanding that holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned at such time by the
Company or any entity directly or indirectly controlling or controlled by, or
under direct or indirect common control with, the Company, shall not be
entitled to vote or consent and shall, for purposes of such vote or consent, be
treated as if such Convertible Preferred Securities were not outstanding.
The procedures by which holders of Convertible Preferred Securities
may exercise their voting rights are described below. See "--Form, Denomination
and Registration--Global Certificate; Book-entry Form" below.
Holders of the Convertible Preferred Securities will have no rights to
appoint or remove the Issuer Trustees, who may be appointed, removed or
replaced solely by the Company as the indirect or direct holder of all of the
Common Securities.
MODIFICATION OF THE DECLARATION
Each Declaration may be modified and amended if approved by the
Company Trustees (and in certain circumstances the Trustee and the Delaware
Trustee), provided, that if any proposed amendment provides for, or the Company
Trustees otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the Trust Securities issued
pursuant to such Declaration whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Issuer
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities voting together as a single class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in liquidation amount
of the Trust Securities affected thereby; provided, that if any amendment or
proposal referred to in clause (i) above would adversely affect only the
Convertible Preferred Securities or the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be
made to a Declaration if such amendment or modification would (i) cause such
Issuer to be classified for purposes of United States federal income taxation
as other than a grantor trust, (ii) reduce or otherwise adversely affect the
powers of the Trustee or (iii) cause such Issuer to be deemed an "investment
company" which is required to be registered under the 1940 Act.
FORM, DENOMINATION AND REGISTRATION
The Convertible Preferred Securities are issued in fully registered
form, without coupons.
Global Certificate; Book-entry Form. Except as provided below,
Convertible Preferred Securities are evidenced by one or more global
certificates representing Convertible Preferred Securities (collectively, the
28
"Global Certificates" or each individually, a "Global Certificate"), which have
been deposited with the Property Trustee as custodian for DTC and registered in
the name of Cede & Co. ("Cede") as DTC's nominee. Except as set forth below,
record ownership of a Global Certificate may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
Except as provided below, owners of beneficial interests in a Global
Certificate will not be entitled to have certificates registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form, and will not be considered holders thereof.
Conveyance of notices and other communications by DTC to organizations
who are participants in DTC ("Participants"), by Participants to certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant either directly or
indirectly ("Indirect Participants"), and by Participants and Indirect
Participants to owners of beneficial interests in the Global Certificate held
by DTC will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time. Redemption
notices shall be sent to Cede. If less than all of the Convertible Preferred
Securities are being redeemed, DTC will reduce the amount of the interest of
each Participant in such Convertible Preferred Securities in accordance with
its procedures.
Although voting with respect to the Convertible Preferred Securities
is limited, in those cases where a vote is required, neither DTC nor Cede will
itself consent or vote with respect to Convertible Preferred Securities. Under
its usual procedures, DTC would mail an Omnibus Proxy to the applicable Issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede's
consenting or voting rights to those Participants to whose accounts the
Convertible Preferred Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy). The Company and the Issuers believe
that the arrangements among DTC, Participants and Indirect Participants, and
owners of beneficial interests in the Global Certificate held by DTC will
enable such beneficial owners to exercise rights equivalent in substance to the
rights that can be directly exercised by a holder of a beneficial interest in
the respective Issuers.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company and the Issuers believe
to be reliable, but neither the Company nor the Issuers take responsibility for
the accuracy thereof.
Distribution payments on the Global Certificates will be made to Cede,
the nominee for DTC, as the registered owner of the Global Certificates by wire
transfer of immediately available funds. Neither the Company, the Property
Trustee nor any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Certificates or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
The Company has been informed by DTC that, with respect to any
distribution payments on the Global Certificates, DTC's practice is to credit
Participants' accounts on the payment date therefor with payments in amounts
proportionate to their respective beneficial interests in the Convertible
Preferred Securities represented by a Global Certificate, as shown on the
records of DTC, unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants to owners of beneficial
interests in Convertible Preferred Securities represented by a Global
Certificate held through such Participants will be the responsibility of such
Participants, as is not the case with securities held for the accounts of
customers registered in "street name."
Holders who desire to convert their Convertible Preferred Securities
into Common Stock pursuant to the terms of the Convertible Preferred Securities
should contact their brokers or other Participants or Indirect Participants to
obtain information on procedures, including proper forms and cut-off times, for
submitting such requests.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants
29
and certain banks, the ability of a person having a beneficial interest in
Convertible Preferred Securities represented by a Global Certificate to pledge
such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect to such interest, may be affected
by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Property Trustee (or any registrar, paying
agent or conversion agent under the applicable Declaration) will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised the Company that it will take any
action permitted to be taken by a holder of Convertible Preferred Securities
(including, without limitation, the presentation of Convertible Preferred
Securities for exchange as described below) only at the direction of one or
more Participants to whose account with DTC interests in the Global Certificate
are credited and only in respect of the number of Convertible Preferred
Securities represented by the Global Certificates as to which such Participant
or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its Participants
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Participants and by the NYSE, the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. The rules
applicable to DTC and its Participants are on file with the SEC.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Certificates among Participants
of DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. If DTC is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
cause the Convertible Preferred Securities to be issued in definitive form in
exchange for the Global Certificates. None of the Company, the Property Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC, their Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Certificate.
Certificated Convertible Preferred Securities. Certificated securities
may be issued in exchange for Convertible Preferred Securities represented by
the Global Certificate if no successor depositary is appointed by the Company
as set forth above under "--Global Certificate; Book-Entry Form" or in certain
other circumstances set forth in each Declaration.
PAYMENT AND PAYING AGENCY
Payments in respect of the Convertible Preferred Securities shall be
made to DTC, which shall credit the relevant accounts at DTC on the applicable
distribution dates or, in the case of certificated securities, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. The Paying Agent shall initially be
The Bank of New York. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Issuer Trustees. In the event that
The Bank of New York shall no longer be the Paying Agent, the Trustee shall
appoint a successor to act as Paying
30
Agent (which shall be a bank or trust company).
REGISTRAR, TRANSFER AGENT AND CONVERSION AGENT
Upon their issuance The Bank of New York will act as registrar,
transfer agent and conversion agent (the "Conversion Agent") for the
Convertible Preferred Securities. Registration of transfers of Convertible
Preferred Securities will be effected without charge by or on behalf of an
Issuer, but upon payment (with the giving of such indemnity as the Issuer or
the Company may require) in respect of any tax or other government charges
which may be imposed in relation to it. An Issuer will not be required to
register or cause to be registered the transfer of Convertible Preferred
Securities after such Convertible Preferred Securities have been called for
redemption.
INFORMATION CONCERNING THE TRUSTEE
The Company and certain of its subsidiaries maintain deposit accounts
and conduct other banking transactions with the Trustee in the ordinary course
of their businesses.
MISCELLANEOUS
Each Issuer's Issuer Trustees are authorized and directed to conduct
the affairs of and to operate the respective Issuer in such a way that such
Issuer will not be deemed to be an "investment company" required to be
registered under the 1940 Act or characterized as other than a grantor trust
for federal income tax purposes and so that the Convertible Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Issuer Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust or the Declaration that such Issuer Trustees determine in
their discretion to be necessary or desirable for such purposes as long as such
action does not adversely affect the interests of the holders of the
Convertible Preferred Securities.
Holders of the Convertible Preferred Securities have no preemptive
rights.
31
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees
that will be executed and delivered by the Company for the benefit of the
holders from time to time of Convertible Preferred Securities. Each Guarantee
will be separately qualified under the Trust Indenture Act and will be held by
The Bank of New York, acting in its capacity as indenture trustee with respect
thereto, for the benefit of holders of the Convertible Preferred Securities of
the applicable Issuer. The terms of each Guarantee will be those set forth in
such Guarantee and those made part of such Guarantee by the Trust Indenture
Act. This description summarizes the material terms of the Guarantees and is
qualified in its entirety by reference to the form of Guarantee, which is filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, any prospectus supplement and the Trust Indenture Act.
GENERAL
The particular terms of each Guarantee, as well as any modifications
of or additions to the general terms of the Guarantees as described herein that
may be applicable to a particular Issuer's Trust Securities, will be described
in the Prospectus Supplement relating to such Trust Securities. Accordingly,
for a description of the terms of the Guarantee relating to a particular
Issuer's Trust Securities reference must be made to both the Prospectus
Supplement relating thereto and the description of the Guarantees set forth in
this Prospectus.
Pursuant to each Guarantee, the Company irrevocably and
unconditionally agrees, to the extent set forth herein or in any Prospectus
Supplement, to pay in full, to the holders of the Convertible Preferred
Securities, the Guarantee Payments (as defined below), as and when due,
regardless of any defense, right of set off or counterclaim which the Issuer
may have or assert. The following payments with respect to the Convertible
Preferred Securities, to the extent not paid by an Issuer (the "Guarantee
Payments"), are subject to each Guarantee (without duplication): (i) any
accrued and unpaid distributions which are required to be paid on the
Convertible Preferred Securities to the extent of funds of the applicable
Issuer available therefor, (ii) the amount payable upon redemption of the
Convertible Preferred Securities, payable out of funds of the applicable Issuer
available therefor with respect to any Convertible 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 Convertible Junior Subordinated Debentures, the lesser
of (a) the aggregate of the liquidation preference and all accrued and unpaid
dividends on the Convertible Preferred Securities to the date of payment and
(b) the amount of assets of the Issuer remaining available for distribution to
holders of Convertible Preferred Securities upon the liquidation of the Issuer.
The Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of Convertible
Preferred Securities or by causing the Issuer to pay such amounts to such
holders.
If the Company fails to make interest payments on the Convertible
Junior Subordinated Debentures or pay amounts payable upon the redemption,
acceleration or maturity of the Convertible Junior Subordinated Debentures, the
applicable Issuer will have insufficient funds to pay distributions on or to
pay amounts payable upon the redemption or repayment of the Convertible
Preferred Securities. The Guarantee does not cover payment of distributions or
the amount payable upon redemption or repayment in respect of the Convertible
Preferred Securities when an Issuer does not have sufficient funds to pay such
distributions or such amount.
In taking any action to enforce a Guarantee, holders of the
Convertible Preferred Securities may proceed directly against the Company as
guarantor, rather than having to proceed against the Issuer before attempting
to collect from the Company, and the Company waives any right or remedy to
require that any action be brought against the Issuer or any other person or
entity before proceeding against the Company. Such obligations will not be
discharged except by payment of the Guarantee Payments in full.
Each Guarantee, when taken together with the Company's obligations
under the Convertible Junior Subordinated Debentures, and the Indenture and the
applicable Declaration, including its obligations to pay costs, expenses, debts
and liabilities of the Issuer (other than with respect to the Trust Securities)
will provide
32
a full and unconditional guarantee on a subordinated basis by the Company of
payments due on the Convertible Preferred Securities to be issued by each
Issuer.
The Company has also agreed separately to irrevocably and
unconditionally guarantee the obligations of each Trust with respect to the
Common Securities (the "Common Securities Guarantee") to the same extent as the
Guarantee, except that upon the occurrence and during the continuation of a
Declaration Event of Default, holders of Convertible Preferred Securities shall
have priority over holders of Common Securities with respect to distributions
and payments on liquidation, redemption, or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Guarantee, the Company will covenant that, so long as any
Convertible Preferred Securities remain outstanding, if at such time (a) the
Company has exercised its option to defer interest payments on the Convertible
Junior Subordinated Debentures and such deferral is continuing, (b) the Company
shall be in default with respect to its payment or other obligations under a
Guarantee or (c) 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 Company (i) shall not declare or
pay dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock (other than (A) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans, (B) as a result of a reclassification of capital stock
of the Company or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of capital stock of the
Company, (C) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock of the Company or the security being converted or exchanged or (D) stock
dividends paid by the Company which consist of the stock of the same class as
that on which the dividend is being paid), (ii) shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company after the date of original issuance of
the Convertible Junior Subordinated Debentures that rank pari passu with or
junior to the Convertible Junior Subordinated Debentures, and (iii) shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee).
As part of each Guarantee, the Company will agree that it will honor
all obligations described therein relating to the conversion of the Convertible
Preferred Securities into Common Stock as described in "Description of the
Convertible Preferred Securities--Conversion Rights."
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of Convertible Preferred Securities (in which case
no consent of holders will be required), each Guarantee may be changed only
with the prior approval of the holders of not less than a majority in aggregate
stated liquidation preference of the outstanding Convertible Preferred
Securities issued by the applicable Issuer. The manner of obtaining any such
approval of holders of the Convertible Preferred Securities will be as set
forth under "Description of the Convertible Preferred Securities--Voting
Rights." All guarantees and agreements contained in the Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Convertible Preferred
Securities then outstanding. Except in connection with any permitted merger or
consolidation of the Company with or into another entity or any permitted sale,
transfer or lease of the Company's assets to another entity as described below
under "Description of the Convertible Junior Subordinated
Debentures--Restrictions," the Company may not assign its rights or delegate
its obligations under any Guarantee without the prior approval of the holders
of at least a majority of the aggregate stated liquidation preference of the
Convertible Preferred Securities issued by the applicable Issuer.
33
TERMINATION OF THE GUARANTEE
Each Guarantee will terminate as to each holder of Convertible
Preferred Securities and be of no further force and effect upon (a) full
payment of the applicable redemption price of such holder's Convertible
Preferred Securities, (b) the distribution of Common Stock to such holder in
respect of the conversion of such holder's Convertible Preferred Securities
into Common Stock or (c) the distribution of the Convertible Junior
Subordinated Debentures to the holders of all the Convertible Preferred
Securities and will terminate completely upon full payment of the amounts
payable upon liquidation of the Issuer. Notwithstanding the foregoing, each
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Convertible Preferred Securities must restore
payment of any sums paid under such Convertible Preferred Securities or the
Guarantee.
STATUS OF THE GUARANTEE; SUBORDINATION
Each Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, except any liabilities that may be made pari passu
expressly by their terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred or
preference stock or preferred securities of any affiliate of the Company and
(iii) senior to Common Stock. Each Declaration will provide that each holder of
Convertible Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the applicable Guarantee. Upon the
bankruptcy, liquidation or winding up of the Company, its obligations under the
applicable Guarantee will rank junior to all its other liabilities (except as
aforesaid) and, therefore, funds may not be available for payment under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default,
undertakes to perform only such duties as are specifically set forth in the
applicable Guarantee and, after default with respect to the Guarantee, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of Convertible Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
GOVERNING LAW
Each Guarantee will be governed by, and construed in accordance with,
the laws of the State of New York.
34
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
Convertible Junior Subordinated Debentures, in which the Issuer will
invest with the proceeds of the issuance and sale of (i) the Convertible
Preferred Securities and (ii) the Common Securities, may be issued from time to
time in one or more series under an Indenture (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Indenture Trustee"). The
form of Convertible Junior Subordinated Debentures Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
The following description summarizes the material terms of the Indenture, and
is qualified in its entirety by reference to the Indenture, any Prospectus
Supplement and the Trust Indenture Act. Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein.
The particular terms of each series of Junior Subordinated Debentures,
as well as any modifications of or additions to the general terms of the Junior
Subordinated Debentures, will be described in the Prospectus Supplement
relating to such series of Trust Securities. Accordingly, for a description of
the terms of a particular series of Junior Subordinated Debentures, reference
must be made to both the Prospectus Supplement relating to the Trust Securities
and the description of the Junior Subordinated Debentures set forth in this
Prospectus.
Under certain circumstances involving the dissolution of an Issuer
following the occurrence of a Tax Event or Investment Company Event,
Convertible Junior Subordinated Debentures may be distributed to the holders of
the Convertible Preferred Securities in liquidation of an Issuer. See
"Description of the Convertible Preferred Securities--Tax Event or Investment
Company Event Redemption or Distribution."
GENERAL
The Indenture will not limit the aggregate principal amount of
indebtedness which may be issued thereunder and provides that Convertible
Junior Subordinated Debentures may be issued thereunder from time to time in
one or more series. The Convertible Junior Subordinated Debentures are issuable
in one or more series pursuant to an indenture supplemental to the Indenture.
The Convertible Junior Subordinated Debentures applicable to each Issuer will
be limited in aggregate principal amount the sum of the aggregate stated
liquidation preference of the Convertible Preferred Securities and the Common
Securities for such Issuer.
The entire principal amount of the Convertible Junior Subordinated
Debentures will become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest, if any, at the applicable
Stated Maturity for each Issuer, subject to the Company's right to shorten the
maturity thereof as described under "Description of the Convertible Preferred
Securities--Conditional Right to Shorten Maturity; Tax Event Redemption and
Investment Company Event Distribution."
In the event Convertible Junior Subordinated Debentures are issued to
an Issuer or a Trustee of such Issuer in connection with the issuance of Trust
Securities by such Issuer, such Convertible Junior Subordinated Debentures
subsequently may be distributed pro rata to the holders of such Trust
Securities in connection with the dissolution of such Issuer upon the
occurrence of certain events described in the Prospectus Supplement relating to
such Trust Securities. Only one series of Convertible Junior Subordinated
Debentures will be issued to an Issuer or a Trustee of such Issuer in
connection with the issuance of Trust Securities by such Issuer.
Reference is made to the Prospectus Supplement which will accompany
this Prospectus for the following terms of the series of Convertible Junior
Subordinated Debentures being offered thereby (to the extent such terms are
applicable to the Convertible Junior Subordinated Debentures): (i) the specific
designation of such Convertible Junior Subordinated Debentures, aggregate
principal amount, purchase price and premium, if any; (ii) any limit on the
aggregate principal amount of such Convertible Junior Subordinated Debentures;
(iii)
35
the date or dates on which the principal of such Convertible Junior
Subordinated Debentures is payable and the right, to extend or defer such date
or dates; (iv) the rate or rates at which such Convertible Junior Subordinated
Debentures will bear interest or the method of calculating such rate or rates,
if any; (v) the date or dates from which such interest shall accrue, the
interest payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for the
determination of holders to whom interest is payable on any such interest
payment dates; (vi) the right, if any, to extend the interest payment periods
and the duration of such extension; (vii) the period or periods within which,
the price or prices at which, and the terms and conditions upon which, such
Convertible Junior Subordinated Debentures may be redeemed, in whole or in
part, at the option of the Company; (viii) the obligation, if any, of the
Company to redeem or purchase such Convertible Junior Subordinated Debentures
pursuant to any sinking fund or analogous provisions or at the option of the
holder thereof and the period or periods for which, the price or prices at
which, and the terms and conditions upon which, such Convertible Junior
Subordinated Debentures shall be redeemed or purchased, in whole or part,
pursuant to such obligation; (ix) any exchangeability, conversion or prepayment
provisions of the Convertible Junior Subordinated Debentures; (x) any
applicable United States federal income tax consequences, including whether and
under what circumstances the Company will pay additional amounts on the
Convertible Junior Subordinated Debentures held by a person who is not a U.S.
person in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether the Company will have the option to redeem such
Convertible Junior Subordinated Debentures rather than pay such additional
amounts; (xi) the form of such Convertible Junior Subordinated Debentures;
(xii) if other than denominations of $50 or any integral multiple thereof, the
denominations in which such Convertible Junior Subordinated Debentures shall be
issuable; (xiii) any and all other terms with respect to such series, including
any modification of or additions to the events of default or covenants provided
for with respect to such series, including any modification of or additions to
the events of default or covenants provided for with respect to the Convertible
Junior Subordinated Debentures, and any terms which may be required by or
advisable under applicable laws or regulations not inconsistent with the
Indenture; and (xiv) whether such Convertible Junior Subordinated Debentures
are issuable as a global security, and in such case, the identity of the
depositary.
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the Convertible Junior Subordinated Debentures will, if distributed to
holders of Convertible Preferred Securities in a dissolution of an Issuer, will
initially be issued as a global security to the extent of any Global
Certificates at the time representing any Convertible Preferred Securities and
otherwise in fully registered, certificated form. In the event that Convertible
Junior Subordinated Debentures are issued in certificated form, such
Convertible Junior Subordinated Debentures will be denominations of $50 and
integral multiples thereof and may be transferred or exchanged at the offices
described below.
Payments on Convertible Junior Subordinated Debentures issued as a
global security will be made in immediately available funds to DTC, as the
depository for the Convertible Junior Subordinated Debentures. In the event
Convertible Junior Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Convertible Junior
Subordinated Debentures will be registrable and Convertible Junior Subordinated
Debentures will be exchangeable for Convertible Junior Subordinated Debentures
of other denominations of a like aggregate principal amount at the corporate
trust office of the Indenture Trustee in The City of New York; provided that,
unless the Convertible Junior Subordinated Debentures are held by the Issuer or
any successor permissible under "Description of the Convertible Preferred
Securities -- Merger, Consolidation or Amalgamation of the Issuer," payment of
interest may be made at the option of the Company by check mailed to the
address of the persons entitled thereto.
The Indenture does not contain any provisions that afford holders of
Convertible Junior Subordinated Debentures protection in the event of a highly
leveraged transaction involving the Company. The Convertible Junior
Subordinated Debentures are not entitled to the benefit of any sinking fund.
36
INTEREST
Convertible Junior Subordinated Debentures will bear interest from
their date of issuance, payable quarterly in arrears on March 1, June 1,
September 1 and December 1 (unless otherwise set forth in a Prospectus
Supplement (each, an "Interest Payment Date"), commencing on the date set forth
in the applicable Prospectus Supplement, to the person in whose name such
Convertible Junior Subordinated Debenture is registered at the close of
business on the fifteenth day immediately preceding such Interest Payment Date.
Interest will compound quarterly and will accrue at the annual rate set forth
in the applicable Prospectus Supplement on any interest installment not paid
when due. The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Convertible Junior Subordinated Debentures is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (without any interest
or other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right, with respect to each Issuer, at any
time during the term of such Issuer's Convertible Junior Subordinated
Debentures to defer interest payments from time to time for successive periods
not exceeding 20 consecutive quarters for each such period. At the end of each
Deferral Period (subject to extensions as provided below), the Company shall
pay all interest then accrued and unpaid (together with interest thereon at the
rate specified for the Convertible Junior Subordinated Debentures to the extent
permitted by applicable law). In no event shall any Deferral Period extend
beyond the maturity of the Convertible Junior Subordinated Debentures or any
earlier Redemption Date. During any Deferral Period, the Company (i) shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than (A) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by the Company of its obligations
under any employee benefit plans, (B) as a result of a reclassification of
capital stock of the Company or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of capital
stock of the Company, (C) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock of the Company or the security being converted or exchanged
or (D) stock dividends paid by the Company which consist of the stock of the
same class as that on which the dividend is being paid), (ii) shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by the Company that rank pari passu with
or junior to the Convertible Junior Subordinated Debentures, and (iii) shall
not make any guarantee payments with respect to the foregoing (other than
pursuant to the Guarantee). Prior to the expiration of any such Deferral
Period, the Company may further extend such Deferral Period; provided that such
Deferral Period together with all previous and further extensions thereof may
not exceed 20 consecutive quarters. Upon the expiration of any Deferral Period
and the payment of all amounts then due, the Company may select a new Deferral
Period, subject to the above requirements. No interest during a Deferral
Period, except at the end thereof, shall be due and payable. If the Issuer
shall be the sole holder of the Convertible Junior Subordinated Debentures, the
Company shall give the Issuer notice of its selection of such Deferral Period
at least one Business Day prior to the earlier of (i) the date the
distributions on the Convertible Preferred Securities are payable or (ii) the
date the Issuer is required to give notice to any applicable self-regulatory
organization or to holders of the Convertible Preferred Securities of the
record date or the date such distribution is payable, but in any event not less
than ten Business Days prior to such record date. The Company shall cause the
Issuer to give notice of the Company's selection of such Deferral Period to the
holders of the Convertible Preferred Securities. If the Issuer shall not be the
sole holder of the Convertible Junior Subordinated Debentures, the Company
shall give the holders of the Convertible Junior Subordinated Debentures notice
of its selection of such Deferral Period at least ten Business Days prior to
the earlier of (i) the Interest Payment Date or (ii) the date the Company is
required to give notice to any applicable self-regulatory organization or to
holders of the Convertible Junior Subordinated Debentures of the record or
payment date of such related interest payment, but
37
in any event not less than two Business Days prior to such record date.
ADDITIONAL INTEREST
If an Issuer would be required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding, transfer or
stamp taxes) imposed by the United States, or any other taxing authority, then,
in any such case, the Company will pay as additional interest ("Additional
Interest") such amounts as shall be required so that the net amounts received
and retained by the Issuer after paying any such taxes, duties, assessments or
governmental charges will be not less than the amounts the Issuer would have
received had no such taxes, duties, assessments or governmental charges been
imposed.
CONVERSION OF THE CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
The Convertible Junior Subordinated Debentures of an Issuer to be
issued pursuant to the Indenture are convertible into Common Stock at the
option of the holders of the Convertible Junior Subordinated Debentures at any
time beginning 60 days following the first date of original issuance of the
Issuer's Convertible Junior Subordinated Debentures prior to maturity (except
in the case of Convertible Preferred Securities called for redemption which
shall be convertible at any time prior to the close of business on the Business
Day prior to the redemption date) at the initial conversion price set forth in
the applicable Prospectus Supplement subject to the conversion price
adjustments described under "Description of the Convertible Preferred
Securities--Conversion Rights." The Issuer will covenant not to convert
Convertible Junior Subordinated Debentures held by it except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of
Convertible Preferred Securities. Upon surrender of each $50 of liquidation
preference of Convertible Preferred Securities to the Conversion Agent for
conversion, the Issuer will distribute $50 principal amount of the Convertible
Junior Subordinated Debentures (or such other amounts if set forth in an
applicable Prospectus Supplement) to the Conversion Agent on behalf of the
holder of the Convertible Preferred Securities so converted, whereupon the
Conversion Agent will convert such Convertible Junior Subordinated Debentures
to Common Stock on behalf of such holder. The Company's delivery to the holders
of the Convertible Junior Subordinated Debentures (through the Conversion
Agent) of the fixed number of shares of Common Stock into which the Convertible
Junior Subordinated Debentures are convertible (together with the cash payment,
if any, in lieu of fractional shares) will be deemed to satisfy the Company's
obligation to pay the principal amount of the Convertible Junior Subordinated
Debentures so converted, and the accrued and unpaid interest thereon
attributable to the period from the last date to which interest has been paid
or duly provided for; provided, however, that if any Convertible Junior
Subordinated Debenture is converted after a record date for payment of
interest, the interest payable on the related interest payment date with
respect to such Convertible Junior Subordinated Debenture shall be paid to the
Issuer (which will distribute such interest to the converting holder) or other
holder of Convertible Junior Subordinated Debentures, as the case may be,
despite such conversion.
OPTIONAL REDEMPTION
Pursuant to the Indenture, the Company shall have the right to redeem
the Convertible Junior Subordinated Debentures, in whole or in part, on terms
described in each supplemental Indenture.
In the event of any redemption in part, the Company shall not be
required to (i) issue, register the transfer of or exchange any Convertible
Junior Subordinated Debenture during a period beginning at the opening of
business 15 days before any selection for redemption of Convertible Junior
Subordinated Debentures and ending at the close of business on the earliest
date on which the relevant notice of redemption is deemed to have been given to
all holders of Convertible Junior Subordinated Debentures to be so redeemed and
(ii) register the transfer of or exchange any Convertible Junior Subordinated
Debentures so selected for redemption, in whole or in part, except the
unredeemed portion of any Convertible Junior Subordinated Debenture being
redeemed in part.
SUBORDINATION
38
The Indenture provides that the Convertible Junior Subordinated
Debentures are subordinate and junior in right of payment to all Senior
Indebtedness of the Company as provided in the Indenture. No payment of
principal of (including redemption payments), or interest on, the Convertible
Junior Subordinated Debentures may be made (i) if any Senior Indebtedness is
not paid when due, any applicable grace period with respect to such default has
ended and such default has not been cured or waived, or (ii) if the maturity of
any Senior Indebtedness has been accelerated because of a default. Upon any
distribution of assets of the Company to creditors upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
and premium, if any, and interest due or to become due on, all Senior
Indebtedness must be paid in full before the holders of the Convertible Junior
Subordinated Debentures are entitled to receive or retain any payment. In the
event that, notwithstanding the foregoing, any payment or distribution of cash,
property or securities shall be received or collected by a holder of the
Convertible Junior Subordinated Debentures in contravention of the foregoing
provisions, such payment or distribution shall be held for the benefit of and
shall be paid over to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instrument evidencing Senior Indebtedness may have
been issued, as their respective interests may appear, to the extent necessary
to pay in full all Senior Indebtedness then due, after giving effect to any
concurrent payment to the holders of Senior Indebtedness. Subject to the
payment in full of all Senior Indebtedness, the rights of the holders of the
Convertible Junior Subordinated Debentures will be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions
applicable to Senior Indebtedness until all amounts owing on the Convertible
Junior Subordinated Debentures are paid in full.
The term "Senior Indebtedness" shall mean in respect of the Company
(i) the principal, premium, if any, and interest in respect of (A) indebtedness
of such obligor for money borrowed and (B) indebtedness evidenced by
securities, convertible preferred securities, bonds or other similar
instruments issued by such obligor, (ii) all capital lease obligations of such
obligor, (iii) all obligations of such obligor issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
obligor and all obligations of such obligor under any title retention agreement
(but excluding trade accounts payable arising in the ordinary course of
business), (iv) all obligations of such obligor for the reimbursement of any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction, (v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons for the payment of which such obligor is
responsible or liable as obligor, guarantor or otherwise, and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such obligor (whether
or not such obligation is assumed by such obligor), except for (1) any such
indebtedness issued after the date of original issuance of the Convertible
Junior Subordinated Debentures that is by its terms subordinated to or pari
passu with the Convertible Junior Subordinated Debentures and (2) any
indebtedness (including all other debt securities and guarantees in respect of
those debt securities) initially issued to any other trust, or a trustee of
such trust, partnership or other entity affiliated with the Company that is,
directly or indirectly, a financing vehicle of the Company (a "Financing
Entity") in connection with the issuance by such Financing Entity of preferred
securities or other similar securities. Such Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior
Indebtedness the Company may issue.
CERTAIN COVENANTS
If Convertible Junior Subordinated Debentures are issued to an Issuer
in connection with the issuance of Trust Securities by such Trust, the Company
will covenant in the Indenture that if (a) there shall have occurred any event
that would constitute an Event of Default, (b) the Company shall be in default
with respect to its payment of any obligations under the applicable Guarantee,
or (c) the Company shall have given notice of its election to defer payments of
interest on the Convertible Junior Subordinated Debentures by extending the
interest payment period as provided in the Indenture and such period, or any
extension thereof, shall be continuing, then the Company (i) shall not declare
or pay dividends on, make distributions with respect to, or
39
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than (A) purchases or acquisitions of shares
of Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans, (B) as a result of a
reclassification of capital stock of the Company or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of capital stock of the Company, (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock of the Company or the security
being converted or exchanged or (D) stock dividends paid by the Company which
consist of stock of the same class as that on which the dividend is being
paid), (ii) shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company after the date of original issuance of the Convertible Junior
Subordinated Debentures for each Issuer that rank pari passu with or junior to
the Convertible Junior Subordinated Debentures, and (iii) shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee).
The Company will also covenant (a) to directly or indirectly maintain
100% ownership of the Common Securities of each Issuer; provided, however, that
any permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities and (b) to use its reasonable
efforts to cause each Issuer (x) to remain a statutory business trust, except
in connection with the distribution of Convertible Junior Subordinated
Debentures to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and (y)
to otherwise continue to be classified as a grantor trust for United States
federal income tax purposes.
RESTRICTIONS
The Indenture provides that the Company shall not consolidate with or
merge with or into any other corporation, or, directly or indirectly, convey,
sell, transfer or lease all or substantially all of the properties and assets
of the Company on a consolidated basis to any person, unless either the Company
is the continuing corporation or such corporation or person assumes by
supplemental indenture all the obligations of the Company under the Indenture
and the Convertible Junior Subordinated Debentures, no default or Event of
Default shall exist immediately after the transaction, and the surviving
corporation or such person is a corporation, partnership or trust organized and
validly existing under the laws of the United States of America, any state
thereof or the District of Columbia.
EVENTS OF DEFAULT
The Indenture also provides that any one or more of the following
described events, which has occurred and is continuing, constitutes an "Event
of Default" with respect to the applicable Convertible Junior Subordinated
Debentures: (i) failure for 30 days to pay interest on the Convertible Junior
Subordinated Debentures, including any Additional Interest in respect thereof,
when due; or (ii) failure to pay principal of or premium, if any, on the
Convertible Junior Subordinated Debentures when due whether at maturity, upon
redemption, by declaration or otherwise; or (iii) failure by the Company to
deliver shares of Common Stock upon an election by a holder of Convertible
Preferred Securities to convert such Convertible Preferred Securities; or (iv)
failure to observe or perform any other covenant contained in the Indenture for
90 days after notice; or (v) the dissolution, winding up or termination of the
Issuer, except in connection with the distribution of Convertible Junior
Subordinated Debentures to the holders of Convertible Preferred Securities in
liquidation of the Issuer and in connection with certain mergers,
consolidations or amalgamations permitted by the Declaration; or (vi) certain
events in bankruptcy, insolvency or reorganization of the Company.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of a series of the Convertible Junior Subordinated
Debentures may declare the principal of and interest (including any Additional
Interest) on such Convertible Junior Subordinated Debentures due and payable
immediately on the occurrence of an Event of Default; provided, however, that,
after such acceleration, but before a judgment or decree based on acceleration,
the holders of a majority in aggregate principal amount of outstanding
40
Convertible Junior Subordinated Debentures may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the Indenture. For information as to waiver of defaults, see "--Modification of
the Indenture."
Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing and such event is attributable to the failure of the Company to
pay interest or principal on the affected Convertible Junior Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of any redemption, the redemption date), a holder of Convertible
Preferred Securities may institute a Direct Action for payment on or after the
respective due date (or redemption date) specified in the Convertible Junior
Subordinated Debentures. The Company may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
all the holders of Convertible Preferred Securities. Notwithstanding any
payment made to such holder of Convertible Preferred Securities by the Company
in connection with a Direct Action, the Company shall remain obligated to pay
the principal of or interest on the Convertible Junior Subordinated Debentures
held by the Issuer or the Trustee of the Issuer and the Company shall be
subrogated to the rights of the holder of such Convertible Preferred Securities
with respect to payments on the Convertible Preferred Securities to the extent
of any payments made by the Company to such holder in any Direct Action. The
holders of Convertible Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the affected Convertible
Junior Subordinated Debentures.
The Trustee will be the initial holder of the Convertible Junior
Subordinated Debentures. However, whenever Convertible Preferred Securities are
outstanding, the Trustee has agreed not to waive an Event of Default with
respect to the Convertible Junior Subordinated Debentures without the consent
of holders of a majority in aggregate liquidation preference of the affected
Convertible Preferred Securities then outstanding.
A default under any other indebtedness of the Company or any of its
subsidiaries or joint ventures or an Issuer would not constitute an Event of
Default under the Convertible Junior Subordinated Debentures.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee in case an Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request or direction of any
holders of affected Convertible Junior Subordinated Debentures, unless such
holders shall have offered to the Indenture Trustee reasonable indemnity.
Subject to such provisions for the indemnification of the Indenture Trustee,
the holders of a majority in aggregate principal amount of the Convertible
Junior Subordinated Debentures then outstanding will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee, or exercising any trust or power conferred
on the Indenture Trustee.
No holder of any Convertible Junior Subordinated Debenture will have
any right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such holder shall have previously given to the
Indenture Trustee written notice of a continuing Event of Default and, if the
Issuer is not the sole holder of Convertible Junior Subordinated Debentures,
unless the holders of at least 25% in aggregate principal amount of the
affected Convertible Junior Subordinated Debentures then outstanding shall also
have made written request, and offered reasonable indemnity, to the Indenture
Trustee to institute such proceeding as Indenture Trustee, and the Indenture
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Convertible Junior Subordinated Debentures
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a
suit instituted by a holder of a Convertible Junior Subordinated Debenture for
enforcement of payment of the principal of or interest on such Convertible
Junior Subordinated Debenture on or after the respective due dates expressed in
such Convertible Junior Subordinated Debenture.
The holders of a majority in aggregate outstanding principal amount of
all series of the Convertible Junior Subordinated Debentures affected thereby
may, on behalf of the holders of all the Convertible Junior Subordinated
Debentures of such series, waive any past default, except a default in the
payment of principal, premium, if any, or interest. The Company is required to
file annually with the Indenture Trustee and the
41
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants under the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Indenture Trustee, with the consent of the holders of not less than a majority
in principal amount of the affected Convertible Junior Subordinated Debentures,
to modify the Indenture or any supplemental indenture, provided that no such
modification may, without the consent of the holder of each outstanding
Convertible Junior Subordinated Debenture affected thereby, (i) extend the
fixed maturity of any Convertible Junior Subordinated Debentures of any series,
or reduce the principal amount thereof, or reduce the rate or extend the time
of payment of interest thereon, or reduce any premium payable upon the
redemption thereof, or adversely affect the right to convert Convertible Junior
Subordinated Debentures, without the consent of the holder of each Convertible
Junior Subordinated Debenture so affected, or (ii) reduce the percentage of
Convertible Junior Subordinated Debentures, the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of each Convertible Junior Subordinated Debenture then outstanding and
affected thereby.
In addition, the Company and the Indenture Trustee may execute,
without the consent of any holder of Convertible Junior Subordinated
Debentures, any supplemental indenture to cure any ambiguities, comply with the
Trust Indenture Act and for certain other customary purposes.
SETOFF
Notwithstanding anything contained to the contrary in the Indenture,
the Company will have the right to set off any payment with respect to the
Convertible Junior Subordinated Debentures it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under an applicable
Guarantee.
GOVERNING LAW
The Indenture and the Convertible Junior Subordinated Debentures will
be governed by, and construed in accordance with, the laws of the State of New
York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, has undertaken to perform
only such duties as are specifically set forth in the Indenture and, after
default, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provision,
the Indenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Convertible
Junior Subordinated Debentures, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Indenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its
duties if the Indenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
42
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES
As set forth in each Declaration, the sole purpose of each Issuer is
to issue the Trust Securities and use the proceeds thereof to purchase from the
Company the Convertible Junior Subordinated Debentures.
As long as payments of interest and other payments are made when due
on the Convertible Junior Subordinated Debentures, such payments will be
sufficient to cover distributions and payments due on the Convertible Preferred
Securities primarily because (i) the aggregate principal amount of Convertible
Junior Subordinated Debentures will be equal to the sum of the aggregate stated
liquidation preference of the Convertible Preferred Securities and the Common
Securities; (ii) the interest rate and interest and other payment dates on the
Convertible Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Convertible Preferred Securities;
(iii) the Indenture provides that the Company, as originator, shall pay for
all, and each Issuer shall not be obligated to pay, directly or indirectly, for
any costs and expenses of such Issuer; and (iv) each Declaration provides that
the holders of Common Securities and the Issuer Trustees shall not cause or
permit each Issuer to, among other things, engage, in any activity that is not
consistent with the purposes of such Issuer.
If an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest or principal on
the Convertible Junior Subordinated Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a holder of Convertible Preferred Securities may institute a Direct
Action against the Company for payment on or after the respective due date for
payment (or redemption date). In addition, if the Trustee fails to enforce its
rights under the Convertible Junior Subordinated Debentures (other than rights
arising from a Declaration Event of Default described in the immediately
preceding sentence) after any holder of Preferred Securities shall have made a
written request to the Trustee to enforce such rights, such holder of
Convertible Preferred Securities may, to the fullest extent permitted by law,
thereafter institute a Direct Action to enforce the Trustee's rights as holder
of the Convertible Junior Subordinated Debentures, without first instituting
any legal proceeding against the Trustee or any other person.
Payments of distributions and other payments due on the Convertible
Preferred Securities out of moneys held by each Issuer are guaranteed by the
Company to the extent set forth under "Description of the Guarantees." If the
Company fails to make payments under a Guarantee, a holder of any of the
applicable Convertible Preferred Securities may institute a Direct Action
against the Company to enforce its rights under the Guarantee.
43
PLAN OF DISTRIBUTION
The Company may sell the Convertible Junior Subordinated Debentures
and the Issuers may sell the Convertible Preferred Securities in any of the
following ways (or in any combination thereof): (i) through underwriters or
dealers; (ii) directly to a limited number of purchasers or to a single
purchaser; or (iii) through agents. The Prospectus Supplement with respect to
any Offered Securities will set forth the terms of the offering of such Offered
Securities, including the name or names of any underwriters, dealers or agents
and the respective amounts of such Offered Securities underwritten or purchased
by each of them, the initial public offering price of such Offered Securities
and the proceeds to the Company from such sale, any discounts, commissions or
other items constituting compensation from the Company and any discounts,
commissions or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such Offered Securities may be listed.
If underwriters are used in the sale of any Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Such Offered Securities may be either offered
to the public through underwriting syndicates represented by managing
underwriters, or directly by underwriters.
Offered Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will
authorize underwriters, dealers or agents to solicit offers by certain
purchasers to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those conditions set forth
in the Prospectus Supplement.
Agents, dealers and underwriters may be entitled under agreements
entered into with the Company to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof.
LEGAL MATTERS
Unless otherwise indicated in an applicable Prospectus Supplement, the
validity of the Convertible Junior Subordinated Debentures, the Guarantees and
any Common Stock issuable upon conversion of such Convertible Junior
Subordinated Debentures will be passed upon for the Company and the respective
Issuers by Steven A. McArthur, Senior Vice President and General Counsel of the
Company, and by Willkie Farr & Gallagher. Certain matters of Delaware law
relating to the validity of the Convertible Preferred Securities will be passed
upon for the Issuers by Morris, Nichols, Arsht & Tunnell. As of August 31,
1997, Mr. McArthur beneficially owned 123,542 shares of Common Stock.
EXPERTS
The consolidated financial statements and financial statement
schedules of the Company and its subsidiaries incorporated by reference in this
Registration Statement by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports which are incorporated
herein by reference, and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
44
With respect to the Company's unaudited interim financial information
for the periods ended March 31, 1997 and 1996 and June 30, 1997 and 1996,
incorporated herein by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June
30, 1997, and incorporated by reference herein, they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act for their reports on the unaudited interim financial information because
those reports are not "reports" or a "part" of the Registration Statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Securities Act.
The consolidated financial statements of Northern Electric plc as of
March 31, 1996 and 1995, and for each of the three years in the period ended
March 31, 1996, appearing in the Company's Report on Form 8-K/A dated February
18, 1997, have been audited by Ernst & Young, chartered accountants, as stated
in their report which is included therein and incorporated herein by reference.
Such financial statements have been incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
With respect to Northern's unaudited condensed consolidated financial
statements at September 30, 1996, and for the six months ended September 30,
1996 and 1995, incorporated by reference in this Prospectus, Ernst & Young
chartered accountants have reported that they have applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate report, included in the Company's Current Report on
Form 8-K/A dated February 18, 1997, and incorporated herein by reference,
states that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. Ernst & Young are not subject to the
liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated statements of operations, changes in stockholders'
equity, and cash flows of Magma Power Company, and subsidiaries for the year
ended December 31, 1994, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
45
==============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY ISSUER OR ANY OF THEIR
AGENTS. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN CONVERTIBLE
OFFER TO SELL OR A SOLICITATION OF AN PREFERRED SECURITIES
OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH CALENERGY CAPITAL TRUST IV
JURISDICTION. NEITHER THE DELIVERY OF CALENERGY CAPITAL TRUST V
THIS PROSPECTUS NOR ANY PROSPECTUS CALENERGY CAPITAL TRUST VI
SUPPLEMENT NOR ANY SALE MADE HEREUNDER
OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN OR
THEREUNDER IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF
OR THAT THERE HAS BEEN NO CHANGE IN THE GUARANTEED TO THE EXTENT
AFFAIRS OF THE COMPANY OR ANY ISSUER SET FORTH HEREIN BY
SINCE SUCH DATE. AND CONVERTIBLE INTO
COMMON STOCK OF
--------------------
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION...............................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....4 [LOGO]
RISK FACTORS........................................5
THE ISSUERS........................................15
THE COMPANY........................................16
RATIO OF EARNINGS TO FIXED CHARGES.................17
ACCOUNTING TREATMENT...............................17
USE OF PROCEEDS....................................17 CALENERGY COMPANY, INC.
DESCRIPTION OF THE CONVERTIBLE PREFERRED
SECURITIES........................................18
DESCRIPTION OF THE GUARANTEES......................32
DESCRIPTION OF THE CONVERTIBLE JUNIOR SUBORDINATED
DEBENTURES........................................35
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE
JUNIOR SUBORDINATED DEBENTURES AND THE
GUARANTEES........................................43
PLAN OF DISTRIBUTION...............................44
LEGAL MATTERS......................................44 PROSPECTUS
EXPERTS............................................44
===============================================================================
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses in connection with the
distribution of the securities being registered hereunder, other than
underwriting discounts and commissions.
AMOUNT
SEC registration fee.......................................... $454,545
Printing, shipping and engraving expenses..................... 350,000
Legal fees and expenses....................................... 500,000
Accounting fees and expenses.................................. 100,000
Transfer Agent, Registrar and trustee fees and expenses....... 50,000
Miscellaneous expenses........................................ 245,455
----------
Total.................................................... $1,700,000
==========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
THE COMPANY
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") grants each corporation organized thereunder, such as the Company,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Article EIGHTH of the Company's Restated Certificate of
Incorporation and Article V of the Company's By-Laws provides for
indemnification of directors and officers of the Company to the extent
permitted by the DGCL. Article V of the Company's By-Laws further provides that
the Registrant may enter into contracts providing indemnification to the full
extent authorized or permitted by the DGCL and that the Company may create a
trust fund, grant a security interest and/or use other means to ensure the
payment of such amounts as may become necessary to effect indemnification
pursuant to such contracts or otherwise.
Section 102(b)(7) of the DGCL permits a provision in the certificate
of incorporation of each corporation organized thereunder, such as the Company,
eliminating or limiting, with certain exceptions, the personal liability of a
director to the corporation or its stockholders for monetary damages for
certain breaches of fiduciary duty as a director. Article EIGHTH of the
Company's Restated Certificate of Incorporation eliminates the personal
liability of directors to the full extent permitted by the DGCL.
The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the DGCL, Article EIGHTH of the Company's
Restated Certificate of Incorporation and Article V of the Company's By-Laws.
Section 145 of the DGCL empowers a Delaware corporation to indemnify
any persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was an officer
or director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
II-1
provided that such officer or director acted in good faith and in a manner
reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe
his conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation
in the performance of his duty. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
THE TRUSTS
The Declaration of Trust for each of the Issuers (the "Declaration")
provides that no Trustee, affiliate of any Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agent of the
relevant Issuer, or any employee or agent of the Issuer or its affiliates (each
an "Indemnified Person") shall be liable, responsible or accountable in damages
or otherwise to an Issuer or any employee or agent of the trust or its
affiliates for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by the such Indemnified Person in good faith on
behalf of an Issuer and in a manner such Indemnified Person reasonably believed
to be within the scope of the authority conferred on such Indemnified Person by
the Declaration 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 gross negligence (or, in the case of the Trustee, negligence) or
willful misconduct with respect to such act or omissions. The Declaration also
provides that to the fullest extent permitted by applicable law, the Company
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of an Issuer and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person by the
Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case of the
Trustee, negligence) or willful misconduct with respect to such acts or
omissions. The Declaration further provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
or 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 for the underlying cause of action as authorized by the
Declaration. The directors and officers of the Company and the Trustees are
covered by insurance policies indemnifying them against certain liabilities,
including certain liabilities arising under the Securities Act of 1933, as
amended, which might be incurred by them in such capacities and against which
they cannot be indemnified by the Company or an Issuer.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
The following exhibits are filed as part of this Registration
Statement:
Exhibit No. Description
- ----------- -----------
1.1 Form of Underwriting Agreement (Common Stock, Preferred
Stock and Debt Securities)
1.2 Form of Underwriting Agreement (Preferred Securities)
4.1 Form of Senior Debt Securities Indenture
4.2 Form of Subordinated Debt Securities Indenture*
4.3 Form of Convertible Junior Subordinated Debentures
Indenture
4.4 Declaration of Trust of CalEnergy Capital Trust VI
4.5 Certificate of Trust of CalEnergy Capital Trust VI
4.6 Declaration of Trust of CalEnergy Capital Trust IV
II-2
4.7 Certificate of Trust of CalEnergy Capital Trust IV***
4.8 Declaration of Trust of CalEnergy Capital Trust V
4.9 Certificate of Trust of CalEnergy Capital Trust V***
4.10 Form of Amended and Restated Declaration of Trust for each
of CalEnergy Capital Trust IV, CalEnergy Capital Trust V
and CalEnergy Capital Trust VI
4.11 Form of Convertible Preferred Securities***
4.12 Form of Common Securities Certificate
4.13 Form of Junior Subordinated Debentures
4.14 Form of Convertible Preferred Securities Guarantee
Agreement with respect to Convertible Preferred Securities
4.15 Form of Common Securities Guarantee
4.16 Form of CalEnergy Company, Inc. Common Stock Certificate**
5.1 Opinion of Willkie Farr & Gallagher
5.2 Opinion of Steven A. McArthur, General Counsel of
CalEnergy Company, Inc.
5.3 Opinion of Morris, Nichols, Arsht & Tunnell
12.1 Statement re: Computation of ratio of earnings to fixed
charges
15.1 Letter of Deloitte & Touche LLP, regarding unaudited
financial information.
15.2 Letter of Ernst & Young, chartered accountants, regarding
unaudited financial information
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ernst & Young
23.3 Consent of Coopers & Lybrand LLP
23.4 Consent of Willkie Farr & Gallagher (included as part of
Exhibits 5.1 and 8.1)
23.5 Consent of Steven A. McArthur, General Counsel of
CalEnergy Company, Inc. (included as part of Exhibit 5.2)
23.6 Consent of Morris, Nichols, Arsht & Tunnell (included as
part of Exhibit 5.3)
24.1 Powers of Attorney for the Company (included on the
signature page of this Registration Statement)***
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of IBJ Schroder Bank & Trust Company, as
Trustee under the Senior Debt Securities Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Subordinated Debt Securities Indenture***
25.3 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Convertible Junior Subordinated Debentures
Indenture***
25.4 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
with respect to the Amended and Restated Declarations of
Trust of CalEnergy Capital Trust IV, CalEnergy Capital
Trust V and CalEnergy Capital Trust VI
25.5 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Convertible Preferred Securities Guarantee of
the Company with respect to the Convertible Preferred
Securities of CalEnergy Capital Trust VI
25.6 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
with respect to the Convertible Preferred Securities
Guarantee of the Company with respect to the Preferred
Securities of CalEnergy Capital Trust IV***
25.7 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Convertible Preferred Securities Guarantee of the
Company with respect to the Convertible Preferred
Securities of CalEnergy Capital Trust V***
- --------------------------
* To be filed by amendment.
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
*** Previously filed.
II-3
B. Financial Statements and Schedules
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements and schedules of CalEnergy Company, Inc.
included in its Annual Report on Form 10-K for the year ended December 31,
1996.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act").
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Securities and Exchange
Commission ("SEC") by such registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the provisions described in Item 15 or otherwise,
the Registrant has been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with
the securities being
II-4
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the SEC under Section
305(b)(2) of the Trust Indenture Act.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CalEnergy
Company, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska, on September 18,
1997.
CALENERGY COMPANY, INC.
By: /s/ David L. Sokol
---------------------------------
David L. Sokol
Chairman of the Board and
Chief Executive Officer
Signature Title Date
- ---------------------------------------------------------------------------------------------------------
/s/ David L. Sokol Chairman of the Board and September 18, 1997
- ------------------------------------- Chief Executive Officer
David L. Sokol (principal executive officer)
/s/ Craig M. Hammett Vice President and September 18, 1997
- ------------------------------------- Chief Financial Officer
Craig M. Hammett (principal financial officer)
/s/ Gregory E. Abel Chief Accounting Officer September 18, 1997
- -------------------------------------
Gregory E. Abel
* Director September 18, 1997
- -------------------------------------
Edgar D. Aronson
* Director September 18, 1997
- -------------------------------------
Judith E. Ayres
* Director September 18, 1997
- -------------------------------------
Richard K. Davidson
Director September 18, 1997
- ------------------------------------
David H. Dewhurst
* Director September 18, 1997
- -------------------------------------
Richard R. Jaros
Director September 18, 1997
- -------------------------------------
David R. Morris
* Director September 18, 1997
- -------------------------------------
Bernard W. Reznick
* Director September 18, 1997
- -------------------------------------
Walter Scott, Jr.
* Director September 18, 1997
- -------------------------------------
John R. Shiner
Director September 18, 1997
- -------------------------------------
Neville G. Trotter
* Director September 18, 1997
- -------------------------------------
David E. Wit
II-6
By: */s/ Steven A. McArthur
- -------------------------------------
Steven A. McArthur
Attorney-in-fact
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended. CalEnergy Capital Trust IV certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Omaha, State of
Nebraska, on September 18, 1997.
CALENERGY CAPITAL TRUST IV
By: /s/ Steven A. McArthur
----------------------------------
Steven A. McArthur
Trustee
By: /s/ Craig M. Hammett
----------------------------------
Craig M. Hammett
Trustee
By: /s/ Gregory E. Abel
----------------------------------
Gregory E. Abel
Trustee
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, CalEnergy Capital Trust V certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Omaha, State of
Nebraska, on September 18, 1997.
CALENERGY CAPITAL TRUST V
By: /s/ Steven A. McArthur
-------------------------------
Steven A. McArthur
Trustee
By: /s/ Craig M. Hammett
-------------------------------
Craig M. Hammett
Trustee
By: /s/ Gregory E. Abel
-------------------------------
Gregory E. Abel
Trustee
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, CalEnergy Capital Trust VI certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Omaha, State of
Nebraska, on September 18, 1997.
CALENERGY CAPITAL TRUST VI
By: /s/ Steven A. McArthur
-------------------------------
Steven A. McArthur
Trustee
By: /s/ Craig M. Hammett
-------------------------------
Craig M. Hammett
Trustee
By: /s/ Douglas L. Anderson
-------------------------------
Douglas L. Anderson
Trustee
II-10
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1.1 Form of Underwriting Agreement (Common Stock, Preferred
Stock and Debt Securities)
1.2 Form of Underwriting Agreement (Preferred Securities)
4.1 Form of Senior Debt Securities Indenture
4.2 Form of Subordinated Debt Securities Indenture*
4.3 Form of Convertible Junior Subordinated Debentures
Indenture
4.4 Declaration of Trust of CalEnergy Capital Trust VI
4.5 Certificate of Trust of CalEnergy Capital Trust VI
4.6 Declaration of Trust of CalEnergy Capital Trust IV
4.7 Certificate of Trust of CalEnergy Capital Trust IV***
4.8 Declaration of Trust of CalEnergy Capital Trust V
4.9 Certificate of Trust of CalEnergy Capital Trust V***
4.10 Form of Amended and Restated Declaration of Trust for each
of CalEnergy Capital Trust IV, CalEnergy Capital Trust V
and CalEnergy Capital Trust VI
4.11 Form of Convertible Preferred Securities***
4.12 Form of Common Securities Certificate
4.13 Form of Junior Subordinated Debentures
4.14 Form of Convertible Preferred Securities Guarantee
Agreement with respect to Convertible Preferred Securities
4.15 Form of Common Securities Guarantee
4.16 Form of CalEnergy Company, Inc. Common Stock Certificate**
5.1 Opinion of Willkie Farr & Gallagher
5.2 Opinion of Steven A. McArthur, General Counsel of
CalEnergy Company, Inc.
5.3 Opinion of Morris, Nichols, Arsht & Tunnell
12.1 Statement re: Computation of ratio of earnings to fixed
charges
15.1 Letter of Deloitte & Touche LLP, regarding unaudited
financial information.
15.2 Letter of Ernst & Young, chartered accountants, regarding
unaudited financial information
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ernst & Young
23.3 Consent of Coopers & Lybrand LLP
23.4 Consent of Willkie Farr & Gallagher (included as part of
Exhibits 5.1 and 8.1)
23.5 Consent of Steven A. McArthur, General Counsel of
CalEnergy Company, Inc. (included as part of Exhibit 5.2)
23.6 Consent of Morris, Nichols, Arsht & Tunnell (included as
part of Exhibit 5.3)
24.1 Powers of Attorney for the Company (included on the
signature page of this Registration Statement)***
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of IBJ Schroder Bank & Trust Company, as
Trustee under the Senior Debt Securities Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Subordinated Debt Securities Indenture***
25.3 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Convertible Junior Subordinated Debentures
Indenture***
25.4 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
with respect to the Amended and Restated Declarations of
Trust of CalEnergy Capital Trust IV, CalEnergy Capital
Trust V and CalEnergy Capital Trust VI
25.5 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Convertible Preferred Securities Guarantee of
the Company with respect to the Convertible Preferred
Securities of CalEnergy Capital Trust VI
25.6 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
with respect to the Convertible Preferred Securities
Guarantee of the Company with respect to the Preferred
Securities of CalEnergy Capital Trust IV***
25.7 Statement of Eligibility under The Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee,
under the Convertible Preferred Securities Guarantee of the
Company with respect to the Convertible Preferred
Securities of CalEnergy Capital Trust V***
- --------------------------
* To be filed by amendment.
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
*** Previously filed.