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FORM OF
AMENDED AND RESTATED DECLARATION
OF TRUST
CALENERGY CAPITAL TRUST ___
Dated as of ________ __, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions............................................... 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.......................... 10
SECTION 2.2 Lists of Holders of Securities............................ 10
SECTION 2.3 Reports by the Property Trustee........................... 11
SECTION 2.4 Periodic Reports to Property Trustee...................... 11
SECTION 2.5 Evidence of Compliance with Conditions Precedent.......... 12
SECTION 2.6 Events of Default; Waiver................................. 12
SECTION 2.7 Event of Default; Notice.................................. 14
ARTICLE III
ORGANIZATION
SECTION 3.1 Name...................................................... 15
SECTION 3.2 Office.................................................... 15
SECTION 3.3 Purpose................................................... 15
SECTION 3.4 Authority................................................. 16
SECTION 3.5 Title to Property of the Trust............................ 16
SECTION 3.6 Powers and Duties of the Regular Trustees................. 17
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees...... 20
SECTION 3.8 Powers and Duties of the Property Trustee................. 21
SECTION 3.9 Certain Duties and Responsibilities of the Property
Trustee................................................... 25
SECTION 3.10 Certain Rights of Property Trustee....................... 27
SECTION 3.11 Delaware Trustee......................................... 30
SECTION 3.12 Not Responsible for Recitals or Issuance of Securities... 30
SECTION 3.13 Duration of Trust........................................ 30
SECTION 3.14 Mergers.................................................. 31
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities................... 33
SECTION 4.2 Responsibilities of the Sponsor........................... 33
ARTICLE V
TRUSTEES
Page
SECTION 5.1 Number of Trustees........................................ 34
SECTION 5.2 Delaware Trustee.......................................... 34
SECTION 5.3 Property Trustee; Eligibility............................. 35
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally................................................. 36
SECTION 5.5 Initial Trustees.......................................... 36
SECTION 5.6 Appointment, Removal and Resignation of Trustees.......... 37
SECTION 5.7 Vacancies among Trustees.................................. 39
SECTION 5.8 Effect of Vacancies....................................... 39
SECTION 5.9 Meetings.................................................. 39
SECTION 5.10 Delegation of Power...................................... 40
SECTION 5.11 Merger, Conversion, Consolidation or Succession to
Business................................................. 41
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions............................................. 41
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities................... 41
SECTION 7.2 Execution and Authentication.............................. 42
SECTION 7.3 Form and Dating........................................... 43
SECTION 7.4 Registrar, Paying Agent and Conversion Agent.............. 44
.............................................................. 45
SECTION 7.6 Replacement Securities.................................... 45
SECTION 7.7 Outstanding Preferred Securities.......................... 46
SECTION 7.8 Preferred Securities...................................... 46
SECTION 7.9 Temporary Securities...................................... 46
SECTION 7.10 Cancellation............................................. 47
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust...................... 47
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General................................................... 49
SECTION 9.2 Transfer of Securities.................................... 50
SECTION 9.3 Deemed Security Holders................................... 52
SECTION 9.4 Book Entry Interests...................................... 53
SECTION 9.5 Notices to Clearing Agency................................ 53
SECTION 9.6 Appointment of Successor Clearing Agency.................. 54
SECTION 9.7 Definitive Preferred Security Certificates................ 54
Page
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability................................................ 55
SECTION 10.2 Exculpation.............................................. 55
SECTION 10.3 Fiduciary Duty........................................... 56
SECTION 10.4 Indemnification.......................................... 57
SECTION 10.5 Outside Businesses....................................... 61
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.............................................. 62
SECTION 11.2 Certain Accounting Matters............................... 62
SECTION 11.3 Banking.................................................. 63
SECTION 11.4 Withholding.............................................. 63
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments............................................... 64
SECTION 12.2 Meetings of the Holders of Securities; Action by
Written Consent.......................................... 67
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee....... 69
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.................................................. 71
SECTION 14.2 Governing Law............................................ 72
SECTION 14.3 Intention of the Parties................................. 73
SECTION 14.4 Headings................................................. 73
SECTION 14.5 Successors and Assigns................................... 73
SECTION 14.6 Partial Enforceability................................... 73
SECTION 14.7 Counterparts............................................. 74
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
310(a)..................................................... 5.3(a)
310(c)..................................................... Inapplicable
311(c)..................................................... Inapplicable
312(a)..................................................... 2.2(a)
312(b)..................................................... 2.2(b)
313........................................................ 2.3
314(a)..................................................... 2.4
314(b)..................................................... Inapplicable
314(c)..................................................... 2.5
314(d)..................................................... Inapplicable
314(f)..................................................... Inapplicable
315(a)..................................................... 3.9(b)
315(c)..................................................... 3.9(a)
315(d)..................................................... 3.9(a)
316(a)..................................................... Annex I
316(c)..................................................... 3.6(e)
- ---------------
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CALENERGY CAPITAL TRUST ___
________ __, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of ________ __, 1997, by the undersigned trustees (together with
all other Persons from time to time duly appointed and serving as trustees in
accordance with the provisions of this Declaration, the "Trustees"), CalEnergy
Company, Inc., a Delaware corporation, as trust sponsor (the "Sponsor"), and by
the holders, from time to time, of undivided beneficial interests in the Trust
issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established CalEnergy Capital
Trust ___ (the "Trust"), a trust under the Business Trust Act (as defined
herein) pursuant to a Declaration of Trust dated as of ________ __, 1997 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on ________ __, 1997, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures (as defined herein) of the Debenture Issuer (as defined
herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided
beneficial interests in the assets of the Trust issued hereunder, subject to
the provisions of this Declaration.
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ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Additional Interest" means if the Trust is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other taxing authority,
such amounts as shall be required so that the net amounts received and retained
by the Trust after paying such taxes, duties, assessments and governmental
charges will not be less than the amounts the Trust would have received had no
such taxes, duties, assessments or governmental charges been imposed.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
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"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Authorized Officer" of a Person means any Person that is authorized
to bind such Person provided, however that the Authorized Officer signing an
Officer's Certificate given pursuant to section 314(a)(4) of the Trust
Indenture Act shall be the principal executive, financial or accounting officer
of such Person.
"Book Entry Interest" means a beneficial interest in a Global
Preferred Security, ownership and transfers of which shall be maintained and
made through book entries by a Depositary as described in Section 9.4.
"Business Day" means any day other than a day on which banking
institutions in the City of New York or in Wilmington, Delaware are authorized
or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss.3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Certificate" means a certificate in global or definitive form
representing a Common Security or a Preferred Security.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act.
"Closing Date" means ________ __, 1997.
"Code" means the Internal Revenue Code of 1986 as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning set forth in Section 7.1(a).
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
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or (d) any officer, employee or agent of the Trust or its Affiliates.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Conversion Agent" has the meaning set forth in Section 7.4.
"Debenture Issuer" means the Sponsor in its capacity as issuer of the
Debentures.
"Debenture Trustee" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by the
Debenture Issuer under the Indenture to be held by the Property Trustee, a
specimen certificate for such series of Debentures being Exhibit B.
"Definitive Preferred Securities" means any Preferred Securities in
definitive form issued by the Trust.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Depositary" means The Depository Trust Company, the initial Clearing
Agency or any Clearing Agency appointed as successor to The Depository Trust
Company pursuant to Section 9.4.
"Direct Action" has the meaning set forth in Section 3.8(c).
"Distribution" means a distribution payable to Holders of Securities
in accordance with Section 6.1.
"Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) has occurred and is continuing in respect
of the Debentures.
5
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Preferred Security" has the meaning set forth in Section 9.4.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Indenture" means the Indenture, dated as of ________ __, 1997,
between the Debenture Issuer and the Debenture Trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in the terms of
the Securities as set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"List of Holders" has the meaning set forth in Section 2.2(a).
"Majority in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities or by the Trust Indenture
Act, Holder(s) of outstanding Securities voting together as a single class or,
6
as the context may require, Holders of outstanding Preferred Securities or
Holders of outstanding Common Securities voting separately as a class, who are
the record owners of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the
relevant class.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that the officer signing the Certificate has read the
covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken upon which the statements or opinions
contained in such Certificate are based;
(c) a statement that, in such officer's opinion, such officer has
made or caused to be made such examination or investigation as is
necessary to enable such officer to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Participants" means members of, or participants in, the Depositary.
"Paying Agent" has the meaning set forth in Section 7.4.
7
"Payment Amount" has the meaning set forth in Section 6.1.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Securities" has the meaning set forth in Section 7.1(a).
"Preferred Securities Guarantee" means the guarantee agreement dated
as of ________ __, 1997, of the Sponsor in respect of the Preferred Securities.
"Preferred Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant
or as an indirect participant, in each case in accordance with the rules of
such Depositary).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in Section
3.8(c).
"Quorum" means a majority of the Regular Trustees or, if there are
only two Regular Trustees, both of them.
"Registration Statement" has the meaning set forth in Section 3.6(b).
"Registrar" has the meaning set forth in Section 7.4.
"Regular Trustee" means any Trustee other than the Property Trustee
and the Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or
8
indirectly, 100% of the outstanding voting securities of the Sponsor.
"Responsible Officer" means, with respect to the Property Trustee, any
vice-president, any assistant vice-president, the treasurer, any assistant
treasurer, any trust officer or assistant trust officer or any other officer in
the Corporate Trust Department of the Property Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from
time to time or any successor legislation.
"Securities Custodian" means the custodian with respect to the Global
Preferred Security and any other Preferred Security in global form.
"Sponsor" means CalEnergy Company, Inc., a Delaware corporation, or
any successor entity in a merger, consolidation or amalgamation, in its
capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning set forth in Section
5.6(c).
"Successor Entity" has the meaning set forth in Section 3.14(b)(i).
"Successor Property Trustee" has the meaning set forth in Section
5.6(b).
"Successor Securities" has the meaning set forth in Section
3.14(b)(i)(B).
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
9
"Tax Event" means that the Debenture Issuer shall have obtained an
opinion of nationally recognized independent tax counsel (reasonably acceptable
to the Regular 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 __________,
1997), which amendment or change is effective, is enacted or which
interpretation or pronouncement is announced on or after __________, 1997
(collectively, a "Change In Tax Law"), there is more than an insubstantial risk
that (i) the Trust is or will be subject to United States federal income tax
with respect to interest received on the Debentures, (ii) interest payable to
the Trust on the Debentures is not or will not be deductible for United States
federal income tax purposes or (iii) the Trust 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. Notwithstanding anything in the previous sentence to
the contrary, a Tax Event shall not include any Change in Tax Law that requires
the Debenture Issuer for United States federal income tax purposes to defer
taking a deduction for any original issue discount ("OID") that accrues with
respect to the Debentures until the interest payment related to such OID is
paid by the Debenture Issuer in money; provided, that such Change in Tax Law
does not create more than an insubstantial risk that the Debenture Issuer will
be prevented from taking a deduction for OID accruing with respect to the
Debentures at a date that is no later than the date the interest payment
related to such OID is actually paid by the Debenture Issuer in money.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
10
"Trust" means CalEnergy Capital Trust ___, a trust created under the
Business Trust Act.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
"Underwriting Agreement" shall have the meaning set forth in Section
7.3.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration, which are
incorporated by reference in and made part of this Declaration and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by ss.ss. 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
11
(a) Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide the Property Trustee (i) within 14 days after each record
date for payment of Distributions, a list, in such form as the Property Trustee
may reasonably require, of the names and addresses of the Holders of the
Securities ("List of Holders") as of such record date, provided that neither
the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated
to provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Property Trustee by the
Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request from the
Property Trustee for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Property Trustee. The Property Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity) provided that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under
ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year, commencing ______ __, ____,
the Property Trustee shall provide to the Holders of the Preferred Securities
such reports as are required by ss. 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by ss. 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of ss. 313(d) of the
Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information
as required by ss. 314 of the Trust Indenture Act (if any) and the compliance
certificate required by ss. 314 of the Trust Indenture Act in the form, in the
manner and at the times required by ss. 314 of the Trust Indenture Act.
12
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to ss.
314(c)(1) may be given in the form of an Officer's Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures (a "Super Majority")
to be waived under the Indenture, the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Preferred Securities that
the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of
ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the
Preferred Securities or impair any right consequent thereon. Any waiver by the
Holders of
13
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders
of the Common Securities are deemed to have waived such Event of
Default under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed
to have waived such Event of Default under the Declaration as provided
below in this Section 2.6(b), the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least
the proportion in liquidation amount of the Common Securities that the
relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated,
and until such Events of Default have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf
of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of
14
the Trust Indenture Act are hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act. Subject to the
foregoing provisions of this Section 2.6(b), upon such waiver, any such default
shall cease to exist and any Event of Default with respect to the Common
Securities arising therefrom shall be deemed to have been cured for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other default or Event of Default with respect to the Common Securities or
impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu
of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all defaults with respect to the
Securities actually known to a Responsible Officer of the Property Trustee,
unless such defaults have been cured before the giving of such notice (the term
"defaults" for the purposes of this Section 2.7(a) being hereby defined to be
an Event of Default as defined in the Indenture, not including any periods of
grace provided for therein and irrespective of the giving of any notice
provided therein); provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures or in
the payment of any sinking fund installment established for the Debentures, the
Property Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers of the Property Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
default except:
15
(i) a default under Sections 501(1) and 501(2) of the Indenture;
or
(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer of the
Property Trustee charged with the administration of the Declaration
shall have actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "CalEnergy Capital Trust ___," as such name may be
modified from time to time by the Regular Trustees following written notice to
the Holders of Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o CalEnergy
Company, Inc., 302 South 36th Street, Suite 400, Omaha, Nebraska 68131,
Attention: Chief Financial Officer, with a copy to: General Counsel. On 10
Business Days written notice to the Holders of Securities, the Regular Trustees
may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities and use the proceeds from such sale to acquire the Debentures,
and (b) except as otherwise limited herein, to engage in only those other
activities necessary or incidental thereto. The Trust shall not borrow money,
issue debt or reinvest proceeds derived from investments, pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income tax
purposes as a grantor trust.
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SECTION 3.4 Authority.
(a) Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
(b) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may
be exercised by, or with the consent of, any one such Regular Trustee.
(c) Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which the
Regular Trustees have the power and authority to cause the Trust to execute
pursuant to Section 3.6, provided, that the registration statement referred to
in Section 3.6, including any amendments thereto, shall be signed by a majority
of the Regular Trustees; and
(d) a Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Regular Trustees
have power and authority to cause the Trust to execute pursuant to Section 3.6.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of the Trust shall be vested in the Trust. The
17
Holders shall not have legal title to any part of the assets of the Trust, but
shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more
than one series of Common Securities, and, provided further, that there shall
be no interests in the Trust other than the Securities, and the issuance of
Securities shall be limited to simultaneous issuance of both Preferred
Securities and Common Securities on the Closing Date and any other date
Preferred Securities and Common Securities are sold pursuant to the
over-allotment option granted in the Underwriting Agreement;
(b) in connection with the issue and sale of the Preferred Securities,
at the direction of the Sponsor, to:
(i) execute and file with the Commission a registration statement
filed on Form S-3 (the "Registration Statement") prepared by the
Sponsor, including any amendments thereto in relation to the Preferred
Securities;
(ii) execute and file any documents prepared by the Sponsor, or
take any acts as determined by the Sponsor to be necessary in order to
qualify or register all or part of the Preferred Securities in any
State or foreign jurisdiction in which the Sponsor has determined to
qualify or register such Preferred Securities for sale;
(iii) execute and file an application, prepared by the Sponsor,
to the New York Stock Exchange or any other national stock exchange or
the Nasdaq Stock Market's National Market for listing or quotation of
the Preferred Securities;
18
(iv) to execute and deliver letters, documents, or instruments
with the Depositary relating to the Preferred Securities;
(v) execute and file with the Commission, at such time as
determined by the Sponsor, a registration statement on Form 8-A,
including any amendments thereto, prepared by the Sponsor relating to
the registration of the Preferred Securities under Section 12(b) of
the Exchange Act; and
(vi) execute and enter into the Underwriting Agreement and other
related agreements providing for the sale of the Preferred Securities;
(c) to acquire the Debentures with the proceeds of the sale of the
Preferred Securities and the Common Securities; provided, however, that the
Regular Trustees shall cause legal title to the Debentures to be held of record
in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event; provided that the Regular Trustees shall
consult with the Sponsor and the Property Trustee before taking or refraining
from taking any Ministerial Action in relation to a Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of ss.316(c) of the Trust Indenture Act, Distributions,
voting rights, redemptions and exchanges, and to issue relevant notices to the
Holders of Preferred Securities and Holders of Common Securities as to such
actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"),
19
unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power
to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of
any notice received from the Debenture Issuer of its election to defer payments
of interest on the Debentures by extending the interest payment period under
the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust
was created;
(p) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or
20
desirable in carrying out the activities of the Trust as set out in this
Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes;
provided that such action does not materially adversely affect the interests of
Holders; and
(q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust.
The Regular Trustees must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Regular Trustees shall not take any
action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of
the powers or the authority of the Property Trustee set forth in Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this Section
3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including the Property
Trustee) on behalf of the Trust shall not, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust
21
shall not and the Trustees (including the Property Trustee) shall cause the
Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
(vii) other than as provided in this Declaration or Annex I
hereto, (A) direct the time, method and place of exercising any trust
or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under the
Indenture, (C) exercise any right to rescind or annul any declaration
that the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures where such consent shall be required
unless, in the case of each action described in Clause (A), (B), (C)
or (D), the Trust shall have received an opinion of counsel to the
effect that such modification will not cause more than an
insubstantial risk that for United States federal income tax purposes
the Trust will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property
22
Trustee in trust for the benefit of the Holders of the Securities. The right,
title and interest of the Property Trustee to the Debentures shall vest
automatically in each Person who may hereafter be appointed as Property Trustee
in accordance with Section 5.6. Such vesting and cessation of title shall be
effective whether or not conveyancing documents with regard to the Debentures
have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and
under the exclusive control of the Property Trustee on behalf of the
Holders of the Securities and, upon the receipt of payments of funds
made in respect of the Debentures held by the Property Trustee,
deposit such funds into the Property Trustee Account and make payments
to the Holders of the Preferred Securities and Holders of the Common
Securities from the Property Trustee Account in accordance with
Section 6.1. Funds in the Property Trustee Account shall be held
uninvested until disbursed in accordance with this Declaration. The
Property Trustee Account shall be an account that is maintained with a
banking institution the rating on whose long-term unsecured
indebtedness is at least equal to the rating assigned to the Preferred
Securities by a "nationally recognized statistical rating
organization", as that term is defined for purposes of Rule 436(g)(2)
under the Securities Act.
(ii) engage in such ministerial activities as so directed and as
shall be necessary or appropriate to effect the redemption of the
Preferred Securities and the Common Securities to the extent the
Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the Regular
Trustees in accordance with the terms of the Securities, engage in
such ministerial activities as so directed as shall be necessary or
23
appropriate to effect the distribution of the Debentures to Holders of
Securities upon the occurrence of certain special events (as may be
defined in the terms of the Securities) arising from a change in law
or a change in legal interpretation or other specified circumstances
pursuant to the terms of the Securities.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Securities.
(e) The Property Trustee shall take any Legal Action which arises out
of or in connection with an Event of Default of which a Responsible Officer of
the Property Trustee has actual knowledge or the Property Trustee's duties and
obligations under this Declaration or the Trust Indenture Act; provided,
however, that if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Sponsor to pay interest or
principal on the 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 Preferred Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Securities having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Securities. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of Preferred Securities to the extent of any payment made by the
Sponsor to such Holder of Preferred Securities in such Direct Action. In
addition, if the Property Trustee fails to enforce its rights under the
Securities (other than rights arising from an Event of Default described in the
immediately preceding sentence) after any Holder of Preferred Securities shall
have made a written request to the Property Trustee to enforce such rights,
such Holder of Preferred Securities may, to the fullest extent permitted by
law, institute a Direct Action to enforce the Property Trustee's rights as
holder of the Debentures, without first instituting any legal proceeding
against the Property Trustee or any other Person. Except as provided in the
preceding sentences, the Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
24
(f) The Property Trustee shall not resign as a Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of Securities pursuant to
the terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6.
(g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the Indenture
and, if an Event of Default actually known to a Responsible Officer of the
Property Trustee occurs and is continuing, the Property Trustee shall, for the
benefit of Holders of the Securities, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of such
Securities. In no event, however, shall the Property Trustee, in its capacity
as holder of the Debentures, have the power to convert the Debentures.
(h) The Property Trustee will act as Paying Agent and Registrar in New
York to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all securities and any such Paying Agent
shall comply with ss. 317(b) of the Trust Indenture Act. Any Paying Agent may
be removed by the Property Trustee at any time and a successor Paying Agent or
additional Paying Agents may be appointed at any time by the Property Trustee.
(i) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6.
The Property Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.3.
25
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.6) of which a Responsible
Officer of the Property Trustee has actual knowledge, the Property Trustee
shall exercise such of the rights and powers vested in it by this Declaration,
and use the same degree of care and skill in their exercise, as a prudent
individual would exercise or use under the circumstances in the conduct of his
or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Property Trustee shall
be determined solely by the express provisions of this
Declaration and the Property Trustee shall not be liable except
for the performance of such duties and obligations as are
specifically set forth in this Declaration, and no implied
covenants or obligations shall be read into this Declaration
against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Property Trustee and conforming to the requirements of this
Declaration; but in the case of any such certificates or opinions
that by any provision hereof are specifically
26
required to be furnished to the Property Trustee, the
Property Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Declaration or
indemnity reasonably satisfactory to the Property Trustee against such
risk or liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the
Property Trustee Account shall be to deal with such property in a
similar manner as the Property Trustee deals with similar property for
its own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Declaration and
the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of
the Debentures or the
27
payment of any taxes or assessments levied thereon or
in connection therewith;
(vii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in
writing with the Sponsor. Money held by the Property Trustee need not
be segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant
to Section 3.8(c)(i) and except to the extent otherwise required by
law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the Property
Trustee be liable for any default or misconduct of the Regular
Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Regular Trustees
contemplated by this Declaration shall be sufficiently evidenced by an
Officer's Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officer's Certificate which, upon receipt of such
request, shall be promptly delivered by the Sponsor or the Regular
Trustees;
28
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel of its choice
or other experts and the advice or opinion of such counsel and experts
with respect to legal matters or advice within the scope of such
experts' area of expertise shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with such advice or
opinion, such counsel may be counsel to the Sponsor or any of its
Affiliates, and may include any of its employees. The Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Declaration from any court of competent
jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holder, unless such Holder shall
have provided to the Property Trustee adequate security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Property Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by
the Property Trustee provided, that, nothing contained in this Section
3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, security, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Property
Trustee, in its discretion,
29
may make such further inquiry or investigation into such facts or
matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and
the signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder the Property Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in liquidation amount of the Securities
as would be entitled to direct the Property Trustee under the terms of
the Securities in respect of such remedy, right or action, (ii) may
refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be
protected in acting in accordance with such instructions;
(xi) except as otherwise expressly provided by this Declaration,
the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration;
and
(xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it
30
to be authorized or within the discretion or rights or powers
conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Regular Trustees or the Property Trustee described in this Declaration.
Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for
the sole and limited purpose of fulfilling the requirements of ss. 3807 of the
Business Trust Act.
SECTION 3.12 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.13 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of Article
VIII hereof, shall exist until _____________ __, ____.
31
SECTION 3.14 Mergers.
(a) The Trust 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 body, except
as described in Section 3.14(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and without the
consent of the Holders of the Securities, the Delaware Trustee or the Property
Trustee, 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; provided,
that:
(i) if the Trust is not the survivor, such successor entity (the
"Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust
under the Securities; or
(B) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities with respect
to Distributions, assets and payments upon liquidation,
redemption and otherwise;
(ii) the Debenture Issuer expressly acknowledges a trustee of the
Successor Entity that possesses the same powers and duties as the
Property Trustee as the Holder of the Debentures;
(iii) the 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 with any other
organization on which the Preferred Securities are then listed or
quoted;
(iv) such merger, consolidation, amalgamation or replacement does
not cause the Preferred Securities (including any Successor
Securities) to be downgraded
32
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 Preferred Securities (including any Successor
Securities) in any material respect;
(vi) such Successor Entity has a purpose substantially identical
to that of the Trust;
(vii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided
by the Preferred Securities Guarantee; and
(viii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust reasonably acceptable to
the Property Trustee experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or replacement
will not adversely affect the rights, preferences and privileges
of the Holders of the Securities (including any Successor
Securities) in any material respect (other than with respect to
any dilution of the Holders' interest in the new entity);
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be
required to register as an Investment Company; and
(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will be treated
as a grantor trust for United States federal income tax purposes.
(c) Notwithstanding Section 3.14(b), the Trust 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
33
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 the Trust or Successor Entity to be classified as other than a
grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date and on any other date Preferred Securities are
sold pursuant to the over-allotment option granted in the Underwriting
Agreement, the Sponsor will purchase all of the Common Securities issued by the
Trust, in an amount at least equal to 3% of the capital of the Trust, at the
same time as the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities, as applicable:
(a) to prepare for filing by the Trust with the Commission the
Registration Statement, including any amendments thereto;
(b) to determine the States and foreign jurisdictions in which to take
appropriate action to qualify or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions that must be
taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust,
as the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such States and foreign jurisdictions;
(c) to prepare for filing by the Trust an application to the New York
Stock Exchange or any other national stock exchange or the Nasdaq National
Market for listing or quotation of the Preferred Securities;
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(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the
Preferred Securities under Section 12(b) of the Exchange Act, including any
amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement and other
related agreements providing for the sale of the Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders
of the Common Securities;
provided, however, that the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee, the Delaware Trustee, in the
case of a natural person, shall be a person who is a resident of the State of
Delaware or that, if not a natural person, is an entity which has its principal
place of business in the State of Delaware; (2) there shall be at least one
Regular Trustee who is an employee or officer of, or is affiliated with the
Sponsor; and (3) one Trustee shall be the Property Trustee for so long as this
Declaration is required to qualify as an indenture under the Trust Indenture
Act, and such Trustee may also serve as Delaware Trustee if it meets the
applicable requirements.
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
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(a) a natural person who is resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as
Property Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this Section
5.3(a)(ii), the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published; and
(iii) if the Trust is excluded from the definition of an
Investment Company solely by means of Rule 3a-5 and to the extent Rule
3a-5 requires a trustee having certain qualifications to hold title to
the "eligible assets" of the trust, the Property Trustee shall possess
those qualifications.
36
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of ss. 310(b) of the Trust Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be set forth in Section 5.5
hereof.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees shall be:
Steven A. McArthur
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Craig Hammett
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
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Gregory Abel
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
The initial Property Trustee shall be:
The Bank of New York
101 Barclay Street
Corporate Trust Trustee Administration
Floor 21 West
New York, New York 10286
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the Holders
of a Majority in liquidation amount of the Common Securities voting as
a class at a meeting of the Holders of the Common Securities.
(b) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 5.6(a) until a successor Property Trustee possessing
the qualifications to act as Property Trustee under Section 5.3 (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and delivered to
the Regular Trustees and the Sponsor.
(c) The Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.6(a) until
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a successor Trustee possessing the qualifications to act as Delaware Trustee
under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed
and has accepted such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees and
the Sponsor.
(d) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) No such resignation of the Trustee that acts as the Property
Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the
Sponsor and the resigning Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of
the Securities.
(ii) No such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by
such Successor Delaware Trustee and delivered to the Trust, the
Sponsor and the resigning Delaware Trustee.
(e) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.6.
39
(f) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument
of resignation or removal, the Property Trustee or Delaware Trustee resigning
or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees
is increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee
shall not operate to annul the Trust. Whenever a vacancy in the number of
Regular Trustees shall occur, until such vacancy is filled by the appointment
of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in
office, regardless of their number, shall have all the powers granted to the
Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to
40
time upon the call of any Regular Trustee. Regular meetings of the Regular
Trustees may be held at a time and place fixed by resolution of the Regular
Trustees. Notice of any meetings of the Regular Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile or
overnight courier) not less than 24 hours before such meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration, any
action of the Regular Trustees may be taken at a meeting by vote of a majority
of the Regular Trustees present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided that a Quorum is
present, or without a meeting by the unanimous written consent of the Regular
Trustees. In the event there is only one Regular Trustee, any and all action of
such Regular Trustee shall be evidenced by a written consent of such Regular
Trustee.
SECTION 5.10 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
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SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Property Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Property Trustee or
the Delaware Trustee, as the case may be, hereunder, provided such Person shall
be otherwise qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions (as defined herein) in accordance
with the applicable terms of the relevant Holder's Securities. Distributions
shall be made on the Preferred Securities and the Common Securities in
accordance with the preferences set forth in their respective terms. If and to
the extent that the Debenture Issuer makes a payment of interest (including
Compounded Interest (as defined in the Indenture), and Additional Interest),
premium and/or principal on the Debentures held by the Property Trustee (the
amount of any such payment being a "Payment Amount"), the Property Trustee
shall and is directed, to the extent funds are available for that purpose, to
make a distribution (a "Distribution") of the Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
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(a) The Regular Trustees shall on behalf of the Trust issue one class
of convertible preferred securities, representing undivided beneficial
interests in the assets of the Trust (the "Preferred Securities"), having such
terms (the "Terms") as are set forth in Annex I and one class of convertible
common securities, representing undivided beneficial interests in the assets of
the Trust (the "Common Securities"), having such terms as are set forth in
Annex I. The Trust shall issue no securities or other interests in the assets
of the Trust other than the Preferred Securities and the Common Securities. The
Trust shall issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and nonassessable.
(d) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by
a Regular Trustee. In case any Regular Trustee of the Trust who shall have
signed any of the Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such Securities
nevertheless may be delivered as though the person who signed such Securities
had not ceased to be such Regular Trustee; and any Securities may be signed on
behalf of the Trust by such persons who, at the actual date of execution of
such Security, shall be the Regular Trustees of the Trust, although at the date
of the execution and delivery of the Declaration any such person was not such a
Regular Trustee.
(b) One Regular Trustee shall sign the Preferred Securities
for the Trust by manual or facsimile signature. Unless otherwise determined by
the Trust, such signature
43
shall, in the case of Common Securities, be a manual signature.
A Preferred Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular Trustee, the
Property Trustee shall authenticate the Preferred Securities for original issue
by executing the Property Trustee's certificate of authentication contained in
the Preferred Securities. The aggregate number of Preferred Securities
outstanding at any time shall not exceed the number set forth in the Terms in
Annex I hereto except as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee to deal with the Sponsor or an Affiliate.
SECTION 7.3 Form and Dating.
The Preferred Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities shall be substantially in the form of Exhibit A-2, each of which is
hereby incorporated in and expressly made a part of this Declaration.
Securities may be printed, lithographed or engraved or may be produced in any
other manner as is reasonably acceptable to the Regular Trustees, as evidenced
by their execution thereof. The Securities may have letters, numbers, notations
or other marks of identification or designation and such legends or
endorsements required by law, stock exchange rule, agreements to which the
Trust is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Trust). The Trust at the direction
of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to
the Property Trustee in writing. Each Preferred Security shall be dated the
date of its authenti-
44
cation. The terms and provisions of the Securities set forth in Annex I and the
forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of
this Declaration and to the extent applicable, the Property Trustee and the
Sponsor, by their execution and delivery of this Declaration, expressly agree
to such terms and provisions and to be bound thereby.
The Preferred Securities are being offered and sold by the Trust
pursuant to an Underwriting Agreement relating to the Preferred Securities,
dated ________ __, 1997, among the Trust, the Sponsor and the underwriters
named therein (the "Underwriting Agreement").
SECTION 7.4 Registrar, Paying Agent and Conversion Agent.
The Trust shall maintain in the Borough of Manhattan, City of New
York, State of New York, (i) an office or agency where Preferred Securities may
be presented for registration of transfer or for exchange ("Registrar"), (ii)
an office or agency where Preferred Securities may be presented for payment
("Paying Agent") and an office or agency where Securities may be presented for
conversion ("Conversion Agent"). The Registrar shall keep a register of the
Preferred Securities and of their transfer and exchange. The Trust may appoint
the Registrar, the Paying Agent and the Conversion Agent and may appoint one or
more co-registrars, one or more additional paying agents and one or more
additional conversion agents in such other locations as it shall determine. The
term "Paying Agent" includes any additional paying agent and the term
"Conversion Agent" includes any additional conversion agent. The Trust may
change any Paying Agent, Registrar, co-registrar or Conversion Agent without
prior notice to any Holder. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Regular Trustees. The Trust
shall notify the Property Trustee of the name and address of any Agent not a
party to this Declaration. If the Trust fails to appoint or maintain another
entity as Registrar, Paying Agent or Conversion Agent, the Property Trustee
shall act as such. The Trust or any of its Affiliates may act as Paying Agent,
Registrar, or Conversion Agent. The Trust shall act as Paying Agent, Registrar,
co-registrar, and Conversion Agent for the Common Securities.
45
The Trust initially appoints the Property Trustee as Registrar, Paying
Agent, and Conversion Agent for the Preferred Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of principal or distribution on the Securities, and will notify
the Property Trustee if there are insufficient funds. While any such
insufficiency continues, the Property Trustee may require a Paying Agent to pay
all money held by it to the Property Trustee. The Trust at any time may require
a Paying Agent to pay all money held by it to the Property Trustee and to
account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the
Trust) shall have no further liability for the money. If the Trust or the
Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the
Holders all money held by it as Paying Agent.
SECTION 7.6 Replacement Securities.
If the holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Preferred Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. If required by the Property Trustee
or the Trust, an indemnity bond must be sufficient in the judgment of both to
protect the Trustees, the Property Trustee, the Sponsor or any authenticating
agent from any loss which any of them may suffer if a Security is replaced. The
Sponsor may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by
the Sponsor pursuant to Article III hereof, the Sponsor in its discretion may,
instead of issuing a new Security, pay or purchase such Security, as the case
may be.
46
Every replacement Security is an additional obligation of the Trust.
SECTION 7.7 Outstanding Preferred Securities.
The Preferred Securities outstanding at any time are all the Preferred
Securities authenticated by the Property Trustee except for those cancelled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.
If a Preferred Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased
Preferred Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and interest on them
ceases to accrue.
A Preferred Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.
SECTION 7.8 Preferred Securities in Treasury.
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Preferred
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be
fully protected in relying on any such direction, waiver or consent, only
Securities which the Property Trustee knows are so owned shall be so
disregarded.
SECTION 7.9 Temporary Securities.
(a) Until definitive Securities are ready for delivery, the Trust may
prepare and, in the case of the Preferred Securities, the Property Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Trust considers appropriate for temporary Securities. Without unreasonable
delay, the Trust shall prepare and deliver to the Property Trustee
46
Preferred Securities in certificated form (other than in the case of Preferred
Securities in global form) and thereupon any or all temporary Preferred
Securities (other than any such Preferred Securities in global form) may be
surrendered in exchange therefor, at the office of the Registrar, and the
Property Trustee shall authenticate and deliver an equal aggregate liquidation
amount of definitive Preferred Securities in certificated form in exchange for
temporary Preferred Securities (other than any such Preferred Securities in
global form). Such exchange shall be made by the Trust at its own expense and
without any charge therefor. Until so exchanged, temporary Securities shall in
all respects be entitled to the same benefits and subject to the same
limitations under this Declaration as Securities in definitive certificated
form authenticated (in the case of Preferred Securities) and delivered
hereunder.
SECTION 7.10 Cancellation.
The Trust at any time may deliver Preferred Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent
shall forward to the Property Trustee any Preferred Securities surrendered to
them for registration of transfer, redemption, conversion, exchange or payment.
The Property Trustee shall promptly cancel all Preferred Securities,
surrendered for registration of transfer, redemption, conversion, exchange,
payment, replacement or cancellation and shall dispose of cancelled Preferred
Securities as the Trust directs. The Trust may not issue new Preferred
Securities to replace Preferred Securities that it has paid or that have been
delivered to the Property Trustee for cancellation or that any holder has
converted.
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust.
(a) The Trust shall dissolve:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor, upon the consent of at least a
Majority in
48
liquidation amount of the Securities, voting together as a single
class, to file a certificate of cancellation with respect to the
Trust, or the revocation of the charter of the Sponsor and the
expiration of 90 days after the date of revocation without a
reinstatement thereof, except, in each case, to the extent permitted
by Article Eight of the Indenture;
(iii) following the distribution of Debentures having a principal
amount equal to the liquidation amount of the Securities to the
Holders, provided that, the Property Trustee has received written
notice from the Holder of all of the Outstanding Common Securities
directing the Property Trustee to terminate the Trust (which direction
is optional, and except as otherwise expressly provided below, within
the discretion of such Holder) and provided, further, that such
direction and such distribution is conditioned on the Sponsors'
receipt of an opinion of counsel to the effect that such distribution
will not be a taxable event to the Holders of Preferred Securities;
(iv) upon the entry of a decree of judicial dissolution of the
Sponsor or the Trust;
(v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities;
(vi) upon the occurrence and continuation of an Investment
Company Event pursuant to which the Sponsor causes the Regular
Trustees to dissolve the Trust in accordance with the terms of the
Securities;
(vii) upon the distribution of the common stock of the Sponsor to
Holders of all outstanding Securities upon conversion of all such
Securities;
(viii) the expiration of the term of the Trust on ________ __,
____; or
(ix) before the issuance of any Securities, with the consent of
all the Regular Trustees and the Sponsor.
49
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a), and upon the completion of the winding up of the
Trust, one of the Trustees (each of whom is hereby authorized to take such
action) shall file a certificate of cancellation with the Secretary of State of
the State of Delaware thereby terminating the Trust.
(c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General.
(a) When Preferred Securities are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal number of Preferred Securities represented by different certificates, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfers and
exchanges, the Trust shall issue and the Property Trustee shall authenticate
Preferred Securities at the Registrar's request.
(b) Subject to this Article IX, Preferred Securities shall be freely
transferable.
(c) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
(d) Subject to this Article IX, the Sponsor and any Related Party may
only transfer Common Securities to the Sponsor or a Related Party of the
Sponsor; provided that, any such transfer is subject to the condition precedent
that the transferor obtain the written opinion of nationally recognized
independent counsel experienced in such matters that such transfer would not
cause more than an insubstantial risk that:
50
(i) the Trust would not be classified for United States federal
income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the transferee
would become an Investment Company.
SECTION 9.2 Transfer of Securities.
(a) The Regular Trustees shall provide for the registration of
Securities and of transfers of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other governmental charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Securities, the Regular Trustees shall cause one or more new Securities to be
issued in the name of the designated transferee or transferees. Every Security
surrendered for registration of transfer shall be accompanied by a written
instrument of transfer in form satisfactory to the Regular Trustees duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Security surrendered for registration of transfer shall be canceled in
accordance with Section 7.10. A transferee of a Security shall be entitled to
the rights and subject to the obligations of a Holder hereunder upon the
receipt by such transferee of a Security. By acceptance of a Security, each
transferee shall be deemed to have agreed to be bound by this Declaration.
(b) The Trust shall not be required (i) to issue, register the
transfer of, or exchange, Preferred Securities during a period beginning at the
opening of business 15 days before the day of any selection of Preferred
Securities for redemption set forth in the terms of the Securities as set forth
in Annex I hereto and ending at the close of business on the day of selection,
or (ii) to register the transfer or exchange of any Preferred Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Preferred Security being redeemed in part.
(c) Obligations with respect to Transfers and Exchanges of Preferred
Securities.
(i) To permit registrations of transfers and exchanges, the Trust
shall execute and the Property Trustee shall authenticate definitive
Preferred
51
Securities and Global Preferred Securities at the Registrar's or
co-Registrar's request.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the
Trust or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any definitive Preferred
Security selected for redemption in whole or in part pursuant to
Article III, except the unredeemed portion of any definitive Preferred
Security being redeemed in part, or (b) any Preferred Security for a
period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase or redeem Preferred Securities or 15 Business Days
before a quarterly distribution date.
(iv) Prior to the due presentation for registrations of transfer
of any Preferred Security, the Trust, the Property Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the person
in whose name a Preferred Security is registered as the absolute owner
of such Preferred Security for the purpose of receiving Distributions
on such Preferred Security and for all other purposes whatsoever, and
none of the Trust, the Property Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the
contrary.
(v) All Preferred Securities issued upon any transfer or exchange
pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this
Declaration as the Preferred Securities surrendered upon such transfer
or exchange.
(d) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Preferred Security, any
Participant in the Depositary or other Person with respect to the
accuracy of the records of the Depositary or its nominee or of
52
any Participant thereof, with respect to any ownership interest
in the Preferred Securities or with respect to the delivery to any
Participant, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Preferred
Securities. All notices and communications to be given to the Holders
and all payments to be made to Holders under the Preferred Securities
shall be given or made only to or upon the order of the registered
Holders (which shall be the Depositary or its nominee in the case of a
Global Preferred Security). The rights of beneficial owners in any
Global Preferred Security shall be exercised only through the
Depositary subject to the applicable rules and procedures of the
Depositary. The Property Trustee may conclusively rely and shall be
fully protected in relying upon information furnished by the
Depositary or any agent thereof with respect to its Participants and
any beneficial owners.
(ii) The Property Trustee and Registrar shall have no obligation
or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Declaration or under
applicable law with respect to any transfer of any interest in any
Preferred Security (including any transfers between or among
Depositary Participants or beneficial owners in any Global Preferred
Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to
do so if and when expressly required by, the terms of this
Declaration, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall
be registered on the books and records of the Trust as the sole holder of such
Certificate and of the Security represented by such Certificate for purposes of
receiving Distributions and for all other purposes whatsoever and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Certificate or in the Securities represented by such
53
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the Preferred Securities,
the Preferred Securities, on original issuance, will be issued in the form of
one or more, fully registered, global Preferred Security certificates (each a
"Global Preferred Security"), to be delivered to the Depositary, the initial
Clearing Agency, by, or on behalf of, the Trust. Such Global Preferred
Securities shall initially be registered on the books and records of the Trust
in the name of Cede & Co., the nominee of the Depositary, and no Preferred
Security Beneficial Owner will receive a definitive Preferred Security
Certificate representing such Preferred Security Beneficial Owner's interests
in such Global Preferred Securities, except as provided in Section 9.7. Unless
and until definitive, fully registered Preferred Securities Certificates have
been issued to the Preferred Security Beneficial Owners pursuant to Section
9.7:
(a) the provisions of this Section 9.4 shall be in full force and
effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Depositary for all purposes of this Declaration (including the payment of
Distributions on the Global Preferred Securities and receiving approvals, votes
or consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Preferred Securities and shall have no obligation to the
Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict
with any other provisions of this Declaration, the provisions of this Section
9.4 shall control; and
(d) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Depositary and shall be limited to those established
by law and agreements between such Preferred Security Beneficial Owners and the
Depositary and/or the Participants and receive and transmit payments of
Distributions on the Global Cer-
54
tificates to such Participants. The Depositary will make book entry transfers
among the Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred Security
Holders is required under this Declaration, the Regular Trustees shall, in the
case of any Global Preferred Security, give all such notices and communications
specified herein to be given to the Preferred Security Holders to the
Depositary, and shall have no notice obligations to the Preferred Security
Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If the Depository elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
such Preferred Securities.
SECTION 9.7 Definitive Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 9.6; or
(b) the Regular Trustees elect after consultation with the Sponsor to
terminate the book entry system through the Clearing Agency with respect to
the Preferred Securities,
then:
(c) Definitive Preferred Security Certificates shall be prepared by
the Regular Trustees on behalf of the Trust with respect to such Preferred
Securities; and
(d) upon surrender of the Global Securities by the Clearing Agency,
accompanied by registration instructions, the Regular Trustees shall cause
Definitive Certificates to be delivered to Preferred Security
55
Beneficial Owners in accordance with the instructions of the Clearing
Agency. Neither the Trustees nor the Trust shall be liable for any delay in
delivery of such instructions and each of them may conclusively rely on and
shall be protected in relying on, said instructions of the Clearing Agency.
The Definitive Preferred Security Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
Regular Trustees may deem appropriate, or as may be required to comply with
any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which Preferred Securities may
be listed, or to conform to usage.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the
Securities Guarantees and the terms of the Securities, the Sponsor shall not
be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable as principal
obligor, jointly and severally with the Trust, for all of the debts and
obligations of the Trust (other than with respect to the Securities).
(c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of
the Preferred Securities shall be entitled to the same limitation of personal
liability
56
extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this 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 Property Trustee, negligence) or willful misconduct with respect to
such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions
of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust
Indenture Act), are agreed
57
by the parties hereto to replace such other duties and liabilities of such
Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall have
no duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this
Declaration or by applicable law.
58
SECTION 10.4 Indemnification.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a Company Indemnified
Person against expenses (including attorneys' fees and expenses),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
Company Indemnified Person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that he is or was a Company Indemnified Person
against expenses (including attorneys' fees and expenses) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust and
except that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Company Indemnified Person shall have been
adjudged to be liable to the Trust unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the
59
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem
proper.
(iii) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Debenture
Issuer only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1) by
the Regular Trustees by a majority vote of a quorum consisting of such
Regular Trustees who were not parties to such action, suit or proceeding,
(2) if such a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested Regular Trustees so directs, by independent legal counsel
in a written opinion, or (3) by the Common Security Holder of the Trust.
(iv) Expenses (including attorneys' fees and expenses) incurred by a
Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i)
and (ii) of this Section 10.4(a) shall be paid by the Debenture Issuer in
advance of the final disposition of such action, suit or proceeding.
Notwithstanding the foregoing, no advance shall be made by the Debenture
Issuer if a determination is reasonably and promptly made (i) by the
Regular Trustees by a majority vote of a quorum of disinterested Regular
Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Regular Trustees so directs, by independent
legal counsel in a written opinion or (iii) the Common Security Holder of
the Trust, that, based upon the facts known to the Regular Trustees,
counsel or the Common Security Holder at the time such determination is
made, such Company Indemnified Person acted in bad faith or in a manner
that such person did not believe to be in or not opposed to the best
interests of the Trust, or, with respect to any criminal proceeding, that
such Company Indemnified Person believed or had reasonable cause to believe
his conduct was unlawful.
60
(v) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a) shall not
be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Debenture
Issuer or Preferred Security Holders of the Trust or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. All rights to indemnification under this Section
10.4(a) shall be deemed to be provided by a contract between the Debenture
Issuer and each Company Indemnified Person who serves in such capacity at
any time while this Section 10.4(a) is in effect. Any repeal or
modification of this Section 10.4(a) shall require the consent of the
Regular Trustees and not affect any rights or obligations then existing.
(vi) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Debenture Issuer would have the power to indemnify him against such
liability under the provisions of this Section 10.4(a).
(vii) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 10.4(a) with respect to the
resulting or surviving entity as he would have with respect to such
constituent entity if its separate existence had continued.
(viii) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has
61
ceased to be a Company Indemnified Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any and all loss, liability
or expense including taxes (other than taxes based on the income of such
Fiduciary Indemnified Person) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration or
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 10.4(b) shall survive the satisfaction
and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent
ventures or the income or profits derived therefrom, and the pursuit of any
such venture, even if competitive with the business of the Trust, shall not be
deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware
Trustee, or the Property Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee
shall have the right to take for its own account (individually or as a partner
or fiduciary) or to recommend to others any such particular investment or other
opportunity.
62
Any Covered Person, the Delaware Trustee and the Property Trustee may engage or
be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for,
or act on any committee or body of holders of, securities or other obligations
of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, books of account, records and
supporting documents, which shall reflect in reasonable detail, each material
transaction of the Trust. The books of account shall be maintained in
accordance with generally accepted accounting principles consistently applied.
(b) The Regular Trustees shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a
balance sheet of the Trust as of the end of such Fiscal Year, and the related
statements of income or loss, which shall be examined by and reported upon as
of the end of each Fiscal Year by a firm of independent certified public
accountants selected by the Regular Trustees.
(c) The Regular Trustees shall cause to be duly prepared and delivered
to each of the Holders of Securities, any annual United States federal income
tax information statement, required by the Code, containing such information
with regard to the Securities held by each Holder as is required by the Code
and the Treasury Regulations. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Regular Trustees shall endeavor
to deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.
63
(d) The Regular Trustees shall cause to be duly prepared and filed
with the appropriate taxing authority, an annual United States federal income
tax return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly
to the Property Trustee Account and no other funds of the Trust shall be
deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Regular Trustees; provided, however, that
the Property Trustee shall designate the signatories for the Property Trustee
Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to
each Holder, and any representations and forms as shall reasonably be requested
by the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Regular Trustees shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the
Holder to applicable jurisdictions. To the extent that the Trust is required to
withhold and pay over any amounts to any authority with respect to
distributions or allocations to any Holder, the amount withheld shall be deemed
to be a distribution in the amount of the withholding to the Holder. In the
event of any claimed overwithholding, Holders shall be limited to an action
against the applicable jurisdiction. If the amount required to be withheld was
not withheld from actual Distributions made, the Trust may reduce subsequent
Distributions by the amount of such withholding.
64
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by:
(i) the Regular Trustees (or, if there are more than two Regular
Trustees a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property
Trustee; and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware
Trustee;
(b) no amendment shall be made, and any such purported amendment
shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officer's Certificate from each
of the Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms of the
Securities);
(ii) unless, in the case of any proposed amendment which affects
the rights, powers, duties, obligations or immunities of the Property
Trustee, the Property Trustee shall have first received:
(A) an Officer's Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the
Securities); and
(B) an opinion of counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and conforms
to, the
65
terms of this Declaration (including the terms of the
Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor
trust;
(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
which is required to be registered under the Investment Company
Act;
(c) at such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges
or preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
(d) Section 9.1(d) and this Section 12.1 shall not be amended without
the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of the Holders
of a majority in liquidation amount of the Common Securities and;
(f) the rights of the holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove Trustees shall
not be amended without the consent of the Holders of a Majority in liquidation
amount of the Common Securities; and
(g) notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
66
(ii) correct or supplement any provision in this Declaration that may
be defective or inconsistent with any other provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority which amendment does not have a
material adverse effect on the rights, preferences or privileges of the
Holders.
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SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent.
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms
of the Securities or the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading. The Regular Trustees shall call
a meeting of the Holders of such class if directed to do so by the Holders of
at least a Majority in liquidation amount of such class of Securities. Such
direction shall be given by delivering to the Regular Trustees one or more
calls in a writing stating that the signing Holders of Securities wish to call
a meeting and indicating the general or specific purpose for which the meeting
is to be called. Any Holders of Securities calling a meeting shall specify in
writing the Certificates held by the Holders of Securities exercising the right
to call a meeting and only those Securities represented by the Certificates so
specified shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the Holders
of Securities having a right to vote thereat at least 7 days and not
more than 60 days before the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is permitted or
required under this Declaration or the rules of any stock exchange or
over the counter market on which the Preferred Securities are listed
or admitted for trading, such vote, consent or approval may be given
at a meeting of the Holders of Securities. Any action that may be
taken at a meeting of the Holders of Securities may be taken without a
meeting if a consent in writing setting forth the action so taken is
signed by the Holders of Securities owning not less than the minimum
amount of Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of
Secu-
68
rities having a right to vote thereon were present and voting, but in
no event less than a Majority in liquidation amount of the outstanding
Securities. Prompt notice of the taking of action without a meeting
shall be given to the Holders of Securities entitled to vote who have
not consented in writing. The Regular Trustees may specify that any
written ballot submitted to the Security Holders for the purpose of
taking any action without a meeting shall be returned to the Trust
within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after
the expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder of Securities executing it. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of
proxies shall be governed by the General Corporation Law of the State
of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the
Holders of the Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the
Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Preferred Securities are then listed or
trading provide otherwise, the Regular Trustees, in their sole
discretion, shall establish all other provisions relating to meetings
of Holders of Securities, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
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ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration and at
the Closing Date, and each Successor Property Trustee represents and warrants
to the Trust and the Sponsor at the time of the Successor Property Trustee's
acceptance of its appointment as Property Trustee that:
(a) The Property Trustee is a banking corporation with trust powers,
duly organized, validly existing and in good standing under the laws of the
State of New York, with trust power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Declaration.
(b) The execution, delivery and performance by the Property Trustee of
the Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. The Declaration has been duly executed and
delivered by the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance of the Declaration by the
Property Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Property Trustee.
(d) At the Closing Date, the Property Trustee will be the record
holder of the Debentures and the Property Trustee has not knowingly created any
liens or encumbrances on such Debentures.
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(e) No consent, approval or authorization of, or registration with or
notice to, any New York State or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration and at
the Closing Date, and each Successor Delaware Trustee represents and warrants
to the Trust and the Sponsor at the time of the Successor Delaware Trustee's
acceptance of its appointment as Delaware Trustee that:
(a) The Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, this Declaration.
(b) The execution, delivery and performance by the Delaware Trustee of
the Declaration has been duly authorized by all necessary corporate action on
the part of the Delaware Trustee. The Declaration has been duly executed and
delivered by the Delaware Trustee, and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance of the Declaration by the
Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or By-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or registration with or
notice to, any Delaware or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of this
Declaration.
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(e) The Delaware Trustee is a natural person who is a resident of the
State of Delaware, or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
(f) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):
c/o CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
(b) if given to the Property Trustee, at the mailing address set forth
below (or such other address as the Property Trustee may give notice of to the
Holders of the Securities):
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
(c) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of to the
Holders of the Securities):
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The Bank of New York (Delaware)
23 White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
CalEnergy Company, Inc.
302 South 36th Street, Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to the principles of conflict of laws of the State of Delaware or any
other jurisdiction that would call for the application of the law of any
jurisdiction other than the State of Delaware; provided, however, that there
shall not be applicable to the Trust, the Trustees or this Declaration any
provision of the laws (statutory or common) of the State of Delaware pertaining
to trusts that relate to or regulate, in a manner inconsistent with the terms
hereof (i) the filing with any court or governmental body or agency of trustee
accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the
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necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding or investing trust assets, or (vii) the establishment of
fiduciary or other standards of responsibility or limitations on the acts or
powers of trustees that are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees as set forth or referenced in this
Declaration. Section 3540 of Title 12 of the Delaware Code shall not apply to
the Trust.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention
of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 14.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder
of this Declaration, or the application of such provision to persons or cir-
74
cumstances other than those to which it is held invalid, shall not be affected
thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
-----------------------------------
Steven A. McArthur
as Trustee
-----------------------------------
Craig Hammett
as Trustee
-----------------------------------
Gregory Abel
as Trustee
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:
--------------------------------
Name:
Title:
CALENERGY COMPANY, INC.
as Sponsor
By:
--------------------------------
Name:
Title:
ANNEX I
TERMS OF SECURITIES
EXHIBIT A-1
FORM OF PREFERRED SECURITY
EXHIBIT A-2
FORM OF COMMON SECURITY
EXHIBIT B
SPECIMEN OF DEBENTURE
EXHIBIT C
UNDERWRITING AGREEMENT