Exhibit 4.22.28
===============================================================================
CALPINE GUARANTY AND PAYMENT AGREEMENT (SOUTH POINT SP-2)
Dated as of October 18, 2001
among
CALPINE CORPORATION,
as Guarantor,
and
SOUTH POINT OL-2, LLC, as Owner Lessor,
SBR OP-2, LLC, as Owner Participant,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity but solely as Indenture Trustee, and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity but solely as Pass Through Trustee,
as Beneficiaries
SOUTH POINT PROJECT
===============================================================================
CALPINE GUARANTY AND PAYMENT AGREEMENT (SOUTH POINT SP-2)
This CALPINE GUARANTY AND PAYMENT AGREEMENT (SOUTH POINT SP-2), dated
as of October 18, 2001 (the "Guaranty"), is entered into by and among Calpine
Corporation, a Delaware corporation, as guarantor (the "Guarantor"), SOUTH
POINT OL-2, LLC, a Delaware limited liability company, as Owner Lessor, SBR
OP-2, LLC, a Delaware limited liability company, as Owner Participant, State
Street Bank and Trust Company of Connecticut, National Association, not in its
individual capacity but solely as Indenture Trustee and State Street Bank and
Trust Company of Connecticut, National Association, not in its individual
capacity but solely as Pass Through Trustee, and is issued by the Guarantor in
favor of the Beneficiaries (as defined in Section 4 below).
WITNESSETH:
WHEREAS, South Point Energy Center, LLC (the "South Point Lessee") is
an indirect wholly-owned subsidiary of the Guarantor;
WHEREAS, the South Point Lessee is a party to the Participation
Agreement (SP-2) dated as of October 18, 2001 (the "Participation Agreement"),
among the South Point Lessee, ▇▇▇▇▇ Fargo Bank Northwest, National Association,
not in its individual capacity except as expressly provided in the
Participation Agreement, but solely as Lessor Manager, South Point OL-2, LLC,
as Owner Lessor, the Guarantor, SBR OP-2, LLC, as Owner Participant, State
Street Bank and Trust Company of Connecticut, National Association, not in its
individual capacity, except as expressly provided in the Participation
Agreement, but solely as Indenture Trustee, and State Street Bank and Trust
Company of Connecticut, National Association, not in its individual capacity,
except as expressly provided in the Participation Agreement, but solely as Pass
Through Trustee;
WHEREAS, the South Point Lessee and the Owner Lessor are entering
into the South Point (SP-2) Facility Lease, to be dated as of October 18, 2001
(as amended, modified or supplemented from time to time pursuant to Section
14.23 of the Participation Agreement, the "Facility Lease"), providing for the
Owner Lessor's leasing an undivided interest of the South Point Facility to the
South Point Lessee as contemplated therein;
WHEREAS, the South Point Lessee and the Owner Lessor are entering
into the South Point (SP-2) Facility Site Lease, to be dated as of October 18,
2001 (as amended, modified or supplemented from time to time pursuant to
Section 14.23 of the Participation Agreement, the "Facility Site Lease"),
providing for the Owner Lessor's leasing an undivided interest in the Facility
Site to the South Point Lessee as contemplated therein;
1
WHEREAS, the Guarantor will obtain benefits as a result of the South
Point Lessee entering into the Facility Lease, the Facility Site Lease and the
other transactions contemplated by the Participation Agreement; and
WHEREAS, pursuant to Section 4.2 of the Participation Agreement, this
Guaranty is required to be provided by the Guarantor.
NOW, THEREFORE, in consideration of the foregoing premises, the
Mutual agreements herein contained and other good and valuable consideration,
The receipt and sufficiency of which are hereby acknowledged, the Guarantor
Agrees as follows:
I. DEFINITIONS
a) Capitalized terms used in this Guaranty, including the
recitals, and not otherwise defined herein shall have the
respective meanings set forth on Appendix A to the
Participation Agreement, provided that if a term that is
defined in this Guaranty (the "Guaranty Definition")
includes in such definition a term that is defined in
Appendix A to the Participation Agreement (the "Appendix
A Definition"), and the Appendix A Definition in turn
includes in such definition a term that is defined both
in this Guaranty and in Appendix A to the Participation
Agreement (the "Embedded Definition"), then for purposes
of the Appendix A Definition as it is used in the
Guaranty Definition and for purposes of the Guaranty
Definition, the Embedded Definition shall be used as
defined in this Guaranty and not as defined in Appendix A
to the Participation Agreement. Except as otherwise
provided in the previous sentence, the Rules of
Interpretation set forth in Appendix A to the
Participation Agreement shall apply to the terms used in
this Guaranty and specifically defined herein.
b) As used in this Guaranty, the following terms shall have
the respective meanings assigned thereto as follows:
"2000 Calpine Indenture" shall mean that certain Indenture,
dated as of August 10, 2000, relating to the issuance of a principal amount of
$250,000,000 8-1/4% Senior Notes due 2005, issuance of a principal amount of
$750,000,000 8-5/8% Senior Notes due 2010 and issuance of a principal amount of
$2,000,000,000 8-1/2% Senior Notes due 2011 by and between Calpine and the
Wilmington Trust Company, as trustee, as the same may be amended, modified or
supplemented from time to time.
2
"GAAP" means generally accepted accounting principals in the
United States of America as in effect and, to the extent optional, adopted by
the Guarantor, on the date of the Guaranty, consistently applied.
"Indebtedness" of any Person means, without duplication, (i) the
principal in respect of indebtedness of such Person for money borrowed and;
(ii) all Capitalized Lease Obligations of such Person; (iii) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in (i) and (ii) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn upon
or, if and to the extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit); (iv) all obligations
of the type referred to in clauses (i) through (iii) of other Persons and all
dividends of other Persons for the payment of which, in either case, such
Person is responsible or liable, directly or indirectly, as obligor, guarantor
or otherwise; and (v) all obligations of the type referred to in clauses (i)
through (iv) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation on any date of determination being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured. The amount of Indebtedness of any Person at any date shall be, with
respect to unconditional obligations, the outstanding balance at such date of
all such obligations as described above and, with respect to any contingent
obligations at such date, the maximum liability determined by such Person's
board of directors, in good faith, as, in light of the facts and circumstances
existing at the time, reasonably likely to be Incurred upon the occurrence of
the contingency giving rise to such obligation.
"Lien" means any mortgage, lien, pledge, charge, or other
security interest or encumbrance of any kind (including any conditional sale or
other title retention agreement and any lease in the nature thereof).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Subsidiary" means, as applied to any Person, any corporation,
partnership, trust, association or other business entity of which an aggregate
of at least 50% of the outstanding Voting Shares or an equivalent controlling
interest therein, of such Person is, at the time, directly or indirectly, owned
by such Person and/or one or more Subsidiaries of such Person.
"Voting Shares", with respect to any corporation, means the
Capital Stock having the general voting power under ordinary circumstances to
elect at least a majority of the board of directors (irrespective of whether or
not at the time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
3
II. GUARANTEED AND PAYMENT OBLIGATIONS
A. (a) The Guarantor hereby unconditionally and irrevocably
guarantees to the Beneficiaries (except that the
obligations referred to in clauses (1), (2) and (5)(A)
(relating to clause (1) and clause (2) amounts) of this
Section 2.1(a) are for the benefit only of the Owner
Lessor and the Indenture Trustee (as assignee of the
Owner Lessor), as their interests may appear), as
primary obligor and not merely as a surety, the due,
punctual and full payment (when and as the same may
become due and payable), and, as applicable, performance
by the South Point Lessee of all of the South Point
Lessee's obligations under the Operative Documents to
which it is a party and with respect to the South Point
Ground Lease if the same shall not be performed when due
pursuant to the Operative Documents, including, without
limitation, but without duplication, (1) the South Point
Lessee's obligation to make Periodic Rent, Supplemental
Rent and other payments (in accordance with the terms of
the Operative Documents) to the Owner Lessor, (2) the
South Point Lessee's obligation to pay the Termination
Value (and amounts computed by reference thereto) to the
Owner Lessor and all other amounts owed under the
Operative Documents and the South Point Ground Lease
under and in accordance with the Facility Lease, (3)
without duplication of the preceding clause (2), the
South Point Lessee's obligation to pay the Equity
Portion of Periodic Rent and the Equity Portion of
Termination Value to the Owner Lessor, (4) the South
Point Lessee's obligation to make indemnity payments
when due in accordance with the terms of the
Participation Agreement and the Tax Indemnity Agreement,
(5) the South Point Lessee's obligation, pursuant to
Section 3.3 of the Facility Lease, to pay as
Supplemental Rent an amount equal to (A) interest at the
applicable Overdue Rate on any amount under clauses (1),
(2), (3), (4) and 5(B) of this Section 2.1(a), not paid
when due and (B) any Make-Whole Amount to the extent
then due and payable by the Owner Lessor to the
Certificateholders pursuant to the Participation
Agreement, the Facility Lease or any other Operative
Document to which the South Point Lessee is a party and
(6) the South Point Lessee's obligation to make any and
all other payments, and perform all other covenants and
agreements, when due under and in accordance with the
terms of the Operative Documents.
4
b) The Guarantor agrees that upon the occurrence and during
the continuance of a Lease Event of Default, it shall
pay to the Indenture Trustee (as assignee of the Owner
Lessor), upon written demand by the Indenture Trustee
(as assignee of the Owner Lessor) in accordance with the
applicable Operative Documents, all amounts constituting
the Termination Value and all accrued but unpaid
Periodic Rent then due and payable. Such payment
obligation shall be effective without reference to or
requirement for valuation of the Owner Lessor's Interest
or any other security held by any Person for performance
of the South Point Lessee's obligations under the
Facility Lease or any other Operative Documents or the
South Point Ground Lease. The Guarantor agrees that it
shall make such payment notwithstanding the fact that
the South Point Lessee may have a defense to the payment
of any such amounts. The Guarantor's obligations in this
Section 2.1(b) are direct and primary obligations (and
not obligations of a guarantor or surety) of the
Guarantor to the Owner Lessor and the Indenture Trustee
(as assignee of the Owner Lessor), which shall not be
affected in any way by the provisions of Section 2.1(a)
above or any payments under any other Operative
Documents of any amounts until the Owner Lessor and the
Indenture Trustee (as assignee of the Owner Lessor) have
received full payment of such amounts.
c) The Guarantor acknowledges that notwithstanding the
provisions of the second sentence of Section 8.13 hereof
(i) as and to the extent provided in Section 5.6 of the
Collateral Trust Indenture upon the occurrence and
during the continuation of a Lease Event of Default, the
Indenture Trustee and the Owner Lessor may proceed
against the Guarantor for the payment of the Termination
Value (including without limitation all amounts the
Guarantor is obligated to pay under Section 2.1(b)
hereof under the circumstances specified therein).
d) Notwithstanding anything herein or in the Collateral Trust
Indenture to the contrary, in the event that an
Indenture Event of Default that constitutes a Lease
Event of Default has occurred and is continuing and the
Indenture Trustee (as assignee of the Owner Lessor)
forecloses upon and sells, assigns or otherwise
transfers, its interest in this Guaranty pursuant to the
provisions of the Collateral Trust Indenture, the
Guarantor shall remain obligated hereunder
5
to pay to the Owner Lessor the amounts referred to in
Section 2.1(a)(3).
B. In the case of any failure by the South Point Lessee to perform and
observe any term, provision or condition referred to in Section
2.1(a) when due pursuant to the Operative Documents or the South
Point Ground Lease, the Guarantor agrees to cause such performance
or observance to be done, and in the case of any failure by the
South Point Lessee to make such payment as and when the same shall
become due and payable (by acceleration or otherwise), the Guarantor
hereby agrees to make such payment (and, in addition, such further
amounts, if any, as shall be sufficient to cover the costs and
expenses of collection hereunder) as and when such payment is due
and payable.
All obligations and indebtedness set forth in Section 2.1 above, this
Section 2.2, and in Section 8.15 below are referred to in this Guaranty as the
"Obligations."
C. The obligations of the Guarantor contained herein are direct,
independent, and primary obligations of the Guarantor and are
absolute, present, unconditional and continuing obligations and are
not conditioned in any way upon the institution of suit or the
taking of any other action or any attempt to enforce performance of
or compliance with the obligations, covenants or undertakings
(including any payment obligations) of the South Point Lessee and
shall constitute a guaranty of, and agreement with respect to,
payment and performance and not a guaranty of collection, binding
upon the Guarantor and its successors and assigns and shall remain
in full force and effect and irrevocable without regard to the
genuineness, validity, legality or enforceability of the
Participation Agreement, the Facility Lease, the Tax Indemnity
Agreement or any other agreement (including any other Operative
Document and the South Point Ground Lease) or the lack of power or
authority of the South Point Lessee to enter into any of the
Participation Agreement, the Facility Lease, the Tax Indemnity
Agreement or any other agreement (including any other Operative
Document and the South Point Ground Lease) to which the South Point
Lessee is a party, or any substitution, release or exchange of any
other guaranty of, or agreement with respect to, or any other
security for, any of the Obligations (including any settlement,
compromise or other adjustment with respect to the Obligations) or
any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor and
shall not be subject to any right of set-off, recoupment or
counterclaim and is in no way conditioned or contingent upon any
attempt to collect from the South Point Lessee or any other entity
or to perfect or enforce any security or upon any other condition or
contingency or upon any other action, occurrence or circumstance
whatsoever. Without limiting the generality of the
6
foregoing, the Guarantor shall have no right to terminate this
Guaranty, or to be released, relieved or discharged from its
obligations hereunder, other than upon full payment and satisfaction
and performance of all of the Obligations (subject to Section 8.14
hereof), and such obligations shall be neither affected nor
diminished for any other reason whatsoever, including (i) any
amendment or supplement to or modification of any of the
Participation Agreement, the Facility Lease, the Tax Indemnity
Agreement or any other agreement (including any other Operative
Document) to which the South Point Lessee is a party, any release,
extension or renewal of the South Point Lessee's obligations under
any of the Participation Agreement, the Facility Lease, the Tax
Indemnity Agreement or any other agreement (including any other
Operative Document) to which the South Point Lessee is a party or by
which it is bound, including, without limitation, any actions taken
by the Indenture Trustee pursuant to the Collateral Trust Indenture,
or any subletting, assignment or transfer of the South Point
Lessee's or any Beneficiary's interest in the Participation
Agreement, the Facility Lease or any other Operative Document in
accordance with the terms thereof, (ii) any bankruptcy, insolvency,
readjustment, composition, liquidation or similar proceeding with
respect to the South Point Lessee, Owner Lessor, Owner Participant
or any other Person, including, without limitation, termination of
the Facility Lease and the operation of Section 502(b)(6) of the
Bankruptcy Code in connection therewith, (iii) any furnishing or
acceptance of additional security or any exchange, substitution,
surrender or release of any security, (iv) any waiver, consent or
other action or inaction or any exercise or nonexercise of any
right, remedy or power with respect to the Obligations (including
any settlement, compromise or other adjustment with respect to the
Obligations) or any of the Participation Agreement, the Facility
Lease, the Tax Indemnity Agreement or any other agreement (including
any Operative Document) to which the South Point Lessee is a party,
(v) without limiting Section 3.6(b) hereof, any merger or
consolidation of the South Point Lessee or the Guarantor into or
with any other Person, or any sale, assignment, conveyance, lease,
transfer or other disposition of all or substantially all of the
assets or properties of the South Point Lessee or the Guarantor, or
any change in the structure of the South Point Lessee or in the
ownership of the South Point Lessee by the Guarantor, (vi) any
default, misrepresentation, negligence, misconduct or other action
or inaction of any kind by any Beneficiary, the Indenture Trustee or
any other Person under or in connection with any Operative Document
or any other agreement relating to this Guaranty, (vii) any action
or inaction by any Beneficiary as contemplated in Section 5 of this
Guaranty; (viii) any invalidity, irregularity or unenforceability of
all or part of the Obligations or of any security therefor; (ix) any
change in the manner, place, timing or schedule of payment or
performance of, or in any other term of, all or any of the
Obligations; (x) whether the Guarantor is related or unrelated to
the South Point Lessee, (xi) the assignment by the Owner Lessor of
its rights
7
and interests hereunder, under the Facility Lease or under any
other Operative Document or the South Point Ground Lease in
accordance with the Operative Documents and the South Point Ground
Lease (or the genuineness, validity, legality or enforceability of
the obligations of the Owner Lessor under the Collateral Trust
Indenture) and (xii) any other circumstance whatsoever.
III. GUARANTOR'S REPRESENTATIONS, WARRANTIES AND
COVENANTS
A. The Guarantor represents and warrants, as of the date hereof:
1. The Guarantor is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full
power, authority and the legal right to execute, deliver and
perform the terms of this Guaranty and each Operative Document
to which it is a party (together, the "Calpine Documents").
2. The execution, delivery and performance by the Guarantor of the
Calpine Documents have been duly authorized by all necessary
corporate action. The Calpine Documents constitute legal,
valid and binding obligations of the Guarantor enforceable
against the Guarantor in accordance with their respective
terms, except as such enforcement may be affected by
applicable bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally and by
general principles of equity.
3. The execution, delivery and performance of the Calpine Documents
will not (a) contravene any provision of law, rule or
regulation to which the Guarantor is subject or any judgment,
decree or order applicable to the Guarantor, (b) conflict or
be inconsistent with or result in any breach of any terms,
covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien or other
encumbrance upon any of the property or assets of the
Guarantor pursuant to the terms of any agreement or other
instrument to which the Guarantor is a party or by which it or
its property is bound or to which it or its property may be
subject, in each case the violation of which would have a
material adverse effect on the business, operations,
prospects, properties or assets, or in the condition,
financial or otherwise, of the Guarantor, or (c) violate or
contravene any provision of the articles of incorporation or
by-laws of the Guarantor.
4. No pending or, to the knowledge of the Guarantor, threatened
action, suit, investigation or proceedings against the
Guarantor before any Governmental Entity exists which, if
determined
8
adversely to the Guarantor, would materially adversely affect
the business, operations, prospects, properties or assets, or
in its condition, financial or otherwise, or the Guarantor's
ability to perform its obligations under the Calpine
Documents.
5. No consent from, authorization or approval or other action by,
and no notice to or filing with, any Person is required for
the execution, delivery and performance by the Guarantor of
the Calpine Documents except those which have been given and
remain in full force and effect.
6. The South Point Lessee is an indirect, wholly-owned subsidiary
of the Guarantor.
7. The Guarantor is not an "investment company" or a company
controlled by an "investment company" within the meaning of
the Investment Company Act of 1940.
8. The Guarantor is not in default with respect to any judgment,
order, writ, injunction, decree, award, rule or regulation
of any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, domestic
or foreign, which, either, separately or in the aggregate,
would result in any material adverse change in any of its
businesses, operations, prospects or assets, or in its
condition, financial or otherwise, or its ability to perform
its obligations under the Calpine Documents.
9. The Guarantor is not a party to any agreement or instrument, or
subject to any corporate restriction or any judgment, order,
writ, injunction, decree, award, rule or regulation, which
materially adversely affects, or in the future may materially
adversely affect, its business, operations, prospects,
properties or assets, or conditions, financial or otherwise,
or its ability to perform its obligations under the Calpine
Documents.
10. The audited financial statements of the Guarantor and its
Consolidated Subsidiaries, as of December 31, 2000, reported
on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, copies of which have been delivered
to the Indenture Trustee, the Pass Through Trustee, the
Certificateholders and the Owner Participant, are true,
complete and correct and fairly present the financial
condition of the Guarantor and its Consolidated Subsidiaries
as of the date thereof. The financial statements have been
prepared in accordance with GAAP. The Guarantor and its
Consolidated Subsidiaries do not have any material
liabilities, direct or contingent, except (a) as are disclosed
in such financial statements or (b) as arise under the
Operative Documents or the South Point Ground Lease. There has
9
been no material adverse change in the financial condition of
the Guarantor and its Consolidated Subsidiaries since the date
of the audited financial statements referred to above.
11. All factual information relating to the Guarantor (taken as a
whole) heretofore or contemporaneously furnished by or on
behalf of the Guarantor in writing to the Owner Lessor, the
Owner Participant, the Indenture Trustee, the Pass Through
Trustee or the Certificateholders (including, without
limitation, all such information contained herein, in the
Participation Agreement and in any preliminary or final
offering circular distributed in accordance with the terms of
the Operative Documents) for purposes of or in connection with
the Calpine Documents or any transaction contemplated therein
is true and accurate in all material respects on the date as
of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make
such information relating to the Guarantor (taken as a whole)
not misleading in any material respect at such time in light
of the circumstances under which such information was
provided; provided, that no representation or warranty is made
with regard to (i) any projections or other forward-looking
statements provided by or on behalf of the Guarantor, or (ii)
the descriptions of the Operative Documents or the South Point
Ground Lease or the tax consequences to beneficial owners of
Certificates; provided, however, each of the Beneficiaries
acknowledges and agrees that (i) Calpine has heretofore
provided to the Appraiser, solely in order to assist the
Appraiser in connection with the preparation of the appraisal
to be delivered by the Appraiser to certain of the Transaction
Parties at the Closing, certain (1) general market
information, (2) information about the Arizona energy market
and (3) information passed along from other Persons and (ii)
that the South Point Lessee does not make any representation
or warranty whatsoever with respect to the information
described in clause (i) above except to the extent expressly
set forth in Section 4(b) of the Tax Indemnity Agreement.
12. The Guarantor is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of
its property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards
and controls), except such noncompliance as would not, in the
aggregate, have a material adverse effect on the business,
operations, property, assets or condition (financial or
otherwise) of the Guarantor, or the Guarantor's ability to
perform its obligations under the Calpine Documents.
10
13. The Guarantor has filed all tax returns and reports required by
law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing (other than any
such taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on
its books), except such non-filing or non-payment, as the case
may be, as would not, in the aggregate, have a material
adverse effect on the business, operations, property, assets
or condition (financial or otherwise) of the Guarantor. 14. No
default has occurred under this Guaranty, which default would
reasonably be expected to result in a material adverse effect
on the business, operations, assets or condition (financial or
otherwise) of the Guarantor.
14. No default has occurred under this Guaranty, which default would
reasonably be expected to result in a material adverse effect on
the business, operations, assets or condition (financial or
otherwise) of the Guarantor.
15. In accordance with Section 8.12 hereof and Section 14.14 of the
Participation Agreement, the Guarantor has validly submitted
to the jurisdiction of the Supreme Court of the State of New
York, New York County and the United States District Court for
the Southern District of New York.
B. The Guarantor covenants and agrees that on and after the date hereof
and until this Guaranty is terminated pursuant to the terms hereof
the Guarantor shall:
a) file with the Owner Participant and the Indenture Trustee,
within 15 days after the filing with the SEC, copies of
the annual reports and of the information, documents and
other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations
prescribe) which the Guarantor is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. In the event the Guarantor is at any time no longer
subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, it shall file with the Owner
Participant, and for so long as the Certificates remain
outstanding, the Indenture Trustee and the Pass Through
Trustee, within 15 days after the Guarantor would have
been required to file such documents with the SEC,
copies of the annual reports and of the information,
documents and other reports which the Guarantor would
have been required to file with the SEC if the Guarantor
had continued to be subject to such Sections 13 or
15(d). Delivery of such reports, information and
documents to the Owner Participant, the Indenture
Trustee and the Pass Through Trustee is for
informational purposes only and their receipt of the
same shall not constitute
11
constructive notice of any information contained
therein or determinable from information contained
therein, including the Guarantor's compliance with any
of its covenants hereunder (as to which the Owner
Participant, the Indenture Trustee and the Pass Through
Trustee are entitled to rely exclusively on Officers'
Certificates);
b) furnish to the Beneficiaries, promptly upon the Guarantor
obtaining Actual Knowledge of any action, suit or
proceeding pending or threatened against the Guarantor
before any court or before any governmental department,
commission or agency or any arbitrator, which in the
Guarantor's good faith opinion would reasonably be
likely to result in a material adverse effect on the
business, operations, property, assets or condition
(financial or otherwise) of the Guarantor, a certificate
of a senior officer specifying the nature of such
action, suit or proceeding and the proposed response of
the Guarantor thereto;
c) furnish to the Beneficiaries, as soon as possible and in
any event within three days after the Guarantor obtains
Actual Knowledge of default by the Guarantor of any of
its material obligations under this Guaranty, a
statement of an authorized officer of the Guarantor
setting forth details of such default and the action
which the Guarantor has taken and proposes to take with
respect thereto. Notwithstanding the foregoing provision
in this clause (c), the Guarantor shall, within 120 days
after the close of each fiscal year of the Guarantor in
which Certificates are outstanding hereunder, file with
the Owner Participant, and if the Certificates are
outstanding during any part of such fiscal year, the
Indenture Trustee and the Pass Through Trustee, an
Officer's Certificate, provided that one Officer
executing the same shall be the principal executive
officer, the principal financial officer or the
principal accounting officer of the Guarantor, covering
the period from the date hereof to the end of the fiscal
year in which this Guaranty was executed and delivered
by the Guarantor, in the case of the first such
certificate, and covering the preceding fiscal year in
the case of each subsequent certificate, and stating
whether or not, to the Actual Knowledge of each such
executing Officer, the Guarantor has complied with and
performed and fulfilled all covenants on its part
contained in this Guaranty and is not in Default in the
performance or observance of any of the terms or
provisions contained in this Guaranty, and, if any such
signer has obtained Actual Knowledge of any Default by
the Guarantor in the
12
performance, observance or fulfillment of any such
covenant, terms or provision specifying each such
Default and the nature thereof; and
d) promptly furnish to the Owner Participant, the Owner
Lessor, the Indenture Trustee or the Pass Through
Trustee such other information as the Owner Lessor,
Owner Participant, the Indenture Trustee and the Pass
Through Trustee may from time to time reasonably request
with respect to the Guarantor.
So long as the Indenture Trustee is also serving as the Pass Through
Trustee, delivery to the Indenture Trustee shall satisfy the Guarantor's
obligation to furnish information to the Pass Through Trustee under this
Section 3.2.
C. The Guarantor covenants and agrees that it will not transfer or
assign or cause to be transferred or assigned the Ownership
Interest in the South Point Lessee to any other Person, without the
prior written consent of the Owner Lessor, the Owner Participant
and, so long as the Lien of the Collateral Trust Indenture has not
been terminated or discharged, the Indenture Trustee and the Pass
Through Trustee (it being agreed and understood that a consolidation
with or merger of the Guarantor into, or a sale by the Guarantor of
all or substantially all of its assets to, another Person in
accordance with Section 3.6 hereof shall not be deemed to be a
transfer or assignment of the Ownership Interest in the South Point
Lessee for the purposes of this Section), except as permitted in
this Section 3.3 or in Section 8.4 hereof. Notwithstanding the
foregoing, and subject to Section 8.4 below, so long as this
Guaranty remains in full force and effect, the Guarantor may
transfer a portion of the Ownership Interest in the South Point
Lessee (provided that following such transfer the Guarantor shall
continue to own at least a majority of the Ownership Interest in the
South Point Lessee) without the consent of the Owner Lessor, the
Owner Participant, the Indenture Trustee, the Pass Through Trustee
or any other Transaction Party if the following conditions have been
satisfied:
1. the Owner Lessor, the Owner Participant and, so long as the Lien
of the Collateral Trust Indenture shall not have been
terminated or discharged, the Indenture Trustee and the Pass
Through Trustee shall have received an Opinion of Counsel to
the effect that all regulatory approvals required in
connection with such transfer have been obtained;
2. all the obligations of the South Point Lessee under the
Operative Documents and the South Point Ground Lease shall
remain in full force and effect, the Guarantor shall reaffirm
in writing all of its obligations hereunder in a manner
reasonably satisfactory to the
13
Owner Participant, such obligations of the Guarantor shall
remain in full force and effect;
3. no Significant Lease Default or Lease Event of Default shall
have occurred and be continuing at the time of or immediately
following such transfer;
4. the transfer shall not subject the South Point Lessee, the Owner
Participant, the Owner Lessor, the Indenture Trustee, the
Pass Through Trustee or any Certificateholder to regulation
under PUHCA or state laws and regulations regarding the rate
and financial or organizational regulation of electric
utilities in the affected party's reasonable opinion, nor
result in a Regulatory Event of Loss; and
5. the South Point Lessee shall have paid, at no after-tax cost to
such parties, all reasonable and documented out-of-pocket
expenses (including reasonable attorneys' fees and expenses)
of the Owner Lessor, the Owner Participant, the Indenture
Trustee, the Lease Indenture Company and the Pass Through
Trustee in connection with such assignment.
D. Subject to Section 4, the Guarantor shall not, and shall not permit
any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction unless (i) the Guarantor or such Restricted Subsidiary
would be entitled to create a Lien on such property securing
Indebtedness in an amount equal to the Attributable Debt with
respect to such transaction without equally and ratably securing the
Obligations pursuant to Section 3.5 or (ii) the net proceeds of such
sale are at least equal to the fair value (as determined by the
Board of Directors) of such property or asset and the Guarantor or
such Restricted Subsidiary shall apply or cause to be applied an
amount in cash equal to the net proceeds of such sale to the
retirement, within 180 days of the effective date of any such
arrangement, of Indebtedness of the Guarantor or any Restricted
Subsidiary; provided, however, that in addition to the transactions
permitted pursuant to the foregoing clauses (i) and (ii), the
Guarantor or any Restricted Subsidiary may enter into a
Sale/Leaseback Transaction as long as the sum of (x) the
Attributable Debt with respect to such Sale/Leaseback Transaction
and all other Sale/Leaseback Transactions entered into pursuant to
this proviso plus (y) the amount of outstanding Indebtedness secured
by Liens Incurred pursuant to the final proviso to Section 3.5 does
not exceed 15% of Consolidated Net Tangible Assets as determined
based on the consolidated balance sheet of the Guarantor as of the
end of the most recent fiscal quarter for which financial statements
are available; and provided, further, that a Restricted Subsidiary
may enter into a Sale/Leaseback Transaction with respect to property
or assets owned by such Restricted Subsidiary, the proceeds of which
are used to explore,
14
drill, develop, construct, purchase, repair, improve or add to
property or assets of any Restricted Subsidiary, or to repay (within
365 days of the commencement of full commercial operation of any
such property) Indebtedness Incurred to explore, drill, develop,
construct, purchase, repair, improve or add to property or assets of
any Restricted Subsidiary.
E. Subject to Section 4, the Guarantor shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, incur any
Lien on any of its properties or assets (including Capital Stock),
whether owned at the date hereof or thereafter acquired, in each
case to secure Indebtedness of the Guarantor or any Restricted
Subsidiary, other than (a)(1) Liens incurred by the Guarantor or any
Restricted Subsidiary securing Indebtedness Incurred by the
Guarantor or such Restricted Subsidiary, as the case may be, to
finance the exploration, drilling, development, construction or
purchase of or by, or repairs, improvements or additions to,
property or assets of the Guarantor or such Restricted Subsidiary,
as the case may be, which Liens may include Liens on the Capital
Stock of such Restricted Subsidiary or (2) Liens incurred by any
Restricted Subsidiary that does not own, directly or indirectly, at
the time of such original incurrence of such Lien under this clause
(2) any operating properties or assets, securing Indebtedness
Incurred to finance the exploration, drilling, development,
construction or purchase of or by, or repairs, improvements or
additions to, property or assets of any Restricted Subsidiary that
does not, directly or indirectly, own any operating properties or
assets at the time of such original incurrence of such Lien, which
Liens may include Liens on the Capital Stock of one or more
Restricted Subsidiaries that do not, directly or indirectly, own any
operating properties or assets at the time of such original
incurrence of such Lien, provided, however, that the Indebtedness
secured by any such Lien may not be issued more than 365 days after
the later of the exploration, drilling, development, completion of
construction, purchase, repair, improvement, addition or
commencement of full commercial operation of the property or assets
being so financed; (b) Liens existing on the date hereof (other than
Liens relating to Indebtedness or other obligations being repaid or
Liens that are otherwise extinguished with the proceeds of the
offering of the Certificates); (c) Liens on property, assets or
shares of stock of a Person at the time such Person becomes a
Subsidiary; provided, however, that any such Lien may not extend to
any other property or assets owned by the Guarantor or any
Restricted Subsidiary; (d) Liens on property or assets at the time
the Guarantor or a Subsidiary acquires the property or asset,
including any acquisition by means of a merger or consolidation with
or into the Guarantor or a Subsidiary; provided, however, that such
Liens are not incurred in connection with, or in contemplation of,
such merger or consolidation; and provided, further, that the Lien
may not extend to any other property or asset owned by the Guarantor
or any Restricted Subsidiary; (e) Liens securing Indebtedness or
other obligations of a Subsidiary owing to the Guarantor or a
Restricted Subsidiary or of the
15
Guarantor owing to a Subsidiary; (f) Liens incurred on assets that
are the subject of a Capitalized Lease Obligation to which the
Guarantor or a Subsidiary is a party, which shall include, Liens on
the stock or other ownership interest in one or more Restricted
Subsidiaries leasing such assets; (g) Liens to secure any
refinancing, refunding, extension, renewal or replacement (or
successive refinancings, refundings, extensions, renewals or
replacements) as a whole, or in part, of any Indebtedness secured by
any Lien referred to in the foregoing clauses (a), (b), (c), (d) and
(f), provided, however, that (x) such new Lien shall be limited to
all or part of the same property or assets that secured the original
Lien (plus repairs, improvements or additions to such property or
assets and Liens on the stock or other ownership interest in one or
more Restricted Subsidiaries beneficially owning such property or
assets) and (y) the amount of the Indebtedness secured by such Lien
at such time (or, if the amount that may be realized in respect of
such Lien is limited, by contract or otherwise, such limited lesser
amount) is not increased (other than by an amount necessary to pay
fees and expenses, including premiums, related to the refinancing,
refunding, extension, renewal or replacement of such Indebtedness);
(h) Liens by which the Obligations are secured equally and ratably
with other Indebtedness pursuant to this Section 3.5; in any such
case without effectively providing that the Obligations shall be
secured equally and ratably with (or prior to) the obligations so
secured for so long as such obligations are so secured; provided,
however, that the Guarantor or a Restricted Subsidiary may Incur
other Liens to secure outstanding Indebtedness as long as the sum of
(x) the lesser of (A) the amount of outstanding Indebtedness secured
by Liens Incurred pursuant to this proviso (or, if the amount that
may be realized in respect of such Lien is limited, by contract or
otherwise, such limited lesser amount) and (B) the fair value (as
determined by the Board of Directors) of the property securing such
item of Indebtedness, plus (y) the Attributable Debt with respect to
all Sale/Leaseback Transactions entered into pursuant to the first
proviso to Section 3.4 does not exceed 15% of Consolidated Net
Tangible Assets as determined based on the Consolidated balance
sheet of the Guarantor as of the end of the most recent fiscal
quarter for which financial statements are available; and (i) Liens
otherwise permitted under the 2000 Calpine Indenture.
F. (a) The Guarantor covenants and agrees that it shall not consolidate
or merge with or into any other Person, or sell, assign, convey,
lease, transfer or otherwise dispose of, all or substantially all of
its properties or assets to any Person or Persons in one or a series
of transactions, unless immediately after giving effect to such
transaction,
1. no Significant Lease Default or Lease Event of Default shall
have occurred and be continuing;
16
2. either (A) the Guarantor shall be the continuing Person, or (B)
the Person (if other than the Guarantor) formed by such
consolidation or into which the Guarantor is merged or to
which the properties and assets of the Guarantor are sold,
assigned, conveyed, transferred, disposed of or leased as
aforesaid shall be an entity organized and existing under the
laws of the United States or any State thereof or the District
of Columbia and shall execute and deliver to the Owner
Participant, the Owner Lessor and, so long as the Lien of the
Collateral Trust Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass Through
Trustee, a Guarantor Assignment and Assumption Agreement; and
3. each of the Owner Participant, the Owner Lessor and, so long as
the Lien of the Collateral Trust Indenture shall not have
been terminated or discharged, the Indenture Trustee and the
Pass Through Trustee shall have received an Officer's
Certificate of the Guarantor, the surviving entity or the
transferee, as the case may be, in form and substance
reasonably satisfactory to each of such parties, stating that
the proposed merger, consolidation, assignment, conveyance,
transfer, disposition, lease or sale, and the Guarantor
Assignment and Assumption Agreement complies with the terms of
this Section 3(a) and, as to legal matters, an Opinion of
Counsel; and
4. In addition to the conditions set forth in clauses (i) through
(iii) above, the Guarantor, subject to Section 4, will not
consummate any such consolidation, merger or sale of all or
substantially all of its properties or assets unless the
long-term unsecured debt of the resulting, surviving or
succeeding entity shall have a credit rating assigned by the
Rating Agencies that is not less than the lower of (x) the
credit rating of the long-term unsecured debt of the Guarantor
assigned by the Rating Agencies immediately prior to such
transaction and (y) a credit rating of the long-term unsecured
debt of the resulting, surviving or succeeding entity assigned
by the Rating Agencies that is Investment Grade; provided
however, the foregoing credit rating condition set forth in
this paragraph may be waived by the Owner Participant in its
sole discretion, and provided further, that if such credit
rating condition is not otherwise satisfied, or waived by the
Owner Participant, the Guarantor, the surviving entity or the
transferee, as the case may be, may provide in the
alternative, either (A) a letter of credit from a L/C Bank
with at least either (1) an A rating from S&P or (2) an A2
rating from ▇▇▇▇▇'▇, in either case, covering the Equity
Portion of Termination Value from time to time throughout the
Lease Term, or (B) alternative or additional credit support
arrangements which result in the satisfaction of the rating
17
condition in either clause (x) or clause (y) above, provided
that such arrangements contemplated in this sub-clause (B) are
satisfactory to the Owner Participant and result in the
satisfaction of such rating condition.
(b) Upon the consummation of such transaction described in Section
3.6(a), the resulting, surviving or succeeding entity, if other than the
Guarantor, shall succeed to, and be substituted for, and may exercise every
right and power and shall perform every obligation of, the Guarantor under this
Guaranty and each other Calpine Document, and from and after the effective date
and time of the consummation of such transfer, the Guarantor shall be released
from all obligations accruing hereunder other than those accruing prior to such
effective date and time.
G. The Guarantor shall, together with each payment it makes hereunder,
provide a written notice to each Beneficiary or Beneficiaries which
are the intended recipients of such payment of the amount payable to
each such Beneficiary and the Operative Document(s) with respect to
which such payment is being made.
IV. BENEFICIARIES; TERMINATION OF CERTAIN COVENANTS
The Owner Participant, the Owner Lessor, the Trust Company (but only
to the extent indemnified under the Participation Agreement) and, so long as
the Lien of the Collateral Trust Indenture has not been terminated or
discharged, the Indenture Trustee and the Lease Indenture Company, and (but
only to the extent expressly referred to herein, and with respect to Section
3.2(a) hereof and with respect to the obligations of the South Point Lessee
under the Participation Agreement) the Pass Through Trustee (for the benefit of
the Certificateholders) and the Pass Through Company, in each case, together
with their respective permitted successors and assigns (and with respect to
clause (ii) below, the other related Persons referred to therein), are each
beneficiaries of this Guaranty (each a "Beneficiary" or, together, the
"Beneficiaries"); provided that, notwithstanding the foregoing or any other
provision of this Guaranty, (i) the Owner Participant shall be the sole and
exclusive beneficiary of, and shall have the sole right to enforce, (A) clause
(iv) of Section 3.6(a) hereof, (B) clause (4) of Section 2.1(a) hereof to the
extent relating to the South Point Lessee's indemnity obligation under the Tax
Indemnity Agreement, (ii) to the extent that the South Point Lessee is
obligated to indemnify a particular Beneficiary (or any Affiliate, agent
director, officer, or employee thereof) in accordance with Section 9 of the
Participation Agreement, then such Beneficiary (or such Affiliate, agent,
director, officer or employee) shall be the sole and exclusive beneficiary of,
and shall have the sole right to enforce, the Guarantor's guaranty of, and
agreement with respect to, such indemnification obligation hereunder, (iii) the
Owner Lessor and Indenture Trustee (as assignee of Owner Lessor) shall be the
sole and exclusive beneficiaries of, and shall have the sole right to enforce,
the fourth sentence of Section 2.1(b) hereof, and (iv) the Indenture Trustee,
the Lease Indenture Company, the Pass Through Trustee and the Pass Through
Company shall be the sole and exclusive beneficiaries of the provisions of
Section 3.4 and Section 3.5 hereof; provided however, with respect to this
clause (iv), once the Certificates shall have been paid in full, the
18
covenants set forth in Section 3.4 and Section 3.5 hereof shall, subject to the
immediately following sentence, immediately and without any further action
terminate and be of no further force or effect. Any amendment, waiver or
modification of or supplement to Section 3.4 or Section 3.5 which is consented
to by the Indenture Trustee shall be binding upon the Owner Lessor and the
Owner Participant. Notwithstanding the foregoing or anything herein or in any
of the Operative Documents to the contrary, if the Owner Lessor shall have
issued additional Lease Debt at the request of the South Point Lessee in
accordance with Section 11 of the Participation Agreement prior to,
simultaneously with, or after payment in full of the Certificates and such new
Lease Debt is outstanding on or after the date the Certificates are paid in
full, the covenants set forth in Section 3.4 and Section 3.5 shall, to the
extent required by the terms of such new Lease Debt, remain in effect or
thereafter become effective if not then in effect, but shall be for the sole
and exclusive benefit of, and enforceable solely by, the holder of such new
Lease Debt. Upon repayment of such new Lease Debt, or compliance with the terms
thereof, the covenants set forth in Section 3.4 and Section 3.5 shall
immediately and without further action terminate and be of no further force and
effect. Notwithstanding any of the preceding provisions, a breach of Sections
3.4 or 3.5 under this Guaranty at such time as such breach shall have become an
"Event of Default" under Section 7.1 shall constitute a Lease Event of Default
under the circumstances provided in, and to the extent set forth in, the
Facility Lease.
V. BENEFICIARIES' RIGHTS
Each Beneficiary may at any time and from time to time without the
consent of, or notice to the Guarantor, without incurring responsibility to the
Guarantor and without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or
alter, any of the Obligations due to it, any security
therefor, or any liability incurred directly or
indirectly in respect thereof, and, subject to clause
(d) below, the guaranty and agreement herein made shall
apply to the Obligations due to it as so changed,
extended, renewed or altered;
b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any
property by whomsoever at any time pledged or mortgaged
to secure, or howsoever securing, the Obligations or any
liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof due
to it, and/or any offset thereagainst due to it;
c) exercise or refrain from exercising any rights against the
South Point Lessee or others or otherwise act or
refrain from acting;
19
d) settle or compromise any of the Obligations due to it, any
security therefor or any liability (including any of
those hereunder) incurred directly or indirectly in
respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any
liability (whether due or not) of the South Point Lessee
to its creditors other than the Guarantor; provided that
any settlement or compromise with respect to, or other
reduction (by operation of law or negotiation) of, any
of the Obligations (or amounts underlying such
Obligations) due to it (whether occurring before or
after the occurrence of a Lease Event of Default) shall
not alter the amount of the original Obligations due to
it guaranteed hereby and the Guarantor acknowledges and
agrees that its obligations hereunder shall be for the
full amount of the Obligations due to it without giving
effect to any such settlement, compromise or other
reduction;
e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the South Point Lessee
to such Beneficiary regardless of what liabilities or
liabilities of the South Point Lessee remain unpaid;
f) consent to or waive any breach of, or any act, omission or
default under, the Participation Agreement or the
Facility Lease, or otherwise amend, modify or supplement
the Participation Agreement or the Facility Lease or any
of such other instruments or agreements; and/or
g) act or fail to act in any manner referred to in this
Guaranty which may deprive the Guarantor of its right
to subrogation against the South Point Lessee to recover
full indemnity for any payments made pursuant to this
Guaranty.
Anything herein to the contrary notwithstanding, any exercise of rights or
remedies by any Beneficiary hereunder or under any other Operative Document or
the South Point Ground Lease, or the failure of any Beneficiary to exercise any
rights or remedies hereunder in accordance with the provisions hereof or under
any other Operative Document or the South Point Ground Lease, shall not in any
way adversely affect the ability of any other Beneficiary to exercise its
rights or remedies hereunder.
VI. SURVIVAL OF GUARANTY AND PAYMENT AGREEMENT (SOUTH POINT (SP-2))
Notwithstanding anything to the contrary herein, this Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any of the amounts paid to any of the Beneficiaries, in whole or in part, is
required to be repaid upon the insolvency, bankruptcy, dissolution,
liquidation, or reorganization of the
20
Guarantor or the South Point Lessee or any other Person, or as a result of the
appointment of a custodian, interviewer, receiver, trustee, or other officer
with similar powers with respect to the Guarantor or the South Point Lessee or
any other Person or any substantial part of the property of the Guarantor or
the South Point Lessee or such other Person, all as if such payments had not
been made.
VII. DEFAULTS; REMEDIES; SUBROGATION
A. Defaults. The following events shall constitute an "Event of Default"
hereunder (whether any such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any
order, rule or regulation of any Governmental Entity):
a) the Guarantor or the South Point Lessee under the Facility
Lease shall fail to make any payment with respect to
Periodic Rent or the Termination Value (including the
Equity Portion of Termination Value and Debt Portion of
Termination Value) when due and payable under such
Facility Lease or this Guaranty within five (5) days
after the same shall become due thereunder; or
b) the Guarantor or the South Point Lessee shall fail to make
any other amount payable under any Operative Document
after the same shall become due thereunder and such
failure shall have continued from a period of ten (10)
Business Days after receipt by the South Point Lessee
and the Guarantor of written notice of such failure by
the South Point Lessee and/or the Guarantor, as
applicable;
c) The Guarantor shall fail to comply with its covenants set
forth in Section 3.3 (transfer of South Point Lessee
ownership), 3.6 (Guarantor merger) or 8.4 (assignment of
Guaranty) of this Guaranty.
d) the Guarantor shall fail to perform or observe any
covenant, obligation or agreement to be performed or
observed by it under any Calpine Document (other than
any covenant, obligation or agreement referred to in
clauses (a) or (b) of this Section 7.1) in any material
respect, which shall continue unremedied for (1) with
respect to the Guarantor's guaranty of, and agreement
with respect to, any nonmonetary obligation, covenant or
agreement of the South Point Lessee under any of the
Operative Documents or the South Point Ground Lease, 30
days after receipt by the Guarantor of written notice
thereof from the Owner Participant, the Owner Lessor,
the Indenture Trustee or the
21
Pass Through Trustee; provided, however, if such
condition cannot be remedied within such 30-day period,
then the period within which to remedy such condition
shall be extended up to an additional 180 days, so long
as the Guarantor diligently pursues such remedy and such
condition is reasonably capable of being remedied within
such additional 180-day period, and (2) with respect to
any other obligation, covenant or agreement hereunder,
30 days after receipt by the Guarantor of written notice
thereof;
e) there shall have occurred either (i) a default by the
Guarantor or any Restricted Subsidiary under any
instrument or instruments under which there is or may be
secured or evidenced any Indebtedness of the Guarantor
or any Restricted Subsidiary of the Guarantor (other
than the Obligations) having an outstanding principal
amount of $50,000,000 (or its foreign currency
equivalent) or more individually or in the aggregate
that has caused the holders thereof to declare such
Indebtedness to be due and payable prior to its Stated
Maturity, unless such declaration has been rescinded
within 30 days or (ii) a default by the Guarantor or any
Restricted Subsidiary in the payment when due of any
portion of the principal under any such instrument or
instruments, and such unpaid portion exceeds $50,000,000
(or its foreign currency equivalent) individually or in
the aggregate and is not paid, or such default is not
cured or waived, within any grace period applicable
thereto, unless such Indebtedness is discharged within
30 days of the Guarantor or a Restricted Subsidiary
becoming aware of such default;
f) the Guarantor or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an
order for relief against it in an involuntary case;
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) admits in writing its inability to generally pay its debts
as such debts become due;
22
or takes any comparable action under any foreign laws relating to
insolvency;
g) an involuntary case or other proceeding shall be commenced
against the Guarantor or any Significant Subsidiary
seeking (i) liquidation, reorganization or other relief
with respect to it or its debts under Title 11 of the
Bankruptcy Code or any bankruptcy, insolvency or other
similar law now or hereafter in effect, or (ii) the
appointment of a trustee, receiver, liquidator,
custodian or other similar official with respect to it
or any substantial part of its property or (iii) the
winding-up or liquidation of the Guarantor or such
Significant Subsidiary; and such involuntary case or
other proceeding shall remain undismissed and unstayed
for a period of 60 days;
h) any representation or warranty made by the Guarantor herein
shall prove to have been incorrect in any material
respect when made or misleading in any material respect
when made because of the omission to state a material
fact and such incorrect or misleading representation is
and continues to be material and unremedied for a period
of 30 days after receipt by the Guarantor of written
notice thereof; provided, however, that if such
condition cannot be remedied within such 30-day period,
then the period within which to remedy such condition
shall be extended up to an additional 60 days, so long
as the Guarantor diligently pursues such remedy and such
condition is reasonably capable of being remedied within
such additional 60-day period.
The grace periods set forth in Section 7.1(a) and (b) above shall not
affect in any way the right hereunder of any Beneficiary entitled to a payment
of any amount payable to it, or performance of any obligation, by the South
Point Lessee under any Operative Document to demand prompt payment thereof, or
performance thereof, by the Guarantor immediately upon any failure of the South
Point Lessee to pay or perform the same when it has become due (and, for the
avoidance of doubt, without regard to the existence of any cure or grace period
before such failure by the South Point Lessee becomes a Lease Event of
Default); provided, however, notwithstanding the foregoing, no Lease Event of
Default under Section 16(m) and no remedies under the Facility Lease may be
exercised until a Calpine Guaranty Event of Default has occurred and is
continuing.
B. Remedies. Subject to the last paragraph of Section 7.1, each
Beneficiary shall be entitled to (a) all rights and remedies to
which it may be entitled hereunder or at law, in equity or by
statute and may proceed by appropriate court action to enforce the
terms hereof and to recover damages for the breach hereof. Each and
every remedy of the
23
Beneficiaries shall, to the extent permitted by law, be cumulative
and shall be in addition to any other remedy now or hereafter
existing at law or in equity. At the option of each Beneficiary and
upon notice to the Guarantor, the Guarantor may be joined in any
action or proceeding commenced by such Beneficiary against the South
Point Lessee in respect of any Obligations and recovery may be had
against the Guarantor in such action or proceeding or in any
independent action or proceeding against the Guarantor, without any
requirement such Beneficiary first assert, prosecute or exhaust any
remedy or claim against the South Point Lessee. Notwithstanding any
of the foregoing, if an Event of Default specified in clause (e) or
(f) of Section 7.1 with respect to the Guarantor occurs, all
monetary Obligations shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the
Owner Participant, the Owner Lessor, the Indenture Trustee or the
Pass Through Trustee.
C. Subrogation. The Guarantor will not exercise any rights that it may
acquire by way of subrogation under this Guaranty, by any payment
made hereunder or thereunder or otherwise, until all of the
Obligations and all other obligations of the South Point Lessee and
the Guarantor owing to any of the Beneficiaries (or any other party)
under the Operative Documents shall have been paid in full. If any
amount shall be paid to the Guarantor on account of such subrogation
rights at any time when all of the Obligations and such other
obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Beneficiary to whom such
Obligation or other obligation is payable and shall forthwith be
paid to such Beneficiary to be credited and applied to such
Obligation or other obligation, whether matured or unmatured, in
accordance with the terms of the Operative Document under which such
Obligation or other obligation arose. If (i) the Guarantor shall
make payment to any Beneficiary of all or any part of the
Obligations or other obligations and (ii) all the Obligations and
such other obligations shall be paid and performed in full, such
Beneficiary will, at the Guarantor's request and expense, execute
and deliver to the Guarantor appropriate documents, without
recourse, subject to Section 6 hereof, necessary to evidence the
transfer by subrogation to the Guarantor of an interest in the
Obligations and such other obligations resulting from such payment
by the Guarantor.
D. Waiver of Demands, Notices, Etc.
a) Without limiting the last sentence of Section 7.1, the
Guarantor hereby unconditionally waives (i) notice of
any of the matters referred to in the second sentence of
Section 2.3 hereof; (ii) all notices which may be
required by statute, rule of law or otherwise, now or
hereafter in effect, to preserve any rights against the
Guarantor hereunder, including, without limitation, any
demand, proof or notice
24
of non-payment of any Obligation; (iii) any right to the
enforcement, assertion or exercise of any right, remedy,
power or privilege under or in respect of the Facility Lease
(or under or in respect of any other agreement including any
Operative Document); (iv) notice of acceptance of this
Guaranty, demand, protest, presentment, notice of
default and any requirement of diligence; (v) any
requirement to exhaust any remedies or to mitigate any
damages resulting from default by the South Point Lessee
or any Person under the Facility Lease (or under any
other agreement including any Operative Document); and
(vi) any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge,
release or defense of a guarantor or surety, or which
might otherwise limit recourse against the Guarantor,
other than satisfaction in full of the Obligations.
b) This Guaranty is a continuing one and all of the
Obligations shall be conclusively presumed to have been
created in reliance hereon. No failure or delay on the
part of any Beneficiary in exercising any right, power
or privilege hereunder and no course of dealing among
the Guarantor, any Beneficiary or the South Point Lessee
shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
The rights, powers and remedies herein expressly
provided are cumulative and not exclusive of any rights,
powers or remedies which the Beneficiary would otherwise
have. No notice to or demand on the Guarantor in any
case shall entitle the Guarantor to any other further
notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Beneficiary to
any other or further action in any circumstances without
notice or demand.
c) If a claim is ever made upon any Beneficiary for repayment
or recovery of any amount or amounts received in
payment or on account of any of the Obligations and any
of the Beneficiaries repays all or part of said amount
by reason of (a) any judgment, decree or order of any
court or administrative body having jurisdiction over
such Beneficiary or any of its property or (b) any
settlement or compromise of any such claim effected by
such Beneficiary with any such claimant (including the
South Point Lessee), then and in such event the
Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon it,
notwithstanding any revocation hereof or
25
the cancellation of the Facility Lease or other instrument
evidencing any liability of the South Point Lessee, and
the Guarantor shall be and remain liable to the
aforesaid Beneficiaries hereunder for the amount so
repaid by or recovered from such Beneficiary to the same
extent as if such amount had never originally been
received by any such Beneficiary.
E. Costs and Expenses. The Guarantor agrees to pay on an After-Tax Basis
any and all reasonable costs and expenses (including reasonable
legal fees) incurred by any Beneficiary in enforcing its rights
under this Guaranty.
F. Survival of Remedies and Subrogation Rights. The provisions of this
Section 7 shall survive the term of this Guaranty and the payment
in full of the Obligations and the termination of the Operative
Documents.
VIII. MISCELLANEOUS
A. Amendments and Waivers. No term, covenant, agreement or condition of
this Guaranty may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively
or prospectively) except by an instrument or instruments in writing
executed by the Guarantor and consented to by the Beneficiaries.
B. Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein
shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become
effective (a) upon personal delivery thereof, including, without
limitation, by overnight mail or courier service, (b) in the case of
notice by United States mail, certified or registered, postage
prepaid, return receipt requested, upon receipt thereof, or (c) in
the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly
confirmed by either of the methods set forth in clauses (a) or (b)
above, in each case addressed to the Guarantor hereto at its address
set forth below or at such other address as such party may from time
to time designate by written notice:
Calpine Corporation
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
26
C. Survival. Except as expressly set forth herein, the warranties and
covenants made by the Guarantor shall not survive the expiration or
termination of this Guaranty.
D. Assignment and Assumption. (a) Except as provided in clause (b)
below, this Guaranty may not be assigned by the Guarantor to, or
assumed by, any successor to or assign of the Guarantor (it being
understood and agreed that a consolidation with or merger of the
Guarantor into, or the sale of all or substantially all of its
assets to, another Person in accordance with Section 3.6 shall not
be deemed such an assignment or assumption for the purposes hereof)
without the prior written consent of the Beneficiaries, nor may the
Guarantor transfer or assign a majority (or more) of the Ownership
Interest in the South Point Lessee.
(b) Notwithstanding any of the foregoing in this Section 8.4, the
Guarantor may transfer a majority (or more) of its Ownership Interest in the
South Point Lessee to a single third party, provided that the Guarantor assigns
this Guaranty to such third party (whereupon the Guarantor shall be released
from all obligations under this Guaranty in connection with such transfer) upon
satisfaction of the following conditions:
(i) unless the Owner Participant shall have consented to such
assignment, such transferee, or a party which unconditionally guarantees
such transferee's obligations under the Operative Documents assigned to
such transferee (A) shall have significant experience owning or operating
gas-fired electric generating facilities in the United Sates and (B) shall
have a tangible net worth of at least $1 billion after giving effect to
such transfer;
(ii) the requirements set forth in Section 3.3(i), (iii), (iv) and
(v) of this Guaranty have been satisfied and, immediately after giving
effect to such transfer, the transferee shall own at least a majority of
the Ownership Interest of the South Point Lessee;
(iii) such transfer occurs (i) subsequent to the tenth year of the
Facility Lease Term of the South Point Lessee and (ii) when the aggregate
principal amount of the Lessor Notes is less than $50 million;
(iv) neither the transferee nor any Affiliate of the transferee
shall be involved in any material litigation with the Owner Participant;
(v) the Rating Agencies shall have confirmed that after giving
effect to such transfer, the Certificates (if then outstanding) and the
transferee (or a party which guarantees such transferee's obligations
under the Operative Documents assigned to such transferee) shall be rated
at least Investment Grade (and not be on negative credit watch) by the
Rating Agencies;
(vi) all the obligations of the South Point Lessee under the
Operative Documents and the South Point Ground Lease shall remain in full
force and
27
effect, the transferee shall assume all the obligations of the Guarantor
under the Operative Documents pursuant to the Guarantor Assignment and
Assumption Agreement and such Operative Documents as so assumed shall
remain in full force and effect, and any guaranty of such transferee's
obligations pursuant to this Section 8.4 shall be in a form satisfactory
to the Owner Participant (it being acknowledged and agreed that any such
guaranty which shall be in form and substance substantially similar to
this Guaranty shall be deemed to be satisfactory to the Owner
Participant); and
(vii) the Owner Participant, the Owner Lessor and, so long as the
Lien on the Collateral Trust Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass Through Trustee shall have
received an Opinion of Counsel as to the satisfaction of the conditions
set forth in clause (vi) of this Section 8.4(b).
28
E. Governing Law. This Guaranty shall be in all respects governed by and
construed in accordance with the laws of the State of New York,
including all matters of construction, validity and performance
(without giving effect to the conflicts of laws provisions, other
than New York General Obligations Law Section 5-1401).
F. Severability. Any provision of this Guaranty that is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
G. Headings. The headings of the sections of this Guaranty are
inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the
provisions hereof.
H. Further Assurances. The Guarantor will promptly and duly execute
and deliver such further documents as may be reasonably
requested by the Owner Lessor, all as may be reasonably
necessary to affirm the Guarantor's obligations under this
Guaranty.
I. Effectiveness of Guaranty. This Guaranty has been dated as of
the date first above written for convenience only. This
Guaranty shall be effective on the date of execution and
delivery by the Guarantor.
J. Acknowledgment by the Guarantor. The Guarantor acknowledges that
an executed (or conformed) copy of the Participation
Agreement, the Facility Lease, the other Operative Documents
and the South Point Ground Lease have been made available to
its principal executive officers and such officers are
familiar with the contents thereof.
K. Tolling. Any acknowledgement or new promise, whether by payment
of principal or interest or otherwise and whether by the
South Point Lessee or others (including the Guarantor), with
respect to any of the Obligations shall, if the statute of
limitations in favor of the Guarantor against any Beneficiary
shall have commenced to run, toll the running of such statute
of limitations, and if the period of such statute of
limitations shall have expired, prevent the operation of such
statute of limitations.
L. Consent to Jurisdiction; Waiver of Trail by Jury; Process Agent.
a) The Guarantor (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County (without prejudice to
the right of the Guarantor to remove to the United
States District
29
Court for the Southern District of New York) and
to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York for
the purposes of any suit, action or other proceeding
arising out of this Guaranty, the Facility Lease, the other
Operative Documents, or the subject matter hereof or
thereof or any of the transactions contemplated hereby or
thereby brought by any of the Beneficiaries hereunder or
their successors or assigns; (ii) hereby irrevocably agrees
that all claims in respect of such action or proceeding may
be heard and determined in such New York State court, or in
such federal court; and (iii) to the extent permitted by
Applicable Law, hereby irrevocably waives, and agrees not
to assert, by way of motion, as a defense, or otherwise, in
any such suit, action or proceeding any claim that it is
not personally subject to the jurisdiction of the
above-named courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this
Guaranty, the other Operative Documents, or the subject
matter hereof or thereof may not be enforced in or by such
court.
b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR
HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL
BY JURY, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF THIS GUARANTY, THE OTHER OPERATIVE
DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
BROUGHT BY ANY OF THE BENEFICIARIES HEREUNDER OR THEIR
SUCCESSORS OR ASSIGNS.
c) By the execution and delivery of this Guaranty, the
Guarantor designates, appoints and empowers National
Registered Agent, Inc., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ as its authorized agent to receive for
and on its behalf service of any summons, complaint or
other legal process in any such action, suit or
proceeding in the State of New York for so long as any
obligation of the Guarantor shall remain outstanding
hereunder or under any of the other Operative Documents.
The Guarantor shall grant an irrevocable power of
attorney to National Registered Agent, Inc. in respect
of such appointment and shall maintain such power of
attorney in full force and effect for so long as any
obligation of the Guarantor shall remain outstanding
hereunder or under any of the Operative Documents.
30
M. Agreement for Benefit of Parties Hereto. Nothing in this
Guaranty, express or implied, is intended or shall be
construed to confer upon, or to give to, any person
other than the parties hereto and their respective
successors and assigns, any right, remedy or claim under
or by reason of this Guaranty or any covenant, condition
or stipulation hereof; and the covenants, stipulations
and agreements contained in this Guaranty are and shall
be for the sole and exclusive benefit of the parties
hereto and their respective successors and assigns. The
Guarantor acknowledges that certain of the rights of the
Owner Lessor hereunder have been or shall be assigned to
and may be enforced by the Indenture Trustee pursuant to
the terms of the Collateral Trust Indenture (excluding,
among other things, rights to Excepted Payments), the
Guarantor hereby consents to such assignment and the
Guarantor agrees to render performance of such assigned
obligations directly to the Indenture Trustee (as
assignee of the Owner Lessor). The Guarantor agrees to
make all payments which have been so assigned owing to
the Owner Lessor under this Guaranty directly to the
account of the Indenture Trustee to be specified to the
Guarantor in writing, or to such other account specified
in writing from time to time by the Indenture Trustee.
N. Termination of Guaranty. Upon the full payment and
satisfaction of the Obligations and all of the
Guarantor's obligations hereunder, this Guaranty shall
terminate and shall be of no further effect.
Nevertheless, this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at
any time, any payment, or any part thereof, of any of
the Obligations is rescinded or must otherwise be
returned by any Beneficiary upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization
of the South Point Lessee or otherwise, all as though
such payment had not been made.
O. Additional Obligations. Upon the assumption by the South
Point Lessee of the Lessor Notes in connection with a
termination of the Facility Lease, as permitted therein,
the obligation of the South Point Lessee to pay
principal of, and Make-Whole Amount if any, and interest
on the Lessor Notes, and amounts payable by it to the
Indenture Trustee under the Collateral Trust Indenture,
shall thereupon become Obligations for all purposes of
this Guaranty, and the Guarantor shall therefor execute
and deliver to the Indenture Trustee such further
guaranties, instruments and documents as the Indenture
Trustee may reasonably request in order to more fully
effectuate the Guarantor's unconditional guaranty of
such additional Obligations.
P. Miscellaneous Provisions. The payment obligations of the
Guarantor hereunder shall rank pari passu with all
other senior unsecured indebtedness of the Guarantor for
borrowed money.
31
[No more text on this page]
33
IN WITNESS WHEREOF, the parties have caused this Guaranty to be
duly executed and delivered on the day and year first above written.
CALPINE CORPORATION,
as Guarantor
By: _________________________________
Name:
Title:
SOUTH POINT OL-2, LLC,
a Delaware limited liability company
By: _________________________________
Name:
Title:
SBR OP-2, LLC,
a Delaware limited liability company
By: _________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
National Association, not in its
individual capacity but solely as
Indenture Trustee
By: ____________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
National Association, not in its
individual capacity but solely as
Pass Through Trustee
By: ____________________________
Name:
Title: