Dated as of March 15,
2006
CALPINE CONSTRUCTION FINANCE
COMPANY, L.P.
THE GUARANTORS NAMED
HEREIN
Relating to the Indenture
Dated as of August 14, 2003
and
Amended as of September 18, 2003, January 14, 2004 and
March 5, 2004
WAIVER
AGREEMENT UNDER INDENTURE, dated as of March 15, 2006 (the
“ Waiver Agreement ”), among Calpine
Construction Finance Company, L.P., a Delaware limited partnership
(the “Company”), CCFC Finance Corp., a Delaware
corporation (“ Finance Corp. ”), the Guarantors
and Wilmington Trust FSB, as trustee (the “ Trustee
”).
WHEREAS,
the Company, Finance Corp., the Guarantors and the Trustee have
executed that certain Indenture, dated as of August 14, 2003,
as supplemented by that certain Supplemental Indenture, dated as of
September 18, 2003, and as further supplemented by that
certain Second Supplemental Indenture, dated as of January 14,
2004, and as further supplemented by that certain Third
Supplemental Indenture, dated as of March 5, 2004 (as
supplemented, the “ Indenture ”), in connection
with the co-issuance by the Company and Finance Corp. of certain
Second Priority Senior Secured Floating Rate Notes due 2011 (the
“ Notes ”);
WHEREAS,
on December 20, 2005, Calpine Corporation (“
Calpine ”) and certain of its controlled subsidiaries,
including, among others, Calpine Operating Services Company, Inc.
and Calpine Energy Services, L.P. (“ CES ”),
filed a voluntary proceeding for relief under Chapter 11 of
the United States Bankruptcy Code with the United States Bankruptcy
Court for the Southern District of New York (the “
Proceeding ”);
WHEREAS,
as permitted under the Indenture, the Company used net proceeds of
approximately $212.0 million to prepay for gas under the Index
Based Gas Sale and Power Purchase Agreement dated as of
August 14, 2003, as amended (the “ PPA
”);
WHEREAS,
ordinarily under the PPA, the cost of gas consumed by the
Company’s facilities is offset against the cost of power
generated by the facilities, with CES paying the Company only the
net amount due; however due to the prepayment, CES was obligated
for a period of time to pay full cost for the power under the PPA,
without offset;
WHEREAS,
certain defaults, including CES payment defaults relating to
periods prior to December 20, 2005, have occurred under the
PPA, which is a Major Project Document, as the result of the filing
of the Proceeding, and such defaults, in turn, constitute Defaults
which have become Events of Default (the “
Proceeding-Related Defaults ”);
WHEREAS,
CES failed to pay to the Company under the PPA approximately
$24.4 million due on January 25, 2006 (the “
January PPA Payment ”) and approximately
$61.8 million due on February 27, 2006 (the “
February PPA Payment ”), both of which relate to
periods following the filing of the Proceeding;
WHEREAS,
the failure by CES to timely make each of the January PPA Payment
and the February PPA Payment constitutes a Default, and such
Defaults have not as of the date hereof become Events of Default
(the “ PPA Payment Defaults ,” and together with
the Proceeding-Related Defaults, the “ Specified
Defaults ”);
WHEREAS,
pursuant to a consent solicitation commenced as of
February 22, 2006 and amended and restated as of
March 10, 2006 (the “Solicitation”), the Company
and Finance Corp. have requested that the Holders consent to a
waiver of the Specified Defaults (the “ Waiver
”), which will also have the effect of permitting the Company
to distribute Excess Cash
Flow to the
direct and indirect holders of its Equity Interests in accordance
with Section 4.07 of the Indenture;
WHEREAS,
pursuant to Section 6.04 and 9.02 of the Indenture, the
Holders of at least a majority in aggregate principal amount of the
Notes have consented to the Waiver; and
WHEREAS,
the Company and Finance Corp. have directed the Trustee to execute
and deliver this Waiver Agreement in accordance with the terms of
the Indenture.
NOW
THEREFORE, for and in consideration of the premises and mutual
covenants herein contained, the Company, Finance Corp., the
Guarantors and the Trustee agree as follows:
Section 1.1
Definition of Terms.
Unless
the context otherwise requires, capitalized terms used herein that
are not otherwise defined herein shall have the meaning assigned to
such terms in the Indenture.
ARTICLE II
WAIVER OF SPECIFIED DEFAULTS
(a) Upon
the satisfaction of the conditions set forth in Section 2.4 of
this Waiver Agreement, the Holders, pursuant to Section 6.04
of the Indenture, hereby waive application of Section 6.01(11) of
the Indenture solely to the extent applicable to any Specified
Default, such Waiver being effective on the first date that all of
the conditions set forth in Section 2.4 of this Waiver
Agreement shall have been satisfied (the “ Waiver
Effective Date ”). (b) Except for the Waiver
expressly set forth above in subsection (a), the Holders reserve
each and every right and remedy they may have under the Indenture
and under applicable law with respect to any Default or Event of
Default.
Section 2.2
Distributions . The Holders, the Company, Finance Corp. and
the Guarantors acknowledge (a) that within two Business Days
of the Waiver Effective Date (i) an amount not to exceed
$16.0 million may be distributed out of Excess Cash Flow on
account of the Company’s Equity Interests (to enable CCFC
Preferred Holdings, LLC, the indirect parent of the Company, to pay
a semi-annual dividend to the holders of its redeemable preferred
shares) in accordance with Section 4.07 of the Indenture, and
(ii) notwithstanding the Company’s right under
Section 4.07 of the Indenture (after giving effect to this
Waiver Agreement) to distribute additional Excess Cash Flow on
account of the Company’s Equity Interests, in addition to the
amount referred to in (i) above, the Company shall not so
distribute more than $2.0 million in the aggregate in Excess
Cash Flow on such date and such distributed amount shall be
primarily for the purpose of reimbursement of legal expenses
incurred by the holders of the Company’s Equity Interests and
otherwise for administrative fees related to the issuance of the
redeemable preferred shares of CCFC Preferred Holdings, LLC,
(b) that prior to August 26, 2006, the Company
shall
2
not make any
distribution, dividend or other payment to or on account of the
Company’s Equity Interests and (c) that in the event
that, by August 26, 2006, the PPA shall not have been assumed
pursuant to Section 365 of the Bankruptcy Code (as defined
below) in the Proceeding, or amended or replaced in accordance with
the terms of the Indenture, including, without limitation, with the
consent of Holders of at least a majority in aggregate principal
amount of the Notes, then notwithstanding the Company’s
right, if any, under Section 4.07 of the Indenture to
distribute Excess Cash Flow on account of the Company’s
Equity Interests on such date, the Company shall not so distribute
Excess Cash Flow in an amount exceeding the lesser of (x) the
sum of (i) the amount sufficient to enable CCFC Preferred
Holdings, LLC to pay the semi-annual dividend to the holders of its
redeemable preferred shares due on such date, and (ii) up to
$2.5 million for the purpose of paying expenses of CCFC
Preferred Holdings, LLC, and (y) an amount that would result
in the Company retaining at least $25.0 million in cash or
cash equivalents on hand immediately following such
distribution.
Section 2.3
Agreement to File Proof of Claim and Motion for Administrative
Expense . Following the Waiver Effective Date, the Company
shall timely file a proof of claim against CES in the Proceeding
for the amounts owed to the Company by CES under the PPA. To the
extent that any amounts remain due and owing by CES under the PPA
for post-petition goods or services, the Company shall file in the
Proceeding a motion seeking allowance of such amounts as
administrative expenses under 11 U.S.C. §503(b) or shall
obtain the entry of a Stipulation and Agreed Order providing for
the allowance of such amounts as administrative expenses under 11
U.S.C. §503(b).
Section 2.4
Conditions . The effectiveness of Section 2.1(a) of
this Waiver Agreement is subject to the satisfaction of the
following conditions precedent:
(a) Holders
of at least a majority in aggregate principal amount of the Notes
shall have consented to this Waiver, and the Company, Finance
Corp., and the Guarantors named as signatories hereto and the
Trustee shall have executed and delivered their respective
counterparts of this Waiver Agreement;
(b) the
Company shall have paid current principal and interest (at the rate
set forth in Section 1 of the Notes) required under the Notes
on the February 27, 2006 payment date prior to the payment of
any other amounts due on such payment date, including amounts due
pursuant to Section 2.2 of this Waiver Agreement;
prov
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