THIS WAIVER
AGREEMENT (this “ Agreement ”) is entered into
as of the 15 th day of March, 2006, by and among CALPINE
CONSTRUCTION FINANCE COMPANY, L.P., a Delaware limited partnership
(the “ Borrower ”), CALPINE HERMISTON, LLC, a
Delaware limited liability company (“ Calpine LLC
”), CPN HERMISTON, LLC, a Delaware limited liability company
(“ CPN LLC ”), and HERMISTON POWER PARTNERSHIP,
an Oregon general partnership (the “ Hermiston
Partnership ” and, together with Calpine LLC and CPN LLC,
the “ Guarantors ”), the lenders party hereto
(the “ Lenders ”), and GOLDMAN SACHS CREDIT
PARTNERS L.P., as administrative agent (together with its
successors in such capacity, the “ Administrative
Agent ”).
WHEREAS, the
Borrower, the Guarantors, the Lenders, the Administrative Agent and
the Sole Lead Arranger entered into a Credit and Guarantee
Agreement, dated as of August 14, 2003 (as amended on
September 12, 2003, January 13, 2004 and March 5,
2004, and as may be further amended from time to time, the “
Credit Agreement ”), pursuant to which the Borrower
borrowed, on a non-recourse basis as described in the Credit
Agreement, $385,000,000 in aggregate principal amount of First
Priority Senior Secured Institutional Term Loans due 2009 (the
“ Term Loans ”);
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 Credit Agreement, the Borrower 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
Borrower’s facilities is offset against the cost of power
generated by the facilities, with CES paying the Borrower 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 Borrower 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;
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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, the
Borrower has asked that the Lenders waive the Specified Defaults
pursuant to a waiver request, dated as of February 22, 2006
and amended and restated as of March 10, 2006 (the
“Waiver Request”); and
WHEREAS, the
Lenders, on the terms and subject to the conditions hereinafter
provided, are willing to waive the Specified Defaults.
NOW THEREFORE, in
consideration of the premises and the mutual agreements set forth,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1.
Definitions . Unless otherwise defined herein, capitalized
terms used herein that are not otherwise defined herein shall have
the respective meanings assigned to such terms in the Credit
Agreement
(a) Upon
satisfaction of the conditions set forth in Section 5
of this Agreement, the Lenders, pursuant to the terms of
Section 7.04 of the Credit Agreement, hereby waive
application of Section 7.01(i) of the Credit Agreement
(the “ Waiver ”) 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 5
of this Agreement shall have been satisfied (the “ Waiver
Effective Date”) .
(b) Except
for the Waiver expressly set forth above in subsection (a), the
Administrative Agent and the Lenders reserve each and every right
and remedy they may have under the Credit Agreement and the
Security Documents (the “ Term Loan Documents ”)
and under applicable law with respect to any Default or Event of
Default.
3.
Distributions . The Borrower, the Guarantors and the Lenders
hereby agree (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
Borrower’s Equity Interests (to enable CCFC Preferred
Holdings, LLC, the indirect parent of the Borrower, to pay a
semi-annual dividend to the holders of its redeemable preferred
shares) in accordance with Section 5.05 of the Credit
Agreement, and (ii) notwithstanding the Borrower’s right
under Section 5.05 of the Credit Agreement (after giving
effect to this Waiver) to distribute additional Excess Cash Flow on
account of the Borrower’s Equity Interests, in addition to
the amount referred to in (i) above, the Borrower 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 Borrower’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
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Borrower shall
not make any distribution, dividend or other payment to or on
account of the Borrower’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 Credit Agreement, including,
without limitation, with the consent of the Requisite Lenders, then
notwithstanding the Borrower’s right, if any, under
Section 5.05 of the Credit Agreement to distribute Excess Cash
Flow on account of the Borrower’s Equity Interests on such
date, the Borrower 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 Borrower retaining at
least $25.0 million in cash or cash equivalents on hand
immediately following such distribution.
4.
Agreement to File Proof of Claim and Motion for Administrative
Expense . Following the Waiver Effective Date, the Borrower
shall timely file a proof of claim against CES in the Proceeding
for the amounts owed to the Borrower 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 Borrower 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).
5.
Conditions . The effectiveness of Section 2(a)
of this Agreement is subject to the satisfaction of the following
conditions precedent (unless specifically waived in writing by the
Requisite Lenders):
(a) the
Borrower and the Guarantors named as signatories hereto and the
Requisite Lenders shall have executed and delivered to the
Administrative Agent their respective counterparts of this
Agreement;
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