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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
AMENDMENT NO. 1
(Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934)
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MAGMA POWER COMPANY
(Name of Subject Company)
CE ACQUISITION COMPANY, INC.
CALIFORNIA ENERGY COMPANY, INC.
(Bidders)
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(Title of Class of Securities)
94-2213782
(CUSIP Number of Class of Securities)
------------
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALIFORNIA ENERGY COMPANY, INC.
10831 OLD MILL ROAD
OMAHA, NEBRASKA 68194
(402) 330-8900
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
Copies to:
PETER J. HANLON, ESQ.
MICHAEL A. SCHWARTZ, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
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<PAGE>
California Energy Company, Inc., a Delaware corporation ("CECI"), and CE
Acquisition Company, Inc., a Delaware corporation and a wholly owned subsidiary
of CECI (the "Purchaser"), hereby amend and supplement their Statement on
Schedule 14D-1 ("Schedule 14D-1") filed with the Securities and Exchange
Commission (the "Commission") on December 9, 1994 with respect to the
Purchaser's offer to purchase 12,400,000 shares of Common Stock, par value
$0.10 per share (the "Shares"), of Magma Power Company, a Nevada corporation
(the "Company") upon the terms and subject to the conditions set forth
in the Offer to Purchase dated December 9, 1994 (the "Offer to Purchase") and
the related Letter of Transmittal (which together with the Offer to Purchase
constitute the "Offer").
Unless otherwise indicated herein, each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Schedule
14D-1 or the Offer to Purchase.
Item 4. Source and Amount of Funds or Other Consideration.
The information set forth in Items 4(a)-(b) is hereby amended and
supplemented by the following:
On December 21, 1994, CECI, the banks and other financial
institutions party thereto, and Credit Suisse, New York Branch executed a
Limited Recourse Credit Agreement (the "Tender Facility"), a copy of which is
attached hereto as Exhibit (b)(2). The terms of the Tender Facility do not
differ in any material respect from the description of such terms set forth in
Section 13 of the Offer to Purchase.
Item 9. Financial Statements of Certain Bidders.
The information set forth in Item 9 is hereby supplemented by adding
thereto the following:
In considering the Offer, the holders of Shares may wish to consider
the following selected historical and pro forma financial information.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Selected Historical Consolidated Financial and Operating Data of CECI
The following table sets forth selected historical consolidated
financial and operating data, which should be read in conjunction with CECI's
consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
CECI incorporated by reference to CECI's Annual Report on Form 10-K for the
year ended December 31, 1993 and included in CECI's Quarterly Report on Form
10-Q for the quarters ended September 30, 1993 and 1994. The unaudited
consolidated financial statements of CECI as of and for the nine months ended
September 30, 1993 and 1994 reflect all adjustments necessary, in the opinion
of management, (consisting only of normal recurring adjustments) for a fair
presentation of such financial data. The selected consolidated data as of and
for each of the five years in the period ended December 31, 1993 have been
derived from the audited historical consolidated financial statements of CECI.
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
1989 1990 1991 1992 1993 1993 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales of electricity $43,010 $89,026 $104,155 $115,087 $129,861 $99,398 $115,357
Sales of steam -- -- 2,029 2,255 2,198 1,648 1,851
Interest and other income 5,386 7,787 9,379 10,187 17,194 12,294 21,980
Total revenue 48,396 96,813 115,563 127,529 149,253 113,340 139,188
Plant operations, general and
administrative and royalties 13,615 37,412 41,506 45,183 46,794 34,019 41,321
Income before depreciation,
amortization, interest, income
taxes, extraordinary item and
cumulative effect of change
in accounting principle (1) 34,781 59,401 74,057 82,346 102,459 79,321 97,867
Depreciation and amortization 6,605 13,372 14,752 16,754 17,812 13,044 15,439
Interest expense, net of capitalized
interest 15,125 30,464 24,439 14,860 23,389 17,171 36,962
Provision for income taxes 2,715 3,522 8,284 11,922 18,184 14,295 14,067
Income before extraordinary item
and cumulative effect of change
in accounting principle (1) 10,336 12,043 26,582 38,810 43,074 34,811 31,399
Extraordinary item-refinancing (2) -- -- -- (4,991) -- -- (2,007)
Cumulative effect of change in
accounting principle (3) -- -- -- -- 4,100 4,100 --
Net income (1) 10,336 12,043 26,582 33,819 47,174 38,911 29,392
Preferred dividends (paid in kind) -- -- -- 4,275 4,630 3,429 3,711
Net income available to common
<PAGE>
stockholders 10,336 12,043 26,582 29,544 42,544 35,482 25,681
Income per share before
extraordinary item and cumulative
effect of change in accounting
principle (1)
Assuming no dilution 0.38 0.44 0.75 0.92 1.00 0.81 0.77
Assuming full dilution (4) 0.38 0.44 0.75 0.92 1.00 0.81 0.76
Extraordinary item per share (2) -- -- -- (0.13) -- -- (0.06)
Cumulative effect of change in
accounting principle per share (3) $ -- $ -- $ -- $ -- $ .11 $ .11 $ --
Net income per share
Assuming no dilution 0.38 0.44 0.75 0.79 1.11 0.92 0.71
Assuming full dilution (4) 0.38 0.44 0.75 0.79 1.11 0.92 0.70
Weighted average shares
outstanding (5) 27,019 27,254 35,471 37,495 38,485 38,436 36,174
Capital expenditures 124,749 32,514 68,377 32,446 87,191 64,250 78,892
<CAPTION>
December 31, September 30,
1989 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Property-power plant, net $302,514 $321,303 $373,948 $389,646 $458,974 $440,527 $522,268
Total assets 349,282 393,853 517,994 580,550 715,984 710,659 1,087,064
Total debt 260,120 270,738 257,038 299,334 382,610 390,972 775,534
Preferred stock -- 4,705 54,705 54,350 58,800 57,650 62,350
Stockholders' equity 42,163 55,088 143,128 168,764 211,503 206,675 179,660
</TABLE>
______________
(1) The Navy I Plant commenced operation prior to 1989 and the BLM and Navy II
Plants commenced commercial operation in February 1989 and January 1990,
respectively. The Desert Peak, Nevada facility and the Roosevelt Hot
Springs, Utah steam field were acquired in March and January 1991,
respectively.
(2) The refinancing of CECI's three largest domestic projects located at the
Naval Air Weapons Station at China Lake, California (collectively, the
"Coso Project") resulted in an extraordinary item in 1992 in the amount of
$5.0 million, after the tax effect of $1.5 million. The defeasance of the
Senior Notes resulted in an extraordinary item in 1994 in the amount of
$2.0 million, after the tax effect of $1.0 million.
(3) On January 1, 1993, CECI adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
resulted in a cumulative adjustment to net income of $4.1 million in 1993.
(4) Fully diluted earnings per share reflects the dilutive effect of
convertible subordinated debentures as if they were converted at the
beginning of the reporting period.
(5) The number of shares outstanding is calculated by using the treasury stock
method.
<PAGE>
Selected Historical Consolidated Financial and Operating Data of the Company
The following information concerning the Company is excerpted from the
Company's Annual Report on Form 10-K for the year ended December 31, 1993 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
The selected financial data set forth below with respect to the Company's
statements of operations for each of the five years in the period ended
December 31, 1993 and the balance sheets of the Company as of December 31, 1989
through 1993 are derived from the consolidated financial statements of the
Company that have been audited by Coopers & Lybrand, independent certified
public accountants. The selected financial data set forth below with respect
to the Company's statements of operations for the nine-month period ended
September 30, 1994 and 1993 and, with respect to the balance sheet of the
Company as of September 30, 1994, have been derived from the unaudited
consolidated financial statements of the Company, which, in the opinion of
management, reflect all adjustments necessary (consisting only of normal
recurring adjustments) for a fair presentation of such financial data.
The selected financial data set forth below should be read in conjunction with
the consolidated financial statements and related notes and other financial
information included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 incorporated herein by reference.
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
1989 1990 1991 1992 1993 1993 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues $63,103 $ 85,599 $94,891 $108,966 $167,138 $124,781 $146,104
Operating revenues(1) 56,743 76,893 84,135 100,313 162,943 121,146 142,238
Income from operations 26,892 36,694 41,204 49,667 74,913 57,957 67,915
Income before cumulative
effect of accounting change 22,295 30,166 33,941 36,358 52,135 39,469 46,843
Cumulative effect of change
in accounting for income taxes -- -- -- 17,833(2) -- -- --
Net income 22,295 30,166 33,941 54,191 52,135 39,469 46,843
Return on revenues 35.3% 35.2% 35.8% 33.4%(3) 31.2% 31.6% 32.1%
Capital expenditures $43,762 $ 7,054 $15,711 $ 12,043 $ 8,434 $ 5,718 $ 8,854
Return on averagestockholders'
equity 16.1% 17.6% 16.2% 14.3%(3) 16.4% 13.0% 12.5%
Weighted average shares
outstanding 21,999 22,898 23,611 22,936 24,063 24,037 24,017
Income before cumulative effect
of accounting change per
common share
Assuming no dilution $1.01 $1.32 $1.44 $1.59 $2.17 $1.64 $ 1.95
Assuming full dilution(4) 0.96 1.32 1.44 1.52 2.17 1.64 1.95
Income per common share
Assuming no dilution 1.01 1.32 1.44 2.36(2) 2.17 1.64 1.95
Assuming full dilution(4) 0.96 1.32 1.44 2.27(2) 2.17 1.64 1.95
<CAPTION>
September
December 31, 30,
1989 1990 1991 1992 1993 1994
(In thousands)
Balance Sheet Data:
Property, plant and
equipment, net . $124,062(5) $120,125 $118,541 $113,922 $265,215 $256,561
Exploration and development
costs, net . . . 46,681 44,782 48,644 52,001 107,069 104,271
Total assets 282,624 325,131 353,788 396,650 611,311 630,422
Long-term obligations(6) 98,212 99,297 89,808 87,339 200,509 164,313
Total debt(7) 100,517 102,842 97,541 96,126 226,008 188,969
Stockholders' equity 150,142 192,626 226,872 282,260 351,918 395,286
</TABLE>
_______________
(1) Excludes interest and other income.
(2) The cumulative effect of the Company's adoption of SFAS 109 increased net
income by $17,833, or $.77 per share. See Note 11, Provision for Income
Taxes, accompanying the consolidated financial statements for the year
ended December 31, 1992 for the Company incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1993.
(3) Excludes the impact of cumulative effect of change in accounting for
income taxes.
(4) Fully diluted earnings per share reflects the dilative effect of stock
options and warrants at the end of the reporting period.
(5) Projects in progress reclassified to appropriate asset classification.
(6) Consists of the noncurrent portion of long-term loans payable and other
long-term liabilities.
(7) Represents loans payable, including the current portion of long-term loans
payable.
Pro Forma Unaudited Condensed Combined Financial Data
<PAGE>
The following Pro Forma Unaudited Condensed Combined Balance Sheet as
of September 30, 1994 and the Pro Forma Unaudited Condensed Combined Statements
of Earnings for the year ended December 31, 1993 and the nine months ended
September 30, 1994 combine the historical consolidated balance sheets of CECI
and the Company as if the acquisition had been effective on September 30, 1994,
and the historical statements of income as if the acquisition had been
effective at the beginning of the period. The acquisition is reflected under
the purchase method of accounting, after giving effect to the pro forma
adjustments and assumptions described in the accompanying notes. Under this
method of accounting, which is in accordance with generally accepted accounting
principles, assets and liabilities of the Company are adjusted to their
estimated fair value, and combined with the recorded values of the assets and
liabilities of CECI. This pro forma combined financial data should be read in
conjunction with the financial data appearing under "SELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OPERATING DATA OF CECI," "SELECTED CONSOLIDATED
FINANCIAL DATA OF THE COMPANY" and the consolidated financial statements,
including the notes thereto, of CECI and the Company, incorporated herein by
reference to their respective Annual Reports on Form 10-K for the year ended
December 31, 1993 and Quarterly Reports on Form 10-Q for the quarter ended
September 30, 1994.
CECI has not completed reviewing the Company's records in order to make
its determination of the fair value of the Company's assets and liabilities.
The fair value adjustments reflected in the accompanying pro forma combined
financial data reflect, among other things, estimates of fair value made by
CECI based on market quotations and assumptions it believes to be reasonable.
It should be noted, however, that the actual fair values will be
determined on the basis of the financial condition of the Company at the time
the the Company Shares are purchased.
The pro forma data do not reflect operating efficiencies and cost
reductions which CECI anticipates are achievable. The savings would be largely
attributable to the economies of scale obtained through the combination of
CECI's operations with the Company's operations, and the resulting decrease in
employment and occupancy costs, as well as general overhead expenses.
The pro forma combined financial data are not intended to present the
results that would have actually occurred if the acquisition had been in effect
on the assumed dates and for the assumed periods, and are not necessarily
indicative of the results that may be obtained in the future.
<PAGE>
Pro Forma Unaudited Condensed Combined Balance Sheet
CECI and the Company
As of September 30, 1994
(In thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CECI Company Adjustments Combined
<S> <C> <C> <C> <C>
Assets
Cash and short term investments $316,349 $ 5,111 $(210,944)(4C) $110,516
Marketable securities. . . . . -- 43,609 -- 43,609
Joint venture cash and short
term investments 27,088 25,478 -- 52,566
Restricted cash and short term
investments 127,380 -- -- 127,380
Accounts receivable-trade and
other 33,901 54,204 -- 88,105
Prepaid expenses and other assets -- 10,423 -- 10,423
Due from joint ventures. . . . 1,639 -- -- 1,639
Property and plant, net. . . . 522,268 395,560 340,000(4B) 1,257,828
Equipment, net . . . . . . . . 4,699 -- -- 4,699
Notes receivable-joint venture 12,255 -- -- 12,255
Other investments. . . . . . . 11,517 41,245 -- 52,762
Power purchase contracts . . . -- 21,313 60,000(4B) 81,313
Deferred charges and other assets 29,968 24,480 6,948(4B,4C) 61,396
Goodwill . . . . . . . . . . . -- 8,999 319,143(4B) 328,142
---------- -------- ------------ -----------
Total Assets. . . . . . . . .$1,087,064 $630,422 $515,147 $2,232,633
---------- -------- ------------ -----------
---------- -------- ------------ -----------
Liabilities and Stockholders' Equity
Liabilities
Accounts payable . . . . . . . $ 1,021 $ 7,832 $ -- $ 8,853
Other accrued liabilities. . . 23,357 3,605 -- 26,962
Income taxes payable . . . . . 587 -- -- 587
Construction loans . . . . . . 21,079 -- -- 21,079
Project loans. . . . . . . . . 233,080 188,969 -- 422,049
Senior discount notes. . . . . 421,375 -- -- 421,375
Convertible subordinated
debenture 100,000 -- -- 100,000
Deferred income taxes. . . . . 24,774 22,376 $158,000(4B) 205,150
Other long term liabilities. . -- 12,354 500,000(4C) 512,354
---------- -------- ------------ -----------
Total liabilities . . . . . . 825,273 235,136 658,000 1,718,409
Deferred income. . . . . . . . 19,781 -- -- 19,781
Redeemable preferred stock . . 62,350 -- -- 62,350
Commitments and contingencies. -- -- -- --
Stockholders' Equity
Preferred stock
Common Stock . . . . . . . . . 2,407 2,401 (1,599)(4A) 3,209
Additional paid in capital . . 100,000 142,765 49,350 (4A) 292,115
Unrealized gain from
marketable securities -- (677) 677(4A) --
Retained earnings. . . . . . . 136,769 250,797 (250,797)(4A) 136,769
Treasury stock . . . . . . . . (59,516) -- 59,516 (4A) --
---------- -------- ------------ -----------
Total stockholders' equity. . 179,660 395,286 (142,853) 432,093
---------- -------- ------------ -----------
Total liabilities and
stockholders'equity $1,087,064 $630,422 $515,147 $2,232,633
---------- -------- ------------ -----------
---------- -------- ------------ -----------
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined
financial statements are an integral part of these statements.
<PAGE>
Pro Forma Unaudited Condensed Combined Statements of Earnings
CECI and the Company
For the Year Ended December 31, 1993 and the Nine Months Ended September 30,
1994
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1993 Nine Months Ended September 30, 1994
Pro Forma Pro Pro Forma
Adjustment Forma Adjustment Pro Forma
CECI Company (4D) Combined CECI Company (4D) Combined
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Sales of electricity
and steam . $132,059 $137,882 $-- $269,941 $117,208 $124,086 $-- $241,294
Royalties -- 19,629 -- 19,629 -- 15,062 -- 15,062
Interest and other
income. . . 17,194 4,195 (10,547) 10,842 21,980 3,866 (7,910) 17,936
Management
services. . -- 5,432 -- 5,432 -- 3,090 -- 3,090
--------- -------- --------- -------- -------- ------- ------- -------
Total Revenue 149,253 167,138 (10,547) 305,844 139,188 146,104 (7,910) 277,382
Costs and Expenses
Plant operations 25,362 49,493 -- 74,855 23,887 41,208 -- 65,095
General and
administrative 13,158 10,943 -- 24,101 9,536 9,602 -- 19,138
Royalties 8,274 -- -- 8,274 7,898 -- -- 7,898
Depreciation and
amortization 17,812 21,692 18,254 57,758 15,439 17,737 13,690 46,866
Other non--plant
costs . . . -- 471 -- 471 -- 380 -- 380
Interest expense 30,205 9,626 45,000 84,831 44,480 9,262 33,750 87,492
Less interest
capitalized (6,816) -- -- (6,816) (7,518) -- -- (7,518)
--------- -------- --------- -------- -------- ------- ------- -------
Total costs and
expenses. . 87,995 92,225 63,254 243,474 93,722 78,189 47,440 219,351
--------- -------- --------- -------- -------- ------- ------- -------
Income before
income taxes 61,258 74,913 (73,801) 62,370 45,466 67,915 (55,350) 58,031
Provision for
income taxes 18,184 22,778 (26,056) 14,906 14,067 21,072 (19,542) 15,597
--------- -------- --------- -------- -------- ------- ------- -------
Income from
continuing operations 43,074 52,135 (47,745) 47,464 31,399 46,843 (35,808) 42,434
Preferred dividends 4,630 -- -- 4,630 3,711 -- -- 3,711
--------- -------- --------- -------- -------- ------- ------- -------
Income available to
common stock-
holders . . $38,444 $52,135 $(47,745) $42,834 $27,688 $46,843 $(35,808) $38,723
--------- -------- --------- -------- -------- ------- ------- -------
--------- -------- --------- -------- -------- ------- ------- -------
Income per
common and common equiva-
lent share
Assuming no dilution $1.00 $2.17 $0.80 $0.77 $1.95 $0.75
--------- -------- -------- -------- ------- -------
--------- -------- -------- -------- ------- -------
Assuming full dilution $1.00 $2.17 $0.79 $0.76 $1.95 $0.73
--------- -------- -------- -------- ------- -------
--------- -------- -------- -------- ------- -------
Weighted average
common shares
outstanding 38,485 24,063 53,784 36,174 24,017 51,473
--------- -------- -------- -------- ------- -------
--------- -------- -------- -------- ------- -------
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined financial
statements are an integral part of these statements.
<PAGE>
Notes To Pro Forma Unaudited Condensed Combined Financial Data
CECI and the Company
(In thousands, except per share data)
The Merger will be accounted for as a purchase. The resulting
adjustments are based on the historical consolidated financial statements of
CECI and the Company. The final adjustments will be based on the fair value of
CECI's Common Stock and the fair value of the assets and liabilities of the
Company at or near the closing. For purposes of the pro forma combined
financial statements, it is assumed that one hundred percent of the Shares will
be acquired and that the fair value of the CECI Common Stock will be $16.50
(the mid-point of the "Average Closing Price" range limits stipulated in the
Agreement and Plan of Merger).
The pro forma unaudited condensed combined financial statements are
based on the following assumptions:
1. The Merger occurred as of September 30, 1994 for balance sheet purposes
and at the beginning of the periods presented for statement of earnings
purposes.
2. 24,043,000 Shares outstanding, net of 200,000 shares owned by CECI,
will be purchased for $39.00 per Share consisting of a package of, on a blended
basis, approximately $28.50 per share in cash and approximately $10.50 in
market value per share of CECI Common Stock (see "Merger Consideration").
3. The options outstanding will be retired for approximately $8,500,000 in
cash.
4. The pro forma adjustments to reflect the effect of the transaction are
as follows:
A. The adjustments reflect the elimination of the Company's equity
accounts and the issuance of CECI Common Stock.
B. The adjustments which have been made to the net assets of the
Company and CECI to give effect to the Merger follow:
Assumed value of the
CECI Common Stock and cash consideration
plus estimated direct costs to be
incurred in consummating the Merger . . $942,377
Cost of retiring outstanding
Company options . . . . . . . . . . . . 8,500
Cost of Shares presently owned by CECI . . 5,552
Net assets of the Company. . . . . . . . . $395,286
Adjustment to eliminate goodwill
of the Company. . . . . . . . . . . . . (8,999) 386,287
Excess of purchase price over carrying
value of net assets acquired. . . . . . 570,142
Allocated to:
Property and plant. . . . . . . . . . . (340,000)
Power purchase contracts. . . . . . . . (60,000)
Deferred income taxes on
allocated costs . . . . . . . . . . . 158,000
Goodwill . . . . . . . . . . . . . . . . . $328,142
C. The additional cash which CECI will be required to pay in order to
effect the Merger has been provided for in the pro forma adjustments as
follows:
Reduce cash on hand . . . . . . . . . . . . $210,944
Increase long-term debt . . . . . . . . . . 500,000
$710,944
Represents:
Payments to Company common stockholders. . . $677,444
Payments to Company stock option holders . . 8,500
Other direct acquisition costs . . . . . . . 12,500
Finance costs. . . . . . . . . . . . . . . . 12,500
$710,944
D. The pro forma adjustments to the pro forma combined statements of
earnings include the following:
i. Record amortization of the excess of purchase price over net assets
acquired over a 40-year period, eliminate the amortization of goodwill from the
historical operating results of the Company and provide depreciation expense on
costs allocated to property and plant. CECI's policy is to provide
depreciation and amortization expense beginning upon the commencement of energy
production over the estimated remaining useful life of plant and equipment or
the contract period for costs applicable to power sales and development
contracts. Costs of $150 million have been allocated to power sales and
development contracts and plant for which energy production is not expected to
commence until 1996 or later. Accordingly, revenues, period operating costs
and amortization of future costs to be incurred in the completion of such
facilities together with amortization of this allocation of acquisition costs
are not included in the pro forma combined statements of earnings.
ii. Increase interest expense relating to amortization of deferred
financing costs over ten years and cash used to finance the merger, utilizing
an 8.75 percent annual interest rate assumption applied to additional
borrowings and a 5 percent annual interest rate assumption applicable to the
reduction of cash on hand.
<PAGE>
iii. Change income tax expense as a result of pro forma adjustments
which affect taxable income.
The pro forma income per common share has been determined on the
basis of weighted average outstanding shares which have been adjusted to
include the number of shares of CECI Common Stock to be exchanged for the
outstanding Shares.
5. The pro forma combined income from continuing operations available to
common shareholders per share for the year ended December 31, 1993, and nine
months ended September 30, 1994, would be $0.82 and $0.78, respectively, based
upon the assumption that (1) 100% of the Shares are acquired by CECI and (2)
the market value of CECI Common Stock issued to the present shareholders of the
Company is $18.73 per share. The pro forma combined book value per share at
September 30, 1994, would be $9.45 under the same assumptions.
6. The pro forma combined income from continuing operations available to
common shareholders per share for the year ended December 31, 1993, and nine
months ended September 30, 1994, would be $0.76 and $0.72, respectively, based
upon the assumption that (1) 100% of the Shares are acquired by CECI and (2)
the market value of CECI Common Stock issued to the present shareholders of the
Company is $14.27 per share. The pro forma combined book value per share at
September 30, 1994, would be $8.66 under the same assumptions.
Item 11. Material to be Filed as Exhibits.
(b)(2)Limited Recourse Credit Agreement, dated December 21, 1994, by and
among California Energy Company, Inc., the banks and other financial
institutions parties thereto and Credit Suisse, New York Branch.
(b)(3)Form of Borrower Pledge and Security Agreement to be made by
California Energy Company, Inc. in favor of Credit Suisse, New York Branch.
(b)(4)Form of CE Acquisition Pledge Agreement to be made by CE Acquisition
Company, Inc. in favor of Credit Suisse, New York Branch.
(b)(5)Form of Term Note.
<PAGE>
Signatures
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: December 27, 1994
CE ACQUISITION COMPANY, INC.
By: /s/ Steven A. McArthur
----------------------------------
Steven A. McArthur
Senior Vice President, General
Counsel and Secretary
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
----------------------------------
Steven A. McArthur
Senior Vice President, General
Counsel and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Page
No. Description No.
- ------- ----------- ----
(b)(2) Limited Recourse Credit Agreement, dated December
21, 1994, by and among California Energy Company,
Inc., the banks and other financial institutions
parties
thereto and Credit Suisse, New York Branch.
(b)(3) Form of Borrower Pledge and Security Agreement to be
made by California Energy Company, Inc. in favor of
Credit Suisse, New York Branch.
(b)(4) Form of CE Acquisition Pledge Agreement to be made
by CE Acquisition Company, Inc. in favor of Credit
Suisse, New York Branch.
(b)(5) Form of Term Note.
EXHIBIT (b)(2)
EXECUTION COPY
==============================================================================
LIMITED RECOURSE CREDIT AGREEMENT
by and among
CALIFORNIA ENERGY COMPANY, INC.,
as Borrower
THE BANKS AND OTHER FINANCIAL
INSTITUTIONS PARTIES HERETO,
as Banks
and
CREDIT SUISSE, NEW YORK BRANCH,
as Agent
==============================================================================
Dated as of December 21, 1994
Tender Offer Facility
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Interpretation . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . 1
Section 1.2 Computation of Time Periods. . . . . . . . . . . . 21
Section 1.3 Accounting Terms . . . . . . . . . . . . . . . . . 21
Section 1.4 Presumption Against Any Party. . . . . . . . . . . 21
Section 1.5 Use of Certain Terms. . . . . . . . . . . . . . . 21
Section 1.6 Headings and References. . . . . . . . . . . . . . 21
Section 1.7 Independence of Provisions . . . . . . . . . . . . 22
ARTICLE II
Amounts and Terms of the Loans . . . . . . . . . . . . . . . . . . . 22
Section 2.1 The Loans. . . . . . . . . . . . . . . . . . . . . . 22
Section 2.2 Repayment. . . . . . . . . . . . . . . . . . . . . . 25
Section 2.3 Interest on Loans. . . . . . . . . . . . . . . . . . 26
Section 2.4 Payments and Computations. . . . . . . . . . . . . . 30
Section 2.5 Fees . . . . . . . . . . . . . . . . . . . . . 33
Section 2.6 Increased Costs and Capital Requirements . . . . . . 33
Section 2.7 Taxes . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.8 Extension of Final Maturity Date . . . . . . . . . . 39
Section 2.9 Limited Liability. . . . . . . . . . . . . . . . . . 40
Section 2.10 Election Under Section 1111(b)
of Bankruptcy Code . . . . . . . . . . . . . . . . 41
ARTICLE III
Conditions of Commitments. . . . . . . . . . . . . . . . . . . . . . 41
Section 3.1 Conditions Precedent to the
Making of the Loans. . . . . . . . . . . . . . . . . 41
ARTICLE IV
Representations and Warranties . . . . . . . . . . . . . . . . . . . 47
Section 4.1 Representations and Warranties . . . . . . . . . . . 47
ARTICLE V
Covenants of Borrower. . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.1 Affirmative Covenants. . . . . . . . . . . . . . . . 59
Section 5.2 Negative Covenants . . . . . . . . . . . . . . . . . 67
Section 5.3 Financial Covenants. . . . . . . . . . . . . . . . . 71
ARTICLE VI
Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 6.1 Events of Default . . . . . . . . . . . . . . . . . . . 71
ARTICLE VII
Relationship of Agent and Banks. . . . . . . . . . . . . . . . . . . 75
Section 7.1 Authorization and Action . . . . . . . . . . . . . . 75
Section 7.2 Agent's Reliance, Etc. . . . . . . . . . . . . . . . 76
Section 7.3 Agent and Affiliates . . . . . . . . . . . . . . . . 77
Section 7.4 Bank Credit Decision. . . . . . . . . . . . . . . . 77
Section 7.5 Indemnification. . . . . . . . . . . . . . . . . . . 77
Section 7.6 Successor Agent. . . . . . . . . . . . . . . . . . . 78
ARTICLE VIII
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 8.1 Notices. . . . . . . . . . . . . . . . . . . . . . . 79
Section 8.2 Successors and Assigns . . . . . . . . . . . . . . . 79
Section 8.3 Amendments and Related Matters . . . . . . . . . . . 79
Section 8.4 Costs and Expenses; Indemnification. . . . . . . . . 80
Section 8.5 Oral Communications . . . . . . . . . . . . . . . . 81
Section 8.6 Entire Agreement. . . . . . . . . . . . . . . . . . 82
Section 8.7 Governing Law. . . . . . . . . . . . . . . . . . . . 82
Section 8.8 Severability . . . . . . . . . . . . . . . . . . . . 82
Section 8.9 Counterparts . . . . . . . . . . . . . . . . . . . . 82
Section 8.10 Confidentiality. . . . . . . . . . . . . . . . . . . 82
Section 8.11 Assignments and Participations . . . . . . . . . . . 83
Section 8.12 Waiver of Trial by Jury . . . . . . . . . . . . . . . 86
Section 8.13 Choice of Forum and Service of Process. . . . . . . . 87
Section 8.14 Remedies . . . . . . . . . . . . . . . . . . . . . . 87
Section 8.15 Right of Set-Off . . . . . . . . . . . . . . . . . . 87
SCHEDULES
Schedule 1 - Commitment Schedule
Schedule 2 - Magma Litigation
Schedule 3 - Margin Stock
Schedule 4.1(v) - ERISA
Schedule 4.1(aa) - Insurance
EXHIBITS
<PAGE>
Exhibit A - Assignment and Acceptance Agreement
Exhibit B - Borrower Pledge Agreement
Exhibit C - CE Acquisition Pledge Agreement
Exhibit D - CE Acquisition Secured Term Note
Exhibit E - Compliance Certificate
Exhibit F - Form of Note
Exhibit G - Notice of Borrowing
Exhibit H - Notice of Conversion/Continuation
Exhibit I-1 - Opinion of Willkie Farr & Gallagher, New York Counsel
Exhibit I-2 - Opinion of Steven A. McArthur, General Counsel to Borrower
LIMITED RECOURSE CREDIT AGREEMENT
This LIMITED RECOURSE CREDIT AGREEMENT, dated as of
December 21, 1994, is made by and among CALIFORNIA ENERGY
COMPANY, INC., a Delaware corporation ("Borrower"), THE BANKS
AND OTHER FINANCIAL INSTITUTIONS PARTIES HERETO ("Banks") and CREDIT
SUISSE, NEW YORK BRANCH, as agent for the Banks (in such
capacity, "Agent").
The parties hereto agree as follows:
ARTICLE I
Definitions and Interpretation
Section 1.1 Defined Terms. As used in this Agreement:
"Acquisition" means the acquisition by CE
Acquisition of the Magma Shares in connection with the Tender
Offer.
"Affiliate" means, as to any Person, any other
Person directly or indirectly controlling or controlled by or
under common control with such Person. For the purpose of
Section 5.2(f), the term "Affiliate" shall include only
Kiewit Energy and any entity owning 10% or more of the
capital stock or other equity interest having the power to
vote for the election of directors (or persons fulfilling
similar responsibilities) of Kiewit Energy or Borrower.
"Agency Office" means the office of Agent
designated on the Commitment Schedule, or such other office
of Agent as Agent may from time to time designate by notice
to Borrower and the Banks.
"Agent" means Credit Suisse in its capacity as
agent for the Banks hereunder, and any successor thereto in
such capacity.
"Alto Peak" means a prospective 72 gross megawatt
Philippine geothermal project of Magma.
"Applicable Agent's Account" means the account of
Agent maintained at the Agency Office, or such other account
of Agent as may be hereafter from time to time designated by
Agent upon notice to the Borrower and the Banks, as the
account through which the Banks are to make Loans and the
Borrower is to repay Loans and to pay the other sums due
under this Agreement.
"Applicable Lending Office" means with respect to
each Bank the office of such Bank designated on the
Commitment Schedule, or in the Assignment and Acceptance
Agreement pursuant to which it became a Bank, or such other
office of such Bank as such Bank may from time to time
designate by notice to Borrower and the Agent.
"Applicable Margin" means (a) with respect to any
Base Rate Loan, 125 basis points (1.25%) per annum, and
(b) with respect to any Eurodollar Rate Loan, 250 basis
points (2.50%) per annum.
"Assignee" has the meaning ascribed thereto in
Section 8.11.
"Assignment and Acceptance Agreement" means an
assignment and acceptance agreement, in compliance with
Section 8.11 and substantially in the form of Exhibit A
hereto.
"Banks" means the banks and other financial
institutions signatory hereto in their capacity as Banks, and
any Assignees hereafter added as Banks under one or more
Assignment and Acceptance Agreements pursuant to Section
8.11.
"Banking Day" means (a) a day on which banks are
not required or authorized to close in the city in which the
Agency Office or any Applicable Lending Office is located,
and, in matters relating to the determination of a Eurodollar
Rate or Interest Period, a day on which the London interbank
market deals in Dollar deposits, and (b) with respect to a
day on which a Notice of Borrowing is to be given to Agent at
the Agency Office or on which notifications or other
<PAGE>
documents are to be received by, or an action is required of
Agent at the Agency Office pursuant to the provisions of this
Agreement, a day on which banks are not required or
authorized to close in the city in which the Agency Office is
located.
"Bankruptcy Code" means Title 11 of the United
States Code entitled "Bankruptcy," as amended from time to
time, or any successor statute.
"Base Rate" means a fluctuating rate per annum
which is at all times equal to the higher of (a) the rate per
annum announced by Credit Suisse (New York Branch) from time
to time as its base lending rate for commercial loans in
Dollars in the United States or (b) the rate quoted by Credit
Suisse (New York Branch), at approximately 11:00 a.m. New
York City time, to dealers in the New York federal funds
market for overnight offering of Dollars by Credit Suisse
(New York Branch) for deposit, plus a margin of 0.50
percentage points, the Base Rate to change as and when such
rates change. The base lending rate is not the lowest rate
of interest charged by Credit Suisse in connection with
extensions of credit.
"Base Rate Loan" means any Loan bearing interest as
provided in Section 2.3(a).
"Borrower Pledge Agreement" means the Pledge
Agreement dated as of the Closing Date by Borrower in favor
of Agent substantially in the form of Exhibit B hereto, as it
may be amended or supplemented from time to time.
"Borrower Subsidiary" means any Subsidiary of
Borrower other than Magma and its Subsidiaries.
"Borrower Tender Offer Documents" means the Offer
to Purchase and all other documents filed by or on behalf of
Borrower or its Affiliates with the SEC with respect to the
Tender Offer.
"Cash Equivalent" means any of the following: (i)
securities issued or directly and fully guaranteed or insured
by the United States of America or any agency or
instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support
thereof) with a maturity date not more than six months from
the date of acquisition, (ii) time deposits and certificates
of deposit of any commercial bank organized in the United
States of America having capital and surplus in excess of
$500,000,000 or any commercial bank organized under the laws
of any other country having total assets in excess of
$500,000,000 with a maturity date not more than six months
from the date of acquisition, (iii) repurchase obligations
with a term of not more than 30 days for underlying
securities of the types described in clauses (i) or (iv) that
were entered into with any bank meeting the qualifications
set forth in clause (ii) or another financial institution of
national reputation acceptable to Agent, (iv) commercial
paper issued by (a) the parent corporation of any commercial
bank organized in the United States of America having capital
and surplus in excess of $500,000,000 or any commercial bank
organized under the laws of any other country having total
assets in excess of $500,000,000, and (b) others having one
of the two highest ratings obtainable from either S&P or
Moody's (or, if at any time neither S&P nor Moody's may be
rating such obligations, then from another nationally
recognized rating service acceptable to Agent) and in each
case maturing within six months from the date of acquisition,
(v) overnight bank deposits and bankers' acceptances at any
commercial bank organized in the United States of America
having capital and surplus in excess of $500,000,000 or any
commercial bank organized under the laws of any other country
having total assets in excess of $500,000,000, (vi) deposits
available for withdrawal on demand with any commercial bank
organized in the United States of America having capital and
surplus in excess of $500,000,000 or any commercial bank
organized under the laws of any other country having total
assets in excess of $500,000,000, (vii) investments in money
market funds substantially all of whose assets comprise
securities of the types described in clauses (i) through (v)
and (viii) money market preferred stock having one of the two
highest ratings obtainable from either S&P or Moody's (or, if
at any time neither S&P nor Moody's may be rating such
obligations, then from another nationally recognized rating
service acceptable to Agent).
"CE Acquisition" means CE Acquisition Company,
Inc., a Delaware corporation and a wholly-owned subsidiary of
Borrower.
"CE Acquisition Credit Agreement" means the credit
agreement dated as of the Closing Date by and between CE
Acquisition and Borrower in form and substance satisfactory
to Agent.
"CE Acquisition Pledge Agreement" means the Pledge
<PAGE>
Agreement dated as of the Closing Date by CE Acquisition in
favor of Borrower substantially in the form of Exhibit C
hereto, as it may be amended or supplemented from time to
time.
"CE Acquisition Secured Term Note" means the
Secured Term Note made by CE Acquisition in favor of Borrower
in a principal amount equal to the aggregate amount of the
Loans made on the Closing Date, substantially in the form of
Exhibit D hereto.
"Change of Control" means that (x) a Person
(together with any affiliates of such Person or Persons
otherwise associated with such person) or a "group" within
the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934 (the "1934 Act") is or becomes the beneficial
owner (as defined under Rule 13(d) of the 1934 Act), directly
or indirectly, of shares of stock of Borrower entitling such
person to exercise 25% or more of the total voting power of
all classes of stock of Borrower entitled to vote in election
of directors (a "Control Interest"), other than any Person or
group or any of their Affiliates which on the date hereof
holds a Control Interest and (y) Kiewit Energy does not own a
Control Interest at least as large as that held by the Person
or "group" described in clause (x) above.
"Closing Date" means the date on which the first
Loan under any Commitment is made.
"Collateral" means, collectively: (i) all capital
stock and other property pledged pursuant to the Security
Documents, (ii) all "collateral" as defined in the Security
Documents, (iii) all real property mortgaged pursuant to the
Security Documents and (iv) any property or interest provided
in addition to or in substitution for any of the foregoing.
"Commitment" means, as to any Bank, the amounts set
forth opposite such Bank's name as its Commitment on the
Commitment Schedule, subject to adjustment for the effect of
any one or more Assignment and Acceptance Agreements to which
such Bank may be a party.
"Commitment Schedule" means the schedule attached
as Schedule 1 hereto.
"Compliance Certificate" means a certificate of,
and duly executed by, a Responsible Officer of Borrower in
the form of Exhibit E hereto.
"Consolidated Net Worth" means at any date of
determination thereof, all amounts that would, in conformity
with GAAP, be included as shareholders' equity on a
consolidated balance sheet of Borrower and its Subsidiaries
as of such date.
"Control" (including the terms "controlling,"
"controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a
Person whether through the ownership of voting securities, by
contract, or otherwise.
"Credit Documents" means this Agreement, the Notes,
the CE Acquisition Credit Agreement, the CE Acquisition
Secured Term Note, any Assignment and Acceptance Agreements,
the Security Documents, and any certificates, opinions,
warranties and representations, and other documents required
to be delivered pursuant to Section 3.1 or 5.1(h) or
delivered pursuant to or in connection with any one or more
of the foregoing and expressly designated by Agent as a
"Credit Document" at the time of delivery hereunder.
"Debt" means (i) indebtedness for borrowed money,
(ii) obligations to pay the deferred purchase price of
property or services, (iii) obligations as lessee under
leases which shall have been or are required to be, in
accordance with GAAP, recorded as capital leases,
(iv) obligations evidenced by bonds, debentures, notes, or
equivalent instruments, (v) reimbursement obligations in
respect of drawings made or available under letters of
credit, (vi) obligations under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, obligations of others of
the kinds referred to in clauses (i) through (v) above (but
excluding surety, bid, operating and performance guarantees
or other similar instruments or obligations incurred in the
ordinary course of business), (vii) withdrawal liability
incurred by Borrower or any ERISA Affiliate under ERISA to
any Multiemployer Plan which is required to be reserved for,
reflected or disclosed in financial statements prepared in
accordance with GAAP and (viii) without duplication of any of
the foregoing, the items listed in the definition of "Debt"
in Section 101 of the Indenture.
"Default" means any event, occurrence, condition,
<PAGE>
act or omission which with the giving of notice, the passage
of time or both would constitute an Event of Default.
"Directive" means any Law, and any directive,
guideline or requirement of any governmental authority
(whether or not having the force of law).
"Dollar" and "$" means the lawful currency of the
United States of America.
"Employee Benefit Plan" means any employee benefit
plan (other than a Multiemployer Plan) within the meaning of
Section 3(3) of ERISA which (i) is maintained for, or on
behalf of, its current or former employees, officers or
directors by Borrower or any ERISA Affiliate or (ii) has at
any time within the preceding six years been maintained for,
or on behalf of, its current or former employees, officers or
directors by Borrower or any current or former ERISA
Affiliate.
"Environmental Laws" means any Law imposing
liability or standards of conduct concerning, or otherwise
relating to, pollution, waste disposal, industrial hygiene,
occupational health and safety, the manufacture, use,
handling or release of Hazardous Materials or the protection
of human health, plant life or animal life, natural resources
or the environment.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" means, as applied to Borrower,
any Person who is a member of a group which is under common
control with Borrower, who together with Borrower is treated
as a single employer within the meaning of Section 414(b),
(c), (m) or (o) of the IRC or Section 4001(b) of ERISA.
"Eurocurrency Liabilities" has the meaning
specified in Regulation D promulgated by the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Rate" means, for each Interest Period
for each Eurodollar Rate Loan, the rate of interest per annum
(based on a year of 360 days and calculated on actual days
elapsed) equal at all times during such Interest Period to
the quotient (rounded upward, if necessary, to the nearest
one-sixteenth of one percent (0.0625%)) of (i) the rate of
interest determined by Agent to be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100 of
1%) of the rates at which deposits in Dollars are offered by
Reference Banks to prime banks in the London interbank market
at 11:00 a.m. (London time) two Banking Days before the first
day of such Interest Period for a period equal to such
Interest Period and in an amount as to each Reference Bank
substantially equal to the Eurodollar Rate Loan of such
Reference Bank divided by (ii) a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage (as defined
below) for such Interest Period.
"Eurodollar Rate Loan" means any Loan bearing
interest as provided in Section 2.3(b).
"Eurodollar Rate Reserve Percentage" for each
Interest Period for each Eurodollar Rate Loan means the
highest reserve percentage applicable during such Interest
Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System or any
successor for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental
or other marginal reserve requirement), with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (as defined below) having a term equal to such
Interest Period.
"Event of Default" has the meaning specified in
Section 6.1.
"EWG" has the meaning ascribed thereto in Section
4.1(bb).
"Exchange Act" means the Securities and Exchange
Act of 1934, as amended from time to time.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upwards, if necessary, to the nearest one-
hundredth (1/100th) of one percent (1%)), equal to the
weighted average of the rates of overnight federal funds
transactions with members of the Federal Reserve System
arranged by federal funds brokers as published for such day
(or if such day is not a Banking Day, for the next preceding
Banking Day) by the Federal Reserve Bank of New York, or if
such rate is not so published for any day which is a Banking
Day, the average of the quotations for such day on such
transactions received by Agent from three (3) federal funds
brokers of recognized standing selected by Agent.
<PAGE>
"Fees" has the meaning ascribed thereto in Section
2.5.
"FERC" means the Federal Energy Regulatory
Commission or any successor thereto.
"Final Maturity Date" means (x) the first
anniversary of the Closing Date or such later date to which
such date may be extended pursuant to Section 2.8 or (y) the
date of the consummation of the Merger, if earlier; provided,
however, that if the outstanding principal amount of the
Loans, interest thereon and other amounts payable hereunder
shall be due and payable sooner pursuant to Section 6.1 or
otherwise, then the Final Maturity Date shall be such earlier
date that such amounts are due and payable.
"FPA" has the meaning ascribed thereto in Section
4.1(bb).
"GAAP" means United States generally accepted
accounting principles.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof,
and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Hazardous Materials" means any asbestos,
flammables, volatile hydrocarbons, industrial solvents,
explosive or radioactive materials, hazardous wastes, toxic
substances or related materials including, without
limitation, substances defined as "hazardous substances,"
"hazardous materials," "contaminants," "pollutants,"
"hazardous wastes" or "toxic substances" (A) in (i) the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act, 42 U.S.C. Section 9601 et seq.,
(ii) the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., (iii) the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., (iv) the
Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq., (v) the Clean Air Act, 33 U.S.C.
Section 7401 et seq., (vi) the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., (vii) the Safe Drinking Water
Act, 42 U.S.C. Section 300f et seq., (viii) applicable
foreign, state or local law, or (ix) the rules, orders or
regulations adopted or proposed or in the publications
promulgated pursuant to said laws; or (B) in any reported
decision of a foreign, state or federal court.
"Indenture" means the Indenture dated as of March
24, 1994 between Borrower and IBJ Schroder Bank & Trust
Company, relating to Borrower's 10-1/4% Senior Discount Notes
due 2004 in the aggregate amount of $529,640,000, as in
effect on the date hereof.
"Interest Period" means, for each Loan, the period
commencing on the date of such Loan and ending on the last
day of the period selected by Borrower with respect to Loans
made to it pursuant to the provisions of Section 2.1. The
duration of each such Interest Period shall be (i) in the
case of a Eurodollar Rate Loan, 1, 2, 3 or 6 months (or such
other period as may be requested by Borrower and which Agent
reasonably determines is available), and (ii) in the case of
a Base Rate Loan, any period that does not extend beyond the
Final Maturity Date; provided, however, that:
(i) Borrower may not select any Interest Period
which ends after the then existing Final Maturity Date;
(ii) whenever the last day of any Interest
Period would otherwise occur on a day other than a Banking
Day, the last day of such Interest Period shall be extended
to occur on the next succeeding Banking Day; provided,
however, that, with respect to any Interest Period for a
Eurodollar Rate Loan, if such extension would cause the last
day of such Interest Period to occur in the next following
month, the last day of such Interest Period shall occur on
the next preceding Banking Day; and
(iii) whenever the first day of any Interest
Period occurs on a day of an initial calendar month for which
there is no numerically corresponding day in the calendar
month that succeeds such initial calendar month by the number
of months equal to the number of months in such Interest
Period, such Interest Period shall end on the last Banking
Day of such succeeding calendar month.
"Investment" in any Person means (i) any loan or
advance to such Person, (ii) any purchase or other
acquisition of any capital stock, warrants, rights, options,
obligations or other securities of such Person, (iii) any
capital contribution to such Person, (iv) any other
investment in such Person or (v) without duplication of any
<PAGE>
of the foregoing, any of the items listed in the definition
of "Investment" in Section 101 of the Indenture.
"IRC" means the Internal Revenue Code of 1986, as
amended from time to time.
"Kiewit Energy" means Kiewit Energy Company, a
Delaware corporation, and any other Subsidiary or Affiliate
of Peter Kiewit Sons' Inc., a Delaware corporation, Kiewit
Construction Group Inc., a Delaware corporation, or Kiewit
Diversified Group, Inc., a Delaware corporation.
"Laws" means all federal, state, local or foreign
laws, rules, regulations and treaties, all judgments, awards,
orders, writs, injunctions or decrees issued by any federal,
state, local or foreign authority, court, tribunal, agency or
other governmental authority, or by any arbitrator, all
permits, licenses, approvals, franchises, notices,
authorizations and similar filings, by or with any federal,
state, local or foreign governmental authority and all
consent decrees or regulatory agreements with any federal,
state, local or foreign governmental authority.
"Liens" means any lien, mortgage, security
interest, pledge, encumbrance, charge, conditional sale or
other title retention arrangement, or any undertaking or
arrangement with respect to property or rights (including a
"negative pledge") which has the practical effect of
preventing the grant of a security interest or lien securing
the Obligations.
"Loan" has the meaning ascribed thereto in Section
2.1(a) and includes Base Rate Loans or Eurodollar Rate Loans.
"Magma" means Magma Power Company, a Nevada
corporation.
"Magma Litigation" means the proceedings and
actions identified on Schedule 2.
"Magma Shares" means 12,400,000 shares of the
Common Stock, par value $0.10 per share, of Magma.
"Magma Tender Offer Documents" means all documents
filed by or on behalf of Magma or its Affiliates with the SEC
with respect to the Tender Offer.
"Majority Banks" means:
(a) As of any time before the Closing Date, Banks
holding Commitments which collectively constitute more than
50% of the aggregate amount of all Commitments; and
(b) As of any time on or after the Closing Date,
Banks whose total outstanding Loans exceed 50% of the total
outstanding Loans of all Banks.
"Malitbog" means the 231 gross megawatt Philippine
geothermal project of Magma currently under construction.
"Material Adverse Effect" means (a) subject to the
proviso to this definition, any change or effect, when taken
together with all other adverse changes and effects relating
to Borrower and its Subsidiaries that is materially adverse
to the business, operations, properties, condition (financial
or otherwise), assets or liabilities (including, without
limitation, contingent liabilities) of Borrower and its
Subsidiaries, taken as a whole, or (b) subject to the proviso
to this definition, any change or effect, when taken together
with all other adverse changes and effects relating to CE
Acquisition and its Subsidiaries that is materially adverse
to the business, operations, properties, condition (financial
or otherwise), assets or liabilities (including, without
limitation, contingent liabilities) of CE Acquisition and its
Subsidiaries, taken as a whole, or (c) the material
impairment of the ability of Borrower to perform its
obligations under any Credit Document to which it is a party
or the material impairment of the ability of Agent or any
Bank to enforce or collect any of the Obligations, or (d) the
material impairment of the ability of CE Acquisition to
perform its obligations under the CE Acquisition Secured Term
Note, or (e) the impairment of the perfection of the security
interest in, or the ability of the Agent to realize upon, any
part of the Collateral; provided , however, that for purpose
of determining whether Borrower has satisfied the conditions
set forth in Section 3.1, the occurrence of any or all of the
following shall not constitute a "Material Adverse Effect"
under clause (a) or (b) of this definition: (i) a failure to
receive any contract or award for which Magma or any of its
Subsidiaries has submitted or will submit a competitive bid,
(ii) the loss of any contract or arrangement (whether by
revocation, lapse or invalidity) with respect to a project
that Magma or any of its Subsidiaries has under development,
other than any such loss related to Malitbog, Fish Lake (as
defined below) or Alto Peak and other than any such loss
resulting from a breach by Magma of the representations and
<PAGE>
warranties set forth in Sections 4.22 and 4.23 of the Merger
Agreement, (iii) an unfavorable ruling by the California
Public Utilities Commission with respect to Magma's
California plants under the pending Biennial Resource Plan
Update, (iv) a loss of, or unfavorable ruling in, Magma's
pending litigation against Southern California Edison
Company, but only insofar as such litigation seeks to
increase the energy price payable for deliveries over
nameplate capacity and not insofar as any unfavorable ruling
affects the validity or enforceability of any contract
subject thereto or the enforceability of any material term
thereof, (v) a failure to close any public or private
financing of any project in which Magma or any of its
Subsidiaries owns a direct or indirect interest (other than
as a result of a loss with respect to Malitbog or Fish Lake
or as a result of a breach by Magma of the representations
and warranties set forth in Section 4.22 or 4.23 of the
Merger Agreement) or (vi) the termination of the employment
of any employee, officer, director or consultant of Magma or
any of its Subsidiaries. For purpose of this definition of
"Material Adverse Effect" the term "Fish Lake" shall mean the
capacity expansion of 36 megawatts at Magma's Salton Sea
project in connection with a 16 megawatt Interim Standard
Offer No. 4 contract originally assigned to Magma's
geothermal resources at Fish Lake, Nevada, and in connection
with a 20 megawatt expansion option under a negotiated
contract that was acquired as part of Magma's acquisition of
Union Oil Company of California's Salton Sea geothermal
assets in March 1993.
"Material Subsidiary" means (i) Magma, (ii) CE
Acquisition, (iii) each Project Owner and (iv) with respect
to Borrower, any Person which is (x) a Subsidiary of Borrower
which holds any material amount of capital stock of Borrower,
or (y) a Subsidiary of Borrower which is a "significant
subsidiary", with respect to Borrower as defined in Section
1-02(v) of Regulation S-X of the Securities and Exchange
Commission (17 C.F.R. Section 210.1-02(v)) as the same may be from
time to time amended or the equivalent definition under any
successor or replacement regulation of the Securities and
Exchange Commission; provided, however, that no Person which
has at any time been a Material Subsidiary by reason of the
foregoing shall cease to be such a Material Subsidiary for
the purposes hereof unless Borrower has theretofore given
Agent notice of such change in status.
"Maturity Date" means with respect to each
Eurodollar Rate Loan, the last day of the Interest Period
applicable to such Eurodollar Rate Loan.
"Maximum Loan Value" shall have the meaning
assigned to such term in Section 221.8 of Regulation U.
"Merger" means the merger between CE Acquisition
and Magma pursuant to the Merger Agreement.
"Merger Agreement" means the Merger Agreement dated
as of December 5, 1994 among Borrower, CE Acquisition and
Magma.
"Moody's" means Moody's Investors Services, Inc.
"Multiemployer Plan" means a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA to which Borrower
or any ERISA Affiliate is making, or is obligated to make,
contributions or has made, or has been obligated to make,
contributions within the preceding six years.
"Note" shall mean any promissory note issued by
Borrower pursuant to Section 2.4(i) hereof, substantially in
the form annexed as Exhibit F hereto, appropriately completed
in conformity herewith.
"Notice of Borrowing" means a request by Borrower
for Loans on the Closing Date pursuant to Section 2.1 and in
the form of Exhibit G hereto.
"Notice of Conversion or Continuation" means a
request by Borrower for the conversion of one Type of Loan to
another Type of Loan or the continuation of a Eurodollar Rate
Loan pursuant to Section 2.1(g) and in the form of Exhibit H
hereto.
"Obligations" means any and all obligations,
indebtedness and liability of Borrower of every kind and
character, owed to Agent or the Banks, arising directly or
indirectly out of or in connection with the Credit Documents
(including any modifications, amendments, extensions,
restatements or renewals of, supplements to, or substitutions
or replacements for, any one or more of the Credit
Documents), and including all such obligations, indebtedness
and liability, whether for principal, interest (including
interest that, but for the filing of a petition in bankruptcy
with respect to Borrower, would have accrued on the
Obligations), reimbursement obligations, fees, costs,
expenses, premiums, charges, attorneys' fees, indemnity,
whether heretofore, now, or hereafter made, incurred or
created, whether voluntarily or involuntarily and however
arising, whether or not due, whether absolute or contingent,
<PAGE>
liquidated or unliquidated, or determined or undetermined,
and whether Borrower may be liable individually or jointly
with others.
"Offer to Purchase" means the Offer to Purchase of
Borrower and CE Acquisition dated December 9, 1994 relating
to the Acquisition.
"Pension Plan" means any Employee Benefit Plan
which is subject to the provisions of Title IV of ERISA or
Section 412 of the IRC and which (a) is maintained for
employees of Borrower or any of its ERISA Affiliates or (b)
has at any time within the preceding six years been
maintained for the employees of Borrower or any of its
current or former ERISA Affiliates.
"Permitted Liens" means any Liens that (i) do not
in any way affect or relate to the Collateral or the Agent's
security interest in the Collateral and (ii) are:
(a) Liens for taxes, or other governmental levies
and assessments that (x) do not arise under ERISA or
Environmental Laws and (y) are not yet due or which are
being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto
are maintained on the books of Borrower in accordance
with GAAP;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not overdue
for a period of more than 60 days or which are being
contested in good faith and by appropriate proceedings;
(c) pledges or deposits in connection with
workmen's compensation, unemployment insurance and other
social security legislation;
(d) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions
(including landmarking and zoning restrictions) and
other similar encumbrances incurred or imposed in the
ordinary course of business which are not of the nature
of a Lien for security purposes and which, in the
aggregate, do not require the expenditure of substantial
sums, and which do not in any case materially detract
from the value of the property subject thereto or
interfere with the ordinary conduct of the business of
Borrower or any of its Subsidiaries;
(f) Liens incidental to the conduct of its
business or the ownership of its property and assets
which do not relate to Debt, do not arise under ERISA,
the IRC or Environmental Laws and which do not
materially detract from the value of its property or its
assets or materially impair the use thereof in the
operation of its business;
(g) zoning and landmarking restrictions;
(h) Liens arising under the Security Documents;
(i) Liens arising from judgments, provided that
(1) the execution or other enforcement of such Lien is
effectively stayed, (2) the judgment secured thereby is
being actively appealed in good faith and by appropriate
proceedings, (3) adequate book reserves shall have been
established and maintained and shall exist with respect
thereto, (4) such Lien shall have been in existence no
more than sixty days from the date of its creation, and
(5) the aggregate amount so secured shall not at any
time exceed $25,000,000;
(j) Purchase Money Liens, if, after giving effect
thereto and any concurrent transactions: (1) each such
Purchase Money Lien secures Debt in an amount not
exceeding the lesser of (x) the cost of acquisition or
construction of the property subject to such Lien or
(y) the fair market value of such property at the time
of acquisition or construction, and (2) no Default or
Event of Default would exist as a result of incurring
the Debt secured by such Purchase Money Lien;
(k) Liens existing on property of an entity at the
time such property is acquired by the Borrower or a
Subsidiary, or at the time such entity becomes a
Subsidiary, provided such Liens (x) are not created,
incurred or assumed in contemplation of such acquisition
or of such entity becoming a Subsidiary and (y) do not
extend to any other property of Borrower or any of its
<PAGE>
Subsidiaries; and
(l) Liens created in the ordinary course of
business of Magma and its Subsidiaries in connection
with the development, construction, operation, financing
or refinancing of a Permitted Facility (as defined in
the Indenture) and which are consistent with
Section 1012(iii)(B), (vii), (viii), (ix)(D) or (ix)(E)
of the Indenture.
"Person" means an individual, partnership,
corporation (including a business trust), joint stock
company, trust, unincorporated association, joint venture or
other entity, or a government or any political subdivision or
agency thereof.
"PBGC" means the Pension Benefit Guaranty
Corporation or any successor thereto.
"Plants" has the meaning ascribed thereto in
Section 4.1(bb).
"Project Owners" means, collectively, Del Ranch,
Ltd., a California limited partnership, Elmore, L.P., a
California limited partnership, Leathers, L.P., a California
limited partnership, Vulcan/BN Geothermal Power Company, a
Nevada general partnership, Salton Sea Power Company, a
Nevada Corporation, Magma Operating Company, a Nevada
corporation, Salton Sea Brine Processing, L.P., a California
limited partnership, Salton Sea Power Generation, L.P., a
California limited partnership and Visayas Geothermal Power
Company, a Philippine general partnership.
"PUHCA" means the Public Utility Holding Company
Act of 1935, as amended.
"Purchase Money Lien" means any Lien on property
acquired or constructed by Borrower after the Closing Date,
which Lien secures all or a portion of the related purchase
price or construction costs of such property, provided that
such Lien (1) is created within 180 days of such acquisition
or construction, (2) encumbers only property purchased or
constructed after the Closing Date and acquired or
constructed with the proceeds of the Debt secured thereby,
and (3) such Lien does not extend to any other property.
"QF" has the meaning ascribed thereto in Section
4.1(bb).
"Reference Banks" means the New York City office of
Credit Suisse or any substitute Reference Bank for either of
the foregoing from time to time selected by Agent with
Borrower's written consent (which consent shall not be
unreasonably withheld).
"Regulation G" means Regulation G of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 207,
as amended from time to time.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221,
as amended from time to time.
"Reportable Event" has the meaning assigned to that
term in Title IV of ERISA.
"Requirement of Law" means as to any Person, the
Certificate of Incorporation and By-Laws or other
organizational or governing documents of such Person, and any
law, treaty, rule or regulation, or any award, order,
judgment or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Responsible Officer" means, as to any Person, the
president, chief executive officer, chief operating officer,
chief financial officer, vice president, chief corporate
officer, treasurer, or controller of such Person.
"Restricted Junior Payment" means: (a) any
dividend or other distribution, direct or indirect, on
account of any shares of any class of stock of Magma or any
of its Subsidiaries now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to
the holders of that class which is pledged to Agent on behalf
of the Banks; (b) any redemption, conversion, exchange,
retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any
shares of any class of stock of CE Acquisition or any of its
Subsidiaries now or hereafter outstanding; (c) any voluntary
prepayment of principal of, premium, if any, or interest on
(however so affected, including by way of redemption,
conversion, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to), any
subordinated Debt of CE Acquisition or any of its
<PAGE>
Subsidiaries; and (d) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of CE
Acquisition or any of its Subsidiaries now or hereafter
outstanding.
"S&P" means Standard & Poor's Corporation.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933,
as amended from time to time.
"Security Documents" means the Borrower Pledge
Agreement, the CE Acquisition Pledge Agreement and all
financing statements, certificates, guaranties, assignments,
security agreements, mortgages, deeds of trusts, instruments
or documents executed and/or delivered pursuant thereto or in
connection therewith.
"Small Power QF" has the meaning ascribed thereto
in Section 4.1(bb).
"Solvent" and "Solvency" mean, with respect to any
Person on a particular date, that on such date (a) the fair
value of the property of such Person is greater than the
total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair
salable value of the assets of such Person is not less than
the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature
and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a
transaction, for which such Person's property would
constitute an unreasonably small capital.
"Subsidiary" means (i) as to any Person, any now
existing or hereafter organized corporation, partnership,
limited liability company, unincorporated association, joint
venture or other organization in which such Person, directly
or indirectly, owns beneficially or of record equity
securities (or securities currently convertible into equity
securities) which give such Person directly or indirectly,
upon conversion, exercise or otherwise, an interest of 50
percent or more of any of the profits, losses, capital or
property of, or ordinary voting power in respect of, such
corporation, partnership, joint venture or other organization
and (ii) as to Borrower, any of the foregoing and, after the
Closing Date, Magma.
"Tender Offer" means the offer by CE Acquisition to
acquire the Magma Shares as described in the Offer to
Purchase.
"Tender Offer Conditions" means the conditions to
the Acquisition as set forth in the Offer to Purchase.
"Termination Date" means September 30, 1995.
"Termination Event" means: (a) a "Reportable
Event" described in Section 4043 of ERISA and the regulations
issued thereunder other than those events as to which the 30-
day notice requirement has been waived under subsections 13,
14, 18, 19 or 20 of PBGC Regulation Section 2615 and the
regulations issued thereunder; or (b) the withdrawal of
Borrower or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as
a termination under Section 4041 of ERISA; or (d) the
institution of proceedings to terminate, or the appointment
of a trustee with respect to, any Pension Plan by the PBGC;
or (e) any other event or condition which would constitute
grounds under Section 4042(a)(1), (2) or (3) of ERISA, and
any other event or condition which has been identified to
Borrower or any ERISA Affiliate by notice from the PBGC which
would constitute grounds under Section 4042(a)(4) of ERISA,
for the termination of, or the appointment of a trustee to
administer, any Pension Plan; or (f) the partial or complete
withdrawal of Borrower or any ERISA Affiliate from a
Multiemployer Plan; or (g) the imposition of a Lien pursuant
to Section 412 of the IRC or Section 302 of ERISA; or (h) any
event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or
4245 of ERISA; or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A
of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
"Type" means, with respect to any Loan, a Base Rate
Loan or a Eurodollar Rate Loan.
<PAGE>
"UCC" means the Uniform Commercial Code of the
State of New York, as in effect from time to time.
Section 1.2 Computation of Time Periods. In this
Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until"
mean "to but excluding."
Section 1.3 Accounting Terms. All accounting
terms not specifically defined herein shall be construed in
accordance with GAAP.
Section 1.4 No Presumption Against Any Party.
Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against any Bank or
Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed
by each of the parties and their counsel and shall be
construed and interpreted according to the ordinary meaning
of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
Section 1.5 Use of Certain Terms. Unless the
context of this Agreement requires otherwise, the plural
includes the singular, the singular includes the plural, the
part includes the whole, "including" is not limiting, and
"or" has the inclusive meaning of the phrase "and/or." The
words "hereof," "herein," "hereby," "hereunder," and other
similar terms of this Agreement refer to this Agreement as a
whole and not exclusively to any particular provision of this
Agreement.
Section 1.6 Headings and References. Section and
other headings are for reference only, and shall not affect
the interpretation or meaning of any provision of this
Agreement. Unless otherwise provided, references to
Articles, Sections, Schedules, and Exhibits shall be deemed
references to Articles, Sections, Schedules and Exhibits of
this Agreement. References to this Agreement and any other
Credit Document include this Agreement and other Credit
Documents as the same may be modified, amended, restated or
supplemented from time to time pursuant to the provisions
hereof or thereof. A reference to a Person includes the
successors and assigns of such Person, but such successors
and assigns shall have rights under this Agreement only to
the extent permitted hereby.
Section 1.7 Independence of Provisions. All
agreements and covenants hereunder and under the other Credit
Documents shall be given independent effect such that if a
particular action or condition is prohibited by the terms of
any such agreement or covenant, the fact that such action or
condition would be permitted within the limitations of
another agreement or covenant shall not be construed as
allowing such action to be taken or condition to exist.
ARTICLE II
Amounts and Terms of the Loans
Section 2.1 The Loans.
(a) The Loan Commitments. Each Bank severally
agrees on the terms and conditions set forth in this
Agreement (including those of Article III hereof), to make
term loans (the "Loans") on the Closing Date at the
Applicable Lending Office in an amount equal to the lesser of
(i) its Commitment and (ii) its pro rata share of the Maximum
Loan Value of the Collateral; provided that each Bank's
commitment to make such Loans shall expire on the Termination
Date unless the Closing Date shall have occurred prior to
such date. Each Loan shall be made by the Banks ratably
according to each Bank's Commitment. All Loans shall be
funded in one drawing on the Closing Date and shall be made
available to Borrower at the Agency Office. The Loans and
any amount repaid may not be reborrowed.
(b) Borrowing Mechanics. Each Eurodollar Rate
Loan made on the Closing Date shall be in an aggregate
minimum amount of $10,000,000 and integral multiples of
$1,000,000 in excess of such amount. The Loans shall be made
on a Notice of Borrowing, given not later than 11:00 a.m.
(local time in the city where the Agency Office is situated)
on the third Banking Day prior to the date of the proposed
Loans by Borrower to Agent at the Agency Office, and Agent
shall give to each Bank prompt notice thereof by telex, cable
or telefacsimile, but in any event, such notice shall be
received by each Bank prior to 1:00 p.m. New York City time
on the date Agent receives such Notice of Borrowing in
compliance with this Section 2.1(b). Such Notice of
Borrowing shall be by telex, cable, telefacsimile, or
telephone confirmed promptly in writing, but in no event
shall such written confirmation be received by Agent later
than 11:00 a.m. (local time in the city where the Agency
Office is situated) on the Banking Day prior to the date the
<PAGE>
Loans are to be made. Such Notice of Borrowing shall specify
(i) the date of the Loans, (ii) the amount of each Loan,
(iii) the requested interest rate option under Section 2.3(a)
or (b) and (iv) the Interest Period in the case of Eurodollar
Rate Loans. In the event Borrower fails to specify an
Interest Period for any Eurodollar Rate Loan, such Interest
Period shall be for one month. In the event Borrower fails
to specify the interest rate option for any Loan, such Loan
shall be deemed a Base Rate Loan. Each Bank shall, before
2:00 p.m. (local time in the city the Agency Office is
situated) on the date the Loans are to be made, make
available to Agent at the Agency Office in same day funds in
Dollars for credit to the Applicable Agent's Account, such
Bank's ratable portion of the Loans and, unless Agent has
been notified by a Bank that the applicable conditions set
forth in Article III have not been fulfilled, Agent will make
such funds available to Borrower at the Agency Office on such
date; provided, however, in no event shall a Bank be required
to make funds available to Agent prior to 11:00 a.m. New York
City time on the date the Loans are to be made.
(c) Notice of Borrowing Irrevocable. A Notice of
Borrowing shall be irrevocable and binding on Borrower.
Borrower shall indemnify each Bank against any loss, cost or
expense incurred by such Bank as a result of any failure to
fulfill on or before the date specified in the Notice of
Borrowing, the applicable conditions set forth in Article
III, including, without limitation, any loss (including loss
of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund the Loans to be made by such
Bank when the Loans, as a result of such failure, are not
made on such date.
(d) Agent's Reliance on Bank Loans. Unless Agent
shall have received notice from a Bank prior to the date of
the Loans, that such Bank will not make available to Agent
such Bank's ratable portion of the Loans, Agent may assume
that such Bank has made such portion available to Agent on
the date of the Loans in accordance with this Section 2.1,
and Agent may, in reliance upon such assumption, make
available to Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made
such ratable portion available to Agent, such Bank and
Borrower severally agree to repay to Agent forthwith on
demand such corresponding amount advanced to Borrower,
together with interest thereon, for each day from the date
such amount is made available to Borrower until the date such
amount is repaid to Agent, at (i) in the case of Borrower,
the interest rate applicable at the time to the Loans and
(ii) in the case of such Bank, the Federal Funds Rate. If
such Bank shall repay such amount to Agent, such repayment
shall constitute such Bank's ratable portion of the Loans for
purposes of this Agreement.
(e) Failure to Make Loan. The failure of any Bank
to make the Loans to be made by it shall not relieve any
other Bank of its obligation, if any, hereunder to make its
Loan, on the date of the Loans, but no Bank shall be
responsible for the failure of any other Bank to make the
Loans to be made by such other Bank on the date of the Loans.
(f) Notice of Interest Rate and Interest Period.
Agent shall give prompt notice to Borrower and the Banks of
the applicable interest rate for such Loan determined by
Agent pursuant to Section 2.3 hereof as soon as reasonably
practicable after such rate is determined by Agent and in no
event later than three Banking Days prior to making such Loan
in the case of any Eurodollar Rate Loan. Such notice shall
also provide the Interest Period for any Eurodollar Rate
Loan.
(g) Voluntary Conversion or Continuation of Loans.
(i) Subject to the provisions of Sections 2.03(d) and (e),
Borrower shall have the option to (1) convert at any time all
or any part of Base Rate Loans equal to $10,000,000 and
integral multiples of $1,000,000 in excess of that amount to
Eurodollar Rate Loans, (2) convert at any time all or any
part of Eurodollar Rate Loans to Base Rate Loans (so long as
in the case of a partial conversion the remaining amount of
the Eurodollar Rate Loan is in an aggregate minimum amount of
$10,000,000 and integral multiples of $1,000,000 in excess of
such amount), or (3) upon the expiration of any Interest
Period applicable to a Eurodollar Rate Loan, to continue all
or any portion of such Eurodollar Rate Loan equal to
$10,000,000 and integral multiples of $1,000,000 in excess of
that amount as a Eurodollar Rate Loan and the succeeding
Interest Period(s) of such continued Eurodollar Rate Loan
shall commence on the Maturity Date of the Eurodollar Rate
Loan to be continued; provided that no outstanding Eurodollar
Rate Loan may be continued or be converted when any Event of
Default has occurred and is continuing or when there is an
occurrence of any condition or event which, with notice or
lapse of time or both, would constitute an Event of Default.
(ii) Borrower shall deliver a Notice of
<PAGE>
Conversion/Continuation to the Agent no later than 1:00 p.m.
(New York City time) at least three (3) Banking Days in
advance of the proposed conversion/continuation date. A
notice of Conversion/Continuation shall specify: (1) the
proposed conversion/continuation date (which shall be a
Banking Day); (2) the Type and amount of the Loan to be
converted or continued; and (3) in the case of a conversion
to, or a continuation of, a Eurodollar Rate Loan, the
requested Interest Period.
(iii) A Notice of Conversion/Continuation,
requesting a conversion to or continuation of a Eurodollar
Rate Loan shall be irrevocable once given, and Borrower shall
be bound to convert or continue, as applicable, in accordance
therewith.
Section 2.2 Repayment.
(a) Scheduled Repayments. Borrower shall repay
the principal amount of each Loan on the Final Maturity Date.
(b) Voluntary Prepayments. Upon at least one
Banking Day's notice to Agent by Borrower with respect to
Base Rate Loans, and three Banking Days' notice to Agent by
Borrower with respect to Eurodollar Rate Loans, stating the
proposed date and aggregate principal amount of the
prepayment, Borrower may, and if such notice is given
Borrower shall, prepay the outstanding principal amount of
any Base Rate Loan or Eurodollar Rate Loan, as applicable, as
identified by Borrower in such notice, in whole or ratably in
part, together with accrued interest to the date of such
prepayment on the principal amount prepaid, as well as any
additional amount owed by Borrower pursuant to Section
2.3(c), provided that each partial prepayment shall be in a
minimum amount of $1,000,000, and that if such prepayment is
a prepayment of the entire outstanding amount of the Loans,
such prepayment shall be accompanied by the prepayment of all
other Obligations.
(c) Mandatory Prepayments. The Loans shall be
prepaid in whole by Borrower, together with all accrued and
unpaid interest through the date of prepayment and any
additional amounts owed by Borrower pursuant to
Section 2.3(c), immediately upon (i) the consummation of the
Merger, (ii) the occurrence of any sale, transfer,
assignment, pledge or other encumbrance or disposition by CE
Acquisition of any of the Magma Shares, except the pledge
pursuant to the CE Acquisition Pledge Agreement and the
Borrower Pledge Agreement or (iii) the imposition of a
permanent injunction on the consummation of the Merger. The
Loans shall also be prepaid by Borrower, together with all
accrued and unpaid interest through the date of prepayment
and any additional amounts owed by Borrower pursuant to
Section 2.3(c), immediately upon the receipt by Borrower from
CE Acquisition, or upon the receipt by CE Acquisition from
Magma, of any dividends, loans, advances or other
distributions, or, in the case of Borrower, any principal
payments to Borrower under the CE Acquisition Secured Term
Note, in an amount equal to 100% of the amount of such
dividends, loans, advances or other distributions or
principal payment under the CE Acquisition Secured Term Note.
If any of such prepayment is a partial prepayment of the
outstanding amount of the Loans, such prepayment shall be
applied in accordance with Section 2.4(e), and if any such
prepayment is a prepayment of the entire outstanding amount
of the Loans, such prepayment shall be accompanied by the
prepayment of all other Obligations.
Section 2.3 Interest on Loans.
(a) Base Rate Loans. (i) Except to the extent
that Borrower shall have elected in the applicable Notice of
Borrowing to pay interest on any Loan for an Interest Period
pursuant to Section 2.3(b), or (ii) to the extent that
Eurodollar Rate Loans shall have become unavailable or
unlawful pursuant to Section 2.3(d) or (e), and (iii) in any
case, from and after the Maturity Date of each Eurodollar
Rate Loan that has not been continued pursuant to Section
2.1(g), Borrower shall pay interest on the unpaid principal
amount of each Loan made to Borrower, from the date of such
Loan until such principal amount is paid in full, at a
fluctuating interest rate per annum equal to the Base Rate
plus the Applicable Margin, together with, in each case, any
additional interest rate margin as shall be applicable under
Section 2.3(f).
(b) Eurodollar Rate Loans. Borrower may, if no
Event of Default has occurred and is continuing and subject
to the provisions of this Section 2.3 (as of the date the
Notice of Borrowing is required to be given pursuant to
Section 2.1(b) or as of the date a Loan may be converted to
or continued as a Eurodollar Rate Loan pursuant to
Section 2.1(g)), elect to pay interest on each Loan made to
Borrower during the Interest Period selected therefor in the
Notice of Borrowing or Notice of Conversion or Continuation
at a rate per annum equal to the sum of the Eurodollar Rate
<PAGE>
for such Interest Period plus the Applicable Margin, by
selecting the same in the Notice of Borrowing or the Notice
of Conversion or Continuation, as applicable, together with,
in each case, any additional interest rate margin as shall be
applicable under Section 2.3(f); provided that at no time
shall there be more than six Interest Periods outstanding for
all Eurodollar Rate Loans. From and after the Maturity Date
of each Interest Period for any Eurodollar Rate Loan and
until repaid, the unpaid principal balance thereof shall
automatically become, and bear interest as, a Base Rate Loan
(together with any additional interest rate margin as shall
be applicable under Section 2.3(f)) unless such Eurodollar
Rate Loan is continued pursuant to Section 2.1(g).
(c) Breakage Expenses. (i) Subject to clause
(ii) of this Section 2.3(c), if for any reason and at any
time or from time to time, including without limitation
voluntary or mandatory prepayment of principal or payment of
principal at any accelerated maturity, the outstanding
principal balance of any Eurodollar Rate Loan is reduced in
whole or in part prior to the Maturity Date of the applicable
Interest Period by reason of the reduction of any Loan, then,
in addition to accrued interest thereon, Borrower shall pay
to the Applicable Agent's Account for credit to each Bank for
the account of the Applicable Lending Office, on demand by
such Bank, (x) the amount by which the interest which would
have accrued on the amount of such principal reduction
subject to such Interest Period until such Maturity Date had
such principal reduction not been made, exceeds the interest
obtained by such Bank in the reemployment of such principal
reduction for the balance of such Interest Period and (y) any
cancellation or similar fees incurred by or allocated to
lenders of funds borrowed by such Bank to carry the unpaid
principal sum thereof at the applicable Eurodollar Rate, and
a certificate as to such excess and fees submitted by such
Bank to Borrower shall, absent manifest error, be final and
conclusive.
(ii) If Borrower elects to prepay a Eurodollar
Rate Loan on a day other than on the Maturity Date of such
Eurodollar Rate Loan, Borrower shall not be obligated for any
amounts referred to in this Section 2.3(c) relating to such
Eurodollar Rate Loan if (x) Borrower irrevocably deposits
with Agent cash or securities issued by the United States or
a combination thereof in amounts (including interest, but
without consideration of any reinvestment of such interest)
and with maturities sufficient to pay and discharge on such
Maturity Date the principal of and interest on such
Eurodollar Rate Loan, (y) Borrower delivers to Agent a
certificate from a nationally recognized firm of independent
accountants expressing its opinion that such deposited cash
and/or securities will provide cash at such times and in such
amounts as will be sufficient to pay the principal of and
interest on such Eurodollar Rate Loan due on such Maturity
Date, and (z) on such Maturity Date such cash and/or
securities have a value sufficient to pay in full the
principal of and interest on such Eurodollar Rate Loan.
(d) Eurodollar Rate Loans Not Available. In the
event that prior to the commencement of any Interest Period
for any Eurodollar Rate Loan, (x) Agent notifies Borrower and
each Bank that (1) adequate and fair means do not exist for
Agent to ascertain the relevant Eurodollar Rate, or (2) in
the case of a Eurodollar Rate Loan, one or more of the
Reference Banks or Agent, as applicable, is not offering
deposits in Dollars in the relevant interbank market in the
amount, at the time, or for the Interest Period necessary
fairly and adequately to determine the relevant Eurodollar
Rate, or (y) Banks whose Loans will exceed 50% of all Loans
at the commencement of such Interest Period, notify Agent
(and Agent shall promptly notify all other Banks and
Borrower) that the relevant Eurodollar Rate will not
adequately reflect the cost to the Banks giving such
notification of making or maintaining their Eurodollar Rate
Loans for such Interest Period, then, and in each such event,
(i) the obligation of the Banks to make such Eurodollar Rate
Loans shall be suspended, and (ii) all Loans made on or after
notice of such an event shall be Base Rate Loans for the
balance of the applicable Interest Period, and, until Agent
shall notify Borrower and the Banks that the circumstances
specified in clause (x) or (y) above no longer continue,
further Loans must be Base Rate Loans; provided that Agent
shall make a good faith effort (and Borrower agrees to
reimburse Agent for all expenses incurred in connection
therewith) to identify possible assignees of any Bank
described in clause (y) above, and Borrower shall have the
right to designate such an assignee (which may be an
Affiliate of Borrower) subject to the consent of Agent, which
consent shall not be unreasonably withheld.
(e) Eurodollar Loans Unlawful. In the event that
any Bank shall have determined (which determination, absent
manifest error, shall be final and conclusive) that the
continuation of any interest rate based on the Eurodollar
Rate, has become unlawful (or impracticable by compliance by
such Bank in good faith with any Directive) with respect to a
<PAGE>
Commitment of such Bank, then, and in any such event,
effective upon notice by such Bank to Agent and Borrower and
until such notice is rescinded, no such Type of Loan shall be
available under such Commitment with respect to future Loans
made by such Bank and any such existing Eurodollar Rate Loan
shall from and after such notice, become a Base Rate Loan for
the balance of the Interest Period, and Borrower shall pay to
such Bank, upon demand, all amounts necessary to compensate
such Bank in making such change in interest rates, including
any interest (without duplication) or fees payable by such
Bank to lenders of funds obtained by it in order to make or
maintain such Loan, and a certificate of such Bank as to such
interest, fees and other amounts to be conclusive absent
manifest error; provided, however, that (i) to the extent it
may lawfully do so without incurring any penalty or increased
costs, such Bank shall continue the existing Eurodollar Rate
Loan until the Maturity Date of the relevant Interest Period,
and (ii) before such termination, such Bank shall use
reasonable efforts (consistent with internal policies and
applicable Directives) to designate a different Applicable
Lending Office if the making of such designation would avoid
such illegality and would not, in the sole judgment of such
Bank, be otherwise to its disadvantage in any material
respect; provided, further, that Agent shall make a good
faith effort (and Borrower agrees to reimburse Agent for all
expenses incurred in connection therewith) to identify
possible assignees of any Bank prevented from making
Eurodollar Rate Loans due to the foregoing provisions, and
Borrower shall have the right to designate such an assignee
(which may be an Affiliate of Borrower) subject to the
consent of Agent, which consent shall not be unreasonably
withheld.
(f) Default Interest Rate. If an Event of Default
has occurred, then from and after the date of occurrence of
such Event of Default, and so long as such Event of Default
continues, the rate or rates of interest applicable to the
then and any subsequent outstanding Loans shall in all cases
be increased to (x) for Base Rate Loans, the Base Rate, plus
the Applicable Margin, plus 200 basis points (2.0%) per
annum, and (y) for Eurodollar Rate Loans, the rate of
interest in effect thereon at the time of the Event of
Default plus 200 basis points (2.0%) per annum until the end
of the then current Interest Period therefor and thereafter
the Base Rate, plus the Applicable Margin, plus 200 basis
points (2.0%) per annum. Other amounts payable by the
Borrower hereunder that are not paid when due (whether at
stated maturity, by acceleration or otherwise) shall accrue
interest at a rate per annum during the period commencing on
the date due until such other amounts are paid in full equal
to the Base Rate, plus the Applicable Margin, plus 200 basis
points (2.0%) per annum.
(g) Interest Payment Dates. Borrower shall pay
accrued interest on each Loan (without duplication),
determined and calculated as herein provided, as follows:
interest accruing on each Loan is payable on (i) the Maturity
Date for an Interest Period for Eurodollar Rate Loans,
(ii) the last Banking Day of each March, June, September and
December, commencing with the first such Banking Day
following the making of any Loan, in the case of any Base
Rate Loan or Eurodollar Rate Loan, (iii) the date such Loan
is Converted pursuant to Section 2.1(g), or (iv) the Final
Maturity Date, if earlier; provided that interest accruing on
and after the Final Maturity Date shall be due daily.
Section 2.4 Payments and Computations.
(a) Payments to Applicable Agent's Account.
Except as provided in Section 2.7, Borrower shall pay all
amounts due to Agent and Banks hereunder and under any other
Credit Document to which it is a party, without condition or
deduction for any counterclaim, defense, recoupment or
setoff, in Dollars and in same day funds delivered to Agent
not later than (i) 1:00 p.m. (local time in the city where
the Agency Office is situated) on the day when due by deposit
of such funds to the Applicable Agent's Account. Agent will
promptly thereafter cause to be distributed like funds
relating to the payment of principal, interest, or fees
ratably (other than amounts subject to Taxes pursuant to
Section 2.7) to the Banks for the account of their respective
Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Bank to such Bank
for the account of its Applicable Lending Office to be
applied in accordance with, and subject to, the terms of this
Agreement. Upon an Assignment and Acceptance Agreement
becoming effective as provided in Section 8.11 and recording
by Agent of the information contained therein in the register
maintained for purposes of this Agreement by Agent at its
Agency Office, from and after the effective date specified in
such Assignment and Acceptance Agreement, Agent shall make
all payments hereunder and under any other Credit Document in
respect of the interest assigned thereby to the Assignee
thereunder, and the parties to such Assignment and Acceptance
Agreement shall make all appropriate adjustments in such
payments for periods prior to such effective date directly
<PAGE>
between themselves.
(b) Setoff. Subject to the provisions of
Section 2.9, Borrower hereby authorizes each Bank, if and to
the extent payment owing to such Bank from Borrower is not
made when due hereunder, to charge from time to time against
any or all of Borrower's accounts with such Bank any amount
so due.
(c) Interest Computations. (i) Computations of
interest for the Eurodollar Rate, and the Federal Funds Rate,
shall be made by Agent on the basis of a year of 360 days,
(ii) computations of interest for the Base Rate and
computation of Fees shall be made by Agent on the basis of a
year of 365 or 366 days, as appropriate to reflect the actual
number of days in such year, and (iii) all computations in
every case shall be for the actual number of days (including
the first day but excluding the last day) occurring in the
period for which such interest or Fees are payable. Each
determination by Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest
error.
(d) Agent's Reliance on Borrower Payments. Unless
Agent shall have received notice from Borrower prior to the
date on which any payment is due to a Bank hereunder that
Borrower will not make such payment in full, Agent may assume
that Borrower has made such payment in full to Agent on such
date and Agent may, in reliance upon such assumption, cause
to be distributed to the Banks on such due date an amount
equal to the amount then due to such Banks. If and to the
extent Borrower shall not have so made such payment in full
to Agent, each Bank shall repay to Agent forthwith on demand
such amount distributed to such Bank together with interest
thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such
amount to Agent, at the Federal Funds Rate.
(e) Application of Payments. Amounts received by
Agent for application to the principal of any Loans shall be
applied (i) if received on or before the Final Maturity Date
(if not specified by Borrower or if received after the
occurrence and continuance of an Event of Default) first, to
the ratable payment of the outstanding Base Rate Loans,
second, subject to Section 2.3(c), to the ratable payment of
the outstanding Eurodollar Rate Loans, and (ii) if received
after the Final Maturity Date to the ratable payment of all
the outstanding Loans, subject to Section 2.3(c).
(f) Payments on Non-Banking Days. Whenever any
payment hereunder shall be stated to be due on a day other
than a Banking Day, such payment shall be made on the next
succeeding Banking Day (except as otherwise provided with
respect to the determination of Interest Periods), and such
extension of time shall in such case be included in the
computation of payment of interest or Fees, as the case may
be.
(g) Adjustments. If any Bank shall obtain any
payment whether voluntary, involuntary, through the exercise
of any right of setoff, or otherwise with respect to
principal, interest, or fees due under the Credit Documents,
in excess of its ratable share of payments on account of
principal, interest, or such fees, as the case may be, then
due and owing to all Banks under the Credit Documents, such
Bank shall forthwith purchase from such other Banks such
participations in the principal, interest or such fees, as
the case may be, owing to them as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with
each of the Banks; provided, however, that if all or any
portion of such excess payment is thereafter recovered from
such Bank, such purchase from such other Banks shall be
rescinded and each such other Bank shall repay to the
purchasing Bank the purchase price to the extent of such
recovery, without interest. Borrower agrees that any Bank
purchasing a participation from another Bank pursuant to this
Section may, to the fullest extent permitted by law and
subject to the provisions of Section 2.9, exercise all its
rights of payment (including the right of setoff) with
respect to such participation as fully as if such Bank were
the direct creditor of Borrower in the amount of such
participation.
(h) Loan Register. The indebtedness of Borrower
resulting from all Loans hereunder shall be evidenced by the
entries made in a register maintained by Agent at the Agency
Office; such register shall record (i) the date of and amount
of each Loan, the Type of each Loan and the Interest Period
applicable thereto from time to time, (ii) the terms of each
Assignment and Acceptance Agreement delivered to and accepted
by it, (iii) the amount of any principal or interest due and
payable or to become due and payable from Borrower to each
Bank, (iv) the amount of any sum received by Agent from
Borrower under any Credit Document and each Bank's share
thereof, and (v) the interest rate for such Loan. The
entries made in such register shall be conclusive and binding
<PAGE>
for all purposes, absent manifest error.
(i) The Notes. The obligation of Borrower to
repay the aggregate unpaid principal amount of the Loans
shall be evidenced by notes (the "Notes") in the form of
Exhibit E annexed hereto, appropriately completed in
conformity herewith, payable to the order of each Bank, duly
executed and delivered by Borrower to each Bank and bearing
interest and maturing as provided herein.
Section 2.5 Fees. Borrower shall pay the fees
(the "Fees") set forth in the fee letter dated October 25,
1994, as the same may be amended from time to time, between
Borrower, CE Acquisition and Credit Suisse in accordance with
the terms thereof.
Section 2.6 Increased Costs and Capital
Requirements. In the event that at any time or from time to
time after the date of this Agreement, any Directive, or a
change in any existing or future Directive (including any
change resulting from the operation of any transitional or
phase-in requirements), or in the interpretation or
application thereof by any governmental or judicial
authority, or any action pursuant thereto, or compliance by
Agent or any Bank with any request or Directive imposed or
modified by any central bank or by any other financial,
monetary or other governmental authority:
(a) shall (i) impose, increase, modify or apply
any reserve (including basic, supplemental, marginal and
emergency reserves, but excluding reserve requirements
which are expressly included in the determination of any
interest rate pursuant to the provisions hereof),
special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities
with or for the account of, or credit extended by, or
any other acquisition of funds by, any office of Agent
or any Bank; or (ii) impose on Agent or any Bank any
fee, charge, tax (other than "Taxes," "Other Taxes," and
"Excluded Taxes" subject to the provisions of Section
2.7), or condition with respect to this Agreement, any
Commitment or any part thereof, or any sums outstanding
or payable hereunder or thereunder; and the result of
any of the foregoing is to increase the cost to Agent or
any Bank of making or maintaining such Commitment, or
any Loan or to reduce the amount of any sum received or
receivable by Agent or such Bank, with respect to such
Commitment, any Loan or any interest, fees or other sums
payable hereunder,
then, subject to the last sentence of this Section 2.6, upon
demand by Agent or such Bank, Borrower shall pay with respect
to any affected Commitment (including Loans thereunder),
promptly for the account of Agent or such Bank, such
additional amount or amounts as Agent or such Bank, in good
faith, certifies in writing to Borrower shall compensate
Agent or such Bank for the amount of such increased cost or
reduced amount receivable, such certification to be
conclusive and binding for all purposes hereof absent
manifest error; or
(b) shall impose, modify or deem applicable any
capital adequacy or similar requirement (including
without limitation a request or requirement which
affects the manner in which any Bank allocates capital
resources to its commitments, including its obligations
hereunder) and as a result thereof, in the sole opinion
of such Bank, the rate of return on such Bank's capital
as a consequence of its obligations hereunder is or will
be reduced to a level below that which such Bank could
have achieved but for such circumstances,
then and in each such case upon notice to Borrower through
Agent, Borrower shall, subject to the last sentence of this
Section 2.6, pay to such Bank such additional amount or
amounts as shall compensate such Bank for such reduction in
rate of return for (i) any Loans outstanding under any
Interest Period commencing after such notification, (ii) any
Loans bearing interest at the Base Rate with respect to the
period after the end of the calendar month in which such
notification was given and (iii) any portion of the affected
Bank's Commitment outstanding with respect to the period
after the end of the calendar month in which such
notification was given.
If a Bank determines that it may be entitled to
claim any additional amounts pursuant to this Section during
the next succeeding Interest Period or month, as the case may
be, it shall promptly notify, through Agent, Borrower and
each other Bank of the event by reason of which it has become
so entitled. A certificate as to any such additional amount
or amounts submitted by a Bank, through Agent, to Borrower
and the other Banks shall certify that similar demands have
been made to other customers of such Bank which are subject
to similar provisions and shall, in the absence of manifest
error, be final and conclusive. In determining such amount,
<PAGE>
a Bank may use any reasonable averaging and attribution
methods. Notwithstanding the foregoing, Borrower shall only
be obligated to compensate any Bank or Agent for any amount
described in this Section 2.6 arising or occurring during (i)
any time period commencing not more than 90 days prior to the
date on which such Bank notifies Agent and Borrower that such
Bank or Agent proposes to demand such compensation and (ii)
any time period during which, because of the unannounced
retroactive application of such statute, regulation or other
bases, such Bank could not have known that such amount might
arise or accrue. Agent shall make a good faith effort (and
Borrower agrees to reimburse Agent for all expenses incurred
in connection therewith) to identify possible assignees of
any Bank entitled to any additional amounts pursuant to this
Section, and Borrower shall have the right to designate such
an assignee (which may be an Affiliate of Borrower) subject
to the consent of Agent, which consent shall not be
unreasonably withheld.
Section 2.7 Taxes.
(a) Payments Free of Taxes. Any and all payments
or reimbursements made hereunder or under any other Credit
Document shall be made free and clear of and without
deduction for any and all present and future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto ("Charges"), excluding (i)
in the case of payments to each Bank (a) Charges imposed on,
or measured by, its income or receipts (other than Charges
imposed by the United States by means of withholding taxes),
and franchise taxes imposed on it, by the jurisdiction under
the laws of which such Bank is organized (or any political
subdivision thereof), or by the jurisdiction of such Bank's
Applicable Lending Office (or any political subdivision
thereof) and (b) Charges imposed by the United States by
means of withholding taxes if and to the extent that such
withholding taxes shall be in effect and shall be applicable
under current laws and regulations (including judicial and
administrative interpretations thereof) to payments to be
made for the account of such Bank's Applicable Lending Office
on the Closing Date, or, in the case of an Assignee, on the
effective date of the Assignment and Acceptance Agreement
pursuant to which it became a Bank, or on the date the Bank
changes its Applicable Lending Office, or, if such
withholding taxes result therefrom, changes any other office
from which such Bank makes or maintains any other extension
of credit under this Agreement (other than any change
pursuant to Section 2.7(e)); and (ii) in the case of payments
to Agent, (a) Charges imposed on, or measured by, its income
or receipts (other than Charges imposed by the United States
by means of withholding taxes), and franchise taxes imposed
on it, by the jurisdiction under the laws of which it is
organized (or any political subdivision thereof) or by any
jurisdiction in which Agent is doing business (other than
where such circumstances would not exist but for a connection
arising in respect of this Agreement) and (b) Charges imposed
by the United States by means of withholding taxes if and to
the extent that such withholding taxes shall be in effect and
shall be applicable under current laws and regulations
(including judicial and administrative interpretations
thereof) to payments to Agent under any Credit Document on
the Closing Date (all Charges described in clauses (i) and
(ii) being referred to as "Excluded Taxes" and all Charges
not described in clauses (i) and (ii) being hereinafter
referred to as "Taxes"). Subject to Section 2.7(h), Borrower
shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any other
Credit Document to any Bank or Agent, (i) the sum payable
shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section) such Bank or
Agent receives an amount equal to the sum it would have
received had not such deductions been made, (ii) Borrower
shall make such deductions, and (iii) Borrower shall pay the
full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law (and shall
be entitled to any "Tax Credit" with respect to such payment
pursuant to Section 2.7(g)).
(b) Other Taxes. In addition, Borrower agrees to
pay any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies
(but not any tax on any transfer or assignment of, or any
participation in, the Loans or this Agreement) which arise
from any payment made hereunder or under any other Credit
Document or from the execution, delivery or registration or
filing or recording of, or otherwise with respect to, this
Agreement or any other Credit Document or document delivered
hereunder or under any other Credit Document (hereinafter
referred to as "Other Taxes").
(c) Tax Indemnity. Borrower will indemnify each
Bank and Agent for the full amount of Taxes (but not any tax
on any transfer or assignment of, or any participation in,
the Loans or this Agreement) or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
<PAGE>
jurisdiction on amounts payable under this Section) paid by
such Bank or Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This
indemnification payment shall be made within 30 days from the
date such Bank or Agent (as the case may be) makes written
demand therefor.
(d) Evidence of Tax Payments. Within 30 days
after the date of any payment of Taxes with respect to any
Bank or Agent, Borrower will (as to Taxes paid by it) furnish
to Agent, at the Agency Office, the original or a certified
copy of a receipt or other evidence reasonably satisfactory
to Agent of payment thereof.
(e) Change of Applicable Lending Office. Any Bank
claiming any additional amounts payable pursuant to this
Section shall use its reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to
change the jurisdiction of its Applicable Lending Office or
any other office from which such Bank makes or maintains any
extension of credit under this Agreement, if the making of
such a change would avoid the need for or reduce the amount
of, any such additional amounts which may thereafter accrue
and would not, in the sole judgment of such Bank, be
otherwise disadvantageous to such Bank.
(f) Survival. Without prejudice to the survival
of any other agreement of Borrower hereunder, the agreement
and obligations of Borrower contained in this Section 2.7
shall survive the payment in full of the Obligations
hereunder for a period expiring concurrently with the
expiration of the statute of limitations applicable to claims
made by the taxing authorities to collect Taxes or Other
Taxes.
(g) Tax Credits. If any Bank or Agent shall
receive a credit or refund from a taxing authority with
respect to, and actually resulting from, an amount of Taxes
or Other Taxes actually paid to or on behalf of such Bank or
Agent by Borrower, which credit or refund would not arise but
for such Taxes or Other Taxes (a "Tax Credit"), such Bank or
Agent shall promptly notify Borrower of such Tax Credit. If
such Tax Credit is received by such Bank or Agent in the form
of cash, such Bank or Agent shall promptly pay to Borrower
the amount so received with respect to the Tax Credit. If
such Tax Credit is not received by such Bank or Agent in the
form of cash, such Bank or Agent shall pay the amount of such
Tax Credit not later than the time prescribed by applicable
law for filing the return (including extensions of time) for
such Bank's or Agent's taxable period which includes the
period in which such Bank or Agent receives the economic
benefit of such Tax Credit. In any event, the amount of any
Tax Credit payable by a Bank or Agent to Borrower pursuant to
this Section 2.7(g) shall not exceed the actual amount of
cash refunded to, or credits received and usable by, such
Bank or Agent from a taxing authority. In determining the
amount of any Tax Credit, a Bank or Agent shall use such
apportionment and attribution rules as such Bank or Agent
customarily employs in allocating taxes among its various
operations and income sources and such determination shall be
conclusive absent manifest error. Borrower further agrees
promptly to return to a Bank or Agent the amount paid to
Borrower with respect to a Tax Credit by such Bank or Agent
if such Bank or Agent is required to repay, or is determined
to be ineligible for, a Tax Credit for such amount.
(h) Foreign Banks. Each Bank organized under the
laws of a jurisdiction outside the United States (a "Foreign
Bank") as to which payments to be made under any Credit
Document are exempt from (or are subject to a reduced rate
of) United States withholding tax under an applicable statute
or tax treaty shall provide to Borrower and Agent (1) a
properly completed and executed Internal Revenue Service Form
4224 or Form 1001 or other applicable form, certificate or
document prescribed by the Internal Revenue Service of the
United States certifying as to such Foreign Bank's
entitlement to such exemption (or reduced rate) with respect
to payments to be made to such Foreign Bank under any Credit
Document (a "Certificate of Exemption") or (2) a letter from
any such Foreign Bank stating that it is not entitled to any
such exemption (or reduced rate) (a "Letter of Non-
Exemption"). Prior to becoming a Bank under this Agreement
and within fifteen (15) days after a reasonable written
request of Borrower or Agent from time to time thereafter,
each Foreign Bank that becomes a Bank under this Agreement
shall provide a Certificate of Exemption or a Letter of Non-
Exemption to Borrower and Agent. If a Foreign Bank is
entitled to an exemption (or reduced rate) with respect to
payments to be made to such Foreign Bank under any Credit
Document and does not provide a Certificate of Exemption to
Borrower and Agent within the time periods set forth in the
preceding sentence, Borrower shall withhold taxes from
payments to such Foreign Bank at the applicable statutory
rates and Borrower shall not be required to pay any
<PAGE>
additional amounts as a result of such withholding; provided,
however, that all such withholding shall cease (or be
reduced, as appropriate) upon delivery by such Foreign Bank
of a Certificate of Exemption to Borrower and Agent.
Section 2.8 Extension of Final Maturity Date. Not
earlier than the date 90 days and not later than the date 60
days prior to the Final Maturity Date, Borrower may, by
notice to Agent, request an extension of the Final Maturity
Date then constituting the Final Maturity Date to the date
that is one year after the then-effective Final Maturity
Date; provided, that the Final Maturity Date as of the
Closing Date may not be extended for more than two
consecutive one year periods. Agent shall promptly notify
each Bank of such request. If all of the Banks and Agent
consent in writing to such extension, Agent shall, within
three Banking Days of its receipt of the last written
consent, notify Borrower in writing that such request has
been accepted and, upon the giving of such notice, the Final
Maturity Date shall be so extended, effective as of the close
of business on the date such notice is given. If Agent fails
to give such notice of acceptance within such time or if all
Banks and Agent fail to give such written consents, the
request for extension shall be deemed rejected. If requested
by any Bank, Agent shall, to the extent known by Agent,
notify such Bank whether the other Banks have agreed to
extend the Final Maturity Date. If the written consent of
all Banks to any such request for extension has not been
received by Agent on or before 60 days prior to the then-
effective Final Maturity Date, Borrower may withdraw its
request for such extension any time thereafter. The written
consent of the Banks to any such request for extension shall
be in form and substance satisfactory to Agent in its sole
discretion. Each Bank may accept, reject or fail to act upon
such request for extension in its sole and absolute
discretion; provided, however, that if any Bank has failed to
give its written consent to such extension to Agent prior to
the later of (x) 30 days from the date such Bank receives
from Agent notice of Borrower's request for an extension of
the Final Maturity Date and (y) 30 days prior to the
expiration of the then-effective Final Maturity Date, such
Bank shall, at the request of Agent, within three Banking
Days after receipt of notice from Agent requiring such
assignment, assign such Bank's rights and obligations under
this Agreement and the other Credit Documents to one or more
Assignees (which may be one or more Banks, including Agent in
its capacity as a Bank) designated by Agent, such assignment
to be at par (based on the non-consenting Bank's outstanding
Loans and accrued interest and fees on the effective date of
such assignment) and to be made pursuant to Sections 8.11(a)
through (d) under one or more Assignment and Acceptance
Agreements, which shall be executed by such non-consenting
Bank upon the execution thereof by such Assignee or
Assignees. Nothing herein shall be deemed to impose any
obligation on Agent to issue any such notice requiring
assignment or to impose any obligation on any Bank (including
Agent in its capacity as a Bank) to become assignees of such
non-consenting Bank, provided that Agent shall make a good
faith effort to identify possible assignees and Borrower
shall have the right to designate such an assignee (which may
be an Affiliate of Borrower) subject to the consent of Agent,
which consent will not be unreasonably withheld. Borrower
shall pay to any non-consenting Bank any amounts due pursuant
to Section 2.3(c), in respect of any assignment of
outstanding Eurodollar Rate Loans required to be made during
any Interest Period.
Section 2.9 Limited Liability. Agent and each
Bank agrees that the Loans made hereunder are being made on a
non-recourse basis (as to principal) and that any claim
against Borrower for the repayment of the principal amount of
the Loans shall be made only against and shall be limited to
the Collateral, and that no judgment, proceeding, whether
legal or equitable, with respect to the principal amount of
the Loans shall be obtained or enforced against Borrower's
assets (other than the Collateral), for purpose of obtaining
payment of the principal amount of the Loans. It is
expressly agreed and understood that no recourse may be had
to any officer, director, employee, agent, partner, joint
venturer or stockholder of Borrower with respect to, and no
such person shall have any liability with respect to, the
obligations and liabilities of Borrower under any of the
Credit Documents. Notwithstanding the foregoing, Borrower
shall be liable for, and Agent and the Banks shall have
recourse against Borrower with respect to, interest on the
Loans, the Fees and the other Obligations (other than the
principal amount of the Loans, it being understood that in no
event shall Borrower be personally liable for the repayment
of the principal amount of the Loans whether directly or
indirectly through the application of the indemnification
provisions of any of the Credit Documents).
Section 2.10 Election Under Section 1111(b) of the
Bankruptcy Code. Agent and each Bank hereby irrevocably
agree, to the maximum extent permitted by law, that, in any
case in which Borrower is the debtor or one of the debtors
<PAGE>
under the Bankruptcy Code, each of Agent and the Banks shall
be deemed to have made a timely election pursuant to Section
1111(b)(1)(A)(i) of the Bankruptcy Code (or any substantially
comparable provision which is the successor thereto) as to
any claim for the payment of the principal of the Loans and
(ii) if (A) Borrower becomes a debtor subject to the
reorganization provisions of the Bankruptcy Code or any
successor provisions or any other applicable bankruptcy or
insolvency statutes, (B) pursuant to such provisions,
Borrower is held to have recourse liability to Agent or the
Banks directly or indirectly on account of any amount payable
in respect of the principal of the Loans and (C) Agent or any
Bank actually receives any payment which reflects any payment
by Borrower on account of the matters referred to in clause
(ii)(B) of this sentence, then Agent or such Bank, as the
case may be, shall promptly refund to Borrower the Recourse
Amount (as defined below). For purposes of this Section
2.10, "Recourse Amount" means the amount by which the portion
of such payment by Borrower on account of the matters
referred to in clause (ii)(B) of the preceding sentence
actually received by Agent or such Bank, as the case may be,
exceeds the amount which would have been received by Agent or
such Bank, as the case may be, if Borrower had not become
subject to the recourse liability referred to in such clause
(ii)(B) of the preceding sentence; provided, however, that
Agent and each Bank shall be allowed to receive and retain
all payments required pursuant to Section 1129(b) of the
Bankruptcy Code (or any substantially comparable provision
which is the successor thereto) as a result of having made
the election pursuant to Section 1111(b)(1)(A)(i).
ARTICLE III
Conditions of Commitments
Section 3.1 Conditions Precedent to the Making of
the Loans. The obligations of each Bank to make its ratable
share of the Loans on the Closing Date is subject to the
conditions precedent that Agent shall have received on or
before the Closing Date, in form and substance satisfactory
to Agent in its sole discretion:
(a) Certificate of Incorporation. A copy of the
certificate of incorporation of Borrower, CE Acquisition and
Magma, and each amendment thereto, certified by the Secretary
of State of Delaware, with respect to the Certificates of
Incorporation of Borrower and CE Acquisition, and the
Secretary of State of Nevada, with respect to the Certificate
of Incorporation of Magma, as being a true and correct copy
thereof, such certificate to be dated a recent date prior to
the Closing Date.
(b) Certificate of Good Standing. For Borrower
and CE Acquisition, certificates of the Secretary of State of
Delaware, and for Magma, a certificate from the Secretary of
State of Nevada, listing the certificate of incorporation and
each amendment thereto on file in his office and certifying
that (i) such amendments are the only amendments to each such
certificate of incorporation on file in his office, (ii) each
of Borrower, CE Acquisition and Magma, as appropriate, has
paid all franchise taxes to the date of such certificate and
(iii) each of the Borrower, CE Acquisition and Magma, as
appropriate, is duly incorporated and in good standing under
the laws of such jurisdiction, such certificates to be dated
a recent date prior to the Closing Date.
(c) Certificate of Qualification. Certificates or
equivalent documents from all states in which the laws
thereof require Borrower and CE Acquisition to be qualified
and/or licensed to do business, certifying that Borrower or
CE Acquisition, as applicable, has duly qualified to do
business in such jurisdiction as a foreign corporation and is
in good standing under such qualification, such certificates
or equivalent documents to be dated a recent date prior to
the Closing Date.
(d) By-Laws and Resolutions. For each of Borrower
and CE Acquisition, copies of its by-laws, the resolutions of
its Board of Directors approving each Credit Document to
which it is a party, and of all documents evidencing other
necessary corporate action and governmental approvals, if
any, with respect to each such Credit Document, certified as
of the Closing Date as true and correct in each case by a
Responsible Officer of Borrower or CE Acquisition, as
applicable.
(e) Incumbency Certificate. A certificate of a
Responsible Officer of each of Borrower and CE Acquisition
dated as of the Closing Date certifying the names and true
signatures of the officers of each of Borrower and CE
Acquisition authorized to sign, in the case of Borrower, each
Credit Document to which it is a party and the other
documents to be delivered by it pursuant to any Credit
Document, and in the case of CE Acquisition, the CE
Acquisition Secured Term Note.
<PAGE>
(f) Opinions of Counsel. A favorable opinion of
(a) Willkie Farr & Gallagher, as counsel to Borrower and CE
Acquisition, substantially in the form of Exhibit I-1 hereto,
and as to such other matters as Agent or Majority Banks may
reasonably request, (b) Steven A. McArthur, as counsel to
Borrower and CE Acquisition, substantially in the form of
Exhibit I-2 hereto, and as to such other matters as Agent or
Majority Banks may reasonably request and (c) Nevada counsel
in form and substance satisfactory to Agent, in each case
dated the Closing Date.
(g) Fees. Payment in full by Borrower of all fees
and expenses which are to be paid on or before the Closing
Date.
(h) Security Documents. Fully executed
counterparts of all Security Documents requested by Agent,
signed by all parties thereto (other than Agent), and UCC
Financing Statements in a form satisfactory to Agent signed
by Borrower.
(i) Magma Shares. Stock certificates representing
the Magma Shares registered in the name of CE Acquisition,
together with irrevocable undated stock powers duly endorsed
in blank (being delivered concurrently with the making of the
Loans).
(j) Notes. Fully executed Notes completed, issued
and delivered in conformity with this Agreement.
(k) Capital Contribution. Evidence satisfactory
to Agent that not less than the principal amount of the Loans
made on the Closing Date has been contributed, in cash, in
the form of equity, to the capital of CE Acquisition by
Borrower and such funds have been deposited into a depository
account.
(l) Security Interest. Evidence satisfactory to
Agent that it has, for the benefit of the Banks, a valid and
perfected first priority security interest in the Collateral.
(m) CE Acquisition Secured Term Note and CE
Acquisition Credit Agreement. The original CE Acquisition
Secured Term Note, endorsed by Borrower to Agent. An
executed copy of the CE Acquisition Credit Agreement.
(n) Notice of Borrowing. A Notice of Borrowing in
accordance with Section 2.1(b).
(o) Officer's Certificate. A certificate executed
by a Responsible Officer of Borrower, stating that: (a) on
such date, and after giving effect to the funding of the
Loans and the consummation of the Acquisition, no Default or
Event of Default has occurred and is continuing; (b) no
Material Adverse Effect has occurred since December 31, 1993;
(c) the representations and warranties set forth in Article
IV are true and correct in all material respects on and as of
such date with the same effect as though made on and as of
such date; (d) Borrower on such date is in compliance with
all the terms and provisions set forth in this Agreement on
its part to be observed and performed; (e) neither Borrower
nor any of the Borrower Subsidiaries is in material default
under any material agreement, indenture, credit agreement or
other document to which it is a party; and (f) concurrently
with the making of the Loans, CE Acquisition is acquiring the
Magma Shares and that the Magma Shares represents not less
than 50.1% of the outstanding shares of Common Stock of
Magma.
(p) Confirmation of Agent for Service.
Confirmation from CT Corporation System of its acceptance of
its appointment as agent for service of process required
under Section 8.13.
(q) Financial Statements. A copy of Borrower's
and Magma's annual audited financial statements for the
fiscal year ended December 31, 1993 and Borrower's unaudited
interim financial statements for the nine month period ended
September 30, 1994.
(r) Performance of Agreements. Borrower and CE
Acquisition, as applicable, shall have performed all
agreements which this Agreement and the Credit Documents
provide shall be performed on or before the Closing Date.
(s) Government Approvals and Litigation. Evidence
satisfactory to Agent that (a) all governmental approvals and
filings and consents from third parties required in
connection with the consummation of the Acquisition and the
transactions contemplated hereby have been obtained and
(b) there is no litigation arising from or relating to the
transactions contemplated hereby or in connection with the
Acquisition, other than the Magma Litigation. There shall
not have occurred any development in any action, charge,
claim, demand, suit, proceeding, petition, governmental
investigation or arbitration to which Borrower or any of its
<PAGE>
Subsidiaries is a party that, in the opinion of Agent, could
reasonably be expected to have a Material Adverse Effect.
(t) Acquisition. Concurrently with the making of
the Loans, the Acquisition shall have been consummated in
accordance with the terms of the Offer to Purchase and as
contemplated hereby.
(u) Liquidity. Evidence satisfactory to Agent
that Borrower has available unrestricted and uncommitted
cash, Cash Equivalents (marked to market) and/or an
availability under a line of credit in an amount (or, with
respect to Cash Equivalents, with a fair market value) equal
to or greater than $50,000,000 in the aggregate.
(v) Alto Peak and Malitbog. Evidence satisfactory
to Agent that upon the consummation of the Merger, the
remaining equity commitment for Alto Peak and Malitbog and
the ownership interest therein shall be funded by Magma as
may be required and as may be agreed to between Borrower and
Agent.
(w) Tender Offer Conditions. Neither Borrower nor
CE Acquisition shall have waived any of the Tender Offer
Conditions that Agent deems material without the prior
written consent of Agent.
(x) Amendments to Offer to Purchase. All
amendments or modifications to the Offer to Purchase shall be
satisfactory to Agent.
(y) Material Adverse Effect. There shall not have
occurred a Material Adverse Effect since December 31, 1993.
(z) Business Plan. Agent shall have received at
least three Banking Days prior to the Closing Date a
preliminary business plan for operating Magma and its
Subsidiaries with an attached financial model reflecting all
significant aspects of such business plan, in each case in
form and substance satisfactory to Agent in its sole
discretion.
(aa) Form U-1. Federal Reserve Form U-1, provided
for in Regulation U, completed and executed by Borrower, the
statements made in which shall be, in the opinion of Agent,
such as to permit the transactions contemplated hereby in
accordance with Regulation U.
(bb) Form G-3. To the extent applicable, Federal
Reserve Form G-3, provided for in Regulation G, completed and
executed by CE Acquisition, the statements made in which
shall be, in the opinion of Agent, such as to permit the
transactions contemplated hereby in accordance with
Regulation G.
(cc) Form G-1. To the extent applicable, Federal
Reserve Form G-1, provided for in Regulation G, completed and
executed by Borrower, the statements made in which shall be,
in the opinion of Agent, such as to permit the transactions
contemplated hereby in accordance with Regulation G.
(dd) Indenture. Certified copy of the Indenture.
(ee) Merger Agreement. Certified copy of the
Merger Agreement.
(ff) No Amendment to Merger Agreement. The Merger
Agreement shall not have been amended without the prior
written consent of Agent.
(gg) Salton Sea and Malitbog Obligations. Agent
shall be satisfied with the arrangements made by Borrower to
assume (a) Magma's obligations with respect to certain debt
service reserve account and equity funding obligations under
Magma's Salton Sea project financing agreements and
(b) certain political risk, equity funding and project
completion obligations under the Malitbog project financing
agreements.
(hh) Other Matters. Such other agreements,
certificates, opinions, approvals, consents, instruments or
documents as Agent or the Majority Banks may reasonably
request, and all matters and proceedings shall be
satisfactory to Agent, each Bank and counsel for Agent and
each Bank.
ARTICLE IV
Representations and Warranties
Section 4.1 Representations and Warranties. In
order to induce Agent and each Bank to enter into this
Agreement and to induce each Bank to make the Loans
hereunder, Borrower represents and warrants to Agent and each
Bank that the following statements are and, after giving
effect to the Acquisition, will be true, correct and
<PAGE>
complete:
(a) Organization. Borrower and each Borrower
Subsidiary and, to the best of Borrower's knowledge, Magma
and its Subsidiaries, are duly organized and validly existing
under the Laws of the jurisdiction of its formation, and is
properly qualified to do business and in good standing in
every jurisdiction where the failure to maintain such
qualification or good standing could reasonably be expected
to have a Material Adverse Effect.
(b) Authorization of Credit Documents. The
execution, delivery and performance of each of the Credit
Documents to which Borrower or CE Acquisition is a party are
within its respective corporate powers and have been duly
authorized. Each of the Credit Documents to which Borrower
or CE Acquisition is a party has been validly executed and
delivered by Borrower or CE Acquisition, as applicable.
(c) Consents. The execution, delivery and
performance of each of the Credit Documents to which Borrower
or CE Acquisition is a party and the consummation of the
Acquisition do not and will not require any registration
with, consent or approval of, or notice to, or other action
to, with or by, any governmental authority, regulatory body
or any other Person, except for filings required by federal
or state securities laws (which filings have been made and
true and complete copies of which have been delivered to
Agent) and other filings, authorizations, consents and
approvals, all of which have been made or obtained or the
absence of which would not have a Material Adverse Effect.
(d) No Conflicts. The execution, delivery and
performance of the Credit Documents and the consummation of
the Acquisition will not (i) violate (A) the certificate of
incorporation or by-laws (or comparable documents) of
Borrower or any Borrower Subsidiary, (B) any Law or (C) any
provision of any material contract, agreement, indenture or
instrument to which Borrower or any Borrower Subsidiary is a
party or by which any of its respective properties is bound
or (ii) be in conflict with, or result in a breach of or
constitute a default under, any contract, agreement,
indenture or instrument referred to in (d)(i)(C) above or
(iii) result in the creation or imposition of any Lien,
except Permitted Liens or (iv) give to any Person rights to
cancel, terminate or suspend performance of their obligations
to Borrower or any Borrower Subsidiary under, or accelerate
payments of amounts owed by Borrower or any Borrower
Subsidiary to others under, any of the foregoing. To the
best of Borrower's knowledge, the execution, delivery and
performance of the Credit Documents and the consummation of
the Acquisition will not (i) violate (A) the certificate of
incorporation or by-laws (or comparable documents) of Magma
or any of its Subsidiaries, (B) any Law or (C) any provision
of any contract, agreement, indenture or instrument to which
Magma or any of its Subsidiaries is a party or by which any
of its respective properties is bound or (ii) be in conflict
with, or result in a breach of or constitute a default under,
any contract, agreement, indenture or instrument referred to
in (d)(i)(C) above or (iii) result in the creation or
imposition of any Lien, except Permitted Liens or (iv) give
to any Person rights to cancel, terminate or suspend
performance of their obligations to Magma or any of its
Subsidiaries under, or accelerate payments of amounts owed by
Magma or any of its Subsidiaries to others under, any of the
foregoing.
(e) Enforceability of Credit Documents. Each
Credit Document to which Borrower or CE Acquisition is a
party is a legal, valid and binding agreement of Borrower or
CE Acquisition, as applicable, enforceable against Borrower
or CE Acquisition, as applicable, in accordance with their
respective terms, except for bankruptcy and similar laws
affecting the enforcement of creditors' rights generally and
for the application of general equitable principles.
(f) Title to Property. Borrower and each Borrower
Subsidiary and, to the best of Borrower's knowledge, Magma
and its Subsidiaries have good, valid and sufficient title to
their material properties and assets free and clear of all
Liens, except for Permitted Liens.
(g) Compliance with Law. Borrower and each
Borrower Subsidiary and, to the best of Borrower's knowledge,
Magma and its Subsidiaries are in compliance with all
applicable Laws, except where the failure to maintain such
compliance could not reasonably be expected to have a
Material Adverse Effect.
(h) No Litigation. There are no actions, suits,
proceedings, claims or disputes pending or threatened,
against or affecting Borrower or any Borrower Subsidiary or,
to the best of Borrower's knowledge, Magma or any of its
Subsidiaries or any of its respective properties or assets
before any court or governmental department, commission,
board, bureau, agency or instrumentality domestic or foreign
<PAGE>
affecting any assets or properties of Borrower, any Borrower
Subsidiary, Magma or any of Magma's Subsidiaries (other than
the Magma Litigation), except for any thereof which would
not, in the aggregate, have a Material Adverse Effect.
(i) Events of Default. No event has occurred or
would result from the incurring of obligations under any
Credit Document or the consummation of the Acquisition which
is, or upon the lapse of time or notice or both would become,
an Event of Default.
(j) Material Subsidiaries. All Material
Subsidiaries of Borrower and the nature and extent of its
ownership interest therein have been heretofore disclosed in
writing to Agent and the Banks.
(k) Financial Condition. The consolidated balance
sheet of Borrower and its Subsidiaries as at December 31,
1992 and December 31, 1993 and the related consolidated
statements of operations and retained earnings and changes in
financial position for the fiscal years ended on such dates,
certified by Deloitte & Touche, copies of which have
heretofore been furnished to Agent, with sufficient copies
for each Bank, are complete and correct and present fairly
the consolidated financial condition of Borrower and the
Borrower Subsidiaries as at such dates, and the consolidated
results of their operations and changes in financial position
for the fiscal years then ended. Such financial statements,
including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such
accountants and as disclosed therein). Borrower and the
Borrower Subsidiaries, taken as a whole, are (and after
giving effect to the transactions contemplated by the Credit
Documents and the Acquisition will be) Solvent. To the best
of Borrower's knowledge, the consolidated balance sheet of
Magma and its Subsidiaries as at December 31, 1992 and
December 31, 1993 and the related consolidated statements of
operations and retained earnings and changes in financial
position for the fiscal years ended on such dates, certified
by Coopers & Lybrand, copies of which have heretofore been
furnished to Agent, with sufficient copies for each Bank, are
complete and correct and present fairly the consolidated
financial condition of Magma and its Subsidiaries as at such
dates, and the consolidated results of their operations and
changes in financial position for the fiscal years then
ended. To the best of Borrower's knowledge, such financial
statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as
approved by such accountants and as disclosed therein).
(l) No Material Adverse Effect. Since
December 31, 1993, there has been no Material Adverse Effect
with respect to Borrower and the Borrower Subsidiaries taken
as a whole. To the best of Borrower's knowledge, since
December 31, 1993, there has been no Material Adverse Effect
with respect to Magma and its Subsidiaries taken as a whole.
(m) Collateral. Borrower has good and marketable
title to the CE Acquisition Secured Term Note free and clear
of all Liens or rights of others, except for Liens in favor
of Agent under the Security Documents. CE Acquisition has
good and marketable title to the Magma Shares free and clear
of all Liens or rights of others, except for Liens in favor
of Borrower under the Security Documents. The first priority
security interest in the Magma Shares granted by CE
Acquisition to Borrower pursuant to the CE Acquisition Pledge
Agreement has been duly and validly assigned by Borrower to
Agent pursuant to the Borrower Pledge Agreement. Upon
delivery by CE Acquisition of the Magma Shares to Borrower in
accordance with the Security Documents, Borrower will have a
valid, fully perfected, first-priority security interest in
the Magma Shares. Upon delivery of the CE Acquisition
Secured Term Note to Agent and the Magma Shares in accordance
with the Security Documents, Agent will have, for the ratable
benefit of the Banks, a valid, fully perfected, first-
priority security interest in the CE Acquisition Secured Term
Note and (by virtue of its interest in the CE Acquisition
Pledge Agreement and the CE Acquisition Secured Term Note)
the Magma Shares. Schedule 1 of the Borrower Pledge
Agreement is a complete and accurate description of the CE
Acquisition Secured Term Note and the Magma Shares.
(n) No Default. Neither Borrower nor any Borrower
Subsidiary and, to the best of Borrower's knowledge, neither
Magma nor any of its Subsidiaries is in default under or with
respect to any contractual obligation in any respect which
could have a Material Adverse Effect. Neither Borrower nor
any Borrower Subsidiary and, to the best of Borrower's
knowledge, neither Magma nor any of its Subsidiaries is in
default under any material order, award or decree of any
court, arbitrator or Governmental Authority binding upon or
affecting it or by which any of its properties or assets is
bound or affected.
<PAGE>
(o) No Burdensome Restrictions. No contractual
obligation of Borrower or any Borrower Subsidiary or, to the
best of Borrower's knowledge, Magma or any of its
Subsidiaries, and no Requirement of Law has, or is reasonably
expected to have, in light of all facts and circumstances of
which Borrower has actual knowledge, a Material Adverse
Effect, it being understood that the mere existence of
traditional project finance contractual provisions which
provide lenders the ability to restrict cash distributions
would not constitute a burdensome restriction hereunder.
(p) Taxes. Borrower and each Borrower Subsidiary
have filed or caused to be filed all tax returns which are
required to be filed, and have paid all taxes shown to be due
and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any
Governmental Authority (other than those the amount or
validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves
in conformity with GAAP have been provided on the books of
Borrower or its applicable Borrower Subsidiary, as the case
may be); and no tax Liens have been filed and, to the
knowledge of Borrower, no claims are being asserted with
respect to any such taxes, fees or other charges which are
material either as to amount or potentially adverse effect
when considered with respect to the financial and business
condition of Borrower and its Subsidiaries taken as a whole.
To the best of Borrower's knowledge, Magma and each of its
Subsidiaries have filed or caused to be filed all tax returns
which are required to be filed, and have paid all taxes shown
to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by
any Governmental Authority (other than those the amount or
validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves
in conformity with GAAP have been provided on the books of
Magma or its applicable Subsidiary, as the case may be); and
no tax Liens have been filed and, to the knowledge of
Borrower, no claims are being asserted with respect to any
such taxes, fees or other charges which are material either
as to amount or potentially adverse effect when considered
with respect to the financial and business condition of Magma
and its Subsidiaries taken as a whole.
(q) ERISA and IRC Compliance and Liability.
Borrower and each ERISA Affiliate is in compliance with all
applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all
Employee Benefit Plans and, to the extent that such
compliance is required of Borrower or such ERISA Affiliate
with respect to all Multiemployer Plans, except where failure
to comply would not be expected to have a Material Adverse
Effect and except for any required amendments for which the
remedial amendment period as defined in Section 401(b) of the
IRC has not yet expired. Each Employee Benefit Plan and
Multiemployer Plan that is intended to be qualified under
Section 401(a) of the IRC has been determined by the Internal
Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section
501(a) of the IRC or an application for determination letter
confirming such qualification and exemption is pending or
will be filed prior to the expiration of the applicable
remedial amendment period as defined in Section 401(b) of the
IRC. No material liability has been incurred by Borrower or
any ERISA Affiliate which remains unsatisfied for any taxes
or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan. Each representation set forth in this
Section 4.1(q) with respect to Magma or any of its
Subsidiaries or any Employee Benefit Plan, Pension Plan or
Multiemployer Plan applicable thereto is being made to the
best knowledge of Borrower.
(r) Funding. No Pension Plan has been terminated,
nor has any accumulated funding deficiency (as defined in
Section 412 of the IRC) been incurred (without regard to any
waiver granted under Section 412 of the IRC), nor has any
funding waiver from the IRS been received or requested with
respect to any Pension Plan, nor has Borrower or any ERISA
Affiliate failed to make any contributions or to pay any
amounts due and owing as required by Section 412 of the IRC,
Section 302 of ERISA or the terms of any Pension Plan prior
to the due dates of such contributions under Section 412 of
the IRC or Section 302 of ERISA, nor has there been any event
requiring any disclosure under Section 4041(c)(3)(C) or
4063(a) of ERISA with respect to any Pension Plan. Each
representation set forth in this Section 4.1(r) with respect
to Magma or any of its Subsidiaries or any Employee Benefit
Plan or Pension Plan applicable thereto is being made to the
best knowledge of Borrower.
(s) Prohibited Transactions and Payments. Neither
the Borrower or any of its Subsidiaries nor, in the case of
clauses (2) through (4) hereof, any ERISA Affiliate has: (1)
engaged in a nonexempt prohibited transaction described in
<PAGE>
Section 406 of ERISA or Section 4975 of the IRC; (2) incurred
any liability to the PBGC which remains outstanding other than
the payment of premiums and there are no premium payments which
are due and unpaid; (3) failed to make a required contribution
or payment to a Multiemployer Plan; or (4) failed to make a
required installment or other required payment under Section 412
of the IRC, which in any such case in clauses (1) through (4),
the occurrence of which results in or could reasonably be
expected to result in a Material Adverse Effect. Each
representation set forth in this Section 4.1(s) with respect to
Magma or any of its Subsidiaries or any Employee Benefit Plan,
Pension Plan or Multiemployer Plan applicable thereto is being
made to the best knowledge of Borrower.
(t) No Termination Event. No Termination Event
has occurred or is reasonably expected to occur which has or
could reasonably be expected to have a Material Adverse
Effect.
(u) ERISA Litigation. No proceeding, claim,
lawsuit and/or investigation is existing or, to the knowledge
of Borrower, threatened concerning or involving any (1)
employee welfare benefit plan (as defined in Section 3(1) of
ERISA) currently maintained or contributed to by Borrower or
any of its Subsidiaries or any ERISA Affiliate to which
Borrower or any of its Subsidiaries may have liability, (2)
Pension Plan or (3), to the knowledge of Borrower,
Multiemployer Plan which could reasonably be expected to have
a Material Adverse Effect. Each representation set forth in
this Section 4.1(u) with respect to Magma or any of its
Subsidiaries or any Employee Benefit Plan, Pension Plan or
Multiemployer Plan applicable thereto is being made to the
best knowledge of Borrower.
(v) No Other Obligations. Except as set forth on
Schedule 4.1(v), neither Borrower nor any of its Subsidiaries
has any obligation to provide post-retirement welfare
benefits under any Employee Benefit Plan or other plan or
agreement, except for benefits due (i) under employee pension
benefit plans (as defined in Section 3(2) of ERISA), (ii) to
its disabled employees, (iii) under 4980B of the IRC or
Section 601 et seq. of ERISA, or (iv) as otherwise required
by law. Each representation set forth in this Section 4.1(v)
with respect to Magma or any of its Subsidiaries or any
Employee Benefit Plan, Pension Plan or Multiemployer Plan
applicable thereto shall be made to the best knowledge of
Borrower.
(w) Margin Regulations. Borrower is not engaged
in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation G, T, U, or X of the Board of Governors of the
Federal Reserve System) and no proceeds of any Loan will be
used in a manner which would violate, or result in a
violation of, such Regulation G, T, U, or X. Except as set
forth in Schedule 3 hereto, no part of the proceeds of any
Loan will be used for "buying" or "carrying" any "margin
stock" within the respective meanings of each of the quoted
terms under Regulation U or for any purpose which violates,
or which would be inconsistent with, the provisions of the
Regulations of the Board of Governors of the Federal Reserve
System. The principal amount of all Loans does not exceed
the Maximum Loan Value of the Collateral.
(x) Investment Company Act. Neither Borrower nor
any Borrower Subsidiary and, to the best of Borrower's
knowledge, neither Magma nor any of its Subsidiaries is an
"investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended. Neither Borrower nor any
Borrower Subsidiary and, to the best of Borrower's knowledge,
neither Magma nor any of its Subsidiaries is a "public
utility holding company" or a "subsidiary company" of a
"public utility holding company" as defined in PUHCA.
(y) Environmental Matters. (i) There are no
claims, liabilities, investigations, litigation,
administrative proceedings, judgments or orders, whether
asserted, pending or threatened, relating to any liability
under or to compliance with any applicable Environmental Law,
against Borrower or any Borrower Subsidiary or, to the best
of Borrower's knowledge, Magma or any of its Subsidiaries or
relating to any real property currently or formerly owned,
leased or operated by Borrower or any Borrower Subsidiary or,
to the best of Borrower's knowledge, Magma or any of its
Subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
(ii) Neither Borrower nor any Borrower
subsidiary and, to the best of Borrower's knowledge, neither
Magma nor any of its Subsidiaries has received any notices of
violations or liabilities under any applicable Environmental
Law that could be reasonably expected to have a Material
Adverse Effect.
(iii) No Hazardous Materials have been or are
<PAGE>
being spilled, discharged or released on or from real
property currently or formerly owned, leased or operated by
Borrower or any Borrower Subsidiary or, to the best of
Borrower's knowledge, Magma or any of its Subsidiaries in any
quantity or manner violating or resulting in liability under
any applicable Environmental Law that could be reasonably
expected to have a Material Adverse Effect.
(z) Disclosure. No representation or warranty of
Borrower or CE Acquisition contained in any Credit Document,
or any other document, certificate or written statement
furnished to Agent or any Bank by or on behalf of any such
Person for use in connection with the Credit Documents or the
Acquisition contains any untrue statement of a material fact
or omitted, omits or will omit to state a material fact
necessary in order to make the statements contained herein or
therein, when taken as a whole, not misleading in any
material respect in light of the circumstances in which the
same were made. There is no fact, event or condition known
to Borrower that has had or can reasonably be expected to
have a Material Adverse Effect and that has not been
disclosed herein or in such other documents, certificates and
statements furnished to Agent or each Bank for use in
connection with the transactions contemplated hereby.
(aa) Insurance. Schedule 4.1(aa) hereto sets forth
a complete and accurate description of all material policies
of insurance that will be in effect as of the Closing Date
for Borrower and each Borrower Subsidiary. Such policies are
with responsible and reputable insurance companies or
associations, and the coverages provided by such policies are
in amounts and covers such risks as is usually carried by
companies engaged in similar businesses and owning similar
properties in the same general areas in which Borrower or any
Borrower Subsidiary operates. To the best of the Borrower's
knowledge, Magma and each of its Subsidiaries maintain, with
responsible and reputable insurance companies or
associations, insurance in such amounts and covering such
risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general
areas in which Magma or any of its Subsidiaries operates.
(bb) Energy Regulatory Status. (i) Each of the
operational electric generation facilities ("Plants") owned
in whole or part, directly or indirectly by (A) Borrower or
Magma or (B) any legal entity in which Borrower or Magma
directly or indirectly owns more than 5% of the voting stock
or other equity interest, including any partnership in which
Borrower or Magma has an interest, is located in the United
States of America and is a "qualifying cogeneration facility"
("QF") or a "qualifying small power production facility"
("Small Power QF"), as such terms are defined under the
Federal Power Act, as amended ("FPA"), and the regulations
thereunder, and has continuously been in compliance with the
requirements for being a QF or Small Power QF since it
commenced sales of electricity.
(ii) The owner or operator of each of the
Plants under development by Borrower or any of its
Subsidiaries or Magma or any of its Subsidiaries and located
in the United States of America will, no later than the date
operations commence, either qualify as a QF, Small Power QF
or an "exempt wholesale generator" ("EWG"), as such terms are
defined under the FPA, PUHCA and the regulations thereunder,
and if an EWG, the rates for service therefrom will be on
file with FERC.
(iii) The owner or operator of each of the
Plants under development by Borrower or any of its
Subsidiaries or Magma or any of its Subsidiaries and located
outside the United States of America will, no later than the
date operations commence, either (A) qualify as an EWG or (B)
qualify as a "foreign utility company," as such term is
defined under PUHCA and the regulations thereunder.
(iv) None of the entities identified in
clause (A) or (B) of subparagraph (i) above owns or operates
any electric distribution facilities or any electric
transmission facilities other than electric transmission
facilities that are part of a QF or Small Power QF.
(v) None of the entities identified in clause
(A) or (B) of subparagraph (i) above is a "public utility
holding company" or a "subsidiary company" of a "public
utility holding company," as those terms are defined under
PUHCA.
(vi) Each of the Plants obtained any
necessary certificates or permits from state regulatory
authorities for construction of each of the operational
Plants and associated transmission equipment owned by the
owners of the Plant, and each other entity constructing,
owning or operating any of the foregoing has obtained each
required certificate or permit.
Each representation set forth in this Section 4.1(bb) with
<PAGE>
respect to Magma and its Subsidiaries is being made to the
best knowledge of Borrower.
(cc) Certain Energy Regulatory Filing. To take
advantage of the Solar, Wind, Waste and Geothermal Power
Production Incentives Act of 1990, a Notice of Qualifying
Status pursuant to 18 C.F.R. Section 292.207 has been, or will be,
filed with FERC on or before December 30, 1994 with respect
to any Qualifying Small Power Production Facility (as defined
in Section 3 of the FPA, as amended by PURPA) that has a
capacity of more than (i) 30 megawatts, except in the case of
geothermal facilities, or (ii) 80 megawatts, in the case of
geothermal facilities, in each case considered alone or
aggregated with any other facilities that are located within
one mile of each other, use the same energy resource, and are
under common ownership, treating Magma and Borrower and their
respective Subsidiaries as a single company for this purpose,
and taking into account any contemplated expansion of any
such facilities, such filings to be made by Borrower on
behalf of itself, Magma and their respective Subsidiaries.
(dd) Information in Magma Tender Offer Documents.
To the best of Borrower's knowledge, none of the Magma Tender
Offer Documents contains any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading.
(ee) SEC Filings of Magma. To the best of
Borrower's knowledge, Magma has filed all forms, reports and
documents required to be filed with the SEC since January 1,
1992, and Borrower has heretofore delivered to Agent, in the
form filed with the SEC, (i) Magma's Annual Reports on Form
10-K for the fiscal years ended December 31, 1993 and
December 31, 1992, respectively, (ii) all proxy statements
relating to Magma's meetings of stockholders (whether annual
or special) held since January 1, 1992, and (iii) all other
reports or registration statements (other than Quarterly
Reports on Form 10-Q) filed by Magma with the SEC since
January 1, 1992 (collectively, the "Magma SEC Reports"). To
the best of Borrower's knowledge, the Magma SEC Reports (i)
were prepared in all material respects in accordance with the
requirements of the Securities Act, or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. To the best of Borrower's knowledge, no
Subsidiary of Magma is required to file any statements or
reports with the SEC pursuant to Sections 13(a) or 15(d) of
the Exchange Act.
(ff) SEC Filings of Borrower. Borrower has filed
all forms, reports and documents required to be filed with
the SEC since January 1, 1992, and has heretofore delivered
to Agent, in the form filed with the SEC, its (i) Annual
Reports on Form 10-K for the fiscal years ended December 31,
1993 and December 31, 1992, respectively, (ii) all proxy
statements relating to Borrower's meetings of stockholders
(whether annual or special) held since January 1, 1992, and
(iii) all other reports or registration statements (other
than Quarterly Reports on Form 10-Q) filed by Borrower with
the SEC since January 1, 1992 (collectively, the "Borrower
SEC Reports"). The Borrower SEC Reports (i) were prepared in
all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No
Subsidiary of Borrower (other than Magma) is required to file
any statements or reports with the SEC pursuant to Section
13(a) or 15(d) of the Exchange Act.
(gg) Information in Borrower Tender Offer
Documents. None of the Borrower Tender Offer Documents
contains any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they are made, not
misleading.
(hh) CE Acquisition. CE Acquisition was organized
on September 22, 1994 for the purposes of (i) making the
Tender Offer, (ii) acquiring and holding the Magma Shares
acquired in connection therewith and (iii) entering into the
Merger, and since such date has not carried on any activities
other than those incident to its formation and the foregoing.
(ii) Labor Matters. There are no strikes or other
labor disputes or grievances or charges or complaints with
respect to any employee or group of employees pending or
threatened against Borrower or any Material Subsidiary which
<PAGE>
could reasonably be expected to have a Material Adverse
Effect.
(jj) Solvency. Each of Borrower and, to the best
of Borrower's knowledge, Magma is Solvent.
ARTICLE V
Covenants of Borrower
Section 5.1 Affirmative Covenants. So long as any
Obligations shall remain outstanding or any of the
Commitments shall remain available hereunder, Borrower will,
unless Majority Banks shall otherwise consent in writing:
(a) Payment of Taxes, Etc. Pay and discharge, and
cause each of its Subsidiaries to pay and discharge, before
the same shall become delinquent, (i) all taxes, assessments
and governmental charges or levies imposed upon it or upon
its property, and (ii) all lawful claims which, if unpaid,
might by Law become a Lien upon its property; provided,
however, that neither Borrower nor any of its Subsidiaries
shall be required to pay or discharge any such tax,
assessment, charge or claim which is being contested in good
faith and by proper proceedings and as to which adequate
reserves have been established.
(b) Maintenance of Insurance. Maintain, and cause
each of its Subsidiaries to maintain, or cause to be
maintained for each of its Subsidiaries, with responsible and
reputable insurance companies or associations, insurance in
such amounts and covering such risks (including, but not
limited to, catastrophe perils insurance (i.e., hurricane,
earthquake, flood, and storm) and business interruption
insurance) as is usually carried by companies engaged in
similar businesses and owning similar properties in the same
general areas in which Borrower or any of its Subsidiaries
operates (the "Industry Standard"), and, subject to the
following provisos, in any event the insurance coverages
shall not be less than the insurance coverages set forth on
Schedule 4.1(aa); provided that if the Industry Standard is
such that the insurance coverages then being maintained by
Borrower and its Subsidiaries is below the Industry Standard,
Borrower shall use its best efforts to obtain the necessary
insurance coverages such that its and its Subsidiaries'
insurance coverages equals or is greater than the Industry
Standard; provided, further, that if the Industry Standard is
such that the insurance coverages then being maintained by
Borrower and its Subsidiaries is in excess of the Industry
Standard, then Borrower may conform its or its Subsidiaries'
insurance coverages to the Industry Standard unless Agent
determines that maintaining the Industry Standard would not
be reasonable under the circumstances (and in making such
determination Agent shall take into account the availability
of such insurance coverages on commercially reasonable
terms).
(c) Preservation of Corporate Existence, Etc.
Preserve and maintain, and cause each Material Subsidiary to
preserve and maintain and keep in full force and effect, its
corporate existence, rights (charter and statutory) and
franchises.
(d) Compliance with Laws. Comply, and cause each
of its Subsidiaries to comply, with the requirements of all
applicable Laws noncompliance with which could have a
Material Adverse Effect.
(e) Inspection Rights. At any reasonable time and
from time to time upon reasonable notice, permit Agent or any
agents or representatives thereof, to examine (at the
location where normally kept) and make abstracts from the
records and books of account of, and visit the properties of
Borrower and its Subsidiaries and to, upon reasonable notice
to Borrower, discuss the affairs, finances and accounts of
Borrower and its Subsidiaries with any of their respective
officers and discuss the affairs, finances and accounts of
Borrower and its Subsidiaries with its independent certified
public accountants (at which discussion, if Borrower so
requests, a representative of Borrower shall be permitted to
be present) and permit such accountants to disclose to Agent
any and all financial statements and other reasonably
requested information of any kind that they may have with
respect to Borrower and its Subsidiaries.
(f) Keeping of Books. Keep, and cause each of its
Subsidiaries to keep, proper books of record and account, in
which full and correct entries shall be made of all financial
transactions and the assets and business of Borrower and its
Subsidiaries in a form, in the case of Borrower, such that
Borrower may readily produce no less frequently than at the
end of each of its fiscal quarters, financial statements in
accordance with GAAP consistently applied.
(g) Maintenance of Properties, Etc. Maintain and
preserve, and cause each of its Subsidiaries to maintain and
<PAGE>
preserve, all of its properties which are used or useful in
the conduct of its business in good working order and
condition, ordinary wear and tear excepted (subject to any
customary mandatory requirement of any contractual obligation
imposed in respect of any Permitted Facility (as defined in
the Indenture)); provided, however, that nothing in this
Section 5.1(g) shall prevent Borrower or any of its
Subsidiaries from discontinuing the operation or maintenance
of any such properties or, if not prohibited under Section
1015 of the Indenture, disposing of any of them if such
discontinuance or disposal is, as determined by Borrower in
good faith, desirable in the conduct of its business or the
business of any of its Subsidiaries and does not have a
Material Adverse Effect.
(h) Reporting Requirements. Furnish to Agent and
each Bank:
(i) Quarterly Financial Statements of Borrower
and CE Acquisition. As soon as available to any Person
(other than Borrower and CE Acquisition) and in any
event within 45 days after the end of each of the first
three fiscal quarters of each fiscal year of Borrower
and CE Acquisition, consolidated and consolidating
balance sheets of Borrower and its Subsidiaries and CE
Acquisition and its Subsidiaries as of the end of such
quarter and consolidated and consolidating statements of
operations, stockholders' equity and cash flows of
Borrower and its Subsidiaries and CE Acquisition and its
Subsidiaries for the period commencing at the beginning
of such fiscal year and ending with the end of such
quarter, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by a Responsible
Officer of Borrower or CE Acquisition, as applicable, as
having been prepared in accordance with GAAP
consistently applied, together with a Compliance
Certificate as of the end of such fiscal quarter;
(ii) Annual Financial Statements of Borrower
and CE Acquisition. As soon as available to any Person
(other than Borrower and CE Acquisition) and in any
event within 90 days after the end of each fiscal year
of Borrower and CE Acquisition, the consolidated and
consolidating balance sheets of Borrower and its
Subsidiaries and CE Acquisition and its Subsidiaries as
of the end of such fiscal year and the consolidated and
consolidating statements of operations, stockholders'
equity and cash flows of Borrower and its Subsidiaries
and CE Acquisition and its Subsidiaries for such fiscal
year, in the case of such consolidated financial
statements, certified, without material qualifications
or limitations as to scope of the audit, by independent
public accountants of recognized standing, as having
been prepared in accordance with GAAP, consistently
applied, together with a Compliance Certificate as of
the end of such fiscal year for Borrower and CE
Acquisition;
(iii) Accountants' Reports. Promptly upon
receipt thereof, Borrower or CE Acquisition, as
applicable, will deliver copies of all significant
reports submitted to Borrower or CE Acquisition, as
applicable, by independent public accountants in
connection with each annual, interim or special audit of
the financial statements of Borrower or CE Acquisition,
as applicable, made by such accountants;
(iv) Notice of Defaults. As soon as possible
and in any event within five days after the occurrence
of each Event of Default and each event which, with the
giving of notice or lapse of time, or both, would
constitute an Event of Default, continuing on the date
of such statement, a statement of a Responsible Officer
of Borrower setting forth details of such Event of
Default or event and the action which Borrower has taken
and proposes to take with respect thereto;
(v) PBGC Notices. Promptly and in any event
within ten Banking Days after receipt thereof by
Borrower or any ERISA Affiliate from the PBGC, copies of
each notice received by Borrower or any such ERISA
Affiliate of the intention of the Pension Benefit
Guaranty Corporation to terminate any Pension Plan or to
have a trustee appointed to administer any Pension Plan;
(vi) Monthly Officer's Certificate. On the
fifth Banking Day after the close of Borrower's books
for each calendar month, a certificate signed by a
Responsible Officer of Borrower, in form and substance
reasonably satisfactory to Agent, (x) certifying
(i) compliance with Section 5.3(a) and (ii) the absence
of (A) a material adverse change in the financial
condition or results of operations of Borrower and its
Subsidiaries, taken as a whole, since the Closing Date
and (B) a material adverse change in the financial
condition or results of operations of CE Acquisition and
<PAGE>
its Subsidiaries, taken as a whole, since the Closing
Date, in the case of clauses (A) and (B) which could
reasonably be expected to materially impact the ability
of Borrower to satisfy the Obligations or materially
impact the ability of Agent or any of the Banks to
exercise any of its rights or remedies under any
Security Document and (y) setting forth a list, if
applicable, of any and all uncured and unwaived payment
defaults by Borrower or any of its subsidiaries
aggregating more than $1,000,000 on any Debt as of the
last day of the prior calendar month;
(vii) SEC Filings and Press Releases. Promptly
upon their becoming available, Borrower will deliver
copies of: (1) all financial statements, reports,
notices and proxy statements sent or made available by
Borrower or any of its Subsidiaries to its respective
public security holders; (2) all regular and periodic
reports and all registration statements and
prospectuses, if any, filed by Borrower or any of its
Subsidiaries with any securities exchange or with the
Securities and Exchange Commission; and (3) all press
releases and other statements made available by Borrower
or any of its Subsidiaries to the public concerning
developments in the business of any such Person, other
than any such press releases or statements issued in the
ordinary course of business;
(viii) Employee Benefit Plans. With reasonable
promptness, and in any event within thirty (30) days,
Borrower will give notice of and/or deliver to Agent and
each Bank copies of: (1)(a) the establishment of any
new Pension Plan or Multiemployer Plan, (b) the
commencement of contributions to any Pension Plan or
Multiemployer Plan to which Borrower or any of its ERISA
Affiliates was not previously contributing or becomes
obligated to contribute or (c) any material increase in
the benefits of any existing Pension Plan or
Multiemployer Plan or (d) the establishment or amendment
of any Employee Benefit Plan or other plan or agreement
which creates or increases liability of Borrower or any
of its Affiliates with respect to health or welfare
benefits to retirees; (2) each funding waiver request
filed with respect to any Employee Benefit Plan and all
communications received or sent by Borrower or any ERISA
Affiliate with respect to such request; and (3) the
failure of Borrower or any ERISA Affiliate to make a
required installment or payment under Section 302 of
ERISA or Section 412 of the IRC by the due date;
provided that such notice shall be required (I) with
respect to Magma or any of its Subsidiaries or any
Pension Plan, Multiemployer Plan or Employee Benefit
Plan applicable thereto and (II) with respect to any
increase in benefits under any Multiemployer Plan only
after Borrower has obtained knowledge or reason to know
of the event described in (1), (2) or (3) hereof;
(ix) Termination Events. Promptly and in any
event within ten (10) days of becoming aware of the
occurrence of or forthcoming occurrence of any (1)
Termination Event or (2) "prohibited transaction," as
such term is defined in Section 406 of ERISA or Section
4975 of the IRC, in connection with any Pension Plan or
any trust created thereunder, Borrower will deliver to
Agent and each Bank a notice specifying the nature
thereof, what action the applicable Borrower or ERISA
Affiliate has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(x) ERISA Notices. With reasonable promptness
but in any event within ten (10) days for purposes of
clauses (1), (2) and (3), Borrower will deliver to Agent
and each Bank copies of: (1) any favorable or
unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an
Employee Benefit Plan or Multiemployer Plan under
Section 401(a) of the IRC; (2) all notices received by
Borrower or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan; (3) each
Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by Borrower or any ERISA
Affiliate with the Internal Revenue Service with respect
to each Pension Plan; and (4) all notices received by
Borrower or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA;
provided, however, that such notice shall be required
with respect to Magma or any of its Subsidiaries or any
Pension Plan, Multiemployer Plan or Employee Benefit
Plan applicable thereto only after Borrower has obtained
knowledge or reason to know of the event described in
(1), (2), (3) or (4) hereof. Borrower will notify Agent
and each Bank in writing within two (2) Banking Days of
<PAGE>
Borrower or any Borrower Subsidiary obtaining knowledge
or reason to know that Borrower or any ERISA Affiliate
has filed or intends to file a notice of intent to
terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA;
(xi) Additional Information. Such other
information respecting the condition or operations,
financial or otherwise, of Borrower or its Subsidiaries
as any Bank through the Agent may from time to time
reasonably request; and
(xii) Significant Events. Promptly upon
Borrower's knowledge thereof, a written statement from a
Responsible Officer of Borrower describing the details
of:
(A) any substantial dispute which may exist
between Borrower or any of its Subsidiaries and any
governmental regulatory body or law enforcement
authority that could reasonably be expected to have
a Material Adverse Effect;
(B) any labor controversy resulting in or
reasonably likely to result in a strike or work
stoppage or slowdown against Borrower or any of its
Subsidiaries that could reasonably be expected to
have a Material Adverse Effect;
(C) CE Acquisition or any of its Subsidiaries
that are Material Subsidiaries ceasing to be a
Material Subsidiary and the reasons for such change
in status;
(D) any Person becoming a Material Subsidiary
of CE Acquisition and the reasons why such Person
has become a Material Subsidiary; and
(E) any matter (including, without
limitation, the commencement of any actions, suits
or proceedings before any court or governmental
department, commission, board, bureau, agency, or
instrumentality domestic or foreign or any
development in any such actions, suits or
proceedings) which has resulted or might reasonably
be expected to result in a Material Adverse Effect.
(i) Use of Proceeds. Use the proceeds of the
Loans solely to advance funds to CE Acquisition under the CE
Acquisition Secured Term Note, and to cause CE Acquisition to
use such funds together with other funds contributed to CE
Acquisition as capital to acquire the Magma Shares.
(j) Energy Regulatory Status. (i) Cause the owner
or operator of each of the Plants under development by
Borrower or any of its Subsidiaries or Magma or any of its
Subsidiaries and located in the United States of America to,
no later than the date operations commence, either self
certify or secure a FERC certification that the Plant is a QF
or Small Power QF or secure a determination by FERC that the
Plant is an EWG, and if an EWG, ensure that the rates for
service therefrom are on file with FERC.
(ii) Cause the owner or operator of each of
the Plants under development by Borrower or any of its
Subsidiaries or Magma or any of its Subsidiaries and located
outside the United States of America to, no later than the
date operations commence, either secure a determination by
FERC that the Plant is an EWG or qualify and have filed the
requisite notice as a "foreign utility company," as such term
is defined under PUHCA and the regulations thereunder.
(k) Establishment of Collection Account. If the
Merger Agreement is terminated, establish promptly thereafter
a collection account with Agent and cause all dividends and
distributions from CE Acquisition to Borrower and from
Subsidiaries of CE Acquisition to CE Acquisition to be
deposited into such account and all funds deposited into such
account shall be applied to the satisfaction of the
Obligations.
Section 5.2 Negative Covenants. So long as any
Obligations shall remain outstanding or any of the
Commitments shall remain available hereunder, Borrower will
not, without the written consent of Majority Banks:
(a) Negative Pledge and Liens. Sell, assign,
transfer, pledge or otherwise encumber or dispose of any
shares of capital stock or other equity securities in CE
Acquisition or any of CE Acquisition's Subsidiaries, except
pursuant to or as contemplated by the Security Documents, or
create, incur, assume or suffer to exist any Lien, except
Permitted Liens, upon or with respect to any assets or
property of CE Acquisition or any Subsidiary of CE
Acquisition, or permit any of its Subsidiaries so to do.
<PAGE>
(b) Fundamental Changes. (i) Enter into any
transaction of consolidation or merger with or into any other
Person; wind up, liquidate or dissolve its affairs; sell,
lease, transfer or otherwise dispose of directly or
indirectly (or agree to any of the foregoing at any future
time), all or any substantial portion of its property or
assets or any of the Collateral; purchase or otherwise
acquire (in one or a series of related transactions) any
material portion of the property or assets of any Person out
of the ordinary course of business; or (ii) permit any
Material Subsidiary so to do; provided that notwithstanding
the foregoing, Borrower and any Borrower Subsidiary (other
than CE Acquisition) may engage in any of the foregoing
transactions which are between Borrower and any Borrower
Subsidiary (other than CE Acquisition) or between Borrower
Subsidiaries (other than CE Acquisition) (including
dissolutions and liquidations).
(c) Nature of Business. (i) Engage in, or permit
any Borrower Subsidiary (other than CE Acquisition) to engage
in any business activity, except (A) the ownership, design,
engineering, procurement, construction, development,
acquisition, operation, servicing, management or disposition
of Permitted Facilities (as defined in the Indenture), (B)
the ownership, creation, development, acquisition, servicing,
management or disposition of Restricted Subsidiaries (as
defined in the Indenture) and Joint Ventures (as defined in
the Indenture) that own, construct, develop, design,
engineer, procure, acquire, operate, service, manage or
dispose of Permitted Facilities, (C) obtaining, arranging or
providing financing incident to any of the foregoing and (D)
other related activities incident to any of the foregoing; or
(ii) permit CE Acquisition, Magma or any of Magma's
Subsidiaries to engage in any business activity other than
the business activity it conducts on the date hereof and
except as contemplated by the Merger.
(d) Fiscal Year. Change its fiscal year.
(e) Bankruptcy. Commence, or join with or solicit
any other Person in commencing, any case or other proceeding
seeking liquidation, reorganization or other relief with
respect to Borrower or any Material Subsidiary or its debts,
under any bankruptcy, insolvency or other similar Law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of
Borrower or any Material Subsidiary, or permit any of its
Subsidiaries so to do.
(f) Transactions with Affiliates. Enter into any
transaction, or permit any of its Subsidiaries to do so,
including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any
Affiliate of Borrower or with any director, officer or
employee of Borrower or any of its Subsidiaries, except in
the ordinary course of and pursuant to the reasonable
requirements of Borrower's or any of its Subsidiaries'
business and upon fair and reasonable terms no less favorable
to Borrower or such Subsidiary than would be obtained in an
comparable arm's length transaction with a Person not an
Affiliate of Borrower.
(g) Restricted Junior Payments. Permit CE
Acquisition or any of CE Acquisition's Subsidiaries to make
any Restricted Junior Payment, except that (i) Subsidiaries
of Magma may make Restricted Junior Payments and (ii) Magma
may make Restricted Junior Payments so long as CE Acquisition
receives 100% of the amount distributed by Magma in
connection with any such Restricted Junior Payments.
(h) Limitation on Debt. Create, incur, assume or
otherwise become or remain directly or indirectly liable with
respect to any Debt, except as permitted by Section 1008 of
the Indenture; or permit any Borrower Subsidiary (other than
CE Acquisition) to create, incur, assume or otherwise become
or remain directly or indirectly liable with respect to any
Debt, except as permitted by Section 1009 of the Indenture;
or permit CE Acquisition or any of CE Acquisition's
Subsidiaries to create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to any
Debt, except as contemplated by the CE Acquisition Secured
Term Note and except for Debt incurred in the ordinary course
of business of Magma and its Subsidiaries in order to fund
and finance Alto Peak, Malitbog and its other Permitted
Facilities (as defined in the Indenture) and the terms of
which are consistent with past practices and otherwise
permitted by Section 1009 of the Indenture.
(i) Investments. Make, or permit any Borrower
Subsidiary (other than CE Acquisition) to make, any
Investments, except as permitted by Section 1010 of the
Indenture; or permit CE Acquisition or any of its
Subsidiaries to make any Investments other than in the Magma
Shares and other than Investments made in the ordinary course
of business of Magma and its Subsidiaries and which (i) are
consistent with past practices and otherwise permitted by
<PAGE>
Section 1010 of the Indenture and (ii) do not impair the
availability of funds necessary to fund the equity required
to complete Magma's projects (which funds shall be deemed
available if Borrower shall undertake to provide such funds
and such undertaking is satisfactory to Agent).
(j) Agreements Restricting the Payment of
Dividends. Enter into any agreement or contract restricting
or prohibiting the declaration or making of any dividend
payment or other distribution of assets, cash or securities
by CE Acquisition, Magma or any of their respective
Subsidiaries on account of any shares of any class of its
capital stock, or permit any of its Subsidiaries so to do,
other than limitations existing in respect of Permitted
Facilities (as defined in the Indenture) incurred in the
ordinary course of business and which are consistent with
past practices and otherwise permitted by Section 1010 of the
Indenture.
(k) Changes to CE Acquisition Credit Documents.
Change or amend the terms of the CE Acquisition Credit
Agreement, the CE Acquisition Secured Term Note or the CE
Acquisition Pledge Agreement, or permit any of its
Subsidiaries so to do.
(l) Changes to Merger Agreement. Change or amend
the terms of the Merger Agreement, or permit any of its
Subsidiaries so to do.
(m) Compliance with ERISA.
(i) Permit the occurrence of any Termination
Event; or
(ii) Permit the present value of all benefit
liabilities (based on the then most recent actuarial
assumptions) under all Pension Plans to exceed the
current value of the assets of such Pension Plans; or
(iii) Permit any accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of
the IRC) with respect to any Pension Plan, whether or
not waived; or
(iv) Fail to make any contribution or payment to
any Multiemployer Plan which Borrower or ERISA Affiliate
may be required to make under any agreement relating to
such Multiemployer Plan, or any law pertaining thereto;
or
(v) Engage, or permit any ERISA Affiliate to
engage, in any prohibited transaction under Section 406
of ERISA or Section 4975 of the IRC for which a civil
penalty pursuant to Section 502(i) of ERISA or a tax
pursuant to Section 4975 of the IRC is imposed; or
(vi) Permit the establishment of any Employee
Benefit Plan or other plan or agreement providing post-
retirement welfare benefits, except as may be required
pursuant to Section 4980B of the IRC or Section 601 et
seq. of ERISA or as otherwise required by law or
establish or amend any Employee Benefit Plan which
establishment or amendment could result in liability to
Borrower or any of its Subsidiaries or increase the
obligation of Borrower or any of its Subsidiaries,
whether directly or indirectly through an ERISA
Affiliate, to a Multiemployer Plan which liability or
increase, is material to Borrower or any of its
Subsidiaries; or
(vii) Fail to establish, maintain and operate each
Employee Benefit Plan or permit any ERISA affiliate to
fail to establish, maintain and operate each Pension
Plan in compliance in all material respects with the
provisions of ERISA, the IRC and all other applicable
laws and the regulations and interpretations thereof;
which in any such case in (i) through (vii) results in or
could reasonably be expected to result in a Material
Adverse Effect.
Section 5.3 Financial Covenants. So long as any
Obligations shall remain outstanding or any of the
Commitments shall remain available hereunder, Borrower will,
unless Majority Banks shall otherwise consent in writing:
(a) Liquidity. Maintain at all times unrestricted
and uncommitted cash, Cash Equivalents (marked to market)
and/or an availability under a line of credit in an amount
(or, with respect to Cash Equivalents, with a fair market
value) equal to or greater than $50,000,000 in the aggregate.
(b) Consolidated Net Worth. Maintain at all times
Consolidated Net Worth in an amount equal to or greater than
90% of Borrower's Consolidated Net Worth at the end of its
prior fiscal year; provided that in calculating such amount,
<PAGE>
the following amounts (not to exceed $35,000,000 in the
aggregate), shall be added back to Consolidated Net Worth for
all periods during which such amounts were paid: (i)
expenses incurred and paid by Borrower in connection with the
Acquisition and the Merger and (ii) amounts expended by
Borrower to redeem or purchase any of its capital stock.
(c) Solvency. Remain Solvent and cause CE
Acquisition and Magma to do so.
ARTICLE VI
Events of Default
Section 6.1 Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) Payments. Borrower shall fail to pay any
principal of, or interest on, any of the Loans when the same
becomes due and payable, or Borrower shall fail to pay any
other sum due under this Agreement or any other Credit
Documents within five Banking Days of the date when the same
becomes due and payable; or
(b) Representations and Warranties. Any
representation or warranty made or deemed to be made by
Borrower or any of its Subsidiaries under or in connection
with any Credit Document shall have been incorrect or
misleading in any material respect when made or deemed to be
made; or
(c) Particular Covenant Defaults. Borrower or any
of its Subsidiaries shall fail to perform or observe any
covenant contained in Sections 5.1(b) and (h) and Sections
5.2 and 5.3; or
(d) Taxes and Compliance with Laws Covenants.
Borrower shall fail to perform or observe any covenant
contained in Sections 5.1(a) and (d) and such failure shall
remain unremedied for five Banking Days after the earlier of
(i) such failure shall first become known to Borrower, (ii)
Borrower could reasonably have been expected to have known of
such failure or (iii) a written notice thereof shall have
been given to Borrower by Agent or any Bank; or
(e) Other Covenants. Borrower or any of its
Subsidiaries shall fail to perform or observe any term,
covenant or agreement contained herein or in any other Credit
Document on its part to be performed or observed (other than
those referred to in Sections 6.1(a), (c) and (d) above and
Section 6.1(s) below) and any such failure shall remain
unremedied for 15 Banking Days after the earlier of (i) such
failure shall first become known to Borrower, (ii) Borrower
could reasonably have been expected to have known of such
failure or (iii) a written notice thereof shall have been
given to Borrower by Agent or any Bank; or
(f) Other Debts. Borrower shall fail to make any
payment on any Debt (individually or in the aggregate) in
excess of $25,000,000 in the aggregate, or any interest or
premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable notice and
grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default under
any agreement or instrument relating to any such Debt, or any
other event, shall occur and shall continue without remedy,
cure or waiver for a period of 180 consecutive days, or if
the effect of such default or event is to accelerate the
maturity of such Debt; or any such Debt shall be declared to
be due and payable prior to the stated maturity thereof; or
(g) Subsidiary Debts. Any of Borrower's
Subsidiaries shall fail to make any payment of $25,000,000 or
more on any Debt (which Debt instrument has a face amount in
excess of $25,000,000) when due (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the
applicable notice and grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other
default under any agreement or instrument relating to any
such Debt, or any other event, shall occur and shall continue
after the applicable notice and grace period, if any,
specified in such agreement or instrument, if the effect of
such default or event is to accelerate the maturity of such
Debt; or any such Debt shall be declared to be due and
payable prior to the stated maturity thereof; provided,
however, that the occurrence of one or more of the events
described in this Section 6.1(g) shall not be deemed an Event
of Default unless in the reasonable judgment of Agent the
occurrence of such event materially impairs or is likely to
materially impair Borrower's ability to perform its
obligations under any Credit Document to which it is a party;
or
<PAGE>
(h) Judgments and Orders. Any judgment or order
for the payment of money in excess of $25,000,000 shall be
rendered against Borrower or any Material Subsidiary and
either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there
shall be any period of 60 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(i) Insolvency or Voluntary Proceedings. Borrower
or any Material Subsidiary is generally not paying or admits
in writing its inability to pay its debts as such debts
become due, or files any petition or action for relief under
any bankruptcy, reorganization, insolvency, or moratorium Law
or any other Law for the relief of, or relating to, debtors,
now or hereafter in effect, or makes any assignment for the
benefit of creditors, liquidates or dissolves, or takes any
action in furtherance of any of the foregoing; or
(j) Involuntary Proceedings. An involuntary
petition is filed against Borrower or any Material Subsidiary
under any bankruptcy, reorganization, insolvency, or
moratorium Law now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or
other similar official) is appointed to take possession,
custody or control of any property of Borrower or any
Material Subsidiary, and (i) such petition or appointment is
not set aside or withdrawn or otherwise ceases to be in
effect within 60 days from the date of said filing or
appointment, or (ii) an order for relief is entered against
Borrower or any Material Subsidiary with respect thereto, or
(iii) Borrower or any Material Subsidiary shall take any
action indicating its consent to, approval of, or
acquiescence in, any such petition or appointment; or
(k) Collateral Impairment. Agent's Lien on the
Collateral shall cease for any reason (other than the Agent's
consent or release of Collateral in accordance with the terms
of the Borrower Pledge Agreement) to be a fully perfected,
first priority security interest in all such Collateral; any
Lien is filed pursuant to Section 6321 of the IRC or any
other applicable Law affecting the Collateral; or Borrower
(or any trustee, receiver, custodian or other Person
asserting rights on behalf of or derived from or through
Borrower) shall so state in writing; or
(l) ERISA - Pension Plans. (1) Borrower or any
ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or
Section 412 of the IRC, Borrower or any ERISA Affiliate is
required to pay as contributions thereto and such failure
results in or could reasonably be expected to result in a
Material Adverse Effect; or (2) an accumulated funding
deficiency occurs or exists, whether or not waived, with
respect to any Pension Plan which results in, or could
reasonably be expected to result in, a Material Adverse
Effect; or (3) a Termination Event occurs which results in or
could reasonably be expected to result in a Material Adverse
Effect; or
(m) ERISA - Multiemployer Plans. Borrower or any
ERISA Affiliate as employers under one or more Multiemployer
Plans makes a complete or partial withdrawal from such
Multiemployer Plans and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that
such employer has incurred a withdrawal liability requiring
payments in an amount which results in or could reasonably be
expected to result in a Material Adverse Effect; or
(n) ERISA - General Liability. Borrower or any
Borrower Subsidiary incurs liability under or relating to any
Employee Benefit Plan or Multiemployer Plan resulting from a
violation of ERISA, the IRC and/or any other applicable
federal, state or local law which results in, or could
reasonably be expected to result in, a Material Adverse
Effect; or
(o) Credit Documents. Any provision of any Credit
Document shall for any reason cease to be valid and binding
on Borrower, or Borrower or any Governmental Authority shall
so state in writing, and such is reasonably expected to have
a Material Adverse Effect; or
(p) Injunction of Merger. Any court or
Governmental Authority shall permanently enjoin the
consummation of the Merger; or
(q) Change of Control. A Change of Control shall
occur; or
(r) Loan to Collateral Value Ratio. The ratio of
the aggregate principal amount of the Loans outstanding to
the fair market value of the Magma Shares shall be greater
than .78 to 1; or
(s) Default by CE Acquisition Under the CE
<PAGE>
Acquisition Secured Term Note or the CE Acquisition Credit
Agreement. CE Acquisition fails to pay when due any amounts
under the CE Acquisition Secured Term Note or the CE
Acquisition Credit Agreement;
then, (i) automatically upon the occurrence of any event
specified in clauses (g) or (h) of this Section 6.1 and at
the option of Majority Banks, by notice from Agent to
Borrower, in any other event, (A) the obligation of each Bank
hereunder or under any other Credit Documents to make any
Loans, shall be immediately terminated, and (B) the total
outstanding principal amount of all Loans, all interest
thereon and all other amounts payable under this Agreement or
under any other Credit Document shall be forthwith due and
payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived
by Borrower, and (ii) Agent shall upon the request, or may
with the consent, of Majority Banks take such actions under
and exercise such rights and remedies pursuant to the Credit
Documents, or any of them, as Agent may deem appropriate.
ARTICLE VII
Relationship of Agent and Banks
Section 7.1 Authorization and Action. Each Bank
hereby appoints and authorizes Agent, as agent on behalf of
such Bank, to take such action and to exercise such powers
under the Credit Documents as are delegated to Agent by the
terms thereof, together with such powers as are reasonably
incidental thereto. As to any (x) matters requiring or
permitting an approval, consent, waiver, election or other
action by Majority Banks, (y) matters as to which,
notwithstanding any delegation of authority to Agent, Agent
has requested instructions from Majority Banks, and
(z) matters not expressly provided for by the Credit
Documents, Agent shall not be required to exercise any
discretion or take any action, but shall be required to act
or to refrain from acting only (and shall be fully protected
in so acting or refraining from acting) upon the instructions
of Majority Banks, and such instructions shall be binding
upon all Banks; provided, however, that Agent shall not be
required to take any action which exposes Agent to personal
liability or which is contrary to any Credit Document or
applicable Law. Agent agrees to give to each Bank prompt
notice of each notice given to it by Borrower pursuant to the
terms of any Credit Document.
Section 7.2 Agent's Reliance, Etc. Neither Agent
nor any of its directors, officers, agents, attorneys or
employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with any Credit
Document, except for its or their own gross negligence or
willful misconduct. Without limiting the generality of the
foregoing, Agent: (i) may treat each Bank as the holder of
the right to payment of its outstanding Loans until Agent
receives and accepts (together with any required transfer
fee) an Assignment and Acceptance Agreement signed by such
Bank and its Assignee in form satisfactory to the Agent and
otherwise in accordance with the provisions of this
Agreement; (ii) may consult with legal counsel (including
counsel for Borrower), independent public accountants and
other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or
experts if such counsel, accountants or other experts are
selected without gross negligence or willful misconduct on
the part of the Agent; (iii) makes no warranty or
representation to any Bank and shall not be responsible to
any Bank for any statements, warranties or representations
made in or in connection with any Credit Document; (iv) shall
not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of any Credit Document on the part of Borrower or
to inspect the property (including the books and records) of
Borrower; (v) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Credit Document or
any other instrument or document furnished pursuant thereto;
and (vi) shall incur no liability under or in respect of any
Credit Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by
telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties unless such
action by the Agent constitutes gross negligence or willful
misconduct on its part.
Section 7.3 Agent and Affiliates. With respect to
its Commitments, the Loans made by it and the obligations of
Borrower owed to it under the Credit Documents as a Bank
thereunder, Agent shall have the same rights and powers under
the Credit Documents as any other Bank and may exercise the
same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include
Agent in its individual capacity. Agent and its Affiliates
may accept deposits from, lend money to, act as trustee under
<PAGE>
indentures of, and generally engage in any kind of business
with, Borrower, any of its Affiliates and any Person who may
do business with or own securities of Borrower or any such
Affiliates, all as if Agent were not Agent and without any
duty to account therefor to Banks.
Section 7.4 Bank Credit Decision. Each Bank
acknowledges that (a) it has, independently and without
reliance upon Agent or any other Bank and based on such
documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this
Agreement, (b) it will, independently and without reliance
upon Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Credit
Documents, and (c) Agent has no duty or responsibility,
either initially or on a continuing basis, to provide any
Bank with any credit or other information (other than
obtained under the provisions of this Agreement) with respect
thereto, whether coming into its possession before the date
hereof or at any time thereafter.
Section 7.5 Indemnification. Each Bank agrees to
indemnify Agent (to the extent not reimbursed by Borrower),
ratably according to the ratio of such Bank's Commitments to
the Commitments of all Banks, from and against any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against Agent in any way relating to
or arising out of the Credit Documents, or any of them, or
any action taken or omitted by Agent under the Credit
Documents, or any of them, provided that no Bank shall be
liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. Without limiting the
foregoing, each Bank agrees to reimburse Agent promptly upon
demand for such Bank's ratable share (based on the proportion
of all Commitments held by such Bank) of any out-of-pocket
expenses (including counsel fees and allocated costs of in-
house legal services) incurred by Agent in connection with
the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, the
Credit Documents, or any of them, to the extent that Agent is
not reimbursed for such expenses by Borrower.
Section 7.6 Successor Agent. Agent may resign at
any time as Agent under the Credit Documents by giving 30
days' prior written notice thereof to Banks and Borrower and
may be removed as Agent under the Credit Documents at any
time with or without cause upon written notice to Agent and
Borrower signed by Majority Banks. Upon any such resignation
or removal, Majority Banks shall have the right to appoint a
successor Agent thereunder. If no successor Agent shall have
been so appointed by Majority Banks, and shall have accepted
such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or Majority Bank's removal of
the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States
of America or of a state thereof and having a combined
capital and surplus of at least $200,000,000. Unless and
until a successor Agent shall have been appointed as above
provided, the retiring Agent shall serve as a caretaker Agent
unless dismissed by Majority Banks. Upon the acceptance of
any appointment as Agent under the Credit Documents by a
successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent
shall be discharged from all duties and obligations of the
Agent arising thereafter under the Credit Documents. After
any retiring Agent's resignation or removal as Agent under
the Credit Documents, the provisions of this Article VII
shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under the Credit
Documents.
ARTICLE VIII
Miscellaneous
Section 8.1 Notices. Except as provided in
Article II with respect to the matters therein specified, all
notices, demands, instructions, requests, and other
communications required or permitted to be given to, or made
upon, any party hereto shall be in writing and (except for
financial statements and other related informational
documents to be furnished pursuant hereto which may be sent
by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by prepaid telex, TWX,
telecopy, or telegram (with messenger delivery specified) and
<PAGE>
shall be deemed to be given for purposes of this Agreement on
the day that such writing is received by the Person to whom
it is to be sent pursuant to the provisions of this
Agreement. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this
Section, notices, demands, requests, instructions, and other
communications in writing shall be given to or made upon each
party hereto at the address (or its telex, TWX, or telecopier
numbers, if any) set forth for such party on the signature
pages hereof or, in the case of any Assignee, set forth in
the relevant Assignment and Acceptance Agreement.
Section 8.2 Successors and Assigns. This
Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns; provided,
however, that Borrower shall not assign this Agreement or any
of the rights of Borrower hereunder without the prior written
consent of all Banks and Agent (the giving of such consent to
be in each Bank's and Agent's sole and absolute discretion),
and any such purported assignment without such consent shall
be absolutely void, and (b) no Bank shall assign this
Agreement or any of the rights of such Bank hereunder except
in accordance with Section 8.11.
Section 8.3 Amendments and Related Matters. No
amendment or waiver of any provision of any Credit Document,
nor consent to any departure by Borrower therefrom, shall in
any event be effective unless the same shall be in writing
and signed by Majority Banks and Borrower and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given;
provided, however, that no amendment, waiver or consent with
respect to any Credit Document shall, unless in writing and
signed by all Banks, do any of the following: (a) waive, or
have the effect of waiving, any of the conditions specified
in Section 3.1, (b) increase the Commitments of any Banks or
subject the Banks to any additional obligations, (c) reduce
the principal of, or interest on, the Loans or fees or other
amounts payable to Banks hereunder or under any other Credit
Document, (d) postpone any date fixed for any payment of
principal of, or interest on, the Loans or any fees or other
amounts payable to Banks hereunder or under any other Credit
Document, (e) change the relative percentage of the
Commitments or of the aggregate unpaid principal amount of
the Loans, or the number of Banks required for Banks or any
of them to take any action hereunder, (f) release any
guaranty of all or any part of the Obligations, (g) release
any Collateral except in accordance with the terms of the
Security Documents, (h) change the several nature of the
obligations of the Banks hereunder or under the other Credit
Documents, or (i) amend Section 2,6, 2.8, 8.2, this Section
8.3 or Section 8.4(b); and provided, further, that no
amendment, waiver or consent with respect to any Credit
Document shall, unless in writing and signed by Agent in
addition to the Banks required above to take such action,
affect the rights or duties of Agent under this Agreement or
any other Credit Document.
Section 8.4 Costs and Expenses; Indemnification.
(a) Expenses. Borrower agrees to pay on demand,
subject to the proviso set forth below, (i) all costs and
expenses of Agent in connection with the syndication by Agent
of the credit facility provided hereunder and in connection
with the preparation, execution, delivery, administration,
modification and amendment of the Credit Documents and the
other documents to be delivered under the Credit Documents,
including, without limitation, the reasonable fees and
expenses of counsel (excluding allocated costs for in-house
legal services) for Agent with respect thereto and with
respect to advising Agent as to its rights and
responsibilities under the Credit Documents, and (ii) all
costs and expenses of Agent and each of the Banks, if any
(including, without limitation, reasonable counsel fees and
expenses, but limited to costs and expenses of one counsel
and any one local counsel who shall act for Agent and the
Banks (excluding allocated costs for in-house legal
services)), in connection with the enforcement (whether
through negotiations, legal proceedings or otherwise),
restructuring (whether or not in the nature of a "work-out"),
and the administration of the Credit Documents and the other
documents to be delivered under the Credit Documents;
provided that Borrower shall only be liable for costs or
expenses incurred in connection with the initial syndication
of the credit facility provided hereunder to any Bank that is
or becomes party to this Agreement on or prior to the Closing
Date or within 90 days thereafter.
(b) Indemnification. Borrower agrees to indemnify
Agent, each Bank and each officer, director, Affiliate,
employee, agent or representative of Agent or Bank ("Bank
Indemnitees") and hold each Bank Indemnitee harmless from and
against any and all liabilities, losses, damages, costs, and
expenses of any kind (including the reasonable fees and
disbursements of counsel for any Bank Indemnitee (excluding
allocated costs of in-house counsel)) in connection with any
<PAGE>
investigative, administrative, or judicial proceeding,
whether or not such Bank Indemnitee shall be designated a
party thereto (but if not a party thereto, then only with
respect to such proceedings where such Bank Indemnitee (i) is
subject to legal process (whether by subpoena or otherwise)
or other compulsion of law, (ii) believes in good faith that
it may be so subject, or (iii) believes in good faith that it
is necessary or appropriate for it to resist any legal
process or other compulsion of law which is purported to be
asserted against it), which may be incurred by any Bank
Indemnitee, relating to or arising out of this Agreement or
any of the other Credit Documents, any of the transactions
contemplated hereby or thereby, or any actual or proposed use
of proceeds of Loans hereunder; provided, however, that no
Bank Indemnitee shall have the right to be indemnified
hereunder for its own gross negligence or willful misconduct.
Section 8.5 Oral Communications. Agent may, but
is not required (except as provided in Section 2.1(b)) to,
accept and act upon oral communications from Borrower. Any
oral communication from Borrower to Agent (including
telephone communications) hereunder shall be immediately
confirmed in writing by Borrower, but in the event of any
conflict between any such oral communication and the written
confirmation thereof, such oral communication shall control
if Agent has acted thereon prior to actual receipt of written
confirmation. Borrower shall indemnify Agent and hold Agent
harmless from and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including attorneys' fees and
allocated costs for in-house legal services) which arise out
of or are incurred in connection with the making of Loans or
taking other action in reliance upon oral communications,
except that Agent shall not be indemnified against its own
gross negligence or willful misconduct.
Section 8.6 Entire Agreement. This Agreement and
the other Credit Documents are intended by the parties hereto
to be a final and complete expression of all terms and
conditions of their agreement with respect to the subject
matter thereof and supersede all oral negotiations and prior
writings in respect to the subject matter hereof.
Section 8.7 Governing Law. THIS AGREEMENT AND
EACH OTHER CREDIT DOCUMENT (EXCEPT TO THE EXTENT THE LAW OF
ANOTHER JURISDICTION IS EXPRESSLY CHOSEN THEREIN) SHALL BE
GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.
Section 8.8 Severability. The illegality or
unenforceability of any provision of this Agreement or any
other Credit Document shall not in any way affect or impair
the legality or enforceability of the remaining provisions of
this Agreement or such Credit Document.
Section 8.9 Counterparts. This Agreement may be
executed in as many counterparts as may be deemed necessary
or convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall
constitute but one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
Section 8.10 Confidentiality. Unless otherwise
required by any Directive, Agent and each Bank agree not to
voluntarily disclose to an unrelated third party information
which Borrower designates in writing as "Confidential" and
which is provided to it pursuant to this Agreement or the
other Credit Documents, except that there shall be no
obligation of confidentiality in respect of (i) any
information which may be generally available to the public or
becomes available to the public through no fault of Agent or
such Bank; (ii) communications with actual or prospective
participants or Assignees which undertake in writing to be
bound by this Section 8.10; or (iii) disclosures to Agent's
or any Bank's directors, officers, employees and other
representatives and agents, and directors, officers,
employees and other representatives and agents of its
Affiliates, legal counsel, auditors and internal bank
examiners, and to the extent necessary or advisable in its
judgment, independent engineering consultants and other
experts or consultants retained by it, if in the case of a
person or entity other than a director, officer, employee,
legal counsel, auditor or internal bank examiner, Agent or
such Bank obtains from such person or entity an undertaking
in writing as to confidentiality substantially identical to
this undertaking and if, as to all other Persons, Agent or
such Bank informs them of the obligations under this
Section 8.10 and is responsible for any breach thereof.
Section 8.11 Assignments and Participations.
<PAGE>
(a) Assignments. Each Bank may, upon at least
five Banking Days' notice to Agent and Borrower, assign to
one or more financial institutions (as "Assignee") all or a
portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its
Commitments, and the Loans); provided, however, that (i) each
such assignment shall be of a constant, and not a varying,
percentage of the assigning Bank's rights and obligations
under this Agreement being assigned, and any assignment of
such Bank's Commitment and Loans shall cover the same
percentage of such Bank's Commitment and Loans, (ii) unless
Agent and Borrower otherwise consent, the amount of the
Commitment (such amount to be determined without reduction
for utilization) of the assigning Bank being assigned
pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance Agreement with respect to
such assignment) shall not be less than $5,000,000 or shall
be an integral multiple of $1,000,000 in excess thereof, and,
unless such assigning Bank is assigning its entire
Commitment, shall not reduce the amount of the Commitment
retained by such Bank to less than $5,000,000, (iii) each
such assignment shall be to an institutional lender, (iv) the
parties to each such assignment shall execute and deliver to
Agent for recording an Assignment and Acceptance Agreement,
together with a processing and recordation fee of $3,500, and
(v) Borrower and Agent shall consent to such assignment,
which consent shall not be unreasonably withheld. Upon such
execution, delivery, approval, acceptance and recording, from
and after the effective date specified in each Assignment and
Acceptance Agreement, (x) the Assignee thereunder shall be a
party hereto as a Bank and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance Agreement, have the rights and
obligations of a Bank hereunder and under the other Credit
Documents and (y) the Bank assignor thereunder shall, to the
extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance
Agreement, relinquish its rights and be released from its
obligations under this Agreement and under the other Credit
Documents (and, in the case of an Assignment and Acceptance
Agreement, covering all or the remaining portion of an
assigning Bank's rights and obligations under this Agreement
and under the other Credit Documents, such Bank shall cease
to be a party hereto).
(b) Effect of Assignment. By executing and
delivering an Assignment and Acceptance Agreement, a Bank
assignor thereunder and the Assignee thereunder confirm to
and agree with each other and the other parties hereto as
follows: (i) other than as expressly provided in such
Assignment and Acceptance Agreement, such assigning Bank
makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with any Credit
Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of any
Credit Document or any other instrument or document furnished
pursuant to any Credit Document; (ii) such assigning Bank
makes no representation or warranty and assumes no
responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any
of its obligations under any Credit Document or any other
instrument or document furnished pursuant to any Credit
Document or with respect to the taxability of payments to be
made hereunder or under the other Credit Documents;
(iii) such assignee confirms that it has received a copy of
the Credit Documents, together with copies of the financial
statements referred to in the Credit Documents and such other
documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance Agreement; (iv) such Assignee will,
independently and without reliance upon Agent, such assigning
Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking action under any Credit Document; (v) such Assignee
appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Credit
Documents as are delegated to Agent by the terms thereof,
together with such powers as are reasonably incidental
thereto; and (vi) such Assignee agrees that it will perform
in accordance with their terms all of the obligations which
by the terms of any Credit Document are required to be
performed by it as a Bank.
(c) Assignment Register. Agent shall maintain at
its Agency Office a copy of each Assignment and Acceptance
Agreement delivered to it and a register for the recordation
of the names and addresses of the Banks and the Commitments
of, and principal amount of the Loans owing to, each Bank
from time to time. The entries in such register shall be
conclusive and binding for all purposes, absent manifest
error, and Borrower and Agent and Banks may treat each Person
whose name is recorded in the register as a Bank hereunder
for all purposes of this Agreement. The register shall be
available for inspection by Borrower or any Bank at any
<PAGE>
reasonable time and from time to time upon reasonable prior
notice.
(d) Assignments Recorded. Upon its receipt of an
Assignment and Acceptance Agreement executed by an assigning
Bank and an Assignee, Agent shall, if such Assignment and
Acceptance Agreement has been properly completed, and subject
to Borrower's consent as above provided (i) record the
information contained therein in the register maintained by
Agent for this purpose and (ii) give prompt notice thereof to
Borrower.
(e) Participations. Each Bank may sell
participations to one or more Persons in all or a portion of
its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitments, and
the Loans owing to it); provided, however, that (i) such
Bank's obligations under this Agreement (including, without
limitation, its Commitments to Borrower hereunder) shall
remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the owner
of such Loans for all purposes of this Agreement, and
(iv) Borrower, Agent, and Banks shall continue to deal solely
and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement; provided,
further, to the extent of any such participation (unless
otherwise stated therein and subject to the preceding
proviso), the assignee or purchaser of such participation
shall, to the fullest extent permitted by law, have the same
rights and benefits hereunder as it would have if it were a
Bank hereunder; and provided, further, that each such
participation shall be granted pursuant to an agreement
providing that the purchaser thereof shall not have the right
to consent or object to any action by the selling Bank (who
shall retain such right) other than an action which would
(i) reduce principal of or interest on any Loan or any fees
due under any Credit Document in which such purchaser has an
interest, or (ii) postpone any date fixed for payment of
principal of or interest on any such Loan or such fees;
provided, further, that notwithstanding anything to the
contrary in this Section 8.11(e), the provisions of Sections
2.6, 2.7 and 2.9 shall apply to the purchasers of
participations as if they were Banks, provided that no such
purchaser shall be entitled to receive any greater amount
pursuant to any such Sections than the Bank selling such
participation would have been entitled to receive in respect
of the participation transferred had no such transfer
occurred.
(f) Assignment to Affiliates and Federal Reserve
Bank. Anything herein to the contrary notwithstanding, each
Bank shall have the right to assign or pledge from time to
time any or all of its Commitments, Loans or other rights
hereunder or under any of the other Credit Documents to any
of its Affiliates or to any Federal Reserve Bank without the
prior consent of Borrower.
Section 8.12 Waiver of Trial by Jury. BORROWER,
BANKS, AND AGENT, TO THE MAXIMUM EXTENT THEY MAY LEGALLY DO
SO, HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING
UNDER OR WITH RESPECT TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR
INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH
RESPECT TO THIS AGREEMENT, OR THE OTHER CREDIT DOCUMENTS, THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE, OR ENFORCEMENT
HEREOF OR THEREOF, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO,
BORROWER, BANKS AND AGENT HEREBY AGREE THAT ANY SUCH CLAIM,
DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 8.12 WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS
OR THEIR RIGHT TO TRIAL BY JURY.
Section 8.13 Choice of Forum and Service of
Process. To the maximum extent permitted by Law, Borrower
agrees that all actions or proceedings arising in connection
with the Credit Documents shall be tried and determined only
in the state and federal courts located in the City of New
York, State of New York, or, at the sole option of Agent, in
any other court in which Agent shall initiate legal or
equitable proceedings and which has subject matter
jurisdiction over the matter in controversy. Borrower waives
any right it may have to assert the doctrine of forum non
conveniens or to object to venue to the extent any proceeding
is brought in accordance with this section. Borrower hereby
irrevocably and unconditionally designates and appoints
(a) CT Corporation System and (b) such other Person as may be
selected by Borrower and irrevocably agreeing in writing to
so serve, as its agent to receive on its behalf service of
all process in any proceedings in any such court, such
<PAGE>
service being hereby acknowledged by Borrower to be effective
and binding service in every respect. A copy of any such
process so served shall be mailed by registered mail to
Borrower; provided, however, that unless otherwise provided
by mandatory provisions of applicable law, any failure to
mail such copy shall not affect the validity of service of
process. If any agent appointed by Borrower refuses to
accept service, Borrower hereby agrees that service upon it
by mail shall constitute sufficient notice. Nothing herein
shall affect the right to serve process in any other manner
permitted by law.
Section 8.14 Remedies. The remedies provided to
Agent and Banks in the Credit Documents are cumulative and
are in addition to, and not in lieu of, any remedies provided
by law. To the maximum extent permitted by law, remedies may
be exercised by Agent or any Bank successively or
concurrently, and the failure to exercise any remedy shall
not constitute a waiver thereof, nor shall the single or
partial exercise of any remedy preclude any other or further
exercise of such remedy or any other right or remedy.
Section 8.15 Right of Set-Off. Subject to the
provisions of Section 2.9, upon the occurrence and during the
continuance of any Event of Default, each Bank is hereby
authorized at any time and from time to time, to the fullest
extent permitted by law, to set-off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time
owing by such Bank to or for the credit or the account of
Borrower against an equivalent amount of the Obligations,
irrespective of whether or not such Bank shall have made any
demand under this Agreement and although such obligations may
be unmatured. Each Bank agrees promptly to notify Borrower
and Agent after any such set-off and application is made by
such Bank, provided that the failure to give such notice
shall not affect the validity of such set-off and
application. The rights of each Bank under this Section are
in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Bank may
have.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above
written.
CALIFORNIA ENERGY COMPANY, INC.
By /s/ John G. Sylvia
--------------------------------
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer
Address for Notices:
10831 Old Mill Road
Omaha, Nebraska 68154
Attn: John G. Sylvia
Telecopier: (402) 334-3759
with a copy to:
10831 Old Mill Road
Omaha, Nebraska 68154
Attn: Steven A. McArthur
Telecopier: (402) 334-3746
CREDIT SUISSE, as Agent and Bank
By /s/ Scott E. Zoellner
-------------------------
Name: Scott E. Zoellner
Title: Associate
By /s/ Bruce W. Hurd
-------------------------
Name: Bruce W. Hurd
Title: Associate
Address for Notices:
Tower 49
12 East 49th Street
New York, New York 10017
Attn:
Telecopier:
<PAGE>
Schedule 1
Commitment Schedule
A. Agency Office: Tower 49
12 East 49th Street
New York, New York 10017
B. Banks: (Listed Below)
Bank Commitment Lending Office
Credit Suisse The lesser of Tower 49
$250,000,000 and 12 East 49th Street
the Maximum Loan New York, New York 10017
Value of the
Collateral
<PAGE>
Schedule 2
Magma Litigation
All litigation referred to in Magma's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994 and all
litigation referred to in Section 15 of the Offer to Purchase.
<PAGE>
Schedule 3
Margin Stock
Proceeds of the Loans will be used to purchase
shares of common stock of Magma in connection with the
Tender Offer.
<PAGE>
Schedule 4.1(v)
ERISA
Group health insurance coverage is provided for
each Magma executive who has a Change in Control
Agreement with Magma for a period of two years following
termination of employment (or such lesser number of
months up to the date of such executive's retirement),
upon termination of employment other than for Cause,
Retirement or Disability, or upon termination for Good
Reason (as those terms are defined in such Agreements).
This coverage is to be provided to such executive and his
dependents on substantially the same basis as benefits
are provided immediately prior to change in control of
Magma.
<PAGE>
Schedule 4.1(aa)
Insurance
Schedule of insurance maintained by the Borrower.
EXHIBIT (b)(3)
FORM OF BORROWER PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of
January , 1995, made by CALIFORNIA ENERGY COMPANY, INC., a
Delaware corporation ("Pledgor"), in favor of CREDIT SUISSE,
NEW YORK BRANCH, as agent for the Banks under the Limited
Recourse Credit Agreement referred to below ("Pledgee").
W I T N E S S E T H :
WHEREAS, pursuant to the Limited Recourse Credit
Agreement dated as of December 21, 1994 (as amended, supplemented
or otherwise modified from time to time, the "Limited Recourse
Credit Agreement") by and among Pledgor, the Banks and Pledgee,
as Agent for the Banks, the Banks have agreed to make the Loans
to Pledgor upon the terms and subject to the conditions set forth
therein;
WHEREAS, pursuant to the terms of the Credit
Agreement dated as of December __, 1994 (as amended,
supplemented or otherwise modified from time to time, the "CE
Acquisition Credit Agreement") by and between Pledgor and CE
Acquisition Company, Inc., a Delaware corporation and a
wholly-owned subsidiary of Pledgor ("CE Acquisition"), the
proceeds of the Loans together with the proceeds of an equity
contribution by Pledgor will be used to acquire the Pledged
Stock;
WHEREAS, pursuant to the terms of the Pledge
Agreement of even date herewith (as amended, supplemented or
otherwise modified from time to time, the "CE Acquisition
Pledge Agreement") by CE Acquisition in favor of Pledgor, CE
Acquisition has granted to Pledgor a first-priority security
interest in the Pledged Stock to secure its obligations under
the CE Acquisition Credit Agreement and the other Credit
Documents to which it is a party;
WHEREAS, to secure its obligations under the
Limited Recourse Credit Agreement and the other Credit
Documents, Pledgor hereby grants to Pledgee a first-priority
security interest in the Pledged Note and in its rights,
title and interests (including its security interests) in, to
and under the CE Acquisition Credit Agreement, the CE
Acquisition Pledge Agreement and the Pledged Stock;
WHEREAS, it is a condition precedent to the
obligation of the Banks to make the Loans under the Limited
Recourse Credit Agreement that Pledgor shall have executed
and delivered this Pledge Agreement to Pledgee; and
NOW, THEREFORE, in consideration of the premises
and to induce the Banks to make the Loans under the Limited
Recourse Credit Agreement, Pledgor hereby agrees with Pledgee
for its benefit and the benefit of the Banks as follows:
1. Defined Terms. Unless otherwise defined
herein, terms which are defined in the CE Acquisition Credit
Agreement and used herein are so used as so defined, and the
following terms shall have the following meanings:
"Assigned Interests" means all of Pledgor's rights,
title and interest in, to and under the CE Acquisition
Credit Agreement, the CE Acquisition Pledge Agreement
and the Pledged Stock.
"Collateral" means the Assigned Interests, the
Pledged Note and all Proceeds thereof.
"Issuer" means Magma Power Company, a Nevada
corporation.
"Pledge Agreement" means this Pledge Agreement, as
amended, supplemented or otherwise modified from time to
time.
"Pledged Note" means the promissory note issued by
CE Acquisition to Pledgor, as described on Schedule I
hereto.
"Pledged Stock" means the shares of capital stock
of the Issuer listed in Schedule I hereto, together with
all stock certificates, options or rights of any nature
whatsoever which may be issued or granted by the Issuer
to CE Acquisition while this Pledge Agreement is in
effect.
"Proceeds" means all "proceeds" as such term is
defined in Section 9-306(1) of the UCC on the date
<PAGE>
hereof and, in any event, shall include, without
limitation, all dividends or other income from the
Pledged Stock and the Pledged Note, collections thereon
or distributions with respect thereto.
"UCC" means the Uniform Commercial Code from time
to time in effect in the State of New York.
2. Pledge; Grant of Security Interest. Pledgor
hereby delivers to Pledgee the Pledged Note and the Pledged
Stock and hereby grants to Pledgee a first priority security
interest in and lien on the Collateral as collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
3. Stock Powers, Etc. Concurrently with the
delivery to Pledgee of the Pledged Note and each certificate
representing the Pledged Stock, Pledgor hereby delivers an
undated bond power and stock power covering the Pledged Note
and such certificate, respectively, duly executed in blank,
and if Pledgee so requests, with signatures guaranteed.
4. Representations and Warranties. Pledgor
represents and warrants to Pledgee that:
(a) the shares of Pledged Stock listed in
Schedule I hereto constitute all the issued and
outstanding shares of all classes of the capital stock
of the Issuer owned by CE Acquisition;
(b) all the shares of the Pledged Stock have
been duly and validly issued and are fully paid and
nonassessable;
(c) Pledgor is the record and beneficial
owner of, and has good, valid and marketable title to,
the Pledged Note and the Assigned Interests, free and
clear of all pledges, security interests, liens,
charges, encumbrances, equities, claims or options of
whatever nature, except the security interest and lien
in favor of Pledgee created by this Pledge Agreement;
(d) upon delivery to Pledgee of the Pledged
Note and the stock certificates evidencing the Pledged
Stock, and assuming the continuous possession of the
Pledged Note and such stock certificates by Pledgee, the
security interest and lien granted pursuant to this
Pledge Agreement will constitute a valid, perfected
first priority security interest in and lien on the
Pledged Note and the Pledged Stock, enforceable as such
against all creditors of Pledgor and any Persons
purporting to purchase any Collateral from Pledgor;
(e) this Pledge Agreement creates valid
security interests in the Collateral securing the
payment of the Obligations, and all filings and other
actions necessary or desirable to perfect and protect
the security interests created hereby have been duly
taken;
(f) the Pledged Note constitutes the legal
and valid and binding obligation of CE Acquisition;
there are no setoffs, counterclaims or disputes existing
or asserted with respect to the Pledged Note and Pledgor
has not made any agreement with CE Acquisition for any
deduction therefrom; and there are no facts, events or
occurrences which in any way impair the validity or
enforceability of the Pledged Note or tend to reduce the
amount payable other than pursuant to the terms thereof;
and
(g) Pledgor has no knowledge of any fact or
circumstance which would impair the collectibility of
the amounts due under the Pledged Note.
5. Covenants. Pledgor covenants and agrees with
Pledgee that, from and after the date of this Pledge
Agreement until the Obligations are paid in full:
(a) If Pledgor shall, as a result of its
rights under the CE Acquisition Pledge Agreement, become
entitled to receive or shall receive any stock
certificate (including, without limitation, any
certificate representing a stock dividend or a
distribution in connection with any reclassification,
increase or reduction of capital and any certificate
issued in connection with any reorganization), option or
right, whether in addition to, in substitution of, as a
conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, Pledgor
shall accept the same as Pledgee's agent, hold the same
in trust for Pledgee and deliver the same forthwith to
Pledgee in the exact form received, duly endorsed by
Pledgor to Pledgee, if required, together with an
undated stock power covering such certificate duly
<PAGE>
executed in blank and, if Pledgee so requests, with
signatures guaranteed, to be held by Pledgee hereunder
as additional collateral security for the Obligations.
Any sums paid upon or in respect of the Pledged Stock
upon the liquidation or dissolution of the Issuer and
received by Pledgor shall be forthwith paid over to
Pledgee to be held by it hereunder as additional
collateral security for the Obligations, and in case any
distribution of capital shall be made on or in respect
of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of
the capital of the Issuer or pursuant to the
reorganization thereof, the property so distributed and
received by Pledgor shall be forthwith delivered to
Pledgee to be held by it, subject to the terms hereof,
as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed
in respect of the Pledged Stock shall be received by
Pledgor, Pledgor shall, until such money or property is
paid or delivered to Pledgee, hold such money or
property in trust for Pledgee, segregated from other
funds of Pledgor, as additional collateral security for
the Obligations.
(b) Without the prior written consent of
Pledgee, Pledgor will not, to the extent it may do so,
(i) vote to enable, or take any other action to permit,
the Issuer to issue any stock or other equity securities
of any nature or to issue any other securities
convertible into or granting the right to purchase or
exchange for any stock or other equity securities of the
Issuer, (ii) sell, assign, transfer, exchange or
otherwise dispose of, or grant any option with respect
to, the Collateral or (iii) create, incur or permit to
exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Collateral (or
any part thereof), or any interest therein, except for
the security interests and liens provided for by this
Pledge Agreement. Pledgor will defend the right, title
and interest of Pledgee in and to the Collateral against
the claims and demands of all Persons whomsoever, except
for claims and demands that result from the gross
negligence or willful misconduct of Pledgee.
(c) At any time and from time to time, upon
the request of Pledgee, and at the sole expense of
Pledgor, Pledgor will promptly and duly execute and
deliver such further instruments and documents and take
such further actions as Pledgee may reasonably request
for the purposes of obtaining or preserving the full
benefits of this Pledge Agreement and of the rights and
powers herein granted. If any amount payable under or
in connection with any of the Collateral shall be or
become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or
chattel paper shall be immediately delivered to Pledgee,
duly endorsed in a manner reasonably satisfactory to
Pledgee, to be held as additional collateral security
for the Obligations.
(d) Pledgor agrees to comply with all
covenants and agreements with respect to Pledgor set
forth in the CE Acquisition Pledge Agreement and the CE
Acquisition Credit Agreement.
6. Rights of Pledgee. If an Event of Default has
occurred and is continuing, Pledgor hereby irrevocably
authorizes and empowers Pledgee to assert, either directly or
on behalf of Pledgor, any claims Pledgor may have, from time
to time, against CE Acquisition under the Pledged Note, under
the CE Acquisition Pledge Agreement or under the CE
Acquisition Credit Agreement or to otherwise exercise any
right or remedy of Pledgor thereunder (including, without
limitation, the right to enforce directly against CE
Acquisition all of Pledgor's rights thereunder, to make all
demands and give all notices and to make all requests
required or permitted to be made by Pledgor thereunder).
7. Pledgor Remains Liable. Anything herein to
the contrary notwithstanding: (a) Pledgor shall remain
liable under the CE Acquisition Credit Agreement and under
the CE Acquisition Pledge Agreement to the extent set forth
therein to perform all of its duties and obligations
thereunder to the same extent as if this Pledge Agreement had
not been executed; (b) the exercise by Agent or any Bank of
any rights hereunder shall not release Pledgor from any of
its duties or obligations under the CE Acquisition Credit
Agreement or under the CE Acquisition Pledge Agreement; and
(c) neither Agent nor any Bank shall have any obligation or
liability under the CE Acquisition Credit Agreement or under
the CE Acquisition Pledge Agreement, nor shall Agent be
obligated to perform or fulfill any of the obligations or
duties of Pledgor granted thereunder.
8. Rights of Pledgee. (a) If an Event of Default
<PAGE>
shall have occurred and be continuing and Pledgee shall have
given notice of its intent to exercise such rights to
Pledgor: (i) Pledgee shall have the right to receive any and
all payments of any character paid in respect of the
Collateral and make application thereof to the Obligations
(in the manner set forth in Section 9 hereof) and (ii) all
Pledged Stock shall be registered in the name of Pledgee or
its nominee, and Pledgee or its nominee may thereafter
exercise (A) all voting, corporate and other rights
pertaining to the Pledged Stock at any meeting of
shareholders of the Issuer or otherwise and (B) any and all
rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to the Pledged Stock
as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and
all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change
in the corporate structure of the Issuer, or upon the
exercise by Pledgor or Pledgee of any right, privilege or
option pertaining to such shares of the Pledged Stock, and in
connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine), all without
liability except to account for property actually received by
it, but Pledgee shall have no duty to exercise any such
right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
(b) The rights of Pledgee hereunder shall not be
conditioned or contingent upon the pursuit by Pledgee of any
right or remedy against Pledgor, CE Acquisition or the Issuer
or against any other Person which may be or become liable in
respect of all or any part of the Obligations or against any
other collateral security therefor, guaranty thereof or right
of offset with respect thereto.
9. Remedies. If an Event of Default shall have
occurred and shall be continuing, Pledgee may, subject to the
last two sentences of this Section 9, exercise, in addition
to all other rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, including, without
limitation, the Limited Recourse Credit Agreement, all rights
and remedies of a secured party under the UCC or any other
applicable law. Without limiting the generality of the
foregoing, Pledgee, without demand of performance or other
demand, defense, presentment, protest, advertisement or
notice of any kind (except any notice required by law) to or
upon Pledgor, the Issuer or any other Person (all and each of
which demands, defenses, presentment, protest, advertisements
and notices are hereby waived, except any notice required by
law) may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give an option or
options to purchase or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the
foregoing), in one or more portions at public or private sale
or sales, in the over-the-counter market, at any exchange,
broker's board or office of Pledgee or elsewhere upon such
terms and conditions and at such prices as it may deem
advisable, for cash or on credit or for future delivery
without assumption of any credit risk. Pledgee shall have
the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption in Pledgor, which
right or equity is hereby waived or released. Pledgee shall
apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein
or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the
rights of Pledgee hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations in whatever order
Pledgee may elect and only after such application and after
the payment by Pledgee of any other amount required by any
provision of law, including, without limitation, Section 9-
504(1)(c) of the UCC, need Pledgee account for the surplus,
if any, to Pledgor. Pledgor waives all claims, damages and
demands it may acquire against Pledgee arising out of the
exercise by Pledgee of any of its rights hereunder. If any
notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such
sale or other disposition. Pledgee shall not be obligated to
make any sale of Collateral regardless of notice of sale
having been given. Pledgee may postpone or adjourn any
public or private sale of any Collateral from time to time by
announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and
place to which it was so postponed or adjourned. Pursuant to
the terms of the Limited Recourse Credit Agreement, the Loans
made thereunder have been made on a non-recourse basis (as to
<PAGE>
principal) and it is expressly agreed and understood that any
claim against Pledgor for the repayment of the principal
amount of the Loans or the performance of any of Pledgor's
obligations under the Credit Documents (subject to the last
sentence of this Section) shall be made only against and
shall be limited to the Collateral, and no judgment or
proceeding, whether legal or equitable, with respect to the
principal amount of the Loans or the performance of any of
Pledgor's obligations under the Credit Documents (subject to
the last sentence of this Section) shall be obtained or
enforced against Pledgor or Pledgor's assets (other than the
Collateral), for purpose of obtaining payment of the
principal amount of the Loans or the performance of any of
Pledgor's obligations under the Credit Documents (subject to
the last sentence of this Section). It is expressly agreed
and understood that no recourse may be had to any officer,
director, employee, agent, partner, joint venturer or
stockholder of Pledgor with respect to, and no such person
shall have any liability with respect to, the obligations and
liabilities of Pledgor under any of the Credit Documents.
Notwithstanding the foregoing, Pledgor shall be liable for,
and Pledgee and the Banks shall have recourse against Pledgor
under the Limited Recourse Credit Agreement with respect to,
interest on the Loans and the other Obligations expressly
provided for in Section 2.9 of the Limited Recourse Credit
Agreement.
10. Registration Rights; Private Sales.
(a) If Pledgee shall determine to exercise its right to
sell any or all of the Pledged Stock pursuant to Section 9
hereof after the occurrence and during the continuance of
an Event of Default, and if in the opinion of Pledgee it
is necessary or advisable to have the Pledged Stock, or
that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the
"Securities Act"), Pledgor will use its best efforts to
cause the Issuer to (i) execute and deliver, and cause the
directors and officers of the Issuer to execute and
deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the
opinion of Pledgee, necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold, under
the provisions of the Securities Act, (ii) cause the
registration statement relating thereto to become
effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged
Stock, or that portion thereof to be sold, and (iii) make
all amendments thereto and/or to the related prospectus
which, in the opinion of Pledgee, are necessary or
advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto.
Pledgor agrees to use its best efforts to cause the Issuer
to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions which Pledgee shall
designate and to make available to its security holders as
soon as practicable, an earnings statement (which need not
be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Pledgor recognizes that Pledgee may be
unable to effect a public sale of any or all of the
Pledged Stock by reason of certain prohibitions contained
in the Securities Act and applicable state securities laws
or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account
for investment and not with a view to the distribution or
resale thereof. Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms
less favorable to Pledgee than if such sale were a public
sale and agrees that such circumstances shall not, in and
of themselves, result in a determination that such sale
was not made in a commercially reasonable manner. Pledgee
shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit
the Issuer to register such securities for public sale
under the Securities Act, or under applicable state
securities laws, even if the Issuer would agree to do so.
(c) Pledgor further agrees to do or cause to be
done all such other acts as may be necessary to make any sale
or sales of all or any portion of the Pledged Stock or the
Pledged Note pursuant to this Pledge Agreement valid and
binding and in compliance with any or all applicable
Certificates of Incorporation and By-Laws or other
organizational or governing documents of the Issuer or CE
Acquisition, and all laws, treaties, rules or regulations or
determinations of an arbitrator or a court or other
governmental authority. Pledgor authorizes Pledgee to
disclose information regarding the Issuer in Pledgee's
possession to a potential buyer of the Pledged Stock in a
foreclosure sale, provided that such buyer agrees to keep any
non-public information confidential. Pledgor further agrees
that a breach of any of the covenants contained in this
<PAGE>
Section 10 will cause irreparable injury to Pledgee, that
Pledgee has no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant
contained in this Section 10 shall be specifically
enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense
that no Event of Default has occurred and is continuing or
prior payment or prior performance.
(d) Pledgor shall pay all expenses incurred in
connection with any registration statement filed pursuant to this
Section 10, including (i) all registration and filing fees, (ii)
fees and expenses of compliance with securities or blue sky laws,
(iii) printing expenses, (iv) the fees and expenses incurred in
connection with the listing of the Pledged Securities, (v) fees
and disbursements of counsel for Pledgor and customary fees and
expenses for independent certified public accountants retained by
Pledgor (including the expenses relating to the preparation and
delivery of any comfort letters requested by Pledgee) and (vi)
reasonable fees and expenses of counsel for Pledgee.
(e) Pledgor will, and hereby does indemnify, to the
extent permitted by applicable law, Pledgee, its officers and
directors and each Person, if any, who controls such Pledgee
within the meaning of Section 15 of the Securities Act, against
all losses, claims, damages, liabilities (or proceedings in
respect thereof) and expenses (under the Securities Act or common
law or otherwise), joint or several, caused by any untrue
statement or alleged untrue statement of a material fact
contained in any registration statement filed pursuant to this
Section 10 or any related prospectus (and as amended or
supplemented if Pledgor shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims,
damages, liabilities (or proceedings in respect thereof) or
expenses are caused by any untrue statement or alleged untrue
statement contained in or by any omission or alleged omission
from information furnished in writing to Pledgor by such holder
expressly for use therein.
(f) The grant of the registration rights in this
Section 10 does not compel Pledgee to conduct a public sale
of the Pledged Stock upon foreclosure.
11. Limitation on Duties Regarding Collateral.
Pledgee's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise,
shall be to deal with it in the same manner as Pledgee deals
with similar securities and property for its own account.
Such duty shall not include any obligation to ascertain or to
initiate any action with respect to, or to inform Pledgor of,
maturity dates, conversion, call, exchange rights, offers to
purchase the Pledged Stock or any similar matters,
notwithstanding Pledgee's knowledge of these matters.
Pledgee shall not have any duty to initiate any action to
protect against the possibility of a decline in the market
value of the Pledged Stock. Neither Pledgee nor any of its
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon the Collateral, or
any part thereof, or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any
Collateral upon the request of Pledgor, the Issuer, CE
Acquisition or otherwise or to take any other action
whatsoever with regard to the Collateral or any part thereof.
12. Pledgee Appointed Attorney-in-Fact and Proxy.
Pledgor hereby appoints Pledgee or Pledgee's designee as
Pledgor's attorney-in-fact and proxy, with full authority and
power in Pledgor's place and stead, and in Pledgor's name,
from time to time in Pledgee's discretion from and after the
occurrence and during the continuance of an Event of Default
to take any action and to execute any instrument which
Pledgee may deem necessary or advisable to perfect, protect
or enforce any right or security interest hereunder or
otherwise accomplish the purposes of this Pledge Agreement,
including, without limitation, to execute and file alone any
financing statement under the UCC and any document or
instrument under any other applicable laws, and to receive,
endorse and collect all instruments made payable to Pledgor
representing any dividend or other distribution in respect of
any of the Collateral and to give full discharge for the
same. Pledgor ratifies and approves all such acts of such
attorney and proxy. Neither Pledgee nor said attorney and
proxy will be liable for any acts or omissions, nor for any
error of judgment or mistake of fact or law, other than
Pledgee's or said attorney's and proxy's gross negligence or
willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. This power,
being coupled with an interest, is irrevocable until all
Obligations have been fully satisfied.
13. Powers Coupled with an Interest. All
<PAGE>
authorizations and agencies herein contained with respect to
the Collateral are irrevocable and powers coupled with an
interest.
14. Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or
obligation under this Pledge Agreement shall not affect or
impair the validity, legality or enforceability of the
remaining provisions or obligations under this Pledge
Agreement or of such provision or obligation in any other
jurisdiction.
15. Headings. All headings used in this Pledge
Agreement are for convenience of reference only and are not
to affect the construction hereof or be taken into
consideration in the interpretation hereof.
16. Failure or Indulgence Not Waiver; Cumulative
Remedies. No failure or delay on the part of Pledgee in the
exercise of any power, right or privilege under this Pledge
Agreement and no course of dealing with respect thereto shall
impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or
privilege preclude any other or further exercise thereof or
any other right, power or privilege. The rights and remedies
of Pledgee provided under this Pledge Agreement, the Limited
Recourse Credit Agreement and the other Credit Documents are
cumulative, may be exercised singly or concurrently and are
cumulative to, and not exclusive of any rights or remedies
provided by law or otherwise available.
17. Security Interest Absolute; Successors and
Assigns; Governing Law; Compliance. All rights of Pledgee
and security interests hereunder, and all obligations of
Pledgor under this Pledge Agreement, shall be absolute and
unconditional irrespective of (i) any lack of validity or
enforceability of any Obligations or the Limited Recourse
Credit Agreement or any other Credit Document; (ii) the
absence of any attempt to collect Obligations from Pledgor or
any other Person or of any other action to enforce the same;
(iii) any change of the time, manner or place of payment, or
any other term, of any Obligations; (iv) any exchange,
release or non-perfection of any collateral securing payment
of any Obligations; (v) any law, regulation or order of any
jurisdiction affecting any term of any Obligations or
Pledgee's rights with respect thereto; and (vi) any other
circumstance which might otherwise constitute a defense
available to, or a discharge of, Pledgor, any guarantor or
any other Person. This Pledge Agreement shall be binding
upon and inure to the benefit of the successors and permitted
assigns of Pledgor and Pledgee, except that Pledgor may not
assign its rights or obligations hereunder or under any other
Credit Documents (or any portion hereof or thereof) without
the written consent of the Banks. THIS PLEDGE AGREEMENT
SHALL BE GOVERNED AND CONTROLLED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICT OF LAWS) AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS, BUT
EXCLUDING PERFECTION, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION.
18. Notices. All notices, approvals, requests,
demands and other communications required or permitted to be
given hereunder shall be given (and shall be effective) in
accordance with the notice provision of the Limited Recourse
Credit Agreement.
19. Termination of Pledge Agreement; Release of
Collateral. This Pledge Agreement, and all obligations of
Pledgor hereunder, shall terminate upon payment in full of
all Obligations and all right, title and interest of Pledgee
in and to the Collateral shall revert to Pledgor and its
successors and assigns. Upon the termination of Pledgee's
security interest and the release of the Collateral, Pledgee
will, at the written request and expense of Pledgor,
(a) promptly execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence the termination
of such security interest or the release of the Collateral,
and (b) promptly deliver or cause to be delivered to Pledgor
(without recourse and without any representation or warranty)
all property of Pledgor then held by Pledgee or any agent or
nominee of Pledgee pursuant to this Pledge Agreement. If, at
any time, all or part of any payment of the Obligations
theretofore made by Pledgor or any other Person is rescinded
or otherwise must be returned by Pledgee or any Bank for any
reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of Pledgor or any
other Person), this Pledge Agreement shall continue to be
effective or shall be reinstated, as the case may be, as to
the Obligations which were satisfied by the payment to be
rescinded or returned, all as though such payment had not
been made.
20. Changes in Writing. No amendment,
<PAGE>
modification, termination or waiver of any provision of this
Pledge Agreement, or consent to any departure by Pledgor
therefrom, shall in any event be effective unless the same
shall be in writing and signed by Pledgee and Pledgor.
21. Counterparts. This Pledge Agreement and any
amendments, waivers, consents or supplements hereto may be
executed in any number of counterparts and by the different
parties in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all
of which counterparts together shall constitute one and the
same instrument. This Pledge Agreement shall become
effective upon the execution of a counterpart hereof by each
of the parties hereto.
IN WITNESS WHEREOF, this Pledge Agreement has been
duly executed as of the date and year first above written.
CALIFORNIA ENERGY COMPANY, INC.
By:
---------------------------
Name:
Title:
Agreed and Accepted as of this
day of January, 1995
CREDIT SUISSE, NEW YORK BRANCH,
as Agent
By:
---------------------------
Name:
Title:
<PAGE>
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Class of Certificate No. of
Issuer Stock No. Shares
------ -------- ----------- ------
<S> <C> <C> <C>
Magma Power Company Common, [12,400,000]
par value
$0.10 per
share
</TABLE>
DESCRIPTION OF PLEDGED NOTE
<TABLE>
<CAPTION>
Principal
Issuer Amount Date Payee
------ --------- ---- -----
<S> <C> <C> <C>
CE Acquisition
Company, Inc. $ January , 1995 California
Energy
Company,
Inc.
</TABLE>
EXHIBIT (b)(4)
FORM OF CE ACQUISITION PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of January __, 1995,
made by CE ACQUISITION COMPANY, INC., a Delaware corporation
("Pledgor"), in favor of CALIFORNIA ENERGY COMPANY, INC., a
Delaware corporation ("Pledgee").
W I T N E S S E T H :
WHEREAS, pursuant to the Limited Recourse Credit
Agreement dated as of December 21, 1994 (as amended,
supplemented or otherwise modified from time to time, the
"Limited Recourse Credit Agreement") by and among Pledgee, the
banks and other financial institutions parties thereto (the
"Banks") and Credit Suisse, New York Branch, as agent for the
Banks ("Agent"), the Banks have agreed to make certain loans
(the "Loans") to Pledgee upon the terms and subject to the
conditions set forth therein;
WHEREAS, pursuant to the Credit Agreement dated as
of the date hereof (as amended, supplemented or otherwise
modified from time to time, the "CE Acquisition Credit
Agreement") between Pledgor and Pledgee, the proceeds of the
Loans will be loaned by Pledgee to Pledgor and Pledgor will
use such proceeds to consummate the Acquisition;
WHEREAS, Pledgor is executing this Pledge Agreement
to secure its obligations under the CE Acquisition Credit
Agreement and the Credit Documents to which it is a party;
WHEREAS, pursuant to the Pledge and Security
Agreement of even date herewith (as amended, supplemented or
otherwise modified from time to time, the "Pledge and Security
Agreement") between Pledgee and Agent, Pledgee has pledged to
Agent its rights, title and interest in, to and under this
Pledge Agreement, the CE Acquisition Credit Agreement and the
Pledged Stock (as hereinafter defined);
WHEREAS, Pledgor is the legal and beneficial owner
of all of the Pledged Stock, which consists of all capital
stock issued by Magma Power Company, a Nevada corporation (the
"Issuer"), to Pledgor;
WHEREAS, it is a condition precedent to the
obligation of the Banks to make the Loans that Pledgor shall
have executed and delivered this Pledge Agreement to Pledgee;
NOW, THEREFORE, in consideration of the premises and
to induce the Banks to make the Loans, Pledgor hereby agrees
with Pledgee for its benefit as follows:
1. Defined Terms. Unless otherwise defined herein,
terms which are defined in the CE Acquisition Credit Agreement
and used herein are so used as so defined, and the following
terms shall have the following meanings:
"Borrower Pledge and Security Agreement"
means the Pledge and Security Agreement of even
date herewith by Pledgee in favor of Agent, as
amended, supplemented or otherwise modified
from time to time.
"Collateral" means the Pledged Stock and
all Proceeds thereof.
"Pledge Agreement" means this Pledge
Agreement, as amended, supplemented or
otherwise modified from time to time.
"Pledged Stock" means the shares of
capital stock of the Issuer listed in Schedule
I hereto, together with all stock certificates,
options or rights of any nature whatsoever
which may be issued or granted by the Issuer to
Pledgor while this Pledge Agreement is in
effect.
"Proceeds" means all "proceeds" as such
term is defined in Section 9-306(1) of the UCC
on the date hereof and, in any event, shall
include, without limitation, all dividends or
other income from the Pledged Stock,
collections thereon or distributions with
respect thereto.
"UCC" means the Uniform Commercial Code
from time to time in effect in the State of New
York.
2. Pledge; Grant of Security Interest. Pledgor
<PAGE>
hereby delivers to Pledgee all the Pledged Stock and hereby
grants to Pledgee a first priority security interest in and
lien on the Collateral as collateral security for the prompt
and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the
Obligations.
3. Stock Powers, Etc. Concurrently with the delivery
to Pledgee of each certificate representing any of the Pledged
Stock, Pledgor hereby delivers an undated stock power covering
such certificate duly executed in blank, and if Pledgee so
requests, with signatures guaranteed.
4. Representations and Warranties. Pledgor
represents and warrants to Pledgee that:
(a) the shares of Pledged Stock
listed in Schedule I hereto constitute all the
issued and outstanding shares of all classes of
the capital stock of the Issuer owned by
Pledgor and represents [51%] of the outstanding
shares of Common Stock of the Issuer;
(b) all the shares of the Pledged
Stock have been duly and validly issued and are
fully paid and nonassessable;
(c) Pledgor is the record and
beneficial owner of, and has good, valid and
marketable title to, the Collateral listed in
Schedule I, free and clear of all pledges,
security interests, liens, charges,
encumbrances, equities, claims or options of
whatever nature, except the security interest
and lien in favor of Pledgee created by this
Pledge Agreement;
(d) upon delivery to Pledgee of the
stock certificates evidencing the Pledged
Stock, and assuming the continuous possession
of such stock certificates by Pledgee, the
security interest and lien granted pursuant to
this Pledge Agreement will constitute a valid,
perfected first priority security interest in
and lien on the Collateral, enforceable as such
against all creditors of Pledgor and any
Persons purporting to purchase any Collateral
from Pledgor.
5. Covenants. Pledgor covenants and agrees with
Pledgee that, from and after the date of this Pledge Agreement
until the Obligations are paid in full:
(a) If Pledgor shall, as a result of
its ownership of the Pledged Stock, become
entitled to receive or shall receive any stock
certificate (including, without limitation, any
certificate representing a stock dividend or a
distribution in connection with any
reclassification, increase or reduction of
capital and any certificate issued in
connection with any reorganization), option or
right, whether in addition to, in substitution
of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in
respect thereof, Pledgor shall accept the same
as Pledgee's agent, hold the same in trust for
Pledgee and deliver the same forthwith to
Pledgee in the exact form received, duly
endorsed by Pledgor to Pledgee, if required,
together with an undated stock power covering
such certificate duly executed in blank and, if
Pledgee so requests, with signatures
guaranteed, to be held by Pledgee hereunder as
additional collateral security for the
Obligations. Any sums paid upon or in respect
of the Pledged Stock upon the liquidation or
dissolution of the Issuer shall be forthwith
paid over to Agent to satisfy Pledgee's
obligations under the Limited Recourse Credit
Agreement and the other Credit Documents to
which Pledgee is party, and in case any
distribution of capital shall be made on or in
respect of the Pledged Stock or any property
shall be distributed upon or with respect to
the Pledged Stock pursuant to the
recapitalization or reclassification of the
capital of the Issuer or pursuant to the
reorganization thereof, the property so
distributed shall be forthwith delivered to
Agent to be held by it, subject to the terms of
the Borrower Pledge and Security Agreement, as
additional collateral security for Pledgee's
obligation under the Limited Recourse Credit
Agreement and the other Credit Documents to
which Pledgee is party. If any sums of money
<PAGE>
or property so paid or distributed in respect
of the Pledged Stock shall be received by
Pledgor, Pledgor shall, until such money or
property is paid or delivered to Agent pursuant
to the foregoing, hold such money or property
in trust for Agent, segregated from other funds
of Pledgor, as additional collateral security
for Pledgee's obligations under the Limited
Recourse Credit Agreement and the other Credit
Documents to which Pledgee is a party.
(b) Without the prior written
consent of Pledgee, Pledgor will not (i) vote
to enable, or take any other action to permit,
the Issuer to issue any stock or other equity
securities of any nature or to issue any other
securities convertible into or granting the
right to purchase or exchange for any stock or
other equity securities of the Issuer,
(ii) sell, assign, transfer, exchange or
otherwise dispose of, or grant any option with
respect to, the Collateral or (iii) create,
incur or permit to exist any Lien or option in
favor of, or any claim of any Person with
respect to, any of the Collateral (or any part
thereof), or any interest therein, except for
the security interests and liens provided for
by this Pledge Agreement and the Borrower
Pledge and Security Agreement. Pledgor will
defend the right, title and interest of Pledgee
in and to the Collateral against the claims and
demands of all Persons whomsoever, except for
claims and demands that result from the gross
negligence or willful misconduct of Pledgee.
(c) At any time and from time to
time, upon the request of Pledgee, and at the
sole expense of Pledgor, Pledgor will promptly
and duly execute and deliver such further
instruments and documents and take such further
actions as Pledgee may reasonably request for
the purposes of obtaining or preserving the
full benefits of this Pledge Agreement and of
the rights and powers herein granted. If any
amount payable under or in connection with any
of the Collateral shall be or become evidenced
by any promissory note, other instrument or
chattel paper, such note, instrument or chattel
paper shall be immediately delivered to Agent,
duly endorsed in a manner reasonably
satisfactory to Agent, to be held as additional
collateral security for Pledgee's obligations
under the Limited Recourse Credit Agreement and
the other Credit Documents to which Pledgee is
a party.
(d) Pledgor agrees to comply with
all covenants and agreements with respect to
the Pledgor set forth in the CE Acquisition
Credit Agreement.
6. Cash Dividends; Voting Rights. Pledgee hereby
authorizes Pledgor, and Pledgor hereby agrees, to forward to
Agent any and all cash dividends of the Issuer received by
Pledgor in respect of the Pledged Stock as payment of the
Pledgee's obligations under the Limited Recourse Credit
Agreement and the other Credit Documents to which Pledgee is a
party. Unless an Event of Default shall have occurred and be
continuing, and Pledgee shall have given notice to Pledgor of
Pledgee's intent to exercise its corresponding rights pursuant
to Section 8 below, Pledgor shall be permitted to exercise all
voting and corporate rights with respect to the Pledged Stock;
provided, however, that no vote shall be cast or corporate
right exercised or other action taken which, in Pledgee's
reasonable judgment, would impair the Collateral or result in
any violation of any provision of this Pledge Agreement, the
CE Acquisition Credit Agreement or any other Credit Document.
Pledgee shall execute and deliver (or cause to be executed and
delivered) to Pledgor (at Pledgor's expense) all such proxies
and other instruments as Pledgor may reasonably request for
the purpose of enabling it to exercise the voting and other
rights that it is entitled to exercise and to receive the
dividends it is entitled to receive pursuant to this Section
6.
7. Rights of Pledgee. (a) If an Event of Default
shall have occurred and be continuing and Pledgee shall have
given notice of its intent to exercise such rights to the
Pledgor: (i) Pledgee shall have the right to receive any and
all payments of any character paid in respect of the
Collateral and shall apply such payments to the satisfaction
of its obligations to Agent and the Banks under the Limited
Recourse Credit Agreement and the other Credit Documents to
which Pledgee is a party and (ii) all Pledged Stock shall be
registered in the name of Agent or its nominee, and Agent or
its nominee may thereafter exercise (A) all voting, corporate
<PAGE>
and other rights pertaining to the Pledged Stock at any
meeting of shareholders of the Issuer or otherwise and (B) any
and all rights of conversion, exchange, subscription and any
other rights, privileges or options pertaining to the Pledged
Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Issuer,
or upon the exercise by Pledgor or Agent of any right,
privilege or option pertaining to such shares of the Pledged
Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine),
all without liability except to account for property actually
received by it, but Pledgee shall have no duty to exercise any
such right, privilege or option and shall not be responsible
for any failure to do so or delay in so doing.
(b) The rights of Pledgee hereunder shall not be
conditioned or contingent upon the pursuit by Pledgee of any
right or remedy against Pledgor or the Issuer or against any
other Person which may be or become liable in respect of all
or any part of the Obligations or against any other collateral
security therefor, guaranty thereof or right of offset with
respect thereto.
8. Remedies. If an Event of Default shall have
occurred and shall be continuing, Pledgee may exercise, in
addition to all other rights and remedies granted in this
Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations,
including, without limitation, the CE Acquisition Credit
Agreement, all rights and remedies of a secured party under
the UCC or any other applicable law. Without limiting the
generality of the foregoing, Pledgee, without demand of
performance or other demand, defense, presentment, protest,
advertisement or notice of any kind (except any notice
required by law) to or upon Pledgor, the Issuer or any other
Person (all and each of which demands, defenses, presentment,
protest, advertisements and notices are hereby waived, except
any notice required by law) may in such circumstances
forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase or otherwise
dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more portions
at public or private sale or sales, in the over-the-counter
market, at any exchange, broker's board or office of Pledgee
or elsewhere upon such terms and conditions and at such prices
as it may deem advisable, for cash or on credit or for future
delivery without assumption of any credit risk. Pledgee shall
have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption in Pledgor, which
right or equity is hereby waived or released. Pledgee shall
apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein
or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the
rights of Pledgee hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment
in whole or in part of its obligations to Agent and the Banks
under the Limited Recourse Credit Agreement and any other
Credit Document to which Pledgee is a party only after such
application and after the payment by Pledgee of any other
amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the UCC, need Pledgee
account for the surplus, if any, to Pledgor. Pledgor waives
all claims, damages and demands it may acquire against Pledgee
arising out of the exercise by Pledgee of any of its rights
hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least
10 days before such sale or other disposition. Pledgee shall
not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Pledgee may postpone or
adjourn any public or private sale of any Collateral from time
to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time
and place to which it was so postponed or adjourned. Pledgor
shall remain liable for any deficiency if the proceeds of any
sale or other disposition of Collateral are insufficient to
pay the Obligations and the fees and disbursements of any
attorneys employed by Pledgee to collect such deficiency.
9. Registration Rights: Private Sales. (a) If
Pledgee shall determine to exercise its right to sell any or
all of the Pledged Stock pursuant to Section 8 hereof after
the occurrence and during the continuance of an Event of
Default, and if in the opinion of Pledgee it is necessary or
advisable to have the Pledged Stock, or that portion thereof
<PAGE>
to be sold, registered under the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), Pledgor will
use its best efforts to cause the Issuer to (i) execute and
deliver, and cause the directors and officers of the Issuer to
execute and deliver, all such instruments and documents, and
do or cause to be done all such other acts as may be, in the
opinion of Pledgee, necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) cause the registration
statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first
public offering of the Pledged Stock, or that portion thereof
to be sold, and (iii) make all amendments thereto and/or to
the related prospectus which, in the opinion of Pledgee, are
necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission
applicable thereto. Pledgor agrees to use its best efforts to
cause the Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions
which Pledgee shall designate and to make available to its
security holders as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Pledgor recognizes that Pledgee may be unable
to effect a public sale of any or all of the Pledged Stock by
reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own
account for investment and not with a view to the distribution
or resale thereof. Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less
favorable to Pledgee than if such sale were a public sale and
agrees that such circumstances shall not, in and of
themselves, result in a determination that such sale was not
made in a commercially reasonable manner. Pledgee shall be
under no obligation to delay a sale of any of the Pledged
Stock for the period of time necessary to permit the Issuer to
register such securities for public sale under the Securities
Act, or under applicable state securities laws, even if the
Issuer would agree to do so.
(c) Pledgor further agrees to do or cause to be
done all such other acts as may be necessary to make any sale
or sales of all or any portion of the Pledged Stock pursuant
to this Pledge Agreement valid and binding and in compliance
with any or all applicable Certificates of Incorporation and
By-Laws or other organizational or governing documents of the
Issuer, and all laws, treaties, rules or regulations or
determinations of an arbitrator or a court or other
governmental authority. Pledgor authorizes Pledgee to
disclose information regarding the Issuer in Pledgee's
possession to a potential buyer of the Pledged Stock in a
foreclosure sale, provided that such buyer agrees to keep any
non-public information confidential. Pledgor further agrees
that a breach of any of the covenants contained in this
Section 9 will cause irreparable injury to Pledgee, that
Pledgee has no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant
contained in this Section 9 shall be specifically enforceable
against Pledgor, and Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of
Default has occurred and is continuing or prior payment or
prior performance.
(d) Pledgor shall pay all expenses incurred in
connection with any registration statement filed pursuant to
this Section 9, including (i) all registration and filing
fees, (ii) fees and expenses of compliance with securities or
blue sky laws, (iii) printing expenses, (iv) the fees and
expenses incurred in connection with the listing of the
Pledged Securities, (v) fees and disbursements of counsel for
Pledgor and customary fees and expenses for independent
certified public accountants retained by Pledgor (including
the expenses relating to the preparation and delivery of any
comfort letters requested by Pledgee) and (vi) reasonable fees
and expenses of counsel for Pledgee.
(e) Pledgor will, and hereby does indemnify, to the
extent permitted by applicable law, Pledgee, its officers and
directors and each Person, if any, who controls such Pledgee
within the meaning of Section 15 of the Securities Act,
against all losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses (under the
Securities Act or common law or otherwise), joint or several,
caused by any untrue statement or alleged untrue statement of
a material fact contained in any registration statement filed
pursuant to this Section 9 or any related prospectus (and as
amended or supplemented if Pledgor shall have furnished any
amendments or supplements thereto) or any preliminary
prospectus or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or
<PAGE>
necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities
(or proceedings in respect thereof) or expenses are caused by
any untrue statement or alleged untrue statement contained in
or by any omission or alleged omission from information
furnished in writing to Pledgor by such holder expressly for
use therein.
(f) The grant of the registration rights in this
Section 9 does not compel Pledgee to conduct a public sale of
the Pledged Stock upon foreclosure.
10. Limitation on Duties Regarding Collateral.
Pledgee's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession,
under Section 9-207 of the UCC or otherwise, shall be to deal
with it in the same manner as Pledgee deals with similar
securities and property for its own account. Such duty shall
not include any obligation to ascertain or to initiate any
action with respect to, or to inform Pledgor of, maturity
dates, conversion, call, exchange rights, offers to purchase
the Pledged Stock or any similar matters, notwithstanding
Pledgee's knowledge of these matters. Pledgee shall not have
any duty to initiate any action to protect against the
possibility of a decline in the market value of the Pledged
Stock. Neither Pledgee nor any of its directors, officers,
employees or agents shall be liable for failure to demand,
collect or realize upon the Collateral, or any part thereof,
or for any delay in doing so or shall be under any obligation
to sell or otherwise dispose of any Collateral upon the
request of Pledgor, the Issuer or otherwise or to take any
other action whatsoever with regard to the Collateral or any
part thereof.
11. Pledgee Appointed Attorney-in-Fact and Proxy.
Pledgor hereby appoints Pledgee or Pledgee's designee as
Pledgor's attorney-in-fact and proxy, with full authority and
power in Pledgor's place and stead, and in Pledgor's name,
from time to time in Pledgee's discretion from and after the
occurrence and during the continuance of an Event of Default
to take any action and to execute any instrument which Pledgee
may deem necessary or advisable to perfect, protect or enforce
any right or security interest hereunder or otherwise
accomplish the purposes of this Pledge Agreement, including,
without limitation, to execute and file alone any financing
statement under the UCC and any document or instrument under
any other applicable laws, and to receive, endorse and collect
all instruments made payable to Pledgor representing any
dividend or other distribution in respect of any of the
Collateral and to give full discharge for the same. Pledgor
ratifies and approves all such acts of such attorney and
proxy. Neither Pledgee nor said attorney and proxy will be
liable for any acts or omissions, nor for any error of
judgment or mistake of fact or law, other than Pledgee's or
said attorney's and proxy's gross negligence or willful
misconduct as determined by a final non-appealable judgment of
a court of competent jurisdiction. This power, being coupled
with an interest, is irrevocable until all Obligations have
been fully satisfied.
12. Powers Coupled with an Interest. All
authorizations and agencies herein contained with respect to
the Collateral are irrevocable and powers coupled with an
interest.
13. Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or
obligation under this Pledge Agreement shall not affect or
impair the validity, legality or enforceability of the
remaining provisions or obligations under this Pledge
Agreement or of such provision or obligation in any other
jurisdiction.
14. Headings. All headings used in this Pledge
Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration
in the interpretation hereof.
15. Failure or Indulgence Not Waiver; Cumulative
Remedies. No failure or delay on the part of Pledgee in the
exercise of any power, right or privilege under this Pledge
Agreement and no course of dealing with respect thereto shall
impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or
privilege preclude any other or further exercise thereof or
any other right, power or privilege. The rights and remedies
of Pledgee provided under this Pledge Agreement, the CE
Acquisition Credit Agreement and the other Credit Documents
are cumulative, may be exercised singly or concurrently and
are cumulative to, and not exclusive of any rights or remedies
provided by law or otherwise available.
16. Security Interest Absolute; Governing Law;
Compliance. All rights of Pledgee and security interests
hereunder, and all obligations of Pledgor under this Pledge
<PAGE>
Agreement, shall be absolute and unconditional irrespective of
(i) any lack of validity or enforceability of any Obligations
or the CE Acquisition Credit Agreement or any other Credit
Document; (ii) the absence of any attempt to collect the
Obligations from Pledgor or any other Person or of any other
action to enforce the same; (iii) any change of the time,
manner or place of payment, or any other term, of any of the
Obligations; (iv) any exchange, release or non-perfection of
any collateral securing payment of any of the Obligations;
(v) any law, regulation or order of any jurisdiction affecting
any term of any of the Obligations or Pledgee's rights with
respect thereto; and (vi) any other circumstance which might
otherwise constitute a defense available to, or a discharge
of, Pledgor, any guarantor or any other Person. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED AND CONTROLLED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK (BUT WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICT OF LAWS) AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER
RESPECTS, BUT EXCLUDING PERFECTION, WHICH SHALL BE GOVERNED
AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION.
17. Assignment by Pledgee. Pledgor acknowledges that
in connection with the transactions contemplated by the
Limited Recourse Credit Agreement, Pledgee is entering into
the Borrower Pledge and Security Agreement, pursuant to which
Pledgee will assign to Agent all of its rights, title and
interest (including its security interest) in, to and under
this Pledge Agreement and the Pledged Stock, and Pledgor
hereby consents to such assignment. Pledgor agrees that upon
such assignment, Agent will have all of the rights hereunder
granted to Pledgee and that Agent may exercise such rights as
if the references herein to Pledgee were references to Agent.
18. Successors and Assigns. This Pledge Agreement
and the rights granted hereunder shall be binding upon and
inure to the benefit of the successors and permitted assigns
of Pledgor and Pledgee, except that Pledgor may not assign its
rights or obligations hereunder without the prior written
consent of Agent and that Pledgee may not assign its rights or
obligations hereunder except to Agent pursuant to the Borrower
Pledge and Security Agreement.
19. Third Party Beneficiaries. Pledgor and Pledgee
acknowledge that Agent and the Banks are express beneficiaries
of this Pledge Agreement.
20. Notices. All notices, approvals, requests,
demands and other communications required or permitted to be
given hereunder shall be given (and shall be effective) in
accordance with the notice provision of the CE Acquisition
Credit Agreement.
21. Termination of Pledge Agreement; Release of
Collateral. This Pledge Agreement, and all obligations of
Pledgor hereunder, shall terminate upon payment in full of all
Obligations and all right, title and interest of Pledgee in
and to the Collateral shall revert to Pledgor and its
successors and assigns. Upon the termination of Pledgee's
security interest and the release of the Collateral, Pledgee
will, at the written request and expense of Pledgor, (a)
promptly execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence the termination
of such security interest or the release of the Collateral,
and (b) promptly deliver or cause to be delivered to Pledgor
(without recourse and without any representation or warranty)
all property of Pledgor then held by Pledgee or any agent or
nominee of Pledgee pursuant to this Pledge Agreement. If, at
any time, all or part of any payment of the Obligations
theretofore made by Pledgor or any other Person is rescinded
or otherwise must be returned by Pledgee for any reason
whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Pledgor or any other Person),
this Pledge Agreement shall continue to be effective or shall
be reinstated, as the case may be, as to the Obligations which
were satisfied by the payment to be rescinded or returned, all
as though such payment had not been made.
22. Changes in Writing. No amendment, modification,
termination or waiver of any provision of this Pledge
Agreement, or consent to any departure by Pledgor or Pledgee
therefrom, shall in any event be effective unless the same
shall be in writing and signed by Pledgee, Pledgor and Agent.
23. Counterparts. This Pledge Agreement and any
amendments, waivers, consents or supplements hereto may be
executed in any number of counterparts and by the different
parties in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute one and the same
instrument. This Pledge Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties
hereto.
IN WITNESS WHEREOF, this Pledge Agreement has been
duly executed as of the date and year first above written.
<PAGE>
CE ACQUISITION COMPANY, INC.
By:
----------------------------
Name:
Title:
Agreed and Accepted as of this
day of January, 1995
CALIFORNIA ENERGY COMPANY, INC.
By:
----------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Pledge Agreement
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Class of Certificate No. of
Issuer Stock No. Shares
- ------ ----- ----------- ------
<S> <C> <C> <C>
Magma Power Company Common, [12,400,000]
par value
$0.10 per
share
</TABLE>
EXHIBIT (b)(5)
TERM NOTE
$_____________ New York, New York
January __, 1995
FOR VALUE RECEIVED, the undersigned,
CALIFORNIA ENERGY COMPANY, INC., a Delaware corporation
(hereinafter referred to as the "Maker") hereby
promises, subject to the third paragraph hereof, to pay
to the order of CREDIT SUISSE, NEW YORK BRANCH
(hereinafter together with any other holder hereof
referred to as the "Holder"), by wire transfer to
Holder's account, ABA No. __________, Account No.
__________ at Credit Suisse, 12 East 49th Street, New
York, New York 10017, Reference:
or at such other place or places and to such account or
accounts as Holder may direct from time to time by
notice to Maker in accordance with the Credit Agreement
(as hereinafter defined), the principal amount of
DOLLARS ($__________) in lawful money of the United States
in immediately available funds, payable, subject to the second
paragraph hereof, on January , 1996. Interest shall
accrue on the outstanding principal amount hereof in
accordance with the Credit Agreement and shall be
payable on such dates and in such amounts as determined
in accordance with the Credit Agreement.
This Note is issued to evidence the Loans (as
defined in the Credit Agreement) made pursuant to the
provisions of Article II of the Limited Recourse Credit
Agreement dated as of December 21, 1994 by and among
Maker, Holder, the banks and other financial
institutions parties hereto and Credit Suisse, New York
Branch, as Agent (as from time to time in effect, the
"Credit Agreement"), as to which reference is hereby
made for a statement of the terms, conditions and
covenants under which the indebtedness evidenced hereby
was made and is to be repaid, including those related to
the acceleration of the indebtedness represented hereby
upon the occurrence of an Event of Default (as defined
in the Credit Agreement) or upon the termination of the
financing of which this Note is part pursuant to the
Credit Agreement. This Note is subject to mandatory
prepayment as provided in the Credit Agreement and is
secured by the Collateral (as defined in the Credit
Agreement).
Holder acknowledges that Maker's obligation to
pay the principal amount due hereunder is non-recourse
and that any claim against Maker for the payment of such
principal amount shall be made only against and shall be
limited to the Collateral, and that no judgment or
proceeding, whether legal or equitable, with respect to
Maker's obligation to pay such principal amount shall be
obtained or enforced against Maker's assets (other than
the Collateral), for purpose of obtaining payment of
such principal amount. Notwithstanding the foregoing,
Maker shall be liable for, and Holder shall have
recourse against Maker with respect to, interest on the
principal amount due hereunder and the other Obligations
(as defined in the Credit Agreement) expressly provided
for in Section 2.9 of the Credit Agreement.
Holder hereby irrevocably agrees, to the
maximum extent permitted by law, that, in any case in
which Maker is the debtor or one of the debtors under
the Bankruptcy Code (as defined in the Credit
Agreement), Holder shall be deemed to have made a timely
election pursuant to Section 1111(b)(1)(A)(i) of the
Bankruptcy Code (or any substantially comparable
provision which is the successor thereto) as to any
claim for the payment of the principal amount due
hereunder and (ii) if (A) Maker becomes a debtor subject
to the reorganization provisions of the Bankruptcy Code
or any successor provisions or any other applicable
bankruptcy or insolvency statutes, (B) pursuant to such
provisions, Maker is held to have recourse liability to
Holder directly or indirectly on account of any amount
payable in respect of the principal amount due hereunder
and (C) Holder actually receives any payment which
reflects any payment by Maker on account of the matters
referred to in clause (ii)(B) of this sentence, then
Holder shall promptly refund to Maker the Recourse
Amount (as defined below). For purposes of this
paragraph, "Recourse Amount" means the amount by which
the portion of such payment by Maker on account of the
matters referred to in clause (ii)(B) of the preceding
sentence actually received by Holder exceeds the amount
which would have been received by Holder if Maker had
<PAGE>
not become subject to the recourse liability referred to
in such clause (ii)(B) of the preceding sentence;
provided, however, that Holder shall be allowed to
receive and retain all payments required pursuant to
Section 1129(b) of the Bankruptcy Code (or any
substantially comparable provision which is the
successor thereto) as a result of having made the
election pursuant to Section 1111(b)(1)(A)(i) of the
Bankruptcy Code.
None of the rights or remedies of Holder
hereunder are to be deemed waived or affected by failure
or delay on the part of Holder to exercise the same.
All remedies conferred upon Holder by this Note or any
other instrument or agreement shall be cumulative and
none is exclusive, and such remedies may be exercised
concurrently or consecutively at Holder's option.
Maker hereby waives presentment, demand for
payment, protest and notice of protest, notice of
dishonor and all other notices in connection with this
Note.
This Note has been executed and delivered in
New York, New York and shall be governed by the laws of
the State of New York without giving effect to
principles of conflicts of law.
WITNESS the signature of Maker.
CALIFORNIA ENERGY COMPANY, INC.
By:___________________________
Name:
Title:
Attest:_____________________
Name:
Title: Secretary
