SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 24, 1995
CALIFORNIA ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
- --------- ------ -----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
10831 Old Mill Road, Omaha, Nebraska 68194
------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 402-330-8900
------------
Not Applicable
--------------
(Former name or former address, if changed from last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On December 5, 1994, California Energy Company, Inc., a Delaware
corporation (the "Company"), CE Acquisition Company, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("CE Sub") and Magma
Power Company, a Nevada corporation ("Magma"), executed an Agreement and Plan of
Merger (the "Merger Agreement," a copy of which is attached hereto as Exhibit
99.1 and incorporated by reference herein). The Merger Agreement was negotiated
on an arms' length basis between the Company and Magma.
Pursuant to the Merger Agreement, on January 10, 1995, CE Sub purchased
12,400,000 shares of common stock, par value $0.10 per share (the "Shares"), of
Magma, at $39.00 per Share, pursuant to a tender offer commenced on December 9,
1994 (the "Offer"). As a result of consummation of the Offer, CE Sub acquired
majority control of Magma as the first step in the acquisition of the entire
equity interest in Magma.
On February 21, 1995, Magma's stockholders voted to approve and adopt
the Merger Agreement and on February 24, 1995 (the "Effective Time"), CE Sub was
merged with and into Magma (the "Merger"), with Magma continuing as the
surviving corporation. As a result of the Merger, on February 24, 1995 Magma
became a wholly owned subsidiary of the Company. On February 24, 1995, the
Company issued a press release relating to consummation of the Merger, a copy of
which is attached hereto as Exhibit 99.2 and incorporated by reference herein.
In the Merger, each then outstanding Share (other than Shares held by
the Company, CE Sub or any other direct or indirect subsidiary of the Company
and Shares held in the treasury of Magma), constituting an aggregate of
approximately 11.4 million Shares, was converted into the right to receive
$38.4772, net in cash, for an aggregate amount of approximately $440.3 million
(the "Merger Consideration"). The formula for determining the consideration to
be paid in the Merger was established so that the blended consideration paid by
the Company in the Offer and the Merger would be $38.75 per Share. The
consideration to be paid in the Offer was negotiated on an arms' length basis
between the Company and Magma.
On February 24, 1995, in connection with consummation of the Merger,
the Company borrowed $500,000,000 under a credit facility provided by Credit
Suisse (the "Merger Facility," a copy of which is attached hereto as Exhibit
99.3 and incorporated by reference herein), and used the proceeds therefrom,
together with approximately $297.9 million in net proceeds from the public
offering, over-allotment option and direct sale of common stock of the Company
(at a price to the public of $17.00 per share) and general corporate funds of
the Company in the amount of approximately $157.0 million, (i) to repay all
outstanding obligations incurred under a bridge financing facility provided by
Credit Suisse to finance the Offer and (ii) to pay the Merger Consideration and
certain fees and expenses related to the Merger.
The Merger Facility is comprised of (i) a six year term loan ("Term
Loan A") in a principal amount of up to the difference between $500 million and
the principal amount of Term Loan B and C (as defined below), expected to be
amortized in semi-annual payments, (ii) a seven year term loan ("Term Loan B")
in a principal amount expected to be not less than $75 million, expected to be
amortized in semi-annual payments in the seventh year of such Term Loan and
(iii) an eight year term loan ("Term Loan C") in a principal amount to be not
less than $75 million, expected to be amortized in semi-annual payments in the
eighth year of such Term Loan. Loans under the Merger Facility have been made to
the Company on a non-recourse basis, and the Company has loaned the proceeds of
such loans to Magma in exchange for secured term note of Magma (the "Magma
Note"). The loans under the Merger Facility are to be amortized from payments
received by the Company from Magma on the Magma Note which will be amortized
from internally generated funds of Magma. Loans under the Merger Facility will
be secured by an assignment and pledge by the Company of the Magma Note and 100%
of the capital stock
2
<PAGE>
of Magma. The Magma Note will be secured by a collateral assignment of certain
unencumbered assets of Magma.
Interest on loans borrowed under the Merger Facility will be payable at
spreads of 2.50% above LIBOR (adjusted for reserves) or 1.50% above the Base
Rate for Term Loan A, and 3.50% above LIBOR (adjusted for reserves) or 2.50%
above the Base Rate for Term Loans B and C. The Company may elect to have the
loans bear interest based on either LIBOR or the Base Rate (as defined in the
Merger Facility).
The Merger Facility contains affirmative and negative covenants
customary for similar non-recourse credit facilities. Such covenants include a
negative pledge of all stock and unencumbered assets of Magma; a limitation on
guaranties by Magma; a limitation on mergers and sales of assets by Magma; a
limitation on investments in other persons by Magma; a prohibition on dividends
and other payments by Magma to the Company unless the proceeds are used to pay
down the Merger Facility; a prohibition on the sale of ownership interests in
Magma; a limitation on the incurrence of additional debt by Magma; a requirement
that the Company deliver each fiscal quarter a certificate as to the absence of
material adverse changes in the Company or Magma which could reasonably be
expected to materially affect the ability of the Company to repay the Merger
Facility or the ability of the lenders to realize on the collateral for the
Merger Facility; and a restriction on a change in the nature of the business of
Magma and its subsidiaries.
The Merger Facility also contains financial covenants and customary
events of default, including events of default based on breaches of certain
representations, warranties and covenants; cross defaults with respect to
certain debt of the Company and Magma; bankruptcy and similar events; the
failure to pay one or more final judgments aggregating more than a specified
threshold to be agreed upon; the failure to make a payment with respect to the
Merger Facility when due; and the failure of the pledge agreement with respect
to the capital stock of Magma and the Magma Note to be in full force and effect.
The Company has paid certain fees to Credit Suisse with respect to the
Merger Facility which, in the aggregate, are not material to the transactions
described herein. The foregoing description of the Merger Facility is qualified
in its entirety by reference to Exhibit 99.3.
3
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired:
MAGMA'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO
Financial Statements for Period Ending
December 31, 1993
Report of Independent Accountants
To the Shareholders and Board of Directors of Magma Power Company
We have audited the accompanying consolidated balance sheets of Magma Power
Company and Subsidiaries (the "Company") at December 31, 1993 and 1992, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1993. The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Magma Power
Company and Subsidiaries at December 31, 1993 and 1992, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand
Coopers & Lybrand
San Diego, California
March 18, 1994
4
<PAGE>
CONSOLIDATED BALANCE SHEETS
(As of December 31, 1993 and 1992)
(Dollars in thousands)
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Assets
Current Assets
Cash .................................................. $ 18,017 $ 2,106
Marketable securities ................................. 32,086 37,501
Partnership cash and marketable securities ............ 22,919 20,724
Accounts receivable:
Trade .............................................. 18,199 11,258
Other .............................................. 14,073 12,681
Prepaid expenses and other assets ..................... 11,922 8,955
-------- --------
Total Current Assets ............................... 117,216 93,225
-------- --------
Land .................................................. 6,225 5,677
Property, plant and equipment, net of accumulated
depreciation of $53,166 and $36,932, respectively .. 265,215 113,922
Exploration and development costs, net of accumulated
amortization of $13,682 and $10,445, respectively .. 107,069 52,001
Acquisition and new project costs ..................... 13,721 26,291
Other investments ..................................... 47,642 79,469
Power purchase contracts, net of accumulated
amortization of $946 and $88, respectively ......... 22,185 853
Other assets and deferred charges ..................... 22,762 16,083
Goodwill, net of accumulated amortization of $2,122
and $1,757, respectively ........................... 9,276 9,129
-------- --------
Total .................................. $611,311 $396,650
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable ............................. $ 7,235 $ 4,635
Accrued and other liabilities ...................... 3,463 3,774
Current portion of loans payable ................... 36,799 10,292
-------- --------
Total Current Liabilities .............. 47,497 18,701
-------- --------
Loans payable ......................................... 189,209 85,834
Deferred income taxes ................................. 11,387 8,350
Other long-term liabilities ........................... 11,300 1,505
-------- --------
Total Non-Current Liabilities .......... 211,896 95,689
-------- --------
Commitments and contingencies
Shareholders' Equity
Preferred stock, $.10 par value, 1,000,000 shares
authorized, none issued and outstanding ............. -- --
Common stock, $.10 par value, 30,000,00 shares
authorized, issued and outstanding 23,989,763 and
22,980,647 shares respectively ...................... 2,399 2,298
Additional paid-in capital ............................ 144,996 128,154
Unrealized gains from marketable securities ........... 583 --
Retained earnings ..................................... 203,940 151,808
-------- --------
Total Shareholders' Equity ............. 351,918 282,260
-------- --------
Total .................................. $611,311 $396,650
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(For the Three Years Ended December 31, 1993, 1992 and 1991)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Revenues
Sales of electricity ................................................... $137,882 $ 72,236 $ 66,015
Royalties .............................................................. 19,629 22,929 13,611
Interest and other income .............................................. 4,195 8,653 10,756
Management services .................................................... 5,432 5,148 4,509
-------- -------- --------
167,138 108,966 94,891
-------- -------- --------
Costs and Expenses
Plant operating costs .................................................. 49,493 33,258 27,353
Depreciation and amortization .......................................... 21,692 11,927 11,673
Other non-plant costs .................................................. 471 800 200
General and administrative ............................................. 10,943 6,483 5,934
Interest incurred ...................................................... 9,626 6,831 8,527
-------- -------- --------
92,225 59,299 53,687
-------- -------- --------
Income from operations .................................................... 74,913 49,667 41,204
Provision for income taxes ................................................ 22,778 13,309 7,263
-------- -------- --------
Income before cumulative effect of accounting change ...................... 52,135 36,358 33,941
======== ======== ========
Cumulative effect to January 1, 1992
of change in accounting for income taxes ................................ -- 17,833 --
-------- -------- --------
Net income .......................................................... $ 52,135 $ 54,191 $ 33,941
======== ======== ========
Income before cumulative effect of accounting change per Common Share
Assuming no dilution .................................................... $ 2.17 $ 1.59 $ 1.44
-------- -------- --------
Assuming full dilution .................................................. 2.17 $ 1.52 $ 1.44
-------- -------- --------
Cumulative effect of accounting change per Common Share
Assuming no dilution ...................................................... $ -- $ .77 $ --
-------- -------- --------
Assuming full dilution .................................................... $ -- $ .75 $ --
Income per Common Share
Assuming no dilution .................................................... $ 2.17 $ 2.36 $ 1.44
-------- -------- --------
Assuming full dilution .................................................. $ 2.17 $ 2.27 $ 1.44
-------- -------- --------
Average Common Shares Outstanding
Assuming no dilution .................................................... 24,063 22,936 23,611
-------- -------- --------
Assuming full dilution .................................................. 24,072 23,847 23,611
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(For the Three Years Ended December 31, 1993, 1992 and 1991)
(Dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Gains From Share-
---------------------------- Paid-In Marketable Retained holders'
Shares Amount Capital Securities Earnings Equity
----------- ------------ ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 ............. 22,902 $ 2,290 $ 126,660 $ -- $ 63,676 $ 192,626
Other equity transactions, net ......... 25 3 302 -- -- 305
Net income, 1991 ....................... -- -- -- -- 33,941 33,941
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1991 ............. 22,927 2,293 126,962 -- 97,617 226,872
Other equity transactions, net ......... 54 5 1,192 -- -- 1,197
Net income, 1992 ....................... -- -- -- -- 54,191 54,191
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1992 ............. 22,981 2,298 128,154 -- 151,808 282,260
Purchase of Dow stock option
through issuance of shares .......... 857 86 (86) -- -- --
Tax effect of Dow option
purchase ............................ -- -- 13,581 -- -- 13,581
Unrealized gains from
marketable securities ............... -- -- -- 583 -- 583
Other equity transactions,
net ................................. 152 15 3,347 -- (3) 3,359
Net income, 1993 ....................... -- -- -- -- 52,135 52,135
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1993 ............. 23,990 $ 2,399 $ 144,996 $ 583 $ 203,940 $ 351,918
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these tatements.
7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(For the Three Years Ended December 31, 1993, 1992 and 1991)
(Dollars in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income ......................................................... $ 52,135 $ 54,191 $ 33,941
Adjustments to reconcile net income to net --------- --------- ---------
cash provided by operating activities:
Depreciation and amortization .................................... 21,692 11,927 11,673
Gain from the disposition of investments ......................... (771) (1,280) (832)
Realization of transmission line credits ......................... 2,538 1,444 1,260
Other, net ....................................................... (227) (76) (237)
Cumulative effect of adoption of SFAS 109 ........................ -- (17,833) --
Changes in components of working capital:
Accounts receivable ............................................ (8,333) (8,529) 373
Partnership cash and marketable securities ..................... (2,195) (1,233) 1,293
Prepaid expenses and other assets .............................. (2,253) 585 (2,565)
Accounts payable and accrued liabilities ....................... 2,845 501 1,101
Accrued interest payable ....................................... 719 (395) 4
Income taxes payable ........................................... 7,605 (301) 439
Deferred taxes from operations ................................. 7,485 6,684 (842)
--------- --------- ---------
Total adjustments .................................... 29,105 (8,506) 11,667
--------- --------- ---------
Net cash provided by operating activities .......................... 81,240 45,685 45,608
--------- --------- ---------
Cash Flows From Investing Activities
Proceeds from the sale of investments .............................. 223,479 150,271 180,113
Purchase of investments ............................................ (184,784) (160,949) (193,767)
Capital expenditures ............................................... (8,434) (12,043) (15,711)
Power plant acquisition costs ...................................... (215,081) (22,527) --
New project development costs ...................................... (12,345) (3,749) --
Other, net ......................................................... 1,893 (667) 43
--------- --------- ---------
Net cash used in investing activities ........................ (195,272) (49,664) (29,322)
--------- --------- ---------
Cash Flows From Financing Activities
Borrowing from banks ............................................... 140,000 -- --
Proceeds from the issuance of common stock ......................... -- 691 --
Repayment of loans payable ......................................... (10,081) (9,501) (5,669)
Commercial paper discounts and prepaid interest .................... 359 1,353 --
Other, net ......................................................... (335) 841 (181)
Net cash provided by (used) in financing
activities ................................................. 129,943 (6,616) (5,850)
--------- --------- ---------
Net (decrease) in cash ............................................. 15,911 (10,595) 10,436
Cash at beginning of year .......................................... 2,106 12,701 2,265
--------- --------- ---------
Cash at end of year ................................................ $ 18,017 $ 2,106 $ 12,701
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands, except per share amount)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis of Consolidation. The consolidated financial statements present
the assets, liabilities, revenues, costs and expenses of Magma Power Company
(the "Company") and its 100% owned subsidiaries and partnerships, Imperial
Magma, Vulcan Power Company ("Vulcan"), Magma Operating Company ("MOC"), Desert
Valley Company ("Desert Valley"), Fish Lake Power Company ("FLPC"), Magma Land I
("MLI"), Salton Sea Power Company, Salton Sea Brine Processing, L.P., Salton Sea
Power Generation, L.P., Peak Power Corporation ("Peak Power") and its pro-rata
50% share of the accounts of Del Ranch, L.P., Elmore, L.P., Leathers, L.P.,
Vulcan/BN Geothermal Power Company and Magma/GEO '83 Joint Venture.
All significant intercompany transactions and accounts have been
eliminated.
Revenue Recognition. Sales of electricity represents Magma's pro-rata
50% share of the revenue accrued by Del Ranch, L.P., Elmore, L.P., Leathers,
L.P., and Vulcan/BN Geothermal Power Company (the "Partnerships") and its 100%
owned interest in Salton Sea Power Generation, L.P., from sales to Southern
California Edison Company ("SCE"). SCE is a subsidiary of SCEcorp. SCEcorp is
the parent corporation of Mission Energy Company which, through its
subsidiaries, owns 50% of the Partnerships. Royalties, management service fees
and rental income contractually payable to Magma by the Partnerships are
recorded on an accrual basis, net of Magma's pro-rata 50% share of the
corresponding partnership expense. Royalties earned from providing geothermal
resources to power plants operated by other geothermal power producers are
recorded on an accrual basis.
Property, Plant and Equipment. Land is carried at cost. Buildings and
equipment are carried at cost less accumulated depreciation. Exploration and
development costs are carried at cost less accumulated amortization. Such
capitalized costs include all costs of acquiring geothermal leases, recurring
lease rents, geological and geophysical studies and drilling and equipping
wells. These costs are not amortized until they can be directly associated with
energy production. Exploration and development costs associated with abandoned
wells and properties are amortized over the estimated remaining life of the
resource.
Depreciation and amortization are computed using the straight-line
method over the asset's useful life.
Useful lives are as follows:
Plant, plant equipment and buildings 20 years
Office furniture and equipment ..... 5-10 years
Maintenance and other equipment .... 7-10 years
Exploration and development costs .. 20 years*
- ------------------------------------
* Life of related plant facility.
When property, plant and equipment is sold or abandoned, the cost and
related accumulated depreciation/amortization are removed from the accounts and
the resulting gain or loss is recognized currently.
Deferred Well Rework Costs. Magma defers all rework costs and amortizes
them over the estimated period between reworks. Production wells are amortized
using a units of production method while injection wells are amortized
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
on a straight-line basis over 18 months. Deferred well rework costs of
$5,181,000 in 1993 and $3,010,000 in 1992 are included in prepaid expenses and
other current assets.
Power Purchase Contracts. Power purchase contracts are carried at cost
less accumulated amortization. Contract costs are amortized on a straight-line
basis over the shorter of the remaining contract life or 20 years. The
amortization begins at the date of acquisition, for contracts in service, or the
date of firm operations. Amortization expense amounted to $858,000 in 1993 and
$25,000 in 1992 and 1991.
Goodwill. In a merger which was effective March 11, 1988, Magma Power
Company became successor in interest to all of the assets and obligations of
Magma Energy. The excess of the value of stock issued over the fair market value
of the assets acquired was recorded as goodwill and is being amortized on the
straight-line method over a period of thirty years. Amortization expense
amounted to $365,000 in 1993, 1992 and 1991.
Marketable Securities, Interest-Bearing Deposits and Other Investments.
Marketable securities and interest-bearing deposits are classified as
"available-for-sale" and are carried at their fair value. Realized gains and
losses are determined using the specific identification method and are included
in other income. Gross unrealized holding gains or losses are excluded from
earnings and reported, net of related tax effect, as a separate component of
Shareholders' Equity. Other investments are carried at cost which approximates
market value.
Retirement Plans. Magma maintains two defined contribution plans covering
all eligible employees. Contributions to the plans are funded annually.
Income per Common Share. The calculation of primary earnings per common
share is based on the weighted average number of outstanding common shares. In
computing primary earnings per common share, adjustment has been made for common
shares issuable for warrants and shares under option. Fully diluted earnings per
share reflects the dilutive effect of stock options and warrants at the end of
the reporting period.
Consolidated Statement of Cash Flows. For purposes of the Statements of
Cash Flows, Magma considers bank and money market deposits as cash. Partnership
cash and marketable securities are not considered cash equivalents as these
assets are segregated for exclusive use of the Partnerships and restrictions in
the Partnership Secured Credit Agreements place limits on distributions of
partnership cash to the partners.
Interest paid was $8,407,000 in 1993, $5,514,000 during 1992 and
$8,153,000 during 1991.
Reclassification. Magma has reclassified the presentation of certain prior
year information to conform with the current presentation format.
2. GEOTHERMAL POWER PARTNERSHIPS
The Vulcan partnership was formed in 1985 with equal ownership between
Vulcan Power Company, a 100% owned subsidiary of Magma Power Company and BN
Geothermal, Inc., a wholly owned subsidiary of Mission Energy Company.
Similarly, the Del Ranch, Elmore and Leathers partnerships were formed
in 1988 with equal ownership between Magma Power Company and Mission Energy
Company.
In March 1993 Magma formed Salton Sea Brine Processing L.P. to hold the
well field and brine processing equipment acquired from Union Oil Company of
California ("Unocal"). Ownership of Salton Sea Brine Processing,
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
L.P. is 99% Salton Sea Power Company and 1% Magma Power Company. Magma also
formed Salton Sea Power Generation L.P. to hold the power generating assets
acquired from Desert Power Company and Earth Energy Inc., both wholly owned
subsidiaries of Unocal. Ownership of Salton Sea Power Generation, L.P. is 99%
Salton Sea Brine Processing, L.P. and 1% Magma Power Company.
3. MARKETABLE SECURITIES AND OTHER INVESTMENTS
Effective December 31, 1993, Magma adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). As of December 31, 1993 all debt and equity
securities have been classified as available-for-sale and are carried at fair
value. Gross unrealized holding gains of $836,000 were recorded, net of tax
effect, as of December 31, 1993.
As of December 31, marketable securities and other investments
consisted of the following:
<TABLE>
<CAPTION>
Marketable
Securities Maturities
(maturing of
within Other Other
one year) Investments Investments
------------- ----------- -----------
<S> <C> <C> <C>
1993
Debt and equity securities
Commercial paper.............................. $ 4,986 $ --
Auction rate preferred stock.................. 23,100
U.S. treasuries and agencies.................. 4,000 12,986 2-5 years
U.S. treasuries and agencies.................. 5,084 6-10 years
Corporate medium-term notes................... 7,093 2-5 years
Corporate medium-term notes................... 4,139 6-10 years
Municipal tax exempts......................... 3,000 2-5 years
Other investments
Low income housing limited partnerships....... 8,333
Other......................................... 7,007
------------- -----------
Total.......................... $32,086 $47,642
============= ===========
1992
Auction rate preferred stock...................... $33,000 $ --
U.S. treasuries and agencies...................... 17,572
Corporate medium-term notes....................... 4,501 43,409
Low income housing limited partnerships........... 8,202
Municipal tax exempts............................. 3,000
Other............................................. 7,286
------------- -----------
Total......................... $37,501 $79,469
============= ===========
</TABLE>
In 1992, marketable securities and other investments are carried at
cost, which approximates market value.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of the following
(dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Plant and equipment ............................ $297,013 $138,361
Maintenance equipment .......................... 8,914 6,069
Buildings ...................................... 5,631 2,364
Office furniture and equipment ................. 3,390 2,047
Other equipment ................................ 3,433 2,013
-------- --------
318,381 150,854
Less accumulated depreciation .................. 53,166 36,932
-------- --------
Property, plant and equipment, net ............. $265,215 $113,922
======== ========
</TABLE>
5. ACQUISITION AND NEW PROJECT COSTS
On December 15, 1992, Magma signed a definitive agreement with Unocal
to purchase all of Unocal's geothermal interests in the Imperial Valley of
California including three operating geothermal power plants (the "Salton Sea
Plants") and 40,600 acres of geothermal leases, its Long Valley geothermal
leases, consisting of approximately 12,000 acres near Mammoth, California and
its 58,300 acres of geothermal leases in Nevada. On March 31, 1993 Magma
consummated its acquisition of the Imperial Valley geothermal interest. Total
cost includes (i) payments to Unocal consisting of the purchase price of $224
million, working capital of $7.3 million and an interest charge of $3.5 million
and (ii) advisory fees and transaction costs totaling $3.4 million and a
provision for $10 million of capital improvements. The total cost of the
acquisition is allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Land ....................................................... $ 388
Property, plant and equipment .............................. 164,366
Exploration and development costs .......................... 53,676
Power purchase contracts ................................... 22,217
Transmission line credits .................................. 6,254
Other ...................................................... 1,278
--------
Total .................................... $248,179
========
</TABLE>
In addition to the initial acquisition price, Magma will make payments
to Unocal contingent on future development of new power generating capacity. The
Salton Sea Plants consist of a 10 MW unit, which started firm operation in 1982,
a 20 MW unit, which started firm operation in 1990 and a 50 MW unit, which
started firm operation in 1989. All three plants deliver electricity to Southern
California Edison Company under 30 year power purchase contracts. The contract
for the 10 MW unit is a negotiated contract while the contracts for the 20 MW
and 50 MW units are ISO4's with levelized energy payments.
On March 11, 1992 Magma acquired a 30 year modified ISO4 contract to
supply SCE with 16 MWs of geothermal power from Fish Lake, Nevada. Magma is
currently engaged in exploratory and well field development activities, which
are preparatory to constructing a power plant.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Acquisition and new project costs as of December 31, 1993 and 1992 were
as follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Deposit paid Unocal toward asset acquisition price ..... -- $22,400
Other Unocal asset acquisition costs ................... -- 127
Fish Lake development costs ............................ 13,721 3,764
------- -------
Total .............................. $13,721 $26,291
======= =======
</TABLE>
6. ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities at December 31 consisted of the
following (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Payroll ...................................... $1,187 $1,554
Interest ..................................... 1,602 883
Other ........................................ 674 1,337
------ ------
Total .................... $3,463 $3,774
====== ======
</TABLE>
7. LOANS PAYABLE
At December 31, loans payable consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Pro-rata portion of partnership non-recourse debt .... $ 75,149 $ 84,177
Bridge loan .......................................... 140,000 --
Other loans .......................................... 10,859 11,949
-------- --------
226,008 96,126
Less amounts due within one year ..................... 36,799 10,292
-------- --------
Loans payable due after one year ..................... $189,209 $ 85,834
======== ========
</TABLE>
Loans payable at December 31, 1993 and 1992 included Magma's pro-rata
share of the debt of the Del Ranch, Elmore, and Leathers partnerships and is
non-recourse to Magma Power Company and subsidiaries, however, it is
collateralized by substantially all of the assets of these partnerships. A
Secured Credit Agreement with a group of international banks, with Morgan
Guaranty Trust Company ("Morgan") as the agent bank provides for direct bank
loans at specified premiums over a choice of either the bank's prime rate, the
London Interbank Offered Rate ("LIBOR") or the CD Base rate. As an alternative,
each partnership may elect to issue commercial paper and medium-term notes
supported by letters of credit issued by Fuji Bank, Limited, which are secured,
in turn, by the project debt facility with Magma.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The partnerships had no direct bank borrowings at December 31, 1993 and
1992. The weighted average interest rate of the commercial paper and medium-term
notes outstanding at December 31, was 5.5% in 1993 and 6.2% in 1992. During 1993
and 1992 Magma's pro-rata share of the partnership weighted average borrowings
was $77,616,000 and $85,926,000, with a weighted average interest rate of 5.6%
and 6.7% for the corresponding periods.
The loans of each partnership are reduced by 25 semi-annual principal
payments in March and September of each year. The last principal payment is
scheduled for September 15, 2001 for the Del Ranch and Elmore loans and
September 15, 2002 for the Leathers loan.
On March 19, 1993 Magma entered into a one-year $140,000,000 term loan
("Bridge Loan") with a group of commercial banks. Proceeds of the loan were used
to finance the acquisition of the Imperial Valley geothermal interests. Interest
on the loan accrues at LIBOR plus .675%.
On February 28, 1994 Magma replaced the Bridge Loan with a $130,000,000
non-recourse project level debt which is collateralized by substantially all of
the assets of the newly acquired Salton Sea Plants. A secured credit agreement
with a group of international banks, with Credit Suisse as the agent bank,
provides for direct loans at LIBOR plus 1.25%.
The loans are reduced by 12 semi-annual principal payments in March and
September of each year. The last principal payment is scheduled for March 15,
2000.
Other loans consist of a 10-year $4,000,000 tax exempt debt financing
guaranteed by Magma Power Company on behalf of Desert Valley, and installment
obligations representing scheduled capital contributions for investments in low
income housing limited partnerships. The tax exempt bonds issued in October,
1990 have a coupon interest rate of 7.625% and a sinking fund requirement in the
seventh through tenth years. The installment obligations are non-interest
bearing and are payable through the year 2000 in varying amounts totalling
$6,467,000.
Magma's pro rata portion of annual maturities of loans payable for the
five years beginning January 1, 1994 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Pro Rata
Salton Sea Portion of
Plants Partnership Debt Other Total
------------ ---------------- ------- -------
<S> <C> <C> <C> <C>
1994 ....................................... $ 25,692 $ 9,724 $ 1,383 $ 36,799
1995 ....................................... 25,072 10,718 1,388 37,178
1996 ....................................... 24,846 12,830 1,393 39,069
1997 ....................................... 26,108 13,348 2,211 41,667
1998 ....................................... 25,552 13,348 2,061 40,961
Thereafter ................................. 12,730 15,181 2,423 30,334
---------- ---------------- ------- --------
Total................... $140,000 $75,149 $10,859 $226,008
========== ================= ======= ========
</TABLE>
In addition, Magma Power Company has an unused and available
$25,000,000 line of credit with Morgan and since February 28, 1994, a $5,000,000
working line of credit with two of the banks participating in the Bridge Loan
replacement.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. SHAREHOLDERS' EQUITY
In 1987 and 1993, Magma entered into technical, engineering and
management agreements with The Dow Chemical Company ("Dow"), a significant
shareholder of Magma Power Company. Magma agreed to pay for those services
either with shares of Magma Power Company common stock valued at the then market
price or cash. Dow services totalling $575,000 in 1993, $799,000 in 1992 and
$1,222,000 in 1991 were charged to the partnership and paid in cash.
The 1987 Agreement granted Dow an option for 2,000,000 shares of Magma
Power Company common stock at option prices that started at $17.00 per share, a
negotiated price that exceeded the then current market price, and which
escalated over a four year period commencing one year after operation of the
Hoch (formerly Del Ranch) plant to a maximum exercise price of $21.00 in 1993.
On October 12, 1993 Magma purchased the option by issuing 857,143 newly issued
and unregistered shares. The number of shares issued was based on the difference
between the exercise price of $21.00 per share and the market price on October
12, 1993 discounted $1.00 to $37.50. Shareholders' equity has been increased by
$13,581,000 representing the tax effect of the shares purchased.
Reserved common stock at December 31 is as follows:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Dow options .................................... -- 2,000,000
Stock Option Plan .............................. 655,331 796,390
Deferred Stock and Incentive Awards ............ 19,925 10,800
--------- ---------
Total ...................... 675,256 2,807,190
========= =========
</TABLE>
9. INCENTIVE STOCK OPTION PLAN
On September 25, 1987, the shareholders of Magma approved the
Magma Power Company Stock Option Plan of 1987 (the "Plan"). Under the Plan,
options to purchase an aggregate of 1,000,000 shares of common stock, $0.10 par
value, of Magma may be granted to salaried employees and consultants of Magma
and its subsidiaries, as selected by the Board of Directors or its compensation
committee (the "Committee"). The number of shares available under the Plan is
subject to adjustment in certain circumstances, including reorganizations,
recapitalizations, stock splits, reverse stock splits, and stock dividends.
The option price granted under the Plan will be established by the
Board of Directors or the Committee, when the option is granted. Such price may
not be less than 90% of the fair market value of the stock on the date the
option is granted. The options have a term of ten years and will become
exercisable in accordance with a vesting schedule starting one year from the
date of the grant.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Options outstanding have been granted to officers and employees to
purchase common stock at prices ranging from $9.25 to $32.50 per share. Option
transactions for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Options outstanding, beginning of year ............... 475,034 302,561
Options granted ...................................... 92,175 220,300
Options exercised (Exercise price $9.25 to $32.50) ... (141,059) (47,827)
-------- --------
Options outstanding, end of year of which 215,849
were exercisable at December 31, 1993 .............. 426,150 475,034
======== ========
</TABLE>
At December 31, 1993 and 1992, respectively, 229,181 and 321,356 shares
of common stock were available for future option grants.
10. Provision for Income Taxes
Magma provides for taxes on income in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred tax assets and liabilities are determined based
on the difference between the financial statement and the tax basis of the
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. The cumulative effect of the adoption
of SFAS 109 as of January 1, 1992 increased net income by $17,833,000 or $.77
per share, and is reported separately in the consolidated statement of
operations. Financial statements for 1991 were not restated to reflect SFAS 109.
The provision consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -------
<S> <C> <C> <C>
1993
Federal ............................. $10,787 $ 6,861 $17,648
State ............................... 3,913 1,217 5,130
------- ------- -------
Total ........... $14,700 $ 8,078 $22,778
======= ======= =======
1992
Federal ............................. $ 4,972 $ 4,783 $ 9,755
State ............................... 1,908 1,646 3,554
------- ------- -------
Total ........... $ 6,880 $ 6,429 $13,309
======= ======= =======
1991
Federal ............................. $ 6,082 $(2,514) $ 3,568
State ............................... 2,633 1,062 3,695
------- ------- -------
Total ........... $ 8,715 $(1,452) $ 7,263
======= ======= =======
</TABLE>
Amounts paid to federal and state authorities for income tax purposes
amounted to $7,707,000 in 1993, $7,244,000 in 1992 and $7,665,000 in 1991.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Deferred tax liabilities and assets for 1993 and 1992 as calculated in
accordance with SFAS 109 consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Deferred Liabilities:
Depreciation ............................ $17,727 $13,953
Intangible drilling costs ............... 22,832 18,724
Other ................................... 270 1,872
------- -------
Gross deferred tax liabilities ................... 40,829 34,549
------- -------
Deferred Assets:
Tax credits ............................. 26,318 23,075
Other ................................... 3,124 3,124
------- -------
Total deferred tax assets ........................ 29,442 26,199
------- -------
Net deferred tax liability ....................... $11,387 $ 8,350
======= =======
</TABLE>
Magma realized a tax benefit of $13,581,000 from the purchase of Dow's
option to acquire Magma Power Company common stock. This benefit resulted in a
decrease in current income taxes payable of $8,880,000, an increase in deferred
tax liabilities of $93,000 and an increase in deferred tax assets of $4,794,000.
The deferred portion of the provision for income taxes for 1991 as
calculated in accordance with Accounting Principles Board Statement No. 11,
"Accounting for Income Taxes," consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1991
--------
<S> <C>
Depreciation ..................................................... $ 1,195
Intangible drilling costs ........................................ (71)
Difference between regular and alternative minimum tax ........... (2,463)
Other ............................................................ (113)
---------
$ (1,452)
=========
</TABLE>
Major differences between the statutory rate and the effective rate for
the years ended December 31 consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Taxes at federal statutory rate (35% in
1993 and 34% for 1992 and 1991) ................................ $ 26,220 $ 16,887 $ 14,009
State taxes ...................................................... 3,592 2,242 2,417
Amortization of goodwill ......................................... 127 123 123
Percentage depletion ............................................. (2,692) (1,321) (1,292)
Investment tax credit ............................................ (520) -- (6,956)
Lease investments ................................................ (4,268) (2,887) --
Capital gains .................................................... -- (1,815) (585)
Other ............................................................ 319 80 (453)
-------- -------- --------
Provision for income taxes .............................. $ 22,778 $ 13,309 $ 7,263
======== ======== ========
Effective tax rate................................................ 30.4% 26.8% 17.6%
======== ======== ========
</TABLE>
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. COMMITMENTS AND CONTINGENCIES
Magma and its subsidiary, Desert Valley Company, have issued
irrevocable letters of credit totalling $300,000 and $6,759,000, respectively,
which guarantee repayment of tax-exempt bond financing, contingent environmental
liabilities and obligations for site clean-up upon cessation of operations.
12. QUARTERLY STATISTICS (Unaudited) (dollars in thousands, except per
share data)
<TABLE>
<CAPTION>
First Second Third Fourth Year
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1993
Total revenues................................ $22,458 $45,008 $57,315 $42,357 $167,138
Income from operations........................ 7,826 19,348 30,783 16,956 74,913
Net income.................................... 5,477 13,539 20,453 12,666 52,135
Income per common share:
Assuming no dilution................. $ .23 $ .56 $ .85 $ .53 $ 2.17
Assuming full dilution............... .23 .56 .85 .53 2.17
1992
Total revenues................................ $21,545 $24,174 $31,580 $31,667 $108,966
Income from operations........................ 7,424 9,312 16,344 16,587 49,667
Income before cumulative effect
of accounting change(b)..................... 5,434 6,816 11,966 12,142 36,358
Net income.................................... 23,267(a) 6,816 11,966 12,142 54,191
Income per common share:
Assuming no dilution................. $ 1.01(a) $ .30 $ .52 $ .53 $ 2.36
Assuming full dilution............... 1.01(a) .30 .52 .51 2.27
</TABLE>
- ---------------
(a) First quarter results were restated to include the cumulative effect of
change in accounting for income taxes as of January 1, 1992 of
$17,833,000 or $0.77 per common share assuming no dilution and $0.75
per common share assuming full dilution due to Magma's adoption of SFAS
109.
(b) Quarterly results have been restated to reflect adoption of SFAS 109.
18
<PAGE>
FINANCIAL STATEMENTS FOR PERIOD ENDING
SEPTEMBER 30, 1994
The consolidated balance sheets of Magma and its subsidiaries as of
September 30, 1994 and December 31, 1993, the consolidated statements of
operations for the nine months ended September 30, 1994 and 1993, and cash flows
for the nine months ended September 30, 1994 and 1993, and the notes thereto,
are set forth below.
The unaudited interim financial statements reflect all adjustments
(consisting of normal recurring accruals) which, in the opinion of management,
are considered necessary for a fair presentation of the results of the periods
covered.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash................................................ $5,111 $18,017
Marketable securities............................... 43,609 32,086
Partnership cash and marketable securities.......... 25,478 22,919
Accounts receivable:
Trade.............................................. 34,192 18,199
Other.............................................. 20,012 14,073
Prepaid expenses and other assets................... 10,423 11,922
-------- --------
Total Current Assets................... 138,825 117,216
-------- --------
Land................................................... 6,361 6,225
Property plant and equipment, net of
accumulated depreciation of $64,828 and
$53,166, respectively............................... 256,561 265,215
Exploration and development costs, net of
accumulated amortization of $18,490 and
$13,682, respectively............................... 104,271 107,069
Acquisition and new project costs...................... 28,367 13,721
Other investments...................................... 41,245 47,642
Power purchase contracts, net of accumulated
amortization of $1,818 and $946,
respectively........................................ 21,313 22,185
Other assets and deferred charges...................... 24,480 22,762
Goodwill, net of accumulated amortization of
$2,419 and $2,122, respectively..................... 8,999 9,276
-------- --------
Total.......................... $630,422 $611,311
</TABLE>
19
<PAGE>
CONSOLIDATED BALANCE SHEETS - (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---- ----
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable.......................... $7,832 $7,235
Accrued and other liabilities................... 3,605 3,463
Current portion of loans payable................ 37,010 36,799
------ ------
Total Current Liabilities.......... 48,447 47,497
------ ------
Loans payable...................................... 151,959 189,209
Deferred income taxes.............................. 22,376 11,387
Other long-term liabilities........................ 12,354 11,300
------ ------
Total Non-Current Liabilities...... 186,689 211,896
------- -------
Shareholders' Equity
Preferred stock, $.10 par value,
1,000,000 shares authorized,
none issued and outstanding..................... -- --
Common stock, $.10 par value, 30,000,000 shares
authorized, issued and outstanding
24,042,915 and 23,989,763 shares, respectively.. 2,401 2,399
Additional paid-in capital......................... 142,765 144,996
Unrealized gains (losses) from marketable
securities...................................... (677) 583
Retained earnings.................................. 250,797 203,940
------- -------
Total Shareholders' Equity........... 395,286 351,918
------- -------
Total.............................. $630,422 $611,311
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
------------- -------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Sales of electricity ........................................... $ 50,592 $ 49,674 $124,086 $103,319
Royalties ...................................................... 5,628 5,569 15,062 14,885
Interest and other income ...................................... 1,400 906 3,866 3,635
Management services ............................................ 1,263 1,166 3,090 2,942
-------- -------- -------- --------
Total.......................................... 58,883 57,315 146,104 124,781
-------- -------- -------- --------
Costs and Expenses
Plant operating costs .......................................... 12,723 14,404 41,208 36,622
Depreciation and amortization .................................. 5,875 6,374 17,737 15,449
Other non-plant costs .......................................... 115 118 380 401
General and administrative ..................................... 3,730 2,912 9,602 7,471
Interest incurred .............................................. 3,301 2,724 9,262 6,881
-------- -------- -------- --------
25,744 26,532 78,189 66,824
-------- -------- -------- --------
Income from operations ......................................... 33,139 30,783 67,915 57,957
Provision for income taxes ..................................... 10,290 10,330 21,072 18,488
-------- -------- -------- --------
Net income ..................................................... $ 22,849 $ 20,453 $ 46,843 $ 39,469
======== ======== ======== ========
Income per Common Share
Assuming no dilution ........................................... $ 0.95 $ 0.85 $ 1.95 $ 1.64
======== ======== ======== ========
Average Common Shares Outstanding
Assuming no dilution ........................................... 24,029 24,096 24,017 24,037
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net income. . . . . . . . . . . . . . $ 46,843 $ 39,469
--------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . 17,737 15,449
Transmission credits realized. . . . 2,209 1,803
Other, net . . . . . . . . . . . . . 1,848 (809)
Changes in components of working capital:
Accounts receivable. . . . . . . . . (21,931) (25,326)
Partnership cash and marketable securities (2,559) 6,373
Prepaid expenses and other assets. . 87 (2,246)
Accounts payable and accrued liabilities 4,776 6,688
Accrued interest payable . . . . . . (1,102) 167
Income taxes payable . . . . . . . . (2,934) 8,646
Deferred taxes from operations . . . 12,645 2,920
--------- ----------
Total adjustments . . . . . . . . . . 10,776 13,665
--------- ----------
Net cash provided by operating activities 57,619 53,134
--------- ----------
Cash Flows From Investing Activities
Proceeds from the sale of investments 205,686 195,545
Purchase of investments . . . . . . . (216,060) (148,655)
Capital expenditures. . . . . . . . . (8,854) (5,718)
Power plant acquisition costs . . . . - (215,718)
New project development costs . . . . (11,909) (11,932)
Other, net. . . . . . . . . . . . . . (1,198) 1,166
--------- ----------
Net cash used in investing activities (32,335) (185,312)
--------- ----------
Cash Flows From Financing Activities
Repayment of loans payable. . . . . . (166,101) (10,070)
Borrowing from banks. . . . . . . . . 130,000 140,000
Loan fees . . . . . . . . . . . . . . (3,225) -
Proceeds from the issuance of common stock 816 2,519
Other, net. . . . . . . . . . . . . . 320 (278)
--------- ----------
Net cash provided (used) by financing activities (38,190) 132,171
--------- ----------
Net increase (decrease) in cash . . . (12,906) (7)
Cash at beginning of period . . . . . 18,017 2,106
--------- ----------
Cash at end of period . . . . . . . . $ 5,111 $ 2,099
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation - The consolidated financial statements present the
assets, liabilities, revenues, costs and expenses of Magma, its 100%-owned
subsidiaries and its proportionate share of partnerships in which Magma
has invested.
All significant intercompany transactions and accounts have been
eliminated.
2. LOANS PAYABLE
Loans payable consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Pro-rata share of partnership
non-recourse debt . . . . . . . . . . $ 65,157 $75,149
Bridge loan. . . . . . . . . . . . . . - 140,000
Salton Sea debt. . . . . . . . . . . . 114,308 -
Other loans. . . . . . . . . . . . . . 9,504 10,859
-------- --------
188,969 226,008
Less amounts due within one year . . . 37,010 36,799
-------- --------
Loans payable due after one year . . . $151,959 $ 189,209
======== ========
</TABLE>
Loans payable at September 30, 1994 and December 31, 1993 included Magma's
pro-rata share of the debt of the Del Ranch, L.P., Elmore, L.P., and Leathers,
L.P. partnerships. The partnership loans are non-recourse to Magma and
subsidiaries, however, it is collateralized by substantially all of the assets
of these partnerships.
On March 19, 1993, Magma entered into a $140 million unsecured one-year
term loan ("Bridge Loan") with a group of commercial banks. Proceeds from the
loan were used to finance the acquisition of the Salton Sea Plants from Unocal.
On February 28, 1994, Magma replaced the Bridge Loan with a $130,000,000 non-
recourse project level loan which is collateralized by substantially all of the
assets and power purchase contracts of the newly acquired Salton Sea Plants.
Under the secured credit agreement for this loan, a group of international banks
loaned to Salton Sea Power Generating, L.P. and Salton Sea Brine Processing,
L.P. (the "Salton Sea Partnerships"), which own the Salton Sea Plants,
$130,000,000 in the form of a six (6) year loan at interest rates of 1.25% over
LIBOR, secured by substantially all of the assets of the Salton Sea
Partnerships. Restrictions in the secured credit agreement place limits on
distribution of cash from the Salton Sea Plants to Magma.
3. DEFERRED INCOME TAXES
Deferred income taxes as of September 30, 1994 and December 31, 1993
represent estimated income taxes payable in the future years as determined in
accordance with SFAS 109 "Accounting for Income Taxes."
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. NET INCOME PER COMMON SHARE
The calculation of primary earnings per common share is based on the
weighted average number of outstanding common shares. In computing primary
earnings per common share, adjustment has been made for
common shares issuable for shares under option.
24
IMPERIAL VALLEY GEOTHERMAL INTERESTS
(ACQUIRED BY MAGMA) FINANCIAL STATEMENTS
Report of Independent Accountants
To the Board of Directors of
Magma Power Company:
We have audited the accompanying Statement of Net Assets Acquired as of March
31, 1993 and Historical Summaries of Gross Revenues and Direct Operating
Expenses for each of the three years in the period ended December 31, 1992
(collectively, the "Statements") of the Imperial Valley Geothermal Interests
(acquired by Magma Power Company from Union Oil Company of California
["Unocal"]). The Statement of Net Assets Acquired is the responsibility of
Magma Power Company's management. The Historical Summaries of Gross Revenues
and Direct Operating Expenses are the responsibility of Unocal's management.
Our responsibility is to express an opinion on the Statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statements. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statements were prepared for inclusion in the Form 8-K of Magma
Power Company on the basis of presentation as described in Note 1, and are not
intended to be a complete presentation of the Imperial Valley Geothermal
Interests' assets, liabilities, revenues and expenses.
In our opinion, the Statements referred to above present fairly, in all material
respects, the net assets acquired as of March 31, 1993 and the gross revenues
and direct operating expenses for each of the three years in the period ended
December 31, 1992 of the Imperial Valley Geothermal Interests on the basis of
presentation as described in Note 1, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand
San Diego, California
May 6, 1993
25
IMPERIAL VALLEY GEOTHERMAL INTERESTS
(Acquired by Magma Power Company)
STATEMENT OF NET ASSETS ACQUIRED
March 31, 1993
(In Thousands)
Prepaid expenses . . . . . . . . . . . . . . . . $ 1,629
Land . . . . . . . . . . . . . . . . . . . . . . 388
Property, plant and equipment. . . . . . . . . . 178,050
Exploration and development costs. . . . . . . . 39,378
Power purchase agreements. . . . . . . . . . . . 22,217
Royalty - free use of technology . . . . . . . . 900
Transmission line credits. . . . . . . . . . . . 5,003
--------
Net assets acquired $247,565
========
The accompanying notes are an integral part of
these statements.
26
IMPERIAL VALLEY GEOTHERMAL INTERESTS
(Acquired by Magma Power Company)
HISTORICAL SUMMARIES OF GROSS REVENUES AND
DIRECT OPERATING EXPENSES
(In Thousands)
Year Ended December 31
------------------------------------
1990 1991 1992
---- ---- ----
Gross Revenues:
Sales of electricity. . . . . . $62,997 $73,442 $72,271
Other revenue. . . . . . . . . 22 20 -
------- ------- --------
Total gross revenues. . . . 63,019 73,462 72,271
------- ------- --------
Direct operating expenses:
Plant operating costs. . . . . 20,815 23,126 21,693
District office charges. . . . 4,123 4,389 3,868
Exploration operations. . . . 901 985 975
Rentals in lieu of drilling . 1,115 1,036 661
------- ------- --------
26,954 29,536 27,197
------- ------- --------
Excess of gross revenues over
direct operating expenses. . $36,065 $43,926 $45,074
======= ======= =======
The accompanying notes are an integral part of
these statements.
27
IMPERIAL VALLEY GEOTHERMAL INTERESTS
(Acquired by Magma Power Company)
NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED AND
HISTORICAL SUMMARIES OF GROSS REVENUES AND
DIRECT OPERATING EXPENSES
(In Thousands)
1. Basis of Presentation:
On March 31, 1993 ("Acquisition Date"), Magma Power Company ("Magma") acquired
certain geothermal and other related assets located in the Imperial Valley of
California (the "Imperial Valley GeothermalInterests") from Union Oil Company of
California ("Unocal"). Magma has accounted for the acquisition under the
purchase method, and, accordingly, the purchase price allocation in the
accompanying Statement of Net Assets Acquired is based on the estimated fair
values of the assets purchased as of the Acquisition Date. Such allocation has
been based on certain estimates which may be revised at a later date. The
Statement of Net Assets Acquired is not intended to be a complete presentation
of the assets and liabilities of the Imperial Valley Geothermal Interests.
The consideration to Unocal and related liabilities assumed in determining
Magma's total cost of acquisition includes $224,000,000 consisting of
$22,400,000 paid on December 31, 1992 ("Initiation Date" of the transaction) and
a $201,600,000 note payable due to Unocal on March 31, 1993 for geothermal and
other related assets; certain current assets and liabilities assumed by Magma as
of the Initiation Date ("Adjusted Assets"), and an estimate of the net of
revenues and certain expenditures ("Adjustment Account") relating to the
operations of the Imperial Valley Geothermal Interests from the Initiation Date
to the Acquisition Date pursuant to the Sale and Purchase Agreement ("Purchase
Agreement") between Magma and Unocal; interest cost incurred during the
acquisition period from the Initiation Date to the Acquisition Date paid to
Unocal pursuant to the Purchase Agreement; an estimate of acquisition costs; and
an estimate of capital expenditures for necessary improvements to the assets.
These costs are summarized as follows:
Acquisition cost of geothermal and
other related assets ................ $224,000,000
Adjusted Assets........................ 6,686,000
Estimated Adjustment Account .......... 590,000
Interest cost during acquisition period 3,489,000
Estimated acquisition costs............ 2,800,000
Estimated capital improvements......... 10,000,000
------------
Total cost of acquisition ............. $247,565,000
============
Excluded from the Statement of Net Assets Acquired are certain contingent
payments of $100,000 perinstalled megawatt and revenue interests of one percent
on the gross revenues generated on the first 150 megawatts of new plant capacity
should Magma construct new geothermal electrical generating facilities, as
defined in the Purchase Agreement.
28
IMPERIAL VALLEY GEOTHERMAL INTERESTS
(Acquired by Magma Power Company)
NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED AND
HISTORICAL SUMMARIES OF GROSS REVENUES AND
DIRECT OPERATING EXPENSES, (Continued)
1. Basis of Presentation, Continued:
The accompanying Historical Summaries of Gross Revenues and Direct Operating
Expenses ("Historical Summaries") include only the gross revenues and direct
operating expenses attributable to the production and sale of geothermal energy
from the Imperial Valley Geothermal Interests on Unocal's basis of accounting.
Prior to the acquisition, the Imperial Valley Geothermal Interests were included
in the consolidated financial statements of Unocal and were not accounted for as
a separate entity. Sales of electricity in the accompanying Historical
Summaries represent revenue accrued from Unocal's sales to Southern California
Edison Company. The Historical Summaries do not include certain significant
expenses that were incurred in connection with the operations of the Imperial
Valley Geothermal Interests and that were recorded in the Unocal financial
statements. Those expenses were either not included
because the information was not obtainable as Unocal did not allocate such
expenses to individual properties, or the basis of such amounts may be
significantly different as operated by Magma. Items excluded are depreciation,
depletion and amortization, transmission charges offset by credits from the
Imperial Irrigation District, interest expense which may have been incurred for
any debt directly orindirectly associated with the assets, allocated income
taxes, accounting, legal, marketing and other general
and administrative costs. The Historical Summaries also exclude any allocation
of the total acquisition costs resulting from the purchase of the Imperial
Valley Geothermal Interest by Magma as reflected in the
accompanying Statement of Net Assets Acquired.
2. Related Parties:
Included in plant operating costs in the accompanying Historical Summaries are
certain technical support costs paid to a division of Unocal. Technical support
costs do not exceed $1,600,000 in any respective year.
29
(b)Pro forma financial information:
PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
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 the
Company and Magma as if the acquisition had been effected on September 30, 1994,
and the historical statements of income as if the acquisition had been effected
at the beginning of each of the periods presented. The acquisition is recorded
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 Magma are adjusted to the estimated fair
value and combined with the recorded values of the assets and liabilities of the
Company. This pro forma combined financial data should be read in conjunction
with the financial data appearing in, and are qualified in their entirety by,
the consolidated financial statements, including the notes thereto, of the
Company and Magma, included in the documents incorporated by reference herein.
The Company has not completed reviewing Magma's records in order to make
its determination of the fair value of Magma's assets and liabilities. The fair
value adjustments reflected in the accompanying pro forma condensed combined
financial data reflect, among other things, estimates of fair value made by the
Company based on market quotations and assumptions it believes to be reasonable.
Accordingly, the final pro forma condensed combined amounts may be different
from those set forth herein.
It should be noted, however, that the actual fair values will be determined
on the basis of the financial condition of Magma at the time the Magma shares
are purchased.
The pro forma combined financial data are intended for information purposes
only and 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.
30
PRO FORMA UNAUDITED CONDENSED COMBINED BALANCE SHEET
COMPANY AND MAGMA
AS OF SEPTEMBER 30, 1994
(In thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
The Company Magma Adjustments Combined
__________ _____ ___________ ________
<S> <C> <C> <C> <C>
ASSETS
Cash and short term investments $316,349 $5,111 $(156,978)(5C) $164,482
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(5B) 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(5B) 81,313
Deferred charges and other assets 29,968 24,480 6,948(5B,5C) 61,396
Excess of cost over fair value of net
assets acquired . . . . . . . - 8,999 310,632(5B) 319,631
---------- --------- ------------ ----------
Total Assets. . . . . . . . . $1,087,064 $630,422 $560,602 $2,278,088
========== ========= ============ ==========
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(5B) 205,150
Other long term liabilities. . - 12,354 500,000(5C) 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
STOCKHOLDERS' EQUITY
Common Stock . . . . . . . . . 2,407 2,401 (1,405)(5A) 3,403
Additional paid-in capital . . 100,000 142,765 94,611 (5A) 337,376
Unrealized gain from marketable securities - (677) 677 (5A) -
Retained earnings. . . . . . . 136,769 250,797 (250,797)(5A) 136,769
Treasury stock . . . . . . . . (59,516) - 59,516(5A) -
---------- --------- ------------ ----------
Total stockholders' equity. . 179,660 395,286 (97,398) 477,548
---------- --------- ------------ ----------
Total liabilities and stockholders' equity $1,087,064 $630,422 $560,602 $2,278,088
========== ========= ============ ==========
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined financial
statements are an integral part of these statements.
31
PRO FORMA UNAUDITED CONDENSED COMBINED STATEMENTS OF EARNINGS
THE COMPANY AND MAGMA
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
The Adjustment Forma The Adjustment Pro Forma
Company Magma (5D) Combined Company Magma (5D) 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 (7,849) 13,540 21,980 3,866 (5,887) 19,959
Management
services. . - 5,432 - 5,432 - 3,090 - 3,090
-------- -------- -------- -------- -------- -------- -------- --------
Total Revenue 149,253 167,138 (7,849) 308,542 139,188 146,104 (5,887) 279,405
-------- -------- -------- -------- -------- -------- -------- --------
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 18,041 57,545 15,439 17,737 13,531 46,707
Other non-plant
costs . . . - 471 - 471 - 380 - 380
Interest expense 30,205 9,626 45,875 85,706 44,480 9,262 34,406 88,148
Less interest
capitalized (6,816) - - (6,816) (7,518) - - (7,518)
-------- -------- -------- -------- -------- -------- -------- --------
Total costs and
expenses . 87,995 92,225 63,916 244,136 93,722 78,189 47,937 219,848
-------- -------- -------- -------- -------- -------- -------- --------
Income before
income taxes 61,258 74,913 (71,765) 64,406 45,466 67,915 (53,824) 59,557
Provision for
income taxes 18,184 22,778 (25,336) 15,626 14,067 21,072 (19,002) 16,137
-------- -------- -------- -------- -------- -------- -------- --------
Income from
continuing
operations. 43,074 52,135 (46,429) 48,780 31,399 46,843 (34,822) 43,420
Preferred dividends 4,630 - - 4,630 3,711 - - 3,711
-------- -------- -------- -------- -------- -------- -------- --------
Income available to
common stock-
holders . . $38,444 $52,135 $(46,429) $44,150 $27,688 $46,843 $(34,822) $39,709
======== ======= ======== ======= ======= ======= ======== =======
INCOME PER
COMMON AND
COMMON
EQUIVALENT
SHARE:
Assuming no
dilution. . $1.00 $2.17 $0.78 $0.77 $1.95 $0.73
======== ======= ======= ======= ======= =======
Assuming full
dilution. . $1.00 $2.17 $0.77 $0.76 $1.95 $0.71
======== ======= ======= ======= ======= =======
Weighted average
common shares
outstanding 38,485 24,063 56,655 36,174 24,017 54,344
======== ======= ======= ======= ======= =======
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined financial
statements are an integral part of these statements.
32
NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
THE COMPANY AND MAGMA
(Tables in thousands)
The Merger will be accounted for as a purchase. The resulting adjustments
are based on the historical consolidated financial statements of the Company and
Magma and the financing of the transaction. The final adjustments will be based
upon the fair market value of the assets of Magma at or near the Effective Time
of the 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. 16,670,000 shares of Common Stock, including all treasury stock, sold in
the Offering and over-allotment at a price sufficient to provide net
proceeds of $16.49 per share to the Company and 1,500,000 shares of Common
Stock sold in the Direct Sale at a price sufficient to provide proceeds of
$17.00 per share to the Company, the sum of which, net of related costs of
$2,500,000 was used to fund a portion of the cost of the Merger.
3. 23,843,000 Magma Shares outstanding as of September 30, 1994 purchased for
cash in an amount of $483,600,000 as to 12,400,000 Magma Shares and cash in
an amount of $440,266,000 as to 11,443,000 Magma Shares.
4. Outstanding Magma options retired for approximately $8,500,000 in cash.
5. The pro forma adjustments to reflect the effect of the transaction are as
follows:
A. The adjustments reflect the elimination of Magma's equity accounts,
the sale of the shares of Common Stock, including all treasury stock,
pursuant to the Offering, over-allotment and the Direct Sale, net of
related costs of $2,500,000.
B. The adjustments which have been made to the net assets of Magma and
the Company to give effect to the Merger follow:
Cash consideration
plus estimated direct costs to be
incurred in consummating the Merger $933,866
Cost of retiring outstanding
Magma options . . . . . . . . . . . 8,500
Cost of 200,000 Magma shares
owned by the Company prior to the Merger 5,552
Net assets of Magma. . . . . . . . . . $395,286
Adjustment to eliminate goodwill
of Magma. . . . . . . . . . . . . . (8,999) (386,287)
-------- -------
Excess of purchase price over carrying
value of net assets acquired. . . . 561,631
33
NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
THE COMPANY AND MAGMA - (Continued)
(Tables in thousands)
Allocated to:
Property and plant. . . . . . . . . (340,000)
Power purchase contracts. . . . . . (60,000)
Deferred income taxes on allocated costs 158,000
--------
Excess of cost over fair value of net assets acquired $319,631
========
C. The cash which the Company 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 . . . . . . . . . . $156,978
Net proceeds from the Offering,
over-allotment and the Direct Sale . . 297,888
Increase long-term debt . . . . . . . . 500,000
--------
Total sources of cash . . . . . . . . . $954,866
========
Payments to Magma common stockholders . $923,866
Payments to Magma stock option holders. 8,500
Other direct acquisition costs. . . . . 10,000
Financing costs . . . . . . . . . . . . 12,500
--------
Total uses of cash. . . . . . . . . . . $954,866
========
D. The pro forma adjustments to the pro forma condensed combined
statements of earnings are as follows:
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
Magma and provide depreciation expense on costs allocated to
property and plant. The Company'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 8.925 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.
iii. Change income tax expense as a result of pro forma adjustments
which affect taxable income.
34
The pro forma income per common and common share equivalent has
been determined on the basis of weighted average shares which have
been adjusted to include the number of shares of Common Stock sold
pursuant to the Offering, over-allotment and the Direct Sale.
(c) Exhibits:
99.1 Agreement and Plan of Merger, dated as of December 5, 1994, among
California Energy Company, Inc., CE Acquisition Company, Inc. and
Magma Power Company.
99.2 Text of Press Release issued by California Energy Company, Inc.,
dated February 24, 1995.
99.3 Non-Recourse Credit Agreement, dated as of February 24, 1995, by
and among California Energy Company, Inc., as Borrower, the banks
and other financial institutions parties thereto, as Banks and
Credit Suisse, New York Branch, as Agent.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALIFORNIA ENERGY COMPANY, INC.
By /s/Steven A. McArthur
---------------------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and Secretary
Date: March 10, 1995
36
EXHIBIT INDEX
Exhibit
- ------------------------------------------------------------------------------
99.1 Agreement and Plan of Merger, dated as of December 5, 1994, among
California Energy Company, Inc., CE Acquisition Company, Inc. and Magma
Power Company.
99.2 Text of Press Release issued by California Energy Company, Inc., dated
February 24, 1995.
99.3 Non-Recourse Credit Agreement, dated as of February 24, 1995, by and
among California Energy Company, Inc., as Borrower, the banks and other
financial institutions parties thereto, as Banks and Credit Suisse, New
York Branch, as Agent.
37
<PAGE>
Exhibit 99.1
CALIFORNIA ENERGY COMPANY, INC.,
CE ACQUISITION COMPANY, INC.
AND
MAGMA POWER COMPANY
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 5, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ----------------- --------
<S> <C> <C>
ARTICLE I
THE TENDER OFFER
SECTION 1.01. The Offer ............................................................ A-1
SECTION 1.02. Company Action ....................................................... A-2
SECTION 1.03. Directors ............................................................ A-3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger ........................................................... A-4
SECTION 2.02. Effective Time ....................................................... A-4
SECTION 2.03. Effect of the Merger ................................................. A-4
SECTION 2.04. Subsequent Actions ................................................... A-4
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and Officers ........ A-4
SECTION 2.06. Merger Consideration ................................................. A-5
SECTION 2.07. Dissenting Company Common Stock ...................................... A-5
SECTION 2.08. Surrender of Company Common Stock; Stock Transfer Books ............. A-6
SECTION 2.09. No Fractional Shares ................................................. A-6
SECTION 2.10. Stock Options; Deferred Stock ........................................ A-7
SECTION 2.11. Dividends; Transfer Taxes ............................................ A-7
SECTION 2.12. Stockholders' Meetings ............................................... A-7
SECTION 2.13. Board Nominees; Assistance in Consummation of the Merger ............ A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
SECTION 3.01. Corporate Organization; Subsidiaries ................................. A-8
SECTION 3.02. Certificate of Incorporation and Bylaws .............................. A-9
SECTION 3.03. Capitalization ....................................................... A-9
SECTION 3.04. Authority Relative to this Agreement ................................. A-9
SECTION 3.05. No Conflict; Required Filings and Consents ........................... A-10
SECTION 3.06. SEC Filings; Financial Statements .................................... A-10
SECTION 3.07. Absence of Certain Changes or Events ................................. A-11
SECTION 3.08. Title to Property .................................................... A-11
SECTION 3.09. Litigation ........................................................... A-11
SECTION 3.10. Financing Arrangements ............................................... A-11
SECTION 3.11. No Prior Activities .................................................. A-11
SECTION 3.12. Brokers .............................................................. A-11
SECTION 3.13. Information in Disclosure Documents; Registration Statement; Etc. ... A-12
SECTION 3.14. Conduct of Business .................................................. A-12
SECTION 3.15. Environment .......................................................... A-12
SECTION 3.16. Energy Regulatory Status ............................................. A-12
SECTION 3.17. Employee Benefit Plans; Labor Matters ................................ A-13
SECTION 3.18. Insurance ............................................................ A-14
SECTION 3.19. Taxes ................................................................ A-14
SECTION 3.20. Trademarks, Licenses, Patents and Copyrights ......................... A-15
SECTION 3.21. Related Party Transactions ........................................... A-15
SECTION 3.22. Status of Development and Construction Projects ...................... A-15
SECTION 3.23. Status of Operating Projects ......................................... A-15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ----------------- --------------------------------------------------------------------- --------
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Organization; Subsidiaries ................................. A-16
SECTION 4.02. Articles of Incorporation and Bylaws ................................. A-16
SECTION 4.03. Capitalization ....................................................... A-16
SECTION 4.04. Authority Relative to this Agreement ................................. A-17
SECTION 4.05. No Conflict; Required Filings and Consents ........................... A-17
SECTION 4.06. SEC Filings; Financial Statements .................................... A-18
SECTION 4.07. Absence of Certain Changes or Events ................................. A-18
SECTION 4.08. Title to Property .................................................... A-19
SECTION 4.09. Litigation ........................................................... A-19
SECTION 4.10. Information in Disclosure Documents .................................. A-19
SECTION 4.11. Fairness Opinion ..................................................... A-20
SECTION 4.12. Brokers .............................................................. A-20
SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement Amendment ........ A-20
SECTION 4.14. Conduct of Business .................................................. A-20
SECTION 4.15. Environment .......................................................... A-20
SECTION 4.16. Energy Regulatory Status ............................................. A-20
SECTION 4.17. Employee Benefit Plans; Labor Matters ................................ A-21
SECTION 4.18. Insurance ............................................................ A-22
SECTION 4.19. Taxes ................................................................ A-22
SECTION 4.20. Trademarks, Licenses, Patents and Copyrights ......................... A-23
SECTION 4.21. Related Party Transactions ........................................... A-23
SECTION 4.22. Status of Development and Construction Projects ...................... A-23
SECTION 4.23. Status of Operating Projects ......................................... A-23
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Acquisition Proposals ................................................ A-24
SECTION 5.02. Conduct of Business by the Parties Pending the Merger ................ A-24
SECTION 5.03. No Shopping .......................................................... A-26
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement/Proxy Statement ............................... A-27
SECTION 6.02. Stock Exchange Listing ............................................... A-27
SECTION 6.03. Additional Agreements ................................................ A-27
SECTION 6.04. Notification of Certain Matters ...................................... A-27
SECTION 6.05. Access to Information ................................................ A-27
SECTION 6.06. Public Announcements ................................................. A-28
SECTION 6.07. Best Efforts; Cooperation ............................................ A-28
SECTION 6.08. Agreement to Defend and Indemnify .................................... A-28
SECTION 6.09. Disposition of Litigation ............................................ A-29
SECTION 6.10. Employee Benefits .................................................... A-29
SECTION 6.11. Certain Action of Parent and Merger Sub .............................. A-30
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ----------------- --------------------------------------------------------------------- --------
<S> <C> <C>
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to Effect the Merger ......... A-30
SECTION 7.02. Additional Conditions to Obligations of the Company .................. A-30
SECTION 7.03. Additional Conditions to Obligations of Parent and Merger Sub ....... A-31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination .......................................................... A-31
SECTION 8.02. Effect of Termination ................................................ A-32
SECTION 8.03. Agreement Termination Fee ............................................ A-32
SECTION 8.04. Offer Fee ............................................................ A-32
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements .......... A-33
SECTION 9.02. Notices .............................................................. A-33
SECTION 9.03. Expenses ............................................................. A-34
SECTION 9.04. Certain Definitions .................................................. A-34
SECTION 9.05. Headings ............................................................. A-34
SECTION 9.06. Severability ......................................................... A-34
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries ....................... A-34
SECTION 9.08. Waiver ............................................................... A-34
SECTION 9.09. Amendment ............................................................ A-34
SECTION 9.10. Assignment ........................................................... A-34
SECTION 9.11. Governing Law ........................................................ A-35
SECTION 9.12. Counterparts ......................................................... A-35
Annex I ............................................................................ I-1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 5, 1994 (this
"Agreement"), among CALIFORNIA ENERGY COMPANY, INC., a Delaware corporation
("Parent"), CE ACQUISITION COMPANY, INC., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and MAGMA POWER COMPANY, a Nevada
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each approved the acquisition of the Company by Parent upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, it is proposed that Merger Sub will make
a cash tender offer (the "Offer") to acquire 12,400,000 shares of the issued
and outstanding common stock, $0.10 par value, of the Company, including the
associated Preferred Stock purchase rights (the "Rights") issued pursuant to
the Rights Agreement dated October 6, 1994 between the Company and Chemical
Trust Company of California, as Rights Agent (the "Rights Agreement") (the
"Company Common Stock"; all issued and outstanding shares of Company Common
Stock and the associated Rights being hereinafter collectively referred to as
the "Shares") for $39.00 per Share, or such higher price as may be paid in
the Offer (the "Per Share Cash Amount"), net to the seller in cash, subject
to (i) there being validly tendered and not withdrawn before the expiration
of the Offer that number of Shares which, together with Shares beneficially
owned by Merger Sub, represents at least a majority of the Shares outstanding
on a fully diluted basis (the "Minimum Tender Condition") and (ii) Merger Sub
having obtained sufficient financing to enable it to consummate the Offer
(the "Financing Condition");
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of the Company and Merger Sub have each approved the merger (the "Merger") of
Merger Sub with and into the Company following completion of the Offer in
accordance with the General Corporation Law of the State of Delaware
("Delaware Law") and the General Corporation Law of the State of Nevada
("Nevada Law") and upon the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, the Board of Directors of the Company has resolved to recommend
acceptance of the Offer and the Merger to the holders of Shares and has
determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE TENDER OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 hereof and none of the events
set forth in Annex I hereto shall have occurred or be existing, Parent shall
cause Merger Sub to, and Merger Sub shall, commence the Offer as promptly as
practicable, but in no event later than five business days after the date
hereof. The obligation of Parent to accept for payment any Shares tendered
shall be subject to the satisfaction of the conditions set forth in Annex I,
including the Minimum Tender Condition. Parent expressly reserves the right
to waive any such condition, to increase the price per Share payable in the
Offer, or to make any other changes in the terms and conditions of the Offer
(provided that no change may be made that decreases the price per Share
payable in the Offer or that imposes additional conditions to the Offer from
those set forth in Annex I hereto). Merger Sub covenants and agrees that,
subject to the terms and conditions of this Agreement, unless the Company
otherwise consents in writing, Merger Sub will accept for payment and pay for
Shares as soon as it is permitted to do so under applicable law. The Per
Share Cash Amount shall be net to the seller in cash, subject to reduction
only for any applicable Federal back-up withholding or stock transfer taxes
payable by the seller. The Company agrees that no Shares held by the Company
or any of its subsidiaries (as hereinafter defined) will be tendered pursuant
to the Offer.
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(b) The Offer shall be made by means of an offer to purchase (the "Offer
to Purchase") having the conditions and provisions set forth in Annex I
hereto. As soon as practicable on the date the Offer is commenced, Parent and
Merger Sub shall file with the Securities and Exchange Commission (the "SEC")
a Tender Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the Offer. The
Schedule 14D-1 will comply in all material respects with the provisions of,
and satisfy in all material respects the requirements of, such Schedule 14D-1
and all applicable Federal securities laws and will contain (including as an
exhibit) or incorporate by reference the Offer to Purchase (or portions
thereof) and forms of the related letter of transmittal (which documents,
together with any supplements or amendments thereto, and any other SEC
schedule or form that is filed in connection with the Offer and related
transactions, are referred to collectively herein as the "Offer Documents").
Each of Parent, Merger Sub and the Company represents and warrants that the
information provided and to be provided by it and/or by its auditors,
attorneys, financial advisors or other consultants or advisors specifically
for use in the Schedule 14D-1 and the Offer Documents on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders shall not contain 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 were made, not misleading. Each of Parent, Merger Sub and the
Company agrees promptly to correct any information provided by it for use in
the Schedule 14D-1 or the Offer Documents if and to the extent that it shall
have become false or misleading in any material respect and to supplement the
information provided by it specifically for use in the Schedule 14D-1 or the
Offer Documents to include any information that shall become necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and Parent and Merger Sub further agree
to take all steps necessary to cause the Schedule 14D-1, as so corrected or
supplemented, to be filed with the SEC and the Offer Documents, as so
corrected or supplemented, to be disseminated to holders of Shares, in each
case as and to the extent required by applicable Federal securities laws. The
Company and its counsel shall be given the right to review and comment on the
Schedule 14D-1 before filing with the SEC.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors
of the Company, at a meeting duly called and held on December 5, 1994, at
which a majority of the Directors were present, duly approved and adopted
this Agreement and the transactions contemplated hereby, including the Offer
and the Merger, recommended that the stockholders of the Company accept the
Offer and tender their Shares pursuant to the Offer, and determined that this
Agreement and the transactions contemplated hereby, including the Offer and
the Merger, are fair to and in the best interests of the stockholders of the
Company. The Company further represents that Goldman, Sachs & Co. ("Goldman
Sachs") has rendered to the Board of Directors of the Company its opinion as
of December 5, 1994, to the effect that the consideration to be received by
the stockholders of the Company pursuant to the Offer and the Merger is fair
to such stockholders (other than Parent and its affiliates).
(b) The Company hereby agrees to file with the SEC, as promptly as
practicable after the filing by Parent and Merger Sub of the Schedule 14D-1
with respect to the Offer, a Tender Offer Solicitation/ Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") that will comply in all material respects with
the provisions of all applicable Federal securities laws. The Company agrees
to mail such Schedule 14D-9 to the stockholders of the Company promptly after
the commencement of the Offer. The Schedule 14D-9 and the Offer Documents
shall contain the recommendations of the Board of Directors of the Company
described in Section 1.02(a) hereof. The Schedule 14D-9, on the date filed
with the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect
to written information supplied by Parent or Merger Sub specifically for
inclusion in the Schedule 14D-9. The Company agrees promptly to correct the
Schedule 14D-9 if and to the extent that it shall become false or misleading
in any material respect, and each of Parent and Merger Sub, with respect to
written information supplied by it specifically for use in the Schedule
14D-9, shall promptly notify the Company of any required corrections of such
information and cooperate with the Company with respect
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<PAGE>
to correcting such information and to supplement the information contained in
the Schedule 14D-9 to include any information that shall become necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Company shall take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and disseminated to the Company's stockholders to the extent required by
applicable Federal securities laws. Parent and Merger Sub, and their counsel,
shall be given an opportunity to review and comment on the Schedule 14D-9
before filing with the SEC.
(c) In connection with the Offer, the Company shall promptly upon
execution of this Agreement furnish Parent and Merger Sub with mailing labels
containing the names and addresses of all record holders of Shares and
security position listings of Shares held in stock depositories, each as of a
recent date, and shall promptly furnish Parent and Merger Sub with such
additional information, including updated lists of stockholders, mailing
labels and security position listings, and such other information and
assistance as Parent and Merger Sub or their agents may reasonably request
for the purpose of communicating the Offer to the record and beneficial
holders of Shares.
SECTION 1.03. Directors. (a) Promptly upon the purchase by Merger Sub of a
majority of the outstanding Shares pursuant to the Offer, and from time to
time thereafter as Shares are acquired by Merger Sub, Merger Sub shall be
entitled, subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934 (the "Exchange Act"), to designate such number of directors,
rounded to the nearest whole number (any number ending with .5 being rounded
to the next highest whole number), on the Board of Directors of the Company
as will give Merger Sub representation on the Board of Directors equal to
that number of directors which equals the product of the total number of
directors on the Board of Directors (giving effect to the directors appointed
or elected pursuant to this sentence and including current directors serving
as officers of the Company) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Merger Sub or any affiliate of Merger
Sub (including for purposes of this Section 1.03 such Shares as are accepted
for payment pursuant to the Offer, but excluding Shares held by the Company
or any of its affiliates) bears to the number of Shares outstanding, but in
no event less than a majority of the entire Board of Directors of the Company
(regardless of vacancies). At such times, the Company will also cause (i)
each committee of the Board of Directors, (ii) if requested by Merger Sub,
the board of directors of each of the Company's Subsidiaries (as defined
below) and (iii) if requested by Merger Sub, each committee of such board to
include persons designated by Merger Sub constituting the same percentage of
each such committee or board as Merger Sub's designees are of the Board of
Directors. The Company shall, upon request by Merger Sub, promptly increase
the size of the Board of Directors or exercise its best efforts to secure the
resignations of such number of directors as is necessary to enable Merger Sub
designees to be elected to the Board of Directors and shall cause Merger
Sub's designees to be so elected; provided, however, that such resignations
shall not cause the number of Disinterested Directors (as defined below) to
be less than two. Subject to applicable law, the Company shall promptly take
all action necessary pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in order to fulfill its obligations under this
Section 1.03 and shall include in the Schedule 14D-9 mailed to stockholders
promptly after the commencement of the Offer (or an amendment thereof or an
information statement pursuant to Rule 14f-1 if Merger Sub has not
theretofore designated directors) such information with respect to the
Company and its officers and directors as is required under Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.03.
Parent and Merger Sub will supply the Company and be solely responsible for
any information with respect to itself and its nominees, officers, directors
and affiliates required by Section 14(f) and Rule 14f-1.
(b) Following the election or appointment of Parent's designees pursuant
to this Section 1.03 and prior to the Effective Time, any amendment of this
Agreement or the Restated Articles of Incorporation or Restated Bylaws of the
Company, any termination of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the obligations or
other acts of Parent or Merger Sub or waiver of any of the Company's rights
hereunder, and any other consent or action by the Board of Directors
hereunder, will require the concurrence of a majority (which shall be at
least two) of the directors of the Company then in office who are not
designees of Parent or Merger Sub (the "Disinterested Directors").
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ARTICLE II
THE MERGER
SECTION 2.01. The Merger. At the Effective Time and subject to and upon
the terms and conditions of this Agreement, Delaware Law and Nevada Law,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger hereinafter sometimes is referred to as the "Surviving Corporation".
SECTION 2.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the
parties hereto shall cause the Merger to be consummated by filing this
Agreement or a Certificate of Merger with the Secretary of State of the State
of Delaware and the Secretary of State of the State of Nevada, in such form
as required by, and executed in accordance with the relevant provisions of,
Delaware Law and Nevada Law, respectively (the time of such later filing
being the "Effective Time"). Prior to such filings, a closing shall be held
at the offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East
53rd Street, New York, New York 10022, or such other place as the parties
shall agree, for the purpose of confirming the satisfaction or waiver of the
conditions set forth in Article VII.
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law
and Nevada Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.04. Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of either of the Company or Merger Sub
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of either the Company or
Merger Sub, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of each of such corporations or
otherwise, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets of the Surviving Corporation or
otherwise to carry out this Agreement.
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and
Officers. (a) Unless otherwise determined by Parent before the Effective
Time, at the Effective Time the Certificate of Incorporation of Merger Sub,
as in effect immediately before the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as
permitted by law and such Articles of Incorporation; provided, however, that
Article One of the Articles of Incorporation of the Surviving Corporation
shall be amended to read as follows: "FIRST: The name of the corporation is
Magma Power Company".
(b) The Bylaws of Merger Sub, as in effect immediately before the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as permitted by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
(c) The directors of Merger Sub immediately before the Effective Time will
be the initial directors of the Surviving Corporation, and the officers of
the Company immediately before the Effective Time will be the initial
officers of the Surviving Corporation, in each case until their successors
are elected or appointed and qualified. If, at the Effective Time, a vacancy
shall exist on the Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
law or the Bylaws of Merger Sub.
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SECTION 2.06. Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or
the holder of any of the following securities:
(a) All Shares which are held by the Company or any subsidiary of the
Company, and any Shares owned by Parent, Merger Sub or any other subsidiary
of Parent, shall cease to be outstanding, shall be canceled and retired
without payment of any consideration therefor and shall cease to exist.
(b) Subject to Section 2.09, each remaining outstanding Share shall be
converted in the Merger into the right to receive that amount of cash and
that number of shares of common stock, par value $0.0675 per share, of Parent
(the "Parent Common Stock") equal to, at the option of Parent, (i) the All
Cash Component Amount (as defined below), net in cash, without interest
thereon, or (ii) both (A) the Mixed Cash Component Amount (as defined below),
net in cash, without interest thereon, and (B) the number of fully paid and
nonassessable shares of Parent Common Stock equal to the quotient of (I)
$39.00 less (II) the Mixed Cash Component Amount divided by the Average
Closing Price (as defined below) (the All Cash Component Amount or (ii)(A)
and (ii)(B), collectively, as applicable, being the "Merger Consideration").
The "Mixed Cash Component Amount" shall mean an amount equal to the quotient
of (A) (x) $28.50 multiplied by the number of Shares outstanding at the
Effective Time less (y) $39.00 multiplied by the number of Shares owned by
Parent and any of its affiliates immediately prior to the Effective Time,
divided by (B) the number of Shares outstanding at the Effective Time (other
than Shares owned by Parent and any of its affiliates). The "All Cash
Component Amount" shall mean an amount equal to the quotient of (A) (x)
$38.75 multiplied by the number of Shares outstanding at the Effective Time
less (y) $39.00 multiplied by the number of Shares owned by Parent and any of
its affiliates immediately prior to the Effective Time, divided by (B) the
number of Shares outstanding at the Effective Time (other than Shares owned
by Parent and any of its affiliates). The "Average Closing Price" shall mean
the average closing price of Parent Common Stock on the New York Stock
Exchange (the "NYSE") during the 15 consecutive trading days ending on the
fifth business day prior to the Effective Time; provided, however, that if
such average closing price exceeds $18.73, the Average Closing Price shall be
$18.73, and if such average closing price is less than $14.27, the Average
Closing Price shall be $14.27.
(c) All Shares to be converted into the right to receive the Merger
Consideration pursuant to this Section 2.06 shall cease to be outstanding,
shall be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall thereafter cease to have any
rights with respect to such shares, except the right to receive for each of
the Shares, upon the surrender of such certificate in accordance with Section
2.08, the Merger Consideration and cash in lieu of fractional shares of
Parent Common Stock as contemplated by Section 2.09.
(d) Each issued and outstanding share of capital stock of Merger Sub shall
be converted into and become one fully paid and nonassessable share of common
stock, $.01 par value, of the Surviving Corporation.
SECTION 2.07. Dissenting Company Common Stock. (a) Notwithstanding any
provision of this Agreement to the contrary, any Shares held by a holder who
has demanded and perfected his demand for appraisal of his shares of Company
Common Stock in accordance with Nevada Law and as of the Effective Time has
neither effectively withdrawn nor lost his right to such appraisal
("Dissenting Shares") shall not be converted into or represent a right to
receive the Merger Consideration pursuant to Section 2.06(b), but the holder
thereof shall be entitled to only such rights as are granted by Nevada Law.
(b) Notwithstanding the provisions of subsection (a) of this Section 2.07,
if any holder of shares of Company Common Stock who demands appraisal of his
shares under Nevada Law shall effectively withdraw or lose (through failure
to perfect or otherwise) his right to appraisal, then, as of the Effective
Time or the occurrence of such event, whichever later occurs, such holder's
shares of Company Common Stock shall automatically be converted into and
represent only the right to receive the Merger Consideration as provided in
Section 2.06(b), without interest thereon, upon surrender of the certificate
or certificates representing such shares of Company Common Stock.
(c) The Company shall give Parent (i) prompt notice of any written demands
for appraisal or payment of the fair value of any Company Common Stock,
withdrawals of such demands, and any other
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instruments served pursuant to Nevada Law received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Nevada Law. The Company shall not voluntarily
make any payment with respect to any demands for appraisal and shall not,
except with the prior written consent of Parent, settle or offer to settle
any such demands.
SECTION 2.08. Surrender of Company Common Stock; Stock Transfer Books. (a)
Before the Effective Time, the Company and Parent shall designate a bank or
trust company to act as agent for the holders of Company Common Stock (the
"Exchange Agent") to receive the funds and securities necessary to make the
payments contemplated by Section 2.06. Such funds shall be invested by the
Exchange Agent as directed by the Surviving Corporation, provided that such
investments shall be in obligations of or guaranteed by the United States of
America or of any agency thereof and backed by the full faith and credit of
the United States of America, in commercial paper obligations rated A-1 or
P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit or
banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital,
surplus and undivided profits aggregating in excess of $200 million (based on
the most recent financial statements of such bank which are then publicly
available at the SEC or otherwise).
(b) Each holder of a certificate or certificates representing any
outstanding shares of Company Common Stock ("Certificates") canceled upon the
Merger pursuant to Section 2.06(b) may thereafter surrender such Certificate
or Certificates to the Exchange Agent, as agent for such holder, to effect
the surrender of such Certificate or Certificates on such holder's behalf for
a period ending one year after the Effective Time.
Any portion of the Merger Consideration which remains unclaimed by the
former stockholders of the Company for one year after the Effective Time
shall be delivered to Parent, upon demand of Parent. Parent agrees that
promptly after the Effective Time it shall cause the distribution to holders
of record of Company Common Stock as of the Effective Time appropriate
materials to facilitate such surrender, including (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender of Certificates for cancellation to the Exchange Agent, together
with such letter of transmittal duly executed and any other required
documents, the holder of such Certificates shall be entitled to receive for
each of the shares of Company Common Stock represented by such Certificates
the Merger Consideration and the Certificates so surrendered shall forthwith
be canceled. Until so surrendered, Certificates shall represent solely the
right to receive the Merger Consideration and any cash in lieu of fractional
shares of Parent Common Stock as contemplated by Section 2.09 with respect to
each of the shares contemplated thereby.
(c) If payment of the Merger Consideration in respect of canceled Shares
is to be made to a person other than the person in whose name a surrendered
Certificate or instrument is registered, it shall be a condition to such
payment that the Certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name other than that of the
registered holder of the Certificate or instrument surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not payable.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and there shall not be any
further registration of transfers of Shares thereafter on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration as provided in Section 2.06(b). No interest shall accrue or be
paid on any cash payable upon the surrender of a Certificate or Certificates
which immediately before the Effective Time represented outstanding shares of
Company Common Stock.
SECTION 2.09. No Fractional Shares. No Certificates or scrip representing
less than one share of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates representing shares
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of Company Common Stock pursuant to Section 2.06(b). In lieu of any such
fractional share, each holder of Shares who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to Section 2.06(b) shall be paid upon such
surrender cash (without interest) in an amount equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the aggregate
fractional Parent Common Stock issued pursuant to this Section 2.09. As soon
as practicable following the Effective Time the Exchange Agent shall
determine the excess of (i) the number of full shares of Parent Common Stock
delivered to the Exchange Agent by Parent over (ii) the aggregate number of
full shares of Parent Common Stock to be distributed to holders of Company
Common Stock (such excess being herein called the "Excess Shares"), and the
Exchange Agent, as agent for the former holders of Company Common Stock,
shall sell the Excess Shares at the prevailing prices on the NYSE. The sale
of the Excess Shares by the Exchange Agent shall be executed on the NYSE and
shall be executed in round lots to the extent practicable. The Exchange Agent
shall deduct from the proceeds of the sale of the Excess Shares all
commissions, transfer taxes and other reasonable out-of-pocket transaction
costs, including any expenses of the Exchange Agent, incurred in connection
with such sale of Excess Shares. Until the net proceeds of such sale have
been distributed to the former stockholders of the Company, the Exchange
Agent will hold such proceeds in trust for such former stockholders. As soon
as practicable after the determination of the amount of cash to be paid to
former stockholders of the Company in lieu of any fractional interests, the
Exchange Agent shall make available in accordance with this Agreement such
amounts to such former stockholders.
SECTION 2.10. Stock Options; Deferred Stock. Immediately prior to the
Effective Time, (a) each unexpired and unexercised option to purchase Shares
(each, a "Company Option"), under the Company's 1987 Stock Option Plan and
1994 Equity Participation Plan (collectively, the "Company Stock Option
Plans"), whether or not then exercisable, shall be cancelled by the Company,
and each holder of a cancelled Company Option shall be entitled to receive at
the Effective Time or as soon as practicable thereafter from the Company in
consideration for the cancellation of such Company Option an amount in cash
equal to the product of (i) the number of Shares previously subject to such
Company Option and (ii) the excess, if any, of the Per Share Cash Amount or,
if the election contemplated by Section 2.06(b)(i) has been made by Parent,
$38.75, over the exercise price per Share previously subject to such Company
Option, and (b) each outstanding unvested share of deferred stock under the
Company's 1994 Equity Participation Plan or otherwise identified on Schedule
4.03 (each, a "Deferred Share") shall be cancelled by the Company, and each
holder of a cancelled Deferred Share shall be entitled to receive at the
Effective Time or as soon as practicable thereafter from the Company in
consideration for the cancellation of such Deferred Share an amount in cash
equal to the Per Share Cash Amount or, if the election contemplated by
Section 2.06(b)(i) has been made by Parent, $38.75.
SECTION 2.11. Dividends; Transfer Taxes. No dividends or other
distributions that are declared or made on Parent Common Stock will be paid
to persons entitled to receive certificates representing Parent Common Stock
pursuant to this Agreement until such persons surrender their Certificates
representing Company Common Stock. Upon such surrender, there shall be paid
to the person in whose name the certificates representing such Parent Common
Stock shall be issued any dividends or other distributions that shall have
become payable with respect to such Parent Common Stock in respect of a
record date after the Effective Time. In no event shall the person entitled
to receive such dividends be entitled to receive interest on such dividends.
Neither the Exchange Agent nor any party hereto shall be liable to a holder
of Shares for any shares of Parent Common Stock or dividends thereon
delivered to a public official pursuant to any applicable escheat laws.
SECTION 2.12. Stockholders' Meetings. (a) The Company shall take all
action necessary, in accordance with applicable law and its Articles of
Incorporation and Bylaws, to convene a special meeting of the holders of
Shares (the "Company Meeting") as promptly as practicable after consummation
of the Offer for the purpose of considering and taking action upon this
Agreement and the Merger. The stockholder vote required for approval of the
Merger will be no greater than that set forth in Nevada Law. The Board of
Directors of the Company will recommend that holders of Shares vote in favor
of and approve the Merger. The Company will use its best efforts to solicit
from stockholders of the Company
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proxies in favor of the Merger and will take all other action necessary or,
in the reasonable opinion of Parent, advisable to secure any vote of
stockholders required by Nevada Law to effect the Merger. At the Company
Meeting, all of the Shares then owned by Parent, Merger Sub, or any other
subsidiary of Parent, or with respect to which Parent, Merger Sub, or any
other subsidiary of Parent holds the power to direct the voting, will be
voted in favor of approval of the Merger and adoption of this Agreement.
(b) Parent shall take all action necessary, unless Parent has elected the
All Cash Component under Section 2.06(b)(i), in accordance with applicable
law and its Certificate of Incorporation and Bylaws, to convene a special
meeting of the holders of Parent Common Stock (the "Parent Meeting") as
promptly as practicable after consummation of the Offer for the purpose of
considering and taking action to (i) authorize the issuance of Parent Common
Stock pursuant to the Merger under the applicable guidelines of the NYSE (the
"Parent Share Proposal") and (ii) authorize the increase of the authorized
Parent Common Stock from 60,000,000 shares to no more than 80,000,000 shares
or such greater number of shares as shall be required to issue the Parent
Common Stock in the Merger. The Board of Directors of Parent will (i)
recommend that holders of Parent Common Stock vote in favor of and approve
the Parent Share Proposal at the Parent Meeting and (ii) recommend that
holders of Parent Common Stock vote in favor of and approve an amendment to
its Certificate of Incorporation increasing the authorized Parent Common
Stock from 60,000,000 shares to no more than 80,000,000 shares or such
greater number of shares as shall be required to issue the Parent Common
Stock in the Merger (the "Charter Amendment"). Parent will use its reasonable
best efforts to solicit from stockholders of Parent proxies in favor of the
Parent Share Proposal and the Charter Amendment and will take all other
action necessary or, in the reasonable opinion of the Company, advisable to
secure any vote of stockholders required by Delaware Law to effect the
Merger.
SECTION 2.13. Board Nominees; Assistance in Consummation of the
Merger. (a) Parent will nominate and use its best efforts to cause up to two
nominees of the Company designated in writing to Parent prior to the closing
of the Merger to be elected or appointed as members of the Board of Directors
of Parent.
(b) Each of Parent, Merger Sub and the Company shall provide all
reasonable assistance to, and shall cooperate with, each other to bring about
the consummation of the Offer and the Merger as soon as possible in
accordance with the terms and conditions of this Agreement. Parent shall
cause Merger Sub to perform all of its obligations in connection with this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Except as set forth on the Parent Disclosure Schedule previously delivered
by Parent to the Company (the "Parent Disclosure Schedule"), Parent and
Merger Sub hereby jointly and severally represent and warrant to the Company
as follows:
SECTION 3.01. Corporate Organization; Subsidiaries. Each of Parent and the
Parent Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority and any
necessary governmental authority to own, operate or lease the properties that
it purports to own, operate or lease and to carry on its business as it is
now being conducted, and is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character
of its properties owned, operated or leased or the nature of its activities
makes such qualification necessary, except for such failure which, when taken
together with all other such failures, would not have a Material Adverse
Effect (as defined below) on Parent and Merger Sub. The term "Parent
Subsidiary" means any corporation, partnership, joint venture or other legal
entity of which Parent (either alone or through or together with any other
Parent Subsidiary) owns, directly or indirectly, 50% or more of the stock or
other equity interests, or owns, directly or indirectly, interests such that
the holders are generally entitled to vote for the election of 50% of the
board of directors or other governing body, of such corporation, partnership,
joint venture or other legal entity. When used in connection with Parent and
Merger Sub, the term "Material Adverse Effect" means any change or effect,
when taken together with all other adverse
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changes and effects relating to Parent or Merger Sub, which are not
individually or in the aggregate deemed to have a Material Adverse Effect,
that is or is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of Parent
and the Parent Subsidiaries taken as a whole; provided, however, that the
occurrence of any or all of the following shall not constitute a Material
Adverse Effect: (i) any change in any law applicable to Parent or any Parent
Subsidiary or by which any property or asset of Parent or any Parent
Subsidiary is bound, (ii) a failure to receive any contract for which Parent
or any Parent Subsidiary has submitted or will submit a competitive bid,
(iii) the loss of any contract or arrangement (whether by revocation, lapse
or invalidity) with respect to a project that Parent or a Parent Subsidiary
has under development other than any such loss resulting from a breach by
Parent of the representations and warranties set forth in Section 3.22 or
3.23 hereof, (iv) a failure to close any public or private financing of any
project in which Parent or any Parent Subsidiary owns a direct or indirect
interest or (v) the termination of the employment of any employee, officer,
director or consultant of Parent or any Parent Subsidiary.
SECTION 3.02. Certificate of Incorporation and Bylaws. Parent has
heretofore furnished to the Company a complete and correct copy of Parent's
and Merger Sub's Certificates of Incorporation and Bylaws, each as amended to
the date hereof. Such Certificates of Incorporation and Bylaws are in full
force and effect. Neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents.
SECTION 3.03. Capitalization. As of the date hereof, the authorized
capital stock of Parent consists of 60,000,000 shares of Parent Common Stock
and 1,000,000 shares of preferred stock ("Parent Preferred Stock"). As of
September 30, 1994, (i) 35,649,278 shares of Parent Common Stock were issued
and outstanding, all of which were validly issued, fully paid and
nonassessable and 3,816,686 shares of Parent Common Stock held in treasury,
(ii) 1,247 shares of Series C Redeemable Preferred Stock of Parent were
outstanding and 3,529,252 shares of Parent Common Stock reserved for issuance
upon conversion of such shares of Series C Redeemable Preferred Stock, (iii)
there were 3,541,166 shares of Parent Common Stock reserved for issuance
pursuant to options granted under Parent's 1986 Stock Option Plan (the
"Parent Stock Option Plan"), (iv) there were 6,064,154 shares of Parent
Common Stock reserved for issuance under options other than those granted
under the Parent Stock Option Plan, and (v) 4,444,444 shares of Parent Common
Stock reserved for issuance pursuant to the 5% Convertible Subordinated
Debentures due July 31, 2000 of Parent. There has been no material change in
the capitalization of Parent since September 30, 1994. All of the outstanding
shares of Parent Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable and free of preemptive rights or other
similar obligations. Except as set forth in this Section 3.03 or on Schedule
3.03, there are not, as of the date hereof, any outstanding or authorized
subscriptions, options, warrants, convertible securities, calls, rights,
commitments to issue or any other agreements of any character relating to the
issued or unissued capital stock or other securities of Parent to which
Parent is party or by which Parent is bound obligating Parent to issue,
deliver, or sell, or cause to be issued, delivered or sold, additional shares
of capital stock of Parent or obligating Parent to grant, extend or enter
into any subscription, option, warrant, call, right, commitment or other such
agreement. All the outstanding capital stock or partnership or other equity
interest of each of the Parent Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed on Schedule
3.01, is owned by Parent or a Parent Subsidiary free and clear of any liens,
security interests, pledges, agreements, claims, charges or encumbrances of
any nature whatsoever. There are no existing options, calls or commitments of
any character relating to the issued or unissued capital stock or other
securities of any Parent Subsidiary. Except for the Parent Subsidiaries and
except as previously disclosed in the Parent SEC Reports (as defined below),
Parent does not directly or indirectly own a 50% or greater equity interest
in any other corporation, partnership, joint venture or other business
association or entity.
SECTION 3.04. Authority Relative to this Agreement. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby (the
"Transactions") have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub and by Parent as the sole stockholder of
Merger
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Sub, and no other corporate proceeding is necessary for the execution and
delivery of this Agreement by Parent or Merger Sub, the performance by Parent
or Merger Sub of their obligations hereunder and the consummation by Parent
or Merger Sub of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Merger Sub and constitutes a
legal, valid and binding obligation of each, enforceable against each of them
in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub will not, (i)
conflict with or violate any law, regulation, court order, judgment or decree
applicable to Parent or any Parent Subsidiary or by which any of their
property is bound or affected, (ii) violate or conflict with either the
Certificate of Incorporation or Bylaws of either Parent or any Parent
Subsidiary, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or
result in the creation of a lien or encumbrance on any of the property or
assets of Parent or any Parent Subsidiary pursuant to, any contract,
instrument, permit, license or franchise to which Parent or any Parent
Subsidiary is a party or by which Parent or any Parent Subsidiary or any of
their property is bound or affected, except in the case of (i) or (iii) for
conflicts, violations, breaches or defaults that, in the aggregate, would not
have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act, "blue sky" laws of
various states, the New York Stock Exchange, Inc. and filing and recordation
of appropriate merger documents as required by Delaware Law and Nevada Law,
neither Parent nor Merger Sub is required to submit any notice, report or
other filing with any governmental authority, domestic or foreign, in
connection with the execution, delivery or performance of this Agreement or
the consummation of the transactions contemplated hereby. Except as
aforesaid, no waiver, consent, approval or authorization of any governmental
or regulatory authority, domestic or foreign, is required to be obtained or
made by either Parent or Merger Sub in connection with its execution,
delivery or performance of this Agreement.
SECTION 3.06. SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC since January
1, 1992, and has heretofore delivered (or made available) to the Company, 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 the Company's meetings of stockholders
(whether annual or special) held since January 1, 1992, and (iii) all other
reports or registration statements (including Quarterly Reports on Form 10-Q)
filed by Parent with the SEC since January 1, 1992 (collectively, the "Parent
SEC Reports"). The Parent 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 that they were
made, not misleading. No Parent Subsidiary is required to file any statements
or reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange
Act.
(b) The consolidated financial statements contained in the Parent SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Parent and the Parent Subsidiaries as at
the respective dates thereof and the consolidated results of operations and
changes in financial position of Parent and the Parent Subsidiaries for the
periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount.
(c) Except as reflected or reserved against in the consolidated financial
statements contained in the Parent SEC Reports, and except as set forth on
Schedule 3.06, Parent and the Parent Subsidiaries have no liabilities of any
nature (whether accrued, absolute, contingent or otherwise) that in the
aggregate could have a Material Adverse Effect or any bonds, debentures,
notes, letters of credit or other indebtedness (including guarantees) for any
amount greater than $1,000,000. Since September 30, 1994,
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neither Parent nor any of the Parent Subsidiaries has incurred any
liabilities material to Parent and the Parent Subsidiaries taken as a whole,
except (i) liabilities incurred in the ordinary course of business and
consistent with past practice, (ii) liabilities incurred in connection with
or as a result of the Offer or the Merger or (iii) liabilities disclosed on
Schedule 3.06.
SECTION 3.07. Absence of Certain Changes or Events. Since September 30,
1994, except as contemplated in this Agreement or as specifically disclosed
in the Parent SEC Reports or the Tender Offer Statement on Schedule 14D-1
that was originally filed by Parent and Merger Sub with the SEC on October 6,
1994 (as amended to the date hereof) (the "Previous 14D-1") or as appears on
Schedule 3.07, there has not been:
(a) any Material Adverse Effect;
(b) any redemption or other acquisition of Parent Common Stock by
Parent or any of the Parent Subsidiaries (other than pursuant to a plan of
repurchase under Rule 10b-18 of the Exchange Act) or any declaration or
payment of any dividend or other distribution in cash, stock or property
with respect to Parent Common Stock;
(c) any entry into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in
the ordinary course of business or as contemplated by this Agreement; or
(d) any change by Parent in accounting principles or methods except
insofar as such change may have been required by a change in generally
accepted accounting principles and disclosed in the Parent SEC Reports.
Since September 30, 1994, except as disclosed on Schedule 3.07, the Previous
14D-1 or in the Parent SEC Reports, Parent and the Parent Subsidiaries have
conducted their business only in the ordinary course and in a manner
consistent with past practice and have not made any material change in the
conduct of the business or operations of Parent and the Parent Subsidiaries
taken as a whole.
SECTION 3.08. Title to Property. Parent and the Parent Subsidiaries have
good and marketable title, or valid leasehold rights in the case of leased
property, to all real property and all personal property purported to be
owned or leased by them, except where the failure to have such title or
rights would not have a Material Adverse Effect.
SECTION 3.09. Litigation. Except as disclosed in the Parent SEC Reports,
the Previous 14D-1, or as disclosed on Schedule 3.09, there are no claims,
actions, suits, proceedings or investigations pending or, to the best
knowledge of Parent, threatened against Parent or any of the Parent
Subsidiaries, or any properties or rights of Parent or any of the Parent
Subsidiaries, before any court, administrative, governmental or regulatory
authority or body, domestic or foreign, which are reasonably likely, in the
aggregate, to have a Material Adverse Effect or would, and are reasonably
likely to, prevent or delay the performance of this Agreement. As of the date
hereof, neither Parent nor any of the Parent Subsidiaries nor any of their
property is subject to any order, judgment, injunction or decree having a
Material Adverse Effect.
SECTION 3.10. Financing Arrangements. Parent and Merger Sub have obtained
a commitment letter from Credit Suisse with respect to the financing for the
Offer and the Merger (the "Commitment Letter"). The Commitment Letter is in
full force and effect on the date of this Agreement, and Parent and Merger
Sub know of no reason why the financing contemplated by the Commitment Letter
will not be consummated in accordance with its terms.
SECTION 3.11. No Prior Activities. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby (including any financing), Merger Sub has not incurred
any obligations or liabilities, and has not engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
SECTION 3.12. Brokers. No broker, finder or investment banker (other than
Gleacher & Co. Inc. ("Gleacher") and Lehman Brothers Inc. ("Lehman
Brothers")) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Merger Sub.
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SECTION 3.13. Information in Disclosure Documents; Registration
Statement; Etc. None of the information supplied by Parent or Merger Sub for
inclusion in (i) the Registration Statement to be filed with the SEC by
Parent on Form S-4 under the Securities Act for the purpose of registering
the shares of Parent Common Stock to be issued in the Merger (the
"Registration Statement") and (ii) the joint prospectus/proxy statement of
the Company and Parent (the "Proxy Statement") required to be mailed to the
stockholders of the Company and Parent in connection with the Merger will, in
the case of the Proxy Statement or any amendments or supplements thereto, at
the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the Parent Meeting to be held in
connection with the Merger, or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, contain 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. The
Registration Statement will comply as to form in all material respects with
the provisions of the Securities Act, and the rules and regulations
promulgated thereunder. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
SECTION 3.14. Conduct of Business. Except as disclosed in Schedule 3.14
hereto, the business of Parent and each of the Parent Subsidiaries is not
being conducted in default or violation of any term, condition or provision
of (i) its respective Articles of Incorporation or Bylaws or similar
organizational documents, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease or other instrument or agreement of any kind to
which Parent or any of the Parent Subsidiaries is now a party or by which
Parent or any of the Parent Subsidiaries or any of their respective
properties or assets may be bound, or (iii) any Federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to Parent or any of the Parent
Subsidiaries, except, with respect to the foregoing clauses (ii) and (iii),
defaults or violations that would not, individually or in the aggregate, have
a Material Adverse Effect.
SECTION 3.15. Environment. (a) As used herein, the term "Environmental
Laws" means all Federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or industrial, toxic or hazardous substances or
wastes into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of chemicals, pollutants, contaminants, or industrial, toxic or
hazardous substances or wastes, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses, notices
or notice letters, orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder.
(b) Except as disclosed on Schedule 3.15 hereto, to the knowledge of
Parent there are, with respect to Parent or any of the Parent Subsidiaries,
or any real property currently or formerly owned, leased, or otherwise used
by Parent or any of the Parent Subsidiaries, no past or present violations of
Environmental Laws, releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law or other legal liability,
including, without limitation, liability under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") or
similar state or local laws, which liabilities, either individually or in the
aggregate, would have a Material Adverse Effect.
SECTION 3.16. Energy Regulatory Status. (a) Each of the operational
electric generation facilities ("Plants") owned in whole or part, directly or
indirectly, by: (i) Parent, or (ii) any legal entity in which Parent directly
or indirectly owns more than 50% of the voting stock or other equity
interest, including any partnership in which Parent has an interest, is a
"qualifying small power production facility" ("Small Power QF"), as such term
is defined in the Federal Power Act, as amended ("FPA"), and the regulations
thereunder, and has continuously been in compliance with the requirements for
being a Small Power QF since it commenced sales of electricity.
(b) The owner of each of the Plants under development by Parent or any
Parent Subsidiary and located in the United States will, no later than the
date operations commence, either qualify as a
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"qualifying small power producer" or an "exempt wholesale generator"
("EWOG"), as such terms are defined in FPA, the regulations under the FPA,
and the Public Utility Holding Company Act of 1935, as amended ("PUHCA").
(c) The owner of each of the Plants under development by Parent or any
Parent Subsidiary and located outside the United States will, no later than
the date operations commence, either qualify as an EWOG or a "foreign utility
company", as such term is defined under PUHCA and the regulations thereunder.
(d) Neither Parent nor any "affiliate" of Parent is a "public utility
company" or a "public utility holding company", as such terms are defined in
PUHCA and the regulations thereunder, a "public utility" as defined in the
FPA and the regulations thereunder, or subject to regulations by any state
public utilities commission or similar state regulatory body.
(e) 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 such
Plant, and each other entity constructing, owning or operating any of the
foregoing has obtained each required certificate or permit.
SECTION 3.17. Employee Benefit Plans; Labor Matters. (a) With respect to
each U.S. or foreign employee benefit plan, program, arrangement and contract
(including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and any executive compensation arrangement, whether or not
funded, maintained or contributed to by Parent or any Parent Subsidiary, or
with respect to which Parent or any Parent Subsidiary could incur liability
under Section 4069, 4212(c) or 4204 of ERISA, as well as any employee benefit
plan that is subject to Section 412 of the Code or Title IV of ERISA and
which is maintained or contributed to by any other trade or business (whether
or not incorporated) which is treated as a single employer with Parent under
Section 414(b), (c), (m) or (o) of the Code (each such trade or business
being referred to herein as a "Code Affiliate") (the "Parent Benefit Plans"),
Parent has made available to the Company a true and correct copy of (i) the
most recent annual report (Form 5500) filed with the Internal Revenue Service
(the "IRS"), (ii) such Parent Benefit Plan, (iii) each trust agreement
relating to such Parent Benefit Plan, (iv) the most recent summary plan
description for each Parent Benefit Plan for which a summary plan description
is required, (v) the most recent actuarial report or valuation relating to a
Parent Benefit Plan subject to Title IV of ERISA, if any, (vi) the most
recent determination letter, if any, issued by the IRS with respect to any
Parent Benefit Plan qualified under Section 401(a) of the Code and (vii) the
most recent annual and periodic accounting of related plan assets, if any.
(b) With respect to the Parent Benefit Plans, no event has occurred and,
to the knowledge of Parent, there exists no condition or set of
circumstances, in connection with which Parent or any Parent Subsidiary could
be subject to any liability under the terms of such Parent Benefit Plans,
ERISA, the Code or any other applicable Law which would have a Material
Adverse Effect. No claim has been asserted or, to the knowledge of Parent,
threatened, by the IRS, the Department of Labor or any participant of a
Parent Benefit Plan that Parent or any Parent Subsidiary has, with respect to
any Parent Benefit Plan, engaged in or been a party to any "prohibited
transaction," as such term is defined in Section 4975 of the Code and Section
406 of ERISA, which would result in the imposition of either a penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by section 4975
of the Code, in each case applicable to Parent, any Parent Subsidiary or any
Parent Benefit Plan. Each Parent Benefit Plan intended to qualify under
Section 401(a) of the Code does so qualify, and the trusts created thereunder
are exempt from tax under Section 501(a) of the Code, and each such Parent
Benefit Plan will be amended in the manner required by the Code by December
31, 1994, and has been or will be submitted to the IRS on or prior to March
31, 1995 for a determination letter confirming that such Parent Benefit Plan
meets the currently applicable requirements for qualification and exemption
from taxation under Section 401(a) and 501(a) of the Code. No Parent Benefit
Plan has plan assets invested in any insurance company which is or has been
in insolvency proceedings within the last 3 years. No Parent Benefit Plan
subject to Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in ERISA), whether or not waived. Neither Parent nor
any of the Parent Subsidiaries or Code Affiliates has at any time since 1987
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maintained or contributed to any Parent Benefit Plan, including without
limitation any "multiemployer plan" (as defined in Section 3(37) of ERISA),
which (i) is a "defined benefit plan" (as defined in Section 414(j) of the
Code) or (ii) is subject to Title IV of ERISA.
(c) Except as set forth in Schedule 3.17, neither Parent nor any Parent
Subsidiary is a party to any collective bargaining or other labor union
contract applicable to persons employed by Parent or any Parent Subsidiary,
no collective bargaining agreement is being negotiated by Parent or any
Parent Subsidiary and neither Parent nor any Parent Subsidiary knows of any
activities or proceedings of any labor union to organize any of their
respective employees. As of the date hereof, (i) Parent and all of the Parent
Subsidiaries are in compliance in all material respects with all applicable
laws relating to employment and employment practices, wages, hours, and terms
and conditions of employment, (ii) there are no material charges with respect
to or relating to Parent or any of the Parent Subsidiaries pending before the
Equal Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices, and (iii)
there is no labor dispute, strike or work stoppage against Parent or any
Parent Subsidiary pending or, to Parent's knowledge, threatened which may
interfere with the respective business activities of Parent or the Parent
Subsidiaries, except where such non-compliance, charge, dispute, strike or
work stoppage would not have a Material Adverse Effect. As of the date
hereof, to the knowledge of Parent, none of Parent or any Parent Subsidiary,
or their respective representatives or employees, has committed any unfair
labor practices in connection with the operation of the respective businesses
of Parent or the Parent Subsidiaries, and there is no charge or complaint
against Parent or the Parent Subsidiaries by the National Labor Relations
Board or any comparable state agency pending or threatened in writing, except
where such unfair labor practice, charge or complaint would not have a
Material Adverse Effect.
SECTION 3.18. Insurance. The insurance policies in force at the date
hereof, with respect to the assets, properties or operations of each of
Parent and the Parent Subsidiaries are set forth on Schedule 3.18 and are in
full force and effect with reputable insurers in such amounts and insure
against such losses and risks (including product liability) as are customary
to protect the properties and business of each of Parent and Parent
Subsidiaries.
SECTION 3.19. Taxes. (a) Except as set forth in Schedule 3.19, and except
as would not, either individually or in the aggregate, have a Material
Adverse Effect, (i) Parent and each of the Parent Subsidiaries have timely
filed with the appropriate governmental authorities all Tax Returns (as
defined below) required to be filed by or with respect to the Company and
each of the Subsidiaries or their respective operations or assets, and such
Tax Returns are true, correct and complete in all material respects and (ii)
all Taxes (as defined below) shown to be due on such Tax Returns, all Taxes
required to be paid on an estimated or installment basis, and all Taxes
required to be withheld with respect to the Parent or any of the Parent
Subsidiaries or their respective operations or assets have been timely paid
or, if applicable, withheld and paid to the appropriate taxing authority in
the manner provided by law, except in each case for such Taxes which are not
material in the aggregate.
(b) Neither Parent nor any of the Parent Subsidiaries has filed a consent
to the application of Section 341(f) of the Code.
(c) No indebtedness of the Parent or any of the Parent Subsidiaries is
"corporate acquisition indebtedness" within the meaning of Section 279(b) of
the Code.
(d) For purposes of this Agreement, "Taxes" means all taxes, charges,
fees, levies or other assessments imposed by any United States Federal, state
or local taxing authority or by any foreign taxing authority, including, but
not limited to, income, gross receipts, excise, property, sales, use,
transfer, payroll, license, ad valorem, value added, withholding, social
security, license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments), franchises,
estimated, severance, stamp, and other taxes (including any interest, fines,
penalties or additions attributable to or imposed on or with respect to any
such taxes, charges, fees, levies or other assessments).
(e) For purposes of this Agreement, "Tax Return" means any return, report,
information return or other document (including any related or supporting
information and, where applicable, profit and loss accounts and balance
sheets) with respect to Taxes.
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SECTION 3.20. Trademarks, Licenses, Patents and Copyrights. Except as set
forth on Schedule 3.20, Parent or the Parent Subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and proprietary
information used or held for use in connection with, and material to, its
business as currently being conducted and are unaware of any assertions or
claims challenging the validity of any of the foregoing which are reasonably
likely to have a Material Adverse Effect; and, to the best knowledge of
Parent, the conduct of Parent's business as now conducted or proposed to be
conducted does not and will not conflict with any patents, patent rights,
licenses, trademarks, trademark rights, trade names, trade name rights or
copyrights of others known to the Parent or the Parent Subsidiaries in any
way reasonably likely to have a Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to Parent or
any of the Parent Subsidiaries is known to Parent or any Parent Subsidiary
which is reasonably likely to have a Material Adverse Effect.
SECTION 3.21. Related Party Transactions. Except as is set forth in the
Parent SEC Reports and the Previous 14D-1, to the knowledge of Parent,
Schedule 3.21 sets forth the material transactions since September 1, 1994
between Parent and the Parent Subsidiaries on the one hand, and (i) an
officer or director of Parent or any of the Parent Subsidiaries, (ii) a
record or beneficial owner of five percent (5%) or more of the Parent Common
Stock, or (iii) an affiliate of any such officer, director or beneficial
owner, on the other hand, other than payment of compensation for services
rendered to the Parent and the Parent Subsidiaries in the ordinary course of
business.
SECTION 3.22. Status of Development and Construction Projects. To Parent's
knowledge, except as specifically disclosed on Schedule 3.22, the following
statements, as applicable, are true and correct as of the date hereof, with
respect to each of the following development and construction projects: Upper
Mahiao 120 MW and Mahanagdong 180 MW:
(i) There is no pending or threatened revocation or loss of such
project award, whether as a result of government action or otherwise;
(ii) The executed power sales contract and construction contract for
such project is in full force and effect and there is no oral or written
threat to its validity, whether as a result of government action or
otherwise;
(iii) For any project with an executed construction contract, the
estimated total capital cost for construction of such project (without
well-field development expenses), including any existing or expected
change orders, is set forth on Schedule 3.22;
(iv) The joint venture or partnership or similar agreements with
local partners or contractors are in full force and effect and the
Parent's percentage equity ownership pursuant to such contracts are as set
forth on Schedule 3.22, and there is no threat of loss or invalidity to
such contracts, whether as a result of consummating this transaction or
otherwise;
(v) The status of the financing and political risk insurance
arrangements for each such project is set forth on Schedule 3.22; and
(vi) Parent has not taken any actions which violate the Foreign
Corrupt Practices Act ("FCPA") and is not aware of any actions taken by
foreign Parent Subsidiaries or local partners which if taken by a U.S.
company would constitute a violation of the FCPA.
SECTION 3.23. Status of Operating Projects. To Parent's knowledge, as of
the date hereof, with respect to each operating project, except as set forth
on Schedule 3.23:
(i) Parent is not aware of any event or occurrence which would create
a material impairment to the operating performance or a material increase
in operating expenses or material non-compliance with regulatory or
contractual requirements;
(ii) Parent and any of the Parent Subsidiaries or joint ventures has
not changed in any material adverse respect such project's operating,
maintenance reserves or procedures; and
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(iii) Parent is not aware of any events which, with lapse of time or
otherwise, could reasonably be expected to result in a material impairment
to the project's operating performance or a material increase in operating
expenses or material non-compliance with regulatory or contractual
requirements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company Disclosure Schedule previously
delivered by the Company to Parent (the "Company Disclosure Schedule"), the
Company hereby represents and warrants to Parent and Merger Sub as follows:
SECTION 4.01. Corporate Organization; Subsidiaries. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and any material necessary
governmental authority to own, operate or lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character
of its properties owned, operated or leased or the nature of its activities
makes such qualification necessary, except for such failure which, when taken
together with all other such failures, would not have a Material Adverse
Effect (as defined below) on the Company. The term "Subsidiary" means any
corporation, partnership, joint venture or other legal entity of which the
Company or, if the context requires, the Surviving Corporation (either alone
or through or together with any other Subsidiary) owns, directly or
indirectly, 50% or more of the stock or other equity interests, or owns,
directly or indirectly, interests such that the holders are generally
entitled to vote for the election of 50% of the board of directors or other
governing body, of such corporation, partnership, joint venture or other
legal entity. When used in connection with the Company or any of its
Subsidiaries, the term "Material Adverse Effect" means any change or effect,
when taken together with all other adverse changes and effects relating to
the Company and its Subsidiaries, that is or is reasonably likely to be
materially adverse to the business, operations, properties, condition
(financial or otherwise), assets or liabilities (including, without
limitation, contingent liabilities) of the Company and the Subsidiaries taken
as a whole; provided, however, that the occurrence of any or all of the
following shall not constitute a Material Adverse Effect: (i) any change in
any law applicable to the Company or any Subsidiary or by which any property
or asset of the Company or any Subsidiary is bound, (ii) a failure to receive
any contract or award for which the Company or any Subsidiary has submitted
or will submit a competitive bid, (iii) the loss of any contract or
arrangement (whether by revocation, lapse or invalidity) with respect to a
project that the Company or any Subsidiary has under development, other than
any such loss related to the Malitbog project or Fish Lake project and other
than any such loss resulting from a breach by the Company of the
representations and warranties set forth in Sections 4.22 and 4.23 hereof,
(iv) an unfavorable ruling by the California Public Utilities Commission with
respect to the Company's California plants under the pending Biennial
Resource Plan Update, (v) a loss of, or unfavorable ruling in, the Company'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, (vi) a failure to close any
public or private financing of any project in which the Company or any
Subsidiary owns a direct or indirect interest (other than as a result of a
loss with respect to the Malitbog project or the Fish Lake project or as a
result of a breach by the Company of the representations and warranties set
forth in Section 4.22 or 4.23 hereof), or (vii) the termination of the
employment of any employee, officer, director or consultant of the Company or
any Subsidiary. A true and complete list of all the Subsidiaries, together
with the jurisdiction of incorporation or formation of each Subsidiary, is
set forth in Schedule 4.01 hereto.
SECTION 4.02. Articles of Incorporation and Bylaws. The Company has
heretofore furnished to Parent a complete and correct copy of the Articles of
Incorporation and Bylaws or equivalent organizational documents, each as
amended to the date hereof, of the Company, and the Company has
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made available to Parent such documents with respect to all Subsidiaries.
Such Articles of Incorporation, Bylaws and equivalent organizational
documents are in full force and effect. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents.
SECTION 4.03. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 30,000,000 shares of Company Common
Stock and 1,000,000 shares of preferred stock ("Company Preferred Stock"). As
of September 30, 1994, 24,042,915 shares of Company Common Stock were issued
and outstanding, all of which were validly issued, fully paid and
nonassessable, and no shares of Company Preferred Stock were outstanding. As
of December 1, 1994, there were 582,478 shares of Company Common Stock
reserved for issuance pursuant to options and deferred stock awards granted
under the Stock Option Plans or otherwise identified on Schedule 4.03, and
there were 996,943 shares of Company Common Stock reserved for future
issuance under the Stock Option Plans. There have been no material changes in
the capitalization of the Company since September 30, 1994. Schedule 4.03
separately identifies as of December 1, 1994 the option holders, the number
of shares subject to each option held, the exercise prices, vesting schedules
and expiration dates of the outstanding options granted under the Stock
Option Plans. All of the outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable and
free of preemptive rights or other similar obligations. Except as set forth
in this Section 4.03 or on Schedule 4.03, there are not, as of the date
hereof, any outstanding or authorized subscriptions, options, warrants,
convertible securities, calls, rights, commitments to issue or any other
agreements of any character relating to the issued or unissued capital stock
or other securities of the Company to which the Company is party or by which
the Company is bound obligating the Company to issue, deliver, or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
the Company or obligating the Company to grant, extend or enter into any
subscription, option, warrant, call, right, commitment or other such
agreement. All the outstanding capital stock or partnership or other equity
interest of each of the Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and, except as disclosed on Schedule 4.01, is
owned by the Company or a Subsidiary free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances of any nature
whatsoever. There are no existing options, calls or commitments of any
character relating to the issued or unissued capital stock or other
securities of any Subsidiary. Except for the Subsidiaries and except as
previously disclosed to Parent on the Disclosure Schedule and in the Company
SEC Reports (as defined below), the Company does not directly or indirectly
own a 50% or greater equity interest in any other corporation, partnership,
joint venture or other business association or entity.
SECTION 4.04. Authority Relative to this Agreement. The Company has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary stockholder approval of the Merger, to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Merger by the Company's stockholders in accordance with Nevada Law. This
Agreement has been duly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company, enforceable against it
in accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate any law, regulation, court order, judgment or decree applicable to
the Company or any of the Subsidiaries or by which its or any of their
property is bound or affected, (ii) violate or conflict with the Certificate
of Incorporation or Bylaws or equivalent organizational documents of the
Company or any Subsidiary, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination or cancellation
of, or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company or any of the Subsidiaries pursuant to,
any contract, instrument, permit, license or franchise to which the Company
or any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or its or any of their property is bound or affected, except as
set forth on Schedule 4.05 and except in the case of (i) or (iii) for
conflicts, violations, breaches or defaults which, in the aggregate, would
not have a Material Adverse Effect.
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(b) Except for applicable requirements, if any, of the Exchange Act and
filing and recordation of appropriate merger or other documents as required
by Nevada Law, and except for any notice, filings, authorizations, consents
or approvals which are required because of the regulatory status of the
Company or any of its Subsidiaries or facts specifically applicable to them,
and except as set forth on Schedule 4.05, the Company is not required to
submit any notice, report or other filing with any governmental authority,
domestic or foreign, in connection with the execution, delivery or
performance of this Agreement. Except as aforesaid, no waiver, consent,
approval or authorization of any governmental or regulatory authority,
domestic or foreign, is required to be obtained or made by the Company in
connection with its execution, delivery or performance of this Agreement.
SECTION 4.06. SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed with the SEC since
January 1, 1992, and has heretofore delivered (or made available) to Parent,
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 the Company's meetings of stockholders
(whether annual or special) held since January 1, 1992, and (iii) all other
reports or registration statements (including Quarterly Reports on Form 10-Q)
filed by the Company with the SEC since January 1, 1992 (collectively, the
"Company SEC Reports"). The Company 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 is required to file any statements or
reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the Company SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of operations and
changes in financial position of the Company and its Subsidiaries for the
periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount.
(c) Except as reflected or reserved against in the consolidated financial
statements contained in the Company SEC Reports, and except as set forth on
Schedule 4.06, the Company and its Subsidiaries have no liabilities of any
nature (whether accrued, absolute, contingent or otherwise) which in the
aggregate could have a Material Adverse Effect or any bonds, debentures,
notes, letters of credit or other indebtedness (including guarantees) for any
amount greater than $1,000,000. Since September 30, 1994, neither the Company
nor any of the Subsidiaries has incurred any liabilities material to the
Company and the Subsidiaries taken as a whole, except (i) liabilities
incurred in the ordinary course of business and consistent with past
practice, (ii) liabilities incurred in connection with or as a result of the
Offer or the Merger or (iii) liabilities disclosed on Schedule 4.06.
SECTION 4.07. Absence of Certain Changes or Events. Since September 30,
1994, except as contemplated in this Agreement or as specifically disclosed
in the Company SEC Reports or the Tender Offer Solicitation/Recommendation
Statement on Schedule 14D-9 that was originally filed by the Company with the
SEC on October 11, 1994 with respect to Parent's previous tender offer (as
amended to the date hereof) (the "Previous 14D-9"), or as appears on Schedule
4.07, there has not been:
(a) any Material Adverse Effect;
(b) any redemption or other acquisition of Company Common Stock by the
Company or any of the Subsidiaries or any declaration or payment of any
dividend or other distribution in cash, stock or property with respect to
Company Common Stock;
(c) any entry into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in
the ordinary course of business or as contemplated by this Agreement;
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(d) any transfer of, or rights granted under, any material leases,
licenses, agreements, patents, trademarks, trade names or copyrights other
than those transferred or granted in the ordinary course of business and
consistent with past practice;
(e) any mortgage, pledge, security interest or imposition of lien or
other encumbrance on any asset of the Company or any of the Subsidiaries
that when viewed in the aggregate with all such other encumbrances is
material to the business, financial condition or operations of the Company
and the Subsidiaries taken as a whole; or
(f) any change by the Company in accounting principles or methods
except insofar as such change may have been required by a change in
generally accepted accounting principles and disclosed in the Company SEC
Reports.
Since September 30, 1994, except as disclosed on Schedule 4.07, in the
Company SEC Reports or the Previous 14D-9, the Company and its Subsidiaries
have conducted their business only in the ordinary course and in a manner
consistent with past practice and have not made any material change in the
conduct of the business or operations of the Company and its Subsidiaries
taken as a whole. Without limiting the generality of the foregoing, the
Company has not, since such date, except for the contracts referred to in the
Company SEC Reports or as disclosed on Schedule 4.07 or in the Previous
14D-9, made any changes in executive compensation levels (other than
increases in the ordinary course of business and consistent with past
practice) or in the manner in which other employees of the Company or the
Subsidiaries are compensated, paid or agreed to pay any pension, retirement
allowance or other employee benefit not required or permitted by the terms of
any plan, agreement or arrangement existing on such date to any director,
officer or employee, whether past or present, or committed itself to any
collective bargaining agreement (except for renewals of existing collective
bargaining agreements) or to any additional pension, profit-sharing, bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or to any employment or
consulting agreement with or for the benefit of any person, or to amend any
of such plans or any of such agreements in existence on such date.
SECTION 4.08. Title to Property. The Company and its Subsidiaries have
good and marketable title, or valid leasehold rights in the case of leased
property, to all real property and all personal property purported to be
owned or leased by them, except where the failure to have such title or right
would not have a Material Adverse Effect. There are no material mechanics',
materialmen's, laborers', employees', suppliers' or other liens arising by
operation of law on any of the Company's properties.
SECTION 4.09. Litigation. Except as disclosed in the Company SEC Reports,
the Previous 14D-9 or as disclosed on Schedule 4.09, there are no claims,
actions, suits, proceedings or investigations pending or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, before any court, administrative, governmental or regulatory
authority or body, domestic or foreign, which are reasonably likely, in the
aggregate, to have a Material Adverse Effect or would, and are reasonably
likely to, prevent or delay the performance of this Agreement. As of the date
hereof, neither the Company nor any of its Subsidiaries nor any of their
property is subject toany order, judgment, injunction or decree, having a
Material Adverse Effect.
SECTION 4.10. Information in Disclosure Documents. None of the information
with respect to the Company or its Subsidiaries to be included or
incorporated by reference in the Proxy Statement or the Registration
Statement will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and
any amendments or supplements thereto, and at the time of the Company Meeting
to be held in connection with the Merger, or, in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time,
contain 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. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
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SECTION 4.11. Fairness Opinion. The Company has received the opinion of
Goldman Sachs, to the effect that the consideration to be received by the
Company's stockholders pursuant to the Offer and the Merger is fair to the
stockholders of the Company (other than Parent and its affiliates).
SECTION 4.12. Brokers. No broker, finder or investment banker (other than
Goldman Sachs) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Parent true and complete information concerning the
financial arrangements between the Company and Goldman Sachs, pursuant to
which such firm would be entitled to any payment as a result of the
transactions contemplated hereunder.
SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement
Amendment. (a) As of the date hereof and at all times on or prior to the
Effective Time, Sections 78.378 through 78.3793, inclusive, and Sections
78.411 through 78.444, inclusive, of Nevada Law are, and shall be,
inapplicable to the Offer, the Merger and the transactions contemplated by
this Agreement including, without limitation, the pledge of the shares of
Company Common Stock acquired in the Offer to the lending institutions
providing the financing for the Offer, and the transfer of such shares upon
the exercise of remedies under the applicable agreements. The Company has
heretofore delivered to Parent a complete and correct copy of the resolutions
of the Board of Directors of the Company to the effect that such sections of
Nevada Law are, and shall be, inapplicable to the Offer, the Merger and the
transactions contemplated by this Agreement.
(b) The Board of Directors of the Company has taken all necessary action
with respect to the Rights Agreement, such that none of the execution or
delivery of this Agreement, the purchase of Shares pursuant to the Offer, the
exchange of the Shares for the shares of Parent Common Stock and cash in
accordance with this Agreement or any transaction contemplated by this
agreement will cause (A) the rights (the "Rights") issued pursuant to the
Rights Agreement to become exercisable under the Rights Agreement, (B)
Parent, Merger Sub and any of their associates or affiliates (as such terms
are defined in the Rights Agreement) to be deemed an "Acquiring Person" (as
defined in the Rights Agreement), or (C) the "Stock Acquisition Date" or
"Distribution Date" (as such terms are defined in the Rights Agreement) to
occur upon any such event.
SECTION 4.14. Conduct of Business. Except as disclosed in Schedule 4.14
hereto, the business of the Company and each of the Subsidiaries is not being
conducted in default or violation of any term, condition or provision of (i)
its respective Articles of Incorporation or Bylaws or similar organizational
documents, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease or other instrument or agreement of any kind to which the Company or
any of the Subsidiaries is now a party or by which the Company or any of the
Subsidiaries or any of their respective properties or assets may be bound, or
(iii) any Federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to the
Company or any of the Subsidiaries, except, with respect to the foregoing
clauses (ii) and (iii), defaults or violations that would not, individually
or in the aggregate, have a Material Adverse Effect.
SECTION 4.15. Environment. Except as disclosed on Schedule 4.15 hereto, to
the knowledge of the Company, there are, with respect to the Company or any
of its Subsidiaries, or any real property currently or formerly owned,
leased, or otherwise used by the Company or any of its Subsidiaries, no past
or present violations of Environmental Laws, releases of any material into
the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
or other legal liability, including, without limitation, liability under
CERCLA or similar state or local laws, which liabilities, either individually
or in the aggregate, would have a Material Adverse Effect.
SECTION 4.16. Energy Regulatory Status. (a) Each of the Plants owned in
whole or part, directly or indirectly, by: (i) the Company or (ii) any legal
entity in which the Company directly or indirectly owns 50% or greater of the
voting stock or other equity interest, including any partnership in which the
Company has an interest, is a Small Power QF, as such term is defined in the
FPA, and the regulations thereunder, and has continuously been in compliance
with the requirements for being a Small Power QF since it commenced sales of
electricity.
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(b) The owner of each of the Plants under development by the Company or
any Subsidiary and located in the United States will, no later than the date
operations commence, either qualify as a "qualifying small power producer" or
an EWOG, as such terms are defined in the FPA, the regulations under the FPA,
and the PUHCA.
(c) The owner of each of the Plants under development by the Company or
any Subsidiary and located outside the United States will, no later than the
date operations commence, either qualify as an EWOG or a "foreign utility
company", as such term is defined under PUHCA and the regulations thereunder.
(d) Neither the Company nor any "affiliate" of the Company is a "public
utility company" or a "public utility holding company", as such terms are
defined in PUHCA and the regulations thereunder, a "public utility" as
defined in the FPA and the regulations thereunder, or subject to regulations
by any state public utilities commission or similar state regulatory body.
(e) 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.
SECTION 4.17. Employee Benefit Plans; Labor Matters. (a) With respect to
each U.S. or foreign employee benefit plan, program, arrangement and contract
(including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of ERISA) and any executive compensation arrangement, whether or
not funded, maintained or contributed to by the Company or any of its
Subsidiaries, or with respect to which the Company or any of its Subsidiaries
could incur liability under Section 4069, 4212(c) or 4204 of ERISA, as well
as any employee benefit plan that is subject to Section 412 of the Code or
Title IV of ERISA and which is maintained or contributed to by any other
trade or business (whether or not incorporated) which is treated as a single
employer with the Company under Section 414(b), (c), (m) or (o) of the Code
(each such trade or business being referred to herein as a "Code Affiliate")
(the "Company Benefit Plans"), the Company has made available to Parent a
true and correct copy of (i) the most recent annual report (Form 5500) filed
with the IRS, (ii) such Company Benefit Plan, (iii) each trust agreement
relating to such Company Benefit Plan, (iv) the most recent summary plan
description for each Company Benefit Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Company Benefit Plan subject to Title IV of ERISA, if any, (vi)
the most recent determination letter, if any, issued by the IRS with respect
to any Company Benefit Plan qualified under Section 401(a) of the Code and
(vii) the most recent annual and periodic accounting of related plan assets,
if any.
(b) With respect to the Company Benefit Plans, no event has occurred and,
to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any of its Subsidiaries
could be subject to any liability under the terms of such Company Benefit
Plans, ERISA, the Code or any other applicable Law which would have a
Material Adverse Effect. No claim has been asserted, or, to the knowledge of
the Company, threatened by the IRS, the Department of Labor or any
participant of a Company Benefit Plan that the Company or any of the
Subsidiaries has, with respect to any Company Benefit Plan, engaged in or
been a party to any "prohibited transaction", as such term is defined in
Section 4975 of the Code and Section 406 of ERISA, which could result in the
imposition of either a penalty assessed pursuant to Section 502 of ERISA or a
tax imposed by Section 4975 of the Code, in each case applicable to the
Company, any Subsidiary or any Company Benefit Plan. Each Company Benefit
Plan intended to qualify under Section 401(a) of the Code does so qualify,
and the trusts created thereunder are exempt from tax under Section 501(a) of
the Code, and each such Company Benefit Plan will be amended in the manner
required by the Code by December 31, 1994, and has been or will be submitted
to the IRS on or prior to March 31, 1995 for a determination letter
confirming that such Company Benefit Plan meets the currently applicable
requirements for qualification and exemption from taxation under Sections
401(a) and 501(a) of the Code. No Company Benefit Plan has plan assets
invested in any insurance company which is or has been in insolvency
proceedings within the last 3 years. No Company Benefit Plan subject to
Section 412 of the Code has incurred any "accumulated funding
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deficiency" (as defined in ERISA), whether or not waived. Neither the Company
nor any of its Subsidiaries or Code Affiliates has at any time since 1987
maintained or contributed to any Company Benefit Plan, including without
limitation any "multiemployer plan" (as defined in Section 3(37) of ERISA),
which (i) is a "defined benefit plan", (as defined in Section 414(j) of the
Code) or (ii) is subject to Title IV of ERISA.
(c) Except as set forth in Schedule 4.17, (i) neither the Company nor any
of its Subsidiaries is a party to any collective bargaining or other labor
union contract applicable to persons employed by the Company or its
Subsidiaries, (ii) no collective bargaining agreement is being negotiated by
the Company or any of its Subsidiaries and (iii) neither the Company nor any
of its Subsidiaries knows of any activities or proceedings of any labor union
to organize any of their respective employees. As of the date hereof, the
Company and all of its Subsidiaries are in compliance in all material
respects with all applicable laws relating to employment and employment
practices, wages, hours, and terms and conditions of employment, there are no
material charges with respect to or relating to the Company or any of its
Subsidiaries pending before the Equal Employment Opportunity Commission or
any state, local or foreign agency responsible for the prevention of unlawful
employment practices, and there is no labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries pending or, to the Company's
knowledge, threatened which may interfere with the respective business
activities of the Company or its Subsidiaries, except where such
noncompliance, charge, dispute, strike or work stoppage would not have a
Material Adverse Effect. As of the date hereof, to the knowledge of the
Company, none of the Company or any of its Subsidiaries, or their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company or
its Subsidiaries, and there is no charge or complaint against the Company or
its Subsidiaries by the National Labor Relations Board or any comparable
state agency pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have a Material Adverse Effect.
(d) The Company has made available to Parent (i) copies of all employment
agreements with officers of the Company and its Subsidiaries; (ii) copies of
all severance agreements, programs and policies of the Company with or
relating to its employees; and (iii) copies of all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change in control provisions (which plans, programs,
agreements and arrangements are set forth in Schedule 4.17 or have been
disclosed in the Company SEC Reports or the Previous 14D-9).
(e) Except as provided in Schedule 4.17 or as otherwise required by Law,
no Company Benefit Plan provides retiree medical or retiree life insurance
benefits to any person.
SECTION 4.18. Insurance. The insurance policies in force at the date
hereof, with respect to the assets, properties or operations of each of the
Company and the Subsidiaries are set forth on Schedule 4.18 and are in full
force and effect with reputable insurers in such amounts and insure against
such losses and risks (including product liability) as are customary to
protect the properties and businesses of each of the Company and the
Subsidiaries.
SECTION 4.19. Taxes. (a) Except as set forth in Schedule 4.19, and except
as would not, either individually or in the aggregate, have a Material
Adverse Effect, (i) the Company and each of the Subsidiaries have timely
filed with the appropriate governmental authorities all Tax Returns (as
defined below) required to be filed by or with respect to the Company and
each of the Subsidiaries or their respective operations or assets, and such
Tax Returns are true, correct and complete in all material respects and (ii)
all Taxes shown to be due on such Tax Returns and all Taxes required to be
withheld with respect to the Company or any of the Subsidiaries or their
respective operations or assets have been timely paid or, if applicable,
withheld and paid to the appropriate taxing authority in the manner provided
by law, except in each case for such Taxes which are not material in the
aggregate.
(b) Neither the Company nor any of the Subsidiaries has filed a consent to
the application of Section 341(f) of the Code.
(c) Except as set forth on Schedule 4.19, no property of either of the
Company or any of the Subsidiaries is "tax exempt use property" within the
meaning of Section 168(h) of the Code or property
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that either of the Company or any of the Subsidiaries will be required to
treat as being owned by another person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, in effect immediately before the
enactment of the Tax Reform Act of 1986.
SECTION 4.20. Trademarks, Licenses, Patents and Copyrights. Except as set
forth on Schedule 4.20, the Company or the Subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and proprietary
information used or held for use in connection with, and material to, its
business as currently being conducted and are unaware of any assertions or
claims challenging the validity of any of the foregoing which are reasonably
likely to have a Material Adverse Effect; and, to the best knowledge of the
Company, the conduct of the Company's business as now conducted or proposed
to be conducted does not and will not conflict with any patents, patent
rights, licenses, trademarks, trademark rights, trade names, trade name
rights or copyrights of others known to the Company or the Subsidiaries in
any way reasonably likely to have a Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to the
Company or any of the Subsidiaries is known to the Company or any Subsidiary
which is reasonably likely to have a Material Adverse Effect.
SECTION 4.21. Related Party Transactions. Except as is set forth in the
Company SEC Reports or in the Previous 14D-9, to the Company's knowledge,
Schedule 4.21 sets forth the material transaction since September 1, 1994
between the Company and its Subsidiaries, on the one hand, and (i) an officer
or director of the Company or any of its Subsidiaries, (ii) a record or
beneficial owner of five percent (5%) or more of Company Common Stock, or
(iii) an affiliate of any such officer, director or beneficial owner, on the
other hand, other than payment of compensation for services rendered to the
Company and its Subsidiaries in the ordinary course of business.
SECTION 4.22. Status of Development and Construction Projects. To the
Company's knowledge, except as specifically disclosed on Schedule 4.22, the
following statements, as applicable, are true and correct as of the date
hereof with respect to each of the following development and construction
projects: (Malitbog 231 MW, Alto Peak 70 MW, Fish Lake 16 MW and 20MW Salton
Sea Unit 1 expansion):
(i) There is no pending or threatened revocation or loss of such
project award, whether as a result of government action or otherwise;
(ii) The executed power sales contract and construction contract for
such project is in full force and effect and there is no oral or written
threat to its validity, whether as a result of government action or
otherwise;
(iii) For any project with an executed construction contract, the
estimated total capital cost for construction of such project (without
well-field development expenses), including any existing or expected
change orders is set forth on Schedule 4.22;
(iv) The joint venture or partnership or similar agreements with
local partners or contractors are in full force and effect, and the
Company's percentage equity ownership pursuant to such contracts is as set
forth on Schedule 4.22, and there is no threat of loss or invalidity to
such contracts, whether as a result of consummating this transaction or
otherwise;
(v) The status of the financing and political risk insurance
arrangements for each such project is set forth on Schedule 4.22; and
(vi) The Company has not taken any actions which violate the FCPA and
is not aware of any actions taken by foreign Subsidiaries or local
partners which if taken by a U.S. company would constitute a violation of
the FCPA.
SECTION 4.23. Status of Operating Projects. With respect to each operating
project, except as set forth on Schedule 4.23:
(i) The Company is not aware of any event or occurrence which would
create a material impairment to the operating performance or a material
increase in operating expenses or material non-compliance with regulatory
or contractual requirements;
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(ii) The Company and any of its Subsidiaries or joint ventures have
not changed in any material adverse respect such project's operating,
maintenance reserves or procedures; and
(iii) The Company is not aware of any events which, with lapse of
time or otherwise, could reasonably be expected to result in a material
impairment to the project's operating performance or a material increase
in operating expenses or material non-compliance with regulatory or
contractual requirements.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Acquisition Proposals. The Company will notify Parent
immediately if any inquiries or proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated
or continued with the Company, in each case in connection with any
acquisition, business combination or purchase of all or any significant
portion of the assets of, or any equity interest in, the Company or any
Subsidiary. The Company shall provide a copy of any such written inquiries or
proposals to Parent immediately after receipt thereof and thereafter keep
Parent and Merger Sub promptly advised of any development with respect
thereto.
SECTION 5.02. Conduct of Business by the Parties Pending the Merger. (I)
The Company covenants and agrees that, between the date of this Agreement and
the Effective Time, unless Parent shall otherwise consent in writing and
except as is otherwise permitted hereby, the businesses of the Company and
its Subsidiaries shall be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company will
use its best efforts to preserve substantially intact its business
organization, to keep available the services of its present officers,
employees and consultants and to preserve its present relationships with
customers, suppliers and other persons with which it or any of its
subsidiaries has significant business relations. By way of amplification and
not limitation, except as contemplated by this Agreement, neither the Company
nor any of its Subsidiaries shall, between the date of this Agreement and the
Effective Time, directly or indirectly, do any of the following without the
prior written consent of Parent:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of its or its subsidiaries' capital stock of
any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of its or its subsidiaries'
capital stock, or any other ownership interest (except with respect to
Company Common Stock previously reserved for issuance as disclosed in
Section 4.03 hereof); (ii) amend or propose to amend its articles of
incorporation or bylaws or equivalent organizational documents; (iii)
split, combine or reclassify any of its outstanding common stock, or
declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to the common stock; (iv)
redeem, purchase or otherwise acquire or offer to redeem, purchase or
otherwise acquire any shares of its capital stock, except in the
performance of its obligations under existing employee plans; or (v)
authorize or propose or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section
5.02(I)(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock,
partnership interests or assets) any corporation, partnership or other
business organization or division thereof or any other interests in
operating properties; (ii) except in the ordinary course of business and
in a manner consistent with past practices, and except as set forth on
Schedule 5.02(I)(b), sell, pledge, lease, transfer, dispose of, or
encumber or authorize or propose the sale, pledge, lease, transfer
disposition or encumbrance of any of its or its subsidiaries' assets
(including intangible assets); (iii) create, incur, assume or guarantee
any indebtedness or other similar obligation, or enter into any contract
or agreement, except in the ordinary course of business and consistent
with past practice, and except as set forth on Schedule 5.02(I)(b); (iv)
enter into any new line of business or make any bid or enter into any
commitment in respect of any new or proposed projects; (v) prepay or
refinance any part of the principal or interest of any existing
indebtedness before the due date thereof; (vi) assume, guarantee,
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endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or
entity, except for endorsements in the ordinary course of business in
connection with the deposit of items for collection; (vii) make any loans,
advances or capital contributions to or investments in any person or
entity; (viii) waive, release, grant or transfer any rights of value or
modify or change in any material respect any existing license, material
lease or commitment; (ix) make or commit to or guarantee any single
capital expenditure or obligations which are not consistent with past
practice and currently budgeted; or (x) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters
set forth in this Section 5.02(I)(b);
(c) take any action other than in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to the grant of any severance or
termination pay (otherwise than pursuant to policies of the Company or any
of its Subsidiaries in effect on November 30, 1994) or with respect to any
increase of benefits payable under its severance or termination pay
policies in effect on November 30, 1994;
(d) make any payments (except in the ordinary course of business and
in amounts and in a manner consistent with past practice) under any of its
employee plans to any of its or its subsidiaries' employees, independent
contractors or consultants, enter into any new employee plan, any new
employment or consulting agreement, grant or establish any new awards
under such plan or agreement, or adopt or otherwise amend any of the
foregoing;
(e) take any action except in the ordinary course of business and in
a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures
(including without limitation its procedures with respect to the payment
of accounts payable);
(f) before the purchase of Company Common Stock pursuant to the Offer
and other than pursuant to this Agreement, take any action to cause the
shares of its common stock to cease to be listed on the Nasdaq National
Market;
(g) cause or permit any of their current insurance (or reinsurance)
policies to be cancelled or terminated or any of the coverage thereunder
to lapse, unless forthwith upon notice of such termination, cancellation
or lapse, the Company or such Subsidiary used its best efforts to obtain
commercially reasonable replacement policies from the same or comparable
insurers providing coverage which is the same as or comparable to that
provided under the cancelled, terminated or lapsed policies;
(h) enter into any agreement or transaction with any affiliate of the
Company upon terms and conditions less favorable to the Company or such
affiliate than could be obtained on an arm's length basis, except for
agreements or transactions in the ordinary course of business and
consistent with past practice;
(i) settle any material pending litigation; or
(j) enter into any oral or written agreement, contract, commitment,
arrangement or understanding with respect to any of the foregoing.
Notwithstanding any other term or provision of this Section 5.02(I):
(i) the Company may close the financing of its Maltibog project
without the prior consent of Parent provided that Parent has been given
the opportunity to review the relevant financing documents and Company has
given Parent at least two days' prior notice of the anticipated closing
date;
(ii) the Company may make and commit to ordinary course budgeted
operational capital and other expenditures relating to projects in
operation or construction without the consent of Parent;
(iii) the Company may make planned capital and operational
expenditures with respect to its Maltibog project, without the consent of
Parent;
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(iv) the Company will not make any capital or other expenditures in
excess of $500,000 in the aggregate with respect to its Nevada Power
Pumped Storage contract, its Alto Peak contract and any other contract
related to a development project without prior consultation with Parent
and Parent's consent;
(v) the Company may honor all existing contractual obligations
relating to projects in operation or construction without the consent of
Parent; and
(vi) the Company will not incur any additional indebtedness (secured
or unsecured) or make new project or capital commitments in excess of
$1,000,000 without prior consultation with Parent and Parent's consent.
(II) Parent covenants and agrees that, between the date of this Agreement
and the Effective Time (unless the election contemplated by Section
2.06(b)(i) has been made), unless the Company shall otherwise consent in
writing and except as is otherwise permitted hereby, neither Parent nor any
of the Parent Subsidiaries shall, directly or indirectly, do any of the
following:
(a) (i) issue or sell, or propose the issuance or sale of, any shares
of its or its subsidiaries' capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire
any shares of its or its subsidiaries' capital stock, or any other
ownership interest (except with respect to Parent Common Stock previously
reserved for issuance as disclosed in Section 3.03 hereof) if (A) the
proceeds of any such issuance or sale ("Proceeds") exceed $50,000,000, and
(B) such Proceeds are not applied, if necessary, so as to allow Parent to
exercise the election contemplated by Section 2.06(b)(i); (ii) split,
combine or reclassify any of its outstanding common stock, or declare, set
aside or pay any dividend or distribution payable in cash, stock, property
or otherwise with respect to the common stock; (iii) redeem, purchase or
otherwise acquire or offer to redeem, purchase or otherwise acquire any
shares of its capital stock, except in the performance of its obligations
under existing employee plans or pursuant to a repurchase program under
Rule 10b-18 promulgated under the Exchange Act; or (iv) authorize or
propose or enter into any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this Section 5.02(II)(a);
(b) in the case of Parent, merge or consolidate with or into another
person or engage in a recapitalization or other similar extraordinary
business transaction;
(c) make any material change in accounting policies, other than as
required by generally accepted accounting principles; or
(d) enter into any oral or written agreement, contract, commitment,
arrangement or understanding with respect to any of the foregoing.
SECTION 5.03. No Shopping. The Company and its Subsidiaries will not,
directly or indirectly, through any officer, director, agent, financial
adviser or otherwise, solicit, initiate or encourage submission of proposals
or offers from any person relating to any Competing Transaction (as defined
below), or participate in any negotiations regarding, or furnish to any other
person any information (except for information which has been previously
publicly disseminated by the Company in the ordinary course of business) with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to do
or seek any of the foregoing. Notwithstanding the foregoing, the parties
hereby agree that the Board of Directors of the Company may (i) review and
act upon (which actions may include, without limitation, providing
confidential information, negotiating a transaction and entering into an
agreement for a transaction) an unsolicited proposal by any other person
relating to any of the transactions referred to in the preceding sentence, if
the Board of Directors determines in good faith, after consultation with and
based upon the advice of its financial and legal advisors, that failing to
review and act upon such proposal would constitute a breach of fiduciary duty
and (ii) comply with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer, and such review, conduct or compliance
will not violate this Section 5.03. For purposes of this Agreement,
"Competing Transaction" shall mean any of the following involving the Company
or any Subsidiary: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 50% or more
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of the assets of the Company and the Subsidiaries, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or
exchange offer for 50% or more of the Shares or the filing of a registration
statement under the Securities Act in connection therewith; (iv) any person
having acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder) having
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the Shares; or (v) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement/Proxy Statement. (a) As promptly as
practicable after the consummation of the Offer, the Company and Parent shall
prepare and file with the SEC preliminary proxy materials which shall
constitute the preliminary Proxy Statement and a preliminary prospectus with
respect to the Parent Common Stock to be issued in connection with the
Merger. As promptly as practicable after comments are received from the SEC
with respect to such preliminary materials and after the furnishing by the
Company and Parent of all information required to be contained therein, the
Company shall file with the SEC the definitive Proxy Statement and Parent
shall file with the SEC the Registration Statement (which shall include the
definitive Proxy Statement), and Parent and the Company shall use their best
efforts to cause the Registration Statement to become effective and to mail
the definitive Proxy Statement to their respective stockholders as soon
thereafter as practicable.
(b) Parent and the Company shall make all necessary filings with respect
to the Merger and the Parent Share Proposal under the Securities Act and the
Exchange Act and the rules and regulations thereunder, under applicable blue
sky or similar securities laws and the New York Stock Exchange, Inc. and
shall use all reasonable efforts to obtain required approvals and clearances
with respect thereto.
SECTION 6.02. Stock Exchange Listing. Parent shall use its best efforts to
list on the NYSE, upon official notice of issuance, the Parent Common Stock
to be issued pursuant to the Merger.
SECTION 6.03. Additional Agreements. The Company, Parent and Merger Sub
will each comply in all material respects with all applicable laws and with
all applicable rules and regulations of any governmental authority in
connection with its respective execution, delivery and performance of this
Agreement and the transactions contemplated hereby. Each of the parties
hereto agrees to use all reasonable efforts to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to use all reasonable efforts to take, or
cause to be taken, all other actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
SECTION 6.04. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event whose occurrence or
non-occurrence would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time and (ii) any
material failure of the Company, Parent or Merger Sub, as the case may be, or
any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.04 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.05. Access to Information. (a) From the date hereof to the
Effective Time, each of Parent and the Company shall, and shall cause their
respective subsidiaries, officers, directors, employees, auditors, attorneys
and agents to, afford the officers, employees, auditors, attorneys and agents
of the other party (the "Respective Representatives") complete access at all
reasonable times and on reasonable notice to its officers, employees, agents,
accountants, properties, offices and other facilities and to all
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books and records, and shall furnish such Respective Representatives with all
financial, operating and other data and information and all information
relating to the regulatory status of its Plants (whether held by it, a
subsidiary, or agents thereof) as the other party, through its officers,
employees, agents or accountants, may reasonably request.
(b) All information obtained by Parent or the Company pursuant to this
Section 6.05 shall be kept confidential in accordance with the
confidentiality agreements dated December 4, 1994 between Parent and the
Company.
(c) In the event of the termination of this Agreement, each of Parent and
the Company shall, and shall cause its affiliates to, return promptly every
document furnished to them by the other party or its Respective
Representatives in connection with the transactions contemplated hereby and
any copies thereof which may have been made, and shall cause its Respective
Representatives to whom such documents were furnished promptly to return such
documents and any copies thereof any of them may have made, other than
documents filed with the Commission or otherwise publicly available.
SECTION 6.06. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such
press release or make any such public statement before such consultation,
except as may be required by law.
SECTION 6.07. Best Efforts; Cooperation. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to use its best efforts
to take or cause to be taken all actions and to do or cause to be done all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall use its best efforts to obtain all
necessary waivers, consents and approvals, and to effect all necessary
filings under the Exchange Act. The parties shall cooperate in responding to
inquiries from, and making presentations to, regulatory authorities.
SECTION 6.08. Agreement to Defend and Indemnify. (a) If any action, suit,
proceeding or investigation relating hereto or to the transactions
contemplated hereby is commenced, whether before or after the Effective Time,
the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that, subject to the
limitations, if any, on indemnification contained in applicable law, the
Company shall, to the fullest extent permitted under applicable law and
regardless of whether the Merger becomes effective, indemnify and hold
harmless, and after the Effective Time, the Surviving Corporation and Parent
shall, to the fullest extent permitted under applicable law, indemnify and
hold harmless, each director, officer, employee, fiduciary and agent of the
Company or any Subsidiary and their respective subsidiaries and controlled
affiliates, including, without limitation, officers and directors serving as
such on the date hereof (collectively, the "Indemnified Parties"), from and
against any costs or expenses (including attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation arising
out of or pertaining to any of the transactions contemplated hereby,
including without limitation liabilities arising under the Securities Act or
the Exchange Act in connection with the Merger. Parent shall cause the
Surviving Corporation to continue in effect the indemnification provisions
currently provided (or provisions that are no less favorable to the
Indemnified Parties than those currently provided) by the Articles of
Incorporation, Bylaws or any written indemnification agreement of the Company
for a period of not less than six years following the Effective Time. This
Section shall survive the consummation of the Merger. This covenant shall
survive any termination of this Agreement pursuant to Section 8.01 hereof.
Notwithstanding Section 9.07 hereof, this Section is intended to be for the
benefit of and to grant third party rights to Indemnified Parties whether or
not parties to this Agreement, and each of the Indemnified Parties shall be
entitled to enforce the covenants contained herein.
(b) Parent shall cause to be maintained in effect for not less than three
years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries
with respect to matters occurring prior to the Effective Time; provided,
however, that Parent may substitute therefor its current policies or other
policies of at least the same coverage containing terms
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and conditions which are no less advantageous to the Indemnified Parties;
provided, however, that in no event shall Parent be required to expend
pursuant to this Section 6.08(b) more than an amount equal to 125% of current
annual premiums paid by the Company for such insurance.
(c) If Parent, the Surviving Corporation or any of either of their
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provision shall be made so that the successors and assigns of Parent or
Surviving Corporation assume the obligations set forth in this Section 6.08.
SECTION 6.09. Disposition of Litigation. (a) The parties agree to file
jointly a stipulation of dismissal without prejudice, or take other
reasonable steps necessary to terminate without prejudice, the action
entitled Magma Power Company, et al. v. California Energy Company, Inc., et
al., Case No. CV-N-94-00719-DWH pending in the United States District Court
for the District of Nevada, including any and all claims and counterclaims
asserted against the Company, its directors, its officers, Parent and Merger
Sub, with each party bearing its own costs and attorneys' fees. The Company
agrees that it will not settle any litigation currently pending, or commenced
after the date hereof, against the Company or any of its directors by any
stockholder of the Company relating to the Offer or this Agreement, without
the prior written consent of Parent.
(b) The Company will not voluntarily cooperate with any third party that
has sought or may hereafter seek to restrain or prohibit or otherwise oppose
the Offer or the Merger and will cooperate with Parent and Merger Sub to
resist any such effort to restrain or prohibit or otherwise oppose the Offer
or the Merger, unless failing to so cooperate with such third party or
cooperating with Parent or Merger Sub, as the case may be, would constitute a
breach of fiduciary duty of the Board of Directors of the Company or
otherwise violate any applicable law or rules.
SECTION 6.10. Employee Benefits. (a) Parent shall cause the Surviving
Corporation and its Subsidiaries to (x) honor all employment, change in
control, deferred compensation, pension, retirement and severance agreements
in effect on the date hereof between the Company or one of its Subsidiaries
and any employee of the Company or one of its Subsidiaries, or maintained for
the benefit of any employee of the Company or one of its Subsidiaries, all of
which have been made available to Parent, and (y) honor all bonus
determinations for the fiscal year ending December 31, 1994 made by the
Company or any of its Subsidiaries prior to the date hereof with respect to
the bonus plans and arrangements of the Company and its Subsidiaries.
(b) For a period of one year commencing on the Effective Time, Parent
shall cause the Surviving Corporation to provide active employees of the
Company and its Subsidiaries with benefits (including, without limitation,
welfare benefits) that are no less favorable, taken as a whole, than the
benefits provided under the Company Benefit Plans (other than equity-based
plans and bonus plans) as in effect immediately prior to the Effective Time.
To the extent that service is relevant for eligibility, vesting or benefit
calculations or allowances (including, without limitation, entitlements to
vacation and sick days) under any plan or arrangement maintained in order to
provide the benefits described in the preceding sentence, such plan or
arrangement shall credit employees for service on or prior to the Effective
Time with the Company or any of its Subsidiaries.
(c) Parent shall as promptly as practicable after the Effective Time cause
the Surviving Corporation to (or the Company may prior to the Effective Time)
amend each demand note made in favor of the Company by an employee of the
Company or one of its Subsidiaries (each of which has been made available to
Parent) to provide that (x) such demand note will not be repayable on demand
from the Company and (y) upon the involuntary termination without cause of
the employment of such employee, all sums owed under such demand note shall
be payable in equal quarterly installments over a period of not less than 36
months.
(d) With respect to each employee of the Company (other than employees of
the Company which are parties to a "change in control" or "severance"
agreements referred to in the Previous 14D-9) who is, within the one year
period following the closing of the Offering, either (i) terminated without
cause or (ii) terminated as a result of a reduction in force, Parent shall
cause the Surviving Corporation to make the following payments:
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(1) if, upon the effective date of such employee's termination, such
employee has less than one year's service with the Company, a payment
equal to three months base salary plus an amount equal to one-fourth of
the prior years targeted bonus for such employee, payable in twelve equal
installments over the twelve months following such termination; or
(2) if, upon the effective date of such employee's termination, such
employee has one year or more of service with the company, a payment equal
to six months base salary plus an amount equal to one-fourth of the prior
years targeted bonus for each such employee, payable in twelve equal
installments over the twelve months following such termination.
For the purposes of subclauses (1) and (2), if an employee was not
eligible for a bonus in the referenced prior year, then the targeted bonus
for the current year shall be used. An employee shall not be eligible for the
payments specified in subclauses (1) or (2) if such employee's termination
relates to a reduction in force referred to subclause (ii) above and such
employee has been offered a comparable position (in terms of compensation) by
Parent at any location; provided, however, that no such amounts referenced in
(1) and (2) will be payable if, in the good faith determination of the
Company, the employee's job performance did not merit continued employment or
offer of relocation to a comparable position. An employee may not receive the
severance payments contemplated by this Section 6.10(d) and also receive any
severance payments under the Company's severance policy covered by Sections
6.10(a) and (b) and identified on a schedule hereto.
SECTION 6.11. Certain Action of Parent and Merger Sub. Promptly following
the execution of this Agreement, Parent and Merger Sub shall suspend their
solicitation of requests for the call of a special meeting of the Company's
stockholders and their solicitation of proxies to elect nominees to the
Company's Board of Directors.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the following conditions:
(a) Offer. Parent shall have made, or caused to be made, the Offer and
shall have purchased, or caused to be purchased, Shares pursuant to the
Offer.
(b) Company Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the holders of the Company Common Stock.
(c) Parent Stockholder Approval. The Parent Share Proposal shall have been
approved by the requisite vote of the holders of Parent Common Stock.
(d) Stock Exchange Listing. The Parent Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance.
(e) Effectiveness of Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and remain in
effect.
(f) No Prohibition. There shall not be in effect (i) any judgment decree
or order issued by any Federal, state or local court of competent
jurisdiction, or (ii) any statute, rule or regulation enacted or promulgated
by any Federal, state, local or legislative, administrative or regulatory
body of competent jurisdiction, that in either of cases (i) or (ii) prohibits
the consummation of the Merger or makes such consummation illegal.
SECTION 7.02. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall be true and correct
in all material respects on the date hereof and shall
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also be true and correct in all material respects on and as of the Effective
Time, except for changes contemplated by this Agreement, with the same force
and effect as if made on and as of the Effective Time, except to the extent
that the failure of such representations and warranties to be so true and
correct, individually and in the aggregate, does not have a Material Adverse
Effect; provided, however, that any inaccuracy of a representation or
warranty, on the date hereof or at the Effective Time, shall not result in
the non-satisfaction of this Section 7.02(a) unless any such inaccuracy or
inaccuracies, either (i) individually or in the aggregate, constitute facts
or circumstances having a Material Adverse Effect (it being understood that
such facts or circumstances shall be deemed to be so constituted if the
particular representation or warranty which is inaccurate contains a Material
Adverse Effect standard) or (ii) are clearly intentional misrepresentations;
and
(b) Agreements, Conditions and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time.
SECTION 7.03. Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on the date hereof and shall also be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement, with the same force and effect as if made on
and as of the Effective Time, except to the extent that the failure of such
representations and warranties to be so true and correct, individually and in
the aggregate, does to have a Material Adverse Effect; provided, however,
that any inaccuracy of a representation or warranty, on the date hereof or at
the Effective Time, shall not result in the non-satisfaction of this Section
7.03(a) unless any such inaccuracy or inaccuracies, either (i) individually
or in the aggregate, constitute facts or circumstances having a Material
Adverse Effect (it being understood that such facts or circumstances shall be
deemed to be so constituted if the particular representation or warranty
which is inaccurate contains a Material Adverse Effect standard) or (ii) are
clearly intentional misrepresentations; and
(b) Agreements; Conditions and Covenants. The Company shall have performed
or complied in all material respects with all agreements, conditions and
covenants required by this Agreement to be performed or complied with by it
on or before the Effective Time.
(c) Funding. Parent and/or Merger Sub shall have received the proceeds of
the financing contemplated by Section 3.10 hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
before the Effective Time:
(a) By mutual consent of the Boards of Directors of Parent and the
Company; or
(b) By the Company or Parent if the Offer shall not have been consummated
by February 28, 1995; or
(c) By the Company or Parent if the Effective Time shall not have occurred
on or prior to September 30, 1995; or
(d) By either Parent or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order,
decree or ruling the parties hereto shall use their best efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
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<PAGE>
(e) By Parent if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement or any of the
transactions contemplated by this Agreement or shall have resolved to do any
of the foregoing, or (ii) the Board of Directors of the Company recommends to
the holders of Shares any proposal with respect to a merger, consolidation,
share exchange or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement; or
(f) By Parent if, without the Company's consent, any person has acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) has been formed which beneficially owns,
or has the right to acquire "beneficial ownership" (as defined in the Rights
Agreement) of, more than 10% of the Shares; or
(g) By the Company or Parent if (i) a corporation, partnership, person or
other entity or group shall have made a bona fide offer that the Board of
Directors of the Company determines in its good faith judgment and in the
exercise of its fiduciary duties, after consultation with and based upon the
advice of its financial and legal advisors, is more favorable to the
Company's stockholders than the Offer and the Merger or (ii) any person
(including, without limitation, the Company or any affiliate thereof), other
than Parent or any affiliate of Parent, shall have become the beneficial
owner of more than 50% of the then outstanding Shares; or
(h) By either Parent or the Company if the other party shall have breached
this Agreement hereunder in any material respect and such breach continues
for a period of ten days after the receipt of notice of the breach from the
nonbreaching party.
SECTION 8.02. Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01 hereof, this Agreement shall forthwith
become void and there shall be no liability on the part of Parent, Merger Sub
or the Company, except (i) as set forth in Sections 8.03, 8.04 and 9.01
hereof, and (ii) nothing herein shall relieve any party from liability for
any willful breach hereof.
SECTION 8.03. Agreement Termination Fee. (a) If this Agreement is
terminated pursuant to Section 8.01(e) or (g) or terminated by Parent
pursuant to Section 8.01(h), the Company shall pay Parent a fee of $8,000,000
plus Parent's actual documented out-of-pocket expenses incurred since
September 13, 1994 in connection with this Agreement and the transactions
contemplated hereby (including the previous offer referred to in the Previous
14D-9), including, without limitation, legal and professional fees and
expenses.
(b) Any payment required to be made pursuant to Section 8.03(a) shall be
made not later than one business day after termination of this Agreement and
shall be made by wire transfer of immediately available funds to an account
designated by Parent.
SECTION 8.04. Offer Fee. (a) If, by December 19, 1994, Parent has not
delivered to the Company either a revised Commitment Letter or definitive
loan documentation reflecting the financing contemplated by such Commitment
Letter which, in each case, (i) do not contain any due diligence conditions
regarding Parent and the Company and its Subsidiaries and (ii) have a
definition of "material adverse effect" and/or "material adverse change" that
substantially conforms in all material respects with the definition of
Material Adverse Effect (other than as provided in subclause (i) thereof)
contained herein with respect to Parent and the Company, then Parent shall
owe the Company a fee of $8,000,000 payable in accordance with and to the
extent provided in subsection (b) below.
(b) The $8,000,000 fee referred to in Section 8.04(a) shall be paid by
Parent to the Company only upon (i) termination or expiration of the Offer
without Merger Sub having accepted for payment the shares tendered pursuant
thereto or (ii) termination of this Agreement pursuant to Section 8.01(b)
(collectively, the "Offer Termination Events") unless failure to close the
Offer results from one or more of the following:
(i) A Material Adverse Effect with respect to the Company shall exist
or shall have occurred and be continuing on or prior to the relevant Offer
Termination Event;
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<PAGE>
(ii) The Company shall have materially breached this Agreement and
Parent shall have terminated this Agreement under Section 8.01(h), in each
case on or prior to the relevant Offer Termination Event; or
(iii) Generally accepted accounting principles would require a
restatement of the Company's audited financial statements contained in the
Company SEC Reports.
(c) Any payment required to be made pursuant to Section 8.04 shall be made
not later than one business day after the occurrence of an Offer Termination
Event and shall be made by wire transfer of immediately available funds to an
account designated by the Company.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or the termination of this Agreement pursuant
to Section 8.01, as the case may be, except that the agreements set forth in
Article I and Section 6.08 shall survive the Effective Time indefinitely and
those set forth in Sections 6.05(b), 6.05(c), 6.10 and 9.03 shall survive
termination indefinitely.
SECTION 9.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, except that notices
of changes of address shall be effective upon receipt):
(a) if to Parent or Merger Sub
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
Attention: Steven A. McArthur, Esq.
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter J. Hanlon, Esq.
(b) if to the Company:
Magma Power Company
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: Jon R. Peele, Esq.
A-33
<PAGE>
with a copy to:
Shearman & Sterling
555 California Street
San Francisco, California 94104
Attention: Michael J. Kennedy, Esq.
SECTION 9.03. Expenses. Except as is provided in Section 8.03 hereof, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.
SECTION 9.04. Certain Definitions. For purposes of this Agreement, the
term: (a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "control" (including the terms "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 stock, as trustee or executor, by contract
or credit arrangement or otherwise; and
(c) "person" means an individual, corporation, partnership, association,
trust or any unincorporated organization.
SECTION 9.05. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the maximum extent possible.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes any and all other
prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein and for the provisions of Sections 2.10,
6.05 and 6.10 hereof, is not intended to confer upon any other person any
rights or remedies hereunder.
SECTION 9.08. Waiver. At any time before the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only as against such party and
only if set forth in an instrument in writing signed by such party.
SECTION 9.09. Amendment. This Agreement may be amended by the parties
hereto by action taken by Parent and Merger Sub, and by action taken by or on
behalf of the Company's Board of Directors at any time before the Effective
Time; provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made which would materially
adversely impact the interests of the Company's stockholders or reduce the
amount or change the type of consideration into which each Share will be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 9.10. Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Merger Sub may assign
all or any of their rights hereunder to any affiliate of Parent provided that
no such assignment shall relieve the assigning party of its obligations
hereunder.
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<PAGE>
SECTION 9.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
SECTION 9.12. Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ David L. Sokol
--------------------------
Name: David L. Sokol
Title: Chairman, President and
Chief Executive Officer
CE ACQUISITION COMPANY, INC.
By: /s/ David L. Sokol
--------------------------
Name: David L. Sokol
Title: Chairman, President and
Chief Executive Officer
MAGMA POWER COMPANY
By: /s/ Ralph W. Boeker
--------------------------
Name: Ralph W. Boeker
Title: President and
Chief Executive Officer
A-35
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Merger Sub shall not be
required to accept for payment or pay for, or may delay the acceptance for
payment of or payment for, tendered Shares, or may, in the sole discretion of
Merger Sub, terminate or amend the Offer as to any Shares not then paid for
if (i) at the Expiration Date the Minimum Tender Condition or the Financing
Condition shall not have been satisfied or waived, or (ii) on or after
December 9, 1994, and at or before the acceptance for payment for any of such
Shares, any of the following events shall occur:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by
any other person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to make
illegal, to delay or otherwise directly or indirectly to restrain or prohibit
the making of the Offer, the acceptance for payment of or payment for some of
or all the Shares by Merger Sub or any other affiliate of Parent, the
consummation by Merger Sub of the Merger or seeking to obtain material
damages, (ii) seeking to prohibit the ownership or operation by Merger Sub of
all or any material portion of the business or assets of the Company and its
subsidiaries or of Merger Sub, or to compel Merger Sub to dispose of or hold
separately all or any material portion of the business or assets of Merger
Sub or the Company or any of its subsidiaries or seeking to impose any
material limitation on the ability of Merger Sub or any other affiliates of
Parent to conduct their business or own such assets, (iii) seeking to impose
or confirm limitations on the ability of Merger Sub or any other affiliates
of Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired by any
such person on all matters properly presented to the Company's stockholders,
(iv) seeking to require divestiture by Merger Sub or any other affiliates of
Parent of any Shares, or (v) seeking any material diminution in the benefits
expected to be derived by Merger Sub or any other affiliates of Parent as a
result of the transactions contemplated by the Offer or the Merger;
(b) there shall be any action taken, or any statute, rule, regulation,
interpretation, judgment, order or injunction enacted, enforced, promulgated,
amended, issued or deemed applicable (i) to Merger Sub or (ii) to the Offer
or the Merger by any court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer or
to the Merger, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) it shall have been publicly disclosed or Merger Sub shall have
otherwise learned that (i) any person, entity (including the Company or any
of its subsidiaries) or "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) shall have acquired beneficial ownership of more than 20%
of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted any right, option or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 20% or
any class or series of capital stock of the Company (including the Shares)
other than acquisitions for bona fide arbitrage purposes only and except as
disclosed in a Schedule 13D or 13G on file with the SEC on December 5, 1994
or (ii) any such person, entity or group which before December 5, 1994, had
filed such a Schedule with the SEC has acquired or proposes to acquire,
through the acquisition of stock, the formation of a group or otherwise,
beneficial ownership of an additional 5% or more of any class or series of
capital stock of the Company (including the Shares), or shall have been
granted any right, option or warrant, conditional or otherwise, to acquire
beneficial ownership of an additional 5% or more of any class or series of
capital stock of the Company (including the Shares); provided, however, that
if such person or group acquired the shares without the Company's consent and
the Company has not taken any action under its Rights Plan to exempt such
acquisition from the terms thereof, then the foregoing condition shall be
inapplicable;
(d) the Company shall have failed to comply with in any material respect
any of its obligations under the Agreement or any representation or warranty
of the Company in such Agreement shall not be true and correct in any
material respect and such failure to comply or be true and correct shall have
a Material Adverse Effect;
I-1
<PAGE>
(e) a Material Adverse Effect with respect to the Company shall have
occurred;
(f) this Agreement shall have been terminated in accordance with its
terms; or
(g) the Company's Board of Directors shall have withdrawn, modified or
amended in any unfavorable respect its recommendation of the Offer or shall
have resolved to do so or shall have entered into an agreement with a third
party with respect to a Competing Transaction;
which, in the good faith judgment of Parent and Merger Sub with respect to
each and every matter referred to above and regardless of the circumstances
(including any action or inaction by Parent or Merger Sub) giving rise to any
such condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and may be asserted by Parent or Merger Sub or may be waived by Parent or
Merger Sub in whole or in part at any time and from time to time in its sole
discretion.
I-2
Exhibit 99.2
CONTACTS:
John G. Sylvia, Chief Financial Officer
Dale R. Schuster, Vice President
California Energy Company, Inc.
(402) 330-8900
or
Mark H. Harnett
James S. Protos
MacKenzie Partners, Inc.
(212) 929-5500
FOR IMMEDIATE RELEASE:
CALIFORNIA ENERGY COMPLETED MERGER WITH MAGMA AND
CLOSES PUBLIC OFFERING OF COMMON STOCK
OMAHA, NE, February 24, 1995 -- California Energy Company, Inc. (the
"Company") (NYSE, PSE, LSE: CE) announced today that it has completed its
merger with Magma Power Company ("Magma"). The Company also announced it has
successfully consummated the offering of 16,670,000 shares of its Common
Stock, at $17.00 per share, which amount includes a direct sale by the Company
to Peter Kiewit Sons', Inc. ("PKS") of 1.5 million shares.
The Company will use the net proceeds from the public offering and the direct
sale to PKS, together with borrowings under bank credit facilities and general
corporate funds of the Company, to purchase the remaining approximately 49% of
the outstanding common stock formerly representing shares of Magma at a price
of approximately $38.48 per share in cash. On January 10, 1995, the Company
acquired approximately 51% of the outstanding shares of Common Stock of Magma
through a cash tender offer.
David L. Sokol, the Company's Chairman and Chief Executive Officer, stated:
"We are very pleased to announce the completion of this strategic
acquisition which creates the world's largest independent geothermal
power company. With the closure of this common equity offering, we have
positioned the combined companies to aggressively pursue our
international project opportunities in Indonesia, the Philippines and
elsewhere."
California Energy Company, Inc. is a leading international developer, owner
and operator of geothermal and other environmentally responsible power
generation facilities. Its thirteen existing facilities currently produce 553
MW of power, with an additional 500 MW of power under construction and
approximately 1,500 MW currently under award or contract.
# # #
Exhibit 99.3
NON-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 February 24, 1995
Merger Facility
<PAGE>2
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Interpretation . . . . . . . . . . . 1
Section 1.1 Defined Terms . . . . . . . . . . . . . 1
Section 1.2 Computation of Time Periods . . . . . . 34
Section 1.3 Accounting Terms . . . . . . . . . . . 34
Section 1.4 No Presumption Against Any Party . . . 34
Section 1.5 Use of Certain Terms . . . . . . . . . 35
Section 1.6 Headings and References . . . . . . . . 35
Section 1.7 Independence of Provisions . . . . . . 35
ARTICLE II
Amounts and Terms of the Loans . . . . . . . . . . . 35
Section 2.1 The Loans . . . . . . . . . . . . . . . 35
Section 2.2 Repayment . . . . . . . . . . . . . . . 39
Section 2.3 Interest on Loans . . . . . . . . . . . 45
Section 2.4 Payments and Computations . . . . . . . 49
Section 2.5 Fees . . . . . . . . . . . . . . . . . 52
Section 2.6 Increased Costs and Capital
Requirements . . . . . . . . . . . . 52
Section 2.7 Taxes . . . . . . . . . . . . . . . . . 54
Section 2.8 Collateral Security . . . . . . . . . . 58
Section 2.9 Limited Liability . . . . . . . . . . . 60
Section 2.10 Election Under Section 1111(b)
of Bankruptcy Code . . . . . . . . . 60
Section 2.11 Available Amounts . . . . . . . . . . . 61
ARTICLE III
Conditions of Commitments . . . . . . . . . . . . . . 62
Section 3.1 Conditions Precedent to the
Making of the Loans . . . . . . . . . 62
ARTICLE IV
Representations and Warranties . . . . . . . . . . . 68
<PAGE>3
Section 4.1 Representations and Warranties . . . . 68
ARTICLE V
Covenants of Borrower . . . . . . . . . . . . . . . . 82
Section 5.1 Affirmative Covenants . . . . . . . . . 82
Section 5.2 Negative Covenants . . . . . . . . . . 100
Section 5.3 Financial Covenants . . . . . . . . . . 107
ARTICLE VI
Events of Default . . . . . . . . . . . . . . . . . . 109
Section 6.1 Events of Default . . . . . . . . . . . . 109
ARTICLE VII
Relationship of Agent and Banks . . . . . . . . . . . 113
Section 7.1 Authorization and Action . . . . . . . 113
Section 7.2 Agent's Reliance, Etc. . . . . . . . . 114
Section 7.3 Agent and Affiliates . . . . . . . . . 114
Section 7.4 Bank Credit Decision . . . . . . . . . 115
Section 7.5 Indemnification . . . . . . . . . . . . 115
Section 7.6 Successor Agent . . . . . . . . . . . . 116
ARTICLE VIII
Miscellaneous . . . . . . . . . . . . . . . . . . 116
Section 8.1 Notices . . . . . . . . . . . . . . . . 116
Section 8.2 Successors and Assigns . . . . . . . . 117
Section 8.3 Amendments and Related Matters . . . . 117
Section 8.4 Costs and Expenses; Indemnification . . 118
Section 8.5 Oral Communications . . . . . . . . . . 119
Section 8.6 Entire Agreement . . . . . . . . . . . 119
Section 8.7 Governing Law . . . . . . . . . . . . . 120
Section 8.8 Severability . . . . . . . . . . . . . 120
Section 8.9 Counterparts . . . . . . . . . . . . . 120
Section 8.10 Confidentiality . . . . . . . . . . . . 120
Section 8.11 Assignments and Participations . . . . 121
Section 8.12 Waiver of Trial by Jury . . . . . . . . 124
Section 8.13 Choice of Forum and Service of Process 124
Section 8.14 Remedies . . . . . . . . . . . . . . . 125
<PAGE>4
Section 8.15 Right of Set-Off . . . . . . . . . . . 125
SCHEDULES
Schedule 1.1 - Commitment Schedule
Schedule 1.2 - Magma Project Credit Agreements
Schedule 1.3 - Debt Service Coverage Ratio Calculation
Schedule 1.4 - Interest Coverage Ratio Calculation
Schedule 1.5 - Leverage Ratio Calculation
Schedule 1.6 - Excess Cash Flow Calculation
Schedule 1.7 - Persons Executing Account
Pledge Agreements
Schedule 1.8 - Persons Executing Blocked
Account Agreements
Schedule 1.9 - Persons Executing Security
Agreements
Schedule 1.10 - Persons Executing Guaranty
Agreements
Schedule 1.11 - Permitted Securities
Schedule 3.1(k) - Capital Contribution
Schedule 4.1(v) - ERISA
Schedule 4.1(aa) - Insurance
Schedule 4.1(ii) - Transactions With Affiliates
Schedule 4.1(jj) - Bid Bonds, Guarantees, Etc.
Schedule 4.1(nn) - Capitalization
Schedule 4.1(pp) - Bank Accounts
Schedule 5.1(l) - Separate Businesses
Schedule 5.2(c) - Nature of Business
Schedule 5.2(q) - Other Transactions
Schedule 6.1(r) - Project Defaults
<PAGE>5
EXHIBITS
Exhibit A - Assignment and Acceptance Agreement
Exhibit B - Borrower Pledge Agreement
Exhibit C - CE Acquisition Secured Term Note
Exhibit D - Compliance Certificate
Exhibit E - Indenture
Exhibit F - Magma Limited Partner Pledge Agreement
Exhibit G - Magma Pledge Agreement
Exhibit H - General Partner Pledge Agreement
Exhibit I - Guaranty Agreement
Exhibit J - Form of Note
Exhibit K - Notice of Borrowing
Exhibit L - Notice of Conversion/Continuation
Exhibit M - Tax Indemnity Agreement
Exhibit N - Opinion of Willkie Farr & Gallagher
Exhibit O - Opinion of Steven A. McArthur
Exhibit P - Opinion of Lionel, Sawyer & Collins
Exhibit P-1 - Opinion of Stibbe Simont Monahan Duhot
Exhibit Q - Security Agreement
Exhibit Q-1 - Special Security Agreement
Exhibit R - Account Pledge Agreement
Exhibit S - Blocked Account Agreement
<PAGE>6
NON-RECOURSE CREDIT AGREEMENT
This NON-RECOURSE CREDIT AGREEMENT, dated as of February 24, 1995,
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:
"Account Pledge Agreements" means the separate Account Pledge
Agreements each dated as of the Closing Date, by the Persons listed on
Schedule 1.7 in favor of Borrower substantially in the form of Exhibit R.
"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 the Kiewit Entities and any entity owning directly or indirectly 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 any of the Kiewit Entities 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.
"Alto Peak Pre-Funded Equity Amount" means the sum of $28,688,000
deposited with Agent representing funds to be
<PAGE>7
available for application, subject to Section 2.2(h), to Magma's equity
commitment for Alto Peak.
"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
that is made under the Tranche A Commitments, 150 basis points (1.50%) per
annum, (b) with respect to any Base Rate Loan that is made under the Tranche B
Commitments, 250 basis points (2.50%) per annum, (c) with respect to any Base
Rate Loan that is made under the Tranche C Commitments, 250 basis points
(2.50%) per annum, (d) with respect to any Eurodollar Rate Loan that is made
under the Tranche A Commitments, 250 basis points (2.50%) per annum, (e) with
respect to any Eurodollar Rate Loan that is made under the Tranche B
Commitments, 350 basis points (3.50%) per annum and (f) with respect to any
Eurodollar Rate Loan that is made under the Tranche C Commitments, 350 basis
points (3.50%) per annum.
"Asset Disposition" means the disposition of the following, whether
by sale, lease, transfer, loss, damage, destruction, condemnation or
otherwise: (a) any of the stock or equity interest owned directly or
indirectly by Magma in any of its Subsidiaries or (b) any or all of the assets
of Magma or any of its Subsidiaries, but excluding Ordinary Course Lease and
Royalty Restructuring Transactions.
"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.
"Available Amounts" means, at any date of determination, on a
cumulative basis measured from the Closing Date through the date of
determination, (x) all Retained Cash Flow Amounts, minus (y) all amounts
expended by Magma pursuant to the provisions of clauses (i) through (v) of
Section 2.11 and
<PAGE>8
minus (z) any loss recognized on the sale or other disposition of the
securities listed in Schedule 1.11.
"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 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 necessarily 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).
"Blocked Account Agreements" means the separate Blocked Account
Agreements each dated as of the Closing Date, by the Persons listed on
Schedule 1.8 in favor of Borrower substantially in the form of Exhibit S.
"BN Geothermal" means BN Geothermal, Inc., a Delaware corporation.
"Borrower Common Stock" means the Common Stock, par value $0.0675,
of Borrower.
<PAGE>9
"Borrower Meeting" means the special meeting of stockholders of
Borrower held on February 10, 1995 for the purpose of considering and taking
all actions necessary to consummate the Merger.
"Borrower Pledge Agreement" means the Pledge and Security Agreement
dated as of the Closing Date by Borrower in favor of Agent substantially in
the form of Exhibit B hereto.
"BRPU Award" means the order of the CPUC dated June 22, 1994
(confirmed on December 21, 1994), pursuant to which Magma was awarded an
aggregate of 163 megawatts for sale to Southern California Edison Company and
San Diego Gas & Electric Company, with in-service dates in 1997 and 1998.
"BRPU Distributions" means (i) dividends and distributions made to
Magma by any BRPU Subsidiary in respect of the revenues and cash flows from
the BRPU Project and (ii) all other distributions in respect of the BRPU Award
or the BRPU Project other than (x) the net proceeds of the sale of the BRPU
Award or any payments received upon any termination of the BRPU Award, in each
case to the extent such proceeds or payments are in excess of the amount of
funds advanced by the Borrower or one of its other Subsidiaries (other than
Magma and its Subsidiaries) in connection with the development of the BRPU
Project ("Advanced Amounts") or (y) an amount equal to the net equity value of
such BRPU Subsidiary over the Advanced Amounts in connection with the
distribution of the proceeds of any sale of the BRPU Project.
"BRPU Project" means any Project developed in connection with the
BRPU Award.
"BRPU Subsidiary" shall mean any indirect wholly-owned Subsidiary of
Magma which is formed to develop, own, construct and/or operate a BRPU Project
and in respect of which (or the obligations of which) neither Magma nor any
other Subsidiary of Magma has any obligations or liability (direct, indirect
or contingent), all the equity of which is advanced by Borrower (or one of its
Subsidiaries, other than Magma or any Subsidiary of Magma), and none of the
obligations of which are recourse to Magma or any other Magma Subsidiary
(other than another BRPU Subsidiary) or any of their respective properties
(other than the property and assets of any BRPU Subsidiary).
"Capital Expenditures" means, without duplication, for any period,
the aggregate of all expenditures on a consolidated basis including deposits
(whether paid in cash or property or accrued as liabilities and including the
aggregate amount of all principal payments due for the entire term of all
capital leases which are required to be capitalized on the balance sheet) made
by Magma and its Subsidiaries that, in conformity with GAAP, are
<PAGE>10
required to be included in the property, plant, or equipment, or similar fixed
asset account. Notwithstanding the foregoing, Capital Expenditures shall not
include expenditures funded from the following: (a) the Alto Peak Pre-Funded
Equity Amount, (b) the Fish Lake Pre-Funded Equity Amount, (c) the Malitbog
Pre-Funded Equity Amount, (d) the pH Modification Expenditure Amount and
(e) any Net Proceeds of Asset Dispositions reinvested pursuant to
Section 2.2(d).
"Casecnan Project" means a prospective 140 (gross) megawatt
Philippine hydroelectric project of Borrower.
"Cash Balance" means, for any date of determination, the amount of
unrestricted and uncommitted cash and Cash Equivalents on deposit in the
Concentration Account.
"Cash Equivalents" 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 one year 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 one
year 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 270 days 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,
<PAGE>11
(vii) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (i) through (v),
(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) and (ix) the securities set
forth on Schedule 1.11.
"Cash Flow Available for Loan Debt Service" means, for any period,
the sum of the following: (a) all amounts deposited in the Concentration
Account during such period derived from the ordinary course operations
(including net interest income) of Magma and its Subsidiaries and from
earnings realized from investment of funds held in the Concentration Account;
provided, however, that the foregoing shall not include revenues received in
respect of operating and maintenance payments made or to be made for the Magma
Projects, and revenues received in respect of brine fees or other land use
payments to the extent of payments required to be made as royalty or lease
payments to third parties, plus (b) gains on the sale or other disposition of
securities and other investments held n the Concentration Account, minus (c)
losses recognized on the sale or other disposition of securities and other
investments held in the Concentration Account, minus (d) all operating
expenses of Magma and its Subsidiaries (other than Project Owners) for such
period; provided, however, that the foregoing shall not include operating and
maintenance payments made or to be made for the Magma Projects, and brine fees
and other land use payments made as royalty or lease payments to third
parties, to the extent that revenues in respect thereof were excluded from the
calculation of amounts under clause (a) above pursuant to the proviso thereto,
minus (e) total Capital Expenditures of Magma and its Subsidiaries (other than
Project Owners) excluding (A) Capital Expenditures made pursuant to
Section 2.11 and (B) Capital Expenditures to the extent financed by third
parties other than Magma and its Subsidiaries, for such period on a
consolidated basis; and minus (f) debt service during such period on Debt of
Magma (other than the Loans and any refinancing thereof).
"Cash Management Agreement" means that certain Cash Management
Agreement dated as of the Closing Date among Magma and certain of its
Subsidiaries, in form and substance satisfactory to Agent.
"CE Acquisition" means CE Acquisition Company, Inc., a Delaware
corporation and a wholly-owned subsidiary of Borrower.
"CE Acquisition Credit Agreement" means that certain Credit
Agreement dated as of the Closing Date between Borrower and CE Acquisition in
form and substance satisfactory to Agent,
<PAGE>12
with the obligation of CE Acquisition thereunder to be assumed by Magma after
the Merger by an instrument of assumption in form and substance satisfactory
to Agent.
"CE Acquisition Credit Documents" means the CE Acquisition Credit
Agreement, the CE Acquisition Secured Term Note, the Security Documents and
any certificates, opinions, warranties and representations and other documents
required to be delivered thereunder.
"CE Acquisition Secured Term Note" means, collectively, the Secured
Term Notes made by CE Acquisition in favor of Borrower and in an aggregate
principal amount equal to the aggregate amount of the Loans made on the
Closing Date, substantially in the form of Exhibit C hereto, which Secured
Term Note shall be assumed by Magma after the Merger by an instrument of
assumption in form and substance satisfactory to Agent.
"CECI Undertaking Agreement" means the Undertaking Agreement dated
as of the Closing Date by and among Borrower, Magma and Agent (for itself and
for the benefit of the Banks), in form and substance satisfactory to Agent.
"Change of Control" means that (a) 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 35% or more of the total voting
power of all classes of stock of Borrower entitled to vote in the election of
directors (a "35% Control Interest"), other than any of the Kiewit Entities,
(b) in circumstances where clause (a) is not applicable, both (i) 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 "25% Control Interest"), other than any Person or
group which on the date hereof holds a 25% Control Interest and (ii) the
Kiewit Entities do not own an equal or greater percentage of the total voting
power of all classes of stock of Borrower entitled to vote in the election of
directors owned by such Person, (c) Borrower ceases to own, at any time after
the Merger, 100% of the outstanding capital stock of Magma or (d) Magma shall
cease to own the ownership interest percentage it currently owns, directly or
indirectly, in each of the Project Owners.
<PAGE>13
"Closing Date" means the date on which the first Loan under any
Commitment is made.
"Collateral" means, collectively: (a) the Magma Shares, (b) the CE
Acquisition Secured Term Note, (c) all capital stock and other property
pledged pursuant to the Security Documents; (d) all "collateral" as defined in
the Security Documents; (e) all real property mortgaged pursuant to the
Security Documents; and (f) 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 Tranche A Commitment, Tranche B Commitment or Tranche
C 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 1.1
hereto.
"Compliance Certificate" means a certificate of, and duly executed
by, a Responsible Officer of Borrower in the form of Exhibit D hereto.
"Concentration Account" means the special depository account
maintained by Magma at Credit Suisse, New York, New York (Account No. 368725-
01) into which, among other things, distributions to Magma or any of its
Subsidiaries from each Project Owner shall be deposited in accordance with the
Cash Management Agreement.
"Contingent Obligations", as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person with respect to
(i) any direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the
obligation of another Person, (ii) any obligation to make take-or-pay or
similar payments if required regardless of nonperformance by any other party
or parties to an agreement, and (iii) any liability of such Person for the
obligations of another Person through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or
to maintain the solvency, financial condition or any balance sheet item or
level of income of another Person (but excluding in any such case surety, bid,
operating and performance guaranties or similar instruments or obligations
incurred in the ordinary course of business). The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
<PAGE>14
otherwise supported or, if not a fixed and determined amount, the maximum
amount so guaranteed.
"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.
"CPUC" means the California Public Utilities Commission or any
successor thereto.
"Credit Documents" means this Agreement, the Notes, the instrument
pursuant to which Magma assumes the obligations of CE Acquisition under the
CE Acquisition Credit Documents, any Assignment and Acceptance Agreements, the
Security Documents, the CECI Undertaking Agreement 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 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.
"Debt Service Coverage Ratio" means, for any period, Cash Flow
Available for Loan Debt Service divided by Loan Debt Service. A sample
calculation of the Debt Service Coverage Ratio is contained in Schedule 1.3.
<PAGE>15
"Default" means any event, occurrence, condition, 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 (and references to dollar amounts in Articles IV, V and VI shall also
include the equivalent thereof in any foreign currency).
"EBITDA" means, without duplication, for any period, the following,
each calculated for such period: (a) Net Income, plus (b) any provision for
income and franchise taxes included in the determination of Net Income, minus
(c) any benefit from income and franchise taxes included in the determination
of Net Income, plus (d) Interest Expense deducted in the determination of Net
Income, plus (e) amortization and depreciation deducted in determining Net
Income, plus (f) extraordinary losses included in Net Income, minus (g)
extraordinary gains included in Net Income, and plus (h) other non-operating
charges deducted in determining Net Income.
"Effective Time" means the later of the time of (i) filing of the
Merger Agreement or a Certificate of Merger relating to the Merger with the
Secretary of State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the General Corporation Law of
Delaware and (ii) filing of the Merger Agreement or a Certificate of Merger
relating to the Merger with the Secretary of State of Nevada, in such form as
required by, and executed in accordance with the relevant provisions of, the
General Corporation Law of Nevada.
"Elmore" means the 38 (gross) megawatt California geothermal project
owned by Elmore, L.P., a California limited partnership.
"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,
<PAGE>16
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.
"Eurocurrencv 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 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 having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 6.1.
<PAGE>17
"EWG" has the meaning ascribed thereto in Section 4.1(bb).
"Excess Cash Flow" means, for any period, Cash Flow Available for
Loan Debt Service for such period, plus, losses recognized on the sale or
other disposition of the securities listed on Schedule 1.1 for such period,
minus Loan Debt Service for such period and minus revenues from Special
Transactions to the extent included in Cash Flow Available for Loan Debt
Service for such period. A sample calculation of Excess Cash Flow is
contained in Schedule 1.6.
"Excess Cash Flow Debt Service Coverage Ratio" means, with respect
to the following periods, the ratio set forth opposite such period which is
determined by dividing the Cash Flow Available for Loan Debt Service for such
period by Loan Debt Service for such period:
<TABLE>
<CAPTION>
Fiscal Year Ratio
<S> <C>
1995 1.30 to 1
1996 1.30 to 1
1997 1.30 to 1
1998 1.30 to 1
1999 1.35 to 1
2000 and each fiscal year thereafter 1.40 to 1
</TABLE>
"Exchange Act" means the Securities 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.
"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 October 31, 2002; provided, however,
that if the outstanding principal amount of the Loans,
<PAGE>18
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.
"Financed Magma Projects" means Malitbog, Salton Sea I, Salton Sea
II, Salton Sea III, Elmore, Leathers and Hoch and Alto Peak and Fish Lake, if
the construction thereof is financed.
"Financial Closing" means, as to any Project, the date on which all
funding (debt and equity) necessary to complete such Project has been
committed by reliable sources, and actual funding from such sources has
commenced.
"Fish Lake" means 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.
"Fish Lake Pre-Funded Equity Amount" means the sum of $6,941,000
deposited with Agent representing funds to be available, subject to Section
2.2(h), for application to Magma's equity commitment for Fish Lake.
"FPA" has the meaning ascribed thereto in Section 4.1(bb).
"Funded Debt" means, for any period, the balance of all Debt (other
than trade payables) of Magma and its Subsidiaries outstanding on the last day
of such period.
"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.
"Guaranty Agreements" means the Guaranty Agreements, each dated as
of the Closing Date, by the Persons listed on Schedule 1.10 in favor of
Borrower substantially in the form of Exhibit I.
"Hazardous Materials" means any asbestos, flammables, volatile
hydrocarbons, industrial solvents, explosive or
<PAGE>19
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.
"Hoch" means the 38 (gross) megawatt California geothermal project
owned by Del Ranch, L.P., a California limited partnership.
"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, a copy of which is attached hereto as Exhibit E.
"Information Statement" means the joint prospectus/information
statement of Magma and Borrower mailed on February 1, 1995, to the
stockholders of Magma and Borrower in connection with the Merger.
"Interest Coverage Ratio" means, for any period, (a) EBITDA, divided
by (b) Interest Expense. A sample calculation of the Interest Coverage Ratio
is contained in Section 1.4.
"Interest Expense" means, without duplication, for any period, the
aggregate of all interest expenses of Magma and its Subsidiaries to the extent
included in the calculation of Net Income for such period as determined in
accordance with GAAP.
"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
<PAGE>20
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 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.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Borrower or any of its
Subsidiaries against fluctuations in interest rates.
"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 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 Entities" 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
<PAGE>21
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.
"Leathers" means the 38 (gross) megawatt California geothermal
project owned by Leathers, L.P., a California limited partnership.
"Leverage Ratio" means, as of any date of determination, Funded
Debt, divided by EBITDA for the twelve month period ending on the date of
determination. A sample calculation of the Leverage Ratio is contained in
Schedule 1.7.
"Leyte" means Leyte Power Capital Corporation, a Delaware
corporation.
"Leyte General Partner Pledge Agreement" means the General Partner
Pledge Agreement to be delivered pursuant to Section 2.8(b) substantially in
the form of Exhibit H.
"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" means a Tranche A Loan, a Tranche B Loan or a Tranche C Loan.
"Loan Debt Service" means, for any period, the sum of (a) Interest
Expense on the Loans, plus (b) regularly scheduled principal payments on the
Loans (as adjusted after taking into account any mandatory or voluntary
prepayments of the Loans).
"Magma" means Magma Power Company, a Nevada corporation and, after
giving effect to the Merger, the corporation that survives the Merger.
"Magma Limited Partner Pledge Agreement" means the Limited Partner
Pledge Agreement dated as of the Closing Date between Magma and Borrower
substantially in the form of Exhibit F.
"Magma Netherlands" means Magma Netherlands, B.V., a Netherlands
corporation.
<PAGE>22
"Magma Pledge Agreement" means the Pledge Agreement dated as of the
Closing Date by Magma in favor of CECI substantially in the form of Exhibit G.
"Magma Project Credit Agreements" means the financing documents set
forth on Schedule 1.2.
"Magma Project Documents" means any Project Document relating to any
of the Magma Projects in effect on the date hereof (or as amended in
accordance with the provisions of this Agreement) or, in the case of Fish Lake
and Alto Peak, approved by Agent.
"Magma Projects" means Hoch, Elmore, Leathers, Vulcan, Salton Sea I,
Salton Sea II, Salton Sea III, Malitbog, Alto Peak and Fish Lake.
"Magma Shares" means the Common Stock, par value $0.10 per share, of
Magma.
"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.
"Malitbog Pre-Funded Equity Amount" means the sum of $30,396,808
deposited with Agent representing funds to be available for application to
Magma's equity commitment for Malitbog.
"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
<PAGE>23
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 solely for the 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 or Alto Peak and other than any such loss
resulting from a breach by Magma of the representations and 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 litigation against Southern California
Edison Company pending as of December 5, 1994, 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.
"Material Subsidiary" means (i) Magma, (ii) CE Acquisition,
(iii) each Subsidiary of Magma that owns an equity interest in a Project
Owner, (iv) each Project Owner and (v) 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.
210.1-02(v)) as the same may be from time to time amended or the equivalent
definition under any successor
<PAGE>24
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.
"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.
"Merger Documents" means the Merger Agreement and any certificates,
opinions, warranties and representations, assignments, guaranties, and other
documents heretofore, now or hereafter delivered pursuant to or in connection
with any one or more of the foregoing.
"Mission Entity" means (i) with respect to Leathers, San Felipe
Energy Company, a California corporation, (ii) with respect to Hoch, Conejo
Energy Company, a California corporation, (iii) with respect to Elmore, Niguel
Energy Company, a California corporation and (iv) with respect to Vulcan, BN
Geothermal.
"MLC" means Magma Land Company I, a Nevada corporation.
"MOC" means Magma Operating Company, a Nevada corporation.
"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.
"Net Income" means, for any period, the net income (or loss) of
Magma and its Subsidiaries on a consolidated basis after provision for or
benefit from income and franchise taxes determined in accordance with GAAP,
but excluding: (a) the income (or loss) of any Person (other than
Subsidiaries of Magma) in which Magma or any of its Subsidiaries has an
ownership interest unless received by Magma or its Subsidiary in a cash
distribution; and (b) the income (or loss) of any Person accrued prior to the
date it became a Subsidiary of Magma or is merged
<PAGE>25
into or consolidated with Magma or that Person's assets are acquired by Magma
or any of its Subsidiaries.
"Net Proceeds" means proceeds received by Borrower or Magma,
including any proceeds derived directly or indirectly from any Subsidiary of
Magma (other than a BRPU Subsidiary so long as no Default or Event of Default
has occurred and is continuing), in cash from any Asset Disposition (including
payments under notes or other debt securities received in connection with any
Asset Disposition and insurance proceeds and awards of compensation) outside
the ordinary course of business (excluding proceeds permitted pursuant to
Section 2.2(d) to be used for replacement assets), net of (a) the costs of
such sale, lease, transfer or other disposition and (b) amounts applied to the
repayment of Debt (other than the Obligations) secured by a lien, security
interest, claim or encumbrance on, or which is otherwise required, pursuant to
the terms of any Magma Project Document, to be paid out of the proceeds of the
sale of, the asset or property disposed; provided that notwithstanding the
foregoing, in the case of any Project Owner or any Magma Project that is not
directly or indirectly wholly-owned by Magma, the Net Proceeds received by
Magma, such Project Owner or such Magma Project in connection with an Asset
Disposition shall be an amount equal to the amount thereof which is then
currently available for distribution to Magma.
"Net Worth" means stockholders' equity as it would appear on a
consolidated balance sheet at such time for Magma and its Subsidiaries
prepared in accordance with GAAP. All non-cash adjustments in the carrying
value of Magma's or any of its Subsidiaries' assets, liabilities or equity
accounts resulting from the application of purchase accounting principles
(A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) by reason of the Merger made
during the first 12 months after the Closing Date shall be excluded from the
calculation of Net Worth to determine whether Borrower has complied with
Section 5.3(c) but nothing herein is intended to restrict the adjustments to
assets and liabilities, on a net aggregate basis, set forth in the Pro Forma
Balance Sheet delivered pursuant to Section 3.1(bb).
"Non-Financed Magma Project" means at any time and from time to time
any Magma Project that, at such time, is not, or whose Project Owner is not,
party to or subject to any credit, loan or similar financing document or
arrangement (including any refinancings, restructurings, extensions,
amendments or renewals thereof) pursuant to which such Project is financed by
a third party that is not an Affiliate of Borrower or Magma for a material
amount and pursuant to which covenants and events of default customary to
project financings apply.
<PAGE>26
"Note" shall mean any promissory notes issued by Borrower pursuant
to Section 2.4(i) hereof, substantially in the form annexed as Exhibit J
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 K 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 L 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, 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.
"Ordinary Course Lease and Royalty Restructuring Transactions" means
transactions in the ordinary course of business (consistent with past
practices) involving lease and royalty interest restructurings with respect to
MLC's leasehold interests, mineral rights and other real estate interests
which are of a type permitted by the Magma Project Documents relating to
Salton Sea I, Salton Sea II or Salton Sea III and, if applicable, as
hereinafter approved by the existing project finance lenders to the Project
Owner of Salton Sea I, Salton Sea II and Salton Sea III.
"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
<PAGE>27
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 available to
Magma and reasonably acceptable to Agent or are maintained on the books
of Magma or any of its Subsidiaries 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), royalties, leasehold and fee interest covenants
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 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 Magma 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;
<PAGE>28
(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 $10,000,000;
(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 Subsidiaries;
(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;
(m) Liens in effect on the date hereof on the assets of any
Subsidiary of Magma pursuant to any Magma Project Document, and any
refinancing, restructuring, extension or renewal thereof;
(n) Liens on the assets of Alto Peak or Fish Lake pursuant to any
Magma Project Document entered into in connection with the financing,
operation, construction or development of Alto Peak and Fish Lake,
respectively, in the case of Alto Peak and Fish Lake to the extent that
such activities are otherwise permitted by this Agreement; and
<PAGE>29
(o) Liens on the assets of any BRPU Project granted in connection
with the financing, construction, operation or development of such BRPU
Project.
"Permitted Payments" means payments by Magma and its Subsidiaries in
respect of (i) the Support Services Agreement and (ii) dividends to Borrower
from BRPU Distributions so long as no Default or Event of Default shall have
occurred and is continuing.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"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.
"pH Modification Expenditure Amount" means $4,500,000 to fund the
construction of pH modification improvements at Salton Sea I and Salton
Sea III.
"Plants" has the meaning ascribed thereto in Section 4.1(bb).
"Pro Forma Balance Sheets" means the unaudited consolidated balance
sheet of Borrower and the unaudited consolidated balance sheet of Magma as of
the Pro Forma Date after giving effect to the Merger and the transactions
contemplated hereby, prepared on a pro forma basis by the chief financial
officer of Borrower and Magma, as appropriate, and shall be in form and
substance satisfactory to Agent.
"Pro Forma Date" means September 30, 1994 in the case of the Pro
Forma Balance Sheets required to be delivered pursuant to Section 3.1(bb) and
means the Closing Date in the case of the Pro Forma Balance Sheets required to
be delivered pursuant to Section 5.1(s).
"Project" means (i) an electric power or thermal energy generation
or cogeneration facility or related facilities (including residual waste
management and facilities that use thermal energy from a cogeneration
facility), and its or their related electric power transmission, fuel supply
and fuel transportation facilities, together with its or their related power
supply, thermal energy and fuel contracts and other facilities, services or
goods that are ancillary, incidental, necessary or reasonably related to the
marketing, development, construction, management, servicing, ownership or
operation of the foregoing, owned by a utility or otherwise, as well as other
contractual arrangements with customers, suppliers and
<PAGE>30
contractors or (ii) any infrastructure facilities related to (A) the treatment
of water for municipal and other uses, (B) the treatment and/or management of
waste water, (C) the treatment, management and/or remediation of waste,
pollution and/or potential pollutants and (D) any other process or
environmental purpose.
"Project Documents" means any credit or loan agreements, Interest
Rate Agreements, equity contribution agreements, security agreements,
guaranties, letters of credit, mortgages, pledge agreements, other financing
and security agreements and documents, energy conversion agreements,
performance undertakings, accession undertakings, construction contracts,
power purchase agreements, turnkey contracts, ground leases, transportation
agreements, management agreements, partnership agreements, supply contracts,
performance bonds, insurance policies, consent agreements, governmental
approvals and any other document or agreement relating to any Projects.
"Project Owners" means, collectively, (i) Del Ranch, Ltd., a
California limited partnership, (ii) Elmore, L.P., a California limited
partnership, (iii) Leathers, L.P., a California limited partnership,
(iv) Vulcan/BN Geothermal Power Company, a Nevada general partnership,
(v) Salton Sea Brine Processing L.P., a California limited partnership,
(vi) Salton Sea Power Generation L.P., a California limited partnership,
(vii) Visayas Geothermal Power Company, a Philippines general partnership,
(viii) the Person that owns and operates Alto Peak, (ix) the Person that owns
and operates Fish Lake and (xi) any successor or permitted assigns of any of
the foregoing.
"Projections" means the projections of the financial performance of
Magma and the Magma Projects setting forth, among other things, the projected
revenues, debt service and other expenses of Magma and the Magma Projects for
the fiscal years 1995 through 2002 and delivered to Agent pursuant to Section
3.1(bb), such projections to be satisfactory to Agent in its sole discretion.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"Purchase Money Lien" means any Lien on property acquired or
constructed by Magma or any of its Subsidiaries 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.
<PAGE>31
"QF" has the meaning ascribed thereto in Section 4.1(bb).
"Reference Banks" means, initially, the New York City office of
Credit Suisse and, at the request of Agent, shall include up to two other
Banks that deal in Dollar deposits in the London interbank market that may be
selected from time to time by the Agent with Borrower's written consent (which
consent shall not be unreasonably withheld) or any substitute Reference Bank
for the foregoing (or any of them) from time to time selected by Agent with
Borrower's written consent (which consent shall not be unreasonably withheld).
"Registration Statement" means collectively (i) the registration
statement filed with the SEC by Borrower on Form S-4 under the Securities Act
for the purpose of registering the shares of Borrower Common Stock to be
issued in connection with the Merger and (ii) the registration statement filed
with the SEC by Borrower on Form S-3 under the Securities Act for the purpose
of registering shares of Borrower Common Stock to be issued to the public in
connection with the Merger.
"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 Magma 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,
<PAGE>32
exchange, purchase, retirement, defeasance, sinking fund or similar payment
with respect to), any subordinated Debt of Magma or any of its 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 Magma or any of its Subsidiaries now or hereafter outstanding.
"Retained Cash Flow Amounts" means, at any date of determination,
all amounts received and retained by Magma after the date of this Agreement in
respect of (i) 25% of Excess Cash Flow pursuant to the provisions of Section
2.2(e) and (ii) 25% of proceeds of Special Transactions pursuant to the
provisions of Section 2.2(j).
"S&P" means Standard & Poor's Corporation.
"Salton Sea I" means the 10 (gross) megawatt California geothermal
project directly and indirectly owned by Magma.
"Salton Sea II" means the 20 (gross) megawatt California geothermal
project directly and indirectly owned by Magma.
"Salton Sea III" means the 50 (gross) megawatt California geothermal
project directly and indirectly owned by Magma.
"Scheduled Installment" means, with respect to each scheduled
repayment date for the Tranche A Loans, the Tranche B Loans and the Tranche C
Loans set forth in Section 2.2(a), the amount set forth opposite such date.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Security Agreements" means the separate Security Agreements each
dated as of the Closing Date by Magma and the Subsidiaries of Magma listed on
Schedule 1.9 in favor of Borrower substantially in the form of Exhibit Q or
Exhibit Q-1, as applicable.
"Security Documents" means the Borrower Pledge Agreement, the Magma
Pledge Agreement, the Guaranty Agreements, the Leyte General Partner Pledge
Agreement (subject to execution and delivery in accordance with
Section 2.8(b)), the Vulcan General Partner Pledge Agreement (subject to
execution and delivery in accordance with Section 2.8(b)), the Magma Limited
Partner Pledge Agreement (subject to execution and delivery in accordance with
Section 2.8(b)), the Security Agreements, the
<PAGE>33
Blocked Account Agreements, the Account Pledge Agreements, the Cash Management
Agreement and all financing statements, certificates, guaranties, assignments,
security agreements, mortgages, deeds of trusts, instruments and agreements
executed by or on behalf of Magma or any of its Subsidiaries to guaranty or
provide collateral security with respect to the Obligations including, without
limitation, any security agreement or pledge agreement, any guaranty of the
Obligations, any mortgage, and all instruments, documents and agreements
executed pursuant to the terms of the foregoing.
"Small Power QF" has the meaning ascribed thereto in
Section 4.1(bb).
"Special Transactions" means the receipt by Magma or any of its
Subsidiaries of non-operational cash flows from non-recurring transactions
(exclusive of any transaction contemplated by Sections 2.2(d) and 2.2(f) and
any transaction involving a BRPU Distribution).
"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 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.
"Subsidiary Guaranty Agreements" means the separate Guaranty
Agreements each dated as of the Closing Date, by the Subsidiaries of Magma
listed on Schedule 1.10 in favor of Borrower substantially in the form of
Exhibit I.
<PAGE>34
"Support Services Agreement" means the Support Services Agreement
dated as of the Closing Date between Borrower and Magma relating to the
provision of certain services by Borrower to Magma and Magma's Subsidiaries,
in form and substance satisfactory to the Agent.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement dated as
of the Closing Date among Borrower, Magma and Magma's Subsidiaries
substantially in the form of Exhibit M.
"Tender Offer" means the offer by CE Acquisition to acquire
12,400,000 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.
"Tender Offer Credit Facility" means the $245,600,000 credit
facility provided to Borrower to consummate the Acquisition pursuant to that
certain Credit Agreement dated as of December 21, 1994 by and among Borrower,
the banks and other financial institutions parties thereto and Credit Suisse,
New York Branch, as Agent.
"Tender Offer Documents" means the Offer to Purchase and all other
documents filed by or on behalf of Borrower or its Affiliates with the
Securities and Exchange Commission with respect to the Tender Offer.
"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 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
<PAGE>35
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.
"Total Exposed Debt" has the meaning ascribed thereto in Section
5.1(o).
"Tranche A Commitment" means, with respect to each Bank, the
Commitment of such Bank to make Tranche A Loans set forth on the Commitment
Schedule.
"Tranche A Loan" means any loan made pursuant to Section 2.1(a) and
designated by Borrower as a Tranche A Loan in a Notice of Borrowing or any
loan made pursuant to Section 2.1(a) and deemed a Tranche A Loan pursuant to
Section 2.1(b).
"Tranche B Commitment" means, with respect to each Bank, the
Commitment of such Bank to make Tranche B Loans set forth on the Commitment
Schedule.
"Tranche B Loan" means any loan made pursuant to Section 2.1(a) and
designated by Borrower as a Tranche B Loan in a Notice of Borrowing or any
loan made pursuant to Section 2.1(a) and deemed a Tranche B Loan pursuant to
Section 2.1(b).
"Tranche C Commitment" means, with respect to the applicable Banks,
the Commitment of such Bank to make Tranche C Loans set forth on the
Commitment Schedule.
"Tranche C Loan" means any loan made pursuant to Section 2.1(a) and
designated by Borrower as a Tranche C Loan in a Notice of Borrowing or any
loan made pursuant to Section 2.1(a) and deemed a Tranche C Loan pursuant to
Section 2.1(b).
"Type" means, with respect to any Loan, a Base Rate Loan or a
Eurodollar Rate Loan.
"UCC" means the Uniform Commercial Code of the State of New York, as
in effect from time to time.
"Vulcan" means the 34(gross) megawatt California geothermal project
owned by Vulcan/BN Geothermal Power Company, a Nevada general partnership.
<PAGE>36
"Vulcan General Partner Pledge Agreement" means the General Partner
Pledge Agreement dated as of the Closing Date between Vulcan Power and
Borrower substantially in the form of Exhibit H .
"Vulcan Power" means Vulcan Power Company, a Nevada corporation.
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.
Notwithstanding anything herein to the contrary, in connection with
determining whether Borrower is in compliance with the financial covenants set
forth in Section 5.3, no BRPU Subsidiary or its assets, revenues or
liabilities shall be included in such determination or the calculations in
connection therewith.
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
<PAGE>37
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 Tranche A Loans, Tranche B Loans and Tranche C Loans on the
Closing Date at the Applicable Lending Office in an amount equal to its
Tranche A Commitment, Tranche B Commitment and Tranche C Commitment,
respectively; provided that each Bank's commitment to make such Tranche A
Loans, Tranche B Loans and Tranche C Loans shall expire on the Termination
Date unless the Closing Date shall have occurred prior to such date. Each
Tranche A Loan, Tranche B Loan and Tranche C Loan shall be made by the Banks
ratably according to each Bank's Tranche A Commitment, Tranche B Commitment
and Tranche C Commitment, respectively. 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
<PAGE>38
time in the city where the Agency Office is situated) on the Banking Day prior
to the date the Loans are to be made. Such Notice of Borrowing shall specify
(i) the date of the Loans, (ii) the amount of each Loan, (iii) whether the
Loans are Tranche A Loans, Tranche B Loans or Tranche C Loans, (iv) the
requested interest rate option under Section 2.3(a) or (b) and (v) 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
<PAGE>39
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 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;
<PAGE>40
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 the Tranche A Loans, the Tranche B Loans and the Tranche C Loans on
the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
Tranche A Loans Tranche B Loans Tranche C Loans
<S> <C> <C> <C> <C> <C>
Repayment Repayment Repayment
Date Amount Date Amount Date Amount
April 30, 1995 $8,000,000 April 30, 2001 $37,500,000 April 30, 2002 $37,500,000
October 31, 1995 $8,000,000 October 31, 2001 $37,500,000 October 31, 2002 $37,500,000
April 30, 1996 $11,000,000
October 31, 1996 $11,000,000
April 30, 1997 $27,500,000
October 31, 1997 $27,500,000
April 30, 1998 $46,500,000
October 31, 1998 $46,500,000
April 30, 1999 $41,500,000
October 31, 1999 $41,500,000
April 30, 2000 $40,500,000
October 31, 2000 $40,500,000
</TABLE>
(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 in whole or in part the
outstanding principal amount of the Loans, together with all accrued and
unpaid interest on the principal amount being prepaid through the date of
prepayment, and any additional amounts owed by Borrower pursuant to Section
2.3(c), provided that each partial prepayment shall be in a minimum amount of
$1,000,000. If 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 such prepayment is a
<PAGE>41
prepayment of the entire outstanding amount of the Loans, such prepayment
shall be accompanied by the prepayment of all other Obligations.
(c) Mandatory Prepayments from Dividends, Etc. The Loans shall 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 Magma of any
dividends, loans, advances or other distributions (other than Permitted
Payments), or (without duplication of other payments or prepayments required
hereunder) any principal payments to Borrower under the CE Acquisition Secured
Term Note (other than regularly scheduled payments of principal consistent
with the schedule of payments set forth in Section 2.2(a)), 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,
together with accrued and unpaid interest on the principal amount being
prepaid through the date of prepayment and any additional amounts owed by
Borrower pursuant to Section 2.3(c). If such prepayment is a partial
prepayment of the outstanding amount of the Loans, such prepayments shall be
applied in accordance with Section 2.4(e), and 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.
(d) Prepayments from Asset Dispositions. Immediately upon receipt
by Borrower or any of its Subsidiaries of proceeds of any Asset Disposition
which are not covered by Section 2.2(j) or which are not required to be paid
to any Person or reinvested pursuant to any Magma Project Document in effect
on the date hereof, Borrower shall prepay the Loans in an amount equal to the
Net Proceeds of such Asset Dispositions, together with all accrued and unpaid
interest on the principal amount being prepaid through the date of prepayment
and any additional amounts owed by Borrower pursuant to Section 2.3(c). If
such prepayment is a partial prepayment of the outstanding amount of the
Loans, such prepayments shall be applied in accordance with Section 2.4(e),
and 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. Notwithstanding the foregoing, in the event Borrower has an
accrued tax liability with respect to an Asset Disposition or reasonably
expects the proceeds of such Asset Disposition to be reinvested within 180
days in productive assets then used or usable in the business of Magma or any
of Magma's Subsidiaries which used the asset which was the subject of such
Asset Disposition, then Borrower shall deliver such proceeds to Agent to be
held by Agent in a cash collateral account bearing interest payable to
Borrower. Upon Borrower's request and after Agent has received sufficient
evidence of the application of such Net Proceeds, Agent shall
<PAGE>42
release such Net Proceeds to Borrower for payment of the accrued tax liability
or for reinvestment as described above. In the event Borrower is not required
to pay all or any portion of the accrued tax liability or fails to reinvest
such proceeds within 180 days, Borrower authorizes and directs Agent to apply
such amount as a prepayment of the Loans in accordance with this Section
2.2(d). Notwithstanding anything to the contrary herein contained, no
reinvestment of Net Proceeds derived from Special Transactions required to be
applied to the prepayment of the Loans shall be permitted. Nothing contained
in this Section 2.2(d) is intended to supersede the other provisions of this
Agreement pertaining to the sale or acquisition of assets.
(e) Prepayments from Excess Cash Flow. No later than April 30,
1996, and no later than April 30 of each fiscal year of Borrower thereafter,
Borrower shall prepay the Loans, together with all accrued and unpaid interest
on the principal amount being prepaid through the date of prepayment and any
additional amounts owed by Borrower pursuant to Section 2.3(c), in an amount
equal to 75% of Excess Cash Flow for the immediately preceding fiscal year
calculated on the basis of the audited financial statements for such fiscal
year delivered to Agent pursuant to Section 5.1(h)(ii). The remaining 25% of
Excess Cash Flow for such period shall be retained by Magma and may be applied
by Magma in accordance with Section 2.11. If such prepayment is a partial
prepayment of the outstanding amount of the Loans, such prepayments shall be
applied in accordance with Section 2.4(e), and 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.
(f) Prepayments from Equity Offerings. Subject to the proviso to
this sentence, in the event that Magma issues capital stock or other equity
interests, no later than the third Banking Day following the date of receipt
of the proceeds from any sale of such stock, Borrower shall prepay the Loans
in an amount equal to such proceeds, net of underwriting discounts and
commissions and other reasonable costs associated therewith, together with all
accrued and unpaid interest on the principal amount being prepaid through the
date of prepayment and any additional amounts owed by Borrower pursuant to
Section 2.3(c); provided that notwithstanding the foregoing, Magma may not
issue any capital stock except to Borrower, which capital stock or other
equity interest shall be pledged to Agent as collateral securing the
Obligations. If such prepayment is a partial prepayment of the outstanding
amount of the Loans, such prepayments shall be applied in accordance with
Section 2.4(e), and if such prepayment is a prepayment of the entire
outstanding amount of the Loans, any other Obligations then due and payable.
<PAGE>43
(g) Prepayments from Refinancings of Debt of Magma and its
Subsidiaries. Immediately upon receipt by Magma or any of its Subsidiaries of
unrestricted and uncommitted proceeds from the refinancing of any of its Debt
(other than the Loans), Borrower shall cause such proceeds (net of expenses)
to be applied to the prepayment of the Loans, together with all accrued and
unpaid interest on the principal amount being prepaid through the date of
prepayment and any additional amounts owed by Borrower pursuant to Section
2.3(c). If 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 such prepayment is a prepayment of the entire outstanding
amount of the Loans, such prepayment shall be accompanied by the payment of
all other Obligations.
(h) Prepayment from Pre-Funded Equity.
(i) If the Financial Closing for Fish Lake does not occur on or
before December 31, 1997, then no later than January 2, 1998 Borrower
shall prepay the Loans in an amount equal to the Fish Lake Pre-Funded
Equity Amount, together with all accrued and unpaid interest on the
principal amount being prepaid through the date of prepayment and any
additional amounts owed by Borrower pursuant to Section 2.3(c). If the
Financial Closing for Alto Peak does not occur on or before December 31,
1998, then no later than January 4, 1999 Borrower shall prepay the Loans
in an amount equal to the Alto Peak Pre-Funded Equity Amount, together
with all accrued and unpaid interest on the principal amount being
prepaid through the date of prepayment and any additional amounts owed by
Borrower pursuant to Section 2.3(c). If any of the foregoing prepayments
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
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.
(ii) If Borrower or Magma decides prior to December 31, 1997 not
to develop Fish Lake, Borrower shall, promptly upon making such decision,
send Agent written notice thereof, and shall prepay the Loans in an
amount equal to the Fish Lake Pre-Funded Equity Amount on the next
regularly scheduled principal payment date, together with all accrued and
unpaid interest on the principal amount being prepaid through the date of
prepayment and any additional amounts owed by Borrower pursuant to
Section 2.3(c). If Borrower or Magma decides prior to December 31, 1998
not to develop Alto Peak, Borrower shall send Agent written notice
thereof, and shall prepay the Loans in an amount equal to the Alto Peak
Pre-Funded Equity Amount on
<PAGE>44
the next regularly scheduled principal payment date, 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). If any of the foregoing
prepayments 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
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.
(iii) If the amount of equity required to complete the
construction of Alto Peak or Fish lake is less than the Alto Peak
Pre-Funded Equity Amount or the Fish Lake Pre-Funded Equity Amount,
respectively, then upon the completion of the construction of Alto Peak
and Fish Lake, as applicable, Borrower shall prepay the Loans in an
amount equal to the excess of (x) the Alto Peak Pre-Funded Equity Amount
or the Fish Lake Pre-Funded Equity Amount, as the case may be, over
(y) the amount of equity actually required to complete the construction
of Alto Peak and Fish Lake, respectively, together with all accrued and
unpaid interest on the principal amount being prepaid through the date of
prepayment and any additional amounts owed by Borrower pursuant to
Section 2.3(c). If any of the foregoing 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 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.
(i) Prepayments from Refinancing of Tranche B and Tranche C Loans.
Borrower may refinance all or a portion of the Tranche B Loans and Tranche C
Loans provided that (i) the terms and conditions of such refinancing shall be
acceptable to the Banks holding the Tranche A Loans, (ii) Borrower shall
prepay the Tranche B Loans and Tranche C Loans in an amount equal to the
proceeds of any such refinancing and (iii) the parties refinancing the
Tranche B Loans and the Tranche C Loans shall share ratably in the Collateral
securing the Obligations, and the terms thereof shall be satisfactory to the
Banks holding the Tranche A Loans and the parties refinancing the Tranche B
Loans and the Tranche C Loans. At the time of such repayment, Borrower shall
also pay accrued and unpaid interest on the Tranche B Loans and Tranche C
Loans through the date of repayment and any additional amounts owned by
Borrower to the holders of the Tranche B Loans and Tranche C Loans pursuant to
Section 2.3(c). If such refinancing is a refinancing of the entire
outstanding amount of the Tranche B Loans and the Tranche C Loans, Borrower
shall also pay all other Obligations owed to the holders of the
<PAGE>45
Tranche B Loans and Tranche C Loans other than any amount owed in respect of
the Tranche A Loans held by such Persons.
(j) Prepayments from Special Transactions. Promptly upon receipt
by Borrower or Magma or any of its Subsidiaries of proceeds of any Special
Transactions (and if such proceeds are not currently available for
distribution to Magma in the case of receipt of such proceeds by a Project
Owner, promptly after such proceeds are so available for distribution to
Magma), Borrower shall prepay the Loans in an amount equal to 75% of the
amount of such proceeds, together with all accrued and unpaid interest on the
principal amount being prepaid through the date of prepayment and any
additional amounts owed by Borrower pursuant to Section 2.3(c), and the
remaining 25% of such amount shall be retained by Magma and may be applied by
Magma in accordance with Section 2.11. If any such prepayment is a partial
prepayment of the outstanding amount of the Loans, such prepayments shall be
applied in accordance with Section 2.4(e), and 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.
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 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
<PAGE>46
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
<PAGE>47
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 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
<PAGE>48
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
<PAGE>49
(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 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.
<PAGE>50
(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. Subject to Section 2.2(i), amounts
received by Agent for application to the principal of any Loans shall be
applied to the pro rata payment of the remaining Scheduled Installments of the
Tranche A Loans, Tranche B Loans and Tranche C Loans (except that prepayments
pursuant to Section 2.2(e) and Section 2.2(j) shall be applied as follows:
until the Tranche A Loans are paid in full, 70% of such amounts shall be
applied to the pro rata payment of the Tranche A Loans and 30% of such amounts
shall be applied to the pro rata payment of the Tranche B Loans and the
Tranche C Loans, and thereafter all such amounts shall be applied to the pro
rata payment of the Tranche B Loans and the Tranche C Loans) (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 payment of the outstanding Eurodollar Rate Loans
(applied to the Eurodollar Rate Loans designated by Borrower), and (ii) if
received after the Final Maturity Date to the ratable payment of all the
outstanding Loans, subject to Section 2.3(c); provided, that if Borrower fails
to designate which Eurodollar Rate Loans to which payments are to be applied,
Agent shall apply such payment ratably to all outstanding Eurodollar Rate
Loans. In connection with prepayments pursuant to Section 2.2(d), (e), (f),
(g), (h) or (i), in lieu of immediately repaying the Loans and the other
amounts due as described therein, Borrower may irrevocably deposit with Agent
the proceeds of such prepayments, and Agent shall apply such proceeds to the
repayment of the Loans and the other amounts due as described therein on the
immediately succeeding date on which interest on the Loans is due and payable,
and until such application, interest shall continue to accrue on the amount to
be repaid.
(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
<PAGE>51
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 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 J 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.
<PAGE>52
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
<PAGE>53
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, 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
<PAGE>54
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), if 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)).
<PAGE>55
(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 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.
<PAGE>56
(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
<PAGE>57
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
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 Collateral Security. As collateral security for the
Obligations:
(a) On the Closing Date, Borrower shall (i) execute and deliver the
Borrower Pledge Agreement to Agent for the benefit of the Banks, (ii) cause
Magma and Magma's Subsidiaries to, execute and deliver, as applicable the
Magma Pledge Agreement, the Cash Management Agreement, the Guaranty
Agreements, the Security Agreements, the Account Pledge Agreements and the
Blocked Account Agreements and (iii) assign to the Agent for the benefit of
the Banks its interests in each of such Security Documents made by Magma and
Magma's Subsidiaries.
(b) Within 60 days after the Closing Date, Borrower shall (i) cause
MOC to transfer, subject to the receipt of any necessary third party consents,
which Borrower shall use reasonable and diligent efforts to obtain, all of its
right, title and interest in and to Hoch, Elmore and Leathers to Leyte,
(ii) cause Leyte, subject to the receipt of the consent of the Mission Entity,
which Borrower shall use reasonable and diligent efforts to obtain, to pledge
to Borrower and grant a security interest in, all of its right, title and
interest in and to the Project Owner of Hoch pursuant to a Leyte General
Partner Pledge Agreement, (iii) cause Leyte, subject to the receipt of the
consent of the Mission Entity, which Borrower shall use reasonable and
diligent efforts to obtain, to pledge to Borrower and grant a security
interest in all of its right, title and interest in and to the Project Owner
of Elmore pursuant to a Leyte General Partner Pledge Agreement, (iv) cause
Leyte, subject to the receipt of the consent of the Mission Entity, which
Borrower shall use reasonable and diligent efforts to obtain, to pledge to
Borrower and grant a security interest in all of its right, title and interest
in and to the Project Owner of Leathers pursuant to a Leyte General Partner
Pledge Agreement, (v) cause Vulcan Power, subject to the receipt of the
consent of the Mission Entity, which Borrower shall use reasonable and
diligent efforts to obtain, to pledge to Borrower and grant a security
interest in all of its right, title and interest in and to the Project Owner
of Vulcan pursuant to the Vulcan General Partner Pledge Agreement, (vi) cause
Magma, subject to the receipt of the consent of the Mission Entity, which
Borrower shall use
<PAGE>58
reasonable and diligent efforts to obtain, to pledge to Borrower and grant a
security interest in all of its right, title and interest in and to the
Project Owner of Hoch pursuant to a Magma Limited Partner Pledge Agreement,
(vii) cause Magma, subject to the receipt of the consent of the Mission
Entity, which Borrower shall use reasonable and diligent efforts to obtain, to
pledge to Borrower and grant a security interest in all of its right, title
and interest in and to the Project Owner of Elmore pursuant to a Magma Limited
Partner Pledge Agreement, (viii) cause Magma, subject to the receipt of the
consent of the Mission Entity, which Borrower shall use reasonable and
diligent efforts to obtain, to pledge to Borrower and grant a security
interest in all of its right, title and interest in all of its right, title
and interest in and to the Project Owner of Leathers pursuant to a Magma
Limited Partner Pledge Agreement and (ix) assign its rights under the Security
Documents referred to in clauses (ii) through (viii), inclusive, to Agent for
the benefit of the Banks.
(c) Borrower shall, and shall cause Magma and Magma's Subsidiaries
to, execute and deliver all such other Security Documents as may be required
pursuant to Sections 5.1(t) and 5.1(u) of this Agreement.
(d) Subject to compliance with Section 5.1(p), if the construction
of Alto Peak or Fish Lake, as applicable, is financed and any of the Security
Documents conflicts with the terms of such financing, Agent and the Banks
agree to reasonably cooperate with such lenders to achieve a resolution of any
such conflicts including, where required by such lenders, the release on
behalf of the Banks by the Agent of the Liens in favor of the Banks on assets
or other interests related to such projects without the requirement of any
consent of the Banks; provided, however, that except to the extent waived by
Majority Banks after giving effect to such release the Loans will be
collateralized with respect to the assets or other interests pertaining to
such projects at least to the same extent as the Loans are collateralized with
respect to assets or other interests related to similarly situated Magma
Projects. Any such restructuring shall be without cost or expense to Agent or
any Bank and shall not require the payment of any additional consideration by
Borrower, Magma or any of their Subsidiaries. Upon and in connection with a
sale of the stock of Peak Power Corporation, Agent and the Banks agree to
release all Liens granted in connection with the Security Documents or
hereunder on the stock and assets of Peak Power Corporation.
Section 2.9 Limited Liability. Agent and each Bank agrees that,
subject to the proviso of this sentence, the Loans made hereunder are being
made on a non-recourse basis and that any claim against Borrower for the
repayment of any of the Obligations shall be made only against and shall be
limited to
<PAGE>59
the Collateral, and that no judgment, proceeding, whether legal or equitable,
with respect to any of the Obligations shall be obtained or enforced against
Borrower's assets (other than the Collateral) for the purpose of obtaining
payment of any of the Obligations; provided that the foregoing provisions
shall not apply to any claim by Agent or any Bank for (a) the payment of
(i) the fees due Agent or such Bank on or prior to the Closing Date, (ii) any
amounts due pursuant to Section 8.4 and (iii) any amounts payable by Borrower
pursuant to Sections 10(d) and 10(e) of the Borrower Pledge Agreement and
(b) the satisfaction of Borrower's obligation set forth in Section 5.1(w); and
provided, further, that it is understood and agreed that in no event shall
Borrower be personally liable for the repayment of the principal amount of, or
interest on, the Loans whether directly or indirectly through the application
of the indemnification provisions of any of the Credit Documents. 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
acting solely in such capacity for 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.
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 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 amount of,
or interest on, 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 amount of, or interest on, 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,
<PAGE>60
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).
Section 2.11 Available Amounts. Magma may at any time use
Available Amounts (an "Expenditure") for the purpose of (i) prepaying the
Loans, (ii) making Capital Expenditures, (iii) paying amounts which constitute
Magma Obligations as defined in the CECI Undertaking Agreement, (iv)
reimbursement of Borrower for advances made to Magma to fund Capital
Expenditures for any Magma Project, or (v) reimbursement of Borrower for
expenditures made by Borrower in performing its obligations under the CECI
Undertaking Agreement; provided, that Borrower shall not permit Magma to make
any such Expenditure unless (x) Magma was in compliance with the Excess Cash
Flow Debt Service Coverage Ratio for the prior fiscal year, (y) at the time of
such Expenditure, Borrower was in compliance with the provisions of Section
5.3(d) on the immediately preceding April 30 or October 31, as the case may be
(without regard to any funds deposited by the Borrower in the Concentration
Account to effect such compliance on that date), and (z) not less than three
Banking Days before such an Expenditure, Borrower shall have delivered to
Agent a certificate of a Responsible Officer describing in reasonable detail
the nature and amount of such Expenditure and the total of Available Amounts
after giving effect to such Expenditure (which shall be at least $1.00), and
certifying that no Default or Event of Default exists, or will exist after
giving effect to such Expenditure.
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 or Organizational Documents. A
copy of the certificate of incorporation or other organizational documents of
Borrower, CE Acquisition, Magma and each of Magma's Subsidiaries, and each
amendment thereto, certified by the Secretary of State of its incorporation or
other appropriate governmental authority as being a true and correct copy
thereof, such certificate or document to be dated a recent date prior to the
Closing Date.
<PAGE>61
(b) Certificate of Good Standing. For Borrower, CE Acquisition,
Magma and each of Magma's Subsidiaries, a certificate or other appropriate
document from the Secretary of State of its incorporation or other
governmental authority, listing the certificate of incorporation or other
organizational documents and each amendment thereto on file in his office and,
if available, certifying that (i) such amendments are the only amendments to
each such certificate of incorporation or other organizational documents on
file in his office, (ii) each of Borrower, CE Acquisition, Magma and each of
Magma's Subsidiaries has paid all franchise taxes to the date of such
certificate and (iii) each of the Borrower, CE Acquisition, Magma and each of
Magma's Subsidiaries 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, CE
Acquisition, Magma and each of Magma's Subsidiaries, to be qualified and/or
licensed to do business, certifying that Borrower, CE Acquisition, Magma or
such Subsidiary of Magma, 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, CE Acquisition,
Magma and each of Magma's Subsidiaries, copies of its by-laws or other
equivalent organizational documents, the resolutions of its Board of Directors
approving each Credit Document and each Merger 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 and
Merger Document, certified as of the Closing Date as true and correct in each
case by a Responsible Officer of Borrower, CE Acquisition or Magma or such
Subsidiary of Magma, as applicable.
(e) Incumbency Certificate. A certificate of a Responsible Officer
of each of Borrower, CE Acquisition, Magma and each of Magma's Subsidiaries
dated as of the Closing Date certifying the names and true signatures of the
officers of each of Borrower, CE Acquisition, Magma and each of Magma's
Subsidiaries authorized to sign each Credit Document and Merger Document to
which it is a party and the other documents to be delivered by it pursuant to
any Credit Document or any Merger Document.
(f) Opinions of Counsel. A favorable opinion of (a) Willkie Farr &
Gallagher, as counsel to Borrower, CE
<PAGE>62
Acquisition and Magma and its Subsidiaries, substantially in the form of
Exhibit N 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 O hereto, and to such other
matters as Agent or Majority Banks may reasonably request, (c) Lionel, Sawyer
& Collins, Nevada counsel to Borrower, Magma and its Subsidiaries,
substantially in the form of Exhibit P hereto, and (d) Stibbe Simont Monahan
Duhot, Netherlands counsel to Magma Netherlands, B.V., substantially in the
form of Exhibit P-1 hereto, and to such other matters as Agent or Majority
Banks may reasonably request, in each case dated the Closing Date; and copies
of all opinions delivered under the Merger Agreement, in each case addressed
to the Agents and the Banks and in form and substance satisfactory to Agent.
(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 100% of the
issued and outstanding Magma Shares after the Merger registered in the name of
Borrower, 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 amount set forth on Schedule 3.1(k) has been contributed, in
cash, in the form of equity, to the capital of CE Acquisition by Borrower, and
evidence that funds sufficient to pay the consideration required to consummate
the Merger have been deposited into a depository account or made available in
a manner satisfactory to Agent.
(l) Security Interest. Evidence satisfactory to Agent that it has,
for the benefit of the Banks, a valid and perfected priority security interest
in the Collateral on the Closing Date (subject only to Permitted Liens).
(m) CE Acquisition Secured Term Note and CE Acquisition Credit
Agreement. The original CE Acquisition Secured Term Note, endorsed by
Borrower to Agent, and an executed copy of the CE Acquisition Credit
Agreement, together with a duly executed instrument of assumption, in form and
substance
<PAGE>63
satisfactory to Agent, pursuant to which Magma assumes the obligations of
CE Acquisition under the CE Acquisition Secured Term Note and 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 Merger, 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 its Subsidiaries is in material
default under any material agreement, indenture, credit agreement or other
document to which it is a party; (f) concurrently with the making of the
Loans, the Merger has been consummated in accordance with the terms of the
Merger Agreement without any conditions to the consummation thereof having
been waived; (g) no event of default exists or, with the giving of notice, the
passage of time or both, would exist, or would arise as a result of the
consummation of the transactions contemplated hereby, under any of the
material Magma Project Documents; (h) no Default or Event of Default exists
under the Tender Offer Credit Facility (as such terms are defined therein).
(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 each of Borrower's and Magma's
annual audited financial statements for the fiscal year ended December 31,
1993 and Borrower's and Magma's unaudited interim financial statements for the
nine month period ended September 30, 1994.
(r) Performance of Agreements. Borrower, CE Acquisition and Magma,
as applicable, shall have performed all agreements which this Agreement, the
Credit Documents and the Merger 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 Merger and the
transactions
<PAGE>64
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 Merger. 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 Subsidiaries is a party that,
in the opinion of Agent, could reasonably be expected to have a Material
Adverse Effect.
(t) Merger. Concurrently with the making of the Loans, the Merger
shall have been consummated in accordance with the terms of the Merger
Agreement.
(u) Alto Peak, Fish Lake and Malitbog. Evidence satisfactory to
Agent that upon the consummation of the Merger, Magma will have available the
Alto Peak Pre-Funded Equity Amount, the Fish Lake Pre-Funded Equity Amount and
the Malitbog Pre-Funded Equity Amount.
(v) Merger Agreement. The Merger Agreement shall not have been
amended of modified without the prior written consent of Agent.
(w) Ownership of Alto Peak and Malitbog. Evidence satisfactory to
Agent that Magma directly or indirectly owns not less than 99% of the record
equity interest of Alto Peak and Malitbog and 100% of the beneficial equity
interest of Alto Peak and Malitbog.
(x) Material Adverse Effect. There shall not have occurred any
event that causes or could reasonably be expected to cause a Material Adverse
Effect since December 31, 1993.
(y) Tax Indemnity Agreement. Agent shall receive an executed copy
of the Tax Indemnity Agreement in form and substance satisfactory to Agent.
(z) CECI Undertaking Agreement. Agent shall receive an executed
copy of the CECI Undertaking Agreement.
(aa) Support Services Agreement. Agent shall have received an
executed copy of the Support Services Agreement in form and substance
satisfactory to Agent.
(bb) Pro Forma and Projections. Agent shall have received the Pro
Forma Balance Sheets and, at least five Banking Days prior to the Closing
Date, the Projections, in each case demonstrating compliance with the
financial covenants set forth in Section 5.3.
<PAGE>65
(cc) Certificates Relating to the Magma Projects. Agent shall have
received from Magma a certificate executed by a Responsible Officer certifying
that no event of default exists or with the giving of notice, the passage of
time or both would exist under any of the material Magma Project Documents and
that each of the material Magma Project Documents is in full force and effect.
(dd) Satisfaction of Obligations Under the Tender Offer Credit
Facility and the CE Acquisition Secured Term Note. Evidence satisfactory to
Agent that concurrently with the making of the Loans hereunder Borrower's
obligations under the Tender Offer Credit Facility and CE Acquisition's
obligations under the CE Acquisition Secured Term Note issued in the principal
amount of $245,600,000 in connection with the Tender Offer Credit Facility
have been satisfied in full.
(ee) Business Plan. Agent shall have received at least five Banking
Days prior to the Closing Date a final business plan for operating Magma in
form and substance satisfactory to Agent in its sole discretion.
(ff) Cash Balances. Evidence satisfactory to Agent that after
giving effect to the Merger and the transactions contemplated hereby, the Cash
Balances set forth in the Projections are available to Magma without
restriction or delay in the receipt thereof, evidence that such Cash Balances
shall exceed the sum of the Alto Peak Pre-Funded Equity Amount, plus the Fish
Lake Pre-Funded Equity Amount, plus the Malitbog Pre-Funded Equity Amount,
plus the pH Modification Expenditure Amount, and evidence that the receivables
and accrued rights to distributions from Project Owners of Magma and its
Subsidiaries (other than Project Owners) exceeds current payables of Magma and
its Subsidiaries (other than Project Owners). For purposes hereof, in
computing Cash Balances, the securities listed on Schedule 1.11 shall be
marked to market as of the close of business on February 22, 1995.
(gg) 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
<PAGE>66
and warrants to Agent and each Bank that the following statements are and,
after giving effect to the Merger, will be true, correct and complete:
(a) Organization. Borrower and each of 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 and the Merger Documents.
The execution, delivery and performance of each of the Credit Documents and
each Merger Document to which Borrower, Magma, CE Acquisition or any of their
respective Subsidiaries is a party are within its respective corporate powers
and have been duly authorized. Each of the Credit Documents and the Merger
Documents to which Borrower, Magma, CE Acquisition or any of their respective
Subsidiaries is a party has been validly executed and delivered by Borrower,
Magma, CE Acquisition or such Subsidiary, as applicable.
(c) Consents. The execution, delivery and performance of each of
the Credit Documents and the Merger Documents to which Borrower, Magma, CE
Acquisition or any of their respective Subsidiaries is a party and the
consummation of the Merger 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 Merger Documents and the consummation of the Merger
will not (i) violate (A) the certificate of incorporation or by-laws (or
comparable documents) of Borrower or any of its Subsidiaries, (B) any Law or
(C) any provision of any material contract, agreement, indenture or instrument
to which Borrower 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
Borrower or any of its Subsidiaries under,
<PAGE>67
or accelerate payments of amounts owed by Borrower or any of its Subsidiaries
to others under, any of the foregoing.
(e) Enforceability of Credit Documents and Merger Documents. Each
Credit Document and Merger Document to which Borrower, Magma, CE Acquisition
or any of their respective Subsidiaries is a party is a legal, valid and
binding agreement of Borrower, Magma, CE Acquisition or such Subsidiary, as
applicable, enforceable against Borrower, Magma 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; Sufficiency of Assets. Borrower and each of
its Subsidiaries have good, valid and sufficient title to their material
properties and assets free and clear of all Liens, except for Permitted Liens.
To the best of Borrower's knowledge, the services to be performed, the
materials to be supplied and the easements, licenses and other rights granted
or to be granted to each Project Owner pursuant to the terms of the applicable
Project Documents provide or will provide such Project Owner with all rights
and property interests required to enable such Project Owner (other than the
Project Owners of Alto Peak and Fish Lake) to obtain all services, materials
or rights (including access) required for the design, construction, start-up,
operation and maintenance of the applicable Magma Project Document, including
such Project Owner's full and prompt performance of its obligations, and full
and timely satisfaction of all conditions precedent to the performance by
others of their obligations, under the applicable Magma Project Documents,
other than those services, materials or rights that reasonably can be expected
to be obtainable in the ordinary course of business without material
additional expense or material delay. Borrower has no reason to believe that
the Project Owners of Alto Peak and Fish Lake will not be able to enter into
Project Documents, on commercially reasonable terms, that will enable such
Project Owner to obtain all services, materials or rights (including access)
required for the design, construction, start-up, operation and maintenance of
Alto Peak or Fish Lake, as applicable, on commercially reasonable terms.
(g) Compliance with Law. Borrower and each of 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
of its Subsidiaries or any of their respective properties or assets before any
court or governmental
<PAGE>68
department, commission, board, bureau, agency or instrumentality domestic or
foreign, except for any thereof which would not, in the aggregate, have a
Material Adverse Effect. There is no injunction, writ, preliminary
restraining order or any order of any nature issued by an arbitrator, court or
other governmental authority directing that any material aspect of the
transactions provided for in any of the Credit Documents not be consummated as
herein or therein provided.
(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 Merger 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.
(i) 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). 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. Such
financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently
throughout the
<PAGE>69
periods involved (except as approved by such accountants and as disclosed
therein). Borrower and its Subsidiaries, taken as a whole, are (and after
giving effect to the transactions contemplated by the Credit Documents and the
Merger Documents will be) Solvent.
(ii) Except as fully reflected in the financial statements
referred to above and agreements entered into in the ordinary course of
business which are not required to be reflected in such financial
statements in accordance with GAAP, there are no liabilities or
obligations with respect to Magma and its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) for the period to which such financial statements
relate which, either individually or in the aggregate, exceed $2,000,000.
Borrower does not know of any reasonable basis for the assertion against
Magma or any of its Subsidiaries of any liability or obligation of any
nature whatsoever for such relevant period that is not fully reflected in
the financial statements referred to above except for agreements entered
into in the ordinary course of business which are not required to be
reflected in such financial statements in accordance with GAAP which,
either individually or in the aggregate, exceed $2,000,000.
(l) No Material Adverse Effect. Since December 31, 1993, there has
been no Material Adverse Effect.
(m) Collateral. Borrower has good and marketable title to the
Magma Shares and 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. Upon delivery of the CE Acquisition Secured Term Note and
the Magma Shares to Agent 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
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 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 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. No event of force
majeure has occurred which could reasonably be expected to have a Material
Adverse Effect.
<PAGE>70
(o) No Burdensome Restrictions. No contractual obligation of
Borrower 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 with security interests and restrictive covenants,
including the ability to restrict cash distributions, would not constitute a
burdensome restriction hereunder.
(p) Taxes. Borrower 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 Borrower
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 Borrower 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.
<PAGE>71
(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.
(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 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.
(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.
(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.
<PAGE>72
(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.
(x) Investment Company Act. Neither Borrower 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 of its Subsidiaries is a "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 of
its Subsidiaries or relating to any real property currently or formerly owned,
leased or operated by Borrower or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
(ii) Neither Borrower 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 being spilled,
discharged or released on or from real property currently or formerly owned,
leased or operated by Borrower 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, Magma
or CE Acquisition contained in any Credit Document or Merger 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, the Merger Documents or the Merger 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
<PAGE>73
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 of its Subsidiaries. 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 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.
<PAGE>74
(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.
(cc) Information Disclosure Documents. None of the information with
respect to Borrower or its Subsidiaries or Magma or its Subsidiaries included
or incorporated by reference in the Information Statement or the Registration
Statement contained, in the case of the Information Statement or any
amendments or supplements thereto, at the time of the mailing of the
Information Statement and any amendments or supplements thereto, and at the
time of the Borrower Meeting to be held in connection with the Merger, or, in
the case of the Registration Statement, at the time it became effective and at
the Effective Time, 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. The Information Statement complies as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. The Registration Statement complies as to form in all
material respects with the provisions of the Securities Act, and the rules and
regulations promulgated thereunder. No representation or warranty made by
Borrower or Magma in the Information Statement or Registration Statement and
no statement contained in any certificate, list, exhibit or other instrument
specified therein, contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
(dd) SEC Filings of Magma. 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,
Magma's (i) Annual Reports on
<PAGE>75
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"). 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. 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.
(ee) 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.
(ff) CE Acquisition. CE Acquisition was organized on September 22,
1994 for the purposes of (i) making the Tender Offer, (ii) acquiring and
holding the shares of Magma 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, the commencement and
making of the Tender Offer and the consummation of the Merger.
(gg) 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
<PAGE>76
threatened against Borrower or any Material Subsidiary which could reasonably
be expected to have a Material Adverse Effect.
(hh) Additional Representations and Warranties. All representations
and warranties of Borrower, CE Acquisition and Magma set forth in Articles III
and IV of the Merger Agreement are incorporated herein by reference as if
fully stated herein and shall survive the termination of the Merger Agreement
for as long as any of the Obligations remain unpaid or unperformed, and such
representations and warranties are true and correct as though made as of the
date hereof.
(ii) Transactions With Affiliates. Set forth on Schedule 4.1(ii) is
a true, accurate and complete description of all transactions between Magma or
any of its Subsidiaries and any Affiliate of Magma or any of its Subsidiaries
(other than Magma or any Subsidiary of Magma) which since December 31, 1993
required or which will require the payment by Magma or any of its Subsidiaries
of an amount equal to or greater than $100,000 during any twelve-month period.
(jj) Bid Bonds, Guarantees, Etc. Set forth on Schedule 4.1(jj) is a
true, accurate and complete description of all surety, bid, operating and
performance bonds, performance guaranties and other similar instruments or
obligations with respect to Magma and its Subsidiaries.
(kk) Projections. The Projections have been prepared by Borrower in
light of the past operations of the business of Magma, and on the basis of
assumptions which are set forth therein, and (i) the assumptions related
thereto have been made in good faith with due care, (ii) the Projections,
taken as a whole, fairly present, and will fairly present, to the best of
Borrower's knowledge, expectations as to the matters covered thereby as of
their date and on the Closing Date, (iii) the Projections are based on
reasonable assumptions as to all factual and legal matters material to the
estimates therein (including interest rates and costs), (iv) the Projections
are in all material respects consistent with, and will be in all material
respects consistent with, the material provisions of the Magma Project
Documents, and (v) the Projections reflect all significant aspects of the
business plan referred to in Section 3.1(gg) and the transactions contemplated
by the Credit Documents, the Support Services Agreement and the Tax Indemnity
Agreement. Borrower has no reason to believe that Magma will be unable to
achieve the results set forth in the Projections.
(ll) Solvency. Each of Borrower and Magma is Solvent.
(mm) Patents, Licenses, Franchises and Formulas. No patents,
trademarks, service marks, trade names, copyrights,
<PAGE>77
licenses, franchises, formulas or agreements with respect to the usage of
technology or other permits are necessary for the construction, ownership,
operation or maintenance of any Magma Project (other than Alto Peak and Fish
Lake), or, to the best of Borrower's knowledge, will be necessary for the
construction, ownership, operation or maintenance of Alto Peak and Fish Lake,
except for the patents, trademarks, service marks, trade names, copyrights,
licenses, franchises, formulas, agreements or permits which the respective
Project Owner owns, or will own in the case of Alto Peak and Fish Lake, and
has, and will have in the case of Alto Peak and Fish Lake, good title to, free
and clear of all Liens (other than Permitted Liens), or which the respective
Project Owner has, or will have in the case of Alto Peak and Fish Lake, the
right to use to the extent necessary to permit the construction, ownership,
operation and maintenance of the applicable Magma Project in the manner
contemplated by the applicable Magma Project Documents.
(nn) Capitalization. The authorized capital stock or other equity
interests of Magma and each of its Subsidiaries, before and after giving
effect to the Merger, is as set forth on Schedule 4.1(nn). All issued and
outstanding shares of capital stock of Magma and each of its corporate
Subsidiaries are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens other than those granted under the
Security Documents, and such shares were issued in compliance with all
applicable state, federal and foreign Laws concerning the issuance of
securities. The capital stock or other equity interests of Magma and each of
its Subsidiaries is owned by the stockholders of Magma and such Subsidiaries,
as applicable, and in the amounts set forth on Schedule 4.1(nn). No shares of
the capital stock of or other equity interests of Magma or any of its
Subsidiaries, other than those described above, are issued and outstanding.
Except on Schedule 4.1(nn), there are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from Magma or any of its
Subsidiaries of any shares of capital stock or other securities or other
equity interests of any such entity.
(oo) Governmental Approvals. All governmental approvals necessary
under Law in connection with the grant by Borrower, Magma and Magma's
Subsidiaries of the Liens created by the Security Documents and the validity,
enforceability and perfection thereof and the exercise by the Agent or any
Bank, as the case may be, of its rights and remedies thereunder, have been
obtained. All governmental approvals necessary under Law in connection with
the due execution and delivery of, and performance by Magma and its
Subsidiaries of its obligations and the exercise of its rights under, the
Magma Project Documents in effect or required to be in effect as of the date
hereof, and the
<PAGE>78
construction, operation, maintenance and ownership of each Magma Project as
contemplated by the Magma Project Documents, all to the extent necessary to
avoid a Material Adverse Effect, have been obtained. Each of such
governmental approvals is validly issued, is in full force and effect, is not
subject to appeal and is free from conditions or requirements compliance with
which is reasonably likely to have a Material Adverse Effect. There is no
proceeding pending or, to the best knowledge of Borrower, threatened which is
reasonably likely to result in the recision, revocation, material
modification, suspension or determination of invalidity or limitation of
effectiveness of any such governmental approval. The information set forth in
each application and other written material submitted by or on behalf of Magma
or any of its Subsidiaries to the applicable Governmental Authority in
connection with each such governmental approval is accurate and complete in
all material respects. Borrower has no reason to believe that any
governmental approval that has not been obtained, but which will be required
in the future, for each Magma Project will not be granted in due course, on or
prior to the date when required and free from any condition or requirement
compliance with which is reasonably likely to have a Material Adverse Effect
or which Borrower does not reasonably expect to be able to satisfy. The Magma
Projects that have been constructed do, and the Magma Projects that have not
been constructed, if constructed in accordance with the applicable Project
Documents relating to such Magma Project will, conform to and comply in all
material respects with all covenants, conditions, restrictions and
reservations in the governmental approvals relating to such Magma Project and
the Magma Project Documents applicable thereto and all Laws all to the extent
necessary to avoid a Material Adverse Effect.
(pp) Bank Accounts. Schedule 4.1(pp) sets forth the account numbers
and location of all bank accounts of Magma and each of its Subsidiaries.
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
<PAGE>79
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 and Magma Project Documents. Comply, and
cause each of its Subsidiaries to comply, with the requirements of all
applicable Laws (including the maintenance of government approvals described
in Section 4.1(oo) in full force and effect) noncompliance with which could
have a Material Adverse Effect and cause each Project Owner to comply with
each Magma Project Document to which it is a party.
(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
<PAGE>80
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. Cause Magma and each of
Magma's Subsidiaries (including the Project Owners) to maintain 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.
(h) Reporting Requirements. Furnish to Agent with sufficient
copies for each Bank (as designated by Agent):
(i) Quarterly Financial Statements of Borrower and Magma. As
soon as available to any Person outside of Borrower 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 Magma, consolidated balance sheets of
Borrower and its Subsidiaries and consolidated and consolidating balance
sheets of Magma and its Subsidiaries as of the end of such quarter and
consolidated statements of operations, stockholders' equity and cash
flows of Borrower and its Subsidiaries and consolidated and consolidating
statements of operations, stockholders' equity and cash flows of Magma
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 Magma, 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;
<PAGE>81
(ii) Annual Financial Statements of Borrower and Magma. As soon
as available to any other Person and in any event within 90 days after
the end of each fiscal year of Borrower and Magma, the consolidated
balance sheets of Borrower and its Subsidiaries and the consolidated and
consolidating balance sheets of Magma and its Subsidiaries as of the end
of such fiscal year and the consolidated statements of operations,
stockholders' equity and cash flows of Borrower and its Subsidiaries and
the consolidated and consolidating statements of operations,
stockholders' equity and cash flows of Magma 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 (except as provided in the proviso set forth below) 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
Magma provided that with respect to the consolidated financial statements
of Magma and its Subsidiaries, the independent public accountants of
Borrower may rely on the financial statements audited by another
independent public accountant;
(iii) Accountants' Reports. Promptly upon receipt thereof,
Borrower or Magma, as applicable, will deliver copies of all significant
reports submitted to Borrower or Magma, as applicable, by independent
public accountants in connection with each annual, interim or special
audit of the financial statements of Borrower or Magma, 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
Pension Benefit Guaranty Corporation, copies of each notice received by
Borrower or any such ERISA Affiliate of the intention of the PBGC to
terminate any Pension Plan or to have a trustee appointed to administer
any Pension Plan;
<PAGE>82
(vi) Litigation. (i) Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality domestic or foreign affecting Borrower, any of its
Subsidiaries (other than Magma and its Subsidiaries) or any of their
respective assets or properties which could have a Material Adverse
Effect, and promptly after the occurrence thereof, notice of any material
development in any such actions, suits or proceedings; and (ii) promptly
after the commencement thereof, notice of all material actions, suits and
proceedings before any court or governmental department, commission,
board, bureau, agency, or instrumentality domestic or foreign affecting
Magma, any of Magma's Subsidiaries or any of their respective assets or
properties, and promptly after the occurrence thereof, notice of any
material development in any such actions, suits or proceedings;
(vii) Quarterly Officer's Certificate. Together with the
financial statements referred to in Section 5.1(h)(i), 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 and (ii) the absence of a Material Adverse Effect 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 fiscal quarter;
(viii) 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;
(ix) 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
<PAGE>83
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;
(x) 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;
(xi) 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
<PAGE>84
pursuant to Section 4202 of ERISA; provided that such notice shall be required
for the event described in clause (1) above with respect to Multiemployer
Plans only after Borrower has obtained knowledge or has reason to know of such
event. Borrower will notify Agent and each Bank in writing within two (2)
Banking Days of Borrower or any of its Subsidiaries 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;
(xii) Transactions With Affiliates. Within 10 days after the end
of each fiscal quarter of Magma, Borrower will deliver to Agent a
description of any transaction that occurred during such fiscal quarter
between Magma or any of its Subsidiaries and any Affiliate of Magma or
any of its Subsidiaries requiring payments by Magma or any of Magma's
Subsidiaries in excess of $100,000 for any 12-month period;
(xiii) Annual Projections; Annual Budget. Within 30 days prior to
the commencement of each fiscal year of Magma, Borrower will deliver to
Agent (with sufficient copies for each Bank) (A) consolidated and
consolidating projections of the operations of Magma and its Subsidiaries
for the immediately succeeding fiscal year and each fiscal year
thereafter through and including the fiscal year ending immediately after
the Final Maturity Date, such projections to contain the types of
information set forth on the Projections and (B) an annual operating
budget for Magma and its Subsidiaries (including the Project Owners) on a
consolidated basis which shall establish that Magma and its Subsidiaries
will be in compliance, on a pro forma projected basis, with the financial
covenants contained in Section 5.3, such projections and budgets to be
accompanied by the certificate set forth in paragraph (xiv) below, such
budget to be satisfactory to Agent;
(xiv) Projections and Budget Certificate. Together with the
projections and budgets to be delivered pursuant to paragraph (xiii)
above, a certificate executed by the chief financial officer of Borrower
certifying that (i) the assumptions related thereto have been made in
good faith with due care, (ii) the projections or budgets as applicable,
taken as a whole, fairly present, and will fairly present, to the best of
Borrower's knowledge, expectations as to the matters covered thereby as
of their date, (iii) the projections or budgets as applicable, are based
on reasonable assumptions as to all factual and legal matters material to
the estimates therein (including interest rates and costs) and (iv) the
projections or
<PAGE>85
budgets as applicable, are in all material respects consistent with, and will
be in all material respects consistent with, the material provisions of the
Magma Project Documents;
(xv) Debt Service Coverage Ratio Compliance Certificate. No
later than 90 days after each fiscal year of Magma, Borrower shall
deliver to Agent (with sufficient copies for the Banks) a certificate,
executed by a Responsible Officer of Borrower, demonstrating that, based
on the annual budget of Magma and its Subsidiaries for the then current
fiscal year, Borrower will be in compliance, on a pro forma projected
basis, with the financial covenant contained in Section 5.3(f) for such
fiscal year, such certificate to be in form and substance satisfactory to
Agent. No later than August 15th of each fiscal year of Magma, Borrower
shall deliver to Agent (with sufficient copies for the Banks) a
certificate, executed by a Responsible Officer of Borrower, stating that
no event has occurred and Borrower has no reason to believe that any
event will occur which would cause Borrower not to be in compliance with
Section 5.3(f) for the then current fiscal year, such certificate to be
in form and substance satisfactory to Agent;
(xvi) Project Information. Without duplication of any of the
foregoing:
(A) as soon as is available to any other Person and in any
event within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of each Project Owner balance sheet of
such Project Owner as of the end of such quarter and statements of
operations, partners' or stockholders', as applicable, equity and
cash flows of such Project Owner 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 such Project
Owner, as having been prepared in accordance with GAAP consistently
applied, together with a certificate as of the end of such fiscal
quarter executed by a Responsible Officer of such Project Owner
certifying that no event of default has occurred or would occur with
the giving of notice, the passage of time or both under any Project
Document to which it is a party;
(B) as soon as available to any other Person, and in any event
within 90 days after the end of such fiscal year of each Project
Owner, the balance sheet of
<PAGE>86
such Project Owner as of the end of such fiscal year and the statements of
operations, partners' or stockholders', as applicable, equity and cash flows
of such Project Owner for such fiscal year, in the case of such 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 certificate as of the end of such fiscal year executed by a
Responsible Officer of such Project Owner certifying that no event of default
has occurred or with the giving of notice, the passage of time or both would
constitute an event of default under any Project Document to which it is a
party;
(C) as soon as available and in any event within 30 days prior
to the commencement of each Project Owner's fiscal year, an annual
operating budget of such Project Owner accompanied by a statement of
the chief financial officer of such Project Owner that, to the best
of his or her knowledge, the budget is a reasonable estimate for the
period covered thereby;
(D) as soon as available and in any event within 30 days prior
to the commencement of each Project Owner's fiscal year, such
Project Owner's forecasted consolidated and consolidating balance
sheets, profit and loss statements, cash flow statements and
capitalization statements for the immediately succeeding 3 fiscal
years, together with (i) a certificate from the chief financial
officer of Borrower certifying that such forecasted financial
statements are consistent with such Project Owner's historical
financial statements and (ii) a statement of the underlying
assumptions;
(E) simultaneously with the delivery to the lenders under the
Magma Project Credit Agreements, all documents and information
required to be delivered to such lenders (and not covered by the
foregoing) for each of the Financed Magma Projects; and
(F) as soon as available and in any event within five Banking
Days after Borrower has knowledge thereof, written notice of:
(1) any information, development or knowledge of any
adverse change in the business, prospects, properties,
condition (financial or otherwise) or operations, present or
prospective,
<PAGE>87
of any party to any of the Magma Project Documents which are material to such
party's ability to perform thereunder or which has had or may reasonably be
expected to have a Material Adverse Effect and of any other event which has
had, or may reasonably be expected to have, a Material Adverse Effect;
(2) (x) any material dispute involving any Project Owner
or any other party to any of the related Magma Project
Documents and relating to any of the transactions contemplated
by any such document (and promptly upon any decision relating
to any such dispute having been made, a copy of such decision),
and (y) any litigation, investigation, proceeding, material
claim or material controversy (a) involving or affecting any
Project Owner or any of its properties, revenues or assets, or
the related Magma Project, (b) involving or affecting any
partner of such Project Owner, or any of their properties,
revenues or assets, in each case which relate to the applicable
related Magma Project and as to which there is a reasonable
possibility of a Material Adverse Effect, (c) involving or
affecting any other party to any of the related Magma Project
Documents or any of their properties, revenues or assets and as
to which there is a reasonable possibility of a Material
Adverse Effect, (d) which could cause a Default or an Event of
Default, or (e) for the purpose of revoking, terminating,
withdrawing, suspending, modifying or withholding and
governmental approvals necessary for the performance by any
party to any of the related Magma Project Documents of their
respective obligations, or the exercise of their respective
rights, under such Magma Project Documents, or for the
construction, operation or maintenance of the applicable Magma
Project in the manner contemplated by the related Magma Project
Documents;
(3) any proposal by any governmental authority to acquire
compulsorily any Project Owner or a substantial part of such
Project Owner's business or assets;
(4) any fire or other casualty affecting a Magma Project
in any material respect;
<PAGE>88
(5) any substantial dispute between any Project Owner,
any partner of such Project Owner or Magma and any governmental
authority relating to the related Magma Project;
(6) any actual or proposed termination, rescission,
discharge (otherwise than by performance), amendment or waiver
or indulgence under, any material provision of any Magma
Project Document;
(7) any material notice or correspondence received or
initiated by any Project Owner relating to a governmental
approval or other license or authorization necessary for the
performance by it of its obligations under the related Magma
Project Documents;
(8) any Lien (other than a Permitted Lien) becoming
enforceable over any of a Project Owner's assets; and
(9) any proposed material change in the nature or scope
of any Magma Project or the business or operations of any
Project Owner and any one or more events, conditions or
circumstances that exist or have occurred which are reasonably
likely to have a Material Adverse Effect;
(xvii) Additional Information. Such other information respecting
the condition or operations, financial or otherwise, of Borrower or its
Subsidiaries as any Bank through Agent may from time to time reasonably
request; and
(xviii) 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;
<PAGE>89
(C) Magma 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 Magma and the
reasons why such Person has become a Material Subsidiary;
(E) any proposal by any public authority to condemn or acquire
any material assets or business of Borrower or any Material
Subsidiary;
(F) any event or occurrence with respect to Magma or any of
its Subsidiaries or any of its respective businesses, assets or
properties which gives rise to a claim in excess of $5,000,000 under
any insurance policy insuring Magma or any of its Subsidiaries or
any of its respective businesses, assets or properties;
(G) any change of any Law, the introduction of legislation
which is reported out of committee or as to which public hearings
have been scheduled or held that, if enacted, would result in such
change of Law, or any other proposed change of Law which Borrower
reasonably believes may become effective, which change or proposed
change is reasonably likely to have a Material Adverse Effect; and
(H) any matter which has or might reasonably be expected to
have a Material Adverse Effect.
(i) Use of Proceeds. Use the proceeds of the Loans solely to fund
the loan to CE Acquisition by Borrower under the CE Acquisition Credit
Agreement and cause CE Acquisition to apply such proceeds to the payment of
the cash portion of the consideration to be paid by CE Acquisition under the
Merger Agreement.
(j) Permit Distributions. To the extent possible, cause the
Project Owners and the other Subsidiaries of Magma to distribute available and
unrestricted funds to Magma in amounts that are, in the aggregate, sufficient
to make all payments due under the CE Acquisition Secured Term Note
(including, without limitation, both regularly scheduled payments and
mandatory prepayments).
(k) Maintenance of Concentration Account. Borrower shall cause
Magma to maintain with Agent the Concentration Account and shall cause Magma
and its Subsidiaries to comply with the terms of the Cash Management
Agreement.
<PAGE>90
(l) Separate Businesses. Borrower shall, except as set forth on
Schedule 5.1(l), cause Magma and its Subsidiaries to publicly conduct its
business as an entity distinct from Borrower and its Subsidiaries (other than
Magma and its Subsidiaries), including, without limitation, (A) paying its own
expenses from its own funds, (B) maintaining separate books, records and bank
accounts, (C) maintaining and issuing its own financial statements,
(D) maintaining separate assets and liabilities, (E) maintaining adequate
capitalization financing and working capital, (F) engaging in its business
activities separate and distinct from the conduct of its business by Borrower
and its Subsidiaries (other than Magma and its Subsidiaries), (G) observing
corporate formalities, (H) not commingling funds or assets with Borrower or
any of its Subsidiaries (other than Magma and its Subsidiaries and
(I) separately entering into and performing contracts.
(m) Resistance of Regulatory Change. If any litigation,
investigation or proceeding is commenced which causes, or may cause, or any
Governmental Authority shall issue (or propose to issue) any order, judgment,
regulation, decision or interpretation the effect of which is, or may cause
(i) a Material Adverse Effect or (ii) a rescission, termination, repeal,
invalidation, suspension, injunction, or a material amendment or modification
of any license, permit, authorization or Magma Project Document, or any part
thereof, with respect to Magma or any Magma Project, and, if in the opinion of
Borrower, there is a reasonable likelihood that such litigation, investigation
or proceeding or action by any Governmental Authority could have a Material
Adverse Effect, Borrower shall cause Magma to use commercially reasonable
efforts, in light of the circumstances at the time, to (A) contest and resist
any such litigation, investigation or proceeding or such action by any
Governmental Authority, (B) pursue all remedies and appeals as reasonably
necessary in connection therewith and (C) take such other lawful action, in
each case as Borrower shall determine to be reasonably necessary or desirable,
in light of all relevant circumstances, to prevent such litigation,
investigation or proceeding or such action by any Governmental Authority from
becoming final and nonappealable or otherwise irrevocable, to attempt to
postpone the effectiveness of such litigation, investigation or proceeding or
such action by any Governmental Authority, and to cause such litigation,
investigation or proceeding or such action by any Governmental Authority to be
terminated, revoked, amended or modified so as to eliminate the reasonable
likelihood of such effect.
(n) Energy Regulatory Status.
(i) Cause the owner or operator of each of the Plants under
development by Borrower or any of its
<PAGE>91
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.
(o) Interest Rate Agreement.
(i) Within 30 days after the Closing Date, Borrower will enter
into an Interest Rate Agreement, in form and substance satisfactory to
Agent, pursuant to which (a) interest rates on a notional amount of
$200,000,000 of the Loans is protected against increases in the
Eurodollar Rate above 8.5% per annum, for a period of 3 years from the
Closing Date and (b) interest rates on an additional notional amount of
$200,000,000 of the Loans and/or project financing Debt of Magma or its
Subsidiaries is protected against increases in the Eurodollar Rate above
9.0% per annum, for a period of 3 years from the Closing Date.
(ii) If, on any principal payment date (a "Hypothetical Rate
Determination Date") hereunder after the second anniversary of the
Closing Date, a 100 basis point (1.0%) per annum increase in each rate of
interest then in effect on each component of the Total Exposed Debt (each
interest rate as so increased being referred to herein as the "Applicable
Hypothetical Rate") would result in (a) an increase of more than
$4,000,000 in the total interest payments due on the Total Exposed Debt
(as defined below) for the 12-month period immediately succeeding such
Hypothetical Rate Determination Date and (b) the Debt Service Coverage
Ratio for such 12-month period, on a pro forma projected basis, to be
less than the minimum Debt Service Coverage Ratio required for such
period under Section 5.3(f), Borrower shall, or shall cause the
Subsidiary of Magma that is subject to the applicable Total Exposed Debt
to, enter into an Interest Rate Agreement(s), in form and substance
satisfactory to Agent, pursuant to which interest rates on a notional
amount equal to 50% of the Total Exposed Debt shall be protected against
increases
<PAGE>92
in the interest rates applicable thereto above such rates and for such period
or periods as may be agreed to by Borrower and Agent. In the event that
Borrower and Agent fail to agree on a rate and period within 30 days of the
Applicable Hypothetical Rate Determination Date, the rates under the Interest
Rate Agreement(s) shall be set at 200 basis points (2.0%) above the rates then
in effect on the applicable Total Exposed Debt and for a period equal to the
lesser of three years and the remaining scheduled term of the Loans (including
any refinancing of the Tranche B Loans and the Tranche C Loans in the capital
markets). In calculating the effect of the Applicable Hypothetical Rates
under clauses (a) and (b) above, the actual interest rates and the Applicable
Hypothetical Rates shall be applied to the weighted average daily balance of
the applicable Total Exposed Debt for the relevant 12-month period, taking
into account scheduled amortization during such period, but not prepayments of
any type.
(iii) The term "Total Exposed Debt" means (unless such Debt is
subject to fixed rate interest charges, to be approved by Agent if such
rate is in excess of 11% per annum) (i) the Loans, (ii) the Salton Sea
Project credit facility, (iii) the Leathers Project credit facility,
(iv) the Hoch Project credit facility, (v) the Elmore Project credit
facility and (vi) the Fish Lake Project credit facility; provided that
the principal amount outstanding under the Fish Lake Project credit
facility shall be included in the definition of Total Exposed Debt only
if the interest rate thereunder is in excess of 10.5% during construction
of the Fish Lake Project and 11% during operation of the Fish Lake
Project, and shall include any refinancing, restructuring, extensions or
renewals of the Debt described in clauses (i) through (vi) above.
(p) Alto Peak and Fish Lake Development Certificates. At least 10
Banking Days prior to the Financial Closing of each of Alto Peak and Fish Lake
(the "10 Day Period"), deliver to Agent (i) a description of the financing
terms, construction budget, engineering report and other information relating
to the construction, financing and development of Alto Peak or Fish Lake, as
applicable, as Agent may request, such information to be in form and substance
satisfactory to Agent and (ii) a certificate certifying that the relevant
Project pro forma cash flows, taken as a whole, materially conform to the
Projections, such certificate to be in form and substance satisfactory to
Agent. Neither Borrower nor Magma shall use or apply the Alto Peak Pre-Funded
Equity Amount or the Fish Lake Pre-Funded Equity Amount in connection with the
construction, financing or development of Alto Peak or Fish Lake,
respectively, if, after the information relating thereto has been delivered to
Agent, the
<PAGE>93
Majority Banks notify Borrower in writing during the 10 Day Period that the
terms of construction, financing or development (including, but not limited
to, the applicable budgets) are not acceptable to them.
(q) Bank Accounts. Cause Magma and, if required by Agent, cause
Magma's Subsidiaries to maintain all of its or their bank accounts with Agent
other than bank accounts that Magma or any of its Subsidiaries is required to
maintain with another Person pursuant to the terms of any Magma Project
Document.
(r) Syndication Efforts. Make itself reasonably available to
assist Agent in syndicating the Commitments and the Loans. Without limiting
the generality of the foregoing, Borrower shall, at the request of Agent,
assist Agent and otherwise cooperate with Agent in the preparation of an
information memorandum (which assistance may include reviewing and commenting
on drafts of such information memorandum and drafting portions thereof) to
facilitate the preparation and printing of such information memorandum and
shall make its chief financial officer available to attend a bank group
meeting among prospective banks to be held during the week of March 6, 1995.
To ensure an orderly and effective syndication of the Loans, Borrower agrees
that from the date of this Agreement until the termination of the syndication
(as determined by Agent), but not later than June 9, 1995 after a bank group
meeting among prospective banks, Agent and representatives of Borrower,
Borrower will not, and will not permit any of its Subsidiaries to, syndicate
or issue, attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of, any debt facility or debt
security (other than the $50,000,000 credit facility currently being
negotiated with Bank of America National Trust & Savings Association, the
project financing for the Casecnan Project, the project financing for Malitbog
and the project financing for Fish Lake if the financing for Fish Lake is to
be provided or syndicated by Credit Suisse) in the commercial bank market.
(s) Pro Forma Balance Sheets. Within 45 days after the Closing
Date, Borrower will deliver Pro Forma Balance Sheets to the Agent (with
sufficient copies for the Banks).
(t) Additional Documents; Filings and Recordings. Execute and
deliver, and cause each of its Subsidiaries to execute and deliver, from time
to time as reasonably requested by Agent, at Borrower's expense, such other
documents as shall be necessary or advisable or that Agent, may reasonably
request in connection with the rights and remedies of Agent and the Banks
granted or provided for by the Credit Documents, as applicable, and to
consummate the transactions contemplated herein and therein; take, and cause
its Subsidies to take, all reasonable
<PAGE>94
actions that have been or shall be requested by Agent, or that Borrower knows
are necessary to establish, maintain, protect, perfect and continue the
perfection of the first priority security interests of the Banks created by
the Security Documents and shall furnish timely notice of the necessity of any
such action, together with such instruments, in execution form, and such other
information as may be required to enable Agent or the Banks to effect any such
action. Without limiting the generality of the foregoing, Borrower shall, and
cause its Subsidies to (a) execute or cause to be executed and shall file or
cause to be filed such financing statements, continuation statements, fixture
filings and mortgages or deeds of trust in all places necessary or advisable
(in the opinion of counsel for Agent) to establish, maintain and perfect such
security interests and in all other places that Agent shall reasonably request
and (b) do everything necessary in the reasonable judgment of Agent to
(i) create and perfect its first-priority security interest in the Collateral,
(ii) maintain such security interest in full force and effect at all times and
(iii) preserve and protect the Collateral and protect and enforce its rights
and tile and the rights and title of the Banks to the Collateral.
(u) Grant of Security Interest. If at any time any of Salton Sea
I, Salton Sea II, Salton Sea III, Malitbog, Fish Lake or Alto Peak is a Non-
Financed Magma Project, Borrower agrees to cause Magma or the appropriate
Subsidiaries of Magma or Project Owner to grant to Borrower, which Borrower
shall simultaneously assign to Agent, for the benefit of the Banks, to the
extent not then already part of the Collateral, a security interest (subject
only to Permitted Liens) in the assets of such Project and in any Subsidiary
of Magma which is a direct or indirect owner of the applicable Project Owner,
or in the assets acquired, and to execute and deliver, at Borrower's expense,
all documents necessary to evidence, maintain, protect, perfect and continue
such security interest, including, but not limited to, guaranty agreements,
security agreements and pledge agreements; provided that nothing in this
Section 5.1(u) shall restrict or prohibit Magma or any of its Subsidiaries
from granting, from time to time, to Agent and the Banks a security interest
in unencumbered assets of Magma or its subsidiaries pursuant to any Security
Document or otherwise.
(v) Solvency. Remain Solvent and, subject to Section 2.9, cause
Magma to so do.
(w) Deposits into Concentration Account. On the Closing Date,
will, or will cause Magma to, deposit into the Concentration Account the
amounts set forth on Schedule 3.1(k).
(x) Amendment to the Articles of Association of Magma Netherlands.
Within 90 days of the Closing Date, deliver to
<PAGE>95
Agent copies of (a) the resolutions of the shareholders of Magma Netherlands
approving the amendment to the articles of association of Magma Netherlands
which amendment permits Magma Netherlands to issue "up-stream" guaranties, (b)
the Ministry of Justice of the Netherlands' consent to such amendment and (c)
an executed notarial deed incorporating such amendment into the articles of
association of Magma Netherlands, in each case in form and substance
satisfactory to Agent.
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 Magma or any of Magma's Subsidiaries, except pursuant to or as
contemplated by the Security Documents or this Agreement, or create, incur,
assume or suffer to exist any Lien, except Permitted Liens, upon or with
respect to any assets or property of Magma or any Subsidiary of Magma, or
permit any of its Subsidiaries so to do.
(b) Fundamental Changes. Permit Magma or any of its Subsidiaries
to: (i) enter into any transaction of consolidation or merger with or into
any other Person; (ii) wind up, liquidate or dissolve its affairs; (iii) sell,
lease, transfer or otherwise dispose of directly or indirectly (or agree to
any of the foregoing at any future time), assets with a fair market value in
excess of $1,000,000, but not more than $5,000,000 (individually or in the
aggregate during any fiscal year of Magma), unless Agent shall have consented
to such sale, lease, transfer or other disposition, or in excess of $5,000,000
(individually or in the aggregate during any fiscal year of Magma), unless the
Banks shall have consented to such sale, lease or transfer or other
disposition, or any of the Collateral; or (iv) 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;
provided that notwithstanding the foregoing, (A) MLC may not sell, lease,
transfer or otherwise dispose of any of its assets except as provided in
Section 5.2(p), (B) no Project Owner may sell, lease, transfer, dispose of or
otherwise encumber its Magma Project or its interest therein except for
encumbrances currently on such Project pursuant to a Magma Project Document or
encumbrances pursuant to any refinancing, extensions, restructurings or
renewals of indebtedness under any Magma Project Document and (C) any BRPU
Subsidiary and its assets may be transferred to Borrower so long as Agent and
the Banks are granted a security interest in Borrower's residual equity
interest therein, the
<PAGE>96
granting of such security interest and the documentation relating thereto to
be in form and substance acceptable to Agent.
(c) Nature of Business. (i) Engage in, or permit any of its
Subsidiaries (other than Magma and its Subsidiaries) 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 Magma or any of Magma's Subsidiaries to engage in
any business activity other than as set forth on Schedule 5.2(c) 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. Permit Magma or any of its
Subsidiaries to enter into any transaction, 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 (i) under the Support Services
Agreement and (ii) other transactions 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 Magma or any of Magma'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
<PAGE>97
long as Borrower receives 100% of the amount distributed by Magma in
connection with any such Restricted Junior Payments.
(h) Limitation on Debt and Contingent Obligations. Create, incur,
assume or otherwise become or remain directly or indirectly liable with
respect to any Debt, except as set forth in Section 1008 of the Indenture and
except in connection with the refinancing of the Tranche B Loans and the
Tranche C Loans pursuant to Section 2.2(i), or permit Magma or any of Magma's
Subsidiaries (other than a BRPU Subsidiary) to so do, except as contemplated
by the Credit Documents, the Magma Project Documents and except as described
and permitted in clauses (iii), (iv), (v), (vi) and (vii) of Section 1009 of
the Indenture. Permit any other Subsidiary 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; permit Magma or
any of its Subsidiaries (other than a BRPU Subsidiary) to incur any Contingent
Obligations except any Contingent Obligations set forth in any Magma Project
Document as in effect on the date hereof (exclusive of the obligations assumed
by Borrower pursuant to the CECI Undertaking Agreement) and any similar
obligations (in amount and effect) in connection with any amendment or
refinancing under any of the Magma Project Documents.
(i) Investments. Make any Investments, or permit any of its
Subsidiaries (other than Magma and Magma's Subsidiaries) so to do, except
pursuant to Section 1010 of the Indenture, or permit Magma or any of its
Subsidiaries to make any Investments, except Investments in Cash Equivalents
and Investments in Alto Peak, Fish Lake and Malitbog but not to exceed the
Alto Peak Pre-Funded Equity Amount, the Fish Lake Pre-Funded Equity Amount and
the Malitbog Pre-Funded Equity Amount, respectively, and as may be otherwise
permitted by Section 2.11.
(j) Changes to CE Acquisition Secured Term Note, CE Acquisition
Pledge Agreement and Merger Agreement. Change or amend the terms of the CE
Acquisition Secured Term Note, the CE Acquisition Credit Agreement, or the
Merger Agreement, or permit any of its Subsidiaries so to do.
(k) Changes to Support Services Agreement and Tax Indemnity
Agreement. Change or amend the terms of the Support Services Agreement or the
Tax Indemnity Agreement or permit any of its Subsidiaries so to do.
(l) Magma Project Documents. Permit Magma or any of its
Subsidiaries to change or amend any Magma Project Document, including, without
limitation, in connection with any refinancing thereof, if such change or
amendment could reasonably be expected to have a Material Adverse Effect.
<PAGE>98
(m) New Projects. Permit Magma or any of its Subsidiaries to enter
into any document or agreement relating to the development of any new Projects
other than Malitbog, Alto Peak, Fish Lake and, subject to the limitations
contained in this Agreement, a BRPU Project.
(n) 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;
<PAGE>99
which in any such case in (i) through (vii) results in or could reasonably be
expected to result in a Material Adverse Effect.
(o) No Restrictions on Distributions. Except as provided herein or
in the Magma Project Documents, directly or indirectly create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of Magma or any of its Subsidiaries to
(i) pay dividends or make any other distribution on any of its capital stock
or other equity interests directly or indirectly owned by Borrower, (ii) pay
any indebtedness owed to Borrower or any other Subsidiary of Magma, or
(iii) transfer any of its property or assets to Borrower or any other
Subsidiary of Magma, or permit any of its Subsidiaries so to do.
(p) Restrictions on MLC. Permit MLC to sell, lease, transfer or
dispose of, or permit any other Person to use or develop any of, the
geothermal resources owned or leased by MLC, except as such resources are
currently leased to, used or developed by, MLC or another Person as of the
date hereof and except in connection with an Ordinary Course Lease and Royalty
Restructuring Transaction and transactions approved by Agent or the Banks, as
applicable, pursuant to Section 5.2(b).
(q) Other Transactions. Permit Magma or any of its Subsidiaries to
enter into any partnership, profit-sharing, or royalty agreement or other
similar arrangement whereby Magma's or any of its Subsidiaries' income or
profits are, or might be, shared with any other Person, or enter into any
management contract or similar arrangement whereby its business or operations
are managed by any other Person, except as set forth on Schedule 5.2(q).
(r) Abandonment. Permit Magma, or any of Magma's Subsidiaries to
abandon or agree to abandon any Magma Project or place it or agree to place it
on a "care and maintenance basis" for more than 14 days in any calendar year,
provided, however, that (i) nothing in this Section 5.2(t) shall prevent any
Magma Project from shut-downs necessary for repairs and maintenance or from
putting such Magma Project on a "care and maintenance basis" during any force
majeure not within the control of Magma or the relevant Project Owner, which
force majeure prevents such Project Owner from developing, constructing or
operating the relevant Magma Project, and (ii) nothing in this Section 5.2(t)
shall be deemed to waive or limit in any way the right of any of the Banks or
Agent to declare an Event of Default.
(s) Improper Use. Permit Magma or any of its Subsidiaries to use,
maintain, operate or occupy, or allow the use, maintenance, operation or
occupancy of, any portion of any
<PAGE>100
Magma Project for any purpose (to the extent that the same could reasonably be
expected to have a Material Adverse Effect):
(i) which may be dangerous, unless safeguarded as required by
Law (provided, however, that this clause (a) shall not be deemed to
prohibit any Project Owner from carrying out the applicable Magma Project
in accordance with the terms of any Magma Project Document in a
reasonable and prudent manner);
(ii) which violates any Law;
(iii) which may constitute a public or private nuisance;
(iv) which may make void, voidable, or cancelable or increase
the premium of, any insurance then in force with respect to any Magma
Project or any part thereof unless, in the case of an increase in
premium, the applicable Project Owner gives proof of payment of such
increase; or
(v) otherwise than for the intended purpose thereof in the
construction, operation and maintenance of any Magma Project.
(t) Restrictions on Transactions with Affiliates by Magma and its
Subsidiaries. Permit Magma or any of Magma's Subsidiaries to enter into any
transactions with any of their respective Affiliates requiring any payments by
Magma or any of its Subsidiaries except (i) Permitted Payments, (ii) any
payments under any existing Magma Project Document and (iii) as permitted
under Section 2.11.
(u) Optional Prepayments. Permit Magma or any of its Subsidiaries
or any Project Owner to make any optional prepayment of any indebtedness under
any of the Magma Project Credit Agreements (except in connection with a
refinancing, extension or renewal of such indebtedness in a transaction
permitted under Section 5.2(b) and 5.2(h)).
(v) BRPU. Notwithstanding any restrictions contained in this
Section 5.2, any BRPU Project may be developed as an indirect Subsidiary of
Magma so long as (A) all funds necessary (including, without limitation, the
funds for any equity obligations) are provided by Borrower and neither Magma
nor any of Magma's Subsidiaries (other than a BRPU Subsidiary) shall have any
obligations, contingent or otherwise, in connection therewith and (B) the BRPU
Project's capital structure has an equity component of not less than 15% of
total invested capital (debt and equity) provided exclusively by Borrower and
such capital structure may include a debt component, which debt may be
<PAGE>101
provided by Borrower or another Person (other than Magma and its
Subsidiaries), with reasonable commercial terms.
Section 5.3 Financial Covenants. So long as any Obligations shall
remain outstanding or any of the Commitments shall remain available hereunder,
Borrower agrees that the financial covenants set forth below under this
Section 5.3 shall be applicable:
(a) Leverage Ratio. Subject to Section 2.9, the Leverage Ratio for
Magma and its Subsidiaries measured as of June 30 and December 31 of each
fiscal year shall not exceed the amounts set forth below at the corresponding
dates.
<TABLE>
<CAPTION>
Fiscal Period Ending Ratio
<S> <C>
June 30, 1996 6.25 to 1
December 31, 1996 6.25 to 1
June 30, 1997 4.5 to 1
December 31, 1997 4.5 to 1
June 30, 1998 3.0 to 1
December 31, 1998 3.0 to 1
June 30, 1999 3.0 to 1
December 31, 1999 3.0 to 1
June 30, 2000 3.0 to 1
December 31, 2000 3.0 to 1
June 30, 2001 2.5 to 1
December 31, 2001 2.5 to 1
June 30, 2002 2.0 to 1
December 31, 2002 and each June 30 and December 31 thereafter 2.0 to 1
</TABLE>
(b) Interest Coverage Ratio. Subject to Section 2.9, the Interest
Coverage Ratio for Magma and its Subsidiaries for the periods (i) from the
Closing Date through June 30, 1995, (ii) from the Closing Date through
December 31, 1995, and (iii) thereafter for each twelve (12) month period
ending on each June 30 and December 31 of each fiscal year (measured as of the
last day of each such period) shall not be less than the amounts set forth
below during the corresponding periods.
<TABLE>
<CAPTION>
Fiscal Period Ending Ratio
<S> <C>
June 30, 1995 1.8 to 1
December 31, 1995 1.8 to 1
June 30, 1996 2.0 to 1
December 31, 1996 2.0 to 1
June 30, 1997 2.5 to 1
December 31, 1997 2.5 to 1
<PAGE>102
June 30, 1998 3.0 to 1
December 31, 1998 3.0 to 1
June 30, 1999 3.0 to 1
December 31, 1999 3.0 to 1
June 30, 2000 3.0 to 1
December 31, 2000 3.0 to 1
June 30, 2001 4.0 to 1
December 31, 2001 4.0 to 1
June 30, 2002 4.0 to 1
December 31, 2002 and each June 30 and December 31 thereafter 4.0 to 1
</TABLE>
(c) Net Worth. Subject to Section 2.9, the Net Worth of Magma and
its Subsidiaries determined, as of the last day of each fiscal year, shall be
an amount not less than $450,000,000 plus, for each fiscal year ending on or
after December 31, 1996, the Additional Amount. The "Additional Amount" as of
any date of determination means an amount calculated by adding the net income
(calculated in accordance with GAAP) of Magma and its Subsidiaries for each
fiscal year (x) ending after the Closing Date and prior to the date of
determination and (y) in respect of which fiscal year net income is a positive
amount, and multiplying the result thereof by 75%.
(d) Minimum Cash Balances. Subject to Section 2.9, the Cash
Balances on May 1 and November 1 of each fiscal year shall not be less than
$25,000,000.
(e) Capital Expenditure Limits. Subject to Section 2.9, the
aggregate amount of all Capital Expenditures of Magma and its Subsidiaries
(other than Project Owners) for the twelve month period ending December 31 of
each fiscal year shall not exceed $2,000,000, except as permitted by Section
2.11.
(f) Debt Service Coverage Ratio. Subject to Section 2.9, the Debt
Service Coverage Ratio for Magma and its Subsidiaries for the periods (i) from
the Closing Date through December 31, 1995 and (ii) thereafter for each twelve
(12) month period ending on each June 30 and December 31 of each fiscal year,
shall not be less than 1.2 to 1.
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:
<PAGE>103
(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 or Merger 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 or any of
its Subsidiaries 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 or in any Merger 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(h) 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 of
$100,000 or more on any Debt (individually or in the aggregate) (other than
the Loans, the CE Acquisition Secured Note or any refinancing, renewals,
extensions or restructurings thereof) having an outstanding principal amount
of $50,000,000 or more 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, if the effect
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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) Magma Debts. Magma or any of its Subsidiaries shall fail to
make any payment of $10,000,000 or more on any Debt (other than the Loans, the
CE Acquisition Secured Term Note or any refinancing, renewals, extensions or
restructurings thereof) 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 could reasonably be
expected to have a Material Adverse Effect; or
(h) Default Under the CE Acquisition Secured Term Note or the CE
Acquisition Credit Agreement. Magma, as successor to CE Acquisition, fails to
pay when due any amounts under the CE Acquisition Secured Term Note or the CE
Acquisition Credit Agreement; or
(i) Judgments and Orders. Any judgment or order for the payment of
money in excess of $10,000,000 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 30 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
(j) 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
(k) Involuntary Proceedings. An involuntary petition is filed
against Borrower or any Material Subsidiary under any
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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
(l) 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
(m) 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
(n) 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
(o) ERISA - General Liability. Borrower or any of its Subsidiaries
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
<PAGE>106
local law which results in, or could reasonably be expected to result in, a
Material Adverse Effect; or
(p) 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
(q) Change of Control. A Change of Control shall occur; or
(r) Defaults Relating to Non-Financed Magma Projects. The
occurrence of any of the events set forth on Schedule 6.1(r) with respect to
any Non-Financed Magma Project and the occurrence of such event could
reasonably be expected to have a Material Adverse Effect;
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
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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
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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 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.
<PAGE>109
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 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
<PAGE>110
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 (a) 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, 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.
<PAGE>111
(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 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.
<PAGE>112
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 any third
party information which Borrower designates in writing as "Confidential" and
which is
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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 which are banks or other
financial institutions; (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
which are banks or other financial institutions, 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, or (iv) disclosures
made after an Event of Default in connection with the sale or attempted sale
of Magma.
Section 8.11 Assignments and Participations.
(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
<PAGE>114
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
<PAGE>115
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 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
<PAGE>116
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 service being
<PAGE>117
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, after receipt of written consent of
Agent, 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.
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
Title: Senior Vice President
<PAGE>118
Address for Notices:
10831 Old Mill Road
Omaha, Nebraska 68154
Attn: Chief Financial Officer
Telecopier: (402) 334-3759
with a copy to
10831 Old Mill Road
Omaha, Nebraska 68154
Attn: General Counsel
Telecopier: (402) 334-3746
<PAGE>119
CREDIT SUISSE, as Agent and Bank
By /s/ Peter R. Nardin
Title: Member of Senior Management
By /s/ Bryon P. McGregor
Title: Member of Senior Management
Address for Notices:
Tower 49
12 East 49th Street
New York, New York 10017
Attn: Steven Dowe
Telecopier: (212) 238-5461
<PAGE>120
Schedule 1.1
Commitment Schedule
A. Agency Office: Tower 49
12 East 49th Street
New York, New York 10017
B. Banks: (Listed Below)
<TABLE>
<CAPTION>
Tranche A Commitment Tranche B Commitment Tranche C Commitment
Bank Lending Office
<S> <C> <C> <C> <C>
Credit Suisse $350,000,000 $75,000,000 $75,000,000 Tower 49
12 East 49th Street
New York, New York 10017
</TABLE>
<PAGE>121
SCHEDULE 1.2
MAGMA PROJECT CREDIT AGREEMENTS
1. Credit and Reimbursement Agreement, dated as of February 28, 1994, among
Salton Sea Power Generation L.P. and Salton Sea Brine Processing L.P.,
the banks listed therein, as lenders, Credit Suisse, as lead agent and
Issuing Bank, The Fuji Bank, Limited, as co-agent, The Sumitomo Bank,
Limited, Los Angeles Branch, The Bank of Nova Scotia, Bank of America
National Trust and Savings Association, as Lead Managers, and Credit
Suisse and The Fuji Bank, Limited, as working capital lenders, and each
agreement, instrument, note, security document, security agreement,
instrument, note, security document, security agreement, deed of trust,
pledge agreement, guaranty, financing statement, financing document,
consent, certificate, opinion, representation, warranty, undertaking and
other document delivered in connection therewith or with any other of the
foregoing, each as amended and as in effect from time to time.
2. $66,000,000 Amended and Restated Secured Credit Agreement, dated as of
April 18, 1990, among Del Ranch, L.P., the banks listed therein, The Fuji
Bank, Limited, Los Angeles Agency, as Fronting Bank, and Morgan Guaranty
Trust Company of New York, as Agent d The Fuji Bank, Limited, as working
capital lenders, and each agreement, instrument, note, security document,
security agreement, deed of trust, pledge agreement, guaranty, financing
statement, financing document, consent, certificate, opinion,
representation, warranty, undertaking and other document delivered in
connection therewith or with any other of the foregoing, each as amended
and in effect from time to time.
3. $66,000,000 Amended and Restated Secured Credit Agreement, dated as of
April 18, 1990, among Elmore, L.P., the banks listed therein, The Fuji
Bank, Limited, Los Angeles Agency, as Fronting Bank, and Morgan Guaranty
Trust Company of New York, as Agent d The Fuji Bank, Limited, as working
capital lenders, and each agreement, instrument, note, security document,
security agreement, deed of trust, pledge agreement, guaranty, financing
statement, financing document, consent, certificate, opinion,
representation, warranty, undertaking and other document delivered in
connection therewith or with any other of the foregoing, each as amended
and in effect from time to time.
4. $82,000,000 Amended and Restated Security Credit Agreement, dated as of
April 18, 1990, among Leathers, L.P., the banks listed therein, The Fuji
Bank, Limited, Los Angeles Agency, as Fronting Bank, and Morgan Guaranty
Trust Company of New York, as Agent and the Fuji Bank, Limited, as
working capital lenders, and each agreement, instrument, note, security
document, security agreement, deed of trust, pledge agreement, guaranty,
financing statement, financing document, consent, certificate, opinion,
representation, warranty, undertaking and other document delivered in
connection therewith or with any other of the foregoing, each as amended
and in effect from time to time.
5. Credit Agreement, dated as of November 10, 1994, among Visayas Geothermal
Power Company and Visayas Power Capital Corporation and Credit Suisse, as
VPCC Agent and as Project Administrative Agent, and each agreement,
credit agreement, instrument, note, security document, security
agreement, deed of trust, pledge agreement, guaranty, financing
statement, financing document, consent, certificate, opinion,
representation, warranty, undertaking and other document delivered in
connection therewith or with any other of the foregoing, each as amended
and in effect from time to time.
6. Credit Agreement, dated as of November 10, 1994, among Visayas Power
Capital Corporation and the Banks party thereto and Credit Suisse as Bank
Agent and as Project Administrative Agent, and each agreement,
instrument, note, security document, security agreement, deed of trust,
pledge agreement, guaranty, financing statement, financing document,
consent, certificate, opinion, representation, warranty, undertaking and
other document delivered in
<PAGE>122
connection therewith or with any other of the foregoing, each as amended and
in effect from time to time.
7. Finance Agreement, dated as of November 10, 1994, between Visayas
Geothermal Power Company and Overseas Private Investment Corporation, and
each agreement, credit agreement, instrument, note, security document,
security agreement, deed of trust, pledge agreement, guaranty, financing
statement, financing document, consent, certificate, opinion,
representation, warranty, undertaking and other document delivered in
connection therewith or with any other of the foregoing, each as amended
and in effect from time to time.
8. Each credit agreement, loan agreement, reimbursement agreement,
indenture, instrument, note, security document, security agreement, deed
of trust, pledge agreement, guaranty, financing statement, financing
document, consent, certificate, opinion, representation, warranty,
undertaking and other document, other than the documents and agreements
set forth in paragraphs 1-5 of this Schedule 1.2, that are executed and
delivered in connection with any loan, credit or other financing obtained
by, or related to, a Magma Project each as amended and in effect from
time to time.
<PAGE>123
Schedule 1.7
Persons Executing Account Pledge Agreements
1. Desert Valley Company
2. Vulcan Power Company
<PAGE>124
Schedule 1.8
Persons Executing Blocked Account Agreements
1. Magma Power Company
2. Desert Valley Company
3. Fish Lake Power Company
4. Imperial Magma
5. Magma Operating Company
6. Magma Land Company I
7. Vulcan Power Company
8. Peak Power Corporation
<PAGE>125
Schedule 1.9
Persons Executing Security Agreements
1. Magma Power Company
2. Fish Lake Power Company
3. Imperial Magma
4. Magma Operating Company
5. Magma Land Company I
6. Leyte Power Capital Corporation
7. Magma Generating Company I
8. Magma Generating Company II
9. Peak Power Corporation
10. Salton Sea Power Company
<PAGE>126
Schedule 1.10
Persons Executing Guaranty Agreements
1. Desert Valley Company
2. Fish Lake Power Company
3. Imperial Magma
4. Magma Operating Company
5. Magma Land Company I
6. Magma Netherlands, B.V.
7. Leyte Power Capital Corporation
8. Tongonan Power Investment, Inc.
9. Magma Generating Company I
10. Magma Generating Company II
11. Vulcan Power Company
12. Peak Power Corporation
13. Salton Sea Power Company
<PAGE>127
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>128
SCHEDULE 4.1(ii)
TRANSACTIONS WITH AFFILIATES
1. Technical Services Agreement, between The Dow Chemical Company and Magma
Power Company, dated January 1, 1993, as amended.
2. Engineering Services Agreement, between Dow Engineering Company and Magma
Power Company, dated February 1, 1994.
3. Support Services Agreement, between California Energy Company, Inc. and
Magma Power Company, dated as of February 24, 1995.
Does not include any (i) salary, bonus or severance transactions with officers
and directors or (ii) transactions between (A) Magma or any of its
Subsidiaries and (B) a Subsidiary of Magma.
<PAGE>129
SCHEDULE 4.1(jj)
BONDS, PERFORMANCE GUARANTIES AND
SIMILAR INSTRUMENTS AND OBLIGATIONS
<TABLE>
<CAPTION>
BONDS:
<S> <C> <C> <C>
Amount Gov't Beneficiary Magma Entity Comments
$150,000 U.S. Dept. of the Magma Power Company Federal Geothermal Leasing/Exploration &
Nationwide Bond Interior Vulcan Power Company Development/Unit Operations Nationwide Bond
(Bureau of Land Mgmt) Imperial Magma
Desert Valley Company
Fish Lake Power Company
$100,000 State of California Red Hill Geothermal, Drilling activities, blanket geothermal
Statewide Bond Inc. resources well indemnity bond. Covers non-
producing & suspended wells located in
imperial County & Modoc County, California
$150,000 California Regional WQCB Magma Power Company Salton Sea Brine Processing L.P.-Salton Sea
Imperial County Closure Performance Bond Units
1 & 2 (Order No. 88-57)
$150,000 California Regional WQCB Magma Power Company Salton Sea Brine Processing L.P.-Salton
Imperial County Closure Performance Bond Sea Unit
3 (Order No. 88-131)
$150,000 Modoc County Magma Power Company Drilling Bond - County of Modoc
Modoc County Drilling Bond
$100,000 County of Imperial Magma Power Company Site Reclamation Bond - Imperial County
Imperial County Site Reclamation Bond Production Wells
PERFORMANCE GUARANTIES:
1. Guaranty by Magma Power Company to Southern California Edison Co. of payment of any energy payment refunds under the
Salton Sea II power purchase agreement.
2. Guaranty by Magma Power Company to Southern California Edison Co. of payment of any energy payment refunds under the
Salton Sea III power purchase agreement.
3. Reserve Account Guarantee by Magma in connection with the Refinancing of Salton Sea Geothermal Power Production
Facilities, by and among Salton Sea Power Generation L.P., Salton Sea Brine Processing L.P. and Credit Suisse, as Agent
Bank, dated as of February 28, 1994.
SIMILAR INSTRUMENTS (CERTIFICATES OF DEPOSIT):
Amount Gov't Beneficiary Entity Comments
$50,000 State Lands Commission Magma Power Company Campbell Lease PRC 7621.0
State Lands Comm. Mineral Resources C.D. in lieu of bonding.
Management Division First Interstate - 5.50% - CD#40043
$100,000 State of California Vulcan Power Company Abandonment of wells.
Statewide Bonding Division of Oil & Gas First Interstate - 3.00% - CD#1337
$100,000 California Regional WQCB Elmore, L.P. Waste discharge requirement
State of California Geothermal development wells.
First Interstate - 4.50% - CD#462751
$100,000 California Regional WQCB Elmore, L.P. Waste discharge requirement
State of California Colorado River Basin Elmore geothermal power plant holding
basin.
First Interstate - 6.25% - CD #38492
<PAGE>130 California Regional WQCB Leathers, L.P. Waste discharge requirement
Quality Control Board Geothermal development wells.
$100,000 Colorado River Basin First Interstate - 6.25% - CD#20229
State of California
$50,000 California Regional WQCB Leathers, L.P. Waste discharge requirement
State of California Quality Control Board Cleanup costs Geothermal brine holding basin.
Colorado River Basin Leathers containment First Interstate - 4.05% - CD#1346
basin
SIMILAR INSTRUMENTS: (LETTERS OF CREDIT):
Amount Beneficiary Entity Comments
$150,000 Imp. County Planning Magma Power Company Satisfy C.U. Permit #3002-92
Imperial County Comm. Drilling of all wells at Truckhaven
Truckhaven Morgan Guaranty L/C #865493
$150,000 Imp. County Planning Magma Power Company Satisfy C.U. Permit #3003-92
Imperial County Comm. Drilling of all wells at East Brawley
East Brawley Morgan Guaranty L/C #865492
$500,000 Imp. County Planning Del Ranch, L.P. Satisfy C.U. Permit #9002-86 (Now #9002-91)
Imperial County Comm. Morgan Guaranty L/C #860954
$500,000 Imp. County Planning Elmore L.P. Satisfy C.U. Permit #9007-87 (Now #9006-91)
Imperial County Comm. Morgan Guaranty L/C #860953
$500,000 Imp. County Planning Leathers, L.P. Satisfy C.U. Permit #9006-86 (Now #9006-91)
Imperial County Comm. Morgan Guaranty L/C #861532
$1,600,000 Cal. Intgrid. Desert Valley Satisfy provisions of the Solid Waste
Waste Mgmnt. Board Facility
Permit #13-AA-002
Morgan Guaranty L/C #8863677
$1,000,000 Imp. County Planning Desert Valley Satisfy C.U. Permit #889-89
Comm. Morgan Guaranty L/C #864270
$4,159,277.78 The Sanwa Bank Limited Desert Valley To support Magma's tax-exempt debt
obligations issued to the California
Pollution Control Financing Auth. Morgan
Guaranty L/C #863816
$4,159,277.78 California Pollution Desert Valley The Sanwa Bank Limited
Control
Financing Authority
$500,000 Imp. County Planning Salton Sea Brine Financing assurances requirements under
Comm. Process, L.P. C.U. Permits #9014A-94 and #9015A-94
Magma Power Company Corporate Guarantee
$275,000 San Diego Gas & Electric Magma Generating Bids under BRPU process
Company I Morgan Guaranty L/C #866507
$275,000 San Diego Gas & Electric Magma Generating Bids under BRPU process
Company I Morgan Guaranty L/C #866508
$275,000 Southern California Magma Generating Bids under BRPU process
Edison Company II Morgan Guaranty L/C #866502
$137,500 Southern California Magma Generating Bids under BRPU process
Edison Company II Morgan Guaranty L/C #866503
OTHER SIMILAR INSTRUMENTS:
Equity Funding Agreement, dated as of December 13, 1994, among Salton Sea Brine Processing L.P., Salton Sea Power Generation
L.P., Magma Power Company and Credit Suisse.
<PAGE>131
Equity Funding Agreement, dated as of November 10, 1994, among Visayas Geothermal Power Company, Magma Power Company, Magma
Netherlands B.V., Tongonan Power Investment Inc., Visayas Power Capital Corporation, Overseas Private Investment Corporation
("OPIC") and Credit Suisse.
Project Completion Agreement, dated as of November 10, 1994, among Magma Power Company, Credit Suisse and OPIC.
Political Risk Agreement, dated as of November 10, 1994, among Magma Power Company and Credit Suisse.
Any other Magma guaranties or similar obligations referred to in the CECI Undertaking Agreement, dated as of February 24, 1995,
among California Energy Company, Inc., Magma Power Company and Credit Suisse.
</TABLE>
<PAGE>132
SCHEDULE 4.1(nn)
CAPITAL STOCK OF MAGMA AND ITS SUBSIDIARIES
(all information is both before and after giving
effect to the Merger unless otherwise specified)
1. Magma Power Company ("MPC")
Total authorized capital stock: 31,000,000 shares (30,000,000 common,
1,000,000 preferred).
Shareholders before giving effect to the Merger:
a. CE Acquisition Company, Inc. - 12,400,000 shares.
b. California Energy Company, Inc. - 200,000 shares.
c. Others: publicly traded.
d. Total - 24,148,964
After giving effect to the Merger, California Energy Company, Inc. will own
all outstanding shares (100).
2. Magma Operating Company
Total authorized capital stock: 1,000 shares.
All 1,000 outstanding shares are owned by MPC.
3. Salton Sea Power Company
Total authorized capital stock: 1,000 shares.
All 100 outstanding shares are owned by MPC.
4. Magma Land Company I
Total authorized capital stock: 1,000 shares.
All 100 outstanding shares are owned by MPC.
5. Desert Valley Company
Total authorized capital stock: 1,000,000 shares.
All 1,000 outstanding shares are owned by MPC.
6. Imperial Magma
Total authorized capital stock: 2,001,000 shares (2,000,000 common, 1,000
Series A Preferred).
All outstanding shares (951,659 common) are owned by MPC.
7. Vulcan Power Company
Total authorized capital stock: 10,000,000 shares.
All 22,000 outstanding shares are owned by MPC.
8. Fish Lake Power Company
Total authorized capital stock: 3,000 shares.
All 1,000 outstanding shares are owned by MPC.
9. Peak Power Corporation
Total authorized capital stock: 1,000,000 shares.
<PAGE>133
All 1,000 outstanding shares are owned by MPC.
10. Magma Generating Company I
Total authorized capital stock: 1,000 shares.
All 100 outstanding shares are owned by MPC.
11. Magma General Company II
Total authorized capital stock: 1,000 shares.
All 100 outstanding shares are owned by MPC.
12. Magma Netherlands, B.V.
Total authorized capital stock: 400 shares.
All outstanding shares are owned by MPC.
13. Tongonan Power Investment Inc.
Total authorized capital stock: 15,000,000 shares.
Shareholders:
a. MPC: 1,498
b. Espinosa: 2,246
c. Medello: 1
d. Aquino: 1
e. Ferrer: 1
f. de Leon: 1
g. Sokol: 1
h. McArthur: 1
14. Norming Investments, B.V.
Total authorized capital stock: 200 shares.
All outstanding shares are owned by MPC.
15. Leyte Power Capital Corporation
Total authorized capital stock: 1,000 shares.
All 1,000 outstanding shares are owned by MPC.
The capital stock of Magma Netherlands, B.V. and Tongonan Power Investment,
Inc. has been pledged to lenders providing financing to the Malitbog Project.
The capital stock of MPC and certain other subsidiaries of MPC is being
pledged pursuant to the transactions contemplated by the Non-Recourse Credit
Agreement.
<PAGE>134
Schedule 4.1(pp)
[List of Magma Power Company Accounts]
<PAGE>135
Schedule 6.1(r)
Project Default
1. Any Project Owner shall fail to perform or observe any covenant,
term or agreement contained in any Magma Project Document to which it is a
party; or
2. Any statement, representation or warranty made by any Project
Owner in any Magma Project Document to which it is a party shall prove to have
been false, incorrect, incomplete or misleading in any material respect; or
3. Any Project Owner shall cease to have the right to possess and
use its applicable Magma Project; or
4. Any Magma Project Document or any provision therein (i) is or
becomes invalid, illegal or unenforceable or any party thereto shall so
assert, or (ii) ceases to be in full force and effect; or
5. Any party to any Project Document shall be in material default
thereunder; or
6. Any government or Governmental Authority shall have condemned,
nationalized, seized, or otherwise expropriated all or any substantial part of
the property or other assets of any Project Owner or of the ownership
interests in any Project Owner or shall have assumed custody or control of
such property or other assets or of the business or operations of any Project
Owner or of the ownership interests in any Project Owner or shall have taken
any action for the dissolution or disestablishment of any Project Owner or any
action that would prevent any Project Owner, its partners or stockholders or
its other officers from carrying on the business or operations of any Project
Owner or a substantial part thereof; or
7. Any of the governmental approvals required or obtained in
connection with any Magma Project Document or any of the governmental
approvals required to be obtained or obtained in connection with the full
performance of the Magma Project Documents to which any Project Owner is a
party shall be rejected or otherwise denied or shall expire (without being
timely renewed) or be revoked, rescinded, suspended, held invalid or otherwise
limited in effect; or
8. The passage or promulgation of, or any change in any statute,
ordinance or regulation affecting any Magma Project; or
9. Any Project Owner, its Affiliates, Agent or any of the Banks
shall, solely as a result of the participation by such parties, separately or
as a group, in any transaction contemplated hereby or by any other Magma
Project Document, become subject to regulation by any Governmental Authority
of the United States as an "electric utility," "electrical corporation,"
"electric company," "public utility," or "public utility holding company" or a
subsidiary or affiliate of any of the foregoing under any Applicable Law of
the Untied States (including, without limitation, PUHCA and FPA) or by any
Governmental Authority as a "public utility" under any applicable Law; or
10. Title to or any right in all or any part of any Magma Project
shall become vested in any party other than the party named as owner and/or
holder thereof; or
11. There shall have occurred any of the following events: (i)
loss of all or substantially all of any Magma Project or the use thereof due
to destruction, damage beyond economical repair or rendition of such Magma
Project permanently unfit for normal use for any reason whatsoever (other than
if it is merely not economically feasible to maintain, use or operate), (ii)
anything which results in an insurance settlement with respect to any Magma
Project on the basis of a total loss or constructive total loss or (iii) the
condemnation or taking or requisition of title or use for an indefinite period
or a period in excess of two (2) months, by any Governmental Authority which
constitutes the taking of all or substantially all of any Magma Project or all
or such a substantial portion of the site related thereto such that the
remainder is not sufficient to permit operation of such Magma Project on a
commercially feasible basis; or
12. Any Project Owner hereafter grants any easement or dedication,
files any plat, declaration or restriction or enters into any lease or sub-
lease concerning any Magma Project; or
13. A determination by any Bank in its reasonable judgment that
(a) Alto Peak, Malitbog or Fish Lake is not reasonably likely to be completed
within the applicable construction budget, (b) final completion with respect
to any Magma Project is not likely to occur as projected, (c) the date of
commercial operation for any Magma Project is not likely to occur as
projected; or
14. Any Project Owner shall fail to remain continuously exempt from
all regulation under PUHCA as a result of being a "foreign utility company"
under Section 33 of PUHCA or otherwise.
<PAGE>136
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT, dated as of
, 19 , is made between ("Assignor") and
("Assignee") as follows:
1. As used herein (the following definitions to be applicable in
both singular and plural forms):
"Applicable Loans" means the Loans outstanding on the Effective
Date under the Applicable Commitment.
"Applicable Commitment" means Assignor's Commitment under the
Credit Agreement.
"Assigned Percentage" means that percentage of Assignor's
rights and obligations under the Applicable Commitment which is equal to %
of such Applicable Commitment and the Applicable Loans as of the Effective
Date.
"Credit Agreement" means the Non-Recourse Credit Agreement,
dated as of February , 1995, as the same may have been amended to the date
hereof, by and among California Energy Company, Inc., a Delaware corporation,
the banks and other financial institutions parties thereto and Credit Suisse,
New York Branch, as Agent for the Banks.
"Effective Date" has the meaning ascribed thereto in Paragraph
5 hereof.
Other initially capitalized terms used herein and not otherwise
specifically defined herein shall have the meaning ascribed thereto in the
Credit Agreement.
2. Assignor hereby sells and assigns to Assignee, and Assignee
hereby purchases and assumes from Assignor, the Assigned Percentage of
Assignor's rights and obligations as a Bank under the Credit Agreement with
respect to the Applicable Commitment (including, without limitation, the
Assigned Percentage of (i) the Applicable Commitment as in effect as of the
Effective Date and (ii) each of the Applicable Loans).
3. The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Credit Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Credit
Document, or any other instrument or document furnished pursuant thereto
("Instruments"); and (iii) 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 Documents or any other Instruments.
4. Assignee (i) acknowledges that, other than as expressly provided
in this Agreement, Assignor 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 any other Instrument or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Credit Document or any other Instruments; (ii) acknowledges that
Assignor 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 Instruments or with respect to the taxability of payments to be made
under any Credit Document or other Instruments; (iii) confirms that it has
received a copy of the Credit Agreement, together with copies of the financial
statements referred to in the Credit Agreement and such other documents and
information as it has deemed appropriate to make, and further confirms that it
has made its own credit analysis and decision to enter into this Agreement;
(iv) will, independently and without reliance upon Agent, Assignor 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 or other Instruments;
(v) appoints and authorizes Agent to take such action as agent on its behalf
and to exercise such powers under the Credit Documents and the other
Instruments as are delegated to Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (vi) agrees that it will perform
in accordance with their terms all of the obligations which by the terms of
the Credit Documents or any other Instruments are required to be performed by
it as a Bank; and (vii) specifies as its Applicable Lending Office(s) and
address for notices the office(s) set forth beneath its name on the signature
pages hereof and in the Schedules hereto.
5. The effective date for the assignment and acceptance hereunder
(the "Effective Date") shall be the date on which the Assignor receives an
amount in same day funds equal to the Assigned Percentage of the aggregate
principal amount of Applicable Loans outstanding owing to Assignor and
outstanding on such date and has notified Agent of such receipt; provided,
however, that the Effective Date hereunder shall not occur unless and until
Agent has received an executed original of this Agreement, and Agent's
processing and recordation fees have been paid, in accordance with the
requirements of Section 8.11 of the Credit Agreement.
6. (a) As of the Effective Date, (i) Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Agreement, have the
rights and obligations of a Bank thereunder and under the other Credit
Documents, and (ii) Assignor shall, to the extent provided in this Agreement,
relinquish its rights and be released from its obligations under any Credit
Document and the other Instruments; and (b) from and after the Effective Date,
Agent shall make all payments under the Credit Documents in respect of the
interest assigned hereby (including, without limitation, all payments of
principal, interest and commitment and other fees relating to the Assigned
Percentage) to Assignee. Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Documents for periods prior to the
Effective Date directly between themselves.
<PAGE>137
7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
<PAGE>138
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.
ASSIGNOR:
By
Title:
ASSIGNEE:
By
Title:
Applicable Lending Office(s) and address
for notices:
<PAGE>139
Schedule 1
to Assignment and Acceptance Agreement
Dated , 19
FACSIMILE, MAILING AND PAYMENT INSTRUCTIONS
1. Name of Entity for Signature Page:
2. Name of Bank for any eventual Tombstone:
<TABLE>
<CAPTION>
CREDIT CONTACT OPERATIONS CONTACT
<S> <C> <C>
Name
Title:
Address:
(street):
(city, state):
(zip code):
Phone Number:
Facsimile No.:
Answerback:
</TABLE>
<PAGE>140
PAYMENT INSTRUCTIONS
Method of Payment: Chips:
Pay to (Name of Bank):
City, State:
ABA Number:
Account Number:
Account Name:
Reference:
Attention:
Operative Documents sent: Yes No
Initial: Date:
<PAGE>141
TERM NOTE
$___________ New York, New York
February , 1995
FOR VALUE RECEIVED, the undersigned, CE ACQUISITION COMPANY, INC., a
Delaware corporation (hereinafter referred to as the "Maker") hereby promises
to pay to the order of CALIFORNIA ENERGY COMPANY, INC. (hereinafter together
with any other holder hereof referred to as the "Holder"), by wire transfer to
such place or places and to such account or accounts as Holder may direct from
time to time by notice to Maker in accordance with the Credit Agreement (as
hereinafter defined), the principal amount of ___________________
_______________ ($___________) in lawful money of the United States in
immediately available funds, payable, subject to the second paragraph hereof,
in semi-annual installments commencing [___________________], 1995, the amount
of each such installment is set forth in the table contained in Section 2.2(a)
of the Credit Agreement. 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 Tranche A Loans (as defined in
the Credit Agreement) made pursuant to the provisions of Article II of the
Credit Agreement dated as of February __, 1995 by and between Maker and Holder
(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).
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.
CE ACQUISITION COMPANY, INC.
By:___________________________
Name:
Title:
<PAGE>142
ENDORSEMENT
Payable to the order of Credit Suisse, as agent ("Agent") under the
Non-Recourse Credit Agreement, dated as of February __, 1995 by and among
California Energy Company, Inc., the banks and other financial institutions
parties thereto and Agent.
CALIFORNIA ENERGY COMPANY, INC.
By:___________________________
Name:
Title:
<PAGE>143
FORM OF COMPLIANCE CERTIFICATE
Certificate of Chief Financial Officer
of [California Energy Company, Inc.*]
For the Period Ended:
The undersigned, Chief Financial Officer of
[California Energy Company, Inc.*], a Delaware corporation (the "Company"),
hereby certifies, pursuant to Section 5.1(h) of the Non-Recourse Credit
Agreement dated as of February ___, 1995 by and among [the Company/California
Energy Company, Inc.], the banks and other financial institutions parties
thereto (the "Banks") and Credit Suisse, New York Branch, as agent for the
Banks (the "Credit Agreement"), as follow:
(i) that I have reviewed the financial
statements of the Company and its Subsidiaries
dated as of _____________ and for the
_____________ period then ended and such
statements fairly present the financial
condition of the Company and its Subsidiaries as
of the dates indicated and the results of their
operations and cash flows for the periods
indicated, copies of such financial statements
are attached hereto as Exhibit A;
(ii) that I have reviewed the terms of
the Credit Agreement and have made, or caused to
be made under my supervision, a review in
reasonable detail of the transactions and the
condition of the Company and its Subsidiaries
during the accounting period covered by the
financial statements referred to in clause (i)
above;
(iii) such review has not disclosed the
existence during or at the end of such
accounting period of any condition or event that
constitutes a Default or an Event of Default,
nor do I have any knowledge of the existence of
any such condition or event as at the date of
this Certificate [except, [if such condition or
event existed or exists, describe the nature and
period of existence thereof and what action the
Company has taken, is taking and proposes to
take with respect thereto]]; and
(iv) attached hereto as Appendix I are the
calculations required to establish
* An identical certificate shall be prepared and delivered on behalf of Magma
Power Company and its Subsidiaries.
<PAGE>144
compliance by the Company with the financial covenant set forth in Section 5.3
of the Credit Agreement.
Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
IN WITNESS WHEREOF, the undersigned has
executed this Certificate as of this ____ day of _______, 199_.
CALIFORNIA ENERGY COMPANY,
INC.
By:
Name:
Title: Chief Financial Officer
<PAGE>145
[FORM OF]
LIMITED PARTNER PLEDGE AGREEMENT
between
,
as Pledgor
and
CALIFORNIA ENERGY COMPANY, INC.
as Pledgee
Dated as of February , 1995
<PAGE>146
TABLE OF CONTENTS
Page
l. Definitions . . . . . . . . . . . . . . . . . .
2. Grant of Security Interest . . . . . . . . . . .
3. Representations and Warranties . . . . . . . . .
4. Covenants and Agreements . . . . . . . . . . . .
5. Pledgor's Obligations Upon Event of Default . .
6. Remedies; Rights Upon Event of Default . . . . .
7. Application of Proceeds . . . . . . . . . . . .
8. Security Interest Absolute . . . . . . . . . . .
9. Pledgee Appointed Attorney-in-Fact . . . . . . .
10. Pledgee May Perform . . . . . . . . . . . . . .
11. No Duty on Pledgee's Part; Limitation on
Pledgee's Obligations . . . . . . . . . . . . .
12. Reasonable Care . . . . . . . . . . . . . . . .
13. Waiver of Trial by Jury . . . . . . . . . . . .
14. Notices . . . . . . . . . . . . . . . . . . . .
15. Absence of Fiduciary Relation . . . . . . . . .
16. Survival of Representations and Warranties . . .
17. No Waiver; Cumulative Remedies . . . . . . . . .
18. Severability . . . . . . . . . . . . . . . . . .
19. Exculpatory Provisions; Reliance by Pledgee . .
20. Amendment . . . . . . . . . . . . . . . . . . .
21. Assignment by Pledgee . . . . . . . . . . . . .
22. Successors and Assigns . . . . . . . . . . . . .
23. Third-Party Beneficiaries . . . . . . . . . . .
24. Number and Gender . . . . . . . . . . . . . . .
25. Captions . . . . . . . . . . . . . . . . . . . .
26. Applicable Law and Jurisdiction . . . . . . . .
27. Continuing Security Interest; Termination . . .
28. Payments Set Aside . . . . . . . . . . . . . . .
29. Counterparts . . . . . . . . . . . . . . . . . .
Schedule
Schedule A: Financing Statement Filings
<PAGE>147
LIMITED PARTNER PLEDGE AGREEMENT
This LIMITED PARTNER PLEDGE AGREEMENT (this "Pledge Agreement"),
dated as of February , 1995, between , a
corporation ("Pledgor"), and CALIFORNIA ENERGY COMPANY, INC., a Delaware
corporation ("Pledgee").
W I T N E S S E T H :
WHEREAS, pursuant to the Non-Recourse Credit Agreement dated as of
even date herewith (as amended, supplemented or otherwise modified from time
to time, the "Non-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 CE Acquisition Company, Inc., a
Delaware corporation ("CE Acquisition"), and Pledgee, the proceeds of the
Loans will be loaned by Pledgee to CE Acquisition and CE Acquisition will use
such proceeds to consummate the Merger;
WHEREAS, upon consummation of the Merger, CE Acquisition will be
merged with and into Magma Power Company ("Magma") and Magma will assume CE
Acquisition's obligations under the CE Acquisition Credit Agreement and the
other Credit Documents;
WHEREAS, Pledgor is a wholly-owned subsidiary of Magma;
WHEREAS, Pledgor is executing this Pledge Agreement to secure
Magma's obligations under the CE Acquisition Credit Agreement and the other
Credit Documents;
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 other agreements;
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 mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Banks
to make the Loans, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized
terms used herein which are defined in the CE Acquisition
<PAGE>148
Credit Agreement shall have their respective meanings as therein defined. All
references to sections, schedules and exhibits in or to this Pledge Agreement
are to sections, schedules and exhibits in or to this Pledge Agreement, unless
otherwise specified. The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not to any particular provision of this Pledge
Agreement. For purposes of this Pledge Agreement, all other terms used herein
and not otherwise defined herein which are defined in Article 9 of the Uniform
Commercial Code (as the same may be in effect in the State of New York or any
other applicable jurisdiction, the "Code"), shall have their respective
meanings as therein defined.
2. Grant of Security Interest. As security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of any and all of the Obligations, Pledgor hereby
collaterally assigns, conveys, mortgages, pledges, hypothecates and transfers
to Pledgee, and grants and creates a lien on and first priority security
interest (the "Security Interest") in favor of Pledgee, in all right, title
and interest of Pledgor in, to and under the following, whether now existing
or hereafter acquired (the "Collateral"):
(i) its limited partnership interest in the Partnership and all of
its rights under the Partnership Agreement dated as of , 19__
among Pledgor and (the "Partnership Agreement")
(including, without limitation, all of its right, title and interest as a
limited partner of the Partnership and all of its rights to property,
assets, partnership interests and distributions under the Partnership
Agreement);
(ii) all present and future rights of Pledgor to receive any payment
of money or other distribution or payment arising out of or in connection
with its limited partnership interest in the Partnership and its rights
under the Partnership Agreement; and
(iii) to the extent not otherwise included, all proceeds, products
and accessions of and to any and all of the foregoing, including, without
limitation, "proceeds" as defined in Section 9-306(1) of the Code,
including whatever is received upon any sale, exchange, collection or
other disposition of any of the Collateral, and any property into which
any of the Collateral is converted, whether cash or noncash proceeds, and
any and all other amounts paid or payable under or in connection with any
of the Collateral.
3. Representations and Warranties. Pledgor hereby represents and
warrants to Pledgee as follows:
(a) Organization and Existence. Pledgor and [ ] are the
only limited partners of the Partnership, and Magma Operating Company and
[ ] are the only general partners of the Partnership. Pledgor is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and is duly qualified to do business and is in
good standing in the State of Nevada and each other jurisdiction in which the
character of the properties owned or leased by it
<PAGE>149
or in which the transaction of its business as presently conducted or proposed
to be conducted makes such qualification necessary or desirable. Pledgor has
full corporate power and authority to own its property and to carry on its
business as now being conducted and as proposed to be conducted.
(b) Authority; Enforceability. Pledgor has full corporate power
and authority to enter into and perform the Partnership Agreement and this
Pledge Agreement and the entering into and performance of each such agreement
by Pledgor has been duly authorized by all proper and necessary corporate
action. The Partnership Agreement and this Pledge Agreement constitute the
legal, valid and binding obligations of Pledgor, enforceable in accordance
with their respective terms.
(c) No Breach. The execution, delivery and performance by Pledgor
of this Pledge Agreement do not and will not (i) require any approvals of any
governmental authority or regulatory body or any consent, filing or approval
of any Person which has not been obtained or made, (ii) violate the
Partnership Agreement or any organization document of Pledgor, (iii)
contravene, violate or result in any breach of any provision of, or constitute
a default under any mortgage, indenture, contract, agreement or other
undertaking to which Pledgor is a party or which purports to be binding upon
Pledgor or upon any of Pledgor's assets, or (iv) result in the creation or
imposition of any Lien (other than Permitted Liens) on any of the assets of
Pledgor.
(d) No Litigation. There is no action, suit, investigation or
proceeding by or before any court, arbitrator, administrative agency or other
governmental authority or regulatory body pending or, to the knowledge of
Pledgor, threatened, against or affecting Pledgor or any of its properties,
revenues or assets that is reasonably likely to have a Material Adverse
Effect. Pledgor is not in default with respect to any order of any court,
arbitrator, administrative agency, or other governmental authority or
regulatory body.
(e) Regulation of Pledgor. Pledgor is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Pledgor is not a "public utility
holding company" or a "subsidiary company" of a "public utility holding
company" as defined in PUHCA.
(f) Compliance with Laws; Consents. Pledgor is in compliance with
all applicable Laws, except where such non-compliance would not have a
Material Adverse Effect. No governmental approvals or consents are required
to be obtained by Pledgor in connection with the execution and delivery of
this Pledge Agreement or the performance by Pledgor of its obligations
hereunder, other than consents of the other general partner and the limited
partners of the Partnership, which consents have been obtained.
(g) Title; No Other Liens. Pledgor is the legal and beneficial
owner of the Collateral in existence on the date hereof and will be the sole
owner of the Collateral hereafter acquired, free and clear of any and all
Liens or claims of others except for Permitted Liens, and Pledgor has
<PAGE>150
full corporate power and authority to grant the liens and security interests
in and to the Collateral hereunder. Except with respect to Pledgee and as
required under this Pledge Agreement, no security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, and no lien or
security interest on or in the Collateral has been registered in the
registration book maintained by the Partnership in which all partnership
interests of the Partnership are recorded, except such as may have been filed
in favor of Pledgee pursuant to this Pledge Agreement.
(h) Perfection; Registration of Lien. Financing Statements or
other appropriate instruments have been filed pursuant to the Code in the
public offices set forth in Schedule A as may be necessary to perfect any
Security Interest granted or purported to be granted hereby to the extent any
such Security Interest may be perfected by the filing of a Financing
Statement. All other action by Pledgor and, to Pledgor's knowledge, by any
other Person necessary or desirable to perfect the Security Interest in each
item of the Collateral has been duly taken. Subject to the requirements
contained in the Code with respect to the filing of continuation statements,
this Pledge Agreement constitutes a valid and continuing Lien on and perfected
Security Interest (subject only to Permitted Liens) in the Collateral in favor
of Pledgee, superior and prior to the rights of all Persons (subject only to
Permitted Liens), whether the Collateral subject to the Security Interest is
now owned by Pledgor or is hereafter acquired.
(j) No Default. Pledgor is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
applicable to Pledgor contained in the Partnership Agreement.
(j) Governmental Authority. No authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority, any
regulatory body or any other Person is required of Pledgor with respect to the
exercise by Pledgee of the rights provided in this Pledge Agreement or the
remedies in respect of the Collateral pursuant to this Pledge Agreement.
(k) Taxes. Pledgor has filed or caused to be filed all tax returns
that are required to be filed by it and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
assets and properties and all other taxes, fees or other charges imposed on it
by any Governmental Authority (except taxes, fees and charges which are the
subject of a good faith contest by Pledgor), and Pledgor has no knowledge of
any actual or additional assessment in connection therewith for which adequate
provision is not made, and Pledgor has no knowledge of any actual or
additional assessment in connection therewith in material amounts.
(l) Chief Executive Office and Principal Place of Business.
Pledgor's chief executive office and principal place of business and the place
where Pledgor's records concerning the Collateral are kept is:
<PAGE>151
4. Covenants and Agreements. Pledgor hereby covenants and agrees
that Pledgor shall observe and fulfill, and shall cause to be observed and
fulfilled, each and all of the following covenants until all Obligations have
been paid and performed in full:
(a) Notice of Adverse Claims. Pledgor shall, promptly and in no
event later than five (5) Banking Days after Pledgor becomes aware of any
information or has knowledge of any adverse claim against the Collateral which
could have a Material Adverse Effect, deliver to Pledgee and Agent notice of
each such claim.
(b) Consent. Pledgor hereby consents to the execution and delivery
by the other partners of the Partnership of the Security Documents to which
each such partner is a party, and further consents to the granting by such
other partners of the liens and security interests on and in the collateral
thereunder pursuant to such Security Documents.
(c) Further Assurances. Pledgor shall, from time to time at its
expense, and upon request by Pledgee, promptly execute and deliver all further
instruments and documents, and take all further action that may be reasonably
necessary or advisable, or that Pledgee reasonably determines may be
necessary, in order to perfect and protect the Security Interest granted or
purported to be granted hereby or to enable Pledgee to exercise and enforce
its rights and remedies hereunder with respect to the Collateral.
(d) Matters Concerning Partnership Agreement. Pledgor shall not,
(i) directly or indirectly, terminate, cancel or suspend, or consent to any
termination, cancellation or suspension of the Partnership Agreement under
applicable state law, (ii) directly or indirectly amend, modify or supplement,
or consent to the amendment, modification or supplement of, any of the
provisions of the Partnership Agreement, (iii) waive any default under or
breach of any provision of the Partnership Agreement or waive, fail to
enforce, forgive or release any right, interest or entitlement of any kind,
howsoever arising, under or in respect of any provision of the Partnership
Agreement or vary or agree to the variation in any way of any of the
provisions of the Partnership Agreement, or of the performance of any other
Person under the Partnership Agreement, (iv) vote to enable, or take any other
action to permit (A) any additional Persons to become a Partner or (B) the
Partnership to issue to any Person any partnership interest (of any nature) or
to issue any other interests convertible into or granting the right to
purchase or exchange for any partnership interest (of any nature), or (v)
petition, request or take any other legal or administrative action that seeks,
or may be expected to result in, the rescission, termination or suspension of
the Partnership Agreement; further, Pledgor shall not take any action under
the Partnership Agreement that would violate the terms of this Pledge
Agreement or that would cause an Event of Default. Pledgor at its expense
shall perform and comply with the terms and provisions of the Partnership
Agreement to be performed or
<PAGE>152
complied with by it, shall maintain the Partnership Agreement in full force
and effect, and shall take all such action to that end as from time to time
may be reasonably requested by Pledgee.
(e) Certificated Interest. If Pledgor shall become entitled to
receive or shall receive any certificate, instrument, option or rights,
whether as an addition to, in substitution of, or in exchange for the
Collateral or any part thereof, or otherwise, Pledgor shall accept any such
certificate, instrument, option or rights as Pledgee's agent, shall hold them
in trust for Pledgee, and shall deliver them forthwith to Pledgee in the exact
form received, with Pledgor's endorsement when necessary, or accompanied by
duly executed instruments of transfer or assignment in blank or, if requested
by Pledgee, an additional pledge agreement or security agreement executed and
delivered by Pledgor, all in form and substance reasonably satisfactory to
Pledgee, to be held by Pledgee, subject to the terms hereof, as further
Collateral for the Obligations.
(f) Change in Location, Name, Etc. Without the prior written
consent of Pledgee and Agent, Pledgor shall not change its name or the
location of its chief executive office, principal place of business or the
place where its records concerning the Collateral are kept from
, . Without the prior written
consent of Pledgee and Agent, Pledgor shall not adopt any trade name or
fictitious business name.
(g) Maintenance of Existence, Privileges, etc. Pledgor shall at
all times preserve and maintain in full force and effect (i) its existence as
a corporation under the laws of its state of incorporation, (ii) its
qualification to do business in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its
business as conducted or proposed to be conducted makes such qualification
necessary or desirable, except where failure to so qualify would not
reasonably be expected to result in a Material Adverse Effect, and (iii) all
of its powers, rights, privileges and franchises necessary for the fulfillment
of its obligations under this Pledge Agreement. Pledgor shall not merge or
consolidate with or into any other Person or liquidate, wind-up or dissolve or
dispose of all or substantially all of its property, business or assets.
(h) Limitation on Liens on the Collateral. Pledgor shall not
create, incur or permit to exist, shall defend the Collateral now owned or
hereafter acquired by it against, and shall take such other action as is
necessary to remove, any Lien or claim on or to the Collateral, other than
Permitted Liens, and shall defend the right, title and interest of Pledgee in
and to any of the Collateral against the claims and demands of all Persons
whomsoever.
(i) Prohibition Against Transfers of Collateral. Without the prior
written consent of Pledgee and Agent, Pledgor shall not exchange, sell,
transfer, pledge, hypothecate, lease, assign, convey or dispose of, or permit
to be exchanged, sold, transferred, pledged, hypothecated, leased, assigned,
conveyed or disposed of, any of its limited partnership
<PAGE>153
interest in the Partnership or any other right, title or interest possessed by
Pledgor under the Partnership Agreement.
(j) Bankruptcy Filing, etc. Pledgor shall not authorize or permit
the Partnership (i) to commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Partnership or
the Partnership's 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 the Partnership or any
substantial part of the Partnership s property or (ii) to consent to any such
relief or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against the Partnership or
(iii) to make a general assignment for the benefit of the Partnership's
creditors. Neither Pledgor nor any of its Affiliates shall commence or join
with any other Person in commencing any proceeding against the Partnership
under any bankruptcy, reorganization, liquidation or insolvency law or statute
now or hereafter in effect in any jurisdiction.
(k) Governmental Authority Requirement. Pledgor shall not take or
omit to take (or suffer such taking or omission of) any action (unless ordered
to do so by a competent Governmental Authority having jurisdiction) in respect
of Pledgor or the Partnership and their respective businesses if, as a
consequence directly or indirectly of such action or omission, the Partnership
or Pledgor becomes subject to regulation by any Governmental Authority as a
"public utility," an "electric utility," an "electric utility holding
company," a "public utility holding company" or a subsidiary or affiliate of
any of the foregoing under any Laws (including, without limitation, PUHCA, FPA
and PURPA) or as a "holding company" within the meaning of PUHCA.
(l) Indemnification. Pledgor shall defend, indemnify and hold
harmless Pledgee and its officers, directors and employees, from and against
any and all costs, expenses, disbursements, liabilities, obligations, losses,
damages, injunctions, judgments, suits, actions, causes of action, fines,
penalties, claims and demands, of every kind or nature (including, without
limitation, attorney's fees and expenses) which are occasioned by or result
from any (i) failure by Pledgor to perform any of the terms, agreements, or
covenants to be performed by Pledgor under this Pledge Agreement and (ii)
proceeding or action brought by Pledgee pursuant to this Pledge Agreement or
which arise out of any such agreement unless due solely to the gross
negligence or willful misconduct of Pledgee.
5. Pledgor's Obligations Upon Event of Default. If an Event of
Default shall occur and be continuing (a) all payments received by Pledgor
under or in connection with any of the Collateral shall be held by Pledgor in
trust for Pledgee, shall be segregated from other funds of Pledgor and shall,
forthwith upon receipt by Pledgor, be turned over to Pledgee or its designee
in the same form as received by Pledgor (duly endorsed by Pledgor to Pledgee,
if requested), and (b) any and all such payments so received by Pledgee or its
designee (whether from Pledgor or otherwise) may, in the sole discretion of
Pledgee or its designee, be held by Pledgee or such designee as collateral
security for, and/or then or at any time thereafter
<PAGE>154
be applied, in whole or in part by Pledgee or its designee to satisfy the
Obligations.
6. Remedies; Rights Upon Event of Default. Upon the occurrence and
during the continuance of an Event of Default, Pledgee may do one or more of
the following:
(a) upon notice to Pledgor, which notice need not be in writing,
make such payments and do such acts as Pledgee may deem necessary to protect,
perfect or continue the perfection of Pledgee's Security Interest in the
Collateral, including, without limitation, paying, purchasing, contesting or
compromising any Lien which is, or purports to be, prior to or superior to the
Security Interest granted hereunder, and commencing, appearing or otherwise
participating in or controlling any action or proceeding purporting to affect
Pledgee's Security Interest in or ownership of the Collateral;
(b) foreclose on the Collateral as herein provided or in any manner
permitted by law and exercise any and all of the rights and remedies conferred
upon Pledgee hereunder either concurrently or in such order as Pledgee may
determine without affecting the rights or remedies to which Pledgee may be
entitled hereunder or under any other Credit Document. Pledgor hereby waives,
to the extent permitted by applicable law, notice and judicial hearing in
connection with Pledgee's taking possession or collection, recovery, receipt,
appropriation, repossession, retention, set-off, sale, leasing, conveyance,
assignment, transfer or other disposition of or realization upon any or all of
the Collateral, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which
Pledgor would otherwise have under the constitution or any statute or other
law of the United States of America or of any state;
(c) without notice, except as specified below, sell the Collateral,
or any part thereof, in one or more parcels at public or private sale, at any
of Pledgee's offices or elsewhere, at such time or times, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms
as Pledgee may deem commercially reasonable. Pledgor agrees that, to the
extent notice of sale shall be required by law, at least 10 days' notice to
Pledgor of the time and the place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. At
any sale of the Collateral, if permitted by law, Pledgee may bid (which bid
may be, in whole or in part, in the form of cancellation of indebtedness) for
the purchase of the Collateral or any portion thereof for the account of
Pledgee. Pledgee shall not be obligated to make any sale of the Collateral
regardless of notice of sale having been given. Pledgee may adjourn any
public or private sale 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 adjourned. Pledgee shall incur no liability as a
result of the manner of sale of the Collateral, or any part thereof, at any
private sale conducted in a commercially reasonable manner. Pledgor hereby
waives, to the extent permitted by applicable law, any claims against Pledgee
arising by reason of the fact that the price at
<PAGE>155
which the Collateral, or any part thereof, may have been sold at a private
sale was less than the price which might have been obtained at public sale or
was less than the aggregate amount of the Obligations, even if Pledgee accepts
the first offer received which Pledgee in good faith deems to be commercially
reasonable under the circumstances and does not offer the Collateral to more
than one offeree. To the full extent permitted by law, Pledgor shall have the
burden of proving that any such sale of the Collateral was conducted in a
commercially unreasonable manner. To the extent permitted by law, Pledgor
hereby specifically waives all rights of redemption, stay or appraisal which
it has or may have under any law now existing or hereafter enacted. Pledgor
authorizes Pledgee, at any time and from time to time, to execute, in
connection with a sale of the Collateral pursuant to the provisions of this
Pledge Agreement, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral;
(d) upon notice to Pledgor, register the Collateral in the name of
Pledgee or its nominee as pledgee or otherwise take such action as Pledgee
shall in its sole discretion deem necessary or desirable with respect to the
Collateral, and Pledgee or its nominee may thereafter, in its sole discretion,
without notice, exercise all voting, consent, managerial and other rights
relating to the Collateral and exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining
to the Collateral as if it were the absolute owner thereof, including, without
limitation, all rights of Pledgor under the Partnership Agreement, including,
without limitation, the right to (i) receive all permitted distributions, if
any, made for the account of Pledgor under the Partnership Agreement and (ii)
exchange any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Partnership, all
without liability except to account for property actually received by Pledgee,
but Pledgee shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing; and
(e) exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party after default under the Code.
7. Application of Proceeds. The net proceeds of any foreclosure,
collection, recovery, receipt, appropriation, realization or sale of the
Collateral shall be applied in the following order:
(a) to the repayment of the costs and expenses of retaking, holding
and preparing for the sale and the selling of the Collateral (including,
without limitation, attorneys' fees and expenses and court costs) and the
discharge of all assessments, encumbrances, charges or liens, if any, on the
Collateral prior to the lien hereof; and
(b) to the satisfaction of the Obligations.
<PAGE>156
8. Security Interest Absolute. All the rights of Pledgee hereunder
and the Security Interest and all obligations of Pledgor hereunder shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the CE Acquisition
Agreement, this Pledge Agreement or any other Credit Document or the
Partnership Agreement or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment
or waiver of or any consent to any departure from the CE Acquisition
Credit Agreement, this Pledge Agreement or any other Credit Document or
the Partnership Agreement;
(iii) any exchange or release of any Collateral or any other
collateral, or the non-perfection of any of the Security Interest, or any
release or amendment or waiver of or consent to or departure from any
guaranty, for all or any of the Obligations; or
(iv) to the full extent permitted by law, any other circumstance
that might otherwise constitute a defense available to, or a discharge
of, Pledgor or any third party pledgor.
9. Pledgee Appointed Attorney-in-Fact.
(a) Powers. Pledgor hereby irrevocably constitutes and appoints
Pledgee and any officer or agent thereof, with full power of substitution, as
Pledgor's true and lawful attorney-in-fact (which appointment as attorney-in-
fact shall be coupled with an interest), with full authority in the place and
stead of Pledgor and in the name of Pledgor or otherwise, from time to time
upon the occurrence and during the continuance of an Event of Default in
Pledgee's discretion, to take an action and to execute any and all documents
and instruments which Pledgee may deem necessary or advisable to accomplish
the purposes of this Pledge Agreement, without notice to Pledgor, including,
without limitation:
(i) to exercise all partnership rights, powers and privileges to
the same extent Pledgor shall have been entitled under the Partnership
Agreement and in accordance with applicable law, including, without
limitation, all voting rights of Pledgor as limited partner of the
Partnership;
(ii) to receive, endorse and collect all instruments made payable to
Pledgor representing any interest payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge
for the same and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate
by Pledgee for the purpose of collecting any and all of such dividends,
payments or other distributions;
(iii) to pay or discharge taxes and liens levied or placed on the
Collateral; and
<PAGE>157
(iv) (A) to direct any party liable for any payment in respect of or
arising out of any of the Collateral to make payment of any and all
moneys due or to become due in connection therewith directly to Pledgee
or as Pledgee shall otherwise direct, (B) to ask or make demand for,
collect, receive payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect of or
arising out of any Collateral, (C) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce
any other right in respect of any Collateral, (D) to defend any suit,
action or proceeding brought against Pledgor with respect to any
Collateral, (E) to settle, compromise or adjust any suit, action or
proceeding described in clause (D) above and, in connection therewith, to
give such discharges or releases as Pledgee acting in good faith may deem
appropriate, (F) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though Pledgee were the absolute owner thereof
for all purposes, and (G) to do, at Pledgee's option and at Pledgor's
expense, at any time, or from time to time, all acts and things which
Pledgee acting in good faith deems necessary to protect, preserve or
realize upon the Collateral and the Security Interest granted herein and
to effect the intent of this Pledge Agreement, all as fully and
effectively as Pledgor might do.
(b) Other Powers. Pledgor further authorizes Pledgee, at any time
and from time to time (i) to execute, in connection with any sale provided for
hereunder, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral and (ii) to the full extent permitted
by applicable law, to file one or more financing or continuation statements,
and amendments thereto, relative to all or any part of the Collateral without
the signature of Pledgor.
10. Pledgee May Perform. Upon the occurrence and during the
continuance of an Event of Default, Pledgee, without releasing Pledgor from
any obligation, covenant or condition hereof, itself may make any payment or
perform, or cause the performance of, any such obligation, covenant, condition
or agreement or any other action in such manner and to such extent as Pledgee
may deem necessary to protect, perfect or continue the perfection of Pledgee's
Security Interest in the Collateral.
11. No Duty on Pledgee's Part; Limitation on Pledgee s Obligations.
(a) No Duty on Pledgee s Part. The powers conferred on Pledgee
hereunder are solely to protect Pledgee's interests in the Collateral and
shall not impose any duty upon it to exercise any such powers.
(b) Limitations on Obligations. Anything herein to the contrary
notwithstanding, Pledgor shall remain liable under the Partnership 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. The exercise by Pledgee of any of the rights or
<PAGE>158
remedies hereunder shall not release Pledgor from any of its duties or
obligations under the Partnership Agreement or this Pledge Agreement. All of
the Collateral is hereby assigned to Pledgee solely as security, and Pledgee
shall have no duty, liability or obligation whatsoever with respect to any of
the Collateral, unless Pledgee so elects in writing consistent with its rights
under this Pledge Agreement. Pledgor shall not take any action under the
Partnership Agreement that is inconsistent with the terms of this Pledge
Agreement, the CE Acquisition Credit Agreement or that would cause an Event of
Default.
12. Reasonable Care. Pledgee shall exercise the same degree of
care hereunder as it exercises in connection with similar transactions for its
own account. Pledgee shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which Pledgee accords or
would accord collateral held by Pledgee in similar transactions for its own
account. Without limiting the generality of the foregoing and except as
otherwise provided by applicable law, Pledgee shall not be required to
marshall any collateral, including, without limitation, the Collateral subject
to the Security Interest created hereby and any guaranties of the Obligations,
or to resort to any item of Collateral or guaranties in any particular order;
and all of Pledgee s rights hereunder and in respect of such Collateral and
guaranties shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that Pledgor lawfully may, Pledgor hereby
(a) agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of Pledgee's
rights under this Pledge Agreement or under any other instrument evidencing
any of the Obligations or by which any of the Obligations is secured or
guaranteed and (b) irrevocably waives the benefits of all Laws and any and all
rights to equity of redemption or other rights of redemption that it may have
in equity or at law with respect to the Collateral.
13. Waiver of Trial by Jury. WITH REGARD TO THIS PLEDGE AGREEMENT,
PLEDGOR HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
AND FOR ANY COUNTERCLAIM THEREIN.
14. Notices. 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 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 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 14,
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.
15. Absence of Fiduciary Relation. Pledgee undertakes to perform
or to observe only such of its agreements and obligations as are
<PAGE>159
specifically set forth in this Pledge Agreement, and no implied agreements,
covenants or obligations with respect to Pledgor, any Affiliate of Pledgor or
any other party to the Partnership Agreement or any other Credit Document to
which Pledgor is a party shall be read into this Pledge Agreement against
Pledgee; Pledgee is not a fiduciary of and shall not owe or be deemed to owe
any fiduciary duty to Pledgor, any Affiliate of Pledgor or any other party to
the Partnership Agreement or any Credit Document to which Pledgor is a party.
16. Survival of Representations and Warranties. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Pledge Agreement and the other Credit Documents and
satisfaction of the Obligations, and shall be deemed to be material and to
have been relied upon by Pledgee, regardless of any investigation made by or
on behalf of any of Pledgee. Notwithstanding anything in this Pledge
Agreement or implied by law to the contrary, the agreements and obligations of
Pledgor set forth in Section 4(l) shall survive the satisfaction of the
Obligations.
17. No Waiver; Cumulative Remedies. By exercising or failing to
exercise any of its rights, options or elections hereunder (without also
expressly waiving the same in writing), Pledgee shall not be deemed to have
waived any breach or default on the part of Pledgor or to have released
Pledgor from any of its obligations secured hereby. No failure on the part of
Pledgee to exercise, and no delay in exercising (without also expressly
waiving the same in writing) any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof,
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
Pledgee shall have all of the rights and remedies granted under the CE
Acquisition Credit Agreement or any other Credit Document, and available at
law or in equity, and these same rights and remedies may be pursued
separately, successively or concurrently against Pledgor or any Collateral, at
the discretion of Pledgee.
18. Severability. Any provision of this Pledge Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction. Where provisions of any law or
regulation resulting in such prohibition or unenforceability may be waived
they are hereby waived by Pledgor and Pledgee to the full extent permitted by
law so that this Pledge Agreement shall be deemed a valid, binding agreement,
and the Security Interest created hereby shall constitute a continuing first
lien on and first perfected security interest in the Collateral, in each case
enforceable in accordance with its terms.
19. Reliance by Pledgee. Pledgee shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
<PAGE>160
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to Pledgor), independent
accountants and other experts selected by Pledgee. Pledgee shall have no
obligation to any Person to act or refrain from acting or exercising any of
its rights under this Pledge Agreement.
20. Amendment. No amendment, modification, termination or waiver
of any of the provisions of this Pledge Agreement, or consent to any departure
by Pledgor or Pledgee therefrom, shall be effective unless the same shall be
in writing and signed by Pledgee, Pledgor and Agent.
21. Assignment by Pledgee. Pledgor acknowledges that in connection
with the transactions contemplated by the Non-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 Collateral, 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.
22. Successors and Assigns. This Pledge Agreement and the rights
granted hereunder shall be binding upon and inure to the benefit of successors
and permitted assigns of Pledgor and Pledgee, except that Pledgor may not
assign its rights or obligations hereunder except to Agent pursuant to the
Borrower Pledge and Security Agreement.
23. Third-Party Beneficiaries. Pledgor and Pledgee acknowledge
that Agent and the Banks are express beneficiaries to this Pledge Agreement.
24. Number and Gender. Whenever used in this Pledge Agreement, the
singular number shall include the plural and the plural the singular, and the
use of any gender shall be applicable to all genders.
25. Captions. The captions, headings and table of contents used in
this Pledge Agreement are for convenience only and do not and shall not be
deemed to affect, limit, amplify or modify the terms and provisions hereof.
26. Applicable Law and Jurisdiction.
(a) Applicable Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS, BUT EXCLUDING
PERFECTION, WHICH SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION RELEVANT
THERETO.
(b) New York Courts.
<PAGE>161
(i) Pledgor hereby expressly and irrevocably agrees and consents
that any suit, action or proceeding arising out of or relating to this
Pledge Agreement or any other Credit Document to which it is a party and
the transactions contemplated therein may be instituted by Pledgee in any
State or Federal court sitting in the County of New York, State of New
York, United States of America and, by the execution and delivery of this
Pledge Agreement, Pledgor expressly waives any objection which it may
have now or hereafter to the laying of the venue or to the jurisdiction
of any such suit, action or proceeding, and irrevocably submits generally
and unconditionally to the jurisdiction of any such court in any such
suit, action or proceeding.
(ii) In the case of the courts of the State of New York or of the
United States sitting in New York, Pledgor hereby irrevocably designates,
appoints and empowers CT Corporation System (the "Process Agent," which
has consented thereto) with offices on the date hereof at 1633 Broadway,
New York, New York 10019, as agent to receive for and on behalf of
Pledgor service of process in the State of New York. Pledgor further
agrees that such service of process may be made on Process Agent by
personal service on Process Agent of a copy of the summons and complaint
or other legal process in any such suit, action or proceeding, or by any
other method of service provided for under the applicable laws in effect
in the State of New York, and Process Agent is hereby authorized to
accept such service for and on behalf of Pledgor, and to admit service
with respect thereto.
(iii) Upon service of process being made on Process Agent as
aforesaid, a copy of the summons and complaint or other legal process
served shall be mailed by the Process Agent to Pledgor by registered
mail, return receipt requested, at its address set forth below Pledgor's
name on the signature pages hereto, or to such other address as Pledgor
may notify Process Agent in writing. Service upon Process Agent as
aforesaid shall be deemed to be personal service on Pledgor and shall be
legal and binding upon Pledgor for all purposes, notwithstanding any
failure of Process Agent to mail a copy of such legal process to Pledgor,
or any failure on the part of Pledgor to receive the same.
(iv) Pledgor agrees that it will at all times continuously maintain
an agent to receive service of process in the County of New York on its
behalf with respect to this Pledge Agreement or any other Credit Document
to which it is a party. In the event that for any reason Process Agent
or any successor thereto shall no longer serve as agent for Pledgor to
receive service of process in the County of New York, or shall have
changed its address without notification thereof to Pledgee, Pledgor will
promptly but in no event later than five Banking Days after obtaining
knowledge thereof, irrevocably designate and appoint a substitute agent
acceptable to Pledgee and advise Pledgee thereof.
(c) Other Jurisdictions. Nothing contained in this Section 26
shall affect the right to effect service of process in any manner provided for
under applicable law or preclude Pledgee from bringing any suit, action
<PAGE>162
or proceeding arising out of or relating to the this Pledge Agreement or any
other Credit Document in the courts of any place where Pledgor or any of its
property or assets may be found or located. To the extent permitted by the
applicable Laws of any such jurisdiction, Pledgor hereby irrevocably submits
to the jurisdiction of any such court and expressly waives, in respect of any
such suit, action or proceeding, the jurisdiction of any other court or courts
which now or hereafter, by reason of its present or future domicile, or
otherwise, may be available to it.
27. Continuing Security Interest; Termination. This Pledge
Agreement shall create a continuing assignment, pledge and first priority
Security Interest in the Collateral, subject only to Permitted Liens, and
shall remain in full force and effect for the benefit of Pledgee until all
Obligations have been paid and performed in full. Upon the happening of such
event, the Security Interest granted hereby shall terminate. Upon such
termination, Pledgee shall, upon the request and at the expense of Pledgor,
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination or expiration.
28. Payments Set Aside. To the extent that Pledgor or any other
Person on behalf of Pledgor makes a payment or payments to Pledgee, or Pledgee
enforces the Security Interests or Pledgee exercises its right of set-off, and
such payment or payments or the proceeds of such enforcement or set-off or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligations or any
part thereof originally intended to be satisfied, and this Pledge Agreement
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or set-off had not occurred.
29. Counterparts. This Pledge Agreement may be executed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the day and year first written above.
[PLEDGOR]
By:
Name:
Title:
Address for Notices:
_______________________________
_______________________________
_______________________________
Attn:
<PAGE>163
Telecopier:
CALIFORNIA ENERGY COMPANY,
INC., as Pledgee
By:
Name:
Title:
Address for Notices:
10831 Old Mill Road
Omaha, Nebraska 68154
Attn: John G. Sylvia
Telecopier: (402) 334-3759
<PAGE>164
FINANCING STATEMENT FILINGS
<PAGE>165
[FORM OF]
GENERAL PARTNER PLEDGE AGREEMENT
between
,
as Pledgor
and
CALIFORNIA ENERGY COMPANY, INC.
as Pledgee
Dated as of February , 1995
<PAGE>166
TABLE OF CONTENTS
Page
l. Definitions . . . . . . . . . . . . . . . . . .
2. Grant of Security Interest . . . . . . . . . . .
3. Representations and Warranties . . . . . . . . .
4. Covenants and Agreements . . . . . . . . . . . .
5. Pledgor's Obligations Upon Event of Default . .
6. Remedies; Rights Upon Event of Default . . . . .
7. Application of Proceeds . . . . . . . . . . . .
8. Security Interest Absolute . . . . . . . . . . .
9. Pledgee Appointed Attorney-in-Fact . . . . . . .
10. Pledgee May Perform . . . . . . . . . . . . . .
11. No Duty on Pledgee's Part; Limitation on
Pledgee's Obligations . . . . . . . . . . . . .
12. Reasonable Care . . . . . . . . . . . . . . . .
13. Waiver of Trial by Jury . . . . . . . . . . . .
14. Notices . . . . . . . . . . . . . . . . . . . .
15. Absence of Fiduciary Relation . . . . . . . . .
16. Survival of Representations and Warranties . . .
17. No Waiver; Cumulative Remedies . . . . . . . . .
18. Severability . . . . . . . . . . . . . . . . . .
19. Exculpatory Provisions; Reliance by Pledgee . .
20. Amendment . . . . . . . . . . . . . . . . . . .
21. Assignment by Pledgee . . . . . . . . . . . . .
22. Successors and Assigns . . . . . . . . . . . . .
23. Third-Party Beneficiaries . . . . . . . . . . .
24. Number and Gender . . . . . . . . . . . . . . .
25. Subrogation, etc. . . . . . . . . . . . . . . .
26. Captions . . . . . . . . . . . . . . . . . . . .
27. Applicable Law and Jurisdiction . . . . . . . .
28. Continuing Security Interest; Termination . . .
29. Payments Set Aside . . . . . . . . . . . . . . .
30. Counterparts . . . . . . . . . . . . . . . . . .
Schedule
Schedule A: Financing Statement Filings
<PAGE>167
GENERAL PARTNER PLEDGE AGREEMENT
This GENERAL PARTNER PLEDGE AGREEMENT (this "Pledge Agreement"),
dated as of February , 1995, between a
corporation ("Pledgor"), and CALIFORNIA ENERGY COMPANY, INC., a Delaware
corporation ("Pledgee").
W I T N E S S E T H :
WHEREAS, pursuant to the Non-Recourse Credit Agreement dated as of
even date herewith (as amended, supplemented or otherwise modified from time
to time, the "Non-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 CE Acquisition Company, Inc., a
Delaware corporation ("CE Acquisition"), and Pledgee, the proceeds of the
Loans will be loaned by Pledgee to CE Acquisition and CE Acquisition will use
such proceeds to consummate the Merger (described below);
WHEREAS, CE Acquisition owns more than 51% of the outstanding shares
of common stock of Magma Power Company ("Magma"), the parent company of
Pledgor, and upon consummation of the Merger, CE Acquisition will be merged
with and into Magma and Magma will assume CE Acquisition's obligations under
the CE Acquisition Credit Agreement and related agreements;
WHEREAS, Pledgor is a wholly-owned subsidiary of Magma;
WHEREAS, Pledgor has executed a Guaranty dated as of the date hereof
in favor of Pledgee (the "Guaranty"), guaranteeing Magma's obligations under
the CE Acquisition Credit Agreement and the other Credit Documents;
WHEREAS, Pledgor is executing this Pledge Agreement to secure its
obligations under the Guaranty;
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 other agreements;
WHEREAS, Pledgor shall derive substantial benefit from the loan to
be made by Pledgee to CE Acquisition pursuant to the CE Acquisition Credit
Agreement; and
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;
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NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Banks
to make the Loans, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized
terms used herein which are defined in the CE Acquisition Credit Agreement
shall have their respective meanings as therein defined. All references to
sections, schedules and exhibits in or to this Pledge Agreement are to
sections, schedules and exhibits in or to this Pledge Agreement, unless
otherwise specified. The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not to any particular provision of this Pledge
Agreement. For purposes of this Pledge Agreement, all other terms used herein
and not otherwise defined herein which are defined in Article 9 of the Uniform
Commercial Code (as the same may be in effect in the State of New York or any
other applicable jurisdiction, the "Code"), shall have their respective
meanings as therein defined.
2. Grant of Security Interest. As security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of any and all of Pledgor's obligations under the
Guaranty (the "Obligations") now existing or hereafter arising, and howsoever
evidenced, Pledgor hereby collaterally assigns, conveys, mortgages, pledges,
hypothecates and transfers to Pledgee, and grants and creates a lien on and
first priority security interest (the "Security Interest") in favor of
Pledgee, in all right, title and interest of Pledgor in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) its general partnership interest in the Partnership and all of
its rights under the Partnership Agreement dated as of , 19__
among Pledgor and (the "Partnership Agreement")
(including, without limitation, to the extent assignable or transferable,
all of its right, title and interest as a general partner to participate
in the operation or management of the Partnership and all of its rights
to property, assets, partnership interests and distributions under the
Partnership Agreement);
(ii) all present and future rights of Pledgor to receive any payment
of money or other distribution or payment arising out of or in connection
with its general partnership interest in the Partnership and its rights
under the Partnership Agreement; and
(iii) to the extent not otherwise included, all proceeds, products
and accessions of and to any and all of the foregoing, including, without
limitation, "proceeds" as defined in Section 9-306(1) of the Code,
including whatever is received upon any sale, exchange, collection or
other disposition of any of the Collateral, and any property into which
any of the Collateral is converted, whether cash or noncash proceeds, and
any and all other amounts paid or payable under or in connection with any
of the Collateral.
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3. Representations and Warranties. Pledgor hereby represents and
warrants to Pledgee as follows:
(a) Organization and Existence. Pledgor and are the
only general partners of the Partnership, and Magma and [ ] are the
only limited partners of the Partnership. Pledgor is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is duly qualified to do business and is in good standing in
the State of Delaware and each other jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its
business as presently conducted or proposed to be conducted makes such
qualification necessary or desirable. Pledgor has full corporate power and
authority to own its property and to carry on its business as now being
conducted and as proposed to be conducted.
(b) Authority; Enforceability. Pledgor has full corporate power
and authority to enter into and perform the Partnership Agreement, this Pledge
Agreement and the Guaranty and the entering into and performance of each such
agreement by Pledgor has been duly authorized by all proper and necessary
corporate action. The Partnership Agreement, this Pledge Agreement and the
Guaranty constitute the legal, valid and binding obligations of Pledgor,
enforceable in accordance with their respective terms.
(c) No Breach. The execution, delivery and performance by Pledgor
of this Pledge Agreement and the Guaranty do not and will not (i) require any
approvals of any governmental authority or regulatory body or any consent,
filing or approval of any Person which has not been obtained or made, (ii)
violate the Partnership Agreement or any organization document of Pledgor,
(iii) contravene, violate or result in any breach of any provision of, or
constitute a default under any mortgage, indenture, contract, agreement or
other undertaking to which Pledgor is a party or which purports to be binding
upon Pledgor or upon any of Pledgor's assets, or (iv) result in the creation
or imposition of any Lien (other than Permitted Liens) on any of the assets of
Pledgor.
(d) No Litigation. There is no action, suit, investigation or
proceeding by or before any court, arbitrator, administrative agency or other
governmental authority or regulatory body pending or, to the knowledge of
Pledgor, threatened, against or affecting Pledgor or any of its properties,
revenues or assets that is reasonably likely to have a Material Adverse
Effect. Pledgor is not in default with respect to any order of any court,
arbitrator, administrative agency, or other governmental authority or
regulatory body.
(e) Regulation of Pledgor. Pledgor is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Pledgor is not a "public utility
holding company" or a "subsidiary company" of a "public utility holding
company" as defined in PUHCA.
(f) Compliance with Laws; Consents. Pledgor is in compliance with
all applicable Laws, except where such non-compliance would not have a
Material Adverse Effect. No governmental approvals or consents are
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required to be obtained by Pledgor in connection with the execution and
delivery of this Pledge Agreement or the Guaranty or the performance by
Pledgor of its obligations hereunder or thereunder, other than consents of the
other general partner and the limited partners of the Partnership.
(g) Title; No Other Liens. Pledgor is the legal and beneficial
owner of the Collateral in existence on the date hereof and will be the sole
owner of the Collateral hereafter acquired, free and clear of any and all
Liens or claims of others except for Permitted Liens, and Pledgor has full
corporate power and authority to grant the liens and security interests in and
to the Collateral hereunder. Except with respect to Pledgee and as required
under this Pledge Agreement, no security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on
file or of record in any public office, and no lien or security interest on or
in the Collateral has been registered in the registration book maintained by
the Partnership in which all partnership interests of the Partnership are
recorded, except such as may have been filed in favor of Pledgee pursuant to
this Pledge Agreement.
(h) Perfection; Registration of Lien. Financing Statements or
other appropriate instruments have been filed pursuant to the Code in the
public offices set forth in Schedule A as may be necessary to perfect any
Security Interest granted or purported to be granted hereby to the extent any
such Security Interest may be perfected by the filing of a Financing
Statement. All other action by Pledgor and, to Pledgor's knowledge, by any
other Person necessary or desirable to perfect the Security Interest in each
item of the Collateral has been duly taken. Subject to the requirements
contained in the Code with respect to the filing of continuation statements,
this Pledge Agreement constitutes a valid and continuing Lien on and perfected
Security Interest (subject only to Permitted Liens) in the Collateral in favor
of Pledgee, superior and prior to the rights of all Persons (subject only to
Permitted Liens), whether the Collateral subject to the Security Interest is
now owned by Pledgor or is hereafter acquired.
(j) No Default. Pledgor is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
applicable to Pledgor contained in the Partnership Agreement.
(j) Governmental Authority. No authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority, any
regulatory body or any other Person is required of Pledgor with respect to the
exercise by Pledgee of the rights provided in this Pledge Agreement or the
remedies in respect of the Collateral pursuant to this Pledge Agreement.
(k) Taxes. Pledgor has filed or caused to be filed all tax returns
that are required to be filed by it and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
assets and properties and all other taxes, fees or other charges imposed on it
by any Governmental Authority (except taxes, fees and charges which are the
subject of a good faith contest by Pledgor), and Pledgor has no knowledge of
any actual or additional assessment in connection therewith for which adequate
provision is not made, and Pledgor has no knowledge of
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any actual or additional assessment in connection therewith in material
amounts.
(l) Chief Executive Office and Principal Place of Business.
Pledgor's chief executive office and principal place of business and the place
where Pledgor's records concerning the Collateral are kept is:
4. Covenants and Agreements. Pledgor hereby covenants and agrees
that Pledgor shall observe and fulfill, and shall cause to be observed and
fulfilled, each and all of the following covenants until all Obligations (as
defined in the CE Acquisition Credit Agreement) to be paid or performed by CE
Acquisition have been paid and performed in full:
(a) Notice of Adverse Claims. Pledgor shall, promptly and in no
event later than five (5) Banking Days after Pledgor becomes aware of any
information or has knowledge of any adverse claim against the Collateral which
could have a Material Adverse Effect, deliver to Pledgee and Agent notice of
each such claim.
(b) Consent. Pledgor hereby consents to the execution and delivery
by the other partners of the Partnership of the Security Documents to which
each such partner is a party, and further consents to the granting by such
other partners of the liens and security interests on and in the collateral
thereunder pursuant to such Security Documents.
(c) Further Assurances. Pledgor shall, from time to time at its
expense, and upon request by Pledgee, promptly execute and deliver all further
instruments and documents, and take all further action that may be reasonably
necessary or advisable, or that Pledgee reasonably determines may be
necessary, in order to perfect and protect the Security Interest granted or
purported to be granted hereby or to enable Pledgee to exercise and enforce
its rights and remedies hereunder with respect to the Collateral.
(d) Matters Concerning Partnership Agreement. Pledgor shall not,
(i) directly or indirectly, terminate, cancel or suspend, or consent to any
termination, cancellation or suspension of the Partnership Agreement under
applicable state law, (ii) directly or indirectly amend, modify or supplement,
or consent to the amendment, modification or supplement of, any of the
provisions of the Partnership Agreement, (iii) waive any default under or
breach of any provision of the Partnership Agreement or waive, fail to
enforce, forgive or release any right, interest or entitlement of any kind,
howsoever arising, under or in respect of any provision of the Partnership
Agreement or vary or agree to the variation in any way of any of the
provisions of the Partnership Agreement, or of the performance of any other
Person under the Partnership Agreement, (iv) vote to enable, or take any other
action to permit (A) any additional Persons to become a Partner or (B) the
Partnership to issue to any Person any partnership interest (of any nature) or
to issue any other interests convertible into or granting the right to
purchase or exchange for any partnership interest (of any nature), or (v)
petition, request or take any other legal or
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administrative action that seeks, or may be expected to result in, the
rescission, termination or suspension of the Partnership Agreement; further,
Pledgor shall not take any action under the Partnership Agreement that would
violate the terms of this Pledge Agreement or the Guaranty or that would cause
an Event of Default. Pledgor at its expense shall perform and comply with the
terms and provisions of the Partnership Agreement to be performed or complied
with by it, shall maintain the Partnership Agreement in full force and effect,
and shall take all such action to that end as from time to time may be
reasonably requested by Pledgee.
(e) Certificated Interest. If Pledgor shall become entitled to
receive or shall receive any certificate, instrument, option or rights,
whether as an addition to, in substitution of, or in exchange for the
Collateral or any part thereof, or otherwise, Pledgor shall accept any such
certificate, instrument, option or rights as Pledgee's agent, shall hold them
in trust for Pledgee, and shall deliver them forthwith to Pledgee in the exact
form received, with Pledgor's endorsement when necessary, or accompanied by
duly executed instruments of transfer or assignment in blank or, if requested
by Pledgee, an additional pledge agreement or security agreement executed and
delivered by Pledgor, all in form and substance reasonably satisfactory to
Pledgee, to be held by Pledgee, subject to the terms hereof, as further
Collateral for the Obligations.
(f) Change in Location, Name, Etc. Without the prior written
consent of Pledgee, Pledgor shall not change its name or the location of its
chief executive office, principal place of business or the place where its
records concerning the Collateral are kept from ,
. Without the prior written
consent of Pledgee and Agent, Pledgor shall not adopt any trade name or
fictitious business name.
(g) Maintenance of Existence, Privileges, etc. Pledgor shall at
all times preserve and maintain in full force and effect (i) its existence as
a corporation under the laws of its state of incorporation, (ii) its
qualification to do business in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its
business as conducted or proposed to be conducted makes such qualification
necessary or desirable, except where failure to so qualify would not
reasonably be expected to result in a Material Adverse Effect, and (iii) all
of its powers, rights, privileges and franchises necessary for the fulfillment
of its obligations under this Pledge Agreement and the Guaranty. Pledgor
shall not merge or consolidate with or into any other Person or liquidate,
wind-up or dissolve or dispose of all or substantially all of its property,
business or assets.
(h) Limitation on Liens on the Collateral. Pledgor shall not
create, incur or permit to exist, shall defend the Collateral now owned or
hereafter acquired by it against, and shall take such other action as is
necessary to remove, any Lien or claim on or to the Collateral, other than
Permitted Liens, and shall defend the right, title and interest of Pledgee in
and to any of the Collateral against the claims and demands of all Persons
whomsoever.
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(i) Prohibition Against Transfers of Collateral. Without the prior
written consent of Pledgee and Agent, Pledgor shall not exchange, sell,
transfer, pledge, hypothecate, lease, assign, convey or dispose of, or permit
to be exchanged, sold, transferred, pledged, hypothecated, leased, assigned,
conveyed or disposed of, any of its general partnership interest in the
Partnership or any other right, title or interest possessed by Pledgor under
the Partnership Agreement (including, without limitation, any of its right,
title or interest as a general partner to participate in the operation or
management of the Partnership).
(j) Bankruptcy Filing, etc. Pledgor shall not authorize or permit
the Partnership (i) to commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Partnership or
the Partnership's 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 the Partnership or any
substantial part of the Partnership s property or (ii) to consent to any such
relief or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against the Partnership or
(iii) to make a general assignment for the benefit of the Partnership's
creditors. Neither Pledgor nor any of its Affiliates shall commence or join
with any other Person in commencing any proceeding against the Partnership
under any bankruptcy, reorganization, liquidation or insolvency law or statute
now or hereafter in effect in any jurisdiction.
(k) Other Business. Pledgor shall not engage in any business other
than the conduct of activities consistent with and necessary for its business
as general partner of the Partnership, without the prior written consent of
Pledgee.
(l) Governmental Authority Requirement. Pledgor shall not take or
omit to take (or suffer such taking or omission of) any action (unless ordered
to do so by a competent Governmental Authority having jurisdiction) in respect
of Pledgor or the Partnership and their respective businesses if, as a
consequence directly or indirectly of such action or omission, the Partnership
or Pledgor becomes subject to regulation by any Governmental Authority as a
"public utility," an "electric utility," an "electric utility holding
company," a "public utility holding company" or a subsidiary or affiliate of
any of the foregoing under any Laws (including, without limitation, PUHCA, FPA
and PURPA) or as a "holding company" within the meaning of PUHCA.
(m) Indemnification. Pledgor shall defend, indemnify and hold
harmless Pledgee and its officers, directors and employees, from and against
any and all costs, expenses, disbursements, liabilities, obligations, losses,
damages, injunctions, judgments, suits, actions, causes of action, fines,
penalties, claims and demands, of every kind or nature (including, without
limitation, attorney's fees and expenses) which are occasioned by or result
from any (i) failure by Pledgor to perform any of the terms, agreements, or
covenants to be performed by Pledgor under this Pledge Agreement or under the
Guaranty and (ii) proceeding or action brought by Pledgee pursuant to this
Pledge Agreement or any the Guaranty or
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which arise out of any such agreement unless due solely to the gross
negligence or willful misconduct of Pledgee.
5. Pledgor's Obligations Upon Event of Default. If an Event of
Default shall occur and be continuing (a) all payments received by Pledgor
under or in connection with any of the Collateral shall be held by Pledgor in
trust for Pledgee, shall be segregated from other funds of Pledgor and shall,
forthwith upon receipt by Pledgor, be turned over to Pledgee or its designee
in the same form as received by Pledgor (duly endorsed by Pledgor to Pledgee,
if requested), and (b) any and all such payments so received by Pledgee or its
designee (whether from Pledgor or otherwise) may, in the sole discretion of
Pledgee or its designee, be held by Pledgee or such designee as collateral
security for, and/or then or at any time thereafter be applied, in whole or in
part by Pledgee or its designee to satisfy the Obligations.
6. Remedies; Rights Upon Event of Default. Upon the occurrence and
during the continuance of an Event of Default, Pledgee may do one or more of
the following:
(a) upon notice to Pledgor, which notice need not be in writing,
make such payments and do such acts as Pledgee may deem necessary to protect,
perfect or continue the perfection of Pledgee's Security Interest in the
Collateral, including, without limitation, paying, purchasing, contesting or
compromising any Lien which is, or purports to be, prior to or superior to the
Security Interest granted hereunder, and commencing, appearing or otherwise
participating in or controlling any action or proceeding purporting to affect
Pledgee's Security Interest in or ownership of the Collateral;
(b) foreclose on the Collateral as herein provided or in any manner
permitted by law and exercise any and all of the rights and remedies conferred
upon Pledgee hereunder or under the Guaranty either concurrently or in such
order as Pledgee may determine without affecting the rights or remedies to
which Pledgee may be entitled hereunder or under the Guaranty. Pledgor hereby
waives, to the extent permitted by applicable law, notice and judicial hearing
in connection with Pledgee's taking possession or collection, recovery,
receipt, appropriation, repossession, retention, set-off, sale, leasing,
conveyance, assignment, transfer or other disposition of or realization upon
any or all of the Collateral, including, without limitation, any and all prior
notice and hearing for any prejudgment remedy or remedies and any such right
which Pledgor would otherwise have under the constitution or any statute or
other law of the United States of America or of any state;
(c) without notice, except as specified below, sell the Collateral,
or any part thereof, in one or more parcels at public or private sale, at any
of Pledgee's offices or elsewhere, at such time or times, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms
as Pledgee may deem commercially reasonable. Pledgor agrees that, to the
extent notice of sale shall be required by law, at least 10 days' notice to
Pledgor of the time and the place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. At
any sale of the
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Collateral, if permitted by law, Pledgee may bid (which bid may be, in whole
or in part, in the form of cancellation of indebtedness) for the purchase of
the Collateral or any portion thereof for the account of Pledgee. Pledgee
shall not be obligated to make any sale of the Collateral regardless of notice
of sale having been given. Pledgee may adjourn any public or private sale
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 adjourned. Pledgee shall incur no liability as a result of the
manner of sale of the Collateral, or any part thereof, at any private sale
conducted in a commercially reasonable manner. Pledgor hereby waives, to the
extent permitted by applicable law, any claims against Pledgee arising by
reason of the fact that the price at which the Collateral, or any part
thereof, may have been sold at a private sale was less than the price which
might have been obtained at public sale or was less than the aggregate amount
of the Obligations, even if Pledgee accepts the first offer received which
Pledgee in good faith deems to be commercially reasonable under the
circumstances and does not offer the Collateral to more than one offeree. To
the full extent permitted by law, Pledgor shall have the burden of proving
that any such sale of the Collateral was conducted in a commercially
unreasonable manner. To the extent permitted by law, Pledgor hereby
specifically waives all rights of redemption, stay or appraisal which it has
or may have under any law now existing or hereafter enacted. Pledgor
authorizes Pledgee, at any time and from time to time, to execute, in
connection with a sale of the Collateral pursuant to the provisions of this
Pledge Agreement, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral;
(d) upon notice to Pledgor, register the Collateral in the name of
Pledgee or its nominee as pledgee or otherwise take such action as Pledgee
shall in its sole discretion deem necessary or desirable with respect to the
Collateral, and Pledgee or its nominee may thereafter, in its sole discretion,
without notice, exercise all voting, consent, managerial and other rights
relating to the Collateral and exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining
to the Collateral as if it were the absolute owner thereof, including, without
limitation, all rights of Pledgor under the Partnership Agreement, including,
without limitation, the right to (i) receive all permitted distributions, if
any, made for the account of Pledgor under the Partnership Agreement and (ii)
exchange any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Partnership, all
without liability except to account for property actually received by Pledgee,
but Pledgee shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing; and
(e) exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party after default under the Code.
7. Application of Proceeds. The net proceeds of any foreclosure,
collection, recovery, receipt, appropriation, realization or sale of the
Collateral shall be applied in the following order:
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(a) to the repayment of the costs and expenses of retaking, holding
and preparing for the sale and the selling of the Collateral (including,
without limitation, attorneys' fees and expenses and court costs) and the
discharge of all assessments, encumbrances, charges or liens, if any, on the
Collateral prior to the lien hereof; and
(b) to the satisfaction of the Obligations.
8. Security Interest Absolute. All the rights of Pledgee hereunder
and the Security Interest and all obligations of Pledgor hereunder shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the CE Acquisition
Agreement, this Pledge Agreement, the Guaranty or any other Credit
Document or the Partnership Agreement or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations (as defined in the CE
Acquisition Credit Agreement), or any other amendment or waiver of or any
consent to any departure from the CE Acquisition Credit Agreement, this
Pledge Agreement, the Guaranty or any other Credit Document or the
Partnership Agreement;
(iii) any exchange or release of any Collateral or any other
collateral, or the non-perfection of any of the Security Interest, or any
release or amendment or waiver of or consent to or departure from any
guaranty (including the Guaranty), for all or any of the Obligations (as
defined in the CE Acquisition Credit Agreement); or
(iv) to the full extent permitted by law, any other circumstance
that might otherwise constitute a defense available to, or a discharge
of, Pledgor or any third party pledgor.
9. Pledgee Appointed Attorney-in-Fact.
(a) Powers. Pledgor hereby irrevocably constitutes and appoints
Pledgee and any officer or agent thereof, with full power of substitution, as
Pledgor's true and lawful attorney-in-fact (which appointment as attorney-in-
fact shall be coupled with an interest), with full authority in the place and
stead of Pledgor and in the name of Pledgor or otherwise, from time to time
upon the occurrence and during the continuance of an Event of Default in
Pledgee's discretion, to take any action and to execute any and all documents
and instruments which Pledgee may deem necessary or advisable to accomplish
the purposes of this Pledge Agreement, without notice to Pledgor, including,
without limitation:
(i) to exercise all partnership rights, powers and privileges to
the same extent Pledgor shall have been entitled under the Partnership
Agreement and in accordance with applicable law, including, without
limitation, all voting rights of Pledgor as general partner of the
Partnership;
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(ii) to receive, endorse and collect all instruments made payable to
Pledgor representing any interest payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge
for the same and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate
by Pledgee for the purpose of collecting any and all of such dividends,
payments or other distributions;
(iii) to pay or discharge taxes and liens levied or placed on the
Collateral; and
(iv) (A) to direct any party liable for any payment in respect of or
arising out of any of the Collateral to make payment of any and all
moneys due or to become due in connection therewith directly to Pledgee
or as Pledgee shall otherwise direct, (B) to ask or make demand for,
collect, receive payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect of or
arising out of any Collateral, (C) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce
any other right in respect of any Collateral, (D) to defend any suit,
action or proceeding brought against Pledgor with respect to any
Collateral, (E) to settle, compromise or adjust any suit, action or
proceeding described in clause (D) above and, in connection therewith, to
give such discharges or releases as Pledgee acting in good faith may deem
appropriate, (F) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though Pledgee were the absolute owner thereof
for all purposes, and (G) to do, at Pledgee's option and at Pledgor's
expense, at any time, or from time to time, all acts and things which
Pledgee acting in good faith deems necessary to protect, preserve or
realize upon the Collateral and the Security Interest granted herein and
to effect the intent of this Pledge Agreement, all as fully and
effectively as Pledgor might do.
(b) Other Powers. Pledgor further authorizes Pledgee, at any time
and from time to time (i) to execute, in connection with any sale provided for
hereunder, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral and (ii) to the full extent permitted
by applicable law, to file one or more financing or continuation statements,
and amendments thereto, relative to all or any part of the Collateral without
the signature of Pledgor.
10. Pledgee May Perform. Upon the occurrence and during the
continuance of an Event of Default, Pledgee, without releasing Pledgor from
any obligation, covenant or condition hereof, itself may make any payment or
perform, or cause the performance of, any such obligation, covenant, condition
or agreement or any other action in such manner and to such extent as Pledgee
may deem necessary to protect, perfect or continue the perfection of Pledgee's
Security Interest in the Collateral.
11. No Duty on Pledgee's Part; Limitation on Pledgee s Obligations.
<PAGE>178
(a) No Duty on Pledgee s Part. The powers conferred on Pledgee
hereunder are solely to protect Pledgee's interests in the Collateral and
shall not impose any duty upon it to exercise any such powers.
(b) Limitations on Obligations. Anything herein to the contrary
notwithstanding, Pledgor shall remain liable under the Partnership 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 or the Guaranty had
not been executed. The exercise by Pledgee of any of the rights or remedies
hereunder shall not release Pledgor from any of its duties or obligations
under the Partnership Agreement, this Pledge Agreement or the Guaranty. All
of the Collateral is hereby assigned to Pledgee solely as security, and
Pledgee shall have no duty, liability or obligation whatsoever with respect to
any of the Collateral, unless Pledgee so elects in writing consistent with its
rights under this Pledge Agreement. Pledgor shall not take any action under
the Partnership Agreement that is inconsistent with the terms of this Pledge
Agreement, the CE Acquisition Credit Agreement or the Guaranty or that would
cause an Event of Default.
12. Reasonable Care. Pledgee shall exercise the same degree of
care hereunder as it exercises in connection with similar transactions for its
own account. Pledgee shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which Pledgee accords or
would accord collateral held by Pledgee in similar transactions for its own
account. Without limiting the generality of the foregoing and except as
otherwise provided by applicable law, Pledgee shall not be required to
marshall any collateral, including, without limitation, the Collateral subject
to the Security Interest created hereby and any guaranties of the Obligations,
or to resort to any item of Collateral or guaranties in any particular order;
and all of Pledgee s rights hereunder and in respect of such Collateral and
guaranties shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that Pledgor lawfully may, Pledgor hereby
(a) agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of Pledgee's
rights under this Pledge Agreement or the Guaranty or under any other
instrument evidencing any of the Obligations or by which any of the
Obligations is secured or guaranteed and (b) irrevocably waives the benefits
of all Laws and any and all rights to equity of redemption or other rights of
redemption that it may have in equity or at law with respect to the
Collateral.
13. Waiver of Trial by Jury. WITH REGARD TO THIS PLEDGE AGREEMENT,
PLEDGOR HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
AND FOR ANY COUNTERCLAIM THEREIN.
14. Notices. 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 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 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
<PAGE>179
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 14, 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.
15. Absence of Fiduciary Relation. Pledgee undertakes to perform
or to observe only such of its agreements and obligations as are specifically
set forth in this Pledge Agreement or the Guaranty, and no implied agreements,
covenants or obligations with respect to Pledgor, any Affiliate of Pledgor or
any other party to the Partnership Agreement or any other Credit Document to
which Pledgor is a party shall be read into this Pledge Agreement against
Pledgee; Pledgee is not a fiduciary of and shall not owe or be deemed to owe
any fiduciary duty to Pledgor, any Affiliate of Pledgor or any other party to
the Partnership Agreement or any Credit Document to which Pledgor is a party.
16. Survival of Representations and Warranties. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Pledge Agreement and the other Credit Documents and
satisfaction of the Obligations, and shall be deemed to be material and to
have been relied upon by Pledgee, regardless of any investigation made by or
on behalf of any of Pledgee. Notwithstanding anything in this Pledge
Agreement or implied by law to the contrary, the agreements and obligations of
Pledgor set forth in Section 4(m) shall survive the satisfaction of the
Obligations.
17. No Waiver; Cumulative Remedies. By exercising or failing to
exercise any of its rights, options or elections hereunder (without also
expressly waiving the same in writing), Pledgee shall not be deemed to have
waived any breach or default on the part of Pledgor or to have released
Pledgor from any of its obligations secured hereby. No failure on the part of
Pledgee to exercise, and no delay in exercising (without also expressly
waiving the same in writing) any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof,
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
Pledgee shall have all of the rights and remedies granted under the CE
Acquisition Credit Agreement or any other Credit Document, and available at
law or in equity, and these same rights and remedies may be pursued
separately, successively or concurrently against Pledgor or any Collateral, at
the discretion of Pledgee.
18. Severability. Any provision of this Pledge Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction. Where provisions of any law or
regulation resulting in such prohibition or unenforceability may be waived
they are hereby waived by Pledgor and Pledgee to the full extent permitted
<PAGE>180
by law so that this Pledge Agreement shall be deemed a valid, binding
agreement, and the Security Interest created hereby shall constitute a
continuing first lien on and first perfected security interest in the
Collateral, in each case enforceable in accordance with its terms.
19. Reliance by Pledgee. Pledgee shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to Pledgor), independent
accountants and other experts selected by Pledgee. Pledgee shall have no
obligation to any Person to act or refrain from acting or exercising any of
its rights under this Pledge Agreement.
20. Amendment. No amendment, modification, termination or waiver
of any of the provisions of this Pledge Agreement, or consent to any departure
by Pledgor or Pledgee therefrom, shall be effective unless the same shall be
in writing and signed by Pledgee, Pledgor and Agent.
21. Assignment by Pledgee. Pledgor acknowledges that in connection
with the transactions contemplated by the Non-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 Collateral, 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.
22. Successors and Assigns. This Pledge Agreement and the rights
granted hereunder shall be binding upon and inure to the benefit of successors
and permitted assigns of Pledgor and Pledgee, except that Pledgor may not
assign its rights or obligations hereunder except to Agent pursuant to the
Borrower Pledge and Security Agreement.
23. Third-Party Beneficiaries. Pledgor and Pledgee acknowledge
that Agent and the Banks are express beneficiaries to this Pledge Agreement.
24. Number and Gender. Whenever used in this Pledge Agreement, the
singular number shall include the plural and the plural the singular, and the
use of any gender shall be applicable to all genders.
25. Subrogation, etc. Notwithstanding any payment or payments made
by Pledgor or the exercise by Pledgee of any of the remedies provided under
this Pledge Agreement, the CE Acquisition Credit Agreement, the Guaranty or
any of the other Credit Documents, Pledgor shall have no claim (as defined in
11 U.S.C. 101(5)) against Borrower for any payment or transfer of anything
of value Pledgor may make, or may be obligated to make, for any reason
whatsoever, including, without limitation, any and all rights of subrogation,
reimbursement, indemnity, exoneration and
<PAGE>181
contribution which Pledgor may have now or hereafter have against CE
Acquisition or against any collateral, security or guaranties held by Pledgee
in any respect whatsoever. Notwithstanding the foregoing, if any amount shall
be paid to Pledgor on account of such subrogation, reimbursement, indemnity,
exoneration or contribution rights at any time, such amount shall be held by
Pledgor in trust for Pledgee, segregated from other funds of Pledgor, and
shall be turned over to Pledgee, in the exact form received by Pledgor (duly
endorsed by Pledgor to Pledgee if required), to be applied against such
amounts in such order as Pledgee may elect.
26. Captions. The captions, headings and table of contents used in
this Pledge Agreement are for convenience only and do not and shall not be
deemed to affect, limit, amplify or modify the terms and provisions hereof.
27. Applicable Law and Jurisdiction.
(a) Applicable Law. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS, BUT EXCLUDING
PERFECTION, WHICH SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION RELEVANT
THERETO.
(b) New York Courts.
(i) Pledgor hereby expressly and irrevocably agrees and consents
that any suit, action or proceeding arising out of or relating to this
Pledge Agreement or any other Credit Document to which it is a party and
the transactions contemplated therein may be instituted by Pledgee in any
State or Federal court sitting in the County of New York, State of New
York, United States of America and, by the execution and delivery of this
Pledge Agreement, Pledgor expressly waives any objection which it may
have now or hereafter to the laying of the venue or to the jurisdiction
of any such suit, action or proceeding, and irrevocably submits generally
and unconditionally to the jurisdiction of any such court in any such
suit, action or proceeding.
(ii) In the case of the courts of the State of New York or of the
United States sitting in New York, Pledgor hereby irrevocably designates,
appoints and empowers CT Corporation System (the "Process Agent," which
has consented thereto) with offices on the date hereof at 1633 Broadway,
New York, New York 10019, as agent to receive for and on behalf of
Pledgor service of process in the State of New York. Pledgor further
agrees that such service of process may be made on Process Agent by
personal service on Process Agent of a copy of the summons and complaint
or other legal process in any such suit, action or proceeding, or by any
other method of service provided for under the applicable laws in effect
in the State of New York, and Process Agent is hereby authorized to
accept such service for and on behalf of Pledgor, and to admit service
with respect thereto.
(iii) Upon service of process being made on Process Agent as
aforesaid, a copy of the summons and complaint or other legal process
served shall be mailed by the Process Agent to Pledgor by registered
<PAGE>182
mail, return receipt requested, at its address set forth below Pledgor's name
on the signature pages hereto, or to such other address as Pledgor may notify
Process Agent in writing. Service upon Process Agent as aforesaid shall be
deemed to be personal service on Pledgor and shall be legal and binding upon
Pledgor for all purposes, notwithstanding any failure of Process Agent to mail
a copy of such legal process to Pledgor, or any failure on the part of Pledgor
to receive the same.
(iv) Pledgor agrees that it will at all times continuously maintain
an agent to receive service of process in the County of New York on its
behalf with respect to this Pledge Agreement or any other Credit Document
to which it is a party. In the event that for any reason Process Agent
or any successor thereto shall no longer serve as agent for Pledgor to
receive service of process in the County of New York, or shall have
changed its address without notification thereof to Pledgee, Pledgor will
promptly but in no event later than five Banking Days after obtaining
knowledge thereof, irrevocably designate and appoint a substitute agent
acceptable to Pledgee and advise Pledgee thereof.
(c) Other Jurisdictions. Nothing contained in this Section 27
shall affect the right to effect service of process in any manner provided for
under applicable law or preclude Pledgee from bringing any suit, action or
proceeding arising out of or relating to the this Pledge Agreement or any
other Credit Document in the courts of any place where Pledgor or any of its
property or assets may be found or located. To the extent permitted by the
applicable Laws of any such jurisdiction, Pledgor hereby irrevocably submits
to the jurisdiction of any such court and expressly waives, in respect of any
such suit, action or proceeding, the jurisdiction of any other court or courts
which now or hereafter, by reason of its present or future domicile, or
otherwise, may be available to it.
28. Continuing Security Interest; Termination. This Pledge
Agreement shall create a continuing assignment, pledge and first priority
Security Interest in the Collateral, subject only to Permitted Liens, and
shall remain in full force and effect for the benefit of Pledgee until all
Obligations (as defined in the CE Acquisition Credit Agreement) to be paid or
performed by CE Acquisition under the Credit Documents have been paid and
performed in full. Upon the happening of such event, the Security Interest
granted hereby shall terminate. Upon such termination, Pledgee shall, upon
the request and at the expense of Pledgor, execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination or
expiration.
29. Payments Set Aside. To the extent that Pledgor or CE
Acquisition or any other Person on behalf of Pledgor or CE Acquisition makes a
payment or payments to Pledgee, or Pledgee enforces the Security Interests or
Pledgee exercises its right of set-off, and such payment or payments or the
proceeds of such enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such recovery, the Obligations or
<PAGE>183
any part thereof originally intended to be satisfied, and this Pledge
Agreement and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.
30. Counterparts. This Pledge Agreement may be executed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the day and year first written above.
[PLEDGOR]
By:
Name:
Title:
Address for Notices:
_______________________________
_______________________________
_______________________________
Attn: _________________________
Telecopier:____________________
CALIFORNIA ENERGY COMPANY,
INC., as Pledgee
By:
Name:
Title:
Address for Notices:
10831 Old Mill Road
Omaha, Nebraska 68154
Attn: John G. Sylvia
Telecopier: (402) 334-3759
<PAGE>184
FINANCING STATEMENT FILINGS
<PAGE>185
EXHIBIT J
TERM NOTE
$___________ New York, New York
February __, 1995
FOR VALUE RECEIVED, the undersigned, CALIFORNIA ENERGY COMPANY,
INC., a Delaware corporation (hereinafter referred to as the "Maker") hereby
promises, subject to the third paragraph hereof, to pay to the order of ______
_______________________ (hereinafter together with any other holder hereof
referred to as the "Holder"), by wire transfer to Holder's account, ABA No.
_________, Account No. _________ at _____________, ________________________
___________________, Reference: ______________________ or at such other place
or places and to such account or accounts as Holder may direct from time to
time by notice to Maker in accordance with the Credit Agreement (as
hereinafter defined), the principal amount of _____
_____________________________ ($___________) in lawful money of the United
States in immediately available funds, payable, subject to the second
paragraph hereof, in semi-annual installments commencing
[___________________], 1995, the amount of each such installment being
Holder's pro rata share of the amount set forth in the table contained in
Section 2.2(a) of the Credit Agreement opposite the date on which such
installment is scheduled to be paid. 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 Tranche _ Loans (as defined in
the Credit Agreement) made pursuant to the provisions of Article II of the
Non-Recourse Credit Agreement dated as of February __, 1995 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 and
interest amount due hereunder is non-recourse and that any claim against Maker
for the payment of such principal or interest 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 or interest amount shall be obtained or enforced against
Maker's assets (other than the Collateral), for purpose of obtaining payment
of such principal or interest amount. Notwithstanding the foregoing, Maker
shall be liable for, and Holder shall have recourse
<PAGE>186
against Maker with respect to, 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 or
interest 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 or interest 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 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.
CALIFORNIA ENERGY COMPANY, INC.
By:___________________________
Name:
Title:
<PAGE>187
EXHIBIT K
Notice of Borrowing
Credit Suisse, as Agent
under the Credit Agreement
referenced below
This Notice of Borrowing is given pursuant to Section 2.1(b) of that
certain Non-Recourse Credit Agreement, dated as of February ___, 1995, as the
same may have been amended to the date hereof (the "Credit Agreement"), by and
among California Energy Company, Inc., a Delaware corporation ("Borrower"),
the banks and other financial institutions parties thereto (the "Banks") and
Credit Suisse, New York Branch, as agent for the Banks ("Agent"). Any and all
initially capitalized terms used herein and not defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
The undersigned hereby (one checked as applicable):
[ ] gives Agent irrevocable notice
[ ] confirms its irrevocable telephonic notice to Agent
that it requests the following Loans under the Credit Agreement.
1. Date of Loans. The requested date of the proposed Loans is
February __, 1995.
2. Amount of Each Loan. The requested amount of each Loan, the Type of
each Loan, the Type of Commitment under which such Loan is requested and, as
applicable, the Interest Period for each Loan are set forth below:
(a) Loan 1: (i) Amount of Loan: $
(ii) Type of Loan: [Base Rate/Eurodollar Rate]
(iii) Commitment: [Tranche A/B/C]
(iv) Interest Period: [1/2/3/6 month(s)/[or specify
longer
period]]*
(b) Loan 2: (i) Amount of Loan: $
(ii) Type of Loan: [Base Rate/Eurodollar Rate]
* For Eurodollar Rate Loans only. The availability of Interest
Periods longer than six months shall be reasonably determined by Agent.
<PAGE>188
(iii) Commitment: [Tranche A/B/C]
(iv) Interest Period: [1/2/3/6 month(s)/[or specify
longer
period]]*
(c) Loan 3: (i) Amount of Loan: $
(ii) Type of Loan: [Base Rate/Eurodollar Rate]
(iii) Commitment: [Tranche A/B/C]
(iv) Interest Period: [1/2/3/6 month(s)/[or specify
longer
period]]*
3. Representations and Warranties; Default and Event of Default.
The undersigned hereby certifies that on the date hereof and on the date of
the proposed Loans (both before and after giving effect to the making of such
Loans and after giving effect to the application of the proceeds thereof):
(a) the representations and warranties set forth in Article IV of
the Credit Agreement are and will be true and correct as if then made, except
to the extent such representations and warranties relate solely to an earlier
date (in which case such representations and warranties shall have been true
and correct on and as of such earlier date); and
(b) no Default or Event of Default has occurred and is continuing
or will have occurred and be continuing.
Dated: February __, 1995
CALIFORNIA ENERGY COMPANY,
INC.
By:
Name:
Title:
<PAGE>189
EXHIBIT L
Notice of Conversion/Continuation
Credit Suisse,
as Agent under the Credit
Agreement referenced below
This Notice of Conversion/Continuation is given pursuant to Section
2.1(g) of that certain Non-Recourse Credit Agreement, dated as of February
___, 1995, as the same may have been amended to the date hereof (the "Credit
Agreement"), by and among California Energy Company, Inc., a Delaware
corporation ("Borrower"), the banks and other financial institutions parties
thereto and Credit Suisse, New York Branch, as Agent for the Banks. Any and
all initially capitalized terms used herein and not defined herein shall have
the meanings ascribed thereto in the Credit Agreement.
This notice represents Borrower's request to [A: convert $________
in principal amount of presently outstanding [Eurodollar Rate/Base Rate] Loans
[with an Interest Period expiration date of ________, 19__]* to [Base
Rate/Eurodollar Rate] Loans on _________, 19__.] [The Interest Period for
such Eurodollar Rate Loan is requested to be a [one/two/three/six] month
period[/or longer period**].] [B: continue as a Eurodollar Rate Loan
$________ in principal amount of presently outstanding Eurodollar Rate Loans
with an Interest Period expiration date of _________, 19__. The Interest
Period for such Eurodollar Rate Loan is requested to be a [one/two/three/six]
month period[/or longer period***].] The undersigned officer, to the best
of such officer's knowledge and on behalf of Borrower, and Borrower certify
that no Event of Default has occurred and is continuing and no condition or
event exists, which, with notice or lapse of time or both, would constitute an
Event of Default, and no
*Applicable to Eurodollar Rate Loans only.
**The availability of Interest Periods longer than six months shall be
reasonably determined by Agent.
***The availability of Interest Periods longer than six months shall
be reasonably determined by Agent.
<PAGE>190
Event of Default will result from the proposed [conversion/ continuation].
DATED:
CALIFORNIA ENERGY COMPANY, INC.
By:
Name:
Title:
<PAGE>191
EXHIBIT N
February 24, 1995
To each of the Banks and other Financial
Institutions from time to time party
to the Credit Agreement hereinafter
referred to and to Credit Suisse,
New York Branch, as Agent
Ladies and Gentlemen:
We have acted as counsel to (i) California Energy Company, Inc., a
Delaware corporation ("Borrower"), (ii) CE Acquisition Company, Inc., a
Delaware corporation and a wholly-owned subsidiary of Borrower ("CE
Acquisition"), (iii) Magma Power Company, a Nevada corporation and a wholly-
owned subsidiary of Borrower ("Magma"), in connection with the Non-Recourse
Recourse Credit Agreement, dated as of February 24, 1995 (the "Credit
Agreement"), among Borrower, the banks and other financial institutions
parties thereto (the "Banks"), and Credit Suisse, New York Branch, as agent
for the Banks (in such capacity, the "Agent") and (iv) the Subsidiaries of
Magma executing the Additional Security Agreements referred to below ("Magma
Subsidiaries"). As used herein the term "CE Parties" shall mean Borrower, CE
Acquisition, Magma and the Magma Subsidiaries. This opinion is being
delivered to you pursuant to Section 3.1(f) of the Credit Agreement. Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings assigned to such terms in the Credit Agreement.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction as being true
copies, of the following agreements, documents and instruments:
(i) The Credit Agreement.
(ii) The Notes.
(iii) The CE Acquisition Secured Term Note.
(iv) The CE Acquisition Credit Agreement.
(v) The Borrower Pledge Agreement.
(vi) The Magma Pledge Agreement.
<PAGE>192
(vii) The Blocked Account Agreement and the Security Agreement
executed by Magma relating, inter alia, to Magma's account
no. 368725-01 (the "Account") at Credit Suisse, New York
Branch (collectively, the "Account Agreements").
(viii) The Tax Indemnity Agreement.
(ix) The Cash Management Agreement.
(x) The Support Services Agreement.
(xi) The CECI Undertaking Agreement.
(xii) The Guaranty Agreements.
(xiii) The Security Documents listed on Schedule I hereto (the
"Additional Security Agreements").
(xiv) Instrument of Assumption dated the date hereof executed by
Magma (the "Instrument of Assumption").
(xv) All certificates, opinions, warranties and representations,
assignments and other documents, agreements and instruments
executed and delivered by or on behalf of the CE Parties in
connection with items (i) through (xiii) above and the
transactions contemplated by the Credit Agreement.
(xvi) The Merger Agreement.
The agreements, documents and instruments described in clauses (i) through
(xvi) above are hereinafter referred to collectively as the "Credit
Documents."
We have also examined originals or copies of originals, certified or
otherwise identified to our satisfaction, of such corporate records,
agreements, documents, instruments, certificates and other statements of
public and governmental officials and corporate officers and other
representatives, as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
In our examination of the documents referred to above, we have
assumed the genuineness of all signatures (except those of the CE Parties),
the authenticity of all documents submitted to us as originals, and the
conformity to originals of all documents submitted to us as certified or
photostatic copies. As to all questions of fact material to this opinion
which have not been independently verified by us, we have relied upon
<PAGE>193
statements, representations or certificates of the CE Parties or their
respective officers or public officials.
Based upon the foregoing, we are of the opinion that:
1. Each of Borrower, CE Acquisition and the CE Parties listed in
Part 2 of Schedule I hereto (collectively, the "Delaware Companies") is a
corporation duly organized and validly existing and in good standing under the
Laws of the State of Delaware.
2. The execution, delivery and performance of each of the Credit
Documents to which Borrower or CE Acquisition or any Delaware Company is a
party are within its corporate powers and have been duly authorized by each of
them. Each of the Credit Documents to which Borrower or CE Acquisition or a
Delaware Company is a party has been validly executed and delivered by
Borrower or CE Acquisition or such Delaware Company, as applicable.
3. The Certificate of Merger provided for in the Merger Agreement
has been duly filed with the Secretary of State of the State of Delaware and,
assuming the due filing of the Articles of Merger with the Secretary of State
of the State of Nevada, the Merger has been consummated in the manner
contemplated by the Merger Agreement.
4. The execution, delivery and performance of each of the Credit
Documents to which any CE Party is a party, including the borrowings under the
Credit Agreement and under the CE Acquisition Credit Agreement and the use of
proceeds thereof, and the consummation of the Merger and the other
transactions contemplated by the Credit Documents, do not and will not require
any registration with, consent, approval, waiver, license or authorization by,
or notice to, or other action to, with or by, or filing with, any governmental
authority or regulatory body, except for (i) filings by Borrower and CE
Acquisition required by federal or state securities laws (which filings have
been made), (ii) the filing of Uniform Commercial Code Financing Statements
required to be made in connection with the Security Documents and (iii) 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.
5. The execution, delivery and performance of each of the Credit
Documents to which any CE Party is a party, including the borrowing under the
Credit Agreement and under the CE Acquisition Credit Agreement and the use of
proceeds thereof, and the consummation of the Merger and the other
transactions contemplated by the Credit Documents, will not (a) violate (i)
the certificate of incorporation or by-laws of CE Acquisition, any of the
<PAGE>194
Delaware Companies or the Borrower or Magma, (ii) any Law, including
applicable margin regulations, or (iii) any provision of any contract,
agreement, indenture or instrument relating to indebtedness for borrowed money
to which Borrower or Magma is a party or by which any of its respective
properties is bound (a "Debt Agreement") or (b) be in conflict with, or result
in a breach of or constitute a default under, any Debt Agreement or (c) result
in the creation or imposition of any Lien pursuant to any Debt Agreement,
except Permitted Liens, or (d) give to any Person rights to cancel, terminate
or suspend performance of their obligations to Borrower or any of its
Subsidiaries under, or accelerate payments of amounts owed by Borrower or any
Subsidiary of the Borrower to others under, any Debt Agreement.
6. Each Credit Document to which any CE Party is a party (and
which is stated to be governed by the laws of the State of New York) is a
legal, valid and binding agreement of such CE Party enforceable against such
CE Party in accordance with its respective terms except for bankruptcy and
similar laws affecting the enforcement of creditors' rights generally and for
the application of general equitable principles regardless of whether
enforcement is sought in a proceeding at law or in equity. We have assumed
compliance with all applicable fraudulent conveyance laws in connection with
the opinion in this paragraph as it applies to any CE Party other than the
Borrower, CE Acquisition or Magma.
7. The provisions in the Credit Agreement relating to the payment
of interest on the Loans are in conformity with the usury laws of the State of
New York.
8. Magma has duly and validly assumed all of CE Acquisition's
obligation under the CE Acquisition Credit Agreement and the CE Acquisition
Secured Term Note pursuant to the Instrument of Assumption.
9. Each issued and outstanding share of capital stock of CE
Acquisition outstanding immediately prior to the effectiveness of the Merger
(being 100 shares of common stock, $.01 par value) was duly and validly
issued, fully paid and nonassessable and has been converted, effective upon
consummation of the Merger, into 100 shares of the fully paid and non-
assessable shares of common stock, $.01 par value, of Magma ("Magma Shares").
The Magma Shares are owned by Borrower, free and clear of all Liens, except
for Liens in favor of the Agent under the Borrower Pledge Agreement. To the
best of our knowledge, having made due inquiry with respect thereto, there are
no (a) shares of stock or securities convertible into or exchangeable for
shares of Magma's capital stock, (b) rights (either preemptive or other) to
subscribe for the purchase of, or options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any capital stock
<PAGE>195
of Magma or any shares of stock or securities convertible into or exchangeable
or exercisable for any such capital stock, or (c) obligations (contingent or
otherwise) of Magma to repurchase, exchange or otherwise acquire or retire any
shares of such capital stock other than Magma's obligations under the Merger
Agreement.
10. Borrower has good title to the CE Acquisition Secured Term Note
free and clear of all Liens or rights of others, except for Liens in favor of
the Agent under the Borrower Pledge Agreement. Upon delivery of the
certificates evidencing the Magma Shares and the CE Acquisition Secured Term
Note to the Agent in accordance with the Borrower Pledge Agreement, and
assuming continuous possession of the certificates evidencing the Magma Shares
and the CE Acquisition Secured Term Note by the Agent, the 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 the Magma
Shares.
11. The Magma Pledge Agreement creates a valid and enforceable
security interest in the Pledged Stock (as defined in the Magma Pledge
Agreement) in favor of Borrower which has been effectively assigned to the
Agent under the Borrower Pledge Agreement, and upon delivery of the
certificates evidencing the Pledged Stock to the Agent, Agent will have a
valid, fully perfected, first priority security interest in the Pledged Stock
(as assignee of the Borrower's interest) for the ratable benefit of the Banks,
assuming continuous possession of those certificates by the Agent. When the
deliveries, entries and book-entry transfers recited in the attached letter
from Swiss American Securities to Agent are made, Borrower will have a valid
and perfected security interest under the Special Security Agreement dated as
of the date hereof between Magma and the Borrower in the securities described
in Section 1.11 of the Credit Agreement and referred to in such letter, which
security interest has been duly and validly assigned to Agent for the ratable
benefit of the Banks pursuant to the Borrower Pledge Agreement.
12. The Account Agreements create a valid and enforceable security
interest in the funds on deposit in the Account in favor of Borrower which has
been effectively assigned to the Agent under the Borrower Pledge Agreement
and, assuming the Account continues to be maintained in the name of the Agent
as assignee and pledgee under the Account Agreements and the Borrower Pledge
Agreement, Agent will have a valid, fully perfected, first priority security
interest in the funds on deposit in the Account for the ratable benefit of the
Banks.
13. None of the transactions contemplated by the Credit Documents
(including, without limitation, the contemplated use of the proceeds from the
funds made
<PAGE>196
available by the Banks pursuant to the Credit Agreement) will violate or
result in a violation of the Exchange Act, or any rules or regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System.
14. Neither Borrower nor any Subsidiary of Borrower 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 Subsidiary of Borrower is a "holding company" or a
"subsidiary" of a "holding company" as defined in the Public Utility Holding
Act of 1935, as amended.
15. The Registration Statement on Form S-4 (33-57053), as amended
to date (the "Information Statement"), filed by Borrower with the SEC (except
for the financial, statistical and market data contained or incorporated by
reference therein, as to which we have not been requested to express an
opinion), and all proxy materials in connection with the Merger, as amended to
date filed by Borrower with the SEC, comply, as of the date hereof, as to form
in all material respects with the requirements of the Securities Act and the
Exchange Act, and the applicable rules and regulations of the SEC thereunder.
We have participated in conferences with Borrower at which the
contents of the Information Statement were discussed. Although we assume no
responsibility for the factual accuracy of the Information Statement, nothing
has come to our attention which causes us to believe that, as of the date
hereof, the Information Statement (except for the financial, statistical and
market data contained or incorporated by reference therein, as to which we
have not been requested to express an opinion) contain any untrue statement of
any material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
We are members of the bar of the State of New York and do not
express any opinion herein concerning any matter governed by any laws other
than the laws of the State of New York, the General Corporation Law of the
State of Delaware and the Federal laws of the United States of America.
This opinion is addressed to each of the Banks and other Financial
Institutions from time to time party to the Credit Agreement and the Agent for
the use and benefit of such Persons only and may not be relied upon by any
other Person without our written consent.
Very truly yours,
<PAGE>197
Exhibit P
[Letterhead of Lionel, Sawyer & Collins]
February 24, 1995
To each of the Banks and Financial
Institutions party from time to time to the Bank Credit Agreement
hereinafter referred to and to Credit Suisse, New York Branch, as Agent
Ladies and Gentlemen:
We have acted as special Nevada counsel to California Energy
Company, Inc., a Delaware corporation ("Borrower"), CE Acquisition Company,
Inc., a Delaware corporation and a wholly-owned subsidiary of Borrower ("CE
Acquisition") and Magma Power Company, a Nevada Corporation and a wholly-owned
subsidiary of Borrower ("Magma") in connection with (i) the Non-Recourse
Credit Agreement, dated as of February 24, 1995 (the "Bank Credit Agreement"),
among Borrower, the banks and other financial institutions parties thereto
(the "Banks") and Credit Suisse, New York Branch, as agent for the Banks (the
"Agent"), (ii) the Credit Agreement, dated as of February 24, 1995 (the "CE
Acquisition Credit Agreement"), between Borrower and CE Acquisition, and (iii)
the assumption by Magma of the obligations of CE Acquisition under the CE
Acquisition Credit Agreement and the CE Acquisition Secured Term Note pursuant
to an Instrument of Assumption (the "Instrument of Assumption") dated February
24, 1995.
This opinion is being delivered to you pursuant to Section 3.1(f) of
the Bank Credit Agreement. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings assigned to such terms in the Bank Credit
Agreement.
In connection with the foregoing and for the purposes of rendering
the opinions herein, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such corporate records,
agreements, documents, instruments, certificates and other statements of
public officials and corporate officers and other representatives, and have
made such investigations of law, as in our judgment are necessary or
appropriate to enable us to render the opinions expressed below, including
examination of copies of the Merger Agreement, the Bank Credit Agreement,
<PAGE>198
the CE Acquisition Credit Agreement, the CE Acquisition Secured Term Note, the
Instrument of Assumption, the Borrower Pledge Agreement, the Magma Pledge
Agreement and the Security Agreement, dated as of the date hereof (the
"Security Agreement") made by Magma in favor of the Agent and the agreements
listed on Schedule I ("Additional Agreements") executed by the corporations
listed on that Schedule (the "Nevada Companies"). The Bank Credit Agreement,
the Borrower Pledge Agreement, the CE Acquisition Credit Agreement, the Magma
Pledge Agreement, the Security Agreement, the Instrument of Assumption and the
Additional Agreements are sometimes collectively referred to herein as the
"Credit Documents."
In our examination of the foregoing documents we have assumed: (a)
the authenticity of all documents submitted to us as originals, (b) the
conformity to original documents of all documents submitted to us as
certified, conformed, photostatic or facsimile copies and the authenticity of
the originals of such copies, (c) the truth of all matters of fact stated
therein, and (d) the genuineness of signatures thereto.
Based upon the foregoing and in reliance thereon, and subject to any
qualifications and limitations contained herein below, we are of the opinion
as of the date hereof as follows:
1. Magma and the Nevada Companies are each duly organized and
validly existing and in good standing under the Laws of the State of Nevada.
2. The execution, delivery and performance of the Merger Agreement
and of each of the Credit Documents to which Magma or any of the Nevada
Companies, is a party are within its corporate powers and have been duly
authorized by it. The Merger Agreement and each of the Credit Documents to
which Magma or any of the Nevada Companies, is a party have been duly
authorized, executed and delivered by such party.
3. The execution, delivery and performance of each of the Credit
Documents to which Magma or any of the Nevada Companies is a party, including
the borrowing under the CE Acquisition Credit Agreement and the use of
proceeds thereof, and the consummation of the Merger and the other
transactions contemplated by the Credit Documents, do not and will not require
any registration with, consent, approval, waiver, license or authorization by,
or notice to, or other action to, with or by, or filing with, any governmental
authority or regulatory body of the State of Nevada, except for 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.
4. The execution, delivery and performance of the Merger Agreement
and of each of the Credit Documents to which Magma or any of the Nevada
Companies is a party, including the borrowing under the CE Acquisition Credit
Agreement and
<PAGE>199
the use of proceeds thereof, and the consummation of the Merger and the other
transactions contemplated by the Credit Documents, will not violate the
certificate of incorporation or by-laws of Magma or any of the Nevada
Companies, or any Law of the State of Nevada.
5. The Certificate of Merger provided for in the Merger Agreement
has been duly filed with the Secretary of State of the State of Nevada, and,
assuming the due filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, the Merger has been consummated in the manner
contemplated by the Merger Agreement. All shares of capital stock of Magma
have been duly authorized and validly issued, are fully paid and non-
assessable and are owned by Borrower, free and clear of all Liens, except of
the Lien of the Borrower Pledge Agreement. To the best of our knowledge,
having made due inquiry with respect thereto, there are no (al) shares of
stock or securities convertible into or exchangeable for shares of Magma's
capital stock, (b) rights (either preemptive or other) to subscribe for the
purchase of, or options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, any capital stock of Magma of any shares of
stock or securities convertible into or exchangeable or exercisable for any
such capital stock, or (c) obligations (contingent or otherwise) of Magma to
repurchase, exchange or otherwise acquire or retire any shares of such capital
stock other than Magma's obligations under the Merger Agreement.
We are members of the bar of the State of Nevada and we are opining
herein only as to the effect of the laws of the State of Nevada on the matters
set forth herein, as those laws presently exist.
This opinion is addressed to the Banks and the Financial
Institutions party from time to time to the Bank Credit Agreement and the
Agent for the use and benefit of such Persons and may not be relied upon by
any other Person without our written consent.
Very truly yours,
<PAGE>200
Schedule I
Nevada Companies and Additional Agreements
Nevada Companies Additional Agreements
Imperial Magma Guaranty Agreement
Security Agreement
Blocked Account Agreement
Cash Management Agreement
Tax Indemnity Agreement
Magma Land Company I Guaranty Agreement
Security Agreement
Blocked Account Agreement
Cash Management Agreement
Tax Indemnity Agreement
Salton Sea Power Company Blocked Account Agreement
Cash Management Agreement
Tax Indemnity Agreement
Magma Generating Company I Guaranty Agreement
Security Agreement
Blocked Account Agreement
Cash Management Agreement
Tax Indemnity Agreement
Magma Generating Company II Guaranty Agreement
Security Agreement
Blocked Account Agreement
Cash Management Agreement
Tax Indemnity Agreement
Vulcan Power Company Guaranty Agreement
Account Pledge Agreement
Blocked Account Agreement
Cash Management Agreement
Tax Indemnity Agreement
<PAGE>201
FORM OF SPECIAL SECURITY AGREEMENT
This SPECIAL SECURITY AGREEMENT is dated as of _________ __,
19__ and entered into by and between , a
corporation ("Grantor"), and _________________, a ______
corporation.
W I T N E S S E T H :
WHEREAS, pursuant to the Non-Recourse Credit Agreement of even
date herewith (as amended, supplemented or otherwise modified from time to
time, the "Non-Recourse Credit Agreement") by and among CECI, the banks and
other financial institutions party 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 CECI upon the terms and subject to the
conditions set forth therein;
WHEREAS, pursuant to the terms of the Credit Agreement of even
date herewith (as amended, supplemented or otherwise modified from time to
time, the "CE Acquisition Credit Agreement") by and between CECI and CE
Acquisition Company, Inc., a Delaware corporation and a wholly-owned
subsidiary of CECI ("CE Acquisition"), the proceeds of the Loans will be
loaned by CECI to CE Acquisition and CE Acquisition will use such proceeds to
consummate the Merger (defined below);
WHEREAS, CE Acquisition owns approximately 51% of the
outstanding shares of common stock of Magma Power Company ("Magma"), and upon
receipt of the proceeds of the Loans pursuant to the terms of the CE
Acquisition Credit Agreement, CE Acquisition will be merged with and into
Magma (the "Merger") and Magma will assume CE Acquisition's obligations under
the CE Acquisition Credit Agreement and other related documents;
WHEREAS, pursuant to the terms of a Guaranty Agreement of even
date herewith (the "Magma Subsidiary Guaranty"), by and between Grantor and
CECI, Grantor has agreed to guarantee Magma's obligations under the CE
Acquisition Credit Agreement and other related documents;
WHEREAS, Grantor will benefit from the Loans to be made to CECI
by the Banks pursuant to the Non-Recourse Credit Agreement, because, among
other things, such Loans are necessary for the successful continued operation
of Magma, of which Grantor, as a wholly-owned subsidiary, is an integral
component;
WHEREAS, it is a condition precedent to the obligation of the
Banks to make the Loans to CECI that Grantor shall have granted the security
interests contemplated by this Special Security Agreement;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make the Loans to CECI, Grantor hereby agrees with CECI
for its benefit as follows:
SECTION 1. Definitions
<PAGE>202
1.1 Certain Defined Terms. Terms defined in the CE Acquisition
Credit Agreement and not otherwise defined herein have the respective meanings
provided for in the CE Acquisition Credit Agreement. The following terms, as
used herein, have the meanings set forth below:
"Collateral" means Grantor's assets described in Section 2 in which
CECI now has or may in the future obtain a security interest.
"Proceeds" means all proceeds of, and all other profits, or
receipts, in whatever form, arising from the collection, sale, exchange,
assignment, or other disposition of, or realization upon, any Collateral or
the proceeds thereof, including, without limitation, all claims of Grantor
against third parties for loss of, damage to, or for proceeds payable under,
or with respect to any Collateral, in each case whether now existing or
hereafter arising.
"Security Interests" means the security interests granted pursuant
to Section 2 hereof, as well as all other security interests created or
assigned as additional security for the Obligations pursuant to the provisions
of this Special Security Agreement and the other Credit Documents.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York, as amended from time to time, and any
successor statute; provided that if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection of the Security
Interests in any Collateral is governed by the Uniform Commercial Code as in
effect on or after the date hereof in any other jurisdiction, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provision hereof relating to such perfection or effect of perfection or
non-perfection.
1.2 Other Definition Provisions. For purposes of this Special
Security Agreement, all other terms not otherwise defined shall, unless the
context indicates otherwise, have the meanings assigned to such terms in
accordance with the applicable definition therefor (if any) contained in the
UCC. References to "Sections", "subsections", "Exhibits" and "Schedules"
shall be to Sections, subsections, Exhibits and Schedules, respectively, of
this Special Security Agreement unless otherwise specifically provided. Any
of the terms defined in subsection 1.1 may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference.
All references to statutes and related regulations shall include any
amendments of the same and any successor statutes and regulations.
SECTION 2. Grant of Security Interests.
In order to secure to CECI the prompt, full and faithful payment and
performance of the Obligations, Grantor hereby grants to CECI a continuing
lien on and security interest in and to all right, title and interest of
Grantor in all distributions received from [PARTNERSHIP] pursuant to
[PARTNERSHIP AGREEMENT].
SECTION 3. Delivery of Collateral.
<PAGE>203
Delivery of Collateral. All sums of money, funds and cash, from
time to time constituting the Collateral, together with all certificates,
instruments, investments and securities representing or evidencing such
Collateral, shall be delivered to, dealt with and held by CECI pursuant to the
terms hereof. All such certificates, investments, securities and instruments
shall be in suitable form for transfer by delivery or otherwise, or shall be
accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to CECI or Agent, as applicable.
SECTION 4. Representations and Warranties
Grantor represents and warrants to CECI as follows:
4.1 Binding Obligation. This Special Security Agreement is the
legally valid and binding obligation of Grantor, enforceable against Grantor
in accordance with its terms.
[4.2 Location of Collateral; Office Locations. All of the
Collateral and the books and records relating to the Collateral is located at
the places specified on Schedule I. Schedule I includes and designates the
chief place of business, the chief executive office and the other offices and
places of business of Grantor.]
[4.3 Fictitious Names. Grantor does not do business and has not
done business during the past five years under or using any trade name, trade
style or fictitious business name except as disclosed on Schedule II.]
4.4 Ownership of Collateral. Grantor is the legal and beneficial
owner of the Collateral now owned by it, and will be the legal and beneficial
owner of the Collateral hereafter acquired, free and clear of all Liens,
except for Permitted Liens. No mortgage or financing statement or other
instrument or recordation covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
CECI.
4.5 Perfection. This Special Security Agreement creates valid
security interests in the Collateral securing the payment of the Obligations.
The security interests created by this Special Security Agreement are valid
and perfected and, except for the Permitted Liens, constitute first priority
security interests in the Collateral securing the payment of the Obligations.
All filings and other actions necessary or desirable to perfect and protect
the Security Interests have been duly taken.
SECTION 5. Further Assurances; Covenants
5.1 Other Documents and Actions. Grantor shall, from time to time,
at its sole expense, (1) promptly execute and/or deliver, and cause each of
its Subsidiaries to promptly execute and/or deliver, all further instruments,
documents, notices, assignments and consents and other written matter (in each
case in form and substance satisfactory to CECI) and (2) promptly take, and
cause each of its Subsidiaries to take promptly, all further action
<PAGE>204
that may be necessary or desirable, or that CECI may request, in order to
perfect, maintain and protect any security interest granted or purported to be
granted hereby or by the other Credit Documents or to enable CECI to exercise
and enforce its rights and remedies hereunder or under the other Credit
Documents with respect to any Collateral or other assets and property securing
the Obligations or to consummate the transactions contemplated in or by this
Special Security Agreement or the other Credit Documents. Without limiting
the generality of the foregoing, Grantor shall: (a) execute and file, record
or register such Uniform Commercial Code financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as CECI may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby or
by the other Credit Documents; and (b) upon CECI's request, appear in and
defend any action or proceeding that may affect Grantor's title to or CECI's
security interest in the Collateral.
5.2 CECI Authorized. Grantor hereby authorizes CECI to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of Grantor where
permitted by law.
5.3 Trade Names, etc. Grantor shall give CECI thirty (30) days'
prior written notice of its or any of its Subsidiaries' intention to do
business under or use any new or additional trade name, trade style or
fictitious business name, and shall register, or cause its applicable
Subsidiary to register, any such new or additional trade name, trade style or
fictitious business name in accordance with applicable law. In connection
therewith, Grantor shall execute and/or deliver such documents and take such
actions as CECI deems necessary to perfect and protect the Security Interests.
5.4 Business Locations. Grantor shall give CECI thirty (30) days'
prior written notice of any change in the location of Grantor's or any of its
Subsidiaries' chief place of business or chief executive office or of any new
location of any other offices or places of business of Grantor or any of its
Subsidiaries or any new location for any of the Collateral. In connection
therewith, Grantor shall execute and/or deliver such documents and take such
actions as CECI deems necessary to perfect and protect the Security Interests.
5.5 Taxes and Claims. Grantor will pay all taxes, assessments,
fees and governmental and other charges and claims in accordance with the
terms of the CE Acquisition Credit Agreement.
5.6 Collateral Description. Grantor will deliver to CECI,
statements and schedules further identifying and describing the Collateral,
all in reasonable detail, as from time to time may be reasonably requested by
CECI.
5.7 Records of Collateral. Grantor shall keep full and accurate
books and records relating to the Collateral and shall stamp or otherwise mark
such books and records in such manner as CECI may reasonably request
indicating that the Collateral is subject to the Security Interests.
<PAGE>205
SECTION 6. CECI Appointed Attorney-in-Fact
Grantor hereby irrevocably appoints CECI (and all Persons designated
by CECI for that purpose) as Grantor's true and lawful attorney-in-fact, with
full authority and power in the place and stead of Grantor and in the name of
Grantor, CECI or otherwise, from time to time in CECI's discretion from and
after the occurrence and during the continuance of a Default or an Event of
Default, without notice to Grantor and at such time or times thereafter as
CECI may in its sole discretion determine, to take any action and to execute
any instrument that CECI may deem necessary or advisable to accomplish the
purposes of this Special Security Agreement and the other Credit Documents,
including, without limitation:
(a) to ask, demand, collect, enforce, sue for, recover, compound,
receive and give acquittance and receipts for monies due and to become
due under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any checks, drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above;
(c) to file any claims or take any action or institute any
proceedings (and to settle, adjust or compromise any such proceedings)
that CECI may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of CECI with respect to
any of the Collateral;
(d) to pay or discharge taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by CECI in
its sole discretion, and such payments made by CECI to become obligations
of Grantor to CECI, secured hereby and due and payable immediately
without demand; and
(e) generally to sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though CECI were the absolute owner thereof for all
purposes, and to do, at CECI's option and Grantor's expense, at any time
or from time to time, all acts and things that CECI deems necessary to
protect, preserve or realize upon the Collateral.
Grantor hereby ratifies and approves all acts of such attorney made or taken
pursuant to this Section. Neither CECI nor any Person designated by CECI
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law, other than CECI's or such Person's gross negligence or
willful misconduct as determined by a final nonappealable judgment of a court
of competent jurisdiction. The powers granted herein, being coupled with an
interest, are irrevocable so long as this Special Security Agreement shall
remain in force.
SECTION 7. Transfers and Other Liens
<PAGE>206
Unless otherwise restricted by the CE Acquisition Credit Agreement,
Grantor may:
(a) Sell, assign (by operation of law or otherwise), lease,
transfer or otherwise dispose of, or grant any Person an option with
respect to, any of the Collateral; or
(b) Create, incur, assume or permit to exist, directly or
indirectly, any Lien, on or with respect to any of the Collateral
(including any document or instrument with respect to goods or accounts
receivable) or be bound by or subject to any agreement or option to do
so.
SECTION 8. Remedies
If any Event of Default shall have occurred and be continuing, CECI,
in its sole and absolute discretion, may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein
or in the other Credit Documents or otherwise available to it, all the rights
and remedies of a secured party under the UCC (whether or not the UCC applies
to the affected Collateral) or any other applicable law and also may, without
demand, advertisement or notice, except any notice required by law all of
which are hereby expressly waived by Grantor, sell, lease, deliver, grant
options to a third party to purchase or lease or otherwise dispose of the
Collateral or any part thereof in one or more parcels at one or more public or
private sales or other dispositions, at any of the CECI's offices or
elsewhere, at such time or times, for cash, on credit or for future delivery
or otherwise, and at such price or prices and upon such other terms as CECI,
in its sole discretion, may deem commercially reasonable. Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten days
notice to Grantor of the time and place of any public sale or the time at
which any private sale is to be made shall constitute commercially reasonable
and fair notification. CECI shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. CECI 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. To the extent permitted by law, Grantor hereby specifically waives
all rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter enacted. Recourse to security shall not be
required at any time.
SECTION 9. Limitation on Duty of CECI with
Respect to Collateral
Beyond the safe custody thereof, CECI shall have no duty with
respect to any Collateral in its possession or control (or in the possession
or control of any agent or bailee) or with respect to any income thereon or
the preservation of rights against prior parties or any other rights
pertaining thereto. CECI shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession or control if
the Collateral is accorded treatment substantially equal to that which it
accords its own property. CECI shall not be liable or
<PAGE>207
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof.
SECTION 10. Application of Proceeds
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any
part of the Collateral, shall be applied: first, to all fees, costs and
expenses incurred by CECI (or for which CECI may become obligated) with
respect to the CE Acquisition Credit Agreement, the other Credit Documents or
the Collateral including, without limitation, those described in the CE
Acquisition Credit Agreement and in Section 14 hereof; second, to all fees due
and owing to CECI; third, to accrued and unpaid interest on the Obligations
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts); fourth, to the principal amounts of the
Obligations outstanding; and fifth, to any other Obligations owing to CECI.
Grantor shall remain liable for any deficiency.
SECTION 11. Injunctive Relief
Grantor recognizes that in the event Grantor fails to perform,
observe or discharge any of its obligations or liabilities under this Special
Security Agreement or the other Credit Documents and no remedy of law will
provide adequate relief to CECI, then Grantor agrees that CECI shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
SECTION 12. Waivers
Except as may be otherwise specifically provided herein or in any
other agreement between CECI and Grantor which may be applicable, and except
in cases of gross negligence or willful misconduct on the part of CECI,
Grantor waives any right, to the extent applicable law permits, to receive
prior notice of or a judicial or other hearing with respect to any action,
prejudgment remedy or proceeding by CECI to take possession, exercise control
over, or dispose of any item of Collateral in any instance where such action
is permitted under the terms of this Special Security Agreement, any other
Credit Document or by applicable law, or of the time, place or terms of sale
in connection with the exercise of CECI's rights hereunder, and also waives,
to the extent permitted by law, any bonds, security or sureties required by
any statute, rule or otherwise by law as an incident to any taking of
possession by CECI of property subject to CECI's lien. Grantor also waives
any damages (direct, consequential or otherwise) occasioned by the enforcement
of CECI's rights under this Special Security Agreement, including the taking
of possession of any Collateral, all to the extent that such waiver is
permitted by law. These waivers and all other waivers provided for in this
Special Security Agreement and the other Credit Documents have been negotiated
by the parties hereto and thereto and Grantor acknowledges that it has been
represented by counsel of its own choice and has consulted such counsel with
respect to its rights hereunder and thereunder.
SECTION 13. CECI's Rights to Reject Assignment
<PAGE>208
CECI, in its sole and absolute discretion, without waiving or
releasing any obligation, liability or duty of Grantor under this Special
Security Agreement or the other Credit Documents or any Default or Event of
Default, may at any time or times hereafter, but shall be under no obligation
to, pay, acquire and/or accept an assignment of any security interest, lien,
encumbrance or claim asserted by any Person against the Collateral. All sums
paid by CECI in respect thereof and all costs, fees and expenses, including
attorneys' fees, court costs, expenses and other charges relating thereto,
incurred by CECI (or for which CECI becomes obligated) on account thereof
shall constitute Obligations, secured hereby and payable on demand by Grantor
to CECI.
SECTION 14. Expenses
Grantor shall pay all fees, costs and expenses incurred in creating,
perfecting and maintaining the Security Interests, any and all taxes imposed
by any state, federal or local authority on any of the Collateral, or with
respect to the collection upon, sale or other disposition thereof or enforcing
rights against the Collateral, including the costs of preparing for sale and
selling the Collateral. If Grantor fails to promptly pay any portion of the
above expenses when due or to perform or comply with any other obligation of
Grantor under this Special Security Agreement or any other Credit Document,
CECI may, at its option, but shall not be required to, pay or perform the same
or take any action in connection with such performance or compliance which
CECI deems advisable, and Grantor agrees to reimburse CECI therefor on demand.
All sums so paid or incurred by CECI for any of the foregoing, any and all
other sums for which Grantor may become liable hereunder and all costs and
expenses (including attorneys' fees, legal expenses and court costs) incurred
by CECI in enforcing or protecting the Security Interests or any of their
rights or remedies under this Special Security Agreement shall be payable on
demand, shall constitute Obligations, shall bear interest until paid at the
highest rate provided in the CE Acquisition Credit Agreement and shall be
secured by the Collateral.
SECTION 15. Termination of Security Interests;
Release of Collateral
This Special Security Agreement, and all obligations of Grantor
hereunder, shall terminate upon payment in full of all Obligations and all
right, title and interest of CECI in and to the Collateral shall revert to
Grantor and its successors and assigns. Upon the termination of CECI's
security interest and the release of the Collateral, CECI will, at the written
request and expense of Grantor, (a) promptly execute and deliver to Grantor
such documents as Grantor 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 Grantor (without recourse and without any
representation or warranty) all property of Grantor then held by CECI or any
agent or nominee of CECI pursuant to this Special Security Agreement as to
which CECI's Security Interest has terminated pursuant to this Section. If,
at any time, all or part of any payment of the Obligations theretofore made by
any Grantor or any other Person is rescinded or otherwise must be returned by
CECI for any reason whatsoever (including, without
<PAGE>209
limitation, the insolvency, bankruptcy or reorganization of Grantor or any
other Person), this Special Security 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.
SECTION 16. 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 or the Guaranty Agreement, as may be applicable
SECTION 17. Assignment by CECI
Grantor acknowledges that in connection with the transactions
contemplated by the Non-Recourse Credit Agreement, CECI is entering into the
Borrower Pledge and Security Agreement, pursuant to which CECI will assign to
Agent all of its rights, title and interest (including its security interest),
in, to and under this Special Security Agreement, and Grantor hereby consents
to such assignment. Grantor agrees that upon such assignment, Agent will have
all of the rights hereunder granted to CECI and that Agent may exercise such
rights as if the references herein to CECI were references to Agent.
SECTION 18. Successors and Assigns
This Special Security Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
except that Grantor 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 Agent and that CECI may not assign its rights or
obligations hereunder except to Agent pursuant to the Borrower Pledge and
Security Agreement.
SECTION 19. Third Party Beneficiaries
CECI and Grantor acknowledge that Agent and the Banks are express
beneficiaries of this Special Security Agreement.
SECTION 20. Changes in Writing
No amendment, modification, termination or waiver of any provision
of this Special Security Agreement, or consent to any departure by Grantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by CECI, Grantor and Agent.
SECTION 21. Applicable Law
THIS SPECIAL SECURITY AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS, BUT
EXCLUDING
<PAGE>210
PERFECTION, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT
JURISDICTION.
SECTION 22. Failure or Indulgence Not
Waiver; Remedies Cumulative
No failure or delay on the part of CECI in the exercise of any
power, right or privilege under this Special Security Agreement, the CE
Acquisition Credit Agreement or the other Credit Documents 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
other or further exercise thereof or any other right, power or privilege. All
rights and remedies existing under this Special Security Agreement, the CE
Acquisition Credit Agreement or the other Credit Documents may be exercised
singly or concurrently and are cumulative to, and not exclusive of, any rights
or remedies provided by law or otherwise available.
SECTION 23. Headings
All headings contained in this Special Security Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Special Security Agreement for any other purpose or be given any
substantive effect.
SECTION 24. Severability.
The invalidity, illegality or unenforceability in any jurisdiction
of any provision in or obligation under this Special Security Agreement shall
not affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Special Security Agreement or of such
provision or obligation in any other jurisdiction.
SECTION 25. Counterparts
This Special Security 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
Special Security Agreement shall
<PAGE>211
become effective upon the execution of a counterpart hereof by each of the
parties hereto.
IN WITNESS WHEREOF, this Special Security Agreement has been duly
executed as of the date and year first above written.
[GRANTOR'S NAME]
By:
Name:
Title:
Agreed to and Accepted as of
this 24th day of February, 1995:
[GRANTEE]
By:
Name:
Title:
Agreed to and Accepted as of
this 24th day of February, 1995:
[Agent]
By:
Name:
Title:
By:
Name:
Title:
<PAGE>212
SCHEDULE I
Collateral Locations, Chief Place of Business,
Chief Executive Office and Other Offices
<PAGE>213
SCHEDULE II
Trade Names and Fictitious Business Names
<PAGE>214
EXHIBIT S
[FORM OF BLOCKED ACCOUNT AGREEMENT]
This BLOCKED ACCOUNT AGREEMENT (this "Agreement"), dated as of
the ___ day of February, 1995, by and among [Bank of America National Trust
and Savings Association/Credit Suisse], a national banking association
("Bank"), ________ _____________________________________ ("Subsidiary") and
CREDIT SUISSE, as agent ("Agent") on behalf of and for the benefit of the
Lenders (defined below).
WHEREAS, pursuant to the Non-Recourse Credit Agreement of even
date herewith (as amended, supplemented or otherwise modified from time to
time, the "Non-Recourse Credit Agreement") by and among California Energy
Company, Inc. ("CECI"), the banks and other financial institutions party
thereto (the "Lenders") and Agent, the Lenders have agreed to make certain
loans (the "Loans") to CECI upon the terms and subject to the conditions set
forth therein;
WHEREAS, pursuant to the terms of the Credit Agreement of even
date herewith (as amended, supplemented or otherwise modified from time to
time, the "CE Acquisition Credit Agreement") by and between CECI and CE
Acquisition Company, Inc., a Delaware corporation and a wholly-owned
subsidiary of CECI ("CE Acquisition"), the proceeds of the Loans will be
loaned by CECI to CE Acquisition and CE Acquisition will use such proceeds to
consummate the Merger (described below);
WHEREAS, CE Acquisition owns approximately 51% of the
outstanding shares of common stock of Magma Power Company ("Magma"), and upon
consummation of the Merger, CE Acquisition will be merged with and into Magma
and Magma will assume CE Acquisition's obligations under the CE Acquisition
Credit Agreement and other related documents;
WHEREAS, the Subsidiary is [a wholly-owned subsidiary] of
[Magma];
[WHEREAS, Subsidiary will benefit from the Loans to be made to
CECI by the Lenders pursuant to the Non-Recourse Credit Agreement, because,
among other things, such Loans are necessary for the successful continued
operation of Magma, of which Subsidiary, as a wholly owned subsidiary of
Magma, is an integral component;]
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make the Loans to CECI under the Non-Recourse Credit Agreement that
the Subsidiary enter into this Agreement;
[WHEREAS, Subsidiary and Bank have also entered into a Funds
Transfer Standing Instructions Agreement dated as of even date herewith, as
amended (the "Standing Funds Transfer Agreement"); and]
WHEREAS, in order to accommodate and implement the financing
arrangements set forth in the Non-Recourse Credit
<PAGE>215
Agreement, Agent and Subsidiary desire to use Bank, and Bank is willing to
provide such accounts and services related thereto, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Withdrawals Prior to Notice. Unless and until notice is
provided to Bank in accordance with the provisions of Sections 2 and 13 of
this Agreement, Subsidiary shall have the right (insofar as Bank is concerned)
to withdraw and deposit funds and checks in Account No. __________ (the
"Blocked Account") in such amounts and with such frequency as it chooses free
of any direction by Agent. Without limiting the foregoing, Sections 3, 4, 8
and 10 shall only be applicable on and after the effective date of a Notice of
Block until (i) such Notice of Block is withdrawn by Agent by giving written
notice to Bank or (ii) termination of this Agreement as set forth in Section
12 hereof.
2. Notice of Block. Upon the occurrence and during the
continuance of an Event of Default under the CE Acquisition Credit Agreement,
Agent may in its sole discretion, give Bank a written notice signed by Agent
substantially in the form of Exhibit A attached hereto ("Notice of Block").
Such Notice of Block shall be and become effective as set forth in Section 13
hereof. Upon the effectiveness of the Notice of Block, Subsidiary agrees that
its signing authority and right to withdraw or transfer funds from the Blocked
Account shall be terminated.
3. Customary Account Procedures. Bank is hereby authorized:
(a) to charge the Subsidiary for returned checks, service
charges, and other fees and charges associated with this Agreement;
and
(b) to follow its usual procedures in the event the Blocked
Account or any check should be or become the subject of any writ,
levy, order or other similar judicial or regulatory order or
process.
4. Withdrawals After Notice.
(a) On and after the effective date of any Notice of
Block, Subsidiary shall not withdraw funds from the Blocked Account and the
Bank shall wire transfer such funds to Account Number ________________ at
Credit Suisse (the "Agent Account") or transfer such funds to such other
account as Agent may direct. If a Notice of Block is effective and deemed to
have been given pursuant to Section 13 hereof (i) prior to 2:00 p.m. (New York
time) on any Banking Day (such day being any day that is not a (A) Saturday,
Sunday or legal holiday in the State of New York or the State of California or
(B) day on which banking institutions chartered by the State of New York, the
State of California or the United States are legally required or authorized to
close), Bank shall initiate transfers of all collected and available funds in
the
<PAGE>216
Blocked Account to the Agent Account, unless otherwise directed by Agent on
such day or (ii) on or after 2:00 p.m. (New York time), on any Banking Day,
Bank shall initiate transfers of all collected and available funds in the
Blocked Account to the Agent Account, or another account as directed by Agent
by 1:00 p.m. (New York time) on the next Banking Day. Thereafter, Bank shall
automatically and without further notice initiate transfers of all collected
and available funds in the Blocked Account to the Agent Account by 1:00 p.m.
(New York time) on each Banking Day following the date on which such funds are
collected. Funds are not available if, in the reasonable opinion of Bank,
they are subject to a hold, dispute or legal process preventing their
withdrawal. Agent shall have the exclusive right to authorize transfers from
the Blocked Account and Subsidiary shall have no right to direct such
transfers at any time after a Notice of Block is effective and deemed to have
been given to Bank pursuant to Section 13 hereof. Agent shall give Bank prior
reasonable written notice of any change in the instructions so as to enable
Bank to act upon such changes.
(b) Subsidiary hereby authorizes Bank, without prior
notice, from time to time to debit any account Subsidiary may have with Bank,
including the Blocked Account, for the amount or amounts due Bank under
subsection 3(a).
5. Security Interest. Subsidiary has granted to CECI, which
has assigned to the Agent (on behalf and for the benefit of the Lenders) a
continuing lien upon, and security interest in, the Blocked Account and all
funds at any time deposited or credited to the Blocked Account. [For the
purpose of perfecting the security interest of Agent in and to the Blocked
Account and all funds and cash at any time on deposit in the Blocked Account,
Agent has notified Bank of America pursuant to Section 9-302(1)(g) of the
Uniform Commercial Code as in effect in the State of California that
Subsidiary has granted to CECI, a security interest in the Blocked Account,
which security interest has been assigned to Agent.]
6. Failure of Bank to Make Transfers; Liability of Bank. (a)
Bank will not be liable to Subsidiary or Agent or any other Lender for any
expense, claim, loss, damage or cost ("Damages") arising out of or relating to
its performance under this Agreement other than those Damages which result
directly from its acts or omissions constituting negligence, subject to the
limits in the next succeeding sentence. Bank's liability is limited to direct
money Damages actually incurred.
(b) In no event will Bank be liable for any special,
indirect, exemplary or consequential damages, including, but not limited to,
lost profits.
(c) Bank will be excused from failing to act or delay in
acting, and no such failure or delay shall constitute a breach of this
Agreement or otherwise give rise to any liability of Bank, if (i) such failure
or delay is caused by circumstances beyond Bank's reasonable control,
including, but not limited to, legal constraint, emergency conditions, action
or inaction of governmental, civil or military authority, fire, strike,
lockout or other labor dispute, war, riot, theft, flood, earthquake or other
natural disaster, breakdown of public or private or common carrier
<PAGE>217
communications or transmission facilities, equipment failure, or act,
negligence or default of Subsidiary or Agent or any other Lender or (ii) such
failure or delay resulted from Bank's reasonable belief that the action would
have violated any guideline, rule or regulation of any governmental authority.
7. Statements. At the end of each month, Bank's regular
statement covering the deposits to and withdrawals from the Blocked Account
will be sent to Agent, with a duplicate original copy to Subsidiary.
8. Uncollected Funds. Checks deposited in the Blocked
Account which are returned unpaid marked "Refer to Maker," "Insufficient
Funds," "Uncollected Funds," or which are returned for any similar reason,
will be recleared once by Bank. If a check is returned for any other reason,
including for reasons such as "account closed" or "payment stopped" or if a
check is returned a second time, Bank will initially attempt to debit such
amounts from another account of Subsidiary with Bank, if any, as Subsidiary
shall have designated in writing to the Bank, to the extent one of such
accounts has sufficient funds to pay a returned item in full and, then, from
the Blocked Account. If the balances in the Blocked Account are not
sufficient to pay Bank for any returned check and Agent has received the
proceeds of such returned check, then Agent shall promptly return to Bank such
funds received in connection with the returned check. Bank will promptly
notify Agent by telephone or computer transmission of each amount charged back
in respect of the Blocked Account and, to the extent such information is
available, of the identity of the drawer of the check and send a debit advice
with the item to Subsidiary.
9. No Liability of the Lenders. The Lenders will have no
liability to Bank (except with respect to returned items described in Section
8 hereof) or Subsidiary for any costs, fees or charges under or arising in
connection with this Agreement. All such charges will be payable by
Subsidiary.
10. Limitations on Bank. Bank will not set off against,
exercise or claim any security interest or banker's lien in, or, except as may
be required by the order of a court of competent jurisdiction or authorized
governmental agency, otherwise debit the Blocked Account except for service
fees, wire transfers permitted under this Agreement and dishonored or
otherwise returned checks deposited in the Blocked Account which are returned
unpaid as set forth in Section 8 hereof. Except as expressly provided for
herein, Bank will not set off against, exercise or claim any security interest
or banker's lien in, or otherwise debit the Blocked Account for any amounts
owed Bank on account of loans or other credit arrangements with Subsidiary or
any of the Lenders or on account of any other claim of any kind. Except as
expressly provided for herein, Bank waives and releases to the Lenders any
right or claim which it may have deposited in the Blocked Account; [provided
that, only Agent may exercise the right of set-off in accordance with the Non-
Recourse Credit Agreement.]
11. Instructions of Agent; Indemnity. All parties hereto
acknowledge that Bank is entitled to rely upon the instructions of Agent.
Subsidiary agrees to save and hold harmless,
<PAGE>218
to defend and to indemnify, Bank against all actions, proceedings, liabilities
claims, demands, losses, damages, or expenses, including reasonable legal fees
(and allocated costs of staff counsel), as may arise or be made against Bank
in respect of Bank's acting in connection with this Agreement, or which Bank
may in any way incur in defending or prosecuting, settling or discontinuing
any such proceedings, actions, claims, damages, losses or expenses, arising
out of any act or omission of Subsidiary. This Section 11 does not apply to
any cost or damage attributable to the gross negligence or willful misconduct
of Bank. Subsidiary's obligations under this Section 11 shall survive the
termination of this Agreement.
12. Termination. Subsidiary may not terminate this Agreement
without the prior written consent of Agent, and any attempt to terminate this
Agreement by Subsidiary without the prior written consent of Agent shall be
void. Agent may terminate this Agreement at any time upon giving at least 30
days' prior written notice to the Bank and to Subsidiary. Notwithstanding the
foregoing, Agent may terminate this Agreement upon any breach of this
Agreement by the Bank or by Subsidiary upon giving at least 10 days prior
written notice to the Bank and to Subsidiary ; provided, however, that prior
to the occurrence of an Event of Default and in the event that the termination
hereunder was caused by a breach by Bank, then Subsidiary shall have the right
to have such funds in the Blocked Account transferred to another bank
(satisfactory to Agent), provided that Subsidiary, such bank and Agent have
executed a Blocked Account Agreement with respect to such account, in form and
substance satisfactory to Agent, and Subsidiary shall have granted to CECI a
security interest in such accounts (which security interest shall be assigned
to Agent). Except as otherwise provided in the preceding sentence, any funds
remaining in the Blocked Account upon termination will be transferred to the
Agent's Account and such wire transfer will be initiated by 12:00 noon (New
York time) of the Banking Day following any termination and no further
deposits will be made or accepted into the Blocked Account. Bank may
terminate this Agreement upon 30 days' prior written notice to Subsidiary and
Agent or at any time upon any breach of this Agreement by Subsidiary or any
other party hereunder.
13. Notices. All notices, demands, requests, and other
communications required or permitted hereunder shall be in writing, shall be
presented personally or sent by reputable overnight courier service or
registered or certified mail as set forth below and shall be effective and
deemed to have been given as follows: (a) when presented personally, upon
such presentation, (b) when sent by a nationally recognized overnight courier
service addressed to the respective party, as the case may be, at the
following address or such other address as any party may from time to time
designate by written notice to the others as herein required, on the Banking
Day following the date of delivery to such courier service or such later day
as demonstrated by a bona fide receipt therefor, or (c) when sent by the
United States Postal Service, postage prepaid, registered or certified, return
receipt requested, addressed to the respective party, as the case may be, as
set forth in clause (b) above, on the fifth Banking Day following the deposit
thereof in a regularly maintained receptacle for the United States Postal
Service. The telecopy (facsimile) numbers provided below are for convenience
of the parties only.
<PAGE>219
Transmission by telecopy shall constitute provision of notice under this
Agreement only if receipt thereof is acknowledged by the recipient, provided
that such telecopy is then promptly followed by a copy thereof delivered by a
method specified in clause (a), (b) or (c) immediately above.
If to Subsidiary:
Attention:
Telecopy:
If to Agent:
Credit Suisse
Tower 49
12 East 49th Street
New York, New York 10017
Attention:
Telecopy:
If to Bank:
Attention:
Telecopy:
14. Representations. (a) Subsidiary represents and warrants to
Bank and Agent that (i) this Agreement constitutes its duly authorized, legal,
valid, binding and enforceable obligation; (ii) the performance of its
obligations under this Agreement and the consummation of the transactions
contemplated hereunder will not (A) constitute or result in a breach of its
certificate or articles of incorporation, by-laws or partnership agreement, as
applicable, or the provisions of any material contract to which it is a party
or by which it is bound or (B) result in the violation of any law, regulation,
judgment, decree or governmental order applicable to it, and (iii) all
approvals and authorizations required to permit the execution, delivery,
performance and consummation of this Agreement and the transactions
contemplated hereunder have been obtained.
(b) Subsidiary represents and warrants that it has not
assigned or granted a security interest in the Blocked Account or any funds
now or hereafter deposited in the Blocked Account, except to CECI which has
assigned its rights and security interest to Agent (for the benefit of the
Lenders).
(c) Subsidiary agrees that it shall be deemed to make and
renew each representation and warranty in Sections 14(a) and 14(b) hereof on
and as of each day on which the services under this Agreement are performed by
Bank.
<PAGE>220
15. Limitation on Liens. Subsidiary agrees that it will not
permit the Blocked Account to become subject to any other pledge, assignment,
lien, charge or encumbrance of any kind, nature or description, other than
CECI's security interest referred to herein which has been assigned to Agent.
16. Costs; Attorneys' Fees. Subsidiary agrees to pay to Bank, upon
receipt of Bank's invoice, all reasonable costs, expenses and attorneys' fees
(including allocated costs for in-house legal services) incurred by Bank in
connection with the preparation and administration (including any amendments)
and enforcement of this Agreement and any instrument or agreement required
hereunder, including, but not limited to, any such reasonable costs, expenses
and fees arising out of the resolution of any conflict, dispute, motion
regarding entitlement to rights or rights of action, or other action to
enforce Bank's rights in a case arising under Title 11, United States Code.
17. Bankruptcy, Etc. Notwithstanding any of the other provisions
in this Agreement, in the event of the commencement of a case pursuant to
Title 11, United States Code, filed by or against Subsidiary, or in the event
of the commencement of any similar case under then applicable federal or state
law providing for the relief of debtors or the protection of creditors by or
against Subsidiary, Bank may act as Bank deems reasonably necessary to comply
with all applicable provisions of governing statutes and shall be held
harmless from any claim of any of the parties for so doing.
18. Successor Agent. Upon the acceptance of any appointment as
Agent under the Non-Recourse Credit Agreement 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 its duties and obligations hereunder.
19. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction. Where provisions of any law or
regulation resulting in such prohibition or unenforceability may be waived
they are hereby waived by Bank, Subsidiary and Agent to the full extent
permitted by law so that this Agreement shall be deemed a valid, binding
agreement.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
21. Miscellaneous. This Agreement will become effective
immediately upon its execution and delivery by all of the parties. This
Agreement may not be amended by Bank or Subsidiary without the express written
consent of Agent, except that Bank's charges are subject to change by Bank
upon 30 days' prior written notice to Subsidiary and Agent. Agent may modify
this Agreement at any time
<PAGE>221
in writing with Bank's acceptance. The Section headings used in this
Agreement are for convenience only and do not and shall not be deemed to
affect, limit, amplify or modify the terms and provisions hereof. Capitalized
terms used herein, and not otherwise defined herein, shall have the meanings
assigned to them in the Non-Recourse Credit Agreement. This Agreement shall
be governed by, and construed and interpreted in accordance with the laws of
the [State of California/New York] without regard to the principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
[SUBSIDIARY]:
By:
Name:
Title:
[BANK]:
By:
Name:
Title:
CREDIT SUISSE, as Agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE>222
[FORM OF NOTICE OF BLOCK]
[Credit Suisse Letterhead]
[Date]
Attn.:
Re: Notice of Block with Respect to Account No.
Ladies and Gentlemen:
Reference is hereby made to the Blocked Account Agreement (the
"Agreement"), dated as of February __, 1995 among
("Subsidiary"), , a national banking association
("Bank"), and Credit Suisse, as agent ("Agent") on behalf of and for the
benefit of the Lenders under the Non-Recourse Credit Agreement. Any
capitalized term used herein and not otherwise defined herein shall have the
meaning assigned to such term in the Agreement.
Pursuant to Section 2 of the Agreement, Agent hereby delivers this
Notice of Block to Bank with respect to Account No. at Bank
(the "Blocked Account"). Pursuant to the terms of the Agreement, Subsidiary
has agreed, that upon the effectiveness of the Notice of Block, Subsidiary's
signing authority and right to withdraw or transfer funds from the Blocked
Account shall be terminated. Bank shall hereafter prohibit any and all
withdrawals and transfers from the Blocked Account by Subsidiary.
Pursuant to Section 4 of the Agreement, Bank shall transfer all
collected and available funds in the Blocked Account by way of wire transfer
to Agent's account number , at Credit Suisse at Tower
49, 12
<PAGE>223
East 49th Street, New York, New York 10017, ABA No. 0260-0917-9, Attention:
.
This Notice of Block shall in no way modify the terms of the
Agreement.
Sincerely,
CREDIT SUISSE, as Agent
By:
Name:
Title:
By:
Name:
Title:
63180108
