$_______________________
CALIFORNIA ENERGY COMPANY, INC.
__% Senior Discount Notes due 2004
UNDERWRITING AGREEMENT
March ___, 1994
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
California Energy Company, Inc., a Delaware corporation (the "Company"),
proposes to sell $_________ aggregate principal amount of the Company's __%
Senior Discount Notes due January 15, 2004 (the "Notes"). This is to confirm
the agreement concerning the purchase of the Notes from the Company by the
Underwriters named in Schedule 1 hereto (the "Underwriters").
1. Representations, Warranties and Agreements of the Company. The Company
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represents, warrants and agrees that:
(a) A registration statement on Form S-3, and amendments thereto, with
respect to the Notes have (i) been prepared by the Company in conformity with
the requirements of the Securities Act of 1933 (the "Securities Act") and the
rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act and
(iii) become effective under the Securities Act; and the indenture ("the
"Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"), pursuant to which the Notes shall be issued, shall
have been qualified under the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). Copies of such registration statement and the amendments
thereto have been delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters. As used in this Agreement, "Effective
Time" means the date and the time as of which such registration statement, or
the most recent post-effective amendment thereto, if any, was declared
effective by the Commission; "Effective Date" means the date of the Effective
Time; "Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereof, before it became effective
under the Securities Act and any prospectus filed with the Commission by the
Company with the consent of the Representatives pursuant to Rule 424(a) of the
Rules and Regulations; "Registration Statement" means such registration
statement, as amended at the Effective Time, including any documents or
portions of any documents incorporated by reference therein at such time and
all information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in accordance with
Section 5(a) hereof and deemed to be a part of the registration statement as
of the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means such final prospectus, as first filed with
the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations. Reference made herein to any Preliminary Prospectus or to the
Prospectus shall be deemed to refer to and include any documents or portions
of any documents incorporated by reference therein pursuant to Item 12 of Form
S-3 under the Securities Act, as of the date of such Preliminary Prospectus or
the Prospectus, as the case may be, and any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any documents or portions of any documents filed under
the Securities Exchange Act of 1934 (the "Exchange Act") after the date of
such Preliminary Prospectus or the Prospectus, as the case may be, and
incorporated by
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reference in such Preliminary Prospectus or the Prospectus, as the case may
be, in accordance with Item 12 of Form S-3; and any reference to any amendment
to the Registration Statement shall be deemed to include any annual report of
the Company filed with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act after the Effective Time that is incorporated by reference in
the Registration Statement in accordance with Item 12 of Form S-3. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus shall, when they become effective or are filed with the Commission,
as the case may be, conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and the Trust Indenture Act and the
rules and regulations thereunder and do not and shall not, as of the applicable
effective date (as to the Registration Statement and any amendment thereto) and
as of the filing date (as to the Prospectus and any amendment or supplement
thereto) contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in respect of the Prospectus, in the light of the circumstances under
which they were made, not misleading; provided that no representation or
warranty is made as to information contained in or omitted from the Registration
Statement or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company through
the Representatives by or on behalf of any Underwriter specifically for
inclusion therein; and the Indenture conforms in all material respects to the
requirements of the Trust Indenture Act and the rules and regulations
thereunder.
(c) The documents incorporated by reference in the Prospectus, when they
became effective or were last amended or filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue statement
of a material fact or omitted to
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state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made, and any further documents so filed and incorporated by
reference in the Prospectus, when such documents become effective or are filed
with the Commission, as the case may be, shall conform in all material
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder and
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made.
(d) The Company, each Subsidiary (as defined below) and each Joint Venture
(as defined below) have been duly organized and are validly existing and, if
applicable, in good standing under the laws of their respective jurisdictions of
organization as a corporation or partnership, as the case may be, and have the
power and authority to own, lease and operate their property and conduct their
businesses as described in the Prospectus; the Company, the Subsidiaries and the
Joint Ventures are duly qualified to do business and are in good standing as
foreign corporations or foreign partnerships, as the case may be, in each
jurisdiction, domestic or foreign, in which such registration or qualification
or good standing is required (whether by reason of the ownership or leasing of
property, the conduct of business or otherwise), except where the failure to
so register or qualify or be in good standing would not have a material
adverse effect on the financial condition or results of operations of the
Company, its Subsidiaries and Joint Ventures taken as a whole; and the
Company has all requisite corporate power and authority to enter into this
Agreement and the Indenture, and to consummate the transactions contemplated
hereby and thereby. For purposes of this Agreement, (A) the term "Subsidiary"
shall mean Coso Hotsprings Intermountain Power, Inc., China Lake Operating
Company and Coso Technology Corporation, each a Delaware corporation, and the
other subsidiaries listed on Schedule 2 hereto, and (B) the term "Joint
Venture" shall mean the Permitted Joint Ventures and the Eligible Joint
Ventures (as such terms are defined in the Indenture) and Coso Finance
Partners ("CFP"), Coso Energy Developers ("CED") and Coso Power Developers
("CPD"),
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each a California general partnership, it being understood that such term
means the general or limited partnership or other joint venture entity and not
the individual general or limited partners or other joint venturers thereof.
The Subsidiaries listed above and on Schedule 2 are all the direct and
indirect "subsidiaries" of the Company, as such term is defined in Rule 405 of
the Rules and Regulations, and are all of the "Significant Subsidiaries" of
the Company, as such term is defined in Rule 1-02 of Regulation S-X.
(e) All the issued and outstanding shares of capital stock of the Company
have been validly authorized and issued and are fully-paid and nonassessable;
all the outstanding shares of capital stock of each Subsidiary have been duly
and validly authorized and issued and are fully-paid and nonassessable; and
except as otherwise set forth or referred to in the Prospectus, all outstanding
shares of capital stock of each Subsidiary are owned beneficially by the Company
free and clear of any material claims, liens, encumbrances and security
interests. As of the date of this Agreement and the Delivery Date (as defined
below), the Company is the beneficial owner of approximately 46%, 48% and 50% of
the outstanding partnership interests of CFP, CED and CPD, respectively.
All of such interests beneficially owned by the Company have been duly and
validly authorized and issued and, except as otherwise disclosed or referred to
in the Prospectus, are owned beneficially by the Company free and clear of any
material claims, liens, encumbrances and security interests.
(f) The Notes have been duly authorized by the Company, and, when duly
executed, authenticated, issued and delivered against payment therefor as
contemplated hereby and by the Indenture, shall be validly issued and
outstanding, and shall constitute valid and binding obligations on the part of
the Company, entitled to the benefits of the Indenture, and enforceable against
the Company in accordance with their terms, except as enforcement may be limited
by applicable bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and by
equitable principles generally; and the Notes, when issued and delivered, shall
conform in all material respects to the descriptions thereof contained in the
Prospectus.
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(g) The Indenture has been duly authorized, and when duly executed and
delivered by the Company, shall constitute a valid and binding agreement on the
part of the Company, enforceable against the Company in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles generally; and
the Indenture, when executed and delivered, shall conform in all material
respects to the descriptions thereof contained in the Prospectus.
(h) This Agreement has been duly authorized, executed and delivered by the
Company.
(i) The execution, delivery and performance of this Agreement and the
Indenture, the consummation of the transactions contemplated herein and therein
and the issuance and delivery of the Notes shall not (i) conflict with the
corporate charter or by-laws or partnership agreement of the Company, any
Subsidiary or any Joint Venture, (ii) conflict with, result in the creation or
imposition of any lien, charge or other encumbrance upon any asset with a
value in excess of $10,000,000 (a "Material Asset") of the Company, any
Subsidiary or any Joint Venture pursuant to the terms of, or constitute a
breach of, or default under, any material agreement, indenture or other
instrument to which the Company, any Subsidiary or any Joint Venture is a
party (other than the Note Purchase Agreement, dated March 15, 1988, as
amended (the "Note Purchase Agreement"), between the Company and Principal
Mutual Life Insurance Company ("Principal Mutual") pursuant to which
approximately $35 million aggregate principal amount of the Company's 12%
Senior Notes with Contingent Interest due 1995 (the "Senior Notes") are
outstanding), or by which the Company, any Subsidiary or any Joint Venture is
bound or to which any Material Asset of the Company, any Subsidiary or any
Joint Venture is subject, or (iii) result in a violation of any law, order,
rule, regulation, judgment or decree of any court or governmental agency
having jurisdiction over the Company, any Subsidiary or any Joint Venture or
any Material Asset of the Company, any Subsidiary or any Joint Venture, where
any such conflicts, encumbrances, breaches, defaults or violations under
clauses (ii) or (iii), individually or in the
6
aggregate, would have a material adverse effect on the financial condition or
results of operations of the Company, its Subsidiaries and Joint Ventures
taken as a whole. Except for (i) the registration of the Notes under the
Securities Act, (ii) such consents, approvals, authorizations, registrations
or qualifications as may be required under the Exchange Act and applicable
state securities laws in connection with the purchase and distribution of the
Notes by the Underwriters, (iii) the approval for listing the Notes on the New
York Stock Exchange, Inc., (iv) the consent of Principal Mutual under the
Senior Notes and the Note Purchase Agreement, which shall have been obtained
on or prior to the Delivery Date and (v) the waiver by Peter Kiewit Sons',
Inc. of their right to include securities in the Registration Statement, which
has been obtained prior to the date of this Agreement, no consent,
authorization or order of, or filing or registration by the Company, any
Subsidiary or, to the best of the Company's knowledge, any Joint Venture with,
any court, governmental agency or third party is required in connection with
the execution, delivery and performance of this Agreement and the Indenture,
the consummation of the transactions contemplated herein and therein, and the
issuance and delivery of the Notes.
(j) Except with respect to a breach of certain covenants contained in the
Note Purchase Agreement that would occur upon the issuance and delivery of the
Notes, no event has occurred and is continuing that, had the Notes already been
issued, would (whether or not with the giving of notice and/or the passage of
time and/or the fulfillment of any other requirement) constitute an Event of
Default (as defined in the Indenture) under the Indenture.
(k) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any debt
securities of the Company owned or to be owned by such person or to require the
Company to include any such securities in the securities registered pursuant to
the Registration Statement or, with respect to any debt securities, in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.
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(l) The Company has not sold or issued any Notes or similar debt
securities during the six-month period preceding the date of the Prospectus,
including any sales pursuant to Rule 144A or Regulations D or S under the
Securities Act.
(m) Since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, (i) there has been no material
adverse change, or a development which is reasonably likely to lead to a
material adverse change, in the financial condition or results of operations
of the Company, its Subsidiaries and Joint Ventures taken as a whole, (ii)
except as disclosed in the Prospectus, there have not been any transactions
entered into by the Company, its Subsidiaries or any Joint Venture, other than
those in the ordinary course of business, which are material to the Company,
its Subsidiaries and Joint Ventures taken as a whole and (iii) there has not
been any dividend or distribution of any kind declared, paid or made by the
Company on any of its shares of capital stock.
(n) The financial statements of the Company and its consolidated
subsidiaries and the related notes and schedules included or incorporated by
reference in the Prospectus fairly present the financial position, the results
of operations and the cash flows of the Company and its consolidated
subsidiaries at the respective dates and for the respective periods to which
they apply; such financial statements and the related notes and schedules have
been prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified. The capitalization of the Company, as set forth in the column
labeled "Actual" under the caption "Capitalization" in the Prospectus, is
accurately described as of the date presented therein.
(o) Deloitte & Touche, who have certified certain financial statements of
the Company, whose report appears in the Prospectus or is incorporated by
reference therein and who have delivered the initial letter referred to in
Section 7(g) hereof, are and were independent public accountants as required by
the Securities Act and the Rules and Regulations during the periods covered
8
by the financial statements on which they reported contained or incorporated
in the Prospectus.
(p) Except as described in or contemplated by the Prospectus, the
Company, each Subsidiary and each Joint Venture holds, as applicable, good and
valid title to, or valid and enforceable leasehold or contractual interests in,
all items of real and personal property that are material to the business of
such entity, free and clear of all liens, encumbrances and claims which would
materially interfere with the conduct of the business of such entity as
described in the Prospectus.
(q) Except as described in the Prospectus, the Company, the Subsidiaries
and the Joint Ventures carry, or are covered by, insurance in such amounts and
covering such risks as is customary for similarly situated companies in the
Company's industry. Each of the foregoing insurance policies is valid and in
full force and effect, and no event has occurred and is continuing that permits,
or after notice or lapse of time or both would permit, modifications or
terminations of the foregoing that in the aggregate would have a material
adverse effect on the financial condition or results of operations of the
Company, its Subsidiaries and Joint Ventures taken as a whole.
(r) Except as described in the Prospectus, the Company, each Subsidiary
and each Joint Venture (i) has properly obtained each license, permit,
certificate, franchise or other governmental authorization necessary to the
ownership of its property or to the conduct of its business as described in the
Prospectus and (ii) is in compliance with all terms and conditions of such
license, permit, certificate, franchise or other governmental authorization,
except (x) in either case where the failure to do so would not have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries and Joint Ventures taken as a whole, (y) permits,
consents and approvals that may be required for future drilling or operating
activities which are ordinarily deemed to be ministerial in nature and which are
anticipated to be obtained in the ordinary course and (z) permits, consents and
approvals for developmental or construction activities which have not yet been
obtained but which have been or will be applied for
9
in the course of development or construction and which are anticipated to be
obtained in the ordinary course.
(s) There is no legal or governmental proceeding before any court,
governmental agency or body, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against, or, to the knowledge of the
Company, involving the Company, any Subsidiary or any Joint Venture (i) of a
character required to be disclosed in the Registration Statement which is not
adequately disclosed in the Registration Statement or (ii) that, if determined
adversely to the Company, any Subsidiary or any Joint Venture, would materially
and adversely affect the consummation of the transactions contemplated by this
Agreement.
(t) The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
(u) The Company, the Subsidiaries and the Joint Ventures are currently
conducting their respective businesses as described in the Prospectus.
(v) There are not any contracts or other documents that are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations that have not been
described in the Prospectus or filed as exhibits to the Registration Statement
or incorporated therein by reference as permitted by the Rules and Regulations.
(w) There is not any relationship, direct or indirect, that exists between
or among the Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, that is required by the
Securities Act or by the Rules and Regulations to be described in the Prospectus
and which is not so described.
(x) There is not any labor problem or disturbance with the persons
employed by the Company, any Subsidiary or any Joint Venture that exists or, to
the knowledge of the Company, that is threatened and that might reasonably be
expected to have a material adverse effect on the financial condition or
results of opera-
10
tions of the Company, its Subsidiaries and Joint Ventures taken as a whole.
(y) The Company, the Subsidiaries and the Joint Ventures do not maintain
any "pension plans," as defined by the Employee Retirement Income Security Act
of 1974, as amended, other than plans qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended.
(z) None of the Company, any Subsidiary or any Joint Venture (i) is in
violation of its respective charter, by-laws or partnership agreements, (ii) is
in default, and no event exists and is continuing that, with notice or lapse of
time or both, would constitute such a default, in the due performance and
observance of any material term contained in any lease, license, indenture,
mortgage, deed of trust, note, bank loan or other evidence of indebtedness or
any other agreement, understanding or instrument to which the Company, any
Subsidiary or any Joint Venture is a party or by which the Company, any
Subsidiary or any Joint Venture or any property of the Company, any Subsidiary
or any Joint Venture may be bound or affected, which default would have a
material adverse effect on the financial condition or results of operations of
the Company, its Subsidiaries and Joint Ventures taken as a whole, or (iii) is
in violation of any law, ordinance, governmental rule or regulation or court
decree to which it may be subject, which violation would have a material adverse
effect on the financial condition or results of operations of the Company, its
Subsidiaries and Joint Ventures taken as a whole.
(aa) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, hazardous
wastes or hazardous substances by the Company, any Subsidiary or any Joint
Venture (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or
leased by the Company, any Subsidiary or any Joint Venture in violation of any
applicable law, ordinance, rule, regulation, order, judgment, decree or permit
or which would require remedial action under any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit, except for any violation
or
11
remedial action which does not have, or would not be reasonably likely to
have, singularly or in the aggregate with all such violations and remedial
actions, a material adverse effect on the financial condition or results of
operations of the Company, its Subsidiaries and the Joint Ventures taken as a
whole; there has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, solid wastes,
hazardous wastes or hazardous substances due to or caused by the Company, any
Subsidiary or any Joint Venture or with respect to which the Company, any
Subsidiary or any Joint Venture has knowledge, except for any such spill,
discharge, leak, emission, injection, escape, dumping or release which does
not have, or would not be reasonably likely to have, singularly or in the
aggregate with all such spills, discharges, leaks, emissions, injections,
escapes, dumpings and releases, a material adverse effect on the financial
condition or results of operations of the Company, its Subsidiaries and its
Joint Ventures taken as a whole; and the terms "hazardous wastes", "toxic
wastes" and "hazardous substances" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect
to environmental protection.
(ab) The Company is not, and, after giving effect to the issuance of the
Notes and the application of the proceeds therefrom, shall not be, an
"investment company," or, to the best knowledge of the Company after due
inquiry, a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act").
(ac) The Company, each Subsidiary and each Joint Venture has filed all
federal, state and local income and franchise tax returns required to be filed
through the date hereof, or has filed extensions in accordance with applicable
law, and has paid all taxes required to be paid through the date hereof thereon,
except for such failures to file or pay that would not have a material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries and Joint Ventures taken as a whole, and no tax deficiency has
been determined adversely to the Company, any Subsidiary or any Joint Venture
that has had (nor
12
does the Company have any knowledge of any tax deficiency which, if determined
adversely to the Company, any Subsidiary or any Joint Venture would be
reasonably likely to have) a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries and
Joint Ventures taken as a whole.
2. Purchase of the Notes by the Underwriters. On the basis of the
-----------------------------------------
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell the Notes to the
several Underwriters and each of the Underwriters, severally and not jointly,
agrees to purchase the principal amount of Notes set forth opposite that
Underwriter's name in Schedule 1 hereto. The respective purchase obligations of
the Underwriters with respect to the Notes shall be rounded among the
Underwriters to avoid Notes in an amount less than $1,000 or any integral
multiple thereof, as the Representatives may determine. The price to be paid to
the Company for the Notes shall be __% of the aggregate principal amount
thereof. The Company shall not be obligated to deliver any of the Notes to be
delivered on the Delivery Date except upon payment for all the Notes to be
purchased on the Delivery Date as provided herein.
3. Offering of Notes by the Underwriters. Upon authorization by the
-------------------------------------
Representatives of the release of the Notes, the several Underwriters shall
offer the Notes for sale upon the terms and conditions set forth in the
Prospectus.
4. Delivery of and Payment for the Notes. Delivery of and payment for the
-------------------------------------
Notes shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom, 919
Third Avenue, New York, New York 10022, at 10:00 A.M., New York City time, on
the fifth full business day following the date of this Agreement or at such
other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to
as the "Delivery Date." On the Delivery Date, the Company shall deliver or
cause to be delivered certificates representing the Notes to the Representatives
for the account of each Underwriter against payment to or upon the order of the
Company of the purchase price by certified or official bank check or checks
payable in New York Clearing House (next-day)
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funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation
of each Underwriter hereunder. Upon delivery, the Notes shall be in definitive
fully registered form and registered in such names and in such denominations
as the Representatives shall request in writing not less than two full
business days prior to the Delivery Date. For the purpose of expediting the
checking and packaging of the certificates for the Notes, the Company shall
make the certificates representing the Notes available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Delivery Date.
5. Further Agreements of the Company. The Company agrees:
---------------------------------
(a) To prepare the Prospectus in a form approved by the Representatives
and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement or to
the Prospectus prior to the Delivery Date except as permitted herein; to
advise the Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof; to promptly file all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of the Prospectus and for so long as the delivery of a prospectus is required
in connection with the offering or sale of the Notes; to advise the
Representatives, promptly after it receives notice thereof, of the issuance by
the Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Notes for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
14
request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information; and in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, to promptly use its best efforts to obtain
its withdrawal;
(b) To furnish promptly to each of the Representatives and to counsel for
the Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits other
than this Agreement and the Indenture), (ii) each Preliminary Prospectus, the
Prospectus and any amended or supplemented Prospectus and (iii) any document
incorporated by reference in the Prospectus (excluding exhibits thereto); and,
if the delivery of a prospectus is required at any time after the Effective
Time in connection with the offering or sale of the Notes as reasonably
determined by the Representatives and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be necessary
to amend or supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply with
the Securities Act or the Exchange Act, to notify the Representatives and, to
file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended or
supplemented Prospectus which shall correct such statement or omission or
effect such compliance;
15
(d) Until completion of the distribution of the Notes, as reasonably
determined by the Representatives, and at any time if the delivery of a
prospectus is required in connection with the offering or sale of the Notes, to
file promptly with the Commission any amendment to the Registration Statement or
the Prospectus or any supplement to the Prospectus that may, in the judgment of
the Company or, in the reasonable judgment of the Representatives, be required
by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any (i) amendment to the
Registration Statement or supplement to the Prospectus, (ii) any document
incorporated by reference in the Prospectus or (iii) any Prospectus pursuant to
Rule 424 of the Rules and Regulations, to furnish a copy thereof to the
Representatives and counsel for the Underwriters and obtain the consent of the
Representatives to the filing, which consent shall not be unreasonably
withheld;
(f) As soon as practicable after the Effective Date, to make generally
available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and its Subsidiaries (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158);
(g) For a period of two years following the Effective Date, to furnish to
the Representatives, upon their request, a reasonable number of copies of all
materials furnished by the Company to its shareholders and all public reports
and all publicly available reports and financial statements furnished by the
Company to the principal national securities exchange upon which the Company's
common stock may be listed pursuant to requirements of or agreements with such
exchange or to the Commission pursuant to the Exchange Act or any rule or
regulation of the Commission thereunder;
(h) Promptly from time to time, to take such action as the Representatives
may reasonably request to qualify the Notes for offering and sale under the
securities laws of such jurisdictions as the Representatives may reasonably
request and to comply with such laws
16
so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be reasonably necessary to complete the
distribution of the Notes; provided that, in connection therewith the Company
shall not, with respect to any such jurisdiction, be required to qualify as a
foreign corporation, to file a general consent to service of process or to
take any other action that would subject it to service of process in suits
other than those arising out of the offering of the Notes or to taxation in
respect of doing business in any jurisdiction in which it is not otherwise
subject;
(i) For a period of 90 days from the date of the Prospectus, not to offer
for sale, sell, contract to sell or otherwise dispose of, directly or
indirectly, any debt securities of the Company, or to sell, contract to sell
or grant options, rights or warrants with respect to any such debt securities
of the Company, without the prior written consent of the Representatives,
except for (i) the establishment of senior working capital facilities, (ii)
entering into interest rate swaps or other interest rate protection agreements
and (iii) other commercial banking transactions;
(j) Until the completion of the distribution of the Notes, as reasonably
determined by the Underwriters, to file promptly all documents required to be
filed with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act, and such documents shall comply in all material respects with the
requirements of the Exchange Act or any rule or regulation of the Commission
thereunder;
(k) Prior to the Effective Date, to apply for the listing of the Notes on
the New York Stock Exchange, Inc. and to use its reasonable efforts to complete
that listing, subject only to official notice of issuance, on or promptly after
the Delivery Date;
(l) To apply the net proceeds from the sale of the Notes being sold by the
Company as set forth in the Prospectus; and
(m) To take such steps as shall be necessary to ensure that, after giving
effect to the issuance of the Notes and the application of the proceeds
therefrom, none of the Company, any Subsidiary or any
17
Joint Venture shall become an "investment company" within the meaning of the
term under the 1940 Act and the rules and regulations of the Commission
thereunder.
6. Expenses. The Company agrees to pay (a) the costs incident to the
--------
authorization, issuance, sale and delivery of the Notes and any taxes payable in
that connection, (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto (but excluding fees and expenses of counsel for the
Underwriters), (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus or any document
incorporated by reference therein, all as provided in this Agreement, (d) the
costs of reproducing and distributing this Agreement, (e) any applicable
listing or other fees, (f) the fees and expenses of qualifying the Notes under
the securities laws of the several jurisdictions as provided in Section 5(h)
and of preparing, printing and distributing a Blue Sky Memorandum (including
reasonable fees and expenses of counsel to the Underwriters not to exceed
$25,000 in the aggregate), (g) the fees paid to rating agencies in connection
with the rating of the Notes; and (h) all other costs and expenses incident to
the performance of the obligations of the Company under this Agreement;
provided that, except as provided in this Section 6 and in Section 11, the
Underwriters shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Notes which they may sell
and the expenses of marketing and advertising any offering of the Notes made
by the Underwriters.
7. Conditions of Underwriters' Obligations. The respective obligations of
---------------------------------------
the Underwriters hereunder are subject to the accuracy, when made and on the
Delivery Date, of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission in
accordance with
18
Section 5(a); no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise shall
have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company on
or prior to the Delivery Date that the Registration Statement or the Prospectus
or any amendment or supplement thereto contains an untrue statement of a fact
that, in the opinion of Skadden, Arps, Slate, Meagher & Flom, counsel for the
Underwriters, is material or omits to state a fact which, in the opinion of such
counsel, is material and is required to be stated therein or is necessary to
make the statements therein, in respect of the Prospectus, in the light of the
circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Indenture, the Notes,
the Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the Indenture, and the transactions contemplated
hereby and thereby shall be satisfactory in all material respects to counsel for
the Underwriters, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.
(d) The Company shall have furnished to the Representatives the opinion
of Steven A. McArthur, General Counsel to the Company, addressed to the
Underwriters and dated the Delivery Date, in form and substance satisfactory to
the Representatives, to the effect that:
(i) Each of the Company, its Subsidiaries and the Joint Ventures has
been duly organized and is validly existing and, if applicable, in good
standing under the laws of its respective jurisdiction of organization and
each of the Company, its Subsidiaries and the Joint Ventures has the
corporate power and authority to own, lease and
19
operate its respective properties and to conduct its businesses as described
in the Prospectus;
(ii) Each of the Company, its Subsidiaries and the Joint Ventures is
duly registered or qualified to do business and, if applicable, is in good
standing as a foreign corporation or a foreign partnership, as the case may
be, in each jurisdiction, domestic or foreign, in which such registration,
qualification or good standing is required (whether by reason of the
ownership or leasing of property, the conduct of its business or
otherwise), except where failure to so register or qualify or be in good
standing would not have a material adverse effect on the financial
condition or results of operation of the Company, its Subsidiaries and the
Joint Ventures taken as a whole;
(iii) The Company has the authorized and outstanding capitalization
as set forth in the column labeled "Actual" under the caption
"Capitalization" in the Prospectus; all the outstanding shares of capital
stock of each Subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable, and, except as described in or
contemplated by the Prospectus, are owned beneficially by the Company free
and clear of any material claims, liens, encumbrances and security
interests; the Company is currently the beneficial owner of approximately
46%, 48% and 50% of the outstanding partnership interests of CFP, CED and
CPD, respectively; all such interests have been duly and validly authorized
and issued and are owned beneficially by the Company free and clear of any
material claims, liens, encumbrances and security interests, except as
described in or contemplated by the Prospectus;
(iv) There are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the transfer of, the Notes pursuant to
the Company's charter, by-laws or any agreement or other instrument known
to such counsel;
(v) Except as contemplated in the Prospectus with respect to (i) the
pledging or granting of security interests in all material
20
properties to secure project financing obligations and (ii) governmental
contracts, leases and other non-transferable interests that are terminable
by the applicable governmental body, each of the Company, its Subsidiaries
and the Joint Ventures has good title to, or valid and enforceable
leasehold or contractual interests in, all items of real and personal
property that are material to the business of such entity, free and clear
of all liens, encumbrances, claims and security interests except for liens,
claims, encumbrances and title defects that are, singularly and in the
aggregate, not material in amount or do not materially interfere with the
use or enjoyment of such properties by the Company, any Subsidiary or any
Joint Venture as described in the Prospectus;
(vi) To such counsel's knowledge, except as described in the
Prospectus, there is no action, suit or proceeding before any court or
governmental agency or body, domestic or foreign, now pending or threatened
against or affecting the Company, any Subsidiary or any Joint Venture, that
is reasonably expected to result in any material adverse change in the
financial condition or results of operations of the Company and its
Subsidiaries taken as a whole, or is reasonably expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement;
(vii) To such counsel's knowledge, each of the Company, its
Subsidiaries and the Joint Ventures possesses such licenses, certificates,
permits and other authorizations issued by the appropriate state, federal
or foreign regulatory agencies or bodies as are currently required to
conduct the business now operated by it and all such licenses,
certificates, permits and other authorizations are in full force and
effect, and the Company, the Subsidiaries and the Joint Ventures are in
compliance therewith, except as described in or contemplated by the
Prospectus and except with respect to (A) licenses, certificates, permits
or authorizations that the failure to obtain would not have a material
adverse affect on the financial condition or results of operations of the
Company and its Subsidiaries and Joint Ventures taken as a whole,
21
(B) permits, consents and approvals that may be required for future
drilling or operating activities that are ordinarily deemed to be
ministerial in nature and that are anticipated to be obtained in the
ordinary course and (C) permits, consents and approvals for developmental
or construction activities that have not yet been obtained but that have
been or shall be applied for in the course of development or construction
and that are anticipated to be obtained in the ordinary course;
(viii) The Company has all requisite corporate power and authority to
enter into this Agreement and the Indenture, to issue the Notes in
accordance with the Indenture and to consummate the transactions
contemplated by this Agreement and the Indenture;
(ix) The statements in the Prospectus under the captions (A)
"Description of the Notes" insofar as they purport to summarize the
provisions of the Indenture and the Notes and (B) "The Business of the
Company -- Legal Proceedings" to the extent that they constitute matters of
law or legal conclusions have been reviewed by such counsel and fairly
summarize the information or matters described therein;
(x) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described or filed as exhibits to the Registration Statement or
incorporated by reference therein as permitted by the Rules and
Regulations;
(xi) This Agreement has been duly authorized, executed and delivered by
the Company;
(xii) The Indenture has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may
22
be limited by bankruptcy, insolvency (involving, without limitation, all
laws relating to fraudulent transfers), reorganization or other similar
laws affecting creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law);
(xiii) The Notes have been duly authorized and executed by the Company,
and, assuming due authentication by the Trustee, when issued and delivered
as contemplated by the Indenture upon payment therefor as provided in this
Agreement, will be validly issued and outstanding and constitute valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except as enforcement may be limited by bankruptcy, insolvency
(involving, without limitation, all laws relating to fraudulent transfers),
reorganization or other similar laws affecting creditors' rights generally
and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law);
(xiv) None of the Company, any Subsidiary or any Joint Venture is in
violation of its respective charter, by-laws or partnership agreement; to
such counsel's knowledge, none of the Company, any Subsidiary or any Joint
Venture is in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, license, lease or other agreement or
instrument to which it is a party or by which it may be bound, or to which
any of its property or assets is subject, other than any such violation or
default that would not have a material adverse affect on the financial
condition or results of operations of the Company and its Subsidiaries and
Joint Ventures taken as a whole;
(xv) The execution, delivery and performance of this Agreement, the
Indenture and the Notes, and the issuance and delivery by the Company of the
Notes pursuant to the Indenture do not and
23
will not result in any violation of the charter or by-laws of the Company,
and do not and will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any tax, lien, charge or
encumbrance upon any revenues, property or assets of the Company, any
Subsidiary or any Joint Venture pursuant to, (A) any applicable treaty,
law, rule or regulation, (B) any applicable judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any Joint Venture
or any of their respective properties or assets or (C) any contract,
indenture, mortgage, loan, agreement, note, license, lease or other
agreement or instrument to which the Company, any Subsidiary or any Joint
Venture is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company, any Subsidiary or any Joint
Venture is subject (other than any such conflicts, violations, breaches,
defaults, creations or impositions as individually or in the aggregate
would not have a material adverse affect on the financial condition or
results of operations of the Company and its Subsidiaries taken as a
whole);
(xvi) No consent, authorization, order of, or filing or registration by
the Company with, any governmental authority or body having jurisdiction
over the Company is necessary or required for the performance by the
Company of its obligations under this Agreement, or in connection with the
issuance and sale of the Notes hereunder, except as may be required under
applicable or foreign state securities laws or blue sky laws in connection
with the purchase and distribution of the Notes by the Underwriters;
(xvii) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any debt securities of the Company owned or to be owned by such
person or (except as have been waived) to require the Company to include
any securities in the securities registered pursuant to the Registration
24
Statement or, with respect to any debt securities, in any securities being
registered pursuant to any other registration statement filed by the
Company under the Securities Act;
(xviii) The Company is not, and after giving effect to the issuance of the
Notes and the application of the proceeds therefrom shall not be, an
"investment company," or, to such counsel's knowledge, a company
"controlled" by an "investment company," within the meaning of the 1940
Act; and
(xix) The documents incorporated by reference in the Prospectus and any
further amendments or supplements to any such incorporated document made by
the Company prior to the Delivery Date (other than the financial
statements, related schedules and other financial and statistical
information contained therein or omitted therefrom as to which such counsel
need express no opinion), when they became effective or were filed with the
Commission, as the case may be, appear on their face to have been
appropriately responsive in all material respects to the applicable
requirements of the Securities Act or the Exchange Act, as the case may be,
and the Rules and Regulations of the Commission thereunder.
(e) The Company shall have furnished to the Representatives the opinion of
Willkie Farr & Gallagher, special counsel to the Company, addressed to the
Underwriters and dated the Delivery Date, in form and substance satisfactory to
the Representatives, to the effect that:
(i) The Company has been duly organized and is validly existing and
in good standing under the laws of its jurisdiction of organization and the
Company has the corporate power and authority to own, lease and operate its
properties and to conduct its businesses as described in the Prospectus;
(ii) Such counsel has been advised by the Commission that the
Registration Statement has been declared effective under the Securities Act
and the Indenture has been qualified under the Trust
25
Indenture Act; the Prospectus has been filed with the Commission pursuant
to the appropriate subparagraph of Rule 424(b) of the Rules and
Regulations; to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose is pending or threatened by the Commission;
(iii) The Registration Statement and the Prospectus and any further
amendments or supplements thereto made by the Company prior to the Delivery
Date (other than the financial statements, related schedules, other
financial and statistical information contained therein or omitted
therefrom as to which such counsel need express no opinion) as of their
effective dates, appear on their face to have been appropriately responsive
in all material respects to the applicable requirements of the Securities
Act and the Rules and Regulations; and the Indenture conforms in all
material respects to the requirements of the Trust Indenture Act and the
applicable rules and regulations thereunder;
(iv) The statements in the Prospectus under the captions (A)
"Description of the Notes" insofar as they purport to summarize the
provisions of the Indenture and the Notes and (B) "Certain Tax
Considerations," to the extent that they constitute a summary of federal
income tax matters relating to the Notes and constitute matters of law or
legal conclusions, have been reviewed by such counsel and fairly summarize
the information or matters described therein;
(v) To such counsel's knowledge, there are no contracts or other
documents which are required to be described in the Prospectus or filed as
exhibits to the Registration Statement by the Securities Act or by the
Rules and Regulations which have not been described or filed as exhibits to
the Registration Statement or incorporated by reference therein as
permitted by the Rules and Regulations;
(vi) This Agreement has been duly authorized, executed and delivered by
the Company;
26
(vii) The Indenture has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law);
(viii) The Notes have been duly authorized and executed by the Company,
and, assuming due authentication by the Trustee, when issued and delivered
as contemplated by the Indenture upon payment therefor as provided in this
Agreement, will be validly issued and outstanding and constitute valid and
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except as enforcement may be limited by bankruptcy, insolvency
(involving, without limitation, all laws relating to fraudulent transfers),
reorganization or other similar laws affecting creditors' rights generally
and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law);
(ix) No consent, authorization, order of, or filing or registration
by the Company with, any governmental authority or body having jurisdiction
over the Company is necessary or required for the performance by the
Company of its obligations under this Agreement, or in connection with the
issuance and sale of the Notes hereunder, except as may be required under
applicable state or foreign securities laws or blue sky laws in connection
with the purchase and distribution of the Notes by the Underwriters;
(x) The issuance of the Notes and the compliance by the Company with
the terms of the Indenture and the Notes will not result in a "Default" or
"Event of Default" within the meaning of the Senior Notes or the Note
Purchase Agreement and
27
each of (x) the Escrow Deposit Agreement, dated March 3, 1994, among the
Company, Principal Mutual and Bank of America NT & SA (the "Escrow
Agreement") and (y) the Defeasance Agreement, dated March 3, 1994, between
the Company and Principal Mutual (the "Defeasance Agreement"), is a valid
and binding agreement of the Company and is enforceable against the Company
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency (involving, without limitation, all laws relating to
fraudulent transfers), reorganization or other similar laws affecting
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law); and
(xi) The covenants contained in the Senior Notes and the Note Purchase
Agreement as to which the Defeasance Agreement provides for defeasance (the
"Defeased Covenants") shall have ceased to be effective and are not binding
on the Company; the issuance of the Notes and compliance by the Company
with the terms of the Indenture and the Notes would not constitute a
"Default" or "Event of Default" within the meaning of the Senior Notes or
the Note Purchase Agreement in the event the "Defeased Covenants" were
revived or reinstated in accordance with the terms of the Defeasance
Agreement; and the opinions set forth in paragraphs (vii) and (viii) as to
the validity and binding nature, and the enforceability, of the Notes and
the Indenture would not be affected by any such revival or reinstatement of
the Defeased Covenants.
(f) In the rendering of the opinions described in Section 7(d) and Section
7(e) above, such counsel may (i) state that their opinion is limited to matters
governed by the Federal laws of the United States of America, the laws of the
State of New York, the General Corporation Law of the State of Delaware and,
in the case of the General Counsel of the Company, the laws of the State of
California, and (ii) rely, to the extent they deem proper, in respect of matters
of fact, upon certificates and representations of officers of the Company, the
Subsidiaries or the Joint Ventures and public officials. Such counsel shall
also have furnished
28
to the Representatives a written statement, addressed to the Underwriters and
dated the Delivery Date, in form and substance reasonably satisfactory to the
Representatives to the effect that (i) such counsel (in the case of Willkie
Farr & Gallagher, such counsel may state that they have acted as special
counsel to the Company for purposes of the subject Note Offering) have
participated in conferences with representatives of the Company, some of which
have been attended by the Underwriters and their counsel, at which conferences
the contents of the Registration Statement, the Prospectus, each amendment
thereof and supplement thereto and related matters were discussed, although
such counsel has not independently checked or verified and is not passing upon
and assumes no responsibility for the factual accuracy, completeness or
fairness of the statements contained in the Registration Statement, the
Prospectus, any amendment thereof or supplement thereto, and (ii) based on the
foregoing, no facts have come to the attention of such counsel which cause
them to believe that (except for the financial statements, related schedules
and other financial and statistical information contained therein or omitted
therefrom as to all of which such counsel need not express any belief) (I) the
Registration Statement, as of the Effective Date, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, or that the Prospectus, as amended and supplemented as of the
Effective Time, contains any untrue statement of a material fact or omits 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 or (II), in the case of the General Counsel of
the Company, any document incorporated by reference in the Prospectus or any
further amendment or supplement to such incorporated document made by the
Company prior to the Delivery Date when they became effective or were filed
with the Commission, as the case may be, contained, in the case of a
registration statement that became effective under the Securities Act, any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein, in the light of the circumstances under which
they were made, or necessary in order to make the statements therein not
misleading, or, in the case of other documents which were filed under the
Exchange Act with the Commis-
29
sion, an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) With respect to the letter of Deloitte & Touche delivered to the
Representatives concurrently with the execution of this Agreement, the Company
shall have furnished to the Representatives a letter (the "bring-down letter")
of such accountants, addressed to the Underwriters and dated the Delivery Date,
(i) confirming that they are independent public accountants within the meaning
of the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or development since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter, and (iii)
confirming in all material respects the conclusions and findings set forth in
the initial letter.
(h) The Company shall have furnished to the Representatives a certificate,
dated the Delivery Date, of its Chairman of the Board, its President or a Vice
President and its Chief Financial Officer stating that:
(i) The representations, warranties and agreements of the Company in
Section 1 are true and correct as of the Delivery Date; the Company has
complied with all its agreements contained herein; and the conditions set
forth in Sections 7(a) and 7(j) have been fulfilled; and
(ii) They have carefully examined the Registration Statement and the
Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue statement
of a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein, in respect of
the Prospectus, in the light of the circumstances under which they were
made, not
30
misleading, and (B) since the Effective Date no event has occurred which is
required to be set forth in a supplement or amendment to the Registration
Statement or the Prospectus which has not been so set forth.
(i) Each of the Escrow Agreement and the Defeasance Agreement shall have
become effective in accordance with their terms, and pursuant thereto, the
Defeased Covenants shall have ceased to be effective, and no default or event of
default under the Senior Notes or the Note Purchase Agreement shall have
occurred and be continuing, and the Company shall have furnished or caused to be
furnished to the Representatives (i) satisfactory evidence with respect to the
foregoing and (ii) the consent of Principal Mutual to the issuance of the Notes
and the compliance by the Company with the Indenture and the Notes in form and
substance satisfactory to the Representatives;
(j) Since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus (i) there has been no material
adverse change, or a development which is reasonably likely to lead to a
material adverse change, in the financial condition or results of operations of
the Company, its Subsidiaries and Joint Ventures taken as a whole and (ii)
except as disclosed in the Prospectus, there have not been any transactions
entered into by the Company, its Subsidiaries or any Joint Venture, other than
those in the ordinary course of business, which are material and adverse to the
Company, its Subsidiaries and Joint Ventures taken as a whole, and which, in the
judgment of the Representatives, make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Notes on the terms and
in the manner contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Company's senior debt
securities by any "nationally recognized statistical rating organization", as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with
31
possible negative implications, its rating of the Company's senior debt
securities.
(l) Subsequent to the execution and delivery of this Agreement there shall
not have occurred any of the following: (i) trading in securities generally on
the New York Stock Exchange or the American Stock Exchange or in the over-the-
counter market, or trading in any securities of the Company on any exchange or
in the over-the-counter market, shall have been suspended or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been
declared by federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States, the effect of which on the
financial markets in the United States would make it, in the judgment of a
majority in interest of the several Underwriters, impracticable or inadvisable
to proceed with the public offering or delivery of the Notes on the terms and in
the manner contemplated by the Prospectus or (iv) there shall have occurred such
a material adverse change in general economic or financial conditions (or the
effect of international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in interest of the
several Underwriters, impractical or inadvisable to proceed with the public
offering or delivery of the Notes on the terms and in the manner contemplated
in the Prospectus.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
for the Underwriters.
8. Indemnification and Contribution. (a) The Company shall indemnify and
--------------------------------
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, and any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or
32
action relating to purchases and sales of the Notes), to which that
Underwriter or controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, with respect to
any Preliminary Prospectus or the Prospectus, in the light of the
circumstances under which they were made, not misleading, and shall reimburse
each Underwriter and each such controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Underwriter or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion
therein; and provided, further, that as to any Preliminary Prospectus or
Prospectus, this indemnity agreement shall not inure to the benefit of any
Underwriter or any person controlling that Underwriter on account of any loss,
claim, damage, liability or action arising from the sale of Notes to any
person by that Underwriter if that Underwriter failed to send or give a copy
of the Prospectus, as the same may be amended or supplemented, to that person
within the time required by the Securities Act, and the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact in such Preliminary Prospectus was corrected in the
Prospectus and such document was made available to the Underwriters prior to
the sale of such Notes. For purposes of the last proviso to the immediately
preceding sentence, the term "Prospectus" shall not be deemed to include the
documents incorporated therein by reference, and no Underwriter shall be
obligated to send
33
or give any supplement or amendment to any document incorporated by reference
in any preliminary Prospectus or the Prospectus to any person other than a
person to whom such Underwriter had delivered such incorporated document or
documents in response to a written request therefor. The foregoing indemnity
agreement is in addition to any liability which the Company may otherwise have
to any Underwriter or to any controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint
or several, and any action in respect thereof, to which the Company or any
such director, officer, employee, agent or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in respect of any Preliminary Prospectus or the
Prospectus, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
through the Representatives by or on behalf of such Underwriter specifically
for inclusion therein, and shall reimburse the Company and any such director,
officer, employee, agent or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by the Company or any such
director, officer, employee, agent or controlling person in connection with
investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action . The foregoing indemnity agreement is in
addition to any liability which any Underwriter may otherwise have to the
Company or any such director, officer or controlling person.
34
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action (enclosing a copy of all papers
served); provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section 8
except to the extent it has been materially prejudiced by such failure and,
provided, further, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to the indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that the
indemnified party shall have the right to employ counsel to represent the
indemnified party and their respective controlling persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the indemnified party against the indemnifying party under this
Section 8 if the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such
action or, if in the written opinion of counsel to either the indemnifying
party or the indemnified party, representation of both parties by the same
counsel would be inappropriate due to actual or likely conflicts of interest
between them, and in that event the fees and expenses of one firm of separate
counsel (in addition to the fees and expenses of local counsel) shall be paid
by the indemnifying party. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent.
35
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Notes or (ii) if the allocations provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Notes purchased under this Agreement (before
deducting expenses) received by the Company bear to the total underwriting
discounts, fees and commissions received by the Underwriters with respect to
the Notes purchased under this Agreement, on the other hand. The relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be determined
by pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section
36
8(d) shall be deemed to include, for purposes of this Section 8(d), any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim pursuant to Section
8(c) above. Notwithstanding the provisions of this Section 8(d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Notes underwritten by it and distributed
to the public was offered to the public exceeds the amount of any damages
which such Underwriter has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute as provided in this Section 8(d) are several in
proportion to their respective underwriting obligations and are not joint.
(e) The Underwriters severally confirm that the statements with respect to
the public offering of the Notes set forth on the cover page of, and under the
caption "Underwriting" in, the Prospectus are correct and constitute the only
information furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
9. Defaulting Underwriters. If, on the Delivery Date, any Underwriter
-----------------------
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the
principal amount of Notes which the defaulting Underwriter agreed but failed to
purchase on the Delivery Date in the respective proportions which the principal
amount of the Notes set forth opposite the name of each remaining non-defaulting
Underwriter in Schedule 1 hereto bears to the aggregate principal amount of the
Notes set forth opposite the names of all the remaining non-defaulting
Underwriters in Schedule 1 hereto; provided, however, that the remaining non-
defaulting Underwriters shall not be obligated to purchase any Notes on the
Delivery Date if the principal amount of the Notes which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such date exceeds
10.0% of
37
the aggregate principal amount of the Notes to be purchased on the Delivery
Date. If the foregoing maximum is exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase,
in such proportion as may be agreed upon among them, all the Notes to be
purchased on the Delivery Date. If the remaining Underwriters or other
underwriters satisfactory to the Representatives do not elect to purchase the
principal amount of the Notes which the defaulting Underwriter or Underwriters
agreed but failed to purchase on the Delivery Date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or
the Company, except that the Company shall continue to be liable for the
payment of expenses to the extent set forth in Sections 6 and 11. As used in
this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Notes which a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Notes of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder may be
-----------
terminated by the Representatives by notice given to and received by the Company
prior to delivery of and payment for the Notes if, prior to that time, any of
the events described in Section 7(k) or 7(l) shall have occurred or if the
Underwriters shall decline to purchase the Notes for any reason permitted under
this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the Underwriters
---------------------------------------
shall decline to purchase the Notes because of the occurrence of any of the
events
38
described in Section 7(k) or 7(l) or (b) the sale of the Notes is not
consummated by reason of the failure by the Company to perform any material
obligation or satisfy any material condition under this Agreement, the Company
shall reimburse the Underwriters for the reasonable fees and expenses of their
counsel and for such other reasonable out-of-pocket expenses as shall have been
incurred by them in connection with this Agreement and the proposed purchase of
the Notes, and upon demand the Company shall pay the full amount thereof to the
Representatives; provided that, the aggregate amount to be reimbursed shall not
exceed $400,000 (or $350,000 if the Underwriters shall decline to purchase the
Notes because of the occurrence of any of the events described in Sections 7(k)
or 7(l)). If this Agreement is terminated pursuant to Section 9 by reason of
the default of one or more Underwriters, the Company shall not be obligated to
reimburse any defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
------------
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Departments (Fax: 212-528-8822);
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the Company at 10831 Old Mill Road, Omaha,
Nebraska 68154, Attention: General Counsel (Fax: 402-330-9888);
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
- -------- -------
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address shall be supplied to any other party hereto by
the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement
given or made on
39
behalf of the Underwriters by Lehman Brothers Inc. on behalf of the
Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure
----------------------------------------
to the benefit of and be binding upon the Underwriters, the Company, and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that (a) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (b) the indemnity agreement of the Underwriters contained in
Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors, officers, employees and agents of the Company and any person
controlling the Company within the meaning of Section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to give any person,
other than the persons referred to in this Section 13, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
14. Survival. The respective indemnities, representations, warranties and
--------
agreements of the Company and the Underwriters contained in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Notes and shall remain in full force
and effect, regardless of any investigation made by or on behalf of any of them
or any person controlling any of them.
15. Definition of the Term "Business Day". For purposes of this
------------------------------------
Agreement, "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such
40
counterparts shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
--------
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
41
If the foregoing correctly sets forth the agreement among the Company and
the Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
CALIFORNIA ENERGY COMPANY, INC.
By
----------------------------------
Name:
Title:
Accepted:
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
For themselves and as Representatives
of the several Underwriters named in
Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
-------------------------------------
Name:
Title:
42
SCHEDULE 1
Principal
Underwriters Amount of Notes
------------ ---------------
Lehman Brothers Inc. ......................... $
Salomon Brothers Inc .........................
Donaldson, Lufkin & Jenrette
Securities Corporation ......................
Bear, Stearns & Co. Inc. .....................
------------
Total ...................................... $
============
SCHEDULE 2
SUBSIDIARIES OF CALIFORNIA ENERGY COMPANY, INC.
Coso-Related Companies/Partnerships
Coso Hotsprings Intermountain Power, Inc.
Coso Energy Developers
China Lake Operating Co.
Coso Finance Partners
Coso Technology Corporation
Coso Power Developers
Coso Funding Corp.
Coso Transmission Line Partners
China Lake Geothermal Management Co.
Coso Finance Partners II
California Energy General Corporation
CEGC - Mojave Partnership
China Lake Plant Services, Inc.
Coso Land Company
China Lake Joint Venture
Coso Geothermal Company
Coso Hotsprings Overland Power, Inc.
Operating Companies/Partnerships
CE Geothermal Inc.
Western States Geothermal Company
Intermountain Geothermal Company
CE CIS-FSU
Russian-American Science, Inc.
California Energy Development Corporation
California Energy Yuma Corporation
Yuma Cogeneration Associates
Rose Valley Properties, Inc.
The Ben Holt Co.
Development (Holding) Companies
CE Exploration Company
CE Newberry, Inc.
CE Humboldt, Inc.
Beowawe Geothermal, Inc.
American Pacific Finance Company
International Companies
CE International Ltd.
CE Philippines Ltd.
CE Indonesia Ltd.
Himpurna California Energy Ltd.
CE Cebu Geothermal Power Company, Inc.
2