EXHIBIT (a)(1)
[Letterhead of Credit Suisse]
Credit Suisse
Tower 49
12 East 49th Street
New York, New York
October 25, 1994
Mr. John G. Sylvia
Senior Vice President and
Chief Financial Officer
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68155
Dear Mr. Sylvia:
You have advised Credit Suisse (the "Bank") that CE Acquisition
Company, Inc., a newly formed Delaware corporation ("Newco") and a subsidiary of
California Energy Company, Inc. ("CECI"), has offered to acquire through a
tender offer (the "Tender Offer") 51% of the outstanding shares of common stock
of Magma Power Company, a Nevada corporation ("Magma") and will enter into a
merger with Magma (the "Merger").
Pursuant to your request, we are pleased to inform you that we
hereby commit (i) to underwrite the financing of the Tender Offer in the
principal amount of up to $250,000,000 (the "Tender Facility") and (ii) to
underwrite the financing of the Merger in the principal amount of up to
$500,000,000 (the "Merger Facility"), in each case on the terms and conditions
described in the attached term sheets (the "Term Sheets"). This commitment is
subject to (i) the preparation, execution and delivery of mutually acceptable
loan and security documentation incorporating substantially the terms and
conditions outlined in the Term Sheets, (ii) the absence of a material adverse
change in the financial condition or operations of CECI or Magma and (iii) the
Bank's satisfaction with its due diligence with respect to CECI and Magma.
It is understood that, as provided in the Term Sheets, the Bank
will act as Agent for the Tender Facility and the Merger Facility, with the
right to syndicate the Tender Facility and Merger Facility to additional lending
institutions.
CECI and Newco acknowledge their joint and several obligation to
pay fees and expenses as described in the Term Sheets and as otherwise agreed to
by the Bank, Newco and CECI.
CECI and Newco each jointly and severally hereby agrees to
indemnify and hold harmless the Bank and each other lending institution that may
participate in the Tender Facility or the Merger Facility, their respective
affiliates and each of their respective directors, officers, employees, agents
and advisors (each, an "Indemnified Party"), from and against any and all
claims, damages, liabilities (including for securities liabilities), losses and
expenses, including without limitation, fees, expenses and disbursements of
counsel, which may be incurred by or asserted against an Indemnified Party in
connection with the Bank's commitment or participation in the transactions
contemplated hereby, this letter, the Tender Facility, the Merger Facility, the
Tender Offer, the Merger or any related matter or any investigation, litigation
or proceeding in connection therewith and whether or not the Tender Offer, the
Merger or the financing herein contemplated is consummated, except to the extent
such claim, damage, loss, liability or expenses is found in a final non-
appealable judgment by a court of competent jurisdiction to have resulted from
such Indemnified Party's own gross negligence or willful misconduct.
In further consideration of the commitment of the Bank
hereunder, and recognizing that in connection herewith the Bank is incurring
out-of-pocket costs and expenses, CECI and Newco each jointly and severally
agrees to reimburse the Bank for all out-of-pocket costs and expenses (including
fees and disbursements of outside counsel for the Bank), incurred or sustained
by the Bank in connection with the transactions contemplated hereby whether or
not such transactions occur and whether incurred before or after the execution
by CECI and Newco of this letter.
Please evidence your acceptance of the Term Sheets and the other
matters referred to herein by signing in the space provided below and returning
a copy of this letter to us on or before October 25, 1994, the date on which the
Bank's commitment set forth above (if not accepted prior thereto) will expire.
Very truly yours,
CREDIT SUISSE
By: /s/ Scott E. Zoellner
Name: Scott E. Zoellner
Title: Associate
By: /s/ Peter R. Nardin
Name: Peter R. Nardin
Title: Member of Senior
Management
Accepted this 25th day
of October, 1994
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer
CE ACQUISITION COMPANY, INC.
By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer
CONFIDENTIAL
California Energy Company
SUMMARY OF TERMS AND CONDITIONS
UP TO $250,000,000 TENDER OFFER FACILITY
Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent.
Agent/Arranger/
Underwriter: Credit Suisse
Lenders: The Agent and any other financial institutions to which the facility may be syndicated by
the Agent.
Facility: Up to a $250,000,000 12-month tender offer facility (the "Facility") subject to
Regulation U and renewable/extendable for a term of up to three-years from initial
funding at the mutual consent of both the Borrower and Lenders.
Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned
subsidiary ("Newco"), for the purpose of tendering for 51% of the stock of Magma
Power Company (the "Target"). A condition of the tender will be the execution and
delivery of a definitive merger agreement between Newco and the Target (the "Merger
Agreement Condition"), although that condition may be waived by the Borrower as
contemplated in the Offer to Purchase of the Borrower and Newco dated October 6,
1994, as it may be amended, (the "Offer to Purchase") under the caption "The Merger
Agreement Condition." No material amendment to the Offer to Purchase shall be
effective for purposes of this term sheet without the prior written consent of the Bank.
If the Merger Agreement Condition is not waived, the form of the merger agreement
shall be satisfactory to the Agent. Funds provided by the Facility will be advanced by
the Borrower to Newco to purchase a secured note of Newco (the "Newco Secured
Tender Note"). The proceeds from the sale of the Newco Secured Tender Note will be
used, together with the Borrower's capital investment in Newco and other available
moneys which will be in an amount and form satisfactory to the Agent, to purchase the
tendered stock of the Target, and to pay related fees and costs of the transaction. The
economic terms of the Newco Secured Tender Note will mirror the terms of the Facility.
Borrowing Options: Adjusted LIBOR and Base Rate.
CONFIDENTIAL
California Energy Company
"Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%)
of the rates offered to the reference Lenders in the London interbank market for deposits
in an amount and maturity corresponding to the interest period for the advance. LIBOR
will be adjusted for reserves and other regulatory requirements, as appropriate.
"Base Rate" means the higher of the Agent's prime rate or the federal funds rate +
0.50% per annum.
Applicable
Interest Margins: LIBOR + 2.50%
Base Rate + 1.25%
Computation of
Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated
on the basis of the actual number of days elapsed over a 365/366 day year.
Interest on LIBOR loan segments will be payable in arrears (i) at the end of each
applicable interest period and (ii) in the case of any interest period longer than three
months, every three months during such period. Interest on LIBOR loan segments will
be calculated on the basis of the actual number of days elapsed over a 360 day year.
Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall
be maintained as Base Rate loan segments effective in the case of LIBOR loan segments
at the end of each then existing period.
Scheduled
Amortization: The Facility will not be subject to a scheduled amortization prior to its maturity.
Mandatory
Prepayments: Subject to mandatory prepayment as a whole in connection with (i) any sale of any of the
ownership interest of the Target by Newco; (ii) a permanent injunction of the merger
between Newco and the Target; and (iii) the closing of the merger between Newco and
the Target. Subject to mandatory prepayment in part in an amount equal to the proceeds
of any dividends, loans, advances or other distributions from Target to Newco or from
Newco to Borrower.
Optional
Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount
without premium or penalty other than payment of applicable "breakage" costs on LIBOR
loan segments. Required notice to the Agent will be (i) one Business Day prior to the
date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to
the date of prepayment of any LIBOR loan segment.
CONFIDENTIAL
California Energy Company
Application of
Prepayments: All principal reductions shall be permanent. Prepayments will be applied first to Base
Rate loan segments and then to LIBOR loan segments. The prepayment of LIBOR loan
segments will be subject to the payment of "breakage" costs if the date of prepayment
is not the last day of an interest period unless, at the option of the Borrower, the
prepayment amount is escrowed with the Agent and invested in United States Treasury
Securities to the last day of the applicable interest period.
Security: The Facility will be secured by an assignment and a pledge of the Newco Secured Tender
Note, including the Target stock pledged as security thereunder in form satisfactory to
Agent. Payments on the collateral will be paid directly to the Agent, as collateral agent
for the Lenders. The Borrower will provide for the payment of interest on the Facility
in a manner satisfactory to the Agent. The Facility will be non-recourse to the Borrower,
and the Lenders will agree to make an appropriate election under Section 1111(b) of the
Bankruptcy Code to continue such non-recourse status in any proceeding involving
Borrower as Debtor under the Bankruptcy Code.
Representations and
Warranties at
Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, the following:
1. Corporate organization, existence and power.
2. Corporate and government authorization, no contravention, legality, validity,
binding effect and enforceability of all documentation related to this transaction.
3. The financial information of the Borrower, Newco and their material subsidiaries
(to the best knowledge of Borrower based upon information available to it in the
case of Target and its subsidiaries).
4. No material adverse change in the Borrower, Newco and their material subsidiaries
(to the best knowledge of Borrower based upon information available to it in the
case of Target and its subsidiaries).
5. No material litigation (other than litigation to which Target is a party and which
is described in the Target's Form 10-K for the year ended December 31, 1993 and
as described in Section 15 of the Offer to Purchase (the "Magma Litigation")).
6. Absence of default(s) or Event of Default(s).
CONFIDENTIAL
California Energy Company
7. Compliance with ERISA (to the best knowledge of Borrower based upon
information available to it in the case of Target and its subsidiaries).
8. Regulatory approvals, consents, filings and compliance with laws.
9. Existence, incorporation etc. of subsidiaries.
10. Environmental compliance.
11. Not an investment company.
12. Full disclosure.
13. Payment of taxes.
14. Adequate insurance.
Conditions Precedent
to Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, a capital investment in Newco in an amount and form
satisfactory to the Agent, provision for an adequate level of working capital, provisions
effective at the Merger, to insure Alto Peak and Malitbog equity commitments and
ownership interest in Alto Peak and Malitbog satisfactory to Agent, no waiver of Tender
Offer Conditions that are deemed material by Agent (other than the Merger Agreement
Condition as contemplated by the Offer to Purchase) without the prior written consent of
the Bank, receipt of appropriate certificates and legal opinions, accuracy of
representations and warranties, absence of defaults and material litigation (excluding the
Magma Litigation), evidence of authority, receipt of required governmental approvals,
consents and filings of all persons, compliance with laws (including without limitation,
environmental, labor and ERISA), absence of material adverse change in the Borrower,
Newco, the Target and their respective subsidiaries, satisfactory due diligence by the
Agent customary with tender offer facilities and payment of fees.
Covenants: Those customarily found in a credit facility of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, covenants regarding compliance with laws (including
ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence,
visitation rights, keeping of books, maintenance of properties, use of proceeds, margin
stock, transactions with affiliates, notice of defaults, delivery of unaudited (quarterly) and
audited (annual) financial statements of the Borrower, Newco and its significant
subsidiaries, monthly delivery of an officer's certificate, in form and substance
reasonably satisfactory to the Agent, certifying the absence of (i) a material adverse
CONFIDENTIAL
California Energy Company
change in the financial condition or operations of the Borrower and its subsidiaries, taken
as a whole, or (ii) a material adverse change in the financial condition or operations of
Newco and its subsidiaries, taken as a whole (and, in either case, which could reasonably
be expected to materially impact the ability of the Borrower to service the Facility or the
ability of the Agent on behalf of the Lenders to realize upon the collateral securing the
Facility), and other customary financial reporting requirements as any Lender may
reasonably requests; and without limitation, the following restrictions and limitations
(subject to such baskets and exceptions as the parties may agree):
1. Negative pledge of all stock and unencumbered assets of Newco and its
subsidiaries.
2. Limitation on guaranties by Newco and Borrower.
3. Limitation on mergers and sales of assets.
4. Limitation on investment in other persons.
5. Prohibition on restricted payments.
6. Maintenance of ownership of Newco and all subsidiaries.
7. Prohibition on incurrence of additional debt at Newco and its subsidiaries.
8. Limitation on dividends from Newco to Borrower unless the proceeds are used to
pay down the Facility in amounts to be agreed upon.
9. Limitation on the up-streaming of any assets or funds from Newco and its
subsidiaries to the Borrower unless the proceeds are used to pay down the Facility
in amounts to be agreed upon.
10. Restrictions on change in nature of business, except as contemplated by the Merger.
Appropriate language modifications will be made to cover situations where Borrower is
unable to control the Target; provided that in all events the Lenders shall receive the
protections intended to be received from these covenants.
Financial Covenants: Those customarily found in a Regulation U credit facility of similar nature or as may be
appropriate for this transaction.
Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, permanent injunction of the merger contemplated by the
CONFIDENTIAL
California Energy Company
Merger Agreement Condition; breach of representation or warranty in any material
respect; default in any covenant or financial covenant; material cross default; bankruptcy;
insolvency; change of control (except under circumstances mutually satisfactory to the
parties); certain ERISA defaults; the failure to pay one or more final judgments
aggregating more than a specified threshold to be mutually agreed; failure to make a
payment in connection with the Facility when due; and pledge agreement shall cease to
be in full force and effect or the Borrower shall so assert.
Cost and Yield
Protection: Standard provisions for illegality, inability to determine rate, indemnification for
breakage of LIBOR funding and increased costs or reduced return, including those arising
from reserve requirements, taxes and capital requirements; provided that increased costs
may be applied retroactively for a maximum of 90 days preceding written notice to the
Borrower and will not be more, in the case of any participant, than the applicable
fronting Lender would have been entitled to claim.
Assignments and
Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the
consent of the Borrower and the Agent, which consent shall not be unreasonably
withheld, provided that the consent of the Borrower will not be required for assignments
among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and
(ii) to sell participations in all or a part of their loans or commitments with the
transferability of voting rights limited to principal, rate, fees and term. The Borrower
shall not be responsible for the costs and expenses of syndication of the Facility except
as provided under "Expenses" below.
Waivers
and Amendments: With the exception of decreases in interest rates or fees, increases in commitment
amounts, extension of maturities and times for payment, changes in funding and yield
protections and indemnities, changes in sharing provisions among Lenders, changes in
several nature of the obligations of the Lenders, changes in the percentage of the Lenders
necessary to act, assignment by the Borrower of rights or obligations under any of the
documentation for the Facility and release of the pledged collateral (which shall require
consent of all the Lenders), amendments to and waivers of provisions of the loan
documents shall be made or given by Lenders holding a majority of commitments under
the Facility.
Increased Costs/
Changed
Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of
unavailability of funding, illegality, capital adequacy requirements, increased costs, and
funding losses and shall provide for all payments to be made free and clear of taxes.
CONFIDENTIAL
California Energy Company
Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements relating to the transactions and the enforcement of the Agent's and/or
Lenders' rights and remedies with respect to the loan documents, or the Borrower's use
of loan proceeds or the commitments, in each case including but not limited to attorneys'
fees and settlement costs whether or not the transaction contemplated herein is
consummated.
Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to
this transaction pursuant to a schedule to be agreed to by the parties and any subsequent
amendments or waivers; provided, however, that the Borrower shall not be liable for any
such expenses incurred in connection with the syndication of the Facility except for any
such expenses in connection with the syndication by the Agent of the Facility to any
entity that becomes a lender on the closing of the Facility or within 90 days thereafter.
Governing Law: The State of New York.
CONFIDENTIAL
California Energy Company
SUMMARY OF TERMS AND CONDITIONS
UP TO $500,000,000 IN MERGER FACILITIES
Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent
Agent/Arranger/
Underwriter: Credit Suisse
Lenders: The Agent and any other financial institutions to be arranged by the Agent.
Facilities: Up to $500,000,000 in credit facilities (the "Facilities") composed of:
(i) Up to a 6-year amortizing term loan ("Term Loan A") in an expected amount of
up to $500,000,000 less the amount of the Term Loan B and
(ii) Up to an 8-year amortizing term loan ("Term Loan B") in an expected amount not
to be less than $150,000,000.
Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned
subsidiary ("Newco", which term shall also include the surviving corporation in the
Merger (as defined below)), for the purpose of tendering for 51% of the stock of Magma
Power Company (the "Target") and entering into a merger with the Target (the
"Merger"). Funds provided by the Facilities will be advanced by the Borrower to Newco
to purchase a secured term note of Newco (the "Newco Secured Term Note"). The
proceeds from the sale of the Newco Secured Term Note will be used, together with the
Borrower's capital investment in Newco, which will be in an amount and form
satisfactory to the Agent, adequate provision of working capital and other available
moneys, to fund the merger consideration payable in connection with the Merger, to
refinance the Borrower's Tender Offer Facility by repaying its earlier advance to Newco
to purchase the tendered stock of the Target evidenced by the Newco Secured Tender
Note, to repay or acquire certain existing debt of the Target and to pay related fees and
costs of the transaction. The economic terms of the Newco Secured Term Note will
mirror the terms of the Facilities. Upon consummation of the Merger, the Target shall
expressly assume the obligations of Newco under the Newco Secured Term Note.
CONFIDENTIAL
California Energy Company
Borrowing Options: Adjusted LIBOR and Base Rate.
"Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%)
of the rates offered to the reference Lenders in the London interbank market for deposits
in an amount and maturity corresponding to the interest period for the advance. LIBOR
will be adjusted for reserves and other regulatory requirements, as appropriate.
"Base Rate" means the higher of the Agent's prime rate or the federal funds rate +
0.50% per annum.
Applicable
Interest Margins: Term Loan A: LIBOR + 2.50%
Base Rate + 1.50%
Term Loan B: LIBOR + 3.00%
Base Rate + 2.00%
Computation of
Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated
on the basis of the actual number of days elapsed over a 365/366 day year.
Interest on LIBOR loan segments will be payable in arrears (i) at the end of each
applicable interest period and (ii) in the case of any interest period longer than three
months, every three months during such period. Interest on LIBOR loan segments will
be calculated on the basis of the actual number of days elapsed over a 360 day year.
Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall
be maintained as Base Rate loan segments effective in the case of LIBOR loan segments
at the end of each then existing period.
Total annual amortization in accordance with the following table, with payments to be
made semi-annually (the amount and timing of actual semi-annual payments to be
determined after review of cash flows):
CONFIDENTIAL
California Energy Company
Term Loan A Term Loan B
Scheduled Annual Annual
Amortization: Year Amortization Year Amortization
1 $20,000,000 1 $0
2 $30,000,000 2 $0
3 $50,000,000 3 $0
4 $75,000,000 4 $0
5 $80,000,000 5 $0
6 $95,000,000 6 $0
------------
7 $75,000,000
Total $350,000,000 8 $75,000,000
------------
Total $150,000,000
Mandatory
Prepayments: From the excess cash flow and capital transactions of Newco, including without limitation
cash proceeds of asset sales and refinancing, on terms to be mutually agreed. Also from
any other monies received from Newco other than through the Newco Secured Term
Note except as mutually agreed to by the parties.
Optional
Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount
without premium or penalty other than payment of applicable "breakage" costs on LIBOR
loan segments. Required notice to the Agent will be (i) one Business Day prior to the
date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to
the date of prepayment of any LIBOR loan segment.
Application of
Prepayments: Mandatory prepayments will be applied pro rata to each remaining mandatory
amortization payment under the Facilities. All principal reductions shall be permanent.
Prepayments will be applied first to Base Rate loan segments and then to LIBOR loan
segments. The prepayment of LIBOR loan segments will be subject to the payment of
"breakage" costs if the date of prepayment is not the last day of an interest period unless,
at the option of the Borrower, the prepayment amount is escrowed with the Agent and
invested in United States Treasury Securities to the last day of the applicable interest
period. Optional prepayments will be applied in a manner to be agreed.
Security: The Facilities will be secured by an assignment and pledge of the stock of Target and all
other unencumbered assets of Target and its subsidiaries securing the Newco Secured
Term Note. The Facilities will be non-recourse to the Borrower and the Lenders will
CONFIDENTIAL
California Energy Company
agree to make an appropriate election under Section 1111(b) of the Bankruptcy Code to
continue such non-recourse status in any proceeding involving the Borrower as Debtor
under the Bankruptcy Code.
Representations and
Warranties: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, the following:
1. Corporate organization, existence and power including the merger of Newco and
the Target and all related transactions.
2. Corporate and government authorization, no contravention, legality, validity,
binding effect and enforceability of all documentation related to this transaction.
3. The financial information of the Borrower, Newco and their material subsidiaries.
4. No material adverse change in the Borrower, Newco and their material subsidiaries.
5. No material litigation (other than litigation to which the Target is a party and which
is described in the Target's Form 10-K for the year ended December 31, 1993 and
as described in the Offer to Purchase (the "Offer to Purchase") of the Borrower
and Newco dated October 6, 1994, as it may be amended (the "Magma
Litigation")). No material amendments to the Offer to Purchase shall be effective
for purposes of this term sheet without the prior written consent of the Bank.
6. Absence of default(s) or Event of Default(s).
7. Compliance with ERISA.
8. Regulatory approvals, consents, filings and compliance with laws.
9. Existence, incorporation etc. of subsidiaries.
10. Environmental compliance.
11. Not an investment company.
12. Full disclosure.
13. Payment of taxes.
CONFIDENTIAL
California Energy Company
14. Adequate insurance.
Conditions Precedent
to Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, a capital investment in Newco in an amount and form
satisfactory to the Agent, provision for an adequate level of working capital, provisions
to insure Alto Peak and Malitbog equity commitments and ownership interest in Alto
Peak and Malitbog satisfactory to the Agent, receipt of appropriate certificates and legal
opinions, accuracy of representations and warranties, absence of defaults and material
litigation (excluding the Magma Litigation), evidence of authority, receipt of required
governmental approvals, consents and filings of all persons, consummation of the merger
pursuant to a definitive merger agreement between Newco and the Target satisfactory to
Agent, compliance with laws (including without limitation, environmental, labor and
ERISA), absence of material adverse change in the Borrower, Newco, the Target and
their respective subsidiaries (in each case, taken as a whole), satisfactory due diligence
by the Agent and payment of fees.
Covenants: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and its subsidiaries, as applicable,
including, without limitation, covenants regarding compliance with laws (including
ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence,
visitation rights, keeping of books, maintenance of properties, use of proceeds, margin
stock, transactions with affiliates, notice of defaults, delivery of the unaudited (quarterly)
and audited (annual) financial statements of the Borrower, Newco and its significant
subsidiaries, quarterly delivery with financial statements of an officer's certificate, in
form and substance reasonably satisfactory to the Agent, certifying the absence of (i) a
material adverse change in the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, or (ii) a material adverse change in the financial condition
or operations of Newco and its subsidiaries, taken as a whole (and, in either case, which
could reasonably be expected to materially impact the ability of Borrower to service the
Facilities or the ability of the Agent on behalf of the Lenders to realize upon the
collateral securing the Facilities), and other customary financial reporting requirements
as any Lender may reasonably request; and without limitation, the following restrictions
and limitations (subject to such baskets and exceptions as the parties may agree):
1. Negative pledge of all stock and unencumbered assets of Newco and its
subsidiaries.
2. Limitation on guaranties by Newco and its subsidiaries.
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California Energy Company
3. Limitation on mergers and sales of assets by Newco and its subsidiaries.
4. Limitation on investment in other persons by Newco and its subsidiaries.
5. Prohibition on restricted payments by Newco and its subsidiaries.
6. Maintenance of ownership of Newco and all subsidiaries.
7. Prohibition on incurrence of additional debt at Newco and its subsidiaries.
8. Limitation on dividends on Newco stock to Borrower unless proceeds used to pay
down the Facilities in amounts to be agreed upon.
9. Limitation on the up-streaming of any assets or funds from Newco and its
subsidiaries to the Borrower unless the proceeds are used to pay down the Facilities
in amounts to be agreed upon.
10. Restrictions on change in nature of business.
11. Limitation on amendments to the merger agreement.
Financial Covenants: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to Newco and, as applicable, its subsidiaries including,
without limitation, the following:
1. Minimum interest coverage ratio.
2. Maximum leverage ratio.
3. Minimum operating cash flow.
Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, breach of representation or warranty in any material
respect; default in any covenant or financial covenant; permanent injunction of the
Merger; material cross default with respect to Newco and its subsidiaries; payment
default under any other agreement to which the Borrower is a party involving
indebtedness in excess of $50,000,000, or other default under any such agreement
resulting in acceleration which is not rescinded within 30 days; bankruptcy; insolvency;
change of control (except under circumstances mutually satisfactory to the parties);
certain ERISA defaults (which in the case of the Borrower shall only include such
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California Energy Company
defaults as the Agent determines to materially adversely affect the collateral for the
Facilities); the failure to pay one or more final judgments aggregating more than a
specified threshold to be mutually agreed; failure to make a payment in connection with
the Facilities when due; pledge agreement shall cease to be in full force and effect or the
Borrower shall so assert.
Cost and Yield
Protection: Standard provisions for illegality, inability to determine rate, indemnification for
breakage of LIBOR funding and increased costs or reduced return, including those arising
from reserve requirements, taxes and capital requirements; provided that increased costs
may be applied retroactively for a maximum of 90 days preceding written notice to the
Borrower and will not be more, in the case of any participant, than the applicable
fronting Lender would have been entitled to claim.
Assignments and
Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the
consent of the Borrower and the Agent, which consent shall not be unreasonably
withheld, provided that the consent of the Borrower will not be required for assignments
among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and
(ii) to sell participations in all or a part of their loans or commitments with the
transferability of voting rights limited to principal, rate, fees and term. The Borrower
shall not be responsible for the costs and expenses of syndication of the Facilities except
as provided under "Expenses" below.
Waivers
and Amendments: With the exception of decreases in interest rates or fees, increases in commitment
amounts, extension of maturities and times for payment, changes in funding and yield
protections and indemnities, changes in sharing provisions among Lenders, changes in
several nature of the obligations of the Lenders, changes in the percentage of the Lenders
necessary to act, assignment by the Borrower of rights or obligations under any of the
documentation for the Facilities and release of the pledged collateral (which shall require
consent of all the Lenders), amendments to and waivers of provisions of the loan
documents shall be made or given by Lenders holding a majority of commitments under
the Facilities.
Increased Costs/
Changed
Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of
unavailability of funding, illegality, capital adequacy requirements, increased costs, and
funding losses and shall provide for all payments to be made free and clear of taxes.
CONFIDENTIAL
California Energy Company
Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements relating to the enforcement of the Agent's and/or Lenders' rights and
remedies with respect to the loan documents, or the Borrower's use of loan proceeds or
the commitments, in each case including but not limited to attorneys' fees and settlement
costs whether or not the transaction contemplated herein is consummated.
Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to
this transaction pursuant to a schedule to be agreed to by the parties and any subsequent
amendments or waivers; provided, however, that the Borrower shall not be liable for any
such expenses incurred in connection with the syndication of the Facilities except for any
such expenses in connection with the syndication by the Agent of the Facilities to any
entity that becomes a lender on the closing of the Facilities or within 90 days thereafter.
Governing Law: The State of New York.