Exhibit 99.2
INSURANCE AND INDEMNITY AGREEMENT
by and between:
C E ELECTRIC UK FUNDING COMPANY
and
AMBAC INSURANCE UK LIMITED
---------------------
Dated December 15, 1997
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Insurance Agreement. All capitalized terms used in
this Insurance Agreement and not otherwise defined shall have the meanings set
forth in Article I of this Insurance Agreement.)
Page
ARTICLE I
DEFINITIONS...............................................................1
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER AND AMBAC.
Section 2.01. Representations and Warranties of the Issuer............3
Section 2.02. Covenants of the Issuer.................................6
Section 2.03. Representations and Warranties of AMBAC.................7
Section 2.04. Covenants of AMBAC......................................9
ARTICLE III
ISSUANCE OF THE POLICY; REIMBURSEMENT......................................
Section 3.01. Issuance of the Policy...................................9
Section 3.02. Subrogation; Reimbursement Obligation...................10
ARTICLE IV
INDEMNIFICATION...........................................................
Section 4.01. Indemnification by Issuer...............................12
Section 4.02. Indemnification By AMBAC................................12
Section 4.03. Notice of Action........................................12
ARTICLE V
FURTHER AGREEMENTS
Section 5.01 Effective Date; Term of the Insurance Agreement.........13
Section 5.02. Further Assurances......................................13
Section 5.03. Obligations Absolute....................................13
Section 5.04. Assignments; Reinsurance; Third-Party Rights............14
Section 5.05. Liability of AMBAC......................................14
Section 5.06 Confidentiality.........................................14
I
Page
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES...............................................
Section 6.01. Events of Default.......................................15
Section 6.02. Remedies................................................15
Section 6.03 Waivers.................................................16
ARTICLE VII
MISCELLANEOUS.............................................................
Section 7.01. Amendments; etc.........................................16
Section 7.02. Notices.................................................16
Section 7.03. Severability............................................17
Section 7.04. Governing Law...........................................17
Section 7.05. Counterparts............................................17
Section 7.06. Headings................................................17
Section 7.07. Entire Agreement........................................17
Signatures................................................................18
Exhibit A - Form of Policy................................................
II
INSURANCE AND INDEMNITY AGREEMENT, dated December 15, 1997 (the
"Insurance Agreement") by and between C E ELECTRIC UK FUNDING COMPANY, a body
corporate incorporated under the Companies ▇▇▇ ▇▇▇▇ as issuer (the "Issuer") and
AMBAC INSURANCE UK LIMITED, a body corporate incorporated under the Companies
▇▇▇ ▇▇▇▇ ("AMBAC").
WHEREAS, pursuant to a Trust Deed (the "Trust Deed") among the
Issuer, AMBAC and The Law Debenture Trust Corporation p.l.c. as Trustee (the
"Trustee"), dated December 15, 1997, the Issuer will issue (pound)200,000,000
7.25 % Guaranteed Bonds due 2022 (the "Bonds");
WHEREAS, upon issue of the Bonds, AMBAC will issue a financial
guarantee insurance policy and endorsement thereto dated December 15, 1997 (the
"Policy") insuring certain payments in respect of the Bonds;
WHEREAS, in consideration for AMBAC's issuance of the Policy, the
Issuer will pay the Premium and is willing to enter into this Insurance
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Unless the context clearly requires otherwise, all capitalised
terms used herein and not otherwise defined in this Article I shall have the
meanings assigned to them in the Trust Deed or the Conditions of the Bonds.
"APPLICABLE REQUIREMENTS" means applicable law, the rules of any
competent regulatory authority, the rules of any applicable stock exchange and
any applicable confidentiality requirements.
"AMBAC INFORMATION" means the information in the Offering Circular
under the headings "Form of the Bond Policy", "Information relating to AMBAC
Insurance UK Limited", "Financial Information Relating to AMBAC Insurance UK
Limited", "Relationship Between AMBAC Insurance UK Limited and Ambac Assurance
Corporation", "Ambac Assurance Corporation" and the information relating to
AMBAC in paragraphs 1, 3, 5, 6 and 7 of "General Information".
"CLOSING DATE" means December 15, 1997 or, if later, the date on
which the Bonds are issued and paid for in accordance with the provisions of the
Subscription Agreement.
"COMMITMENT" means the commitment letter dated December 4, 1997
issued by AMBAC and acknowledged by the Issuer with respect to the Bonds.
"CONDITIONS" means the Conditions of the Bonds, as set forth in
the Trust Deed.
"ELECTRICITY REGULATOR" means the UK Director General of
Electricity Supply.
"EVENT OF DEFAULT" has the meaning given that term in Section 6.01
hereof.
"EXISTING BONDS" means Northern Electric Finance plc's
(pound)100,000,000 8.875% Guaranteed Bonds due 2020, Northern Electric Finance
plc's (pound)100,000,000 8.625% Bonds due 2005 and Northern's (pound)55,000,000
12.661% Bonds due 1999.
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"LATE PAYMENT RATE" means the base rate of interest announced by
National Westminster Bank Plc on each Business Day.
"MANAGERS" means ▇▇▇▇▇▇ Brothers International (Europe), Credit
Suisse First Boston (Europe) Limited and Dresdner Kleinwort ▇▇▇▇▇▇ in their
capacity as managers under the Subscription Agreement.
"NORTHERN" means Northern Electric plc.
"OFFERING CIRCULAR" means the Offering Circular dated December 11,
1997 prepared in connection with the issue of the Bonds, as the same may be
amended or supplemented prior to the Closing Date.
"PREMIUM" means the insurance premium payable by the Issuer to
AMBAC in consideration for the issuance of the Policy by AMBAC, payable in the
amount, at the time and in the manner described in the Commitment.
"RATING AGENCIES" means, collectively, ▇▇▇▇▇'▇ and S&P.
"RESTRICTIVE DOCUMENTS" means (i) the Reference Documents, (ii)
the Shareholders Agreement between the shareholders of the Issuer, as amended to
date, and (iii) the existing Term Loan and Revolving Credit Facility Agreement
among, inter alia, the Issuer and Credit Suisse.
"STOCK EXCHANGE" means the Luxembourg Stock Exchange.
"SUBSCRIPTION AGREEMENT" means the Subscription Agreement dated
December 11, 1997 by and among the Issuer, the Managers and AMBAC.
"SUBSIDIARY" means any subsidiary for the time being of the Issuer
within the meaning of Section 736 of the Companies ▇▇▇ ▇▇▇▇, as amended.
"TRANSACTION" means the issuance and sale of the Bonds by the
Issuer, the issuance of the Policy by AMBAC and all actions related thereto, all
pursuant to, and as contemplated by, the Transaction Documents.
"TRANSACTION DOCUMENTS" means the Trust Deed, the Policy, the
Subscription Agreement, this Insurance Agreement and any other agreement entered
into pursuant hereto or thereto.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER AND AMBAC
Section 2.01. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The
Issuer hereby represents and warrants to AMBAC on and as of the Closing Date, as
follows:
(a) it and each of its Subsidiaries (including, without
limitation, Northern) is duly incorporated and validly
existing under the laws of England and Wales with full power
and authority to conduct its business as described in the
Offering Circular, is not in liquidation or receivership and
is lawfully qualified to do business in those jurisdictions
in which business is conducted by it, except where the
failure to so qualify is not reasonably likely to have a
material adverse effect on the financial condition, business
or results of operations of the Issuer and its Subsidiaries
(including, without limitation, Northern) taken as a whole
(the "Group") (such effect being hereinafter referred to as
a "Material Adverse Effect");
(b) the Transaction Documents have been duly authorised by the
Issuer and constitute legal, valid and binding obligations
of the Issuer, enforceable against the Issuer in accordance
with their terms, subject only to all applicable insolvency
laws affecting the rights of creditors generally and to
general principles of equity;
(c) the Bonds have been duly authorised by the Issuer and, when
duly executed, authenticated, issued and delivered in
accordance with the Trust Deed, will constitute legal, valid
and binding obligations of the Issuer, enforceable against
the Issuer in accordance with their terms, subject only to
all applicable insolvency laws affecting creditors' rights
generally and to general principles of equity;
(d) no action or thing is required to be taken, fulfilled or
done (including, without limitation, the obtaining of any
consent or licence or the making of any filing or
registration) for the issue of the Bonds, the carrying out
of the other transactions contemplated by the Transaction
Documents or the compliance by the Issuer with the terms of
the Bonds and the Transaction Documents, except for those
which have been obtained and are in full force and effect
and not subject to any conditions which require to be
satisfied prior to the date hereof and have not been
satisfied, and except where the failure to take any such
action or fulfill any such requirement would not,
individually or in the aggregate, result in a Material
Adverse Effect or impair the validity or enforceability of
the Transaction Documents or the Bonds;
(e) the execution and delivery of the Transaction Documents, the
issue of the Bonds, the carrying out of the other
transactions contemplated by the Transaction Documents and
compliance with their terms do not and will not (i) conflict
with or result in a breach of any of the terms or provisions
of, or constitute a default under, the documents
constituting the Issuer or Northern or any indenture, trust
deed, mortgage or other agreement or instrument to which the
Issuer or any other member of the Group is a party or by
which any of them or any of their respective properties is
bound, or (ii) infringe any existing applicable law, rule,
regulation, judgment, order or decree of any government,
governmental body or court, domestic or foreign, having
jurisdiction over the Issuer, any such other member of the
Group or any of their respective properties or assets or
infringe the rules of any stock exchange on which securities
of the Issuer are listed, where any such conflict, breach,
default or infringement, individually or in the aggregate,
is reasonably likely to (x) have a Material Adverse Effect
or (y) impair the validity or enforceability of the
Transaction Documents or the Bonds;
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(f) other than with respect to the AMBAC Information (as defined
below) (i) the Offering Circular contains all information
with respect to the Issuer, the Group and the Bonds which is
material in the context of the issue and offering of the
Bonds, (ii) all statements of fact contained in it are true
and accurate in all material respects and not misleading in
any material respect, (iii) the opinions and intentions
expressed in it with regard to the Issuer and to the Group
are honestly held, have been reached after considering all
relevant circumstances and are based on reasonable
assumptions (it being understood that opinions and
intentions necessarily involve uncertainties), (iv) there is
no other fact or matter omitted from the Offering Circular
which (x) is necessary to enable investors and their
investment advisers to make an informed assessment of the
assets and liabilities, financial position, profits and
losses and prospects of the Issuer and the Group and of the
rights attaching to the Bonds, or (y) the omission of which
makes any statement therein misleading in any material
respect, or (z) in the context of the issue and offering of
the Bonds is material for disclosure therein; and (v) all
reasonable enquiries have been made by the Issuer to
ascertain such facts and to verify the accuracy of all such
information and statements, provided that this subsection
2.01(f) shall not apply to statements in the Offering
Circular based on written information furnished to the
Issuer by the Lead Managers as defined in the Subscription
Agreement (the "Lead Manager Information"), it being
understood and agreed that the only such information is the
legend concerning over-allotments and stabilisation on page
2 of the Offering Circular.
(g) (i) the consolidated financial statements of Northern and
its consolidated subsidiaries taken as a whole (the
"Northern Consolidated Group") incorporated by reference in
the Offering Circular were prepared in accordance with
accounting principles generally accepted in, and pursuant to
the relevant laws of, the United Kingdom consistently
applied and give a true and fair view of the financial
position of the Northern Consolidated Group as at the dates,
and the results of operations and changes in financial
position of the Northern Consolidated Group as at the dates,
and the results of operations and changes in financial
position of the Northern Consolidated Group for the periods,
in respect of which they have been prepared, and (ii) since
the date of the last audited consolidated financial
statements of the Northern Consolidated Group incorporated
by reference in the Offering Circular there has been no
material adverse change, nor any development involving a
prospective material adverse change, in the financial
condition, business or results of operations of the Northern
Consolidated Group;
(h) except as disclosed in the Offering Circular, there are no
pending actions, suits or proceedings against or involving
the Issuer or any other member of the Group or any of their
respective properties which, if determined adversely to any
such member of the Group, would be reasonably likely to
have, individually or in the aggregate, a Material Adverse
Effect or would adversely affect the ability of the Issuer
to perform its obligations under the Transaction Documents
or the Bonds or which are otherwise material in the context
of the issue of the Bonds and, to the best of the Issuer's
knowledge, having made all reasonable enquiries, no such
actions, suits or proceedings are threatened;
(i) no event has occurred or circumstance arisen which, had the
Bonds already been issued, would constitute an event
described under "Issuer Events of Default" in the conditions
of the Bonds as set out in the Offering Circular;
(j) neither the Issuer nor any other member of the Group is in
default in the performance or observance of its obligations
under or in respect of any agreement, undertaking or
instrument to which the Issuer or any other member of the
Group is party or by which the Issuer or any other member of
the Group may be bound and no event has occurred which would
constitute a default under or in respect of such agreement,
undertaking or instrument other than, in each case, such
defaults that would not, individually or in the aggregate,
have a Material Adverse Effect;
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(k) except as disclosed in the Offering Circular, neither the
Issuer nor any other member of the Group is in violation of
any statute, rule, regulation, decision or order of any
governmental agency or body or any court, whether domestic
or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental
laws"), owns or operates any real property contaminated with
any substance that is subject to any environmental laws, is
liable for any off-site disposal or contamination pursuant
to any environmental laws, or is subject to any claim
relating to any environmental laws, which violation,
contamination, liability or claim would individually or in
the aggregate have a Material Adverse Effect;
(l) since the date of the latest audited financial statements
incorporated by reference in the Offering Circular (i)
except as disclosed in or contemplated by the Offering
Circular no member of the Group has entered into a
transaction material to the Group other than those in the
ordinary course of business, and (ii) except as disclosed in
the Offering Circular, there has been no dividend or
distribution of any kind declared, paid or made by the
Issuer or any other member of the Group on any class of its
share capital;
(m) neither the Issuer nor its affiliates nor any person acting
on behalf of any of them have engaged or will engage in any
directed selling efforts (as defined in Regulation S under
the United States Securities Act of 1933, as amended (the
Securities Act")) with respect to the Bonds;
(n) it reasonably believes that there is no substantial US
market interest (as defined in Regulation S under the
Securities Act) in its debt securities; and
(o) except as disclosed in the Offering Circular and except as
would not have a Material Adverse Effect, (i) each member of
the Group has carried on its business in compliance in all
respects with all legal and regulatory requirements
applicable to such business, including, without limitation,
the PES Licence, (ii) each member of the Group has all
necessary permits, licences, authorisations, consents and
approvals and has made all necessary filings required under
any applicable law, regulation or rule, and has obtained all
necessary authorisations, consents and approvals from other
persons, required in the conduct of its businesses as they
are currently carried on, (iii) no member of the Group has
received any notice of proceedings which remain unresolved
relating to the revocation or modification of any such
permits, licences, authorisations, consents or approvals,
and (iv) no member of the Group is in breach of, or in
default under, any such permits, licences, authorisations,
consents or approvals or any applicable law, regulation or
rule or any decree, order or judgment applicable to any
member of the Group.
(p) The Bonds and the Issuer's obligations under this Insurance
Agreement constitute direct, unsecured, (subject to the
express term of the Trust Deed and this Insurance Agreement)
unconditional and unsubordinated obligations of the Issuer;
(q) The PEC Licence has been issued to Northern and there are no
breaches or violations of such PES Licence of which the
Issuer is aware; and
(r) all ring-fencing and other provisions which restrict or
limit the Issuer's and its Subsidiaries' business
activities, asset dispositions, debt incurrence and
corporate guarantees which are material to the Issuer and
its Subsidiaries taken as a whole are contained in the
Restrictive Documents, the PES Licence, the pending Licence
Modifications, the Existing Bonds and not any other
documents, and all such documents will have been supplied to
AMBAC and its counsel prior to the date hereof.
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Section 2.02. COVENANTS OF THE ISSUER. The Issuer agrees as
follows:
(a) it will, at any time prior to the issuance of the Bonds,
notify AMBAC of anything which has or may reasonably be
expected to have rendered or will or may render untrue or
incorrect in any respect any of the representations and
warranties in Section 2.01 as if they had been made or given
at such time with reference to the facts and circumstances
then subsisting, which change is material in the context of
the issue and offering of the Bonds or the issue of the
Policy;
(b) neither it nor any of its affiliates (including any person
acting on behalf of the Issuer or any of its affiliates)
will engage in any directed selling efforts with respect to
the Bonds or will offer or sell, any Bonds in any
circumstances which would require the registration of any of
the Bonds under the Securities Act and that the Issuer and
its affiliates will comply with the offering restrictions
requirement of Regulation S under the Securities Act;
(c) the duties and obligations of the Issuer herein shall
continue in full force and effect until all of the
obligations of the Issuer hereunder are fully discharged,
notwithstanding payment of all amounts due in respect of the
Bonds, provided that the representations and warranties of
the Issuer in Section 2.01 are made as of the Closing Date;
(d) it will provide AMBAC with copies of all reports relating to
violations of the PES Licence received by the Issuer or any
Subsidiary from the Electricity Regulator, as soon as
reasonably practicable after delivery or receipt thereof;
(e) subject to Applicable Requirements, it will, upon reasonable
prior notice by AMBAC make appropriate management personnel
available for a meeting (whether conducted over the
telephone or otherwise) with AMBAC at a mutually acceptable
time and place to discuss the Issuer's operational and
financial performance over the preceding financial year and
its financial plans for the next three years;
(f) subject to Applicable Requirements, it will, as soon as
reasonably practicable after request by AMBAC, provide
appropriate personnel for a meeting (whether conducted over
the telephone or otherwise) with AMBAC at a mutually
acceptable time and place if there occurs a significant
change in the financial position of the Issuer or any
Subsidiary which is material to the Issuer as shown in its
most recent financial statements or in any report produced
by the Electricity Regulator concerning the Issuer or any of
its Subsidiaries;
(g) subject to Applicable Requirements, it will provide AMBAC
with quarterly management accounts, unaudited interim
accounts and audited annual financial statements, as soon as
reasonably practicable after production thereof and in any
event within 45 days for quarterly accounts, and 90 days for
interim accounts and 120 days for annual accounts;
(h) save as provided in the Conditions, all payments of
principal of and interest (including interest accruing after
a payment default) on the Bonds ("Payments") by the Issuer
shall be made free of withholding or deduction for, or on
account of, any present tax, assessment or other
governmental charge of whatever nature ("Tax") imposed or
levied by or on behalf of the United Kingdom or any
political subdivision or taxing authority therein or
thereof, unless the withholding or deduction of such Tax, is
required by law.
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Section 2.03. REPRESENTATIONS AND WARRANTIES OF AMBAC. AMBAC
hereby represents and warrants to the Issuer on and as of the Closing Date
hereof, as follows:
(a) AMBAC is duly incorporated and is validly existing under the
laws of England and Wales with full power and authority to
conduct its business as described in the AMBAC Information
(as defined below), is not in liquidation or receivership,
is able to pay its debts as they fall due and is lawfully
qualified to do business in those jurisdictions in which
business is conducted by it;
(b) the Transaction Documents to which it is a party have been
duly authorised, executed and delivered by AMBAC and
constitute the legal, valid and binding obligations of AMBAC
enforceable in accordance with their respective terms
subject only to all applicable insolvency laws affecting the
rights of creditors generally and to general principles of
equity;
(c) no action or thing is required to be taken, fulfilled or
done (including, without limitation, the obtaining of any
consent or licence or the making of any filing or
registration) for the issue of the Policy or the compliance
by AMBAC with the policy or the Transaction Documents, as
the case may be, except for those which have been and are in
full force and effect and not subject to any conditions
which require to be satisfied prior to the date hereof and
have not been satisfied;
(d) the execution and delivery of the Transaction Documents to
which it is a party, the carrying out of the other
transactions contemplated by the Transaction Documents to
which it is a party and compliance with their terms do not
and will not (i) conflict with or result in a breach of any
of the terms or provisions of, or constitute a default
under, the documents constituting AMBAC or any indenture,
trust deed, mortgage or other agreement or instrument to
which AMBAC is a party or by it or any of its properties is
bound, or (ii) infringe any existing applicable law, rule,
regulation, judgment, order or decree of any government,
governmental body or court, domestic or foreign, having
jurisdiction over AMBAC or any of properties or assets;
(e) (i) the Offering Circular contains all information with
respect to AMBAC which is material in the context of the
issue and offering of the Bonds (including all information
required by English law), (ii) all statements of fact
contained in the information defined as the "AMBAC
Information" on page 2 of the Offering Circular
(hereinafter, the "AMBAC Information") are true and accurate
in all material respects and not misleading in any material
respect, (iii) the opinions and intentions expressed in the
AMBAC Information are honestly held, have been reached after
considering all relevant circumstances and are based on
reasonable assumptions, (iv) there is no other fact or
matter omitted from the AMBAC Information which (x) is
necessary to enable investors and their investment advisers
to make an informed assessment of the assets and
liabilities, financial position, profits and losses and
prospects of AMBAC, or (y) the omission of which makes any
statement therein misleading in any material respect, or (z)
in the context of the issue and offering of the Bonds is
material for disclosure therein; and (v) all reasonable
enquires have been made by AMBAC to ascertain such facts and
to verify the accuracy of all such information;
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(f) except as disclosed in the AMBAC Information, there are no
pending actions, suits or proceedings against or affecting
AMBAC or any of their respective properties which, if
determined adversely to AMBAC would be reasonably likely to
have, individually or in the aggregate, a material adverse
effect on the financial condition, business or results of
operations of AMBAC or would adversely affect the ability of
AMBAC to perform its obligations under the Transaction
Documents or which are otherwise material in the context of
the issue of the Bonds and, to the best of the knowledge of
AMBAC, having made all reasonable enquiries, no such
actions, suits or proceedings are threatened or
contemplated;
(g) no event has occurred or circumstance arisen which, had the
Bonds already been issued, might (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
described under "AMBAC Events of Default" in the terms and
conditions of the Bonds as set out in the Offering Circular;
(h) AMBAC (i) has carried on its business in compliance in all
respects with all legal and regulatory requirements
applicable to such business, (ii) has all necessary permits,
licences, authorisations, consents and approvals and has
made all necessary filings required under applicable law,
regulation or rule, and has obtained all necessary
authorisations, consents and approvals from other persons,
material to the conduct of its business, (iii) has not
received any notice of proceedings which remain unresolved
relating to the revocation or modification of any such
permits, licences, authorisations, consents or approvals,
and (iv) is not in breach of, or in default under, any such
permits, licences, authorisations, consents or approvals or
any applicable law, regulation or rule or any decree, order
or judgment applicable to it;
(i) AMBAC is not in default in the performance or observance of
its obligations under or in respect of any material
agreement, undertaking or instrument to which it is a party
or by which it may be bound and no event has occurred which,
with the giving of notice, lapse of time or other condition
would constitute a default under or in respect of any such
agreement, undertaking or instrument;
(j) the Policy is a direct, unconditional, unsubordinated and
unsecured obligation of AMBAC, and will rank pari passu
among all other present and future direct, unconditional,
unsubordinated and unsecured obligations of AMBAC; and
(k) neither AMBAC nor any of its affiliates nor any person
acting on behalf of any of them have engaged or will engage
in any directed selling efforts (as defined in Regulation S
under the United States Securities Act of 1933, as amended
(the "Securities Act")) with respect to the Bonds.
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Section 2.04. COVENANTS OF AMBAC. AMBAC agrees as follows:
(a) it will, at any time prior to the issuance of the Bonds,
forthwith notify the Issuer of anything which has or may
reasonably be expected to have rendered or will or may
render untrue or incorrect in any respect any of the
representations and warranties in Section 2.03 as if they
had been made or given at such time with reference to the
facts and circumstances then subsisting; and
(b) the duties and obligations of AMBAC herein shall continue in
full force and effect until all of the obligations of AMBAC
hereunder are fully discharged, provided that the
representations and warranties of AMBAC in Section 2.03 are
made as of the Closing Date.
ARTICLE III
ISSUANCE OF THE POLICY; REIMBURSEMENT
Section 3.01. ISSUANCE OF THE POLICY. AMBAC agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions
precedent set forth below:
(a) PAYMENT OF PREMIUM. AMBAC shall have received the Premium on
the Closing Date in accordance with the provisions of the
Commitment;
(b) TRANSACTION DOCUMENTS. AMBAC or its counsel shall have
received a copy of each of the Transaction Documents, and an
opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, legal
advisers to the Issuer as to English law, each in form and
substance satisfactory to AMBAC, duly authorised, executed
and delivered by each party thereto;
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. AMBAC shall have
received a copy of the memorandum and articles of
association of the Issuer, and the resolutions of the
Issuer's Board of Directors authorizing the performance by
the Issuer of its obligations under the Transaction
Documents, certified by a Director or the Secretary of the
Issuer (which certificate shall state that such memorandum
and articles of association and resolutions are in full
force and effect without modification on the Closing Date);
(d) INCUMBENCY CERTIFICATE. AMBAC and the Issuer shall have
received certificates of an officer of the Issuer and AMBAC,
respectively certifying the names and signatures of the
officers of the Issuer and AMBAC, respectively authorized to
execute and deliver the Transaction Documents;
(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATES. The
representations and warranties of the Issuer set forth in
the Subscription Agreement and this Insurance Agreement
shall be true and correct as of the Closing Date as if made
on the Closing Date and AMBAC shall have received a
certificate of an authorised officer of the Issuer to that
effect;
(f) APPROVALS. ETC. AMBAC or its counsel shall have received
true and correct copies of all approvals, licenses and
consents, if any, required to be obtained in connection with
the completion of the Transaction by the Issuer;
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(g) LEGALITY. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government
or governmental or administrative agency or court that would
make the transactions contemplated by any of the Transaction
Documents illegal or otherwise prevent the consummation
thereof;
(h) SATISFACTION OF CONDITIONS OF THE SUBSCRIPTION AGREEMENT.
All conditions in the Subscription Agreement relating to the
Managers' obligation to subscribe for the Bonds (other than
delivery of the duly executed Policy) shall have been
satisfied, without taking into account any waiver by the
Managers of sub-clauses 7(b) or 7(g) of the Subscription
Agreement unless such waiver has been approved by AMBAC;
(i) ISSUANCE OF RATINGS. AMBAC shall have received confirmation
that the Bonds, when issued, will be rated "AAA" by S&P and
"Aaa" by ▇▇▇▇▇'▇ provided that Issuer shall not be obligated
to accept or pay the premium for the Policy if the failure
to obtain such ratings confirmations is due solely to
AMBAC's ratings;
(j) NO DEFAULT. No Event of Default shall have occurred; and
(k) DOCUMENTS, CERTIFICATES. AMBAC and its counsel shall have
determined that all documents and certificates to be
delivered in connection with the issuance of the Bonds
conform to the terms of the Transaction Documents.
Section 3.02. SUBROGATION: REIMBURSEMENT OBLIGATION.
(a) The Issuer agrees that AMBAC shall be subrogated to the
rights of the holders of the Bonds to the extent of any
payment made by AMBAC under the Policy. The Issuer further
agrees that, in accordance with the priorities established
in the Trust Deed and in accordance with this Insurance
Agreement, AMBAC shall be entitled to reimbursement for any
payment made by AMBAC under the Policy, which reimbursement
shall be due and payable on the date that any amount is paid
thereunder, in pounds sterling in an amount equal to the
amount paid pursuant to the Policy on such date and all
amounts previously paid that remain unreimbursed, together
with interest on any and all amounts remaining unreimbursed
(to the extent permitted by law, if in respect of any
unreimbursed amounts representing interest) from the date
such amounts became due until paid in full, shall accrue
interest at a rate equal to the Late Payment Rate.
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(b) Subject to the terms of the Trust Deed, the Issuer agrees to
pay to AMBAC any and all reasonable charges, fees, costs and
expenses that AMBAC may pay or incur, including, but not
limited to, lawyers' and accountants' fees and expenses
properly incurred, in connection with (i) any accounts
established to facilitate payments under the Policy to the
extent AMBAC has not been immediately reimbursed on the date
that any amount is paid by AMBAC under the Policy, (ii) the
enforcement, defense or preservation of any rights in
respect of any of the Transaction Documents, including
defending, monitoring or participating in any litigation or
proceeding (including any insolvency or bankruptcy
proceeding in respect of any Transaction participant or any
affiliate thereof) relating to any of the Transaction
Documents, any party to any of the Transaction Documents, in
its capacity as such a party, or the Transaction or (iii)
any amendment, waiver or other action with respect to, or
related to, any Transaction Document, where the consent of
AMBAC (whether as Controlling Party or otherwise) to any
such amendment, waiver or action is required by the
Transaction Documents, whether or not executed or completed.
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ARTICLE IV
INDEMNIFICATION
Section 4.01. INDEMNIFICATION BY ISSUER. The Issuer undertakes
with AMBAC that it will indemnify and hold harmless AMBAC and its directors and
employees and each person who controls AMBAC from and against any and all
losses, liabilities, costs, claims, damages, expenses or demands (or actions in
respect thereof) which any of them may reasonably incur or which may be made
against any of them (in the currency in which such losses, liabilities, costs,
claims, damages, expenses or demands are incurred), insofar as such losses,
liabilities, costs, claims, damages, expenses or demands (or actions in respect
thereof) arise out of or in relation to or in connection with any breach or
alleged breach of any representation or warranty made by the Issuer in Section
2.01, or any breach or alleged breach of any of the covenants of the Issuer in
Section 2.02; provided that the Issuer shall not be liable for any such loss,
liability, cost, action or claim arising from (i) any statements made in
reliance on information furnished in writing by AMBAC or the Managers to the
Issuer expressly for use in the Offering Circular or from any omissions of
information which should have been so furnished by AMBAC or the Managers, (ii)
any breach by AMBAC of any of its obligations under the Transaction Documents or
(iii) the gross negligence of any indemnified person. Subject to the provisions
of Section 4.03 hereof, the Issuer further agrees to reimburse AMBAC (in the
currency in which incurred by AMBAC) for all costs, charges and expenses which
AMBAC may pay or incur in connection with investigating, disputing or defending
any such action or claim.
Section 4.02 INDEMNIFICATION BY AMBAC. AMBAC undertakes with the
Issuer that it indemnify and hold harmless the Issuer and its directors and
employees and each person who controls the Issues from and against any and all
losses, liabilities, costs, claims, damages, expenses or demands (or actions in
respect thereof) which any of them may reasonably incur or which may be made
against any of them (in the currency in which such losses, liabilities, costs,
claims, damages, expenses or demands are incurred), insofar as such losses,
liabilities, costs, claims, damages, expenses or demands (or actions in respect
thereof) arise out of or in relation to or in connection with any breach or
alleged breach of any representation or warranty made by AMBAC in Section 2.03,
or any breach or alleged breach of any of the covenants of AMBAC in Section
2.04; provided that AMBAC shall not be liable for any such loss, liability,
cost, action or claim arising from (i) any statements made in reliance on
information furnished in writing by the Issuer or the Managers expressly for use
in the Offering Circular or from any omission of information which should have
been so furnished by the Issues or the Managers, (ii) any breach by the Issuer
of any of its obligations under the Transaction Documents or (iii) the gross
negligence of any indemnified person. Subject to the provisions of Section 4.03
hereof, AMBAC further agrees to reimburse the Issuer (in the currency in which
incurred by the Issuer) for all costs, charges and expense which the Issuer may
pay or incur in connection with investigating, disputing or defending any such
action or claim.
Section 4.03. NOTICE OF ACTION, ETC.; SETTLEMENTS. If any
action, claim or demand shall be brought or alleged against an indemnified party
in respect of which indemnity is to be sought against the other party under this
Article IV, the indemnified party shall promptly notify the indemnifying party
in writing, and the indemnifying party shall have the option to assume the
defense thereof, with legal advisers reasonably satisfactory to the indemnified
party. If the indemnifying party so assumes the defense of the action, it shall
not be liable for any fees and expenses of the legal advisers of the indemnified
party incurred thereafter in connection with the action provided, however, that
the indemnified party shall have the right to employ legal advisers to represent
it if the employment of such legal advisers shall have been authorised in
writing by the indemnifying party in connection with the defense of such action
or if, in the written opinion of the legal advisors to either the indemnifying
party or the indemnified party, representation of both parties by the same legal
advisers would be inappropriate due to actual or likely conflicts of interest
between them, and in that event the reasonable fees and expenses of one firm of
separate legal advisers (in addition to the fees and expenses of legal advisers
in any other jurisdiction) shall be paid by the indemnifying party.
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Following any such assumption of the defense the indemnifying party shall not
settle any such action, claim or demand without the prior written consent of the
indemnified party, unless such settlement includes an unconditional release of
the indemnified party from all liability in respect of the subject matter of
such action, claim or demand. However, if such consent, having been requested,
is withheld or not given for more that 14 days, the indemnifying party shall be
entitled to require the relevant indemnified party to reassume the defense of
such action and, whether or not the relevant indemnified person reassumes the
defense of such action, the relevant indemnified party will not be entitled to
any indemnity from the indemnifying party in connection with such action in
excess of the amount which would have been payable as a consequence of such
proposed settlement in respect of which the relevant indemnified party has
withheld or not given its consent. The indemnified party shall provide to the
indemnifying party all assistance as the indemnifying party shall reasonably
require in assuming the defense of any such action. The indemnifying party shall
not be liable to indemnify the indemnified party for any settlement of any
action effected without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld or delayed. ARTICLE V
FURTHER AGREEMENTS
Section 5.01. EFFECTIVE DATE; TERM OF THE INSURANCE AGREEMENT.
This Insurance Agreement shall take effect on the Closing Date and shall remain
in effect in accordance with its terms until the later of (a) such time as AMBAC
is no longer subject to a claim under the Policy and (b) all amounts payable to
AMBAC by the Issuer or from any other source hereunder, under the other
Transaction Documents and all amounts payable under the Bonds have been paid in
full.
Section 5.02. FURTHER ASSURANCES. To the extent permitted by
Applicable Requirements, the parties agree that they will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further instruments as the other
party may request and as may be required in such party's judgment to effectuate
the intention of or facilitate the performance of this Insurance Agreement.
Section 5.03. OBLIGATIONS ABSOLUTE. The obligations of the
parties hereunder shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance Agreement under all
circumstances irrespective of:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver, with respect to any of the Transaction
Documents or the Bonds;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that one party may have at any time against the other;
(iv) any document presented in connection with the Policy proving
to be, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or in any respect;
(v) any payment by AMBAC under the Policy against presentation of
a certificate or other document that does not strictly comply with the terms of
the Policy: and
(vi) any other circumstances, other than, in the case of the
Issuer, payment in full, that might otherwise constitute a defense available
to, or discharge of, the relevant party in respect of any Transaction Document.
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Section 5.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Insurance Agreement shall be a continuing obligation
of the parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
(b) AMBAC shall have the right to give participations in its
rights under this Insurance Agreement and to enter into contracts of reinsurance
with respect to the Policy upon such terms and conditions as AMBAC may in its
discretion determine and at no cost to the Issuer; provided, however, that no
such participation or reinsurance agreement or arrangement shall relieve AMBAC
of any of its obligations hereunder or under the Policy.
(c) Except as provided herein with respect to permitted assigns,
participants and reinsurers, nothing in this Insurance Agreement shall confer
any right, remedy of claim, express or implied, upon any person, including,
particularly, any holders of the Bonds or the Managers, other than the parties
hereto, and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto.
Section 5.05. LIABILITY OF AMBAC. Neither AMBAC nor any of its
officers, directors or employees shall be liable or responsible for: (a) the use
that may be made of the Policy by the Trustee or for any acts or omissions of
the Trustee in connection therewith; or (b) the validity, sufficiency, accuracy
or genuineness of documents delivered to AMBAC in connection with any claim
under the Policy, or of any signatures thereon, even if such documents or
signatures should in fact prove to be in any or all respect invalid,
insufficient, fraudulent or forged (unless AMBAC shall have actual knowledge
thereof). In furtherance and not in limitation of the foregoing, AMBAC may
accept documents that appear on their face to be in order, without
responsibility for further investigation.
Section 5.06. CONFIDENTIALITY. Each party agrees to maintain
any non-public information it receives pursuant to Section 2.02(d), (e) or (f),
as applicable, in strict confidence and shall not disclose any such information
other than to its officers, directors, employees, advisors and representatives
or, in the case of AMBAC, rating agencies, regulators, auditors and reinsurers,
(collectively, "Representatives") and shall not use such information for any
purpose other than as set forth in this section, except to the extent that
disclosure is required by Applicable Requirements; provided, that such
Representatives shall have agreed for the benefit of the other party to be bound
by the terms of this section; and provided, further, that each party shall be
responsible for any breach of this section by any of its Representatives other
than, in the case of AMBAC, its rating agencies, regulators, auditors and
reinsurers. Notwithstanding the foregoing, in the event that a party or its
Representatives become legally compelled or otherwise compelled by regulation to
disclose any such information, such party will provide the other party with
prompt notice so that such other party may seek a protective order or other
appropriate remedy. In the event such protective order or other remedy is not
obtained, the disclosing party will furnish only that portion of the information
that is legally required and will exercise its reasonable efforts to assure that
confidential treatment is accorded such information.
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ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.01. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) any representation or warranty made by the Issuer hereunder
or under the Transaction Documents shall prove to have been
untrue or incomplete in any material respect when made;
(b) the Issuer shall fail to pay when due any amount payable by
the Issuer hereunder;
(c) the occurrence and continuance of an Issuer Event of Default
as defined in the Conditions of the Bonds.; or
(d) any failure on the part of the Issuer duly to observe or
perform in any material respect any of the other covenants
or agreements on the part of the Issuer contained in this
Insurance Agreement or in any other Transaction Document
which, if capable of remedy, continues unremedied beyond any
cure period provided therein, or, in the case of this
Insurance Agreement, for a period of 30 days after the date
on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Issuer.
Section 6.02. REMEDIES. (a)Upon the occurrence of an Event of
Default and, if applicable, after the expiry of any relevant cure period in the
Transaction Documents, AMBAC may exercise any one or more of the rights and
remedies set forth below, subject to the terms of the Trust Deed:
(i) declare all obligations and liabilities of every type
or description then owed by the Issuer to AMBAC to be
immediately due and payable, and the same shall
thereupon be immediately due and payable;
(ii) exercise any rights and remedies available to it under
the Transaction Documents in accordance with the terms
thereof; or
(iii)take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the
amounts then due to it under this Insurance Agreement
or the Transaction Documents or to enforce performance
and observance of any obligation, agreement or covenant
of the Issuer under this Insurance Agreement or the
Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of
any other available remedy, but each remedy shall be
cumulative and shall be in addition to other remedies given
under this Insurance Agreement or the Transaction Documents.
No delay or omission to exercise any right or power accruing
under this Insurance Agreement or any other Transaction
Documents upon the happening of any event set forth in
Section 6.01 hereof shall impair any such right or power or
shall be construed to be a waiver thereof, but any such
right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle AMBAC
to exercise any remedy reserved to AMBAC in this Article, it
shall not be necessary to give any notice, other than such
notice as may be required by this Article or as may be
required under any of the Transaction Documents.
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Section 6.03. WAIVERS.
(a) No failure by AMBAC to exercise, and no delay by AMBAC in
exercising, any right hereunder shall operate as a waiver
thereof. The exercise by AMBAC of any right hereunder shall
not preclude the exercise of any other right, and the
remedies provided herein to AMBAC are declared in every case
to be cumulative and not exclusive of any remedies provided
by law or equity.
(b) AMBAC shall have the right, to exercise in its complete
discretion, the waiver of any Event of Default hereunder, by
written waiver setting forth the terms, conditions and
extent of such waiver and signed by AMBAC and delivered to
the Issuer and the Trustee. Unless such written waiver
expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence which
gave rise to the Event of Default so waived and not to any
other similar event or occurrence which occurs subsequent to
the date of such waiver.
ARTICLE VII
MISCELLANEOUS
Section 7.01. AMENDMENTS, ETC. This Insurance Agreement may be
amended, modified or terminated only by written instrument or written
instruments signed by the parties hereto.
Section 7.02. NOTICES. All demands, notices and other
communications to be given hereunder shall be in writing (except as otherwise
specifically provided herein) and shall be mailed by registered mail or
personally delivered and telecopied to the recipient as follows:
(a) To AMBAC:
AMBAC Insurance UK Limited
▇▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: Managing Director
Facsimile No.: 171 444 7227
Telephone No.: ▇▇▇ ▇▇▇ ▇▇▇▇
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(b) To the Issuer:
C E Electric UK Funding Company
c/o Northern Electric plc
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ GNE
Attention:
Facsimile No.: 191 213 2001
Telephone No.:
with a copy to:
CE Electric UK Funding Company
c/o CalEnergy Company, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
A party may specify an additional or different address or
addresses by writing mailed or delivered to the other party as aforesaid. All
such notices and other communications shall be effective upon receipt.
Section 7.03. SEVERABILITY. In the event that any provision
of this Insurance Agreement shall be held invalid or unenforceable by any court
of competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 7.04. GOVERNING LAW. The Insurance Agreement shall be
governed by and construed in accordance with the laws of England.
Section 7.05. COUNTERPARTS. This Insurance Agreement may be
executed in counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
Section 7.06. HEADINGS. The headings of Articles and Sections
and the Table of Contents contained in this Insurance Agreement are provided for
convenience only. They form no part of this Insurance Agreement and shall not
affect its construction or interpretation. Unless otherwise indicated, all
references to Articles and Sections in this Insurance Agreement refer to the
corresponding Articles and Sections of this Insurance Agreement.
Section 7.07. ENTIRE AGREEMENT. This Insurance Agreement and
the Transaction Documents set forth the entire agreement among the parties with
respect to the subject matter hereof, and this Insurance Agreement supplements
and supersedes any agreement or understanding that may have existed between the
parties prior to the date hereof in respect of such subject matter.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, all as of the day and year first above mentioned.
C E ELECTRIC UK FUNDING COMPANY
as Issuer
By /s/ ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
Title SENIOR VICE PRESIDENT
AMBAC INSURANCE UK LIMITED
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title FIRST VICE PRESIDENT
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EXHIBIT A
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FORM OF POLICY
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