Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1 Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: S-1/A Amendment 1 to Form S-1 HTML 3.29M
2: EX-1.1 Form of HTML 194K
11: EX-10.1.10 Amendment # 1 to Loan Agreement HTML 27K
12: EX-10.1.11 Capital Note HTML 22K
13: EX-10.1.12 Amendment No. 1 to Capital Note HTML 22K
14: EX-10.1.13 Guarantee Fee Agreement HTML 22K
15: EX-10.1.14 Reimbursement Agreement HTML 25K
16: EX-10.1.15 Services Agreement HTML 40K
3: EX-10.1.2 Amended and Restated Bridge Loan Agreement HTML 100K
4: EX-10.1.3 Bank Hapoalim Credit Facility Agreement HTML 386K
5: EX-10.1.4 Credit Agreement Dtd 12/31/02 HTML 730K
6: EX-10.1.5 Credit Agreement Dtd 12/18/03 HTML 1.09M
7: EX-10.1.6 Eximbank Credit Agreement HTML 557K
8: EX-10.1.7 Indenture HTML 703K
9: EX-10.1.8 First Supplemental Indenture HTML 39K
10: EX-10.1.9 Loan Agreement HTML 38K
84: EX-10.10 Indemnification Agreement HTML 46K
17: EX-10.2.1 Purchase and Sale Agreement HTML 360K
18: EX-10.3.1 Power Purchase Contract HTML 121K
23: EX-10.3.11 Amended and Restated Power Purchase and Sale Agmt HTML 237K
24: EX-10.3.13 Power Purchase Contract HTML 197K
25: EX-10.3.14 Amendment No. 1 Power Purchase Contract HTML 64K
26: EX-10.3.16 Power Purchase Contract Dtd 4/16/85 HTML 206K
27: EX-10.3.17 Amend 1 to Power Purchase Contract Dtd 10/25/85 HTML 46K
28: EX-10.3.18 Amend 2 to Power Purchase Contract Dtd 12/20/89 HTML 25K
29: EX-10.3.19 Interconnections Facilities Agreement HTML 77K
30: EX-10.3.20 Interconnection Facilities Agreement HTML 35K
31: EX-10.3.21 Interconnection Facilities Agreement HTML 58K
32: EX-10.3.22 Interconnection Agreement HTML 31K
33: EX-10.3.23 Plant Connection Agreement HTML 58K
34: EX-10.3.24 Plant Connection Agreement HTML 96K
35: EX-10.3.25 Transmission Service Agreement HTML 87K
36: EX-10.3.26 Plant Connection Agreement HTML 53K
37: EX-10.3.27 Plant Connection Agreement HTML 61K
38: EX-10.3.28 Plant Connection Agreement HTML 64K
39: EX-10.3.29 Plant Connection Agreement HTML 186K
19: EX-10.3.3 Power Purchase Contract HTML 111K
40: EX-10.3.30 Plant Connection Agreement HTML 187K
41: EX-10.3.31 Transmission Service Agreement HTML 81K
42: EX-10.3.32 Transmission Service Agreement HTML 83K
43: EX-10.3.33 Transmission Service Agreement HTML 85K
44: EX-10.3.34 Transmission Service Agreement HTML 100K
45: EX-10.3.35 Plant Amendment No. 1 HTML 28K
46: EX-10.3.39 Agreement Addressing Renewable Energy Pricing HTML 74K
47: EX-10.3.40 Amnd No.1 to Agrt Address Renewable Energy Pricing HTML 58K
48: EX-10.3.41 Agreement Addressing Renewable Energy Pricing HTML 72K
49: EX-10.3.42 Amend No. 1 to Agrnt Addr Renewable Energy Pricing HTML 64K
50: EX-10.3.43 Energy Services Agreement HTML 79K
51: EX-10.3.44 Purchase Power Contract, Dated March 24, 1986 HTML 92K
52: EX-10.3.45 Firm Capacity Amendment HTML 78K
53: EX-10.3.46 Amendment to Purchase Power Contract HTML 32K
54: EX-10.3.47 Third Amendment to Purchase Power Contract HTML 76K
55: EX-10.3.48 Performance Agreement HTML 167K
56: EX-10.3.49 Agreement to Design 69 Kv Transmission Lines HTML 79K
20: EX-10.3.5 Amendment #1 to Power Purchase and Sales Agreement HTML 49K
21: EX-10.3.6 Settlement Agreement HTML 37K
22: EX-10.3.7 Power Purchase Contract Dtd 4/16/85 HTML 155K
57: EX-10.4.1 Ormesa Blm Geothermal Resources Lease HTML 160K
63: EX-10.4.12 Lease Agreement, Dated 3/17/64 HTML 89K
64: EX-10.4.13 Lease Agreement, Dated 2/16/64 HTML 72K
65: EX-10.4.18 Geothermal Lease Agreement, Dated 7/18/79 HTML 79K
66: EX-10.4.19 Lease Agreement HTML 82K
58: EX-10.4.2 Ormesa Blm License for Electric Power Plant HTML 42K
67: EX-10.4.20 Lease Agreement, Dated 6/14/71 HTML 56K
68: EX-10.4.21 Lease Agreement HTML 63K
69: EX-10.4.23 Geothermal Lease Agreement HTML 55K
70: EX-10.4.24 Geothermal Lease Agreement, Dated 8/31/83 HTML 128K
71: EX-10.4.26 Geothermal Resources Lease - Guisti HTML 55K
72: EX-10.4.27 Amendment to Geothermal Lease HTML 27K
73: EX-10.4.28 Second Amendment to Geothermal Lease HTML 39K
74: EX-10.4.29 Geothermal Resources Sublease HTML 144K
59: EX-10.4.3 Geothermal Resources Mining Lease, Dated 2/20/81 HTML 126K
75: EX-10.4.30 Klp Lease HTML 265K
76: EX-10.4.31 Klp Lease Amendment No. 1 HTML 341K
77: EX-10.4.32 Second Amendment to Klplease HTML 25K
60: EX-10.4.4 Geothermal Lease Agreement, Dated 10/20/75 HTML 55K
61: EX-10.4.5 Geothermal Lease Agreement HTML 78K
62: EX-10.4.6 Geothermal Resources Lease, Dated 11/18/83 HTML 77K
78: EX-10.5.1 Engineering, Procurement and Construction Contract HTML 434K
79: EX-10.5.3 Engineering, Procurement and Construction Contract HTML 1.00M
80: EX-10.5.4 Patent License Agreement HTML 144K
81: EX-10.7 Executive Employment Agreement of Lucien Bronicki HTML 70K
82: EX-10.8 Exec Employment Agreement of Yehudit Bronicki HTML 75K
83: EX-10.9 Executive Employment Agreement of Yoram Bronicki HTML 82K
85: EX-23.1 Consent of Independent Accountants HTML 22K
86: EX-23.3 Consent of Dani Falk HTML 21K
87: EX-23.4 Consent of Edward Muller HTML 21K
88: EX-23.5 Consent of Lester P. Silverman HTML 21K
89: EX-23.6 Consent of Jacob Worenklein HTML 21K
90: EX-99.3 Material Terms Deviations HTML 21K
Exhibit 10.2.1
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
by and among
CONSTELLATION POWER, INC., as Seller
and
COSI PUNA, INC.
and
ORNI 8 LLC, as Purchaser
and
ORMAT NEVADA INC., as Purchaser's Parent
for the Sale of the Shares of
CE PUNA I, INC.
and
CE PUNA II, INC.
which includes the transfer of interests in
CE PUNA LIMITED PARTNERSHIP
and
PUNA GEOTHERMAL VENTURE
Dated as of April 22, 2004
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated as of April 22, 2004 (the
"Effective Date"), is made and entered into by and among CONSTELLATION POWER,
INC., a Maryland corporation ("CPI" or "Seller"), COSI PUNA, INC., a Maryland
corporation ("COSI PUNA"), ORNI 8 LLC, a Delaware limited liability company
("ORNI 8" or "Purchaser") and ORMAT NEVADA INC., a Delaware corporation
("Purchaser's Parent")(each of the foregoing sometimes referred to herein as a
"Party" and, collectively, as the "Parties").
RECITALS
A. CPI is the record and beneficial owner of 100% of the issued and
outstanding capital stock of (i) CE Puna I, Inc. (the "CE PUNA I Shares"), a
Maryland corporation ("CE PUNA I") and (ii) CE Puna II, Inc. (the "CE PUNA II
Shares"), a Maryland corporation ("CE PUNA II").
B. Each of CE PUNA I and CE PUNA II is the record and beneficial owner
of 50% of the partnership interests (collectively, the "CE PUNA LP Interests")
of CE Puna Limited Partnership, a Maryland limited partnership ("CE PUNA LP").
C. CE PUNA I and CE PUNA LP are the record and beneficial owners of all
of the partnership interests of Puna Geothermal Venture (collectively, the "PGV
Interests"), a Hawaii general partnership ("PGV").
D. PGV owns the Plant (as defined in Section 1.1).
E. COSI PUNA operates the Plant pursuant to the O&M Agreement (as
defined in Section 1.1).
F. The CE PUNA I Shares and the CE PUNA II Shares may sometimes be
referred to herein collectively as the "Purchased Shares", the CE PUNA LP
Interests and the PGV Interests may sometimes be referred to herein collectively
as the "Partnership Interests" and CE PUNA I, CE PUNA II, CE PUNA LP and PGV may
sometimes be referred to herein collectively as the "Companies."
G. CPI desire to sell to Purchaser, and Purchaser desires to purchase
and acquire from CPI, all of the Purchased Shares on the terms and subject to
the conditions hereinafter set forth.
H. COSI PUNA and PGV desire to terminate the O&M Agreement effective as
of the Closing Date.
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I. Seller and Purchaser are entering into this Agreement to evidence
their respective duties, obligations and responsibilities in respect of the
purchase and sale of the Purchased Shares contemplated hereby (the
"Transactions");
J. The Parties desire that Purchaser's Parent support certain of the
obligations of Purchaser hereunder as set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONSSECTION 1.1 Certain Defined Terms. The following terms when used in
this Agreement (or in the Schedules and Exhibits to this Agreement) with initial
letters capitalized have the meanings set forth below:
"338 Allocation Statement" has the meaning set forth in Section 7.5(b).
"Affiliate" of a specified Person means any other Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with the specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
possession of the power to direct the management or policies of the specified
Person, directly or indirectly, whether through the ownership of voting
securities, partnership or limited liability company interests, by contract or
otherwise.
"Agreement" means this Purchase and Sale Agreement, together with the
Schedules and Exhibits hereto.
"Applicable Laws" means all statutes, rules, regulations, ordinances,
orders and codes of Governmental Authorities which apply to Seller, Purchaser,
the Companies, the Plant, this Agreement, or the Transactions, as applicable.
"Balance Sheet" has the meaning set forth in Section 5.17.
"Business" means the business and operations of PGV.
"Business Day" means a day other than Saturday, Sunday or a day on
which banks are authorized to be closed for business in the City of New York,
New York.
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"Cause" means (a) subject Transferred Employee's conviction of (i) a
felony, (ii) a crime against the Transferred Employee's employer, (iii) a crime
involving substance abuse, fraud or moral turpitude, or (iv) a crime which would
materially compromise the reputation of the Transferred Employee's employer, (b)
misconduct on the part of a Transferred Employee that adversely reflects upon
the business, affairs or reputation of his or her employer or upon the
Transferred Employee's ability to perform his or her duties for such employer,
including sexual harassment or public disparagement of such employer or its
Affiliates, (c) the Transferred Employee's failure to pass any narcotics test,
violation of the terms of any agreement entered into with his or her employer or
material violation of other reasonable work rules of the Transferred Employee's
employer, or (d) the failure or refusal by the Transferred Employee to perform
the duties and responsibilities of his or her position with the Transferred
Employee's employer in any material respect, provided that such Transferred
Employee is given 14 days in which to attempt to correct such failure.
"CE PUNA I" has the meaning set forth in the Recitals to this
Agreement.
"CE PUNA I Shares" has the meaning set forth in the Recitals to this
Agreement.
"CE PUNA II" has the meaning set forth in the Recitals to this
Agreement.
"CE PUNA II Shares" has the meaning set forth in the Recitals to this
Agreement.
"CE PUNA LP" has the meaning set forth in the Recitals to this
Agreement.
"CE PUNA LP Interests" has the meaning set forth in the Recitals to
this Agreement.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the rules and regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" has the meaning set forth in the Recitals to this
Agreement.
"Company Guarantees" means any and all obligations relating to the
contracts, agreements, guarantees, letters of credit, bonds and other credit
assurances of a comparable nature of Seller or any of its Affiliates (other than
the Companies) for the benefit of any counterparties of the Companies and listed
or described in Schedule 1.1A.
"Company Insurance Policies" means all insurance policies carried by or
for the benefit of the Companies or COSI PUNA with respect to the ownership,
operation or maintenance of the Plant as set forth on Schedule 1.1B.
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"Condemned Portion" has the meaning set forth in Section 7.6(b).
"Confidentiality Agreement" means that certain confidentiality
agreement, dated as of December 10, 2003 entered into between Purchaser (or an
Affiliate of Purchaser) and CPI in connection with the Transactions.
"COSI PUNA" has the meaning set forth in the introductory paragraph to
this Agreement.
"CPI" has the meaning set forth in the introductory paragraph of this
Agreement.
"Credit Agreement" means that certain Amended and Restated Credit
Agreement Term Loan Facility by and among Puna Geothermal Venture, Credit Suisse
First Boston New York Branch, and the Lenders that are signatories thereto,
dated as of December 2, 1996 and as amended by that certain First Amendment,
dated April 24, 1997, that certain Second Amendment, dated as of August 21,2002, and that certain Third Amendment, dated as of December 10, 2003.
"CSFB Swap Agreement" means that certain ISDA Master Agreement, dated
as of December 23, 1996 by and between Credit Suisse, New York Branch and PGV.
"Damaged Portion" has the meaning set forth in Section 7.6(c).
"Debt Payoff Amount" means the outstanding principal and accrued
interest as of the Closing Date under the Credit Agreement.
"Debt Service Reserve Guaranty" means that certain Constellation Debt
Service Reserve Guaranty, dated as of December 2, 1996, made by Constellation
Investments, Inc. in favor of Credit Suisse, New York Branch, for the benefit of
the Lenders (as defined in the Credit Agreement).
"Dollars" or "$" means dollars in lawful currency of the United States.
"Dresdner Swap Agreement" means that certain ISDA Master Agreement,
dated as of December 23, 1996 by and between Dresdner Bank, AG and PGV.
"Due Diligence Materials" means (a) the due diligence materials
distributed or otherwise made available in written or digital form by or on
behalf of Seller to Purchaser including, without limitation, the materials made
available on the IntraLinks web site established on behalf of Seller and that
certain Preliminary Report, dated April 16, 2004, prepared by Title Guaranty of
Hawaii, Inc., (b) all written answers to questions provided by or on behalf of
Seller to Purchaser, and (c) the documents and materials made available to
Purchaser during any on-site due diligence visit of the Plant.
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"Effective Date" has the meaning set forth in the introductory
paragraph of this Agreement.
"Employee Benefit Plans" means any retirement, pension, profit sharing,
deferred compensation, stock bonus, 401(k), savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, restricted stock,
phantom stock, stock appreciation rights, fringe benefit or other employee
benefit plan, fund, policy, program, contract, arrangement or payroll practice
of any kind (including any "employee benefit plan," as defined in Section 3(3)
of ERISA) or any employment, consulting or personal services contract, whether
written or oral, qualified or nonqualified, funded or unfunded, or domestic or
foreign, (a) sponsored, maintained or contributed to by any of COSI PUNA, the
Companies or an ERISA Affiliate or to which any of COSI PUNA, the Companies or
an ERISA Affiliate is a party, (b) covering or benefiting any current or former
officer, employee, agent, director or independent contractor of any of COSI
PUNA, the Companies or an ERISA Affiliate (or any dependent or beneficiary of
any such individual), or (c) with respect to which any of COSI PUNA, the
Companies or an ERISA Affiliate has (or could have) any obligation or liability.
"Encumbrances" means any and all mortgages, pledges, claims, liens,
security interests, options, warrants, purchase rights, conditional and
installment sales agreements, easements, equities, charges, activity and use
restrictions and limitations, covenants, encroachments, exceptions,
rights-of-way, deed restrictions, defects or imperfections of title,
encumbrances and charges of any kind, and any restrictions on rights to receive
income or voting rights.
"Environmental Laws" means all federal, state, and local civil and
criminal laws, regulations, rules, ordinances, codes, decrees, judgments,
directives, or judicial or administrative orders or common law relating to
pollution or protection of the environment, plants, animals, natural resources
or human health and safety, as the same may be amended or adopted, including,
without limitation, laws relating to Releases or threatened Releases of
Hazardous Materials (including, without limitation, Releases to ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport, disposal or handling of Hazardous Materials, including, but
not limited to: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (section)9601 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. (section)6901 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. (section)1251 et seq.; the Clean Air Act, 42 U.S.C.
(section)7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
(section)1471 et seq.; the Toxic Substances Control Act, 15 U.S.C.
(sections)2601 through 2629; the Oil Pollution Act, 33 U.S.C. (section)2701 et
seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
(section)11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. (section)300f
through 300j; the Occupational Safety and Health Act, 29 U.S.C. (section) 651 et
seq.; the
5
Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. (section)1201 et
seq.; and similar laws of the State of Hawaii or of any other Governmental
Authority having jurisdiction over the site at which the Plant is located or
otherwise applicable to the Plant or its owner or operator.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any person or entity that, together with any of
the Companies or COSI PUNA, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code.
"Estimated Adjustment Statement" has the meaning set forth in Section
3.4(a).
"Excluded Assets" has the meaning provided in Section 7.12.
"Excluded Liabilities" has the meaning set forth in Section 7.13.
"Existing Contracts" means the contracts, agreements, arrangements and
leases of any nature, other than the Permits, to which PGV is a party or by or
to which it, the Plant or any of PGV's other assets is or are bound, affected or
subject.
"Final Adjustment Statement" has the meaning set forth in Section
3.5(a).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means: (a) any federal, state, local, foreign
or other government; (b) any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory, custodial,
or authority or power with respect to Taxes; and (c) any court or governmental
tribunal; provided, however, that it does not include Purchaser, Seller, any
Affiliate thereof, or any of their respective successors in interest or any
owner or operator of the Plant (if otherwise a Governmental Authority).
"Hazardous Substances" means any chemical, material or substance in any
form, whether solid, liquid, gaseous, semisolid, or any combination thereof,
whether waste material, raw material, chemical, finished product, byproduct, or
any other material or article, that is listed or regulated under applicable
Environmental Laws as a "hazardous" or "toxic" substance or waste, or as a
"contaminant," or is otherwise listed or regulated under applicable
Environmental Laws because it poses a hazard to human health or the environment,
including without limitation, petroleum products, asbestos, urea formaldehyde
foam insulation, and lead-containing paints or coatings.
6
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Tax" means any Tax imposed by any Governmental Authority (a)
based upon, measured by or calculated with respect to gross or net income,
profits or receipts (including capital gains Taxes and minimum Taxes), or (b)
based upon, measured by or calculated with respect to multiple bases (including
corporate franchise Taxes) if one or more of such bases is described in clause
(a), in each case together with any interest, penalties or additions
attributable to such Tax. The general excise tax set forth in Hawaii Revised
Statutes Section 237-13 is not an "Income Tax" under this Agreement.
"Indemnifiable Claim" has the meaning set forth in Section 9.7.
"Indemnitee" has the meaning set forth in Section 9.4.
"Indemnitor" has the meaning set forth in Section 9.4.
"Independent Accounting Firm" means such nationally recognized,
independent accounting firm as is mutually appointed by Seller and Purchaser for
purposes of this Agreement.
"Initial Purchase Price" has the meaning set forth in Section 3.2.
"Intercompany Arrangements" means, collectively, any contract or
arrangement in respect of any intercompany transaction between any of the
Companies, on the one hand, and Seller or any of its Affiliates (other than the
Companies) on the other hand, whether or not such transaction relates to any
contribution to capital, loan, the provision of goods or services, tax sharing
arrangements, payment arrangements, intercompany advances, charges or balances
or the like, and including without limitation, the contracts and arrangements
set forth in Schedule 1.1C.
"Inventory" means any and all spare parts, inventory and supplies used
in connection with the ownership, operation and maintenance of the Plant.
"IRS" means the Internal Revenue Service.
"Knowledge" or similar terms used in this Agreement with respect to a
Party means: (a) in the case of Seller, the extent of the actual and current
knowledge of the individuals listed in Schedule 1.1D (or their respective
successors) as of the Effective Date (or, with respect to the officer's
certificate delivered pursuant to Section 10.6, the date of delivery of the
certificate); and (b) in the case of Purchaser, the extent of the actual and
current knowledge as of the Effective Date (or, with respect to the officer's
certificate delivered pursuant to Section 11.6, the date of delivery of the
certificate) of any officer or employee of each of Purchaser or any Affiliate of
Purchaser who has actually participated in the negotiation or review of this
Agreement or due diligence with respect to the Transactions on Purchaser's
behalf.
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"Loan Documents" means, collectively, the Credit Agreement and all
documents related and incidental thereto, including, but not limited to, the
CSFB Swap Agreement, Dresdner Swap Agreement, Pledge Agreement, Debt Service
Reserve Guaranty and the agreements and instruments identified in Item 1 of
Schedule 5.9.
"Losses" has the meaning set forth in Section 9.2(a).
"Material Adverse Effect" means (a) any event, circumstance or
condition materially impairing a Party's authority, right, or ability to (i)
consummate the Transactions or (ii) transfer the Purchased Shares or the
Partnership Interests, or (b) any change in, or effect on, the Plant that is
materially adverse to the finances, operations or physical condition of the
Plant, taken as a whole, but excluding:
(1) any change or effect generally affecting the State of
Hawaii, the Big Island of Hawaii, or the international, national, or local
electric generating, transmission or distribution industry as a whole;
(2) any change or effect resulting from changes in the State
of Hawaii, the Big Island of Hawaii, or the international, national, or local
wholesale or retail markets for electric power;
(3) any change in or effect on the State of Hawaii, the Big
Island of Hawaii, or the North American, national, or local transmission system;
(4) any change or changes cured (including by the payment of
money) before the earlier of the Closing and the termination of the Agreement
pursuant to Section 12.1;
(5) any order or act of any Governmental Authority applicable
to providers of generation, transmission or distribution of electricity
generally that imposes restrictions, regulations or other requirements thereon,
except to the extent specifically relating to PGV, the Plant or the
Transactions;
(6) any change or effect resulting from one or more changes in
the rules established by any independent system operator or regional
transmission organization with jurisdiction over PGV or the Plant;
(7) the financial or other condition of the purchaser under
the Power Purchase Agreement or its Affiliates;
(8) any change or effect resulting from changes in the
national or international securities markets; or
(9) any change or effect resulting from or associated with
acts of war, national disaster, acts of God, or terrorism that does not directly
affect the Plant.
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Any determination as to whether any condition or other matter has a
Material Adverse Effect shall be made only after taking into account proceeds
received under all effective insurance coverages and effective third party
indemnifications with respect to such condition or matter.
"Notice of Claim" has the meaning set forth in Section 9.4.
"O&M Agreement" means that certain Operation and Maintenance Agreement
between PGV and COSI PUNA, dated as of December 2, 1996.
"ordinary course of business" means, with respect to PGV, the operation
of the Plant in the ordinary course consistent with past custom and practice.
"Partnership Interests" has the meaning set forth in the Recitals to
this Agreement.
"Party" has the meaning set forth in the introductory paragraph of this
Agreement.
"Permits" has the meaning provided in Section 5.7.
"Permitted Encumbrances" means:
(a) liens for Property Taxes and other governmental charges
and assessments which are not yet due and payable, or Taxes the validity of
which are being contested in good faith by appropriate proceedings as listed on
Schedule 5.15 and for which adequate provision is made on the Balance Sheet;
(b) all exceptions, restrictions, easements, charges,
rights-of-way and monetary and non-monetary encumbrances which are set forth in
any Permit;
(c) mechanics', carriers', workers', repairers' and other
similar liens and the rights of customers, suppliers and subcontractors arising
or incurred in the ordinary course of business for amounts that are not yet due
and payable or that are contested in good faith by appropriate proceedings as
listed on Schedule 5.8;
(d) purchase money security interests in respect of personal
property arising or incurred in the ordinary course of business;
(e) zoning, entitlement, conservation restriction and other
land use and environmental regulations of any Governmental Authority;
(f) Encumbrances of record (other than Encumbrances securing
indebtedness of Seller for money borrowed which are not covered by any other
clause of this definition);
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(g) restrictions and regulations imposed by any Governmental
Authority or any local, state, regional, national or international reliability
council, or any independent system operator or regional transmission
organization with jurisdiction over either PGV or the Plant;
(h) Encumbrances with respect to the assets of Plant created
by or resulting from the acts or omissions of Purchaser;
(i) claims, equities and other Encumbrances arising under the
Existing Contracts, or which will be and are discharged or released either prior
to, or simultaneously with, the Closing;
(j) any restrictions contained in or imposed by Seller's and
Purchaser's Required Regulatory Approvals and Seller's and Purchaser's Required
Consents; and
(k) such other Encumbrances or imperfections in or failures of
title that would not, individually or in the aggregate, have a Material Adverse
Effect.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, trust, association or unincorporated organization,
any Governmental Authority, or any other entity.
"PGV" has the meaning set forth in the Recitals to this Agreement.
"PGV Interests" has the meaning set forth in the Recitals to this
Agreement.
"Plant" means, to the extent of PGV's ownership interests therein, the
geothermal electricity generation facilities located on the Big Island of Hawaii
and all related personal and real property interests therein.
"Pledge Agreement" means that certain Stock Pledge Agreement (CEI)
dated as of December 21, 1990, by CPI to Credit Suisse, New York Branch, as
amended by that certain Confirmation and Amendment of Pledge Agreement - CPI, by
CPI to Credit Suisse, New York Branch, dated as of December 2, 1996.
"Power Purchase Agreement" means that certain Power Purchase Contract
for Unscheduled Energy Made Available From a Qualifying Facility, dated as of
March 24, 1986, by and between PGV and Hawaii Electric Light Company, Inc., as
amended on July 28, 1989, October 19, 1993, March 7, 1995, and February 12,1996.
"Price Allocation" has the meaning set forth in Section 7.5(b).
"Property Taxes" means real, personal and intangible property Taxes.
"Purchase Price" has the meaning set forth in Section 3.3.
10
"Purchased Shares" has the meaning set forth in the Recitals to this
Agreement.
"Purchaser" has the meaning set forth in the introductory paragraph of
this Agreement.
"Purchaser Claims" has the meaning set forth in Section 9.2(a).
"Purchaser Indemnified Parties" has the meaning set forth in Section
9.2(a).
"Purchaser's Parent" has the meaning set forth in the introductory
paragraph of this Agreement.
"Purchaser's Required Consents" means the consent of any Person
specified in Schedule 1.1E, other than a Governmental Authority, necessary for
Purchaser's consummation of the Transactions.
"Purchaser's Required Regulatory Approvals" means approval of the
purchase and sale contemplated hereby by any Governmental Authority specified in
Schedule 1.1F.
"Recognized Environmental Condition" means the presence or Release, or
threatened Release, to the environment, at the Plant, of Hazardous Substances,
including any migration of Hazardous Substances through air, soil or groundwater
at, to or from the Plant regardless of when such presence or Release occurred or
is discovered.
"Records" has the meaning set forth in Section 7.10(a).
"Release" means any release, spill, leak, discharge, abandonment,
disposal, pumping, pouring, emitting, emptying, injecting, leaching, dumping,
depositing, dispersing, allowing to escape or migrate into or through the
environment (including ambient air, surface water, ground water, land surface
and subsurface strata or within any building, structure, facility or fixture) of
any Hazardous Substance, including the abandonment or discarding of Hazardous
Substances in barrels, drums, or other containers.
"Remediation" means any action of any kind to address a Recognized
Environmental Condition or Release or threatened Release or the presence of
Hazardous Substances on or in the air, soil, surface water or groundwater,
including the following: (a) monitoring, investigation, cleanup, containment,
remediation, removal, mitigation, response or restoration work; (b) obtaining
any permits, consents, approvals or authorizations of any Governmental Authority
necessary to conduct any such work; (c) preparing and implementing any plans or
studies for such work; (d) obtaining a written notice from a Governmental
Authority with jurisdiction under applicable Environmental Laws that no material
additional work is required by such Governmental Authority; (e) any response to,
or preparation for, any inquiry, order, hearing or other proceeding by or
11
before any Governmental Authority with respect to any such Recognized
Environmental Condition, Release or threatened Release or presence of Hazardous
Substances; and (f) any other activities reasonably determined by Seller or PGV
to be necessary or appropriate or required under Environmental Laws to address a
Recognized Environmental Condition, the presence of or Release of Hazardous
Substances in the air, soil, surface water or groundwater at the Plant or any
other off-site location.
"Replacement Benefit Plans" has the meaning set forth in Section
7.14(d).
"Replacement Welfare Plans" has the meaning set forth in Section
7.14(c).
"Section 338(h)(10) Election" has the meaning set forth in Section
7.5(b).
"Securities Act" has the meaning set forth in Section 6.10.
"Seller" has the meaning set forth in the introductory paragraph of
this Agreement.
"Seller's Claims" has the meaning set forth in Section 9.3(a).
"Seller's Indemnified Parties" has the meaning set forth in Section
9.3(a).
"Seller's Marks" means the name "Constellation,""Constellation
Energy", "COSI" and all derivatives thereof and corresponding logos, excluding
the name "Puna Geothermal Venture".
"Seller's Required Consents" means (a) the consent of any Person
specified in Schedule 1.1G other than a Governmental Authority necessary for
Seller's consummation of the Transactions, and (b) the consent of any Person
required by any of the Existing Contracts or the Permits for Seller's
consummation of the Transactions.
"Seller's Required Regulatory Approvals" means approval of the purchase
and sale contemplated hereby by any Governmental Authority specified in Schedule
1.1H.
"Tax" or "Taxes" means (i) all taxes, charges, fees, levies, penalties
or other assessments imposed by any federal, state or local or foreign taxing
authority, including but not limited to, income, excise, real or personal
property, sales, transfer, franchise, payroll, withholding, social security,
receipts, license, stamp, occupation, employment or other taxes, and any
payments to any state, local or foreign taxing authorities in lieu of any such
taxes, charges, fees, levies or assessments, (ii) any interest, penalty or
addition attributable thereto, whether disputed or not, and (iii) any item for
which liability arises as a transferee or successor-in-interest, operation of
law or Treasury regulation Section 1.1502-6(a) (or any predecessor or successor
thereof or similar provision of law).
"Tax Proceeding" has the meaning set forth in Section 7.5(d).
12
"Tax Return" means any return, report, information return, declaration,
claim for refund, or other document, together with all amendments and
supplements thereto, required to be filed with any Governmental Authority
responsible for the administration of Applicable Laws governing Taxes.
"Termination Date" has the meaning set forth in Section 12.1(b).
"Third Party Claim" means a claim by a Person that is not included
among the Seller's Indemnified Parties or the Purchaser Indemnified Parties,
including any claim for the costs of conducting Remediation, or seeking an order
or demanding that a Person undertake Remediation.
"Transactions" has the meaning set forth in the Recitals to this
Agreement.
"Transfer Tax" means any sales Tax, transfer Tax, conveyance fee,
recording fee, use Tax, stamp Tax, stock transfer Tax or other similar Tax,
including any related penalties, interest and additions thereto, but excluding
for all purposes Income Taxes.
"Transferred Employees" has the meaning set forth in Section 7.14(a).
"Transition Period" means the period commencing with the execution of
this Agreement by both Parties and ending upon Closing (or earlier termination
of this Agreement).
"Transition Representative" has the meaning set forth in Section 8.2.
"Unaudited Financial Statements" has the meaning set forth in Section
5.17.
SECTION 1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires:
(a) the singular number includes the plural number and vice
versa;
(b) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity;
(c) reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof;
(d) reference to any Article, Section, Schedule or Exhibit
means such Article, Section, Schedule or Exhibit of or to this Agreement, and
references in any
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Article, Section, Schedule, Exhibit or definition to any clause means such
clause of such Article, Section, Schedule, Exhibit or definition;
(e) any accounting term used and not otherwise defined in this
Agreement has the meaning assigned to such term in accordance with GAAP;
(f) "hereunder,""hereof,""hereto" and words of similar
import are references to this Agreement as a whole and not to any particular
Section or other provision hereof or thereof;
(g) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding or
succeeding such term;
(h) relative to the determination of any period of time,
"from" means "from and including,""to" means "to but excluding" and "through"
means "through and including;"
(i) reference to any law (including statutes and ordinances)
means such law as amended, modified codified or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations promulgated
thereunder; and
(j) any agreement, instrument, insurance policy, statute,
regulation, rule or order defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument,
insurance policy, statute, regulation, rule or order as from time to time
amended, modified, or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein.
ARTICLE 2
PURCHASE AND SALESECTION 2.1 Purchase and Sale. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the Closing,
Seller shall sell and transfer to Purchaser, and Purchaser shall purchase and
accept from Seller, all of the Purchased Shares; and (b) COSI PUNA and PGV shall
terminate the O&M Agreement.
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ARTICLE 3
CLOSING; PURCHASE PRICESECTION 3.1 Closing. Subject to the terms and conditions hereof,
proceedings for the consummation of the Transactions (the "Closing") will take
place at the offices of Constellation Energy Group, Inc., 750 East Pratt Street,
Baltimore, Maryland, at 10:00 a.m. local time, on a mutually acceptable date
within ten (10) Business Days following the date on which the conditions set
forth in ARTICLE 10 and ARTICLE 11, other than those conditions that by their
nature are to be satisfied at the Closing (and for purposes of setting the
Closing Date, the matters contemplated by Section 11.9 shall be assumed to have
been satisfied), have been either satisfied or waived by the Party for whose
benefit such conditions exist, or at such other time and place as the Parties
may mutually agree, and in no event later than the Termination Date. The date on
which such proceedings actually occur is referred to herein as the "Closing
Date." At the Closing, and subject to the terms and conditions hereof, the
following will occur:
(a) Deliveries by Seller. At Closing, Seller shall execute and
deliver, or cause to be executed and delivered, to Purchaser the following:
(i) an instrument of assignment from CPI which is in a
form sufficient to evidence and effect the valid transfer of full title to the
Purchased Shares free and clear of all Encumbrances and all of the original
issued and outstanding Purchased Shares stock certificates;
(ii) the minute books, company records and files of the
Companies and the records of COSI PUNA related to the Transferred Employees (as
permitted by Applicable Laws) and those related to the operation and maintenance
of the Plant; provided, however, that Seller shall not be required to deliver
any of the foregoing to Purchaser to the extent that the same would (A) violate
any court or administrative order, (B) disclose information about the activities
of Seller, COSI PUNA or any of their Affiliates (other than the Companies) that
is unrelated to the Companies, the Business or the Plant, or (C) disclose
proprietary models of Seller or any of its Affiliates pertaining to energy
project evaluation, energy or natural gas price curves or projections, or other
economic predictive models;
(iii) those documents required to be delivered to
Purchaser by Seller pursuant to ARTICLE 10;
(iv) evidence of termination of the O&M Agreement. the
Credit Documents and the Intercompany Arrangements, reasonably satisfactory to
Purchaser;
(v) a listing as of the Closing Date of (A) the amounts
accrued, (B) the amounts actually paid, and (C) any remaining amounts
anticipated to be incurred
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but not yet accrued or paid, by any of the Companies in connection with the
repairs contemplated by Item 1 of Schedule 5.19; and
(vi) any other documents or instruments as may be
reasonably necessary to effect the Transactions to the extent reasonably
requested by Purchaser of Seller.
(b) Deliveries by Purchaser. At Closing, Purchaser shall
deliver, or cause to be delivered, to Seller the following:
(i) the Initial Purchase Price, subject to the provisions
of Section 3.3, if any, by wire transfer of immediately available funds to an
account or accounts designated by Seller in writing prior to the Closing Date.
(ii) those documents required to be delivered to Seller
by Purchaser pursuant to ARTICLE 11; and
(iii) any other documents or instruments as may be
reasonably necessary to effect the Transactions to the extent requested by
Seller of Purchaser a reasonable period of time prior to the Closing Date.
SECTION 3.2 Initial Purchase Price. The initial purchase price for the
Purchased Shares shall be Seventy One Million Dollars ($71,000,000) (the
"Initial Purchase Price").
SECTION 3.3 Adjustment to Initial Purchase Price. The Initial Purchase
Price shall be subject to such adjustments as are specified in Section 3.4,
Section 3.5, Section 7.5, Section 7.6 and ARTICLE 9, if any (the Initial
Purchase Price as so adjusted is herein referred to as the "Purchase Price").
SECTION 3.4 Estimated Adjustment Statement.
(a) By or before 10:00 a.m. on the third Business Day prior
to the scheduled Closing Date, Seller shall prepare and deliver to Purchaser a
statement (the "Estimated Adjustment Statement") that sets forth as of the close
of business on the Closing Date the net working capital of the Companies as of
the Closing Date as calculated as set forth on Schedule 3.4; provided, however
the following shall be excluded from such calculation: (i) any and all
liabilities under the Loan Documents; and (ii) any amounts related to Inventory;
and (iii) the Intercompany Arrangements. In connection with the foregoing
calculation, Seller shall also determine any and all costs, expenses or other
liabilities paid by any of the Companies prior to the Closing Date and any of
the foregoing accrued by any of the Companies prior to the Closing Date related
to the repairs contemplated by Item 1 of Schedule 5.19 prior to the Closing Date
and all such accrued unpaid amounts shall be included in the calculation of net
working capital as provided above. Insurance proceeds to be paid under the
Company Insurance Policies with regard to such repair shall be allocated among
Seller and Purchaser as provided in
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Section 7.7. In the event the Closing is not scheduled to occur on the last day
of a given month, then the items that are included in the Estimated Adjustment
Statement shall be prorated to the extent applicable as of the Closing Date by
multiplying the amount of each such item representing the full calendar month by
a fraction, the numerator of which is the Closing Date and the denominator of
which is the number of days there are in the month in which the Closing occurs.
The Estimated Adjustment Statement will be prepared in conformity with GAAP,
applied on a basis consistent with the financial statements made available to
Purchaser under Section 5.17, using the example and format set forth in Schedule
3.4.
(b) In the event the result of the Estimated Adjustment
Statement is a negative number, then the Initial Purchase Price will be reduced
by an amount equal to absolute value of such number and if the result is a
positive number, then the Initial Purchase Price will be increased by an amount
equal to such number.
SECTION 3.5 Final Adjustment Statement.
(a) Within forty-five (45) days following the Closing Date,
Purchaser shall prepare and deliver to Seller a final statement (the "Final
Adjustment Statement") that sets forth the same information as included in the
Estimated Adjustment Statement provided pursuant to Section 3.4(a) above,
adjusted to take into account the final figures as of 12:01 a.m. on the Closing
Date determined in accordance with the standard set forth in Section 3.4. Seller
shall provide to Purchaser copies of all invoices or other billing information
actually received or sent by Seller during this forty-five (45) day period to
allow Purchaser to prepare the Final Adjustment Statement in accordance with
this Section. The Final Adjustment Statement shall be accompanied by such backup
information and schedules as are reasonably required in order for Seller to
understand and verify the accuracy of the computation of the amount(s) set forth
therein. In the event the Closing does not occur on the last day of a given
month, then the items that are included in the Final Adjustment Statement shall
be prorated to the extent applicable as of the Closing Date by multiplying the
amount of each such item representing the full calendar month by a fraction, the
numerator of which is the Closing Date and the denominator of which is the
number of days there are in the month in which the Closing occurs.
(b) The Parties shall attempt to agree upon the Final
Adjustment Statement within thirty (30) days following the delivery thereof to
Seller. If Seller disputes any item set forth on the Final Adjustment Statement,
Seller shall give Purchaser written notice thereof within thirty (30) days
following the delivery to Seller of the Final Adjustment Statement setting forth
in reasonable detail the disputed item or items. If Seller has not delivered
such notice to Purchaser within such thirty (30) day period, the Final
Adjustment Statement shall be deemed to be final and, to the extent the Final
Adjustment Statement reflects an adjustment to the Initial Purchase Price that
is different from the adjustment calculated pursuant to Section 3.4(a), the
Party that benefited from
17
the variance in the adjustment made on the Closing Date shall pay to the other
Party the variance amount within five (5) days following the expiration of such
thirty (30) day period. If Seller has delivered a notice of a dispute to
Purchaser, the undisputed portion of the variance amount, if any, shall be paid
to the Party entitled to receive the same within five (5) Business Days
following the delivery of the notice by Seller to Purchaser, and the Parties
shall jointly engage the Independent Accounting Firm and shall direct the
Independent Accounting Firm to make a final, binding determination of all such
disputes within forty-five (45) days of presentation to the Independent
Accounting Firm by the Parties of the information that each such Party believes
supports its position with respect to each disputed item. Such information shall
be presented by each Party to the Independent Accounting Firm within ten (10)
days following the selection thereof. The Parties will further direct the
Independent Accounting Firm to deliver a written notice to Purchaser and Seller
setting forth its determination with respect to each disputed item. The results
of such determination will be final and binding, and the balance of the variance
amount, if any, resulting from such determination will be paid to the Party
entitled to receive the same within ten (10) days of the Independent Accounting
Firm's notice of its determination. The fees and expenses of the Independent
Accounting Firm shall be borne in equal parts by the Purchaser on the one hand,
and the Seller, on the other, and further agree that in connection with the
engagement of the Independent Accounting Firm, each of the Purchaser and the
Seller will, if requested by the Auditors, execute a reasonable engagement
letter including customary indemnities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER
Except as set forth in the Schedules to this Agreement as noted below,
or in the Due Diligence Materials, Seller represents and warrants to Purchaser
as of the Effective Date as follows:
SECTION 4.1 Organization and Existence.
(a) CPI is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland.
(b) COSI PUNA is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland.
SECTION 4.2 Execution, Delivery and Enforceability. Each of Seller and
COSI PUNA has all requisite corporate power and authority to execute and
deliver, and perform their obligations under, this Agreement and to consummate
the Transactions. The execution, delivery and performance by Seller and COSI
PUNA of this Agreement and the consummation of the Transactions have been duly
and validly authorized by all necessary corporate action required on the part of
Seller and COSI PUNA and no other corporate proceedings on the part of Seller or
COSI PUNA are necessary to authorize this Agreement or to consummate the
Transactions. Assuming Purchaser's due authorization,
18
execution and delivery of this Agreement, this Agreement constitutes the valid
and legally binding obligation of Seller and COSI PUNA, enforceable against
Seller and COSI PUNA in accordance with its terms.
SECTION 4.3 No Violation. Subject to Seller obtaining Seller's Required
Regulatory Approvals and Seller's Required Consents, and except for compliance
with the requirements of the HSR Act, neither the execution or delivery by
Seller or COSI PUNA of this Agreement, nor Seller's or COSI PUNA's compliance
with any provision hereof, nor Seller's or COSI PUNA's consummation of the
Transactions will:
(a) violate, or conflict with, or result in a breach of any
provisions of the certificate of incorporation or by-laws of Seller or COSI
PUNA;
(b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under, or conflict with any of the
terms, conditions or provisions of, any note, bond, mortgage, indenture,
license, or agreement (including, without limitation, the Existing Contracts) or
other instrument or obligation to which Seller or COSI PUNA is a party or by
which Seller or COSI PUNA may be bound, except for such defaults (or rights of
termination or acceleration) as to which requisite waivers or consents have
been, or prior to the Closing will have been, obtained;
(c) violate, contravene or conflict with, or result in a
breach of, any law, rule, regulation, order, writ, injunction, license, permit
or decree, applicable to Seller or COSI PUNA which would, individually or in the
aggregate, have a Material Adverse Effect and will not affect the validity or
enforceability of this Agreement or the validity of the Transactions; or
(d) require the consent or approval of, filing with, or notice
to any Person which, if not obtained, would prevent Seller or COSI PUNA from
performing its obligations hereunder.
SECTION 4.4 Litigation. There is no claim, action, proceeding or,
investigation pending or, to Seller's or COSI PUNA's Knowledge, threatened
against or relating to Seller or COSI PUNA before any court, arbitrator or
Governmental Authority, or any judgment, decree or order of any court,
arbitrator or Governmental Authority, which would, individually or in the
aggregate, reasonably be expected to result, or has resulted, in:
(a) the institution of legal proceedings to prohibit or
restrain the performance of this Agreement or the consummation of the
Transactions by Seller or COSI PUNA;
(b) a claim against Purchaser or its Affiliates for damages as
a result of Seller or COSI PUNA entering into this Agreement or the consummation
by Seller or COSI PUNA of the Transactions; or
19
(c) a material impairment of Seller's or COSI PUNA`s ability
to perform its obligations under this Agreement.
SECTION 4.5 Brokers. All negotiations relating to this Agreement or the
Transactions for the benefit of Seller, COSI PUNA or the Companies have been
carried on by Seller and COSI PUNA and in such a manner as not to give rise to
any valid claim against Purchaser or Companies (by reason of Seller's, COSI
PUNA's, the Companies' or any of their respective Affiliates' actions) for a
brokerage commission, finder's fee or other like payment to any Person.
SECTION 4.6 Seller's and COSI PUNA's Qualifications. Neither Seller nor
COSI PUNA has any Knowledge of any reason(s) that the Closing conditions set
forth in Articles 10 and 11 (other than the closing conditions set forth in
Section 10.4 as to Purchaser's Consents and Purchaser's Regulatory Approvals)
cannot be satisfied. To Seller's Knowledge, Seller is qualified to sell the
Purchased Shares and there are no conditions in existence which could reasonably
be expected to delay, impede or condition the receipt by Seller of Seller's
Required Regulatory Approvals or Seller's Required Consents. The provisions of
this Section 4.6 are qualified to the extent that the receipt of any Seller's
Required Regulatory Approval is subject to the discretion of the applicable
Governmental Authority.
SECTION 4.7 Consents and Approvals. No consent, approval,
authorization, or permit of, or filing with or notification to, any Person is
required for or in connection with the execution and delivery of this Agreement
by Seller or COSI PUNA or for or in connection with the consummation of the
Transactions and performance of the terms and conditions contemplated hereby by
Seller or COSI PUNA, except for: (a) Seller's Required Regulatory Approvals; (b)
Seller's Required Consents; and (c) requirements under the HSR Act.
SECTION 4.8 Compliance with Laws. Neither Seller nor COSI PUNA is in
violation of any laws, orders, ordinances, rules, regulations or judgments of
any Governmental Authority which could result in a Material Adverse Effect.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
Except as set forth in the Schedules to this Agreement as noted below,
or in the Due Diligence Materials, Seller represents and warrants to Purchaser
as of the Effective Date as follows:
SECTION 5.1 Organization and Existence
(a) CE PUNA I is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power and
20
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.
(b) CE PUNA II is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted.
(c) CE PUNA LP is a limited partnership, duly formed, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted.
(d) PGV is a general partnership, duly formed and in good
standing under the laws of the State of Hawaii and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.
(e) Each of the Companies is duly qualified to do business and
is in good standing in each jurisdiction, if any, in which it is required to be
so qualified except in those jurisdictions where the failure to be so duly
qualified would not reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.2 Ownership.
(a) CPI owns beneficially and of record 100% of the CE PUNA I
Shares which constitute all of the issued and outstanding capital stock of, and
the only class of capital stock of, CE PUNA I.
(b) CPI owns beneficially and of record 100% of the CE PUNA II
Shares which constitute all of the issued and outstanding capital stock of, and
the only class of capital stock of, CE PUNA II.
(c) CE PUNA I and CE PUNA II each own 50% of the CE PUNA LP
Interests which constitute all of the partnership interests of CE PUNA LP.
(d) CE PUNA I and CE PUNA LP own all of the PGV Interests
which constitute all of the partnership interests of PGV.
(e) All of the Purchased Shares have been duly authorized and
validly issued and are fully paid and nonassessable.
(f) At the Closing, (i) Seller will own all of the Purchased
Shares, (ii) CE PUNA I and CE PUNA II will own all of the CE PUNA LP Interests,
and (iii) CE PUNA I and CE PUNA LP will own all of the PGV Interests, free and
clear of any
21
Encumbrances, except purchase rights granted to Purchaser pursuant to the terms
of this Agreement.
SECTION 5.3 Capitalization. Other than this Agreement and except as set
forth on Schedule 5.3, there are no outstanding options, warrants, purchase
rights, subscription rights, conversion rights or other rights of any kind
(preemptive or otherwise) to acquire any capital stock or partnership interests
in the Companies, or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any capital stock
or partnership interests, nor is any of the Companies committed to issue, sell
or otherwise cause to become outstanding any such option, warrant, right or
security, except obligations to Purchaser under this Agreement and there are no
agreements or understandings concerning the ownership, voting, or disposition of
the Purchased Shares or the Partnership Interests.
SECTION 5.4 No Violation. Except as set forth on Schedule 5.4 and
subject to Seller obtaining Seller's Required Regulatory Approvals and Seller's
Required Consents, and except for compliance with the requirements of the HSR
Act, neither the execution or delivery by Seller of this Agreement, nor Seller's
compliance with any provision hereof, nor Seller's consummation of the
Transactions will:
(a) violate, conflict with, or result in a breach of any
provisions of, as applicable, the certificate of incorporation or by-laws, or
the certificate of partnership or partnership agreement, of the Companies;
(b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under, or conflict with any of the
terms, conditions or provisions of, any note, bond, mortgage, indenture,
license, or agreement (including, without limitation, the Existing Contracts) or
other instrument or obligation to which the Companies are a party or by which
the Companies may be bound;
(c) violate, contravene or conflict with, or result in a
breach of, any law, rule, regulation, order, writ, injunction, license, permit
or decree, applicable to the Companies which would, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 5.5 Business.
(a) The ownership of CE PUNA LP is the only business conducted
by CE PUNA II, and, except as set forth on Schedule 1.1C, the 50% of the CE PUNA
LP Interests owned by it are the only assets owned by and liability of CE
PUNA II.
(b) The ownership of CE PUNA LP and PGV is the only business
conducted by CE PUNA I and, except as set forth on Schedule 1.1C, the 50% of the
CE PUNA LP Interests owned by it and its ownership of its portion of the PGV
Interests are the only assets owned by and liability of CE PUNA I.
22
(c) The ownership of PGV is the only business conducted by CE
PUNA LP and, except as set forth on Schedule 1.1C, its ownership of its portion
of the PGV Interests is the only assets owned by and liability of CE PUNA LP.
(d) The only business engaged in by COSI PUNA has been the
services carried out pursuant to the O&M Agreement and COSI PUNA owns and holds
all interest of the Operator (as such term is defined in the O&M Agreement)
under the O&M Agreement.
(e) The only business engaged in by PGV is the ownership,
operation, and maintenance of the Plant, the generation and sale of electric
energy and capacity from the Plant and any and all other activities related or
incidental to the foregoing. As of the Closing, PGV will own all of the assets,
Inventory, software licenses, properties and rights necessary to own, operate
and maintain the Plant in substantially the same manner as it has been owned,
operated and maintained prior thereto.
SECTION 5.6 Compliance with Laws. Except as set forth in Schedule 5.6,
there is no uncured violation by any of the Companies of any laws, orders,
ordinances, rules, regulations or judgments of any Governmental Authority, which
would, individually, or in the aggregate, result in a Material Adverse Effect.
SECTION 5.7 Permits. Except as set forth in Schedule 5.7, PGV holds or
has received all permits, registrations, notifications, franchises, licenses,
certificates, and other authorizations, consents and approvals of all
Governmental Authorities required in order for PGV to own, operate and maintain
the Plant and generate and sell electric energy and capacity as set forth in the
Power Purchase Agreement (collectively, "Permits"), except for such Permits
which if not held would not, individually or in the aggregate, result in a
Material Adverse Effect.
SECTION 5.8 Litigation. There is no claim, action, proceeding, audit or
investigation pending or, to Seller's Knowledge, threatened against or relating
to PGV or the Plant before any court, arbitrator or Governmental Authority, nor
has any judgment, decree or order of any court, arbitrator or Governmental
Authority been issued to PGV or the Plant.
SECTION 5.9 Existing Contracts.
(a) Except for Existing Contracts (i) listed in Schedule
5.9(a), (ii) which will expire prior to the Closing Date, (iii) which do not
require known or liquidated expenditures or payments by PGV in excess of one
hundred thousand Dollars ($100,000) within a twelve (12) month period (and such
agreements within the scope of this clause (iii) in the aggregate not requiring
known or liquidated expenditures or payments by PGV in excess of two hundred
fifty thousand Dollars ($250,000) within a twelve (12) month period), or (iv)
which, if not performed by PGV, would not result in a
23
Material Adverse Effect, PGV is not a party to, and neither PGV nor the Plant is
bound by, any Existing Contract.
(b) Except as set forth in Schedule 5.9(b), there is not under
any of the Existing Contracts listed in Schedule 5.9(a) any default or event
which, with notice or lapse of time or both, would constitute an event of
default by PGV except for such events of default and other events as to which
requisite waivers have been, or prior to Closing will have been, obtained or
which would not, individually or in the aggregate, result in a Material Adverse
Effect.
(c) No claim, action, proceeding or investigation is pending
or, to Seller's Knowledge, threatened against PGV challenging the enforceability
of any of the Existing Contracts specified in Schedule 5.9(a), as applicable.
(d) Seller has delivered or made available to Purchaser true
and complete copies of all Existing Contracts listed in Schedule 5.9(a)
including all amendments thereto. There are no oral amendments to any of the
Existing Contracts listed in Schedule 5.9(a).
SECTION 5.10 Personal Property. Except as listed in Schedule 5.10, PGV
has good and valid title to its personal property, including, without
limitation, all improvements and fixtures located at the Plant, free and clear
of all Encumbrances other than Permitted Encumbrances with regard to any
fixtures included in such personal property.
SECTION 5.11 Real Property. PGV does not own any real property.
SECTION 5.12 Leases. Schedule 5.12 lists, as of the date of this
Agreement, all leases pertaining to real property under which PGV is a lessee or
lessor and other related agreements and which (a) provide for annual payments of
more than $100,000, or (b) are material to the Business of PGV. Except as set
forth in Schedule 5.12, there is not, under any such leases, any event of
default or event which, with notice or lapse of time or both, would constitute
an event of default by PGV or, to Seller's Knowledge the lessors of such real
property, as applicable, except for such events of default and other events as
to which requisite waivers have been, or prior to Closing will have been,
obtained or which would not, individually or in the aggregate, result in a
Material Adverse Effect. Except as set forth in Schedule 5.12, to Seller's
Knowledge the owners of the real property being leased by PGV have good and
valid title to that real property, free and clear of all Encumbrances other than
Permitted Encumbrances.
SECTION 5.13 Intellectual Property. PGV owns, is licensed or otherwise
possesses sufficient legally enforceable rights to use, all patents, copyrights,
trademarks, service marks, technology, know-how, computer software programs and
applications, databases and tangible or intangible proprietary information or
materials that are currently used in the operation of the Plant except for such
items for which the failure to
24
possess such rights would not, individually or in the aggregate, result in a
Material Adverse Effect.
SECTION 5.14 Environmental Compliance. Except as disclosed in Schedule
5.14, or which would not, individually or in the aggregate, have a Material
Adverse Effect:
(a) There has not been a Release of Hazardous Substances at or
otherwise affecting the Plant that: (i) constitutes an unremedied violation of
any Environmental Law if the effect of such violation imposes a current
remediation obligation on the part of PGV; (ii) currently imposes any
release-reporting obligations on PGV under any Environmental Law that have not
been or are not being complied with; or (iii) currently imposes any clean-up or
remediation obligations on PGV under any Environmental Law;
(b) PGV is currently in compliance with all Environmental Laws
applicable to the Plant;
(c) PGV holds and is in compliance with all Permits required
under applicable Environmental Laws, and has not received any written notice
that: (i) any such existing Permit will be revoked; or (ii) any pending
application for any new such Permit or renewal of any such existing Permit will
be denied; and
(d) PGV has not received any currently outstanding written
notice of any material proceedings, action, or other claim, liability or
potential liability arising under any Environmental Laws from any Person or
Governmental Authority regarding the Plant.
SECTION 5.15 Tax Matters. Except as set forth in Schedule 5.15, or as
would not, individually or in the aggregate, have a Material Adverse Effect:
(a) for all periods ending prior to or on the Closing Date,
all Tax Returns required to be filed by or with respect to the Companies have
been or will be timely filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed;
(b) for all periods ending prior to or on the Closing Date,
such Tax Returns are or will be true and correct in all material respects, and
all Taxes legally due on or prior to the Closing Date have been or will be
timely paid;
(c) none of the Companies have extended or waived the
application of any statute of limitations of any jurisdiction regarding the
assessment or collection of any Tax and no power of attorney has been granted by
or with respect to any of the Companies with regard to any matters relating to
Taxes thereof;
25
(d) no notice of deficiency or assessment has been received
from or threatened by any taxing authority with respect to liabilities for Taxes
of any of the Companies, which have not been fully paid or finally settled;
provided, however, that any such deficiency shown in Schedule 5.15 is being
contested in good faith through appropriate proceedings;
(e) for all periods prior to Closing, the Companies have
withheld and paid over to the appropriate taxing authority all Taxes required to
be withheld and paid over in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party;
(f) the Companies do not conduct any business in or derive
income from any state, local or foreign jurisdiction other than those
jurisdictions for which Tax Returns have been duly filed by the Companies;
(g) Seller have delivered to Purchaser correct and complete
copies of (i) the general excise/use tax returns for the period beginning
January 1, 1999, (ii) all other Tax Returns for the periods beginning January 1,1998, and (iii) all examination reports of the Companies and statements of
deficiencies assessed against or agreed to by the Companies within the last 5
years;
(h) none of the Companies has made any payment or payments, is
obligated to make any payment or payments or is a party to (or participating
employer in) any agreement or plan that could obligate it or their successors or
Affiliates to make any payment or payments that as a result of the transactions
contemplated by this Agreement would constitute an "excess parachute payment" as
defined in Section 280(G) of the Code (or comparable provisions of state or
local law);
(i) the Companies have (i) never been a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income Tax Return (other than a group the common parent of
which was either Baltimore Gas and Electric Company (prior to April 30, 1999) or
Constellation Energy Group, Inc. (after May 1, 1999)), and (b) no liability for
Taxes of any Person (other than Baltimore Gas and Electric Company (prior to
April 30, 1999), Constellation Energy Group, Inc. (after May 1, 1999), or any of
their respective subsidiary Affiliates) under Treasury regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise;
(j) CE Puna I and CE Puna II are members of an affiliated
group of corporations filing a consolidated federal income tax return with
Constellation Energy Group, Inc. as common parent; and
(k) the Partnerships are properly characterized as
"partnerships" within the meaning of Section 7701(a)(2) of the Code and any
comparable provision of state,
26
local or foreign law, and none of the Partnerships has every been a
"corporation" within the meaning of Section 7701(a)(3) of the Code.
SECTION 5.16 No Subsidiaries. Except as described in Section 5.2, none
of the Companies own or hold, directly or indirectly, nor have any right or
obligation to acquire, any equity or other ownership interest in any
corporations, limited liability companies, partnerships, joint ventures, or
other Person.
SECTION 5.17 Financial Statements. CPI has made available to Purchaser
the unaudited financial statements of PGV, including a balance sheet as of
December 31, 2003, and an income statement and a statement of cash flows for the
12 months ending December 31, 2003 (collectively, the "Unaudited Financial
Statements"). The foregoing balance sheet is referred to herein as the "Balance
Sheet". The Unaudited Financial Statements were prepared in accordance with GAAP
consistently applied (except that the Unaudited Financial Statements do not
include footnotes required by GAAP) and fairly present, in all material
respects, the financial position and results of operations of PGV as of the date
thereof and for the periods covered thereby. Seller has made available to
Purchaser an unaudited balance sheet and income statement for the combination of
CE PUNA I and CE PUNA II as of December 31, 2003 and such balance sheet and
income statement were prepared in accordance with GAAP (except that such
statements do not include footnotes required by GAAP and such statements do not
reflect income taxes which were reported on the financial statements of Seller)
and fairly present, in all material respects, the financial position and results
of operations of the combination of CE PUNA I and CE PUNA II as of the date
thereof and for the periods covered thereby. From January 1, 2004 to the
Effective Date, none of the Companies have distributed any cash to Seller or any
Affiliate of Seller other than as payment for goods and services rendered in the
ordinary course of business or to satisfy the Intercompany Arrangements as
provided herein. Either (i) the books and records in the possession of the
Companies or Purchaser upon Closing will include the backup accounting and
financial information reasonably necessary for an experienced certified public
accountant to prepare audited financial statements for each of the Companies for
the 2001, 2002 and 2003 calendar years and that portion of the 2004 calendar
year prior to Closing or (ii) the Seller will provide the Purchaser with such
backup accounting and financial information and records reasonably necessary for
an experienced certified public accountant to prepare audited financial
statements for each of the Companies for the 2001, 2002 and 2003 calendar years
and that portion of the 2004 calendar year prior to Closing.
SECTION 5.18 Undisclosed Liabilities. To Seller's Knowledge and except
as set forth in Schedule 5.18, none of the Companies has any liability or
obligation, secured or unsecured, of a nature required by GAAP to be reflected
on its respective balance sheet or disclosed in the notes thereto, which are not
accrued or reserved against on its respective balance sheet or disclosed in the
notes thereto, except those which either (i) were incurred in the ordinary
course of business after the date of the respective balance sheet in accordance
with Section 7.3, (ii) would not, individually or in the aggregate,
27
have a Material Adverse Effect or (iii) in the case of CE PUNA LP, are disclosed
in the balance sheet for the combination of CE PUNA I and CE PUNA II.
SECTION 5.19 Absence of Certain Financial Changes or Events. Except as
(a) set forth in Schedule 5.19, and (b) otherwise contemplated by this
Agreement, there has not been : (i) since the date of the Unaudited Financial
Statements any event or occurrence resulting in a Material Adverse Effect; (ii)
since the date of the Unaudited Financial Statements and prior to the Effective
Date any damage, destruction or casualty loss, whether covered by insurance or
not, which had a Material Adverse Effect; (iii) since the date of the Unaudited
Financial Statements any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing) by any of the Companies which is material to the Business of PGV or
the business of such other Companies, except agreements, commitments or
transactions in the ordinary course of business or as contemplated hereby; or
(iv) since the date of the Unaudited Financial Statements any change by any of
the Companies in accounting methods, principles or practices except as required
or permitted by GAAP.
SECTION 5.20 Consents and Approvals. No consent, approval,
authorization or permit of, or filing with or notification to, any Person is
required for or in connection with the execution and delivery of this Agreement
by Seller or for or in connection with the consummation of the Transactions and
performance of the terms and conditions contemplated hereby by Seller, except
for: (a) Seller's Required Regulatory Approvals; (b) Seller's Required Consents;
(c) requirements under the HSR Act; and (d) consents, approvals, authorizations,
permits, filings, or notices that, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 5.21 Labor Matters. With respect to the ownership or operation
of the Plant, and except for such matters as will not, individually or in the
aggregate, create a Material Adverse Effect, COSI PUNA and each of the Companies
are in compliance with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours. As of the
date hereof, Seller has no Knowledge of any claim of representation by a third
party, organizing drive by a third party seeking to represent all or any portion
of employees working at the Plant, or representation petition concerning the
workforce at the Plant including, without limitation, the Transferred Employees.
SECTION 5.22 Insurance. All Company Insurance Policies are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the date as of which this representation is being made have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy which was not replaced on substantially similar terms
prior to the date of such cancellation. The Company Insurance Policies cover the
property damage to the Plant described in Schedule 5.19.
28
SECTION 5.23 Employee Benefit Plans. Schedule 5.23 contains a complete
and accurate list of all Employee Benefit Plans in which a Transferred Employee
is eligible to participate. The Companies do not have any agreement,
arrangement, commitment or obligation to create, enter into or contribute to any
additional Employee Benefit Plan or to modify any existing Employee Benefit Plan
in connection with the Transferred Employees.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the Schedules to this Agreement, Purchaser
represents and warrants to Seller as of the Effective Date as follows:
SECTION 6.1 Organization and Existence. Purchaser is a limited
liability company, duly organized, validly existing and in good standing under
the laws of State of Delaware, and has all requisite limited liability company
power and authority to own, lease and operate its properties and to carry on its
business as is now being conducted.
SECTION 6.2 Execution, Delivery and Enforceability. Purchaser has all
requisite limited liability company power and authority to execute and deliver,
and to perform its obligations under, this Agreement and to consummate the
Transactions. The execution, delivery and performance of this Agreement and the
consummation of the Transactions have been duly and validly authorized by all
necessary limited liability company action required on the part of Purchaser,
and no other limited liability company proceedings on the part of Purchaser are
necessary to authorize this Agreement or to consummate the Transactions.
Assuming the due authorization, execution and delivery of this Agreement by
Seller, this Agreement constitutes the valid and legally binding obligations of
Purchaser, enforceable against Purchaser in accordance with its terms.
SECTION 6.3 No Violation. Subject to Purchaser obtaining the
Purchaser's Required Regulatory Approvals and the Purchaser's Required Consents,
and except for compliance with the requirements of the HSR Act, neither the
execution or delivery by Purchaser of this Agreement, nor Purchaser's compliance
with any provision hereof, nor Purchaser's consummation of the Transactions
will:
(a) violate, or conflict with, or result in a breach of any
provisions of the limited liability company organization documents of Purchaser;
29
(b) result in a default (or give rise to any right of
termination, cancellation or acceleration) under or conflict with any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
or agreement or other instrument or obligation to which Purchaser is a party or
by which Purchaser may be bound, except for such defaults (or rights of
termination or acceleration) as to which requisite waivers or consents have
been, or prior to the Closing will have been, obtained, or which would not,
individually or in the aggregate, create a Material Adverse Effect;
(c) violate any law, rule, regulation, order, writ,
injunction, or decree, applicable to Purchaser or any of its assets, except
where such violations, individually or in the aggregate, would not create a
Material Adverse Effect and will not affect the validity or enforceability of
this Agreement or the validity of the Transactions; or
(d) require the consent or approval of, filing with, or notice
to any Person which, if not obtained, would prevent Purchaser from performing
its obligations hereunder.
SECTION 6.4 Compliance with Laws. Purchaser is not in violation of any
laws, orders, ordinances, rules, regulations or judgments of any Governmental
Authority which could result in a Material Adverse Effect.
SECTION 6.5 Litigation. There is no claim, action, proceeding or
investigation pending or, to Purchaser's Knowledge, threatened against or
relating to Purchaser or its Affiliates before any court, arbitrator or
Governmental Authority, or any judgment, decree or order of any court,
arbitrator or Governmental Authority, which would, individually or in the
aggregate, reasonably be expected to result, or has resulted, in:
(a) the institution of legal proceedings to prohibit or
restrain the performance of this Agreement or the consummation of the
Transactions by Purchaser;
(b) a claim against Seller or its Affiliates for damages as a
result of Purchaser entering into this Agreement or the consummation by
Purchaser of the Transactions;
(c) a material impairment of Purchaser's ability to perform
its obligations under this Agreement; or
(d) a Material Adverse Effect.
SECTION 6.6 Brokers. All negotiations relating to this Agreement or the
Transactions for the benefit of Purchaser have been carried on by Purchaser in
such a manner as not to give rise to any valid claim against Seller (by reason
of Purchaser's actions) for a brokerage commission, finder's fee or other like
payment to any Person.
30
SECTION 6.7 Financing. Purchaser has now, and at the Closing Purchaser
will have, liquid capital or committed sources therefor sufficient to permit
Purchaser to perform fully and timely its obligations under this Agreement and
has provided evidence of same to Seller.
SECTION 6.8 Purchaser Qualifications. Purchaser has no Knowledge of any
reason(s) that the Closing conditions set forth in Articles 10 and 11 cannot be
satisfied. To Purchaser's Knowledge, Purchaser is qualified to obtain and there
are no conditions in existence which could reasonably be expected to delay,
impede or condition the receipt by Purchaser of Purchaser's Required Regulatory
Approvals or Purchaser's Required Consents. The provisions of this Section 6.8
are qualified to the extent that the receipt of any Purchaser's Required
Regulatory Approval is subject to the discretion of the applicable Governmental
Authority.
SECTION 6.9 "As Is" Sale; Disclaimer of Representations and Warranties;
Further Acknowledgements by Purchaser.
(a) "As Is" Sale. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
ANY OTHER PROVISION OF THIS AGREEMENT AND EXCEPT FOR THE REPRESENTATIONS,
WARRANTIES OR COVENANTS SET FORTH IN THIS AGREEMENT, PURCHASER UNDERSTANDS AND
AGREES THAT SELLER IS NOT MAKING ANY REPRESENTATION, WARRANTY OR COVENANT
WHATSOEVER, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY OR OTHERWISE, AND
PURCHASER FURTHER UNDERSTANDS AND AGREES THAT THE ASSETS OF THE COMPANIES,
INCLUDING THE PLANT AND ALL OF THE PARTNERSHIP INTERESTS, ACQUIRED THEREBY
THROUGH ACQUISITION OF THE PURCHASED SHARES, ARE BEING ACQUIRED "AS IS, WHERE
IS" ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE "WITH ALL
FAULTS," AND THAT PURCHASER IS RELYING ON ITS OWN EXAMINATION OF THE COMPANIES
AND SUCH ASSETS IN PURCHASING THE PURCHASED SHARES HEREUNDER.
(b) Disclaimer of Representations and Warranties. WITHOUT
LIMITING THE GENERALITY OF SECTION 6.9(a) AND EXCEPT FOR THE REPRESENTATIONS,
WARRANTIES AND COVENANTS EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATIONS, WARRANTIES OR COVENANTS, EXPRESS OR IMPLIED, AT COMMON LAW,
STATUTORY, OR OTHERWISE AS TO (i) OPERATION OF THE ASSETS OF THE COMPANIES,
INCLUDING THE PLANT, TITLE, CONDITION, VALUE OR QUALITY OF SUCH ASSETS OR THE
BUSINESS, CONDITION (FINANCIAL OR OTHERWISE), OR PROSPECTS OF THE COMPANIES,
RISKS AND OTHER INCIDENTS OF THE PURCHASED SHARES OR SUCH ASSETS, (ii) ANY
REPRESENTATION OR WARRANTY OF
31
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO SUCH ASSETS OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF OR
THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, (iii) THE PRESENCE
OR ABSENCE OF ANY HAZARDOUS MATERIALS IN, ON, OR DISPOSED OR DISCHARGED FROM,
THE PLANT AND OTHER ASSETS OF THE COMPANIES, OR (iv) ANY INFRINGEMENT BY SELLER,
THE COMPANIES, OR ANY OF THEIR AFFILIATES OF ANY PATENT OR PROPRIETARY RIGHT OF
ANY THIRD PARTY. PURCHASER FURTHER AGREES THAT NO INFORMATION OR MATERIAL
PROVIDED BY OR COMMUNICATION MADE BY SELLER OR ANY REPRESENTATIVE OF SELLER WILL
CONSTITUTE, CREATE OR OTHERWISE CAUSE TO EXIST ANY REPRESENTATION OR WARRANTY
DISCLAIMED BY THE FOREGOING.
SECTION 6.10 Characteristics of Purchaser; No Distribution. Purchaser
or its Affiliates are experienced and knowledgeable investors in the United
States power generation and development business. Prior to entering into this
Agreement, Purchaser was advised by its counsel, accountants, financial
advisors, and such other Persons it has deemed appropriate concerning this
Agreement and has relied solely on Seller's representations and warranties
expressly contained herein and its independent investigation and evaluation of,
and appraisal and judgment with respect to, PGV, the Business, assets, including
the Plant, liabilities, results of operations, condition (financial or
otherwise), and prospects of PGV, and the revenue, price, and expense
assumptions applicable thereto. Purchaser hereby acknowledges that the Purchased
Shares are not registered under the Securities Act of 1933, as amended from time
to time (the "Securities Act"), or registered or qualified for sale under any
state securities laws and cannot be resold without registration thereunder or
exemption therefrom. Purchaser is an "accredited investor," as such term is
defined in Regulation D of the Securities Act and will acquire the Purchased
Shares for its own account and not with a view to a sale or distribution thereof
in violation of the Securities Act, and the rules and regulations thereunder,
any applicable state "blue sky" laws or any other applicable securities laws.
Purchaser has sufficient knowledge and experience in financial and business
matters to enable it to evaluate the risks of investment in the Purchased Shares
and has the ability to bear the economic risk of this investment for an
indefinite period of time.
SECTION 6.11 Intentionally Omitted.SECTION 6.12 Inspection. Purchaser acknowledges that, prior to its
execution of this Agreement:
(a) it has been afforded access to and the opportunity to
inspect each of the Plant, the Existing Contracts, the Permits, and all other
Due Diligence Materials;
(b) it has inspected the Plant, and as of the Closing Date, it
will have inspected the Plant and reviewed the Existing Contracts, the Permits,
and all other Due
32
Diligence Materials to the extent it deems necessary or advisable in connection
with its decision to enter into this Agreement, and to consummate the
Transactions;
(c) it is relying upon Seller's representations and warranties
expressly set forth in this Agreement and its own inspections and investigation
in order to satisfy itself as to the condition and suitability of the Business,
assets, including the Plant, liabilities, results of operations, condition
(financial or otherwise), and prospects of the Companies. Purchaser has not
relied upon any representation, warranty, statement, advice, Records, Due
Diligence Materials, projections, or other information of any type provided by
Seller, COSI PUNA, any of the Companies, their respective Affiliates, or any of
their respective representatives, except for those expressly set forth in this
Agreement. In deciding to enter into this Agreement, and to consummate the
Transactions, Purchaser has relied solely upon its own knowledge, investigation,
and analysis (and that of its representatives) and not on any disclosure or
representation made by Seller, COSI PUNA, any of the Companies, their respective
Affiliates, or any of their respective representatives, other than the
representations and warranties of Seller expressly set forth herein; and
(d) it acknowledges and agrees that, except as provided in
Articles 4 and 5, Seller makes no representation or warranty, express, implied,
at common law, statutory or otherwise, with respect to the accuracy or
completeness of the Records or Due Diligence Materials now, heretofore, or
hereafter made available to Purchaser in connection with this Agreement
(including any description of PGV or the Plant, revenue, price and expense
assumptions, production forecasts, or environmental information, or any other
information furnished to Purchaser by Seller, COSI PUNA, any of the Companies or
any of their respective Affiliates or any director, officer, employee, counsel,
agent, or advisor thereof).
SECTION 6.13 Consents and Approvals. No consent, approval,
authorization, or permit of, or filing with or notification to, any Person is
required for or in connection with the execution and delivery of this Agreement
by Purchaser or for or in connection with the consummation of the Transactions
and performance of the terms and conditions contemplated hereby by Purchaser,
except for: (a) Purchaser's Required Regulatory Approvals; (b) Purchaser's
Required Consents; and (c) requirements under the HSR Act.
SECTION 6.14 Bankruptcy. There are no bankruptcy, reorganization, or
arrangement proceedings pending against, being contemplated by, or to the
Knowledge of Purchaser threatened against, Purchaser.
33
ARTICLE 7
COVENANTS OF EACH PARTYSECTION 7.1 Efforts to Close.
(a) Subject to this Section 7.1, each of the Parties agrees to
use its commercially reasonable efforts to consummate and make effective, as
soon as reasonably practicable, and in any event on or prior to the date that is
one hundred (100) days from the Effective Date, the Transactions, including, but
not limited to, the satisfaction of all conditions thereto set forth herein.
Such actions shall include exerting their commercially reasonable efforts to
obtain the consents, authorizations and approvals of all private parties and any
Governmental Authority whose consent is reasonably necessary to effectuate the
Transactions, including, in the case of Seller, Seller's Required Regulatory
Approvals and Seller's Required Consents, and in the case of Purchaser,
Purchaser's Required Regulatory Approvals and Purchaser's Required Consents, and
effecting all other necessary registrations and filings, including filings under
Applicable Laws, including the HSR Act, and all other necessary filings with any
Governmental Authority. In furtherance of this Section 7.1, each Party shall
designate a representative to act as the primary point of contact for all
communications between the Parties between the Effective Date and the Closing
Date with respect to this Agreement and the Transactions.
(b) All appearances, presentations, briefs, and proposals made
or submitted by or on behalf of either Party before any Governmental Authority
in connection with the approval of this Agreement or the Transactions shall be
subject to the joint approval or disapproval in advance and the joint control of
the Parties, acting with the advice of their respective counsel, and each Party
will consult and fully cooperate with the other Party, and consider in good
faith the views of the other Party, in connection with any such appearance,
presentation, brief, or proposal; provided, however, that nothing will prevent a
Party from responding to a subpoena or other legal process as required by law or
submitting factual information in response to a request therefor. Each Party
will provide the other with copies of all written communications from
Governmental Authorities relating to the approval or disapproval of this
Agreement or the Transactions.
SECTION 7.2 Updating. Each Party shall promptly notify the other Party
of any changes or additions to any of the Schedules to this Agreement provided
by such Party, if any, to correct any matter that would constitute a breach of
any representation or warranty of such Party in Articles 4, 5 or 6, as the case
may be, of this Agreement as of a reasonably current date prior to the Closing,
but in any event not later than three (3) Business Days prior thereto. Subject
to Section 13.13, no such updates made pursuant to this Section 7.2 shall be
deemed to cure any inaccuracy of any representation or warranty made in this
Agreement as of the date hereof, unless the Party for whose benefit such
representation or warranty was made specifically agrees thereto in writing, nor
shall any
34
such notification be considered to constitute or give rise to a waiver by the
Party for whose benefit such representation or warranty was made of any
condition set forth in this Agreement; provided, however, that if the Closing
shall occur, then all matters disclosed by either Party pursuant to any such
change or addition at or prior to the Closing shall be deemed to be matters of
which the other Party had Knowledge for purposes of Section 13.13. Each Party
agrees to advise the other Party promptly in writing of any matter or occurrence
of which it has or obtains Knowledge which may constitute a breach by either
Party of any representation, warranty or covenant contained in this Agreement,
or of any reason of which it has or obtains Knowledge why a condition to the
performance of either Party's obligations hereunder may not be satisfied on or
before the Closing Date.
SECTION 7.3 Conduct Pending Closing.
(a) Prior to the consummation of the Transactions or the
termination or expiration of this Agreement pursuant to its terms, unless
Purchaser shall otherwise consent in writing, which consent shall not be
unreasonably withheld, conditioned or delayed, Seller shall cause each of the
Companies, as applicable to, and Seller shall, in the case of subsection (x)
below, and COSI PUNA shall in the case of subsection (i) and (vii) below, do the
following:
(i) operate and maintain the Plant in accordance in all
material respects with the ordinary course of business consistent with past
practices;
(ii) except as required by their terms and except for the
Loan Documents as provided in Section 7.18, not amend, terminate prior to the
expiration date, renew, or renegotiate in any material respect any Existing
Contract required to be listed in Schedule 5.9 or enter into any new contract or
agreement that would (if it existed on the date hereof) have been required to be
listed in Schedule 5.9, except in the ordinary course of business consistent
with past practices and except for Intercompany Arrangements that will be
terminated and paid in full at or before Closing, or fail to comply in all
material respects with its obligations under any such Existing Contract;
(iii) other than pursuant to the requirements of any
Existing Contract, not sell, lease, transfer or dispose of, or make any contract
for the sale, lease, transfer or disposition of, any material assets or
properties of PGV, except sales, leases, transfers or dispositions in the
ordinary course of business and other than terminating the O&M Agreement as
provided herein;
(iv) not (A) issue any ownership rights or securities
convertible into ownership rights, or repurchase, redeem, or otherwise acquire
any such ownership rights; (B) merge into or with or consolidate with any other
Person or acquire all or substantially all of the business or assets of any
Person; (C) make any material change in its partnership agreement; (D) purchase
any securities of any Person, except for investments made in the ordinary course
of business consistent with past practices; (E) incur any additional obligations
for borrowed money or guarantee or otherwise become
35
liable for the obligations of, or make any loans or advances to, any Person,
except obligations for loans or advances from Seller or any of its Affiliates;
or (F) authorize, declare, or pay any cash dividend or any other similar
distribution to Seller or any Affiliate of Seller other than as payment for
goods and services rendered in the ordinary course, including, but not limited
to, payments made pursuant to Section 7.19.
(v) not take any action or enter into any commitment with
respect to or in contemplation of any liquidation, dissolution,
recapitalization, reorganization, or other winding up of its Business;
(vi) not change its accounting policies or practices
(including, without limitation, any change in depreciation or amortization
policies), except as required under GAAP;
(vii) not enter into any employment agreement not
terminable at will and will not increase any compensation of the Transferred
Employees other than in the ordinary course of business;
(viii) not grant any express Encumbrance on any assets of
PGV, except to the extent (i) required or permitted incident to the operation of
the assets of PGV and the business of PGV in the ordinary course of business of
PGV, or (ii) required or evidenced by any Existing Contract;
(ix) maintain in force and effect the Company Insurance
Policies; and
(x) not take any action which would cause any of Seller's
representations and warranties set forth in Articles 4 and 5 to be incorrect in
any material respect as of the Closing.
(b) Notwithstanding anything to the contrary in Section
7.3(a), Seller shall not be (i) obligated to make or cause PGV to make
expenditures other than in the ordinary course of business consistent with past
practices or to otherwise suffer any economic detriment, or (ii) precluded from,
and PGV shall not be precluded from, instituting, participating in or completing
any program designed to promote compliance or comply with Applicable Laws or
other good business practices with respect to the Plant; provided, however, that
notwithstanding anything to the contrary in Section 7.3(a), Seller may take or
may cause PGV to take (w) actions which are required by Applicable Law, (x)
reasonable actions in connection with any emergency or other force majeure
event, or (y) actions otherwise contemplated by this Agreement or disclosed in
Schedule 7.3(b) or any other Schedule to this Agreement.
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SECTION 7.4 Regulatory Approvals.
(a) As promptly as practicable but in no event later than the
twentieth (20th) day after the date of the execution and delivery of this
Agreement, Seller and Purchaser shall each file or cause to be filed with the
Federal Trade Commission and the Department of Justice all notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder with respect to the Transactions. The Parties shall consult with each
other as to the appropriate time of filing such notifications and shall agree in
good faith upon the timing of such filings, respond promptly to any requests for
additional information made by either of such agencies, and cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date
after the date of filing. All filing fees to be paid in connection with such
filing shall be borne by the Purchaser.
(b) Subject to Section 7.1, Seller and Purchaser shall
cooperate with each other and (i) promptly prepare and file all necessary
documentation, (ii) effect all necessary applications, notices, petitions and
filings and execute all agreements and documents, and (iii) use all commercially
reasonable efforts to obtain all necessary consents, approvals and
authorizations of all other parties, in the case of each of the foregoing
clauses (i), (ii) and (iii), necessary or advisable to consummate the
Transactions. Seller and Purchaser shall use their best efforts to file for all
Seller's Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, respectively, within thirty (30) days after the Effective Date.
Seller shall have the right to review and approve in advance all
characterizations of the information relating to PGV or its assets; and each of
Seller and Purchaser shall have the right to review in advance all
characterizations of the information relating to the Transactions which appear
in any filing made in connection with the Transactions.
(c) Without limiting the generality of Purchaser's
undertakings pursuant to Sections 7.4(a) and 7.4(b):
(i) Purchaser shall promptly take any or all of the
following actions to the extent necessary to eliminate any concerns on the part
of any Governmental Authority regarding the legality of Purchaser's acquisition
of the Purchased Shares under any Applicable Laws: (A) enter into negotiations;
(B) provide information; (C) make proposals; or (D) enter into and perform
agreements or submit to judicial or administrative orders, whether before or
after the Closing; and
(ii) Purchaser and Seller shall use commercially
reasonable efforts (including taking the steps contemplated by Section
7.4(b)(i)) to prevent the entry, in a judicial or administrative proceeding
brought under any Applicable Laws by any Governmental Authority or any other
party, of a permanent or preliminary injunction or other order that would make
consummation of the Transactions unlawful or that would otherwise prevent or
delay such consummation; and
37
(iii) Purchaser and Seller shall promptly take, in the
event that such an injunction or order has been issued in such a proceeding, any
and all reasonable steps, including the appeal thereof, the posting of a bond,
or the steps contemplated by Section 7.4(b)(i), necessary to vacate, modify, or
suspend such injunction or order so as to permit such consummation on a schedule
as close as possible to that contemplated by this Agreement.
(d) Purchaser shall have the primary responsibility for
securing any required transfer, reissuance or procurement of the Permits
effective as of the Closing Date. Seller shall use commercially reasonable
efforts to cooperate with Purchaser's efforts in this regard and assist in any
transfer or reissuance of Permits.
SECTION 7.5 Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the Transactions, whether levied on Purchaser or Seller, shall be
paid by Purchaser when due. Purchaser will file, to the extent required by
Applicable Laws, all necessary Tax Returns and other documentation with respect
to all such Transfer Taxes. To the extent required by Applicable Laws, but
subject to such review and approval, Seller or any of its Affiliates will join
in the execution of any such Tax Returns or other documentation. Seller will be
entitled to review in advance such Tax Returns as it or its Affiliates may be
required to join and execute and such Tax Returns shall be subject to Seller's
approval (which shall not be unreasonably withheld, conditioned or delayed).
(b) As soon as practicable after the Closing, Seller and
Purchaser agree to join in making a timely, effective and irrevocable election
under Section 338(h)(10) of the Code and the comparable election under the laws
of the State of Hawaii with respect to CE PUNA I and CE PUNA II (the "Section
338(h)(10) Election"). At least two (2) days prior to the Closing Date, Seller
shall deliver to Purchaser two Internal Revenue Service Forms 8023 with respect
to CE PUNA I and CE PUNA II. At the Closing Seller shall deliver to Purchaser
executed versions of such forms, which Purchaser shall counter-execute and file
with the IRS within two (2) weeks thereafter. Purchaser shall use commercially
reasonable efforts to deliver to CPI within 90 days after the Closing Date, but
in any event Purchaser shall deliver to CPI within 120 days after the Closing
Date, a statement (the "338 Allocation Statement") allocating the ADSP (as such
term is defined in Treasury regulations Section 1.338-4) of the assets of CE
PUNA I and CE PUNA II in accordance with the Treasury regulations promulgated
under Section 338 of the Code. Purchaser shall deliver a revised 338 Allocation
Statement to account for any adjustment to the Purchase Price pursuant to
Article 3 that was not previously taken into account in the preparation of the
338 Allocation Statement within 10 days after the payment of such Purchase Price
adjustment. CPI shall have the right to review the 338 Allocation Statement for
compliance with the Treasury regulations promulgated under Section 338 and
Section 755 of the Code. The parties agree that the ADSP (including any revised
ADSP) will be allocated in accordance with Schedule 7.5(b). If
38
CPI notifies Purchaser in writing within 30 days after receipt of the 338
Allocation Statement or a revised 338 Allocation Statement that the allocation
of one or more items reflected in the 338 Allocation Statement or a revised 338
Allocation Statement does not comply with the Treasury regulations promulgated
under Section 338 and Section 755 of the Code, Purchaser and CPI will negotiate
in good faith to resolve such dispute. Upon resolution of the disputed items,
the allocation reflected on the 338 Allocation Statement (as such may have been
adjusted) shall be the "Price Allocation" and shall be binding on the parties
except as set forth herein. Seller and Purchaser agree to act in accordance with
the Price Allocation in the preparation, filing and audit of any Tax return. No
Party hereto shall file any form or document required to effect a valid and
timely Section 338(h)(10) Election (or similar state or local election),
including Internal Revenue Service Forms 8023 and 8883, any similar form under
any Applicable Laws and any schedules or attachments thereto, unless it shall
have obtained the consent of the other Party hereto, which consent shall not be
unreasonably withheld, conditioned or delayed, or otherwise required pursuant by
a "determination" within the meaning of Section 1313 of the Code. As soon as
practicable after the Closing, Seller will make a timely election under Section
754 of the Code for PGV and CE PUNA LP. Within two (2) weeks of making such
elections, Seller will provide copies of such elections to Purchaser.
(c) Any Tax Return to be prepared pursuant to the provisions
of this Section 7.5 shall be prepared in a manner consistent with practices
followed in prior years with respect to similar Tax Returns, except for changes
required by changes in Applicable Laws or fact. Purchaser shall not file an
amended Tax Return for any period ending on or prior to the Closing Date without
the consent of CPI, which consent shall not be unreasonably withheld,
conditioned or delayed. The filing of any Tax Returns, or the payment of any
Taxes, described in this Section 7.5 shall be made on a timely basis in
accordance with Applicable Laws. The following provisions shall govern the
allocation of responsibility as between the Parties for certain Tax matters
following the Closing Date:
(i) CPI shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Companies for all periods ending on or
prior to the Closing Date regardless of when such Tax Returns are to be filed.
CPI shall pay, or cause to be paid, the Taxes attributable to the Companies with
respect to such periods (including any Income Taxes resulting from the
338(h)(10) Election), other than Transfer Taxes incurred in connection with this
Agreement and the Transactions, which shall be the responsibility of Purchaser.
(ii) Purchaser shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns of the Companies for Tax periods which
begin before or on the Closing Date and end after the Closing Date, excluding
those returns for which a Tax Return must be filed for a short year return
ending on or prior to the Closing Date, which shall be subject to subparagraph
(i) above. To the extent that such Taxes have not been included as a liability
on the Final Adjustment Statement, Seller shall pay, or cause
39
to be paid, to Purchaser within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of such
Taxes, which relates to the portion of such Tax period ending on the Closing
Date, other than Transfer Taxes incurred in connection with this Agreement and
the Transactions, which shall be the responsibility of Purchaser.
(d) Each Party shall provide the other Party with such
assistance as may reasonably be requested by the other Party in connection with
the preparation of any Tax Return, or any audit or other examination by any
taxing authority, or any judicial or administrative proceedings relating to any
liability for Taxes (a "Tax Proceeding"), and each will retain and provide the
requesting Party with any records or information which may be relevant to such
Tax Return or Tax Proceeding. Any reasonable out-of-pocket expenses incurred in
providing such assistance shall be borne by the requesting party. Any
information obtained pursuant to this Section 7.5 or pursuant to any other
Section hereof providing for the sharing of information relating to or review of
any Tax Return or other schedule relating to Taxes shall be kept confidential by
the Parties in accordance with the Confidentiality Agreement.
(e) After the Closing Date, in the case of any Tax Proceeding
with respect to a Taxable period for which Seller is or may be liable for the
Taxes pursuant to this Agreement, other than a claim for Taxes or a Purchaser
Claim described in Section 7.5(f) or (g), Purchaser shall inform Seller within
ten (10) days of the receipt of any notice of such Tax Proceeding, and shall
afford Seller, at Seller's expense, the opportunity to control the conduct of
such Tax Proceedings. Purchaser shall execute or cause to be executed powers of
attorney or other documents necessary to enable Seller to take all actions
desired by Seller with respect to such Tax Proceeding. Seller shall have the
right to control, in its sole discretion, any such Tax Proceedings and to
initiate any claim for refund, file any amended return, pay such Taxes, or enter
into any settlement agreement with a Governmental Authority, or take any other
action which it deems appropriate with respect to such Taxes; provided, however,
that Seller shall not, without Purchaser's consent (which consent shall not be
unreasonably withheld, conditioned or delayed) agree to any settlement with
respect to any Tax if such settlement would adversely affect the Tax liability
of Purchaser.
(f) Notwithstanding any other provision of this Agreement,
this Section 7.5(f) and Section 7.5(g), the dollar limitations contained in
Section 9.2(b), the dollar threshold contained in Section 9.7(c), and the time
limitations contained in Section 9.10 shall apply to indemnifications by Seller
to Purchaser for, and such indemnification shall be the sole remedy of Purchaser
in respect of, the Losses in respect of Taxes. Seller shall indemnify and hold
harmless Purchaser and the Companies from and against the entirety of any and
all Losses that Purchaser may suffer for any Taxes attributable to the Companies
with respect to any Tax year or portion thereof ending on or before the Closing
Date (or for any Tax year beginning before and ending after the Closing Date to
40
the extent allocable to the portion of such period beginning before and ending
on the Closing Date).
(g) The provisions of this Section 7.5(g) shall apply only to
the indemnification provided for under Section 7.5(f) and a Purchaser Claim with
respect to Taxes. If a Purchaser Claim exists for Taxes or if a claim for Taxes
is made against Purchaser for which Purchaser intends to seek indemnity with
respect thereto under Section 7.5(f), Purchaser shall promptly furnish written
notice to Seller of such Purchaser Claim or claim. Failure of Purchaser to so
notify Seller within thirty (30) days of the claim being made against Purchaser
shall release Purchaser's rights to indemnity by Seller with respect to such
claim to the extent that such failure materially prejudiced Seller's ability to
defend or settle such claim. Seller shall have fifteen (15) days after receipt
of such notice to undertake, conduct, and control (through counsel of its own
choosing and at its own expense) the settlement or defense thereof, and
Purchaser shall cooperate with Seller in connection therewith. Seller shall
permit Purchaser to participate in such settlement or defense through counsel
chosen by Purchaser (but the fees and expenses of such counsel shall be paid by
Purchaser). So long as Seller, at Seller's cost and expense, (i) have undertaken
the defense of, and assumed full responsibility for all indemnified Losses with
respect to, such claim, (ii) are contesting such claim in good faith, by
appropriate proceedings, and (iii) have taken such action (including the posting
of a bond, deposit, or other security) as may be necessary to prevent any action
to foreclose a lien against or attachment of the property of Purchaser or
Companies for payment of such claim so long as Purchaser shall not be subject to
payment obligations in excess of the limits on Seller's indemnification set
forth under this Agreement, Purchaser shall not pay or settle any such claim.
Notwithstanding compliance by Seller with the preceding sentence, Purchaser may
elect to pay or settle any such claim, but upon such election it shall thereby
automatically, and without any further action by any Party, irrevocably waive
any right to indemnity by Seller with respect to such claim. If within fifteen
(15) days after the receipt of Purchaser's notice of a claim of indemnity
hereunder, Seller do not notify Purchaser that it elects (at Seller's sole cost
and expense) to undertake the defense thereof and assume full responsibility for
all indemnified Losses with respect thereto, or gives such notice and thereafter
fails to contest such claim in good faith or to prevent action to foreclose a
lien against or attachment of Purchaser's or Companies' property or material
harm to Purchaser or the Companies as provided above, Purchaser shall have the
right to contest, settle, or compromise such claim and Purchaser shall not
thereby waive any right to indemnity with respect to such claim under this
Agreement.
(h) Any refund of Taxes paid or payable with respect to Taxes
attributable to the Companies shall be promptly paid as follows (or to the
extent payable but not paid due to offset against other Taxes shall be promptly
paid by the Party receiving the benefit of the offset as follows): (i) to Seller
if attributable to Taxes with respect to any Tax year or portion thereof ending
on or before the Closing Date (or for any Tax year beginning before and ending
after the Closing Date to the extent allocable
41
to the portion of such period beginning before and ending on the Closing Date),
including, but not limited to, the potential tax refunds described on Schedule
7.5(h); and (ii) to Purchaser if attributable to Taxes with respect to any Tax
year or portion thereof beginning after the Closing Date (or for any Tax year
beginning before and ending after the Closing Date to the extent allocable to
the portion of such period ending after the Closing Date).
(i) In the event that a dispute arises between Seller and
Purchaser as to the amount of Taxes, the Parties shall attempt in good faith to
resolve such dispute, and any amount so agreed upon shall be paid to the
appropriate Party. If such dispute is not resolved within thirty (30) days
thereafter, the Parties shall submit the dispute to the Independent Accounting
Firm for resolution, which resolution shall be final, conclusive and binding on
the Parties. The Independent Accounting Firm shall be instructed to deliver to
the Parties a written resolution of the dispute within twenty (20) Business Days
from the date of its engagement. For purposes of this Section 7.5(i), the
Independent Accounting Firm may determine the issues in dispute following such
procedures, consistent with the provisions of this Agreement, as it deems
appropriate to the circumstances and with reference to the amounts in issue. The
Parties do not intend to impose any particular procedures upon the Independent
Accounting Firm, it being the desire of the Parties that any such disagreement
shall be resolved as expeditiously and inexpensively as reasonably practicable.
The Independent Accounting Firm shall have no liability to the Parties in
connection with such services except for acts of bad faith, willful misconduct
or gross negligence, and the Parties shall provide such indemnities to the
Independent Accounting Firm as it may reasonably request. Notwithstanding
anything in this Agreement to the contrary, the fees and expenses of the
Independent Accounting Firm in resolving the dispute shall be borne equally by
Seller and Purchaser. Any payment required to be made as a result of the
resolution of the dispute by the Independent Accounting Firm shall be made
within ten (10) days after such resolution, together with any interest
determined by the Independent Accounting Firm to be appropriate.
(j) Except as provided in Section 9.2(a), Section 9.2(b),
Section 9.7(c), Section 9.8, and Section 9.10, from and after the Closing, the
provisions of this Section 7.5 shall be the exclusive agreement among the
parties (including Seller's indemnities and the Purchaser's indemnities), with
respect to Tax matters, including, but not limited to, indemnification for Tax
matters. In the event of any inconsistency between Section 7.5(g) and Sections
9.4 and 9.5 with respect to Tax matters, Section 7.5(g) shall control.
SECTION 7.6 Risk of Loss.
(a) Between the date hereof and the Closing Date, all risk of
loss or damage to the assets and properties of PGV, including the Plant, shall
be borne by Seller except as set forth in Section 8.3.
42
(b) If before the Closing Date all or any portion of the Plant
becomes subject to any condemnation or eminent domain proceeding (the "Condemned
Portion"), Seller shall notify Purchaser promptly in writing of such fact. If
the fair market value of the Condemned Portion is less than twenty-five percent
(25%) of the Initial Purchase Price and the remaining portion of the Plant may
be operated and generate electricity in a manner and amount substantially
similar to that in which the entire Plant was operated immediately prior to the
Effective Date, Seller shall, at its option, either (i) reduce the Initial
Purchase Price by the fair market value of the Condemned Portion (such value to
be determined as of the date immediately prior to such condemnation or eminent
domain proceeding), or (ii) assign to Purchaser at the Closing any claim,
settlement, or proceeds thereof related to such proceeding to which Seller or
any Affiliate of Seller may be entitled. Any failure of a condition to Closing
related to any such proceeding of which Seller shall have so notified Purchaser
shall be deemed not to exist, provided, that Seller exercises its election
pursuant to the preceding sentence within a reasonable period of time. If,
before the Closing Date, all or any portion of the Plant becomes subject to or
is threatened with any condemnation or eminent domain proceeding and the fair
market value of the Condemned Portion is greater than twenty-five percent (25%)
of the Initial Purchase Price, then Purchaser may elect either to (x) require
Seller upon the Closing to assign to Purchaser any claim, settlement, or
proceeds thereof related to such proceeding to which Seller or any Affiliate of
Seller may be entitled and proceed with the Transactions, or (y) terminate this
Agreement.
(c) If before the Closing Date all or any portion of the Plant
is damaged or destroyed (the "Damaged Portion") (whether by fire, theft,
vandalism or other casualty) in whole or in part, and the fair market value of
Damaged Portion or the cost of repair of the Damaged Portion is less than
twenty-five percent (25%) of the Initial Purchase Price, and the undamaged
portion of the Plant may be repaired so that the Plant may be operated and
generate electricity in a manner and amount substantially similar to that in
which it was operated immediately prior to the Effective Date, Seller shall, at
its option, either (i) reduce the Initial Purchase Price by the lesser of the
actual cash value of the Damaged Portion (such value to be determined as of the
date immediately prior to such damage or destruction and calculated as the
replacement cost of the Damaged Portion), or the estimated cost to repair or
restore the same, or (ii) bear the costs of repairing or restoring the Damaged
Portion and, at Seller's election, delay the Closing and any right to terminate
this Agreement for a reasonable time necessary to accomplish the same. Any
failure of a condition to Closing related to any such damage or destruction of
which Seller shall have so notified Purchaser shall be deemed not to exist,
provided, that Seller exercises its election pursuant to the preceding sentence
within a reasonable period of time. If the Plant is damaged or destroyed
(whether by fire, theft, vandalism or other casualty) in whole or in part prior
to the Closing and the lesser of the actual cash value of the Damaged Portion
(determined as provided above) or the cost of repair of the Damaged Portion is
greater than twenty-five percent (25%) of the Initial Purchase Price, then
Purchaser may elect either to (x) require Seller upon the Closing to transfer to
Purchaser the proceeds (or the right to the proceeds) of applicable insurance to
43
which Seller or any Affiliate of Seller (other than PGV) may be entitled and
proceed with the Transactions, or (y) terminate this Agreement.
SECTION 7.7 Insurance. Purchaser shall be obligated at or before
Closing to obtain at its sole cost and effective upon Closing insurance coverage
for the Plant. The proceeds from any Company Insurance Policies (without
reduction for the payment of any deductible related thereto) related to
post-Closing expenses actually paid by Purchaser or the Companies (which shall
exclude any such amounts that were previously accrued by the Companies prior to
the Closing Date and included in the Estimated Adjustment Statement and/or the
Final Adjustment Statement set forth in Sections 3.4 and 3.5) with regard to the
repairs described in Item 1 of Schedule 5.19 (Purchaser shall submit invoices
and other supporting documentation of such expenses to Seller) will be paid by
Seller to Purchaser as soon as practicable after such proceeds are received by
Seller or Seller's Affiliate from the insurance company. Seller and Seller's
Affiliates shall be entitled to retain any additional proceeds they receive
under such Company Insurance Policies with regard to such repairs. For the
avoidance of doubt, Seller or Seller's Affiliate (other than the Companies)
shall bear the cost of any deductible related to the foregoing.
SECTION 7.8 Announcements. Subject to Section 7.1, prior to the Closing
Date no press release or other public announcement, or public statement or
comment in response to any inquiry, relating to this Agreement or the
Transactions shall be issued or made by Purchaser or Seller without the joint
approval of both Purchaser and Seller; provided, however, that a press release
or other public announcement, regulatory filing, statement or comment made
without such joint approval shall not be in violation of this Section 7.8 if it
is made in order to comply with Applicable Laws or stock exchange rules and in
the reasonable judgment of the Party making such release or announcement, based
upon advice of counsel, prior review and joint approval, despite reasonable
efforts to obtain the same, would prevent dissemination of such release or
announcement in a timely enough fashion to comply with such Applicable Laws or
rules; provided, further, that in all instances prompt notice from one Party to
the other shall be given with respect to any such release, announcement,
statement or comment.
SECTION 7.9 Post Closing - Further Assurances. At any time or from time
to time after the Closing, each Party will, upon the reasonable request of the
other Party, execute and deliver any further instruments or documents, and
exercise commercially reasonable efforts to take such further actions as may
reasonably be required, to fulfill and implement the terms of this Agreement or
realize the benefits intended to be afforded hereby. After the Closing, and upon
prior reasonable request, each Party shall exercise commercially reasonable
efforts to cooperate with the other, at the requesting Party's expense
(including, but not limited to, out-of-pocket expenses to third parties incurred
by any Party), in furnishing non-confidential and non-privileged Records,
information, testimony and other assistance in connection with any inquiries,
actions, audits, proceedings or disputes involving either of the Parties (other
than in connection with
44
disputes between the Parties) and based upon contracts, arrangements or acts of
Seller or Purchaser, which were in effect or occurred on, prior to, or after
Closing and which relate to PGV or the Plant, including, without limitation,
arranging discussions with (and calling as a witness) officers, directors,
employees, agents, and representatives of Purchaser or Seller. Without limiting
the generality of the foregoing, Seller has provided to Purchaser copies of the
audited financial statements (of the type described in Section 5.17) for PGV for
each of the three full fiscal years prior to Closing and, upon Purchaser's
request, will make the auditors for the Companies reasonably available to answer
clarification questions regarding those financial statements and the financial
statements of the other Companies that the Purchaser may have.
SECTION 7.10 Post Closing - Information and Records.
(a) For a period of five (5) years after the Closing (or, if
requested in writing by Seller within five (5) years after the Closing, until
the closing of any Tax Proceeding with respect to Seller's Tax Returns for all
periods prior to and including the Closing, if later), Purchaser will not
dispose of any books, records, documents, contracts, data or information,
whether in electronic or physical form, and the software and computer hardware
necessary to retrieve such data or information ("Records"), reasonably relating
to the Companies delivered to it by Seller or in the possession of the Companies
as of the Closing without first giving notice to Seller thereof and permitting
Seller to retain or copy such books and records as it may select. During such
period, Purchaser will permit Seller to examine (during normal business hours
and upon reasonable notice) and make copies, at Seller's expense and subject to
such confidentiality restrictions as Purchaser may reasonably impose, of such
Records for any reasonable purpose, including any litigation now pending or
hereafter commenced against Seller or its Affiliates, or the preparation of
income or other Tax Returns.
(b) During such five (5) year time period, Purchaser will
provide to Seller, at Seller's expense, copies of such Records reasonably
relating to the Companies delivered to it by Seller or in the possession of the
Companies as of the Closing for any reasonable purpose, including any litigation
now pending or hereafter commenced against Seller or its Affiliates by any
Person (including Purchaser). Seller will provide reasonable notice to Purchaser
of its need to access such Records.
(c) If privileged and/or attorney work product documents or
information, including communications between Seller or its Affiliates and any
of their respective counsel, are disclosed to Purchaser in the Records delivered
by Seller or in the possession of the Companies as of the Closing, then
Purchaser agrees that (i) such disclosure is inadvertent, (ii) such disclosure
will not constitute a waiver, in whole or in part, of any privilege or work
product, (iii) such information will constitute confidential information subject
to the provisions of Section 8.4, and (iv) it will promptly return to Seller all
copies of such Records in the possession of the Companies, Purchaser or
45
Purchaser's Affiliates, agents, employees or representatives (including lenders
and financial advisors).
SECTION 7.11 Use of Seller's Marks. Except as provided in the next
sentence, Purchaser acknowledges and agrees that it does not have and, upon
consummation of the Transactions shall not have, any right, title, interest,
license, or any other right whatsoever to the Seller's Marks. As soon as
practicable and in no event later than thirty (30) days following the Closing
Date, Purchaser shall (a) remove any Seller's Marks from, or cover or conceal
the Seller's Marks on, the assets of the Companies, including signage at the
Plant, and provide written verification thereof to Seller promptly after
completing such removal, and (b) return or destroy (with proof of destruction)
all other assets of the Companies that contain any Seller's Marks that are not
removable or that cannot be permanently covered or concealed, other than in the
case of the Companies' books and records transferred pursuant to this Agreement.
Purchaser agrees never to challenge Seller's (or its Affiliates') ownership of
the Seller's Marks or any application for registration thereof or any
registration thereof or any rights of Seller or its Affiliates therein as a
result, directly or indirectly, of its ownership of the Companies. Purchaser
will not conduct any business or offer any goods or services under any Seller's
Marks. Purchaser will not send, or cause to be sent, any correspondence or other
materials to any Person on any stationery that contains any Seller's Marks or
otherwise operate the Companies in any manner which would or might reasonably be
expected to confuse any Person into believing that Purchaser has any right,
title, interest, or license to use any Seller's Marks.
SECTION 7.12 Excluded Assets.
(a) Notwithstanding anything to the contrary contained in this
Agreement, the Transactions shall exclude the following (the "Excluded Assets"):
(i) Except as required in Section 5.22 and Section
7.6(c)(x), all Company Insurance Policies and rights under any Company Insurance
Policies in respect of any and all claims made under such policies whether such
claims are asserted before or after the Closing Date and all rights to any
proceeds payable under any such policy including, without limitation, any
proceeds received by Seller or any of its Affiliates from any Company Insurance
Policies related to Item 1 of Schedule 5.19; and
(ii) the Seller's Marks. Seller's representations and
warranties in Articles 4 and 5 shall not apply to any of the items described in
7.12(a)(ii).
(b) Prior to the Closing Date, Seller may cause the Companies
to transfer any Excluded Asset to Seller or any of its Affiliates; provided,
however, that any Excluded Asset not so transferred prior to the Closing Date
shall be deemed to have been transferred to Seller without any further action.
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SECTION 7.13 Excluded Liabilities. Notwithstanding anything to the
contrary contained in this Agreement, the Transactions shall exclude, and Seller
hereby assumes as of the Closing Date, any liabilities or obligations of the
Companies in respect of the following: (the "Excluded Liabilities"):
(a) any Excluded Asset;
(b) any Employee Benefit Plan;
(c) any Intercompany Arrangements; and
(d) any liability to the State of Hawaii for tax credit
refunds received prior to Closing including, without limitation, the tax credit
refunds identified in Schedule 5.15.
SECTION 7.14 Employees.
(a) Purchaser agrees to offer employment to, or cause
Purchaser's Parent to offer employment, commencing as of the Closing Date, to
all of the employees employed at, or whose work responsibilities involve
principally the operation of, the Plant, which employees are listed on Schedule
7.14(a), as amended between the date of this Agreement and the Closing Date to
reflect any changes in the identities of work force personnel, it being
understood that any such change shall not be deemed to be material for purposes
of Section 10.5; provided, however, that such offer shall be subject to each
such employee's satisfaction of reasonable customary hiring requirements of
Purchaser or Purchaser's Parent, as the case may be, which shall be limited to
background checks and post-offer drug screening and the execution of customary
employee agreements regarding confidentiality, inventions and the like, and
shall contain the base salary and incentive compensation and replacement welfare
plans that are set forth on Schedule 7.14(c). Purchaser or Purchaser's Parent
shall continue to provide base salary and incentive compensation at not less
than then the levels set forth on Schedule 7.14(c) for a period of eighteen (18)
months after the Closing Date and shall maintain replacement welfare plans that
are substantially similar when considered in the aggregate to the replacement
welfare plans set forth on Schedule 7.14(c) for a period of eighteen (18) months
after the Closing Date. Each such employee who is offered and accepts employment
with Purchaser or Purchaser's Parent will be referred to herein as a
"Transferred Employee." With regard to the calendar year which includes the
Closing Date, Purchaser shall pay Transferred Employees the amount of any annual
incentive earned and payable under the terms of an annual incentive plan of
Purchaser or Purchaser's Parent that offers incentive compensation in an amount
and terms meeting the standards specified above, prorated based on the portion
of the full calendar year from the Closing Date to December 31, 2004. Purchaser
agrees that it shall also pay the reasonable relocation costs of any Transferred
Employee who shall relocate at Purchaser's or Purchaser's Parent's request
during the period of 18 months after the Closing Date.
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(b) Any individual who is otherwise a Transferred Employee but
who on the day immediately preceding the Closing Date is not actively at work
due to an approved leave of absence due to illness, military leave or disability
shall nevertheless be treated as Transferred Employees but only if he or she is
able to perform the essential functions of his/her job, with or without a
reasonable accommodation, within the period established under COSI PUNA's
applicable leave of absence policy.
(c) As of the Closing Date, all Transferred Employees shall
cease to participate in the employee welfare benefit plans (as such term is
defined in Section 3(1) of ERISA) maintained or sponsored by Seller or its
Affiliates and shall commence participation in the then-current employee welfare
benefit plans of Purchaser, Purchaser's Parent or their Affiliates (the
"Replacement Welfare Plans") which are included in the summary of benefit plans
of Purchaser and Purchaser's Parent that are in effect as of the Effective Date
and that are described in Schedule 7.14(c). Subject to the approval of
Purchaser's or Purchaser's Parent's insurers and third party administrators, as
needed (which approval shall be requested by Purchaser or Purchaser's Parent
immediately after the Effective Date), Purchaser or Purchaser's Parent, as
applicable shall (i) waive all limitations as to pre-existing condition
exclusions and waiting periods with respect to the Transferred Employees under
the Replacement Welfare Plans, other than, but only to the extent of,
limitations or waiting periods that were in effect with respect to such
employees under the welfare plans maintained by Seller or its Affiliates and
that have not been satisfied as of the Closing Date, and (ii) provide each
Transferred Employee with credit for any co-payments (if permitted under the
applicable Replacement Welfare Plan) and deductibles paid prior to the Closing
Date during a plan year under Seller's or its Affiliates' plan that has not
ended as of the Closing Date, in satisfying any deductible or out of pocket
requirements under the applicable Replacement Welfare Plans with respect to any
plan year that has not ended as of the Closing Date.
(d) Purchaser shall give or cause Purchaser's Parent to give
all Transferred Employees credit for all service recognized by Seller and its
Affiliates immediately prior to the Closing Date under all Replacement Welfare
Plans and arrangements maintained by Purchaser or Purchaser's Parent, as
applicable in which the Transferred Employees become participants. Prior to the
Closing Date, Seller shall provide Purchaser with a description of all such
service recognized by it and its Affiliates, itemized by individual Transferred
Employee. Purchaser agrees that the service credit to be given to Transferred
Employees by Purchaser and its Affiliates is for purposes of eligibility, and
vesting, but not benefit accrual (except for vacation and severance benefits).
(e) To the extent allowable by Applicable Law, including,
without limitation, ERISA's fiduciary provisions, and by the tax qualified
401(k) plan sponsored by the Seller or its Affiliates in effect for Transferred
Employees immediately prior to the Closing Date (the "Seller's Savings Plan"),
Purchaser shall take any and all necessary action to cause the trustee of any
tax-qualified 401(k) plan of Purchaser or its Affiliates in
48
which any Transferred Employee becomes a participant to accept a direct
"rollover" in cash (and any outstanding participant loans) of all or a portion
of said employee's "eligible rollover distribution" within the meaning of
Section 402 of the Code from the Seller's Savings Plan if requested to do so by
the Transferred Employee, except in the case where a participant has an
outstanding participant loan which in such case such participant shall
"rollover" all of its "eligible rollover distribution". However, any
tax-qualified 401(k) plan of Purchaser or its Affiliates accepting such a
rollover shall not be required to permit any investment to be made in
Constellation Energy Group, Inc. common stock on behalf of any Transferred
Employee after the Closing Date or to adopt any other provision of Seller's
Savings Plan except to the extent required by Applicable Law.
(f) Purchaser shall pay to each Transferred Employee whose
employment is terminated without Cause by Purchaser or one of its Affiliates
within eighteen months after the Closing Date a severance benefit package equal
to:
o Two weeks of base pay for each full year of service (including
service with Purchaser or its Affiliates and service
recognized by Seller or Seller's Affiliates immediately prior
to Closing).
o Insurance Benefits: Medical and dental coverage at active
employee rates during the period equal to two weeks for each
year of service (including service with Purchaser and service
recognized by Seller or Seller's Affiliates immediately prior
to the Closing); provided, however, that such coverage shall
be provided during such period only to the extent that a
Transferred Employee timely elects and continues to be
eligible for such coverage under COBRA and the terms of the
applicable benefit plans then maintained by Purchaser or its
Affiliates.
For purposes of calculating the level of severance benefits above to which a
terminated Transferred Employee is entitled, such calculation shall be made as
though the Transferred Employee's termination date is the eighteenth month
anniversary of the Closing Date, regardless of the actual date of termination.
The relocation of a Transferred Employee's employment at Purchaser's or
Purchaser's Parent's request from Purchaser or one of its Affiliates to another
Affiliate of Purchaser shall not constitute termination without Cause for
purposes of this Section.
(g) Seller shall notify Purchaser of (i) any increase in the
rate of compensation granted by COSI PUNA or the Companies payable to or to
become payable prior to the Closing Date to any Transferred Employee, and (ii)
any resignations or termination of any Transferred Employees prior to the
Closing Date.
(h) Neither Purchaser nor its Affiliates shall have any
liabilities or other obligations with respect to any Transferred Employees or
other former employees
49
or consultants of COSI PUNA or its Affiliates arising from actions or inactions
of COSI PUNA or its Affiliates during periods prior to the Closing Date.
(i) Seller and COSI PUNA shall cause the employment of all
Transferred Employees by Seller, COSI PUNA or their Affiliates to be terminated,
and all salaries, wages, benefits, severance payments and benefits or other
amounts due and owing from Seller, COSI PUNA or their Affiliates to the
Transferred Employees as of the Closing Date or as a result of such termination
to be satisfied in full by Seller, COSI PUNA or their Affiliates of Seller,
prior to or concurrently with the Closing.
SECTION 7.15 Additional Covenants of Purchaser. Purchaser hereby agrees
with and covenants to Seller that prior to consummation of the Transactions or
the termination or expiration of this Agreement pursuant to its terms, unless
Seller shall otherwise consent in writing, Purchaser shall not take any action
which would cause any of Purchaser's representations and warranties set forth in
Article 6 to be false as of the Closing in any material respect.
SECTION 7.16 Assumption of Obligations. From and after the Closing,
Purchaser shall cause the Companies to fully perform and fulfill all of their
obligations and commitments, whether existing as of the Closing Date or arising
or incurred thereafter.
SECTION 7.17 Company Guarantees. The Parties shall cooperate and use
commercially reasonable efforts (which shall not include any obligation of
Seller to pay any cost or expense or incur any obligation) in order that,
effective as of the Closing Date, (a) the Company Guarantees identified in Item
3 of Schedule 1.1A and any liabilities related thereto shall be released as to
Seller and its Affiliates, and (b) substitute arrangements, if required, of
Purchaser or its Affiliates shall be in effect.
SECTION 7.18 Action Taken in connection with the Loan Documents.
Between the Effective Date and the Closing Date, Seller shall take all actions
and binding commitments necessary to irrevocably satisfy in full at the Closing
the Debt Payoff Amount and any other amounts required to satisfy in full the
Loan Documents (including, but not limited to, all fees, penalties, early
termination payments, costs, and the like), terminate all of the Loan Documents
and secure a release from all of the counterparties thereto, finally and forever
releasing the Companies, Seller and its Affiliates under the Loan Documents and
releasing all Encumbrances associated with the Loan Documents (such releases to
be in form and substance reasonably satisfactory to Seller and Purchaser),
including, but not limited to, the Debt Service Reserve Guaranty and the Pledge
Agreement.
SECTION 7.19 Payment of Intercompany Arrangements. Seller shall cause
all Intercompany Arrangements to be cancelled and terminated, and all amounts
due and owing as of the Closing Date thereunder to be satisfied in full by the
Companies to Seller or any Affiliates of Seller, prior to or concurrently with
the Closing.
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SECTION 7.20 Repair of Well KS-11R. Seller, at its expense, shall
repair, or shall cause the Companies to repair, the injection well at the Plant
known as KS-11R in accordance with the repair program identified in Schedule 5.7
(as the same may be modified as provided below) and Applicable Laws and the
requirements of Governmental Authorities having jurisdiction. Any payables or
liabilities of the Companies associated with such repairs that have not been
paid as of Closing shall be accounted for as a Purchase Price adjustment
pursuant to the procedures set forth in Sections 3.4 and 3.5. If such repairs
have not been completed prior to Closing, Seller shall reimburse Purchaser or
the Companies for any costs they reasonably incur after Closing to complete such
repairs in accordance with the repair program identified in Schedule 5.7 (as the
same may be modified as provided below). Purchaser shall have the right to
propose modifications to the repair program identified in Schedule 5.7 which
proposed modifications Seller will consider in good faith, but Seller may
condition acceptance of any such modifications upon, among other things, the
approval of its technical experts, the approval of such modifications by
Governmental Authorities having jurisdiction and Purchaser agreeing to pay any
additional costs and assuming any additional risk associated with implementing
such modifications. If the Parties are unable to reach agreement upon any
modifications proposed by Purchaser, then the repairs shall be conducted by or
for Seller as provided in the first sentence of this Section.
ARTICLE 8
ACCESS AND CONFIDENTIALITY; TRANSITION PROCEDURESSECTION 8.1 General Access. Subject to the provisions of Section 8.2,
during the Transition Period, Seller shall permit (and Seller shall cause the
Companies to permit) Purchaser and its representatives:
(a) to have reasonable access, at reasonable times and upon
reasonable advance notice and in a manner so as not to interfere unduly with the
business operations of Seller or the Companies, to the Records of the Companies
relating to their Business and the Plant insofar as the same may be disclosed
without (i) violating any legal constraints or any legal obligation, (ii)
waiving any attorney/client, work product, or like privilege, (iii) disclosing
information about the activities of Seller or its Affiliates (other than the
Companies) that is unrelated to the Companies, their Business or the Plant, or
(iv) disclosing proprietary models of Seller or any of its Affiliates pertaining
to energy project evaluation, energy or natural gas price curves or projections,
or other economic predictive models; and
(b) subject to Seller's receipt of any required consent of any
third Person and upon reasonable advance notice to Seller, to conduct at
reasonable times and at Purchaser's sole risk, cost, and expense, in the
presence of representatives of Seller, reasonable inspections of the Plant;
provided, however, that no soil, water, groundwater or other environmental
testing shall be conducted.
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SECTION 8.2 Transition Period Procedures. The Parties acknowledge and
agree that in order to ensure that upon Closing the transition of the ownership
of the Purchased Shares and the operation of the Plant is as smooth and orderly
as is reasonably practicable, representatives of Purchaser shall be entitled to
become familiar with the Plant and be introduced to, and have the opportunity to
meet with, suppliers, other vendors and customers of any of the Companies. In
order to facilitate such transitions, not later than five (5) Business Days
following the Effective Date, Seller and Purchaser shall each designate a
representative (each a "Transition Representative") to coordinate the activities
contemplated by this Section 8.2 and shall provide the name and relevant contact
information of their respective Transition Representatives to the other Party.
Either Party may designate a different Transition Representative at any time and
from time to time by written notice to the other Party, which notice shall
specify the name of the relevant individual and his or her contact information.
Within ten (10) Business Days of their selection, the Transition Representatives
shall meet (in person or by telephone) to develop such procedures as such
persons determine to be reasonably necessary or appropriate under the
circumstances to accomplish the transitions contemplated by this Section 8.2;
provided, however, that any such procedures shall be consistent with the other
provisions of this Agreement; and provided, further, that in no event shall any
meetings with suppliers, other vendors or customers of any of the Companies
relating in manner to the Companies, the Transactions, the Plant or the Existing
Contracts be conducted prior to the Closing without Seller's Transition
Representative or other representative of Seller being present, nor shall
Purchaser or any of its Affiliates otherwise contact or communicate directly
with any supplier, other vendor or customer of any of the Companies regarding
the above-described matters prior to the Closing without Seller's prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed, unless Seller's Transition Representative or other representative of
Seller shall participate therein.
SECTION 8.3 Indemnification. Purchaser agrees to indemnify and hold
harmless, release, and defend the Seller's Indemnified Parties and the Companies
from and against any and all Losses arising, in whole or in part, from the acts
or omissions of the Purchaser Indemnified Parties in connection with Purchaser's
inspection or assessment of the Plant and other assets and Records of Seller or
any of the Companies, including claims for personal injuries (including, but not
limited to, injuries to employees of Seller), property damage (including, but
not limited to, property damage to the Plant), and reasonable attorneys' fees
and expenses, and all such inspections and assessments shall be at Purchaser's
sole risk. Nothing in this Article 8 shall be construed to permit Purchaser or
its representatives to have access to any Records of Seller or any of the
Companies relating to the Transactions, including any bids or offers received by
Seller or any of the Companies for the sale of the Purchased Shares or the
Plant, it being agreed that all such bids or offers shall be the sole property
of Seller. The provisions set forth in Sections 9.4, 9.5, 9.6, 9.7(a) and 9.7(b)
shall apply to any indemnification by Purchaser under this Section 8.3. For the
avoidance of doubt, Section 9.7(c) shall not apply to any indemnification by
Purchaser under this Section 8.3.
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SECTION 8.4 Confidential Information. Between the Effective Date and
the Closing Date, Purchaser agrees to maintain all information made available to
it under this Agreement confidential and to cause its officers, directors,
agents, employees, representatives, consultants, and advisors to maintain all
information made available to them under this Agreement confidential, all as
provided in the Confidentiality Agreement, the terms of which are incorporated
herein by reference and made a part of this Agreement.
SECTION 8.5 No Other Contact. Between the Effective Date and the
Closing Date, Purchaser shall not in any way contact or correspond with any
customer, employee, or other Person associated with any of the Companies or the
Seller regarding the Companies, the Plant or the Existing Contracts, without the
prior written consent of Seller.
ARTICLE 9
INDEMNIFICATION AND RELEASESECTION 9.1 Exclusivity. Except as provided in Section 7.5 and except
for fraud, willful misconduct, willful misrepresentation, or willful breach of a
representation, warranty, covenant or agreement hereunder, the rights and
remedies of Seller and the Seller's Indemnified Parties, on the one hand, and
Purchaser and the Purchaser Indemnified Parties, on the other hand, for money
damages under this Article are, solely as between Seller and the Seller's
Indemnified Parties on the one hand, and Purchaser and the Purchaser Indemnified
Parties on the other hand, exclusive and in lieu of any and all other rights and
remedies for money damages which each of Seller and the Seller's Indemnified
Parties on the one hand, and Purchaser and the Purchaser Indemnified Parties on
the other hand, may have under this Agreement or under Applicable Laws with
respect to any Indemnifiable Claim, whether at law or in equity.
SECTION 9.2 Indemnification by Seller.
(a) Purchaser Claims. Except as otherwise provided in Section
7.5(f), Seller will indemnify, defend and hold harmless Purchaser and its
Affiliates, and each of their officers, directors, employees, attorneys, agents
and successors and assigns (collectively, the "Purchaser Indemnified Parties"),
from and against any and all demands, suits, penalties, fines, liens, judgments,
obligations, damages, claims, losses, liabilities, payments, costs and expenses,
including reasonable legal, accounting and other expenses in connection
therewith and costs and expenses incurred in connection with investigations and
settlement proceedings ("Losses"), which arise out of, are in connection with,
or relate to, the following (collectively, "Purchaser Claims"):
(i) any breach or violation of any covenant, obligation
or agreement of Seller set forth in this Agreement;
53
(ii) any breach or inaccuracy of the representations or
warranties made, as of the Effective Date or the Closing Date, by Seller in
Articles 4 and 5;
(iii) Seller's ownership, operation or use of the
Excluded Assets after the Closing; or
(iv) if the Closing occurs, the Excluded Liabilities.
(b) Limitations on Seller Indemnification Obligation. As
between the Parties, except in the case of fraud or willful misconduct on the
part of Seller or its Affiliates, the Purchaser Indemnified Parties will not be
entitled to any punitive, incidental, indirect, special or consequential damages
resulting from or arising out of any Purchaser Claims, including damages for
lost revenues, income, or profits, diminution in value of the Plant or any other
damage or loss resulting from the disruption to or loss of operation of the
Plant. The aggregate damages to which the Purchaser Indemnified Parties will be
entitled for all Purchaser Claims shall be limited to ten percent (10%) of the
Initial Purchase Price.
SECTION 9.3 Indemnification by Purchaser.
(a) Seller's Claims. Purchaser will indemnify, defend and hold
harmless Seller and its Affiliates and each of their officers, directors,
employees, attorneys, agents and successors and assigns (collectively, the
"Seller's Indemnified Parties"), from and against any and all Losses which arise
out of or relate to the following (collectively, "Seller's Claims"):
(i) any breach or violation of any covenant, obligation
or agreement of Purchaser set forth in this Agreement;
(ii) any breach or inaccuracy of any of the
representations or warranties made, as of the Effective Date or the Closing
Date, by Purchaser in Article 6;
(iii) if the Closing occurs, the Business of PGV, the
design, construction, ownership, operation or use of any of the assets of PGV,
including the Plant (but excluding the Excluded Assets), the failure to pay,
perform or discharge any liabilities or obligations of PGV (but excluding the
Excluded Liabilities), or any other matter relating to or arising out of the
Business of PGV, the design, construction, ownership, operation or use of any of
the assets of PGV, including the Plant (but excluding the Excluded Assets),
whether relating to periods of time prior to or after the Closing Date, to the
extent such Losses are not properly asserted by Purchaser under Section 7.5 or
Section 9.2(a) (subject to the limitations in this Agreement); or
(iv) if the Closing occurs, without limiting the
generality of Section 9.3(a)(iii), any liability, obligation or responsibility
under or related to former,
54
current or future Environmental Laws, whether such liability or obligation or
responsibility is known or unknown, contingent or accrued, arising as a result
of or in connection with (A) any violation or alleged violation of Environmental
Law, before or after the Closing Date, with respect to the ownership or
operation of the Plant; (B) compliance with applicable Environmental Laws before
or after the Closing Date with respect to the ownership or operation of the
Plant; (C) loss of life, injury to persons or property or damage to natural
resources caused (or allegedly caused) by any Recognized Environmental Condition
on, in, under, adjacent to or migrating from the Plant before or after the
Closing Date, including, but not limited to, Hazardous Substances contained in
building materials at or adjacent to the Plant or in the soil, surface water,
sediments, groundwater, landfill cells, or in other environmental media at the
Plant; (D) the investigation and/or Remediation of Hazardous Substances that are
present or have been Released before or after the Closing Date at, on, in,
under, adjacent to or migrating from the Plant, including, but not limited to,
Hazardous Substances contained in building materials at the Plant or in the
soil, surface water, sediments, groundwater, landfill cells or in other
environmental media at or adjacent to the Plant; and (E) the investigation
and/or Remediation of Hazardous Substances that are disposed, stored,
transported, discharged, Released, recycled, or the arrangement of such
activities, in connection with the ownership or operation of the Plant, at any
off-site location.
Purchaser acknowledges and agrees that the Losses described in Sections
9.3(a)(iii) and 9.3(a)(iv) shall be retained by PGV and transferred with the
transfer of the Purchased Shares and shall continue to be the responsibility of
PGV and Purchaser.
SECTION 9.4 Notice of Claim. Subject to the terms of this Agreement and
upon a Party's receipt of notice of the assertion of a claim or of the
commencement of any suit, action or proceeding made or brought by any Person who
is not a Party to this Agreement or an Affiliate of either Party, the Party
seeking indemnification hereunder (the "Indemnitee") will promptly notify the
Party against whom indemnification is sought (the "Indemnitor") in writing of
any damage, claim, loss, liability or expense which the Indemnitee has
determined has given or could give rise to a claim under Section 9.2 or Section
9.3. Such written notice is herein referred to as a "Notice of Claim." A Notice
of Claim will specify, in reasonable detail, the material facts known to the
Indemnitee regarding the claim. Subject to the terms of this Agreement, the
failure to provide (or timely provide) a Notice of Claim will not affect the
Indemnitee's rights to indemnification; provided, however, that the Indemnitor
is not obligated to indemnify the Indemnitee for the increased amount of any
claim which would otherwise have been payable to the extent that the increase
resulted from the Indemnitee's failure to timely deliver a Notice of Claim.
SECTION 9.5 Defense of Third Party Claims. The Indemnitor will defend,
in good faith and at its expense, any claim or demand set forth in a Notice of
Claim relating to a Third Party Claim and the Indemnitee, at its expense, may
participate in the defense. The Indemnitee may not settle or compromise any
Third Party Claim so long as the
55
Indemnitor is defending it in good faith. If the Indemnitor elects not to
contest a Third Party Claim, the Indemnitee may undertake its defense, and the
Indemnitor will be bound by the result obtained by the Indemnitee. The
Indemnitor may at any time request the Indemnitee to agree to the abandonment of
the contest of the Third Party Claim or to the payment or compromise by the
Indemnitor of the asserted claim or demand. If the Indemnitee does not object in
writing within fifteen (15) days of the Indemnitor's request, then the
Indemnitor may proceed with the action stated in the request. If, within that
fifteen (15) day period, the Indemnitee notifies the Indemnitor in writing that
it has determined that the contest should be continued, the Indemnitor will be
liable under this Article 9 only for an amount up to the amount which the
Indemnitor had proposed as payment or compromise for such Third Party Claim.
This Section 9.5 is subject to the rights of any insurance carrier of Indemnitee
that is defending the Third Party Claim.
SECTION 9.6 Cooperation. The Party defending the Third Party Claim
will: (a) consult with the other Party throughout the pendency of the Third
Party Claim regarding the investigation, defense, settlement, trial, appeal or
other resolution of the Third Party Claim; and (b) afford the other Party the
opportunity to be associated in the defense of the Third Party Claim. The
Parties will cooperate in the defense of the Third Party Claim. The Indemnitee
will make available to the Indemnitor or its representatives all Records and
other materials reasonably required by them for use in contesting any Third
Party Claim (which Records and other materials shall be subject to the
Confidentiality Agreement). If requested by the Indemnitor, the Indemnitee will
cooperate with the Indemnitor and its counsel in contesting any Third Party
Claim that the Indemnitor elects to contest or, if appropriate, in making any
counterclaim against the Person asserting the claim or demand, or any
cross-complaint against any Person. The Indemnitor will reimburse the Indemnitee
for any expenses incurred by Indemnitee in cooperating with or acting at the
request of the Indemnitor.
SECTION 9.7 Mitigation and Limitation of Claims. As used in this
Agreement, the term "Indemnifiable Claim" means any Purchaser Claims or Seller's
Claims. Notwithstanding anything to the contrary contained herein:
(a) the Indemnitee will take all commercially reasonable steps
to mitigate all losses, damages and the like relating to an Indemnifiable Claim,
including availing itself, to the extent the same are commercially reasonable,
of any defenses, limitations, rights of contribution, claims against third
Persons and other rights at law or equity, and will provide such evidence and
documentation of the nature and extent of the Indemnifiable Claim as may be
reasonably requested by the Indemnitor. The Indemnitee's reasonable steps
include the reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expense for which indemnification would otherwise be due
under this Article 9, and the Indemnitor will reimburse the Indemnitee for the
Indemnitee's reasonable expenditures in undertaking the mitigation, together
with interest thereon from the date of payment to the date of repayment at the
"prime rate" in effect during such period as published in The Wall Street
Journal;
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(b) any Indemnifiable Claim shall be limited to the amount of
actual out-of-pocket damages sustained by the Indemnitee by reason of such
breach or nonperformance, net of insurance recoveries; provided, that, subject
to the limitations set forth in Sections 9.2(b) and 9.7(c), a Seller Claim for a
breach of this Agreement by Purchaser that results in a termination of this
Agreement or other failure to consummate the Transactions may include any excess
of the Initial Purchase Price over the (i) consideration to be received by
Seller from the sale of the Purchased Shares to a third Person in any subsequent
transaction, or (ii) fair market value of the Purchased Shares if they are not
subsequently sold; and
(c) if the Closing occurs, no Party shall have any liability
or obligation to indemnify under Section 9.2(a)(ii) or Section 9.3(a)(ii), as
the case may be, unless the aggregate amount for which such Party would be
liable thereunder, but for this provision, exceeds one million Dollars
($1,000,000), and recovery shall be limited only to such amounts as exceed one
million Dollars ($1,000,000). For purposes of the foregoing, individual claims
of one hundred thousand Dollars ($100,000) or less shall not be aggregated for
purposes of calculating such deductible threshold amount or for calculating
damages in excess of such amount. Nothing in this Section 9.7(c) is intended to
modify or limit a Party's liability or obligation hereunder for other
Indemnifiable Claims. Notwithstanding the foregoing, the limits in this Section
9.7(c) shall not apply to any claims relating to breach of Section 4.5 or
Section 6.6.
SECTION 9.8 Adjustment to Purchase Price. Any and all payments required
to be made under this Article 9 and Section 7.5 will be treated as an adjustment
to the Purchase Price.
SECTION 9.9 Specific Performance.
(a) Seller acknowledges that the Transactions are unique and
that Purchaser will be irreparably injured should such Transactions not be
consummated in a timely fashion. Consequently, Purchaser will not have an
adequate remedy at law if Seller shall fail to sell the Purchased Shares when
required to do so hereunder. In such event, Purchaser shall have the right, in
addition to any other remedy available in equity or law, to specific performance
of such obligation by Seller, subject to Purchaser's performance of its
obligations hereunder.
(b) Purchaser acknowledges that the Transactions are unique
and that Seller will be irreparably injured should such Transactions not be
consummated in a timely fashion. Consequently, Seller will not have an adequate
remedy at law if Purchaser shall fail to purchase the Purchased Shares when
required to do so hereunder. In such event, Seller shall have the right, in
addition to any other remedy available in equity or law, to specific performance
of such obligation by Purchaser, subject to Seller's performance of its
obligations hereunder.
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SECTION 9.10 Survival; Time Limitation for Indemnification. The terms
and provisions of this Agreement shall survive the Closing. Notwithstanding the
foregoing, after Closing, any assertion by Purchaser or any Purchaser
Indemnified Party that Seller is liable to Purchaser or any Purchaser
Indemnified Party, or any assertion by Seller or any Seller's Indemnified Party
that Purchaser is liable to Seller or any Seller's Indemnified Party, for
indemnification under the terms of this Agreement or otherwise in connection
with the Transactions must be made in writing and must be given to Seller or
Purchaser, as the case may be (or not at all) on or prior to the date that is
twelve (12) months after the Closing Date, except, in the case of Purchaser, for
matters addressed in Sections 5.23 and 7.5(e), which must be made in writing and
must be given to Seller (or not at all) on or prior to the date that is ninety
(90) days after the date on which the applicable statute of limitations expires
with respect to the matters covered thereby.
SECTION 9.11 Release. Except for the Excluded Liabilities and Seller's
obligations hereunder including, without limitation, under this Article 9
(including without limitation Seller's obligations under this Article 9 as the
result of the breach of any provision of this Agreement), Purchaser on behalf of
itself and each of its Affiliates, and on behalf of each of its and their
successors and assigns, hereby waives its right to recover from Seller and its
Affiliates and any Person acting on behalf of Seller or any such Affiliates, and
forever releases and discharges Seller, any such Affiliates and any such other
Person, from any and all Losses (including, without limitation, attorneys' fees
and costs), whether direct or indirect, known or unknown, foreseen or
unforeseen, that may arise on account of or in any way be connected with any of
the Companies or the Plant, including without limitation, (a) all liabilities or
obligations under or related to Environmental Laws or relating to any claim in
respect of Recognized Environmental Conditions or Hazardous Substances arising
under Applicable Laws, including Environmental Laws, and (b) all liabilities
that in any way arise out of or are related to or associated with the ownership,
possession, use or operation of any of the assets of any of the Companies,
including the Plant, before or after the Closing. In this regard, Purchaser, on
behalf of itself and each of its Affiliates, and each of its and their
successors and assigns, expressly waives any and all rights and benefits that it
now has or they now have, or in the future may have, conferred upon it or them
by virtue of any statute or common law principle which provides that a general
release does not extend to claims which a party does not know or suspect to
exist in its favor at the time of executing the release, if knowledge of such
claims would have materially affected such party's settlement with the obligor.
Purchaser, on behalf of itself and each of its Affiliates, and each of its and
their successors and assigns, hereby further acknowledges that it is aware that
factual matters now unknown to it or them may have given or may hereafter give
rise to claims, losses and liabilities that are presently unknown, unanticipated
and unsuspected, that the release contained herein has been negotiated and
agreed upon in light of such awareness, and that it nevertheless hereby intends
to be bound and to bind each of its Affiliates, and each of its and their
successors and assigns, to the release set forth above.
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ARTICLE 10
PURCHASER'S CONDITIONS TO CLOSING
The obligation of Purchaser to consummate the Transactions shall be
subject to fulfillment at or prior to the Closing of the following conditions,
except to the extent Purchaser waives such fulfillment in writing:
SECTION 10.1 Compliance with Provisions. Seller shall have performed or
complied in all material respects with all covenants and agreements contained in
this Agreement on its part required to be performed or complied with at or prior
to the Closing.
SECTION 10.2 HSR Act. The waiting period under the HSR Act applicable
to the consummation of the sale of the Purchased Shares contemplated hereby
shall have expired or been terminated.
SECTION 10.3 No Restraint. There shall be no:
(a) injunction, restraining order or order of any nature
issued and outstanding by any Governmental Authority of competent jurisdiction
over the Parties which directs that the Transactions shall not be consummated as
herein provided;
(b) suit, action or other proceeding by any Governmental
Authority of competent jurisdiction over the Parties pending or threatened
(pursuant to a written notification), wherein such complainant seeks the
restraint or prohibition of the consummation of the Transactions; or
(c) action taken, or law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over the Parties which would render the purchase and sale of the
Purchased Shares illegal;
provided, that the Parties will use their commercially reasonable efforts to
litigate against, and to obtain the lifting of, any such injunction, restraining
or other order, restraint, prohibition, action, suit, law or penalty.
SECTION 10.4 Required Regulatory Approvals and Consents. Without
limiting the applicability of Sections 7.1 and 7.4, Purchaser shall have
received all of Purchaser's Required Regulatory Approvals and Purchaser's
Required Consents and Seller shall have received all of Seller's Required
Regulatory Approvals and Seller's Required Consents. In the event that any such
Approval requires any modification to this Agreement or the Transactions,
imposes any condition to the effectuation of the Transactions, or places any
restrictions upon Purchaser's ownership of the Plant, then such modifications,
conditions or restrictions shall be subject to Purchaser's approval to the
extent that such modifications, conditions and restrictions, if any, are not
contemplated by this Agreement and would, individually or in the aggregate,
result in a Material Adverse Effect upon
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Purchaser, its ownership of the Plant or the operation of the Plant after the
Closing; provided, however, that Purchaser shall be deemed to have approved of
any such modifications, conditions or restrictions to the extent that Purchaser
fails to disapprove of same in a written notice to Seller received no later than
fifteen (15) Business Days following in the case of a Purchaser's Required
Regulatory Approvals the public announcement of the decision of the Governmental
Authority imposing such modification, condition or restriction and in the case
of a Seller's Required Regulatory Approvals Purchaser's receipt of written
notice from Seller of the decision of the Governmental Authority imposing such
modification, condition or restriction.
SECTION 10.5 Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement that are qualified with respect
to materiality (whether by reference to Material Adverse Effect or otherwise)
shall be true and correct, and the representations and warranties of Seller set
forth in this Agreement that are not so qualified shall be true and correct in
all material respects, on and as of the Closing Date, in each case as though
made on and as of the Closing Date.
SECTION 10.6 Officer's Certificate. Purchaser shall have received a
certificate from Seller, executed on its behalf by an authorized officer, dated
the Closing Date, to the effect that the conditions set forth in Sections 10.1
and 10.5 have been satisfied by Seller.
SECTION 10.7 Material Adverse Effect. Except in the case of matters
contemplated in Section 7.6 (which section shall, for the avoidance of doubt,
control all matters discussed thereby), since the Effective Date, no Material
Adverse Effect shall have occurred and be continuing with respect to the Plant
or the Companies.
SECTION 10.8 Legal Opinion. Purchaser shall have received an opinion or
opinions from Seller's in-house legal counsel dated as of the Closing Date
substantially as to the matters set forth in Exhibit 10.8, subject to the
conditions and limitations therein and to such other customary conditions and
limitations as shall be reasonably acceptable to Purchaser and its legal
counsel.
SECTION 10.9 No Termination. Neither Party shall have exercised any
termination right such Party is entitled to exercise pursuant to Section 12.1.
SECTION 10.10 Receipt of Other Documents. Purchaser shall have received
the following:
(a) A certificate of good standing with respect to Seller, as
of a recent date, issued by the Secretary of State of the State of Maryland;
(b) A copy of Seller's certificates of incorporation certified
as of a recent date, by the Secretary of State of the State of Maryland, and a
copy of Seller's by-laws certified by the Secretary or an Assistant Secretary of
Seller, together with a
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certificate of the Secretary or an Assistant Secretary of Seller that neither of
such documents has been amended on or after the Effective Date;
(c) Copies, certified by the Secretary or an Assistant
Secretary of Seller, of resolutions of Seller authorizing the execution and
delivery by Seller of this Agreement, and authorizing or ratifying of all of the
other agreements and instruments to be executed and delivered by Seller in
connection herewith;
(d) A certificate of the Secretary or an Assistant Secretary
of Seller identifying the name and title and bearing the signatures of the
individuals authorized by Seller to execute and deliver this Agreement and the
other agreements and instruments contemplated hereby;
(e) Written resignations or terminations of each of the
directors and officers of each of the Companies, effective as of the Closing;
(f) A certificate of good standing with respect to each of the
Companies, as of recent date, issued by the Secretary of State of each of their
respective states of incorporation/formation and each other state in which the
Companies are qualified to do business; and
(g) A listing of the items in Inventory.
SECTION 10.11 Loan Documents. Pursuant to Section 7.18, Seller shall
have taken all steps and binding commitment necessary to irrevocably satisfy in
full at the Closing the Debt Payoff Amount and any other amounts required to
satisfy in full the Loan Documents (including, but not limited to, all fees,
penalties, early termination payments, costs, and the like), terminate all of
the Loan Documents and secure a release from all of the counterparties thereto,
finally and forever releasing the Companies, Seller and their Affiliates under
the Loan Documents and releasing all Encumbrances associated with the Loan
Documents (such releases to be in form and substance reasonably satisfactory to
Seller and Purchaser), including, but not limited to, the Debt Service Reserve
Guaranty and the Pledge Agreement.
ARTICLE 11
SELLER'S CONDITIONS TO CLOSING
The obligation of Seller to consummate the Transactions shall be
subject to fulfillment at or prior to the Closing of the following conditions,
except to the extent Seller waives such fulfillment in writing:
SECTION 11.1 Compliance with Provisions. Purchaser shall have performed
or complied in all material respects with all covenants and agreements contained
in this Agreement on its part required to be performed or complied with at or
prior to the
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Closing, including but not limited to the payment of the Initial Purchase Price,
as adjusted pursuant to Section 3.3, to Seller.
SECTION 11.2 HSR Act. The waiting period under the HSR Act applicable
to the consummation of the sale of the Purchased Shares contemplated hereby
shall have expired or been terminated.
SECTION 11.3 No Restraint. There shall be no:
(a) injunction, restraining order or order of any nature
issued and outstanding by any Governmental Authority of competent jurisdiction
over the Parties which directs that the Transactions shall not be consummated as
herein provided;
(b) suit, action or other proceeding by any Governmental
Authority of competent jurisdiction over the Parties pending or threatened
(pursuant to a written notification), wherein such complainant seeks the
restraint or prohibition of the consummation of the Transactions; or
(c) action taken, or law enacted, promulgated or deemed
applicable to the Transactions, by any Governmental Authority of competent
jurisdiction over the Parties which would render the purchase and sale of the
Purchased Shares illegal;
provided, that the Parties will use their commercially reasonable efforts to
litigate against, and to obtain the lifting of, any such injunction, restraining
or other order, restraint, prohibition, action, suit, law or penalty.
SECTION 11.4 Required Regulatory Approvals and Consents. Without
limiting the generality of Sections 7.1 and 7.4, Seller shall have received all
of Seller's Required Regulatory Approvals and Seller's Required Consents and
Purchaser shall have received all of Purchaser's Required Regulatory Approvals
and Purchaser's Required Consents. In the event that any such Approval requires
any modification to this Agreement or the Transactions, imposes any condition to
the effectuation of the Transactions, or places any restrictions upon Seller's
conveyance of the Purchased Shares, or the Companies' ownership of the Plant or
the operation of the Plant prior to the Closing, then such modifications,
conditions or restrictions shall be subject to Seller's approval to the extent
that such modifications, conditions and restrictions, if any, are not
contemplated by this Agreement and would, individually or in the aggregate,
result in a Material Adverse Effect upon Seller, the Companies' ownership of the
Plant or the operation of the Plant prior to the Closing; provided, however,
that Seller shall be deemed to have approved of any such modifications,
conditions or restrictions to the extent that Seller fail to disapprove of same
in a written notice to Seller received no later than fifteen (15) Business Days
following the public announcement of the decision of the Governmental Authority
imposing such modification, condition or restriction.
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SECTION 11.5 Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement that are qualified with
respect to materiality (whether by reference to Material Adverse Effect or
otherwise) shall be true and correct, and the representations and warranties
that are not so qualified shall be true and correct in all material respects, on
and as of the Closing Date, in each case as though made on and as of the Closing
Date.
SECTION 11.6 Officer's Certificate. Seller shall have received a
certificate from Purchaser, executed on its behalf by an authorized officer,
dated the Closing Date, to the effect that the conditions set forth in Sections
11.1 and 11.5 have been satisfied by Purchaser.
SECTION 11.7 Legal Opinion. Seller shall have received an opinion or
opinions from Purchaser's counsel dated the Closing Date substantially as to the
matters set forth in Exhibit 11.7, subject to the conditions and limitations
therein and to such other customary conditions and limitations as shall be
reasonably acceptable to Seller and its counsel.
SECTION 11.8 No Termination. Neither Party shall have exercised any
termination right such Party is entitled to exercise pursuant to Section 12.1.
SECTION 11.9 Loan Documents. Pursuant to Section 7.18, Seller shall
have taken all steps and binding commitment necessary to irrevocably satisfy in
full at the Closing the Debt Payoff Amount and any other amounts required to
satisfy in full the Loan Documents (including, but not limited to, all fees,
penalties, early termination payments, costs, and the like), terminate all of
the Loan Documents and secure a release from all of the counterparties thereto,
finally and forever releasing the Companies, Seller and its Affiliates under the
Loan Documents releasing all Encumbrances associated with the Loan Documents
(such releases to be in form and substance reasonably satisfactory to Seller and
Purchaser), including, but not limited to, the Debt Service Reserve Guaranty and
the Pledge Agreement.
SECTION 11.10 Receipt of Other Documents. Seller shall have received
the following:
(a) A certificate of good standing with respect to Purchaser,
as of a recent date, issued by the appropriate government official of its
jurisdiction of formation;
(b) Copies of the limited liability company agreement and
certificate of formation of Purchaser certified as of a recent date by the
appropriate government official of its jurisdiction of formation, together with
a certificate of a duly authorized manager of Purchaser that none of such
documents have been amended on or after the Effective Date;
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(c) Copies, certified by the manager of Purchaser, of
resolutions of Purchaser authorizing the execution and delivery by Purchaser of
this Agreement, and authorizing or ratifying all of the other agreements and
instruments, in each case, to be executed and delivered by Purchaser in
connection herewith;
(d) A certificate of the manager of Purchaser identifying the
name and title and bearing the signatures of the manager and officers of
Purchaser authorized to execute and deliver this Agreement, and the other
agreements and instruments contemplated hereby; and
(e) Insurance certificates evidencing compliance with Section
7.7.
ARTICLE 12
TERMINATIONSECTION 12.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing Date by mutual written consent of the Parties.
(b) This Agreement may be terminated by either Party if the
Closing shall not have occurred on or before one hundred (100) days following
the Effective Date (the "Termination Date"); provided, however, that the right
to terminate this Agreement under this Section 12.1(b) shall not be available to
a Party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date.
(c) This Agreement may be terminated by Purchaser if there has
been a violation or breach by Seller of any agreement, covenant, representation
or warranty contained in this Agreement which has not been waived by Purchaser
and such violation or breach constitutes a Material Adverse Effect and is not
cured within thirty (30) days after Seller's receipt of notice from Purchaser
concerning such violation or breach.
(d) This Agreement may be terminated by Seller if there has
been a violation or breach by Purchaser of any agreement, covenant,
representation or warranty contained in this Agreement which has not been waived
by Seller and such violation or breach constitutes a Material Adverse Effect and
is not cured within thirty (30) days after Purchaser's receipt of notice from
Seller concerning such violation or breach.
(e) There has been a material adverse change in the financial
condition of Purchaser that constitutes a Material Adverse Effect.
(f) This Agreement may be terminated by either Party in
accordance with the provisions of Sections 7.6(b) or 7.6(c).
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SECTION 12.2 Procedure and Effect of Termination.
(a) If there has been a termination pursuant to Section 12.1,
then this Agreement shall be deemed terminated, and all further obligations of
the Parties hereunder shall terminate, except that the obligations set forth in
Sections 7.8, 8.2, 8.3, and 8.4 and in Article 9, Article 12 and Article 13
shall survive. In the event of such termination of this Agreement, there shall
be no liability for damages on the part of a Party to the other Party under and
by reason of this Agreement or the Transactions except as set forth in Article 9
and except for fraud or willful misconduct of a Party, the remedies for which
shall not be limited by the provisions of this Agreement. The foregoing
provisions shall not, however, limit or restrict the availability of specific
performance or other injunctive or equitable relief to the extent that specific
performance or such other relief would otherwise be available to a Party
hereunder.
(b) In the event a Party shall elect to terminate this
Agreement pursuant to Section 12.1, such Party shall forthwith provide notice
thereof to the other Party whereupon this Agreement shall terminate and the
Transactions shall be abandoned. Upon any such termination, all filings,
applications and other submissions made pursuant to this Agreement shall, to the
extent practicable, be withdrawn from the respective Governmental Authority by
the Party having filed or submitted the same.
ARTICLE 13
GENERAL PROVISIONSSECTION 13.1 Expenses. Whether or not the Transactions are consummated,
except as otherwise provided in any other provision of this Agreement, all costs
and expenses (including attorneys' and consultants' fees, costs and expenses)
incurred in connection with this Agreement and the Transactions shall be paid by
the Party incurring such expenses; provided, however, all fees, charges and
costs of economists and other experts, if any, jointly retained by the Parties
in connection with submissions made to any Governmental Authority and advice in
connection therewith respecting approval of the Transactions will be borne by
Purchaser.
SECTION 13.2 Entire Document; Modification or Amendment. This Agreement
(including the Exhibits and Schedules hereto), and the Confidentiality Agreement
contain the entire agreement between the Parties with respect to the
Transactions, and supersede all negotiations, representations, warranties,
commitments, offers, contracts and writings (except for the Confidentiality
Agreement) prior to the execution date of this Agreement, written or oral. No
modification or amendment of any provision of this Agreement shall be effective
unless made in writing and duly signed by the Parties referring specifically to
this Agreement.
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SECTION 13.3 Schedules and Exhibits.
(a) The Parties agree and acknowledge that the Schedules in
this Agreement may be incomplete or subject to revision prior to the Closing.
The Parties will cooperate and work in good faith to complete and update such
Schedules in a manner consistent with the provisions of Section 7.2 and the
other requirements of this Agreement. For purposes of determining whether
Purchaser's conditions set forth in Section 10.5 have been fulfilled, the
Schedules shall be deemed to include only the information contained therein on
the Effective Date, and shall be deemed to exclude all information contained in
any update, supplement or amendment thereto to the extent such information
relates to (i) periods prior to the "as of" dates of the Schedules attached to
this Agreement on the Effective Date, or (ii) any conditions or matters that do
not have a Material Adverse Effect; provided, however, that if Closing shall
occur, then all matters disclosed by either Party pursuant to any such update,
supplement or amendment at or prior to the Closing shall be deemed to be matters
of which the other Party had Knowledge.
(b) All Schedules and Exhibits hereto which are referred to
herein are hereby made a part hereof and incorporated herein by such reference.
Each Schedule to this Agreement shall be deemed to include and incorporate all
disclosures made on the other Schedules to this Agreement. Certain information
set forth in the Schedules is included solely for informational purposes, is not
an admission of liability with respect to the matters covered by the
information, and may not be required to be disclosed pursuant to this Agreement.
The specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
Schedules is not intended to imply that such amounts (or higher or lower
amounts) are or are not material, and no Party shall use the fact of the setting
of such amounts or the fact of the inclusion of any such item in the Schedules
in any dispute or controversy between the Parties as to whether any obligation,
item, or matter not described herein or included in a Schedule is or is not
material for purposes of this Agreement.
SECTION 13.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 13.5 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid, binding and
enforceable under Applicable Laws, but if any provision of this Agreement is
held to be invalid, void (or voidable) or unenforceable under Applicable Laws,
such provision shall be ineffective only to the extent held to be invalid, void
(or voidable) or unenforceable, without affecting the remainder of such
provision or the remaining provisions of this Agreement. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an
acceptable manner to
66
the end that the Transactions are fulfilled to the extent possible. To the
extent permitted by Applicable Laws, the Parties waive any provision of
Applicable Law that renders any provision hereof prohibited or unenforceable in
any respect.
SECTION 13.6 Assignability. The rights under this Agreement shall not
be assignable or transferable nor the duties delegable by any Party without the
prior written consent of the other Parties, which consent may be granted or
withheld in such other Party's sole discretion.
SECTION 13.7 Captions. The captions of the various Articles, Sections,
Exhibits and Schedules of this Agreement have been inserted only for convenience
of reference and do not modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 13.8 Governing Law and Forum. This Agreement and the rights and
obligations of the parties hereunder and the Transactions shall be governed by,
and construed in accordance with, the law of the State of New York without
respect to its conflict of laws provisions. THE PARTIES HERETO AGREE THAT VENUE
IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS
AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN NEW YORK, NEW YORK, WHICH
COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES
HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY
SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN ANY MANNER
RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.9 Notices. All notices, requests, demands and other
communications under this Agreement must be in writing and must be delivered in
person or sent by certified mail, postage prepaid, by overnight delivery, or by
telefacsimile and properly addressed as follows:
If to Seller:
Constellation Power, Inc.
750 East Pratt Street
Baltimore, Maryland21202
Attention: Bruce Douglas
Facsimile: 410.230.4609
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If to COSI PUNA:
COSI Puna, Inc.
750 East Pratt Street
Baltimore, Maryland21202
Attention: Bruce Douglas
Facsimile: 410.230.4609
With copies to:
Constellation Energy Group, Inc.
750 East Pratt Street, 18th Floor
Baltimore, Maryland21202
Attention: General Counsel
Facsimile: 410.783.3609
and
Constellation Energy Group, Inc.
750 East Pratt Street
Baltimore, Maryland21202
Attention: John Paffenbarger
Facsimile: 410.783.2819
If to Purchaser:
ORNI 8 LLC
c/o Ormat Nevada Inc.
980 Greg Street
Sparks, NV89509
Attention: President
Facsimile: 775.356.9039
If to Purchaser's Parent:
Ormat Nevada Inc.
980 Greg Street
Sparks, NV89509
Attention: President
Facsimile: 775.356.9039
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With a copy to:
Perkins Coie LLP
1201 Third Avenue, Suite 4000
Seattle, WA98101
Attention: Robert E. Giles
Facsimile: 206.583.8500
Any Party may from time to time change its address for the purpose of notices to
that Party by a similar notice specifying a new address, but no such change is
effective until it is actually received by the Party sought to be charged with
its contents. Notices which are addressed as provided in this Section 13.9 given
by overnight delivery or mail shall be effective (a) upon delivery, if delivered
personally or by overnight delivery, (b) five (5) days following deposit in the
United States mail, postage prepaid, if delivered by mail, or (c) at such time
as delivery is refused by the addressee upon presentation. Notices which are
addressed as provided in this Section 13.9 given by telefacsimile shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next business day after receipt if
not received during the recipient's normal business hours. All notices by
telefacsimile shall be confirmed promptly by the sender after transmission in
writing by certified mail or overnight delivery.
SECTION 13.10 No Third Party Beneficiaries. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any Persons other than the Parties and their
respective permitted successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
Persons to any Party, nor give any third Persons any right of subrogation or
action against any Party.
SECTION 13.11 No Relationship. Nothing in this Agreement creates or is
intended to create an association, trust, partnership, joint venture or any
other entity or similar legal relationship between the Parties, or impose a
trust, partnership or fiduciary duty, obligation, or liability on or with
respect to either Party. Neither Party is or shall act as or be the agent or
representative of the other Party.
SECTION 13.12 Construction of Agreement. This Agreement and any
documents or instruments delivered pursuant hereto shall be construed without
regard to the identity of the Person who drafted the various provisions of the
same. Each and every provision of this Agreement and such other documents and
instruments shall be construed as though the Parties participated equally in the
drafting of the same. Consequently, the Parties acknowledge and agree that any
rule of construction that a document is to be construed against the drafting
party shall not be applicable either to this Agreement or such other documents
and instruments.
SECTION 13.13 Closing Over Breaches or Unsatisfied Conditions. If
either Party elects to proceed with the Closing with Knowledge by such Party
(evidenced in writing) of any failure of any condition to be satisfied in its
favor or the breach of any
69
representation, warranty or covenant by the other Party, then the condition that
is unsatisfied or the representation, warranty or covenant which is breached at
the Closing Date will be deemed waived by such Party, and such Party shall be
deemed to fully release and forever discharge the other Party on account of any
and all claims, demands or charges, known or unknown, with respect to the same.
SECTION 13.14 Waiver of Compliance. Except as provided in Section
13.13, to the extent permitted by Applicable Laws, any failure of any of the
Parties to comply with any obligation, covenant, agreement or condition set
forth herein may be waived by the Party entitled to the benefit thereof only by
a written instrument signed by such Party, but any such waiver shall not operate
as a waiver of, or estoppel with respect to, any prior or subsequent failure to
comply therewith. The failure of a Party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
SECTION 13.15 Consents Not Unreasonably Withheld. Wherever the consent
or approval of any Party is required under this Agreement, such consent or
approval shall not be unreasonably withheld, delayed or conditioned unless such
consent or approval is to be given by such Party at the sole or absolute
discretion of such Party or is otherwise similarly qualified.
SECTION 13.16 Survival.
(a) The representations and warranties given or made by any
Party in Articles 4, 5 or 6 hereof or in any certificate or other writing
furnished in connection herewith shall survive the Closing for a period of
twelve (12) months after the Closing Date and shall thereafter terminate and be
of no further force or effect; provided, however, that:
(i) all representations and warranties relating to Taxes
and Tax Returns shall survive the Closing (including for purposes of Section
7.5) for ninety (90) days after the date on which the applicable statutes of
limitation (plus any extensions or waivers thereof) expires with respect to the
matter covered thereby; and
(ii) any representation or warranty as to which a claim
(including a contingent claim) shall have been asserted during the survival
period shall continue in effect with respect to such claim until such claim
shall have been finally resolved or settled.
Subject to Sections 6.9, 6.10, 6.13 and 13.13, each Party shall be entitled to
rely upon the representations and warranties of the other Party set forth
herein, notwithstanding any investigation or audit conducted before or after the
Closing Date or the decision of any Party to complete the Closing.
70
(b) The covenants and agreements of the Parties contained in
this Agreement, including those set forth in Article 9, shall survive the
Closing until performed, unless otherwise specified herein.
SECTION 13.17 Time of Essence. Time is of the essence in the
performance by the Parties of their obligations under this Agreement. If any
date specified in this Agreement for giving any notice or taking any action is
not a Business Day (or if the period during which any notice is required to be
given or any action taken expires on a date which is not a Business Day), then
the date for giving such notice or taking such action (and the expiration date
of such period during which notice is required to be given or action taken)
shall be the next day which is a Business Day.
SECTION 13.18 Purchaser's Parent Support. From the date hereof until
the effectiveness of the Closing, Purchaser's Parent agrees to provide Purchaser
any and all financial support necessary to permit Purchaser to perform its
obligations hereunder. After Closing, Purchaser's Parent shall have no
obligation or liability under this Agreement.
[SIGNATURE PAGE FOLLOWS]
71
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
CONSTELLATION POWER, INC.
By: /s/ John T. Long
-----------------------------------
Name: John T. Long
Title: Senior Vice President
COSI PUNA, INC.
By: /s/ John T. Long
-----------------------------------
Name: John T. Long
Title: President
ORNI 8 LLC
By: Ormat Nevada Inc., Its Manager
By: /s/ Rad Ravin
----------------------------
Name: Rad Ravin
--------------------------
Title: V.P. Business Development
-------------------------
ORMAT NEVADA INC.
By: /s/ Connie Stechman
------------------------------------
Name: Connie Stechman
----------------------------------
Title: Assistant Secretary
----------------------------------
Exhibit 10.8
, 2004
----------------
ORNI 8 LLC
c/o Ormat Nevada, Inc.
980 Greg Street
Sparks, NV89509
Re: Purchase and Sale Agreement
Ladies and Gentlemen:
The undersigned serves as Managing Attorney, Corporate Finance, of
Constellation Energy Group, Inc., and has acted as counsel to Constellation
Power, Inc. (the "Seller") and COSI Puna, Inc. ("COSI PUNA"), in connection with
the transactions contemplated by that certain Purchase and Sale Agreement dated
as of April __, 2004 (the "Agreement"), by and among the Seller, COSI PUNA, ORNI
8 LLC (the "Purchaser") and Ormat Nevada, Inc. (the "Purchaser's Parent").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Purchase Agreement.
Our opinions expressed below are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(A) Purchaser and Purchaser's Parent have each duly and validly
executed and delivered the Agreement and the obligations set forth therein are
their legal, valid and binding obligations, enforceable against them in
accordance with its terms.
(B) Each natural person executing the Agreement or any other
instrument, certificate, agreement or document in connection with the
transaction therein described (the "Transaction Documents") is legally competent
to do so.
(C) There have been no oral or written amendments to the Transaction
Documents, and there has been no waiver of any of the provisions of the
Transaction Documents, by actions or conduct of the parties or otherwise.
(D) All documents submitted to me as originals are authentic, all
documents submitted to me as certified or photostatic copies conform to the
original document, all signatures on all documents submitted to me for
examination are genuine, and all public records (including all indices thereto)
reviewed by anyone in connection with the transaction described in the Agreement
are accurate, complete and up-to-date.
Page 2
(E) All certificates submitted to me and each of the representations
and warranties made by the Purchaser in the Transaction Documents are true and
accurate in all material respects.
(F) I express no opinion as to the enforceability of any provisions
indemnifying a party against, or requiring contributions toward, that party's
liability for its own wrongful or negligent acts, or where indemnification or
contribution is contrary to public policy or prohibited by law.
(G) My opinions expressed below regarding the enforceability of the
Agreement are qualified by the following:
(a) such enforceability may be limited by or subject to (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
other laws and rules of law affecting the enforcement generally of creditors'
rights and remedies, and (ii) the exercise of judicial discretion in accordance
with general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and
(b) certain provisions of the Purchase Agreement may be
unenforceable in whole or in part. The unenforceability of such provisions will
not render the Purchase Agreement invalid as a whole or substantially interfere
with the realization of the principal benefits provided by the Purchase
Agreement.
(H) For purposes of my opinion as to the good standings of Seller,
COSI PUNA, CE PUNA I and CE PUNA II in paragraph 1 below, I have relied solely
upon certificates of good standing issued by the State Department of Assessments
and Taxation of Maryland, and nothing has come to my attention leading me to
question the accuracy of such information.
(I) I am a member of the Bar of the State of Maryland and do not
express any opinions herein on the laws of any jurisdiction other than the laws
of the State of Maryland and the Federal laws of the United States.
Based on and subject to the foregoing, I am of the opinion that:
1. Each of Seller and COSI PUNA is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. Each of
CE PUNA I and CE PUNA II is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland. Each of CE PUNA I and
CE PUNA II has the requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted.
2. Each of Seller and COSI PUNA has all requisite corporate power and
authority to execute and deliver, and to perform its respective obligations
under, the Agreement and to consummate the Transactions.
3. The execution, delivery, and performance by each of Seller and COSI PUNA
of the Agreement and the consummation of the Transactions have been duly and
validly authorized by all necessary corporate action required on the part of the
Seller and COSI PUNA, and no other corporate proceedings on the part of the
Seller or COSI PUNA are necessary to authorize the Agreement or to consummate
the Transactions. Assuming the due authorization, execution and delivery of the
Agreement by Purchaser and Purchaser's Parent, the Agreement constitutes the
valid and legally binding obligation
Page 3
of the Seller and COSI PUNA, enforceable against the Seller and COSI PUNA in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, fraudulent transfer, voidable preference, moratorium or similar
laws, and related judicial doctrines, from time to time in effect, affecting or
related to creditors' rights and remedies generally.
4. Subject to Seller obtaining the Seller's Required Regulatory Approvals
and the Seller's Required Consents, except for compliance with the requirements
of the HSR Act, and except as set forth in the Agreement, the execution and
delivery by Seller and COSI PUNA of the Agreement, the Seller's and COSI PUNA's
compliance with any provision of the Agreement, and the Seller's and COSI PUNA's
consummation of the Transactions will not violate, conflict with, or result in a
breach of any provisions of the articles of incorporation or by-laws of either
Seller or COSI PUNA.
5. Seller owns beneficially and of record 100% of the CE PUNA I Shares
which constitute all of the issued and outstanding capital stock of, and the
only class of capital stock of, CE PUNA I. Seller owns beneficially and of
record 100% of the CE PUNA II Shares which constitute all of the issued and
outstanding capital stock of, and the only class of capital stock of, CE PUNA
II. CE PUNA I and CE PUNA II each own 50% of the CE PUNA LP Interests which
constitute all of the partnership interests of CE PUNA LP. CE PUNA I and CE PUNA
LP own all of the PGV Interests which constitute all of the partnership
interests of PGV. All of the Purchased Shares have been duly authorized and
validly issued and are fully paid and nonassessable.
6. Except for the Agreement or as set forth on Schedule 5.3 to the
Agreement, there are no outstanding options, warrants, purchase rights,
subscription rights, conversion rights or other rights of any kind (preemptive
or otherwise) to acquire any capital stock or partnership interests in the
Companies, or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any capital stock
or partnership interests, nor is any of the Companies committed to issue, sell
or otherwise cause to become outstanding any such option, warrant, right or
security, except obligations to Purchaser under the Agreement, and there are no
agreements or understandings concerning the ownership, voting, or disposition of
the Purchased Shares or the Partnership Interests.
This opinion is based upon currently existing statutes, rules, regulations
and judicial decisions as limited by the preceding paragraphs above and upon
facts known to me on the date hereof, and I disclaim any obligation to advise
you of any change in any of these sources of law or subsequent legal or factual
developments that might affect any matters or opinions set forth herein.
The foregoing opinion is solely for your benefit and may not be relied upon
by any other person without obtaining my prior written consent. The opinions
expressed in this letter are limited to the matters set forth in this letter,
and no other opinions should be inferred beyond the matters expressly stated.
Very truly yours,
Charles A. Berardesco
Managing Attorney, Corporate Finance
Exhibit 11.7
, 2004
-----------------------
Constellation Power, Inc.
750 East Pratt Street
Baltimore, Maryland21202
RE: STOCK PURCHASE AGREEMENT--PUNA POWER PLANT
Ladies and Gentlemen:
We have acted as special counsel to ORNI 8 LLC, a Delaware limited liability
company (the "Buyer"), in connection with the transactions contemplated by the
Purchase and Sale Agreement dated as of April 22, 2004 (the "Purchase
Agreement") between the Buyer, Ormat Nevada Inc., COSI Puna, Inc. and
Constellation Power, Inc. We render this opinion letter to you at the request of
the Buyer pursuant to Section 11.7 of the Purchase Agreement. Capitalized terms
used and not otherwise defined in this opinion letter have the meanings assigned
to such terms in the Purchase Agreement.
A. DOCUMENTS AND MATTERS EXAMINED
In connection with this opinion letter, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents as we
have deemed relevant or necessary as the basis for the opinions herein
expressed, including the following:
A-l The Purchase Agreement; and
A-2
The documents listed in A-l through A-2 are herein collectively referred to as
the "Documents."
Our opinion is based solely upon a review of the Documents. As to matters of
fact bearing upon the opinions expressed herein, we have, with your consent and
without investigation, relied solely upon and have not independently verified
the accuracy of:
(a) information in public authority documents;
(b) information provided in certificates by the Buyer's directors,
officers and/or employees; and
, 2004
--------------------
Page 2
(c) the representations, warranties and other statements of all
parties contained in the Documents.
With your consent, we have reviewed no other documents, records, certificates,
or other statements as a basis for the opinions herein expressed. With your
consent, we have not undertaken, nor were we obligated or expected to undertake,
an independent investigation to determine the accuracy of any facts, and any
limited inquiry undertaken by us during the negotiation of the Documents or
preparation of this opinion letter should not be regarded as such an
investigation.
B. ASSUMPTIONS
For purposes of this opinion letter, we have relied, without investigation, upon
the following assumptions:
B-l All natural persons who are involved on behalf of the Buyer have sufficient
legal capacity to enter into and perform the transaction contemplated by the
Documents or to carry out their role in it.
B-2 Each party to the transaction other than the Buyer has satisfied those legal
requirements applicable to it that are necessary to make the Documents signed by
it enforceable against it in accordance with its terms.
B-3 Each party to the transaction other than the Buyer has complied with all
legal requirements pertaining to its status as such status relates to its rights
to enforce the Documents against the Buyer.
B-4 Each document submitted to us for review is accurate and complete, each such
document that is an original is authentic, each such document that is a copy
conforms to an authentic original, and all signatures on each such document are
genuine.
B-5 Each public authority document reviewed by us for the purpose of rendering
this opinion letter is accurate, complete and authentic, and all official public
records (including their proper indexing and filing) are accurate and complete.
B-6 There has been no mutual mistake of fact or misunderstanding, fraud, duress
or undue influence with respect to, or affecting any of, the parties to the
transaction.
B-7 The conduct of the parties to the transaction has complied with any
requirement of good faith, fair dealing and conscionability.
B-8 The party to whom this opinion letter is directed and any agent acting for
it in connection with the transaction have acted in good faith and without
notice of any defense
, 2004
--------------------
Page 3
against the enforceability of any rights created by, or adverse claim to any
property or security interest transferred or created as a part of, the
transaction.
B-9 There are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course of prior dealing among the
parties that would, in either case, define, supplement or qualify the terms of
the Documents.
B-10 Other agreements and court orders will be enforced as written.
B-l1 The Buyer will not in the future take any discretionary action (including a
decision not to act) permitted under the Documents that would result in the
violation of law or constitute a breach or default under any other agreement or
court order.
B-12 The Buyer will obtain all permits and governmental approvals required in
the future, and will take all actions similarly required, relevant to subsequent
consummation of the transaction or performance of the Documents.
B-l3 All parties to the transaction will act in accordance with, and will
refrain from taking any action that is forbidden by, the terms and conditions of
the Documents.
B-14 Each party to the Documents has received sufficient consideration to
support its obligations thereunder.
B-15 The activities of the Buyer are not of such a nature as to cause the
transactions contemplated by the Documents to be governed by laws or regulations
of the State of New York or the United States of America applicable only because
of such activities (such as laws relating specifically to the banking,
securities, insurance or utility industries) and not applicable to business
corporations generally.
C. OPINIONS
Based upon the foregoing examinations and assumptions and subject to the
qualifications and exclusions stated below, we are of the opinion that:
C-l The Buyer is a limited liability company duly organized, validly existing
and in good standing under Delaware law.
C-2 The Buyer has all necessary power and authority to enter into, and to
perform its obligations under the Purchase Agreement and, to the extent material
to the Buyer's performance of its obligations thereunder, to own its properties
and to carry on its business as it is now conducted.
, 2004
--------------------
Page 4
C-3 The Buyer has authorized, by all necessary action on the part of the Buyer,
the execution and delivery of the Purchase Agreement, and the Buyer has executed
and delivered the Purchase Agreement.
C-4 The Purchase Agreement constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms.
C-5 The execution and delivery by the Buyer of, and the consummation of the
transactions contemplated by, the Purchase Agreement do not (a) violate the
Buyer's Certificate of Formation or Limited Liability Company Agreement
D. QUALIFICATIONS
The opinions set forth herein are subject to the following qualifications:
D-1 The opinions set forth herein, including those opinions as to the
enforceability of the Documents, are subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
affecting the rights and remedies of creditors generally and the effect of
general principles of equity, whether applied by a court of law or equity.
D-2 The opinions set forth herein, including those opinions as to the
enforceability of the Documents, are subject to the effect of generally
applicable rules of law that:
(a) limit or affect the enforceability of provisions of a contract that
purport to require waiver of the obligations of good faith, fair dealing,
diligence and reasonableness;
(b) provide that forum selection clauses in contracts are not necessarily
binding on the court(s) in the forum selected;
(c) limit the availability of a remedy under certain circumstances where
another remedy has been elected;
(d) limit the right of a creditor to use force or cause a breach of the
peace in enforcing rights;
(e) relate to the sale or disposition of collateral or the requirements of
a commercially reasonable sale;
(f) limit the enforceability of provisions of releasing, exculpating or
exempting a party from, or requiring indemnification of a party for, liability
for its own action or inaction, to the extent that the action or inaction
involves gross negligence, recklessness, willful misconduct or unlawful conduct;
, 2004
--------------------
Page 5
(g) may, where less than all of a contract may be enforceable, limit the
enforceability of the balance of the contract to circumstances in which the
unenforceable portion is not an essential part of the agreed exchange;
(h) govern and afford judicial discretion regarding the determination of
damages and entitlement to attorneys' fees and other costs;
(i) may, in the absence of a waiver or consent, discharge a guarantor to
the extent that (i) action by a creditor impairs the value of collateral
securing guaranteed debt to the detriment of the debtor or (ii) guaranteed debt
is materially modified; and
(j) may permit a party who has materially failed to render or offer
performance required by the contract to cure that failure unless (i) permitting
a cure would unreasonably hinder the aggrieved party from making substitute
arrangements for performance or (ii) it is important in the circumstances to the
aggrieved party that performance occur by the date stated in the contract.
D-4 Certain provisions in each of the Documents relating to remedies after
breach or default may be unenforceable, but such unenforceability will not,
subject to the other exceptions, qualifications and limitations in this opinion
letter, render the applicable Document invalid as a whole or substantially
interfere with the realization of the principal benefits provided by such
Document, subject to the economic and procedural consequences of any delay
resulting from such unenforceability.
E. EXCLUSIONS
We express no opinion as to the effect, if any, that one or more of the
following matters may have upon the opinions expressed herein:
E-1 federal securities laws and regulations administered by the Securities and
Exchange Commission, state "blue sky" laws and regulations, and laws and
regulations relating to commodity (and other) futures and indices and other
similar instruments;
E-2 federal and state laws and regulations dealing with:
(a) antitrust and unfair competition laws and regulations;
(b) laws and regulations concerning filing and notice requirements (e.g.,
Hart-Scott-Rodino), other than requirements applicable to charter-related
documents such as a certificate of merger;
(c) environmental laws and regulations;
, 2004
--------------------
Page 6
(d) land use and subdivision laws and regulations;
(e) tax laws and regulations;
(f) patent, copyright, trademark and intellectual property laws and
regulations;
(g) racketeering laws and regulations;
(h) health and safety laws and regulations;
(i) labor laws and regulations;
(j) laws, regulations and policies concerning national and local emergency,
possible judicial deference to acts of sovereign states, and criminal and civil
forfeiture laws; and
(k) statutes of general application to the extent they provide for criminal
prosecution (e.g., mail fraud and wire fraud statutes);
E-3 Federal Reserve Board margin regulations;
E-4 compliance with fiduciary duty requirements;
E-5 the statutes and ordinances, the administrative decisions, and the rules and
regulations of counties, cities, towns, municipalities and special political
subdivisions (whether created or enabled through legislative action at the
federal, state or regional level), and judicial decisions to the extent that
they deal with any of the foregoing;
E-6 fraudulent transfer and fraudulent conveyance laws;
E-7 pension and employee benefit laws and regulations;
E-8 the Buyer's title to or the condition of title of any real or personal
property;
E-9 the creation, attachment, perfection, priority or enforcement of liens on
any real property or a security interest in any personal property;
E-10 choice of law and waiver of jury trial provisions.
For purposes of expressing the opinions set forth herein, we have examined the
laws of the State of New York and the general corporation law of the State of
Delaware and, to the extent applicable, the federal laws of the United States of
America and have assumed that those laws govern the construction, interpretation
and enforcement of each of the Documents,
, 2004
--------------------
Page 7
whether or not any of the Documents includes a choice-of-law provision
stipulating the application of the laws of some other jurisdiction.
We note, with your approval, that we do not maintain an office in the State of
New York.
We have not reviewed, nor are our opinions in any way predicated upon an
examination of, the laws of any other jurisdiction, and we expressly disclaim
responsibility for advising you as to the effect, if any, that the laws of any
other jurisdiction may have upon the opinions set forth herein. Furthermore, we
express no opinion as to matters that may be affected by pending or proposed
federal, state or local legislation, even though such legislation, if
subsequently enacted, might affect the opinions expressed herein.
The opinions set forth herein are as of the date hereof, and we disclaim any
undertaking or obligation to update these opinions for events and circumstances
occurring after the date hereof or as to facts relating to prior events that are
subsequently brought to our attention.
This opinion letter is rendered only to you and is solely for your benefit in
connection with the transaction contemplated by the Documents. This opinion
letter may not be used or relied upon for any other purpose or by any other
person without our prior written consent.
Very truly yours,
EXECUTION COPY
SCHEDULES TO PURCHASE AND SALE AGREEMENT
These Schedules ("Schedules") are provided by Constellation Power, Inc.
("CPI") (the "Seller") pursuant to that certain Purchase and Sale Agreement (the
"Agreement") by and among Seller, Cosi Puna, Inc., ORNI 8 LLC (the "Purchaser"),
and Ormat Nevada Inc. dated as of April 22, 2004. These Schedules are an
integral part of the Agreement, are incorporated therein by reference, and are
not intended to be an independent document. Disclosure of any item herein shall
not constitute an admission that such item is required to be disclosed, and the
information contained herein is disclosed solely for the purposes of the
Agreement. Nothing contained herein shall be deemed to be an admission by any
Party to any third party of any matter whatsoever, including without limitation
any violation of law or breach of agreement. The information in each Schedule is
hereby incorporated into and made a part of each other Schedule to the extent
that an item disclosed on one Schedule should be disclosed on another Schedule,
whether or not specific reference is made to such other Schedule. Disclosure
under one heading of a Schedule is deemed disclosure for all purposes of such
Schedule. Capitalized terms used and not otherwise defined herein shall be
defined as set forth in the Agreement.
SCHEDULE 1.1A
COMPANY GUARANTEES
1. Constellation Debt Service Reserve Guaranty by Constellation Investments,
Inc. in favor of Credit Suisse, New York Branch, dated as of December2, 1996
2. Constellation Underground Injection Control Reserve Guaranty by
Constellation Investments, Inc. in favor of Credit Suisse, New York Branch,
dated as of December 2, 1996(1)
3. The following bonds, by American Motorists Insurance Company(2) for the
benefit of the State of Hawaii:
a. Department of Natural Resources Geothermal Resource Lease Performance
Bond, in the amount of $10,000 (Bond #3SM71475100)
b. Geothermal Resource Well Indemnity Bond, in the amount of $250,000
(Bond # 3SM71474900)
c. Department of Natural Resources Geothermal Resource Lease Performance
Bond, in the amount of $10,000 (Bond # 3SM71475000)
----------
(1) The conditions which would cause the termination of this guaranty (i.e.,
obtaining a permit by a certain date) have been fulfilled, however the release
of the guaranty has not yet been formally acknowledged.
(2) These bonds are in the name of AMOR VIII Corporation, a former general
partner of PGV. Seller isre in the process of changing the principal's name on
these bonds to PGV.
-2-
SCHEDULE 1.1B
COMPANY INSURANCE POLICIES
-----------------------------------------------------------------------------------------
COVERAGE TYPE LIMIT DEDUCTIBLE
-----------------------------------------------------------------------------------------
Property/Boiler & Property Damage -- Full $250,000 Real & Personal
Machinery Replacement Cost Property
Business Interruption -- 12 Month $500,000 Machinery
Period of Indemnity Breakdown
45 Days Time Element
-----------------------------------------------------------------------------------------
Commercial General $ 1,000,000 Per Occurrence $ 1,000 Employee Benefits
Liability Liability
$ 1,000,000 Personal and
Advertising Injury
$ 2,000,000 General Aggregate
$ 1,000,000 Employee Benefits
Liability
-----------------------------------------------------------------------------------------
Time Element $ 1,000,000 Each Occurrence $ 10,000
Pollution $ 2,000,000 Aggregate
-----------------------------------------------------------------------------------------
Commercial $ 1,000,000 Each Accident $ 1,000 Comprehensive
Automobile $ 1,000,000 Uninsured Motorist $ 1,000 Collision
$ 10,000 Medical Payments
-----------------------------------------------------------------------------------------
Commercial Umbrella $25,000,000 Per Occurrence $ 10,000
$25,000,000 General Aggregate
-----------------------------------------------------------------------------------------
$20,000,000 Per Accident or $125,000 Operators Extra
Control of Well Occurrence - Operators Expense
Extra Expense
$ 500,000 Per Accident or $ 50,000 Care, Custody
Occurrence -- Care, and Control
Custody and Control
$ 1,750,000 Rigs and Equipment
-----------------------------------------------------------------------------------------
Workers Statutory $ 0
Compensation
-----------------------------------------------------------------------------------------
Employers Liability $ 1,000,000 Bodily Injury -- $ 0
Accident
$ 1,000,000 Bodily Injury --
Disease Policy Limit
$1,000,000 Bodily Injury --
Disease Each Employee
-----------------------------------------------------------------------------------------
-3-
SCHEDULE 1.1C
INTERCOMPANY ARRANGEMENTS
1. PGV pays $22,000 per month to Seller or an Affiliate of Seller for the
following:
a. Support services
o All accounting services (with the exception of accounts payable)
o Human resource support
o Payroll (with the exception of timekeeping)
o Legal support
o Environmental support
o Safety support
o Insurance claims (loss prevention)
b. Barry Mizuno, a CPI employee, provides oversight in the following
areas: community relations, permits, customer relations, strategic
planning, and political relations.
c. Willis Savage, a CPI employee, provides services in the following
areas: financial management, accounting support and lender
relationships. Mr. Savage also provides services under the O&M
Agreement, including working with the operating and maintenance staff
and preparing the Annual Operating Budget.
2. At December 31,2003, PGV has a payable to COSI PUNA in the amount of
$897,263.(1)
3. At December 31,2003, CE PUNA I and CE PUNA II have a payable to Seller or
an Affiliate of Seller of $2,396,966.79.(2)
----------
(1) This Intercompany Arrangement will be satisfied in full prior to or
contemporaneous with Closing pursuant to Section 7.19 of the Agreement.
(2) This Intercompany Arrangement will be satisfied in full prior to or
contemporaneous with Closing pursuant to Section 7.19 of the Agreement.
-4-
SCHEDULE 1.1D
SELLER'S PERSONS WITH KNOWLEDGE
NAME EMPLOYER
-------------- ---------------------
1. Bruce Douglas Constellation
Generation Group, LLC
2. Steven Gross CPI
3. Daniel Haught CPI
4. Monte Morrison COSI
5. Barry Mizuno CPI
6. Willis Savage CPI
-5-
SCHEDULE 1.1F
PURCHASER'S REQUIRED REGULATORY APPROVALS
1. With respect to filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), the expiration, or the earlier
termination, of all applicable waiting periods under the HSR Act.
2. Required notice prior to the Closing to and consent from the applicable
governmental authorities under the state and federal UIC permits of pending
change in operator, ownership, control or facility name.
-7-
SCHEDULE 1.1H
SELLER'S REQUIRED REGULATORY APPROVALS
With respect to filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), the expiration, or the earlier
termination, of all applicable waiting periods under the HSR Act.
-9-
SCHEDULE 3.4
WORKING CAPITAL ADJUSTMENT
The Net Working Capital for purposes of the Estimated Adjustment Statement and
the Final Adjustment Statement shall be calculated as follows:
Net Working Capital = Current Assets minus Current Liabilities
where Current Assets equals the sum of the following items set forth on the
balance sheet of PGV:
Cash and Cash Equivalents (excluding restricted cash which will apply toward
satisfaction of the Loan Documents)
Advances
Helco Receivable
Other Receivables
Prepaid Expense & Other Assets
and Current Liabilities equals the sum of the following items set forth on the
balance sheet of PGV:
Accounts Payable
Accrued Royalties
Income Tax Payable
Current Deferred Taxes
Other Current Liabilities
All amounts related to Inventory shall not be included in the Net Working
Capital calculation above.
All Intercompany Arrangements shall not be included in the Net Working Capital
calculation above, rather all such amounts will be paid out by PGV to Seller
prior to Closing pursuant to Section 7.19 of the Agreement.
-10-
SCHEDULE 5.3
CAPITALIZATION
1. Second Amended and Restated Partnership Agreement of PGV, dated as of
December 2, 1996, as amended by that certain First Amendment dated as of
December 10, 2003
2. Agreement of Limited Partnership of CE PUNA LP by and between CE PUNA I and
CE PUNA II, dated as of August 31, 1990
3. The following pledge agreements and related documents(3):
a. Amended and Restated Accounts Pledge Agreement by and between PGV,
Credit Suisse, New York Branch, and the Lenders thereto, dated as of
December 2, 1996, as amended by that certain Amendment No. 1 dated as
of March 19, 1999
b. Partnership Interest Pledge Agreement (CE Puna I) by CE PUNA I to
Credit Suisse, New York Branch, dated as of December 21, 1990, as
confirmed and amended by Confirmation and Amendment of Pledge
Agreement (CE Puna I), dated as of December 2, 1996
c. Partnership Interest Pledge Agreement (CE Puna II) by CE PUNA II to
Credit Suisse, New York Branch, dated as of December 21, 1990, as
confirmed and amended by Confirmation and Amendment of Pledge
Agreement (CE Puna II), dated as of December 2, 1996
d. Stock Pledge Agreement (CEI) by CPI, formerly known as Constellation
Energy, Inc., to Credit Suisse, New York Branch, dated as of December
21, 1990 as confirmed and amended by Confirmation and Amendment of
Pledge Agreement (CEI), dated as of December 2, 1996
e. Control Agreement by and between PGV and Credit Suisse First Boston,
New York Branch, dated as of December 10, 2003
4. CSFB Swap Agreement(4)
5. Dresdner Swap Agreement(5)
6. The Credit Agreement(6) requires consent of the Lenders prior to a sale of
the Purchased Shares.
----------
(3) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement, at which point the Purchased Shares and the Partnership
Interests will no longer be encumbered thereby.
(4) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement, at which point the Purchased Shares and the Partnership
Interests will no longer be encumbered thereby.
(5) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement, at which point the Purchased Shares and the Partnership
Interests will no longer be encumbered thereby.
(6) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement, at which point the Purchased Shares and the Partnership
Interests will no longer be encumbered thereby.
-12-
SCHEDULE 5.4
NO VIOLATION
1. PGV, as owner of the Plant, may be subject to the requirement to file FERC
Form 1's. PGV has not filed FERC Form 1's, however, on or about February27, 2004, PGV received from FERC a waiver from such requirement.
2. PGV may be in violation of State of Hawaii law if the three bonds set forth
in Schedule 1.1A item 3 are either not continuing or are required to be in
the name of PGV.
-13-
SCHEDULE 5.7
PERMITS
1. PGV believes a casing leak exists in KS-11 at approximately 1850 feet. The
normal method for avoiding groundwater contamination is to pressurize the
annular space within the well with nitrogen, which holds the geothermal
fluid down below a specified depth. If there is no significant leakage in
the casing, there will be minimal consumption of nitrogen. If there is a
leak, the fluid can still be held down; however, there will be increased
consumption of nitrogen. This is the state in which KS-11 is now operating.
The Underground Injection Control (UIC) permit requires a Mechanical
Integrity Test (MIT) to be conducted annually, initially scheduled for
March 2004. PGV held discussions with the appropriate regulators and
requested, and received, a postponement of the MIT to May 2004 so that PGV
may have sufficient time to repair the leak prior to such MIT.
PGV plans to cement the existing 9-5/8" liner permanently into the well. A
string of 7" hangdown liner will then be suspended in the same manner the
9-5/8" liner is currently installed. PGV plans to commence work to place
this liner on May 16, 2004, during a planned outage period. KS-11 is
expected to be returned to service in June, 2004. The procurement process
for a larger size diameter (8 1/8") hangdown liner has begun, and this
larger diameter casing can be made available to install in KS-11 at a
future date.
2. PGV has two trailers it uses as offices. No permit or other authorization
from any Governmental Authority has been obtained related thereto.
-15-
SCHEDULE 5.9
EXISTING CONTRACTS
Schedule 5.9(a)
1. Credit Agreement, and the following documents relating thereto(7):
a. Secured Term Notes in favor of those certain Lenders as set forth in
the Credit Agreement, in the principal amount of $65,387,594, dated as
of December 23, 1996
b. Amended and Restated Assignment and Security Agreement by and between
PGV, Credit Suisse, New York Branch, and the Lenders thereto, dated as
of December 2, 1996
c. Amended and Restated Accounts Pledge Agreement by and between PGV,
Credit Suisse, New York Branch, and the Lenders thereto, dated as of
December 2, 1996, as amended by that certain Amendment No. 1 dated as
of March 19, 1999
d. Partnership Interest Pledge Agreement (CE Puna I) by CE PUNA I to
Credit Suisse, New York Branch, dated as of December 21, 1990, as
confirmed and amended by Confirmation and Amendment of Pledge
Agreement (CE Puna I), dated as of December 2, 1996
e. Partnership Interest Pledge Agreement (CE Puna II) by CE PUNA II to
Credit Suisse, New York Branch, dated as of December 21, 1990, as
confirmed and amended by Confirmation and Amendment of Pledge
Agreement (CE Puna II), dated as of December 2, 1996
f. Stock Pledge Agreement (CEI) by Constellation Power, Inc., formerly
known as Constellation Energy, Inc., to Credit Suisse, New York
Branch, dated as of December 21, 1990 as confirmed and amended by
Confirmation and Amendment of Pledge Agreement (CEI), dated as of
December 2, 1996
g. Local Operating Account Agreement by and among Bank of Hawaii, PGV,
Credit Suisse, New York Branch, and the Lenders thereto, dated as of
December 2, 1996
2. CSFB Swap Agreement(8)
3. Dresdner Swap Agreement(9)
----------
(7) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement.
(8) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement.
(9) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement.
-16-
4. Power Purchase Agreement
5. O&M Agreement(10)
6. Leases involving surface and geothermal rights and related agreements, as
follows:
a. Surface Lease, dated February 18, 1981, by and between Kapoho Land and
Development Company, Limited ("KLDC") as lessor and Kapoho Land
Partnership ("KLP") as lessee
b. Geothermal Resources Mining Lease No. R-2, dated February 20, 1981, by
and between the State of Hawaii as lessor and KLP as lessee
c. Indenture, dated March 1, 1981, by and among KLDC, KLP, Dillingham
Corporation and Thermal Power Company
d. Lease and Agreement, dated March 1, 1981, by and between KLP as lessor
and PGV as lessee, as amended on July 9, 1990 and December 31, 1996
e. Delivery System Grant of Easements, dated July 9, 1990, by and between
KLP as grantor and PGV as grantee, as amended on September 25, 1996
and November 7, 1996
f. Power Plant Sublease, dated July 9, 1990, by and between KLP as lessor
and PGV as lessee
g. Letter Agreement, dated July 9, 1990, by and among KLDC, KLP, PGV and
Ormat Energy Systems, Inc.
h. Letter Agreement, dated December 17, 1996, by and among KLDC, KLP and
PGV, as amended on December 18, 1996
i. Letter Agreement, dated July 9, 1990, by and between KLP and PGV
j. Indenture, dated March 6, 1987, by and among KLDC as grantor, Hawaii
Electric Light Company, Inc. and Hawaiian Telephone Company as
grantees, KLP as lessee, and PGV as sublessee
7. Accrual Agreement (TPC Royalty), dated September 1, 1990, by and between
PGV and Thermal Power Company
8. Settlement Agreement, dated March 7, 1995, by and between PGV and Hawaii
Electric Light Company, Inc.
----------
(10) The O&M Agreement will be terminated at Closing.
-17-
9. Transmission Line Agreement, dated March 7, 1995, by and between PGV and
Hawaii Electric Light Company, Inc.
10. Confirmation Agreement, dated March 7,1995, by and between PGV and Hawaii
Electric Light Company, Inc.
11. The following bonds, by American Motorists Insurance Company(11) for the
benefit of the State of Hawaii:
a. Department of Natural Resources Geothermal Resource Lease Performance
Bond, in the amount of $10,000 (Bond #3SM71475100)
b. Geothermal Resource Well Indemnity Bond, in the amount of $250,000
(Bond#3SM71474900)
c. Department of Natural Resources Geothermal Resource Lease Performance
Bond, in the amount of $10,000 (Bond # 3SM71475000)
12. Professional Service Agreement, dated January 1,2004, by and between PGV
and The Environmental Company, Inc. This agreement is for environmental
monitoring support services relating to, among other things, air, noise,
and groundwater quality. The fixed price for the two-year term is
$182,083.92, plus any approved additional work on a time and materials
basis.
Schedule 5.9(b)
1. The Power Purchase Agreement requires that the total firm capacity of the
Plant equal thirty (30) megawatts, except in the case of a "catastrophic
equipment failure." The Plant is currently operating, and has in the past
operated, at less than thirty (30) megawatts. PGV has not received any
notice of breach from Hawaii Electric Light Company, Inc.
2. PGV has not paid amounts due to COSI PUNA under the O&M Agreement from and
after about April 2002. COSI PUNA wrote off such amounts for 2003.
----------
(11) These bonds are in the name of AMOR VIII Corporation, a former general
partner of PGV. Seller are in the process of changing the principal's name
on these bonds to PGV.
-18-
SCHEDULE 5.10
PERSONAL PROPERTY
The following parties have a security interest on PGV personal property: the
Lenders under the Credit Agreement, Credit Suisse New York Branch under the CSFB
Swap Agreement, and Dresdner Bank, AG under the Dresdner Swap Agreement(12).
----------
(12) The Loan Documents will be terminated at Closing, pursuant to Section 7.18
of the Agreement, at which point such personal property will no longer be
encumbered thereby.
-19-
SCHEDULE 5.12
LEASES
Leases involving surface and geothermal rights and related agreements, as
follows:
1. Surface Lease, dated February 18, 1981, by and between Kapoho Land and
Development Company, Limited ("KLDC") as lessor and Kapoho Land
Partnership ("KLP") as lessee
2. Geothermal Resources Mining Lease No. R-2, dated February 20, 1981, by
and between the State of Hawaii as lessor and KLP as lessee
3. Indenture, dated March 1, 1981, by and among KLDC, KLP, Dillingham
Corporation and Thermal Power Company
4. Lease and Agreement, dated March 1, 1981, by and between KLP as lessor
and PGV as lessee, as amended on July 9, 1990 and December 31, 1996
5. Delivery System Grant of Easements, dated July 9, 1990, by and between
KLP as grantor and PGV as grantee, as amended on September 25, 1996
and November 7, 1996
6. Power Plant Sublease, dated July 9, 1990, by and between KLP as lessor
and PGV as lessee
7. Letter Agreement, dated July 9, 1990, by and among KLDC, KLP, PGV and
Ormat Energy Systems, Inc.
8. Letter Agreement, dated December 17, 1996, by and among KLDC, KLP and
PGV, as amended on December 18, 1996
9. Letter Agreement, dated July 9, 1990, by and between KLP and PGV
10. Indenture, dated March 6, 1987, by and among KLDC as grantor, Hawaii
Electric Light Company, Inc. and Hawaiian Telephone Company as
grantees, KLP as lessee, and PGV as sublessee
-20-
SCHEDULE 5.14
ENVIRONMENTAL COMPLIANCE
The Plant is listed in the Comprehensive Environmental Response, Compensation,
and Liability Information System (CERCLIS NO. HID984469536). A "Preliminary
Assessment" for past H2s air releases of the facility was completed in December
1993. No regulatory action has been taken or is currently expected relative to
the Plant under the Comprehensive Environmental Response, Compensation, and
Liability Act or the Resource Conservation and Recovery Act.
-21-
SCHEDULE 5.15
TAX MATTERS
Potential liability to Hawaii for tax credit refunds received:
-----------------------------------------------------------------------------
CE Puna I CE Puna II Amor
Credit VIII
-----------------------------------------------------------------------------
2000 Hawaii Tax Credit for Research $108,864 $108,864 $2,199
Activities
-----------------------------------------------------------------------------
2001 Hawaii Tax Credit for Research $234,773 $234,773 $4,743
Activities
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2000 Hawaii Capital Goods Excise Tax Credit $ 0 $ 0 $ 0
-----------------------------------------------------------------------------
2001 Hawaii Capital Goods Excise Tax Credit $ 16,198 $ 16,198 $ 327
-----------------------------------------------------------------------------
Power of Attorney
On March 4, 2003, PGV filed a power of attorney with the State of Hawaii (Form
N-858) for 4 representatives of PricewaterhouseCoopers, Honolulu Office, to
discuss the tax returns filed (Form N-20) for the 2000 and 2001 tax years. The
Power of Attorneys were issued because PricewaterhouseCoopers had assisted PGV
in the calculation of a tax credit for research activities for those years.
-22-
SCHEDULE 5.18
UNDISCLOSED LIABILITIES
The Credit Agreement will be terminated at Closing, and an Early Termination
Payment (as defined in the following agreements) will be due under each of the
CSFB Swap Agreement and the Dresdner Swap Agreement.
-23-
SCHEDULE 5.19
ABSENCE OF CERTAIN FINANCIAL CHANGES OR EVENTS
1. On Tuesday 14 January 2004, the Plant experienced a technical failure that
led to a Plant outage. At approximately 11:00 a.m. PST, a large pentane
leak was followed by an explosion and fire on one of the Plant's 10 turbine
generator units (OEC-21). At the time of the incident, Seller believe the
Hawaiian Electric Company grid was experiencing upsets due to high winds
(i.e., 70 mph gusts). At the time the fire started, Seller believe a
disturbance on the grid caused several of the OEC units, non-condensable
gas compressors, and air compressors to trip off line. Damage to OEC-21 was
extensive, including the pentane turbine and generator. Approximately 40-
50% of the Plant's sound barrier wall was blown out by the force of the
explosion and the Halon system deployed inside the power control shelter.
There is no apparent major damage to the adjacent unit (OEC-22) or to any
of the other units in the power block. Three fire monitoring stations were
immediately directed to spray firewater on adjacent units for cooling as
well as on OEC-21's vaporizer and the affected area.
An insurance claim has been filed to recover the costs related to the
above. The insurance deductible is $500,000. PGV plans to continue repairs
related to the above.
2. See Schedules 5.4 and 5.7
-24-
SCHEDULE 5.23
EMPLOYEE BENEFIT PLANS
HMSA Medical Plan (PPO and HMO options, each including prescription and dental
benefits)
HMSA Dental/Rx Plan
Vision Plan (two plan options)
Employee Life Insurance Plan
Family Life Insurance Plan
Health Care Expense Account (flexible spending account)
Dependent Care Expense Account (flexible spending account)
Short-Term Disability Plan
Long-Term Disability Plan
Employee Savings Plan
Pension Plan
Employee Assistance Program
Tuition Reimbursement
Adoption Assistance
Long-Term Care Insurance
Discount Auto and Home Insurance Program
Vacation
Personal Choice Days
Holidays
Sick Leave Benefits
Post-Retirement Benefits includes medical, dental and life insurance
Travel Accident Insurance (includes AD&D coverage)
Employee Referral Program
Annual Incentive Program
Business Continuation Incentive Program
-25-
SCHEDULE 7.5(H)
TAX REFUNDS
Potential refunds due from Hawaii for 2002 and 2003 tax returns filed:
------------------------------------------------------------------------------
Amor
Credit CE Puna I CE Puna II VIII
------------------------------------------------------------------------------
2002 Hawaii Tax Credit for Research $947,233 $947,233 $19,135
Activities
------------------------------------------------------------------------------
2003 Hawaii Tax Credit for Research $336,564 $336,564 $6,799
Activities (estimated)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2002 Hawaii Capital Goods Excise Tax Credit $206,607 $206,607 $4,174
------------------------------------------------------------------------------
2003 Hawaii Capital Goods Excise Tax Credit $150,589 $150,590 $3,042
(estimated)
------------------------------------------------------------------------------
-28-
SCHEDULE 7.14
EMPLOYEES AND PURCHASER'S REPLACEMENT BENEFIT PLANS
Schedule 7.14(a)
Existing Employees:
1. BENSON, DARREN T
2. BURDETT JR, HOWARD R
3. CARR, GREGOR
4. COSTA, ABEL
5. CULNAN, ROBERT J
6. DAHL, GARY E
7. DUVOISIN, RICK A
8. FONSECA, AARON J
9. GACUSANA, AARON K
10. GRAY, KEVIN E
11. HARA, JORDAN F
12. KALEIKINI, MICHAEL L
13. KISTLE, KALEI K
14. LEWIS, AARON A
15. LOVE, LONDA L
16. MCAULAY, BRUCE
17. OLIVER, DEBORAH M
18. PARK, KELLETT M
19. PARKS, BOYINGTON
20. QUESADA, RONALD P
21. ROCHA, CLIFFORD S K
22. TEEPLES, RANDY W
23. VALDES, LOUIS A
24. WIEBE, WILLIAM E
25. WONG, STEPHEN
26. WYNN, EUGENE R
27. ZIMMERMAN, DARLENE M
28. MIZUNO, BARRY(13)
29. TO BE HIRED(14)
----------
(13) Currently employed by CPI
(14) PGV is in the process of hiring for a vacant position, Maintenance
Technician -- Instrumentation & Electrical, and expects to fill the position in
the second quarter of 2004.
-29-
Schedule 7.14(c)
ANNUAL COMPENSATION
Purchaser or Purchaser's Parent shall provide base salary to each Transferred
Employee for a period of 18 months after the Closing in an amount not less than
109% of the base salary in effect for each such Transferred Employee for the
period immediately preceding the Closing Date.
INCENTIVE COMPENSATION
Purchaser or Purchaser's Parent shall provide the opportunity to earn incentive
compensation to each Transferred Employee for a period of 18 months after the
Closing in an amount no less favorable and on terms not materially less
favorable than the incentive plans of Seller or COSI PUNA in effect for such
Transferred Employee for the period immediately preceding the Closing Date.
REPLACEMENT WELFARE PLANS:
Below is a summary of the benefits offered employees under the employee welfare
benefits plans of Purchaser and Ormat Nevada, Inc. as of the Effective Date:
MEDICAL ORMAT PAY 80% OF PREMIUM
Lifetime Maximum $2,000,000
Deductible $250 Aggregate
Co-Insurance 80/50
Co-Insurance Maximum $1,000/$2,000
Doctor Copay $20/Ded/Co-Ins
Specialist Copay $20/Ded/Co-Ins
Emergency Room Ded/Co-Ins/Ded/Co-Ins
Urgent Care Ded/Co-Ins/Ded/Co-Ins
Laboratory & X-Ray Ded/Co-Ins/Ded/Co-Ins
Outpatient Surgery Ded/Co-Ins/Ded/Co-Ins
Inpatient Surgery Ded/Co-Ins/Ded/Co-Ins
Maternity Care Ded/Co-Ins/Ded/Co-Ins
Chiropractic Care Ded/Co-Ins/Ded/Co-Ins
Physical Therapy Ded/Co-Ins/Ded/Co-Ins
Mental Illness Ded/Co-Ins/Ded/Co-Ins
Substance Abuse Ded/Co-Ins/Ded/Co-Ins
Rx Brand/Generic/Non-Formulary $15/$30
HMO Available None
DENTAL ORMAT PAY 80% OF PREMIUM
Carrier Name Guardian
Preventive Services 100%/100%
Basic Services 90%/80%
Major Services 60%/50%
Annual Deductible $50 Aggregate
Annual Maximum $1,000 Aggregate
Lifetime Ortho Maximum $1,000
-30-
VISION ORMAT PAY 80% OF PREMIUM
Exam $20 Copay Every 12 Months
Lenses & Frames $20 Copay Every 12 Months
LONG TERM DISABILITY ORMAT PAY 100% OF PREMIUM
Elimination Period 90 Days
Maximum Monthly Benefit 66.67% to $9,000
SHORT TERM DISABILITY ORMAT PAY 100% OF PREMIUM
Elimination Period 1st day Accident/7th Day Sickness 13 Weeks
Maximum Weekly Benefit $2,000.00
--------------------------------------------------------------------------------
VACATION 1-5 years 80 hours
--------------------------------------------------------------------------------
6+ years 120 hours
--------------------------------------------------------------------------------
HOLIDAYS 10 days
--------------------------------------------------------------------------------
SICK LEAVE 80 hours Paid at 100%
--------------------------------------------------------------------------------
160 hours maximum accrual Paid at 100%
--------------------------------------------------------------------------------
401(K) 50% match up to 4% of employee contribution
--------------------------------------------------------------------------------
-31-
Dates Referenced Herein and Documents Incorporated by Reference
