Exhibit 10.11
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Caithness Coso Funding Corp.
as Issuer
and
Coso Finance Partners
Coso Energy Developers
Coso Power Developers
as Guarantors
$ 110,000,000 6.80% Senior Secured Notes due 2001
$ 303,000,000 9.05% Senior Secured Notes due 2009
Purchase Agreement
May 21, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
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May 21, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
Caithness Coso Funding Corp., a special purpose Delaware corporation
(the "Issuer"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
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Securities Corporation (the "Initial Purchaser") $110,000,000 in principal
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amount of its 6.80% Senior Secured Notes due 2001 (the "2001 Series A Notes")
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and $303,000,000 in principal amount of its 9.05% Senior Secured Notes due 2009
(the "2009 Series A Notes" and together with the 2001 Series A Notes, the
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"Series A Notes"), subject to the terms and conditions set forth herein. The
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Series A Notes and the Series B Notes (as defined below) issuable in exchange
therefor are collectively referred to herein as the "Notes." The Notes will be
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guaranteed by the unconditional, joint and several guarantees (the "Guarantees")
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of Coso Finance Partners, a California general partnership (the "Navy I
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Partnership"), Coso Energy Developers, a California general partnership (the
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"BLM Partnership"), and Coso Power Developers, a California general partnership
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(the "Navy II Partnership," and together with Navy I Partnership and BLM
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Partnership, the "Guarantors"). The Notes are to be issued pursuant to the
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provisions of an indenture (the "Indenture"), to be dated as of the Closing Date
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(as defined below), among the Issuer, the Guarantors and U.S. Bank Trust
National Association, as trustee (the "Trustee").
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The proceeds to be received by the Issuer from the sale of the Series
A Notes will be loaned by the Issuer to each of the Navy I Partnership, as the
owner of the Navy I geothermal power plant and related facilities ("Navy I"),
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the BLM Partnership, as the owner of the BLM geothermal power plant and related
facilities ("BLM"), and the Navy II Partnership, as the owner of Navy II
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geothermal power plant and related facilities ("Navy II," and together with Navy
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I and BLM, the "Projects") pursuant to a separate credit agreement between the
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Issuer and each such Guarantor (the "Credit Agreements"). Each of the
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Guarantors will execute a promissory note (a "Partnership Note" and, together,
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the "Partnership Notes") evidencing its obligations to the Issuer to repay the
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loan made to it under its Credit Agreement. All distributions of cash flows of
the Guarantors and the Issuer will be governed by the Credit Agreements and by a
Deposit and Disbursement Agreement among the Issuer, the Guarantors and U.S.
Bank Trust National Association, as collateral agent and as depositary (the
"Depositary Agreement"), which will provide for the deposit of funds into
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various accounts designated for specific purposes thereunder (the "Accounts").
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The Notes will be secured by (i) a perfected, first priority pledge of
the Partnership Notes by the Issuer pursuant to a pledge agreement (the
"Partnership Note Pledge Agreement"); (ii) a perfected, first priority lien on
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the funds deposited in the Accounts under the Depositary Agreement; (iii) a
perfected, first priority pledge of all the outstanding capital stock of the
Issuer by the Guarantors pursuant to a stock pledge agreement (the "Stock Pledge
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Agreement"); (iv) a perfected, first priority pledge of all the partnership
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interests of Coso Land Company, a California general partnership ("CLC"), by the
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direct owners of CLC pursuant to a pledge agreement (the "CLC Pledge Agreement")
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and (v) a perfected, first priority pledge of all the partnership interests of
China Lake Joint Venture, a California general partnership ("CLJV"), by the
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direct owners of CLJV pursuant to a pledge agreement (the "CLJV Pledge
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Agreement"
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and, together with the CLC Pledge Agreement, the "Additional Pledge
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Agreements"). The Guarantees, in turn, will be secured by a perfected, first
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priority lien on substantially all the assets of the Guarantors and a perfected,
first priority pledge of all of the ownership interests of the Guarantors by the
direct owners of the Guarantors pursuant to their respective pledge agreements
(the "Partnership Interest Pledge Agreements"). The entities that will pledge
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their respective ownership interests in the Guarantors, CLC and CLJV are listed
on Schedule A hereto (as in existence on the date hereof and on the Closing
Date, each a "Pledgor" and collectively, the "Pledgors"), and the Partnership
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Note Pledge Agreement, the Stock Pledge Agreement, the Partnership Interest
Pledge Agreements, the Additional Pledge Agreements and any deed of trust,
mortgage, security agreement or other instrument evidencing the security
interests to be granted in favor of the Trustee for the benefit of the holders
of the Notes are collectively referred to herein as the "Security Documents."
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Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. Offering Memorandum. The Series A Notes and the Guarantees will
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be offered and sold to the Initial Purchaser pursuant to one or more exemptions
from the registration requirements under the Securities Act of 1933, as amended
(the "Act"). The Issuer and the Guarantors have prepared a preliminary offering
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memorandum, dated May 5, 1999 (the "Preliminary Offering Memorandum"), and a
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final offering memorandum, dated May 21, 1999 (the "Offering Memorandum"),
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relating to the Series A Notes and the Guarantees thereof.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor (other than the Series B Notes), in
substitution thereof or upon conversion thereof) shall bear the following
legend:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE ISSUER THAT: (A) SUCH NOTE MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) (A) INSIDE THE UNITED STATES TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144(A),
(B) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (D) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (2) TO
THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES
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LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2. Agreements to Sell and Purchase. On the basis of the
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representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Issuer agrees to issue
and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase
from the Issuer, $110,000,000 in principal amount of the 2001 Series A Notes and
$303,000,000 in principal amount of the 2009 Series A Notes at a purchase price
equal to 100% of the principal amount thereof (the "Purchase Price"). Upon the
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purchase of the Series A Notes by the Initial Purchaser, the Guarantors shall
pay the Initial Purchaser a fee in an amount equal to 2.0% of the Purchase
Price.
3. Terms of Offering. The Initial Purchaser has advised the Issuer
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that the Initial Purchaser will make offers (the "Exempt Resales") of the Series
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A Notes purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believes to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs") and (ii) to persons permitted to purchase the Series
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A Notes in offshore transactions in reliance upon Regulation S under the Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i) and
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(ii) being referred to herein as the "Eligible Purchasers"). The Initial
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Purchaser will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated as of the Closing Date, in
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substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Notes" (as defined in the Registration Rights
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Agreement). Pursuant to the Registration Rights Agreement, the Issuer and the
Guarantors will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein (i) a registration
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statement under the Act (the "Exchange Offer Registration Statement") relating
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to the Issuer's 6.80% Senior Secured Notes due 2001 (the "2001 Series B Notes")
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and 9.05% Senior Secured Notes due 2009 (the "2009 Series B Notes" and, together
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with the 2001 Series B Notes, the "Series B Notes"), to be offered in exchange
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for the Series A Notes (such offer to exchange being referred to as the
"Exchange Offer") and the Guarantees thereof and (ii) under certain
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circumstances, a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement" and, together with the Exchange Offer
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Registration Statement, the "Registration Statements") relating to the resale by
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certain holders of the Series A Notes and to use its best efforts to cause such
Registration Statements, as the case may be, to be declared and remain effective
and usable for the periods specified in the Registration Rights Agreement and to
consummate the Exchange Offer.
This Agreement, the Indenture, the Notes, the Guarantees, the Credit
Agreements, the Partnership Notes, the Depositary Agreement, the Partnership
Note Pledge Agreement, the Stock Pledge Agreement, the Additional Pledge
Agreements, the Partnership Interest Pledge Agreements and any other Security
Document are hereinafter sometimes referred to collectively as the "Operative
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Documents."
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4. Delivery and Payment.
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(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Latham & Watkins, New York, New
York, or such other location as may be mutually acceptable. Such delivery and
payment shall be made at 9:00 a.m. New York City time, on May 28, 1999 or at
such other time on the same date or such other date as shall be agreed upon by
the Initial Purchaser and the Issuer in writing. The time and date of such
delivery and the payment for the Series A Notes are herein called the "Closing
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Date."
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(b) One or more of the 2001 Series A Notes and one or more of
the 2009 Series A Notes, each in definitive global form, registered in the name
of Cede & Co., as nominee of The Depository Trust Company ("DTC"), and having an
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aggregate principal amount corresponding to the aggregate principal amount of
the 2001 Series A Notes or the 2009 Series A Notes, as the case may be
(collectively, the "Global Notes"), shall be delivered by the Issuer to the
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Initial Purchaser (or as the Initial Purchaser directs) in each case with any
transfer taxes thereon duly paid by the Issuer against payment by the Initial
Purchaser of the Purchase Price thereof by wire transfer in same day funds to
the order of the Issuer. The Global Notes shall be made available to the Initial
Purchaser for inspection not later than 9:30 a.m., New York City time, on the
business day immediately preceding the Closing Date.
5. Agreements of the Issuer and the Guarantors. Each of the Issuer
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and the Guarantors hereby, jointly and severally, agrees with the Initial
Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested
by the Initial Purchaser, confirm such advice in writing, of (i) the issuance by
any state securities commission, after the Issuer or any Guarantor receives
notice of such issuance, of any stop order suspending the qualification or
exemption from qualification of any Series A Notes and Guarantees thereof for
offering or sale in any jurisdiction designated by the Initial Purchaser
pursuant to Section 5(e) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory authority
for such purpose and (ii) the happening of any event during the period referred
to in Section 5(c) below that makes any statement of a material fact made in the
Preliminary Offering Memorandum or the Offering Memorandum untrue or that
requires any additions to or changes in the Preliminary Offering Memorandum or
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances in which they were made, not misleading. The Issuer and the
Guarantors shall use all commercially reasonable efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any
Series A Notes and Guarantees thereof under any state securities or Blue Sky
laws and, if at any time any state securities commission or other federal or
state regulatory authority shall issue an order suspending the qualification or
exemption of any Series A Notes and the Guarantees thereof under any state
securities or Blue Sky laws, the Issuer shall use all commercially reasonable
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Issuer as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchaser may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchaser's
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Issuer and the Guarantors consent to the use of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
and supplements thereto required pursuant hereto, by the Initial Purchaser in
connection with Exempt Resales.
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(c) During such period as in the opinion of counsel for the Initial
Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser, but in no event later
than 180 days after the date hereof, (i) not to make any amendment or supplement
to the Offering Memorandum of which the Initial Purchaser shall not previously
have been advised or to which the Initial Purchaser shall reasonably object in
writing promptly after being so advised and (ii) to prepare promptly, upon the
Initial Purchaser's reasonable request, any amendment or supplement to the
Offering Memorandum which may be reasonably necessary or advisable in connection
with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Issuer and the Guarantors or to the Initial Purchaser, it
becomes necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser, not misleading, or
if, in the opinion of counsel to the Issuer and the Guarantors or to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchaser and such other
persons as the Initial Purchaser may designate such number of copies thereof as
the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchaser
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that neither the Issuer nor any Guarantor shall be required in
connection therewith to qualify as a foreign corporation, limited liability
company or partnership in any jurisdiction in which it is not now so qualified
or to take any action that would subject it to general consent to service of
process or taxation other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales, in
any jurisdiction in which it is not now so subject.
(f) To furnish to the registered holders of the Series A Notes and to
any beneficial owner of the Series A Notes who so requests in writing (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuer
and the Guarantors were required to file such Forms (all prepared and presented
in accordance with generally accepted accounting principles), including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Issuer and the Guarantors and, with respect to the annual information only,
a report thereon by the certified independent accountants of the Issuer and the
Guarantors and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Issuer and the Guarantors were required to
file such reports, in each case, within the time periods specified in the
Commission's rules and regulations or, if such request is made after such time
period, as soon as practicable after the request is received. In addition, the
Issuer and the Guarantors shall, for so long as any Series A Notes remain
outstanding, furnish to holders of the Series A Notes, any beneficial owner of
the Notes and to securities analysts and prospective investors, upon their
written request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Act.
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(g) So long as any Series A Notes or Series B Notes are outstanding,
to furnish to the Initial Purchaser as soon as available copies of all reports
or other communications furnished by the Issuer or any of the Guarantors to its
debt security holders or furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the Issuer or
any of the Guarantors is listed and such other publicly available information
concerning the Issuer and/or its subsidiaries as the Initial Purchaser may
reasonably request.
(h) So long as any Series A Notes remain outstanding and during any
period in which the Issuer and the Guarantors are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
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to furnish, upon written request, to any holder of Series A Notes in connection
with any sale thereof and any prospective purchaser of such Series A Notes from
such holder, the information ("Rule 144A Information") required by Rule
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144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid the
following expenses incident to the performance of the obligations of the Issuer
and the Guarantors under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Issuer and the Guarantors and accountants of the
Issuer and the Guarantors in connection with the sale and delivery of the Series
A Notes to the Initial Purchaser and pursuant to Exempt Resales, and all other
fees and expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements), including the mailing and delivering of copies thereof to the
Initial Purchaser and persons designated by it in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Series A Notes to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Guarantees for offer
and sale under the securities or Blue Sky laws of the several states and all
costs of printing or producing any preliminary and supplemental Blue Sky
memoranda in connection therewith (including the filing fees and reasonable fees
and disbursements of counsel for the Initial Purchaser solely in connection with
such registration or qualification and memoranda relating thereto), (v) the cost
of printing certificates representing the Series A Notes and the Guarantees,
(vi) the reasonable fees and expenses of the Trustee and the Trustee's counsel
in connection with the Operative Documents, (vii) the costs and charges of any
transfer agent, registrar and/or depositary (including DTC), (viii) any fees
charged by rating agencies for the rating of the Notes, (ix) fees in connection
with the filing of UCC-1 financing statements, and (x) all other costs and
expenses incident to the performance of the obligations of the Issuer and
Guarantors hereunder for which provision is not otherwise made in this Section
5(i).
(j) To cooperate with the Initial Purchaser to effect the inclusion
of the Series A Notes in the National Association of Securities Dealers, Inc.
("NASD") Private Offerings, Resales and Trading through Automated Linkages
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("PORTAL") system and to maintain the listing of the Series A Notes on PORTAL
for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the representation
letters of the Issuer and the Guarantors to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(l) Except as disclosed in or contemplated by the Offering
Memorandum, during the period beginning on the date hereof and continuing to and
including the Closing Date, not to
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offer, sell, contract to sell or otherwise transfer or dispose of any debt
securities of the Issuer or any Guarantor or any warrants, rights or options to
purchase or otherwise acquire debt securities of the Issuer or any Guarantor
substantially similar to the Notes and the Guarantees (other than (i) the Notes
and the Guarantees and (ii) commercial paper issued in the ordinary course of
business), without the prior written consent of the Initial Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(n) To cause the Exchange Offer to be made on the appropriate form to
permit the Series B Notes and the Guarantees thereof registered pursuant to the
Act to be offered in exchange for the Series A Notes and the Guarantees thereof
and to comply in all material respects with all applicable federal and state
securities laws in connection with the Exchange Offer.
(o) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes and the
Guarantees.
(p) To use its commercially reasonable efforts to do and perform all
things required or necessary to be done and performed under this Agreement by it
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Notes and the Guarantees.
(q) So long as the Notes are outstanding, not to take or omit to take
any action, and not to permit any person to take or omit to take any action
(other than the exercise by others of remedies available under the Operative
Documents), which action or omission could result in: (i) any of the Projects
ceasing to be a "qualifying facility" (as defined pursuant to the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA"), and the regulations
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promulgated thereunder), (ii) any of the Guarantors, the Issuer, the Initial
Purchaser or any holders of Notes, solely as the result of the participation by
the parties separately or as a group in the transactions contemplated by the
Operative Documents and the ownership, use or operation of the Projects by the
Guarantors, being subject to regulation by any Governmental Authority as a
"public utility," an "electric utility," an "electric utility holding company,"
a "public utility holding company," a "holding company" or an "electrical
corporation" or a subsidiary or affiliate of any of the foregoing under any law
(including, without limitation, rules and regulations of the California State
Energy Resources Conservation and Development Commission, the Federal Power Act
of 1920, as amended, and the Public Utility Holding Company Act of 1935
("PUHCA"), other than such regulation contemplated under Section 9(a)(2) of
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PUHCA and under 18 C.F.R. (S)292.601(c), each as amended).
(r) To use the net proceeds received by it from the sale of the
Series A Notes to the Initial Purchaser pursuant to this Agreement in the manner
specified in the Offering Memorandum under the caption "Use of Proceeds."
6. Representations, Warranties and Agreements of the Issuer and the
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Guarantors. As of the date hereof, each of the Issuer and the Guarantors,
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jointly and severally, represents and warrants to, and agrees with, the Initial
Purchaser that:
(a) The Preliminary Offering Memorandum, as of its date, did not, and
the Offering Memorandum, at the date hereof, does not, and any supplement or
amendment to them will not, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
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or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to (i) pricing terms
and other financial terms intentionally left blank in the Preliminary Offering
Memorandum and (ii) statements in or omissions from the Preliminary Offering
Memorandum or the Offering Memorandum (or any supplement or amendment thereto)
based upon information relating to the Initial Purchaser furnished to the Issuer
in writing by the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) The Issuer has been duly incorporated, is validly existing as a
corporation in good standing under the laws of Delaware and has the corporate
power and authority to carry on its business as described in the Preliminary
Offering Memorandum and the Offering Memorandum and to own, lease and operate
its properties, and is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Issuer, the Guarantors and the Pledgors, taken as a
whole (a "Material Adverse Effect").
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(c) Each of the Guarantors is a general partnership duly formed under
the laws of the State of California and has the partnership power and authority
to carry on its business as described in the Preliminary Offering Memorandum and
the Offering Memorandum and to own, lease and operate its properties.
(d) Except as set forth on Schedule A hereto, each of the Pledgors
has been duly organized and is validly existing as a limited liability company
or a limited partnership, as applicable, existing in good standing under the
laws of the jurisdiction of its organization, and has the limited liability
company or limited partnership power and authority, as the case may be, to carry
on its business as described in the Preliminary Offering Memorandum and the
Offering Memorandum and to own, lease and operate its properties, and each is
duly qualified and is in good standing as a foreign limited liability company or
limited partnership, as the case may be, authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. As of the Closing Date, each
of ESCA Limited Partnership, Caithness Navy II Group, L.P. and Caithness Coso
Holdings, L.P. will have been duly reorganized and will be validly existing as a
limited liability company existing in good standing under the laws of the State
of Delaware, and will have the limited liability company power and authority to
carry on the business conducted by it prior to such reorganization and to own,
lease and operate its properties, and each will be duly qualified and will be in
good standing as a foreign limited liability company authorized to do business
in each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure to be
so qualified would not have a Material Adverse Effect. The limited liability
companies created as a result of the reorganization of ESCA Limited Partnership,
Caithness Navy II Group, L.P. and Caithness Coso Holdings, L.P. are referred to
herein as the "New Pledgors."
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(e) Each of the Issuer, the Guarantors and the Pledgors has, and as
of the Closing Date each of the New Pledgors will have, all corporate,
partnership, limited liability company or limited partnership power and
authority, as the case may be, necessary to execute and deliver each of the
Operative Documents to which it is a party and to perform its obligations
thereunder.
8
(f) All outstanding shares of capital stock of the Issuer have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights. Except as otherwise set forth in or
contemplated by the Offering Memorandum, all of the issued and outstanding
shares of capital stock of the Issuer are owned directly by the Guarantors, free
and clear of any security interest, claim, lien, encumbrance or adverse interest
of any nature (each a "Lien"). All of the partnership interests of each of Navy
----
I Partnership, BLM Partnership and Navy II Partnership represent valid
partnership interests in such partnership. As of the date hereof, all of the
general partnership interests in Navy I Partnership are owned by ESCA Limited
Partnership, a California limited partnership (which as of the Closing Date will
be reorganized into a Delaware limited liability company), and New CLOC Company,
LLC, a Delaware limited liability company. As of the date hereof, all of the
general partnership interests in Navy II Partnership are owned by Caithness Navy
II Group, L.P., a Delaware limited partnership (which as of the Closing Date
will be reorganized into a Delaware limited liability company), and New CTC
Company, LLC, a Delaware limited liability company. As of the date hereof, all
of the general partnership interests in BLM Partnership are owned by Caithness
Coso Holdings, L.P., a California general partnership (which as of the Closing
Date will be reorganized into a Delaware limited liability company), and New
CHIP Company, LLC, a Delaware limited liability company. All of the partnership
interests of CLC are owned by Caithness Acquisition Company, LLC, a Delaware
limited liability company, and Caithness Geothermal 1980 Ltd., L.P., a Delaware
limited partnership. All of the partnership interests of CLJV are owned by
Caithness Acquisition Company, LLC, a Delaware limited liability company, and
Caithness Geothermal 1980 Ltd., L.P., a Delaware limited partnership.
(g) The Issuer and the Guarantors have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, respectively, which is material to the business of the
Issuer and the Guarantors, including the Collateral, in each case, free and
clear of any Liens and defects, except for Permitted Liens as described in the
Offering Memorandum, or such as do not materially affect the value of such
property and do not interfere materially with the use made and proposed to be
made of such property by the Issuer and the Guarantors; and any real property
and buildings held under lease by the Issuer and the Guarantors are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere materially with the use made and proposed to be
made of such property and buildings by the Issuer and the Guarantors, in each
case except as described in the Offering Memorandum.
(h) This Agreement has been duly authorized, executed and delivered
by the Issuer and each of the Guarantors.
(i) The Indenture has been duly authorized by the Issuer and each of
the Guarantors and, on the Closing Date, will have been validly executed and
delivered by the Issuer and each of the Guarantors. When the Indenture has been
duly executed and delivered by the Issuer and each of the Guarantors (assuming
the due authorization, execution and delivery by the Trustee), the Indenture
will be a valid and binding agreement of the Issuer and each Guarantor,
enforceable against the Issuer and each Guarantor, as the case may be, in
accordance with its terms, except as enforceability thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or similar laws
(including fraudulent transfer laws) affecting creditors' rights generally and
(ii) general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding at law or in equity).
(j) The Series A Notes have been duly authorized for issuance and
sale by the Issuer to the Initial Purchaser and, on the Closing Date, will have
been validly executed and delivered by the Issuer. When the Series A Notes have
been issued, executed and authenticated in accordance with the
9
provisions of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Issuer, enforceable in accordance with their terms, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws (including fraudulent transfer laws)
affecting creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity). Series A Notes will, when executed and delivered, conform in all
material respects to the description thereof contained in the Offering
Memorandum.
(k) The Guarantees to be endorsed on the Series A Notes have been
duly authorized by the Guarantors, respectively, and, on the Closing Date, will
have been duly executed and delivered by the Guarantors. When the Guarantees to
be endorsed on the Series A Notes have been executed and delivered in accordance
with the Indenture, the Guarantees to be endorsed on the Series A Notes will be
the valid and binding obligations of the Guarantors, respectively, enforceable
against the Guarantors, respectively, in accordance with their terms, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws (including fraudulent transfer laws)
affecting creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity). On the Closing Date, the Guarantees to be endorsed on the Series A
Notes will conform in all material respects to the description thereof contained
in the Offering Memorandum.
(l) On the Closing Date, the Series B Notes will have been duly
authorized by the Issuer. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be the valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws (including fraudulent transfer laws)
affecting creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity). When the Series B Notes are issued, authenticated and delivered, the
Series B Notes will conform in all material respects to the description thereof
contained in the Offering Memorandum.
(m) On the Closing Date, the Guarantees to be endorsed on the Series
B Notes by the Guarantors, respectively, will have been duly authorized by the
Guarantors. When the Guarantees to be endorsed on the Series B Notes are
executed and delivered in accordance with the terms of the Indenture, the
Guarantees to be endorsed on the Series B Notes will be the valid and binding
obligations of the Guarantors, respectively, enforceable against the Guarantors,
respectively, in accordance with their terms, except as enforceability thereof
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
similar laws (including fraudulent transfer laws) affecting creditors' rights
generally and (ii) general principles of equity and discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding at law or in equity). When the Series
B Notes are issued, authenticated and delivered, the Guarantees to be endorsed
thereon will conform in all material respects to the description thereof
contained in the Offering Memorandum.
(n) The Depositary Agreement has been duly authorized by the Issuer
and each of the Guarantors and, on the Closing Date, will have been validly
executed and delivered by the Issuer and each of the Guarantors. When the
Depositary Agreement has been duly executed and delivered by the
10
Issuer and each of the Guarantors (assuming the due authorization, execution and
delivery by the other parties thereto (other than the Issuer and the
Guarantors), the Depositary Agreement will constitute a valid and binding
agreement of the Issuer and each of the Guarantors, enforceable against the
Issuer and each of the Guarantors in accordance with its terms, except as
enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws (including fraudulent transfer laws)
affecting creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity). On the Closing Date, the Depositary Agreement will conform in all
material respects to the description thereof in the Offering Memorandum.
(o) Each of the Credit Agreements has been duly authorized by the
Issuer, as lender, and by the Guarantor named as the borrower therein,
respectively, and, on the Closing Date, will have been validly executed and
delivered by the Issuer and each of the Guarantors. When each of the Credit
Agreements has been duly executed and delivered by the Issuer, as lender, and
the Guarantor named as the borrower therein, such Credit Agreement will
constitute the valid and binding agreement of the Issuer and such Guarantor,
enforceable against the Issuer and such Guarantor in accordance with its terms,
except as enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws (including fraudulent transfer laws)
affecting creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity). On the Closing Date, each of the Credit Agreements will conform in
all material respects to the description thereof in the Offering Memorandum.
(p) Each of the Partnership Notes has been duly authorized by the
Guarantor issuing such Partnership Note and, on the Closing Date, will have been
validly executed and delivered by such Guarantor. When each of the Partnership
Notes has been issued, executed and delivered by the Guarantor issuing such
Partnership Note in accordance with the provisions of the respective Credit
Agreement, such Partnership Note will be the valid and binding obligation of
such Guarantor, enforceable against such Guarantor in accordance with its terms,
except as enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws (including fraudulent transfer laws)
affecting creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity). On the Closing Date, each of the Partnership Notes will conform in
all material respects to the description thereof in the Offering Memorandum.
(q) Each of the Project Documents (as defined in the Offering
Memorandum) to which the Issuer or any Guarantor is a party has been duly
authorized by the Issuer and each of the Guarantors, as the case may be, and,
assuming due authorization, execution and delivery by the other persons party
thereto, except as described in the Offering Memorandum, constitutes the valid
and binding agreement of the Issuer or such Guarantor, as the case may be,
enforceable against the Issuer or such Guarantor, as the case may be, in
accordance with its terms, except as enforceability thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or similar laws
(including fraudulent transfer laws) affecting creditors' rights generally and
(ii) general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding at law or in equity). On the Closing Date, each
Project Document described in the Offering Memorandum will conform in all
material respects to the description thereof in the Offering Memorandum.
11
(r) The execution and delivery of each of the Security Documents to
which the Issuer, any of the Guarantors and any of the Pledgors is a party, or
will be a party on the Closing Date, will be effective to create in favor of the
Collateral Agent for the benefit of the Secured Parties and, in certain
circumstances, the Issuer, as security for the payment and performance of the
obligations secured thereby, a valid and enforceable security interest in the
Collateral covered or purported to be covered thereby upon the recordation of
the Deeds of Trust and the filing of the UCC-1 financing statements (the
"Financing Statements"), respectively, with the priority purported to be created
--------------------
thereby to the extent that such liens and security interests can be perfected by
filing. Each of the Deeds of Trust is or will be in appropriate form for
recording as a mortgage of real estate and for filing as a financing statement
to protect, preserve and perfect the liens and security interests on real
property created or to be created by the Deeds of Trust. The Financing
Statements on the Closing Date will be in appropriate form for filing (including
the description of the Collateral set forth therein) in each office and in each
jurisdiction where required to perfect the lien and security interest in
personal property described above.
(s) The Registration Rights Agreement has been duly authorized by the
Issuer and the Guarantors and, when duly executed and delivered by the Issuer
and the Guarantors (assuming the due execution and delivery by the Initial
Purchaser), will constitute a valid and binding agreement of the Issuer and each
of the Guarantors, enforceable against the Issuer and each of the Guarantors in
accordance with its terms, except as enforceability thereof may be limited by
(i) bankruptcy, insolvency, or reorganization, moratorium or similar laws
(including fraudulent transfer laws) affecting creditors' rights generally and
(ii) general principles of equity and the discretion of the court before which
any proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding at law or in equity).
(t) Neither the Issuer nor any of the Guarantors is in violation of
its respective charter, by-laws or partnership agreement or in default in the
performance of any material obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Issuer or to any of the Guarantors, taken
as a whole, to which the Issuer or any of the Guarantors is a party or by which
the Issuer or any of the Guarantors or their respective property is bound, and
which violation or default might result, singly or in the aggregate, in a
Material Adverse Effect.
(u) The execution, delivery and performance of this Agreement and the
other Operative Documents by each of the Issuer, the Guarantors and the
Pledgors, compliance by each of the Issuer, the Guarantors and the Pledgors with
all provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) assuming that the Notes are sold in
the manner described in this Agreement, require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states or which have been obtained), and, with
respect to the Registration Rights Agreement, the Act and the Trust Indenture
Act), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter, by-laws or partnership agreement
of the Issuer, the Guarantors or the Pledgors, as the case may be, or any
indenture, loan agreement, mortgage, lease or other agreement or instrument to
which the Issuer, any of the Guarantors or any of the Pledgors is a party or by
which the Issuer, any of the Guarantors or any of the Pledgors or their
respective property is bound, (iii) violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Issuer, any of the
Guarantors or any of the Pledgors or their respective property, (iv) other than
pursuant to the Operative Documents, result in the imposition or creation of (or
the obligation to create or impose) a Lien under, any agreement or instrument to
which the Issuer, any of the Guarantors or any of the Pledgors is a party or by
which the Issuer, any of the
12
Guarantors or any of the Pledgors or their respective property is bound, or (v)
result in the termination, suspension or revocation of any Authorization (as
defined below) of the Issuer, any of the Guarantors or any of the Pledgors or
result in any other impairment of the rights of the holder of any such
Authorization, except, with respect to clauses (ii), (iii) and (v), for
violations, conflicts, breaches, defaults, Liens, terminations, suspensions,
revocations or impairments which would not reasonably be expected to have a
Material Adverse Effect.
(v) Except as is disclosed in the Offering Memorandum, there are no
legal or governmental proceedings pending or, to the best knowledge of the
Issuer and the Guarantors, threatened to which the Issuer or any of the
Guarantors is or could be a party or to which any of their respective property
is or could be subject, which might result, singly or in the aggregate, in a
Material Adverse Effect.
(w) Except as is disclosed in the Offering Memorandum, neither the
Issuer nor any of the Guarantors has violated any federal, state or local law or
regulation, including such laws or regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), or any provisions of
------------------
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(x) Except as is disclosed in the Offering Memorandum, there are no
costs or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any Authorization, any
related constraints on operating activities and any potential liabilities to
third parties) for which the Issuer or any of the Guarantors are liable and
which would, singly or in the aggregate, have a Material Adverse Effect.
(y) Each of the Issuer and the Guarantors has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
-------------
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business in the manner described in the
Preliminary Offering Memorandum and the Offering Memorandum, except where the
failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Except as
disclosed in the Preliminary Offering Memorandum and the Offering Memorandum,
each such Authorization is valid and in full force and effect and each of the
Issuer and its the Guarantors is in compliance with all the applicable terms and
conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are materially burdensome
to the Issuer or any of the Guarantors; except where such failure to be valid
and in full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect.
(z) The accountants, KPMG LLP and PricewaterhouseCoopers LLP, that
have certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum are each independent
certified public accountants with respect to the Issuer and the Guarantors under
Rule 101 of the American Institute of Certified Public
13
Accountant's Code of Professional Conduct and its interpretations and rulings.
The historical financial statements, together with related schedules and notes,
set forth in the Preliminary Offering Memorandum and the Offering Memorandum
comply as to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act.
(aa) The historical financial statements, together with related
schedules and notes, forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the financial position, results of
operations and cash flows of the Issuer and of the Guarantors on the basis
stated in the Offering Memorandum at the respective dates or for the respective
periods to which they apply; such statements and related schedules and notes
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set forth
in the Offering Memorandum (and any amendment or supplement thereto) are, in all
material respects, accurately presented and prepared on a basis consistent with
such financial statements and the books and records of the Issuer and the
Guarantors.
(bb) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Issuer and the
Guarantors and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith (as of the date of the Offering Memorandum)
and present fairly the historical and proposed transactions contemplated by the
Preliminary Offering Memorandum and the Offering Memorandum; and such pro forma
financial statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act. The other pro forma financial
and statistical information and data included in the Offering Memorandum are, in
all material respects, accurately presented and prepared on a basis consistent
with the pro forma financial statements.
(cc) Neither the Issuer nor any Guarantor is, after giving effect to
the offering and sale of the Series A Notes and the application of the proceeds
therefrom as described in the Offering Memorandum, or will be, an "investment
company," or an entity "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
(dd) Neither the Issuer nor any of the Guarantors nor any agent
thereof acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Series A
Notes to violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part
221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(ee) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Issuer or any Guarantor that it is considering
imposing) any condition (financial or otherwise) on the Issuer's or any
Guarantor's retaining any rating assigned as of the date hereof to the Issuer or
any Guarantor or to any securities of the Issuer or any Guarantor other than the
conditions requiring (A) the election of an independent director to the Board of
Directors of the Issuer and the designation of an independent manager to each of
New CLOC Company, LLC, New CHIP Company, LLC and New CTC Company, LLC and (B)
the delivery of final documentation for the transactions contemplated by this
agreement to the ratings agencies or (ii) has indicated to the Issuer or any
Guarantor that it is considering (a) the downgrading, suspension, or withdrawal
of, or any review for a possible change that does not indicate the direction of
the
14
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Issuer, any Guarantor or any securities of the Issuer or any
Guarantor.
(ff) Since the respective dates as of which information is given in
the Offering Memorandum and other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Issuer and the Guarantors, taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Issuer or
any of the Guarantors and (iii) neither the Issuer nor any of the Guarantors has
incurred any material liability or obligation, direct or contingent.
(gg) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act. The Notes and the
Guarantees thereof meet the eligibility requirements of Rule 144A(d)(3) under
the Act.
(hh) The Issuer and each of the Guarantors own, possess, or have the
right to use, or can acquire on reasonable terms, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names ("intellectual
------------
property") currently employed by them in connection with the business now
- --------
operated by them except where the failure to own or possess or otherwise be able
to acquire such intellectual property would not, singly or in the aggregate,
have a Material Adverse Effect; and neither the Issuer nor any of the Guarantors
has received any notice of infringement of or conflict with asserted rights of
others with respect to any of such intellectual property which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.
(ii) The Issuer and each of the Guarantors are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are customary in the businesses in which they are engaged; and
neither the Issuer nor any of the Guarantors (i) has received notice from any
insurer or agent of such insurer that substantial capital improvements or other
material expenditures will have to be made in order to continue such insurance
or (ii) has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers at a cost that would not have a Material Adverse
Effect.
(jj) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or, to the best knowledge of the
Issuer or any of the Guarantors, threatened against the Issuer or any of the
Guarantors before the National Labor Relations Board or any state or local labor
relations board, (ii) strike, labor dispute, slowdown or stoppage pending or, to
the best knowledge of the Issuer or any of the Guarantors, threatened against
the Issuer or any of the Guarantors or (iii) to the best knowledge of the Issuer
or any of the Guarantors, union representation question existing with respect to
the employees of the Issuer or any of the Guarantors, except in the case of
clauses (i), (ii) and (iii) for such actions which, singly or in the aggregate,
would not have a Material Adverse Effect. To the best knowledge of the Issuer
and the Guarantors, no collective bargaining organizing activities are taking
place with respect to the Issuer or any of the Guarantors.
15
(kk) Each of the Issuer and the Guarantors maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability in accordance with
industry practice; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded assets are
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(ll) All material tax returns required to be filed by the Issuer and
each of the Guarantors in any jurisdiction prior to the date hereof have been
filed, other than those filings being contested in good faith, and all material
taxes, including withholding taxes, penalties and interest, assessments, fees
and other charges due pursuant to such returns or pursuant to any assessment
received by the Issuer or any of the Guarantors have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided.
(mm) The factual information provided by the Issuer and Guarantors to
Sandwell Engineering Inc. (the "Independent Engineer"), Henwood Energy Services,
--------------------
Inc. (the "Energy Markets Consultant") and GeothermEx, Inc. (the "Geothermal
------------------------- ----------
Consultant") in connection with the preparation of their reports appearing in
- ----------
Exhibits A, B and C, respectively, to the Offering Memorandum (which factual
information is referenced in those reports), was provided in good faith;
provided that the foregoing does not imply or express any representation or
warranty by the Issuer and the Guarantors as to the accuracy of the information,
projections or conclusions contained in such reports and does not constitute any
obligation to update such reports.
(nn) When the Series A Notes and the Guarantees endorsed thereon are
issued and delivered pursuant to this Agreement, neither the Series A Notes nor
such Guarantees will be of the same class (within the meaning of Rule 144A under
the Act) as any security of the Issuer or the Guarantors that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
(oo) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Issuer, the Guarantors or
any of their respective representatives (other than the Initial Purchaser, as to
whom the Issuer and the Guarantors make no representation) in connection with
the offer and sale of the Series A Notes contemplated hereby, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising; provided, however, that the Issuer and the
Guarantors make no representation or warranty regarding any general solicitation
or advertising that may have been undertaken by any rating agencies. No
securities of the same class as the Series A Notes and/or the Guarantees have
been issued and sold by the Issuer within the six-month period immediately prior
to the date hereof.
(pp) None of the Issuer, the Guarantors nor any of their respective
affiliates or any person acting on its or their behalf (other than the Initial
Purchaser, as to whom the Issuer and the Guarantors make no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("Regulation S") with respect to the Series A Notes
------------
or the Guarantees endorsed thereon.
16
(qq) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(rr) No registration under the Act of the Series A Notes or the
Guarantees is required for the sale of the Series A Notes and the Guarantees to
the Initial Purchaser as contemplated hereby or for the Exempt Resales assuming
the accuracy of the Initial Purchaser's representations and warranties and
agreements set forth in Section 7 hereof.
(ss) Each certificate signed by any officer of the Issuer or any
Guarantor and delivered to the Initial Purchaser or counsel for the Initial
Purchaser on the Closing Date in connection with the issuance and sale of the
Series A Notes shall be deemed to be a representation and warranty by the Issuer
or such Guarantor to the Initial Purchaser as to the matters covered thereby.
(tt) The proceeds from the offering of the Notes will not be used to
purchase or carry any instrument or security other than the Partnership Notes.
(uu) Each of the Projects is a small power "qualifying facility" as
such term is defined pursuant to the Public Utility Regulatory Policies Act of
1978, as amended, and the regulations promulgated thereunder. None of the
Guarantors, the Issuer, the Initial Purchaser or any Holders will, solely as the
result of the participation by the parties separately or as a group in the
transactions contemplated by the Operative Documents and the ownership, use or
operation of the Projects by the Guarantors, be subject to regulation by any
Governmental Authority as a "public utility," an "electric utility," an
"electric utility holding company," a "public utility holding company," a
"holding company" or an "electrical corporation" or a subsidiary or affiliate of
any of the foregoing under any Law (including, without limitation, rules and
regulations of the California State Energy Resources Conservation and
Development Commission, the Public Utility Holding Company Act of 1935, the
Federal Power Act of 1920 and the Public Utility Regulatory Policies Act of
1978, each as amended) other than such regulation contemplated under Section
9(a)(2) of PUHCA and under 18 C.F.R. (S)292.601(c).
(vv) None of the Issuer, the Guarantors or any of their respective
affiliates does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075, Florida
Statutes.
(ww) Prior to the date hereof, none of the Issuer, the Guarantors or
any of their affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Issuer in
connection with the offering of the Series A Notes.
The Issuer and the Guarantors acknowledge that the Initial Purchaser and,
for purposes of the opinions to be delivered to the Initial Purchaser pursuant
to Section 9 hereof, counsel to the Issuer and the Guarantors and counsel to the
Initial Purchaser will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. Initial Purchaser's Representations, Warranties and Agreements. The
--------------------------------------------------------------
Initial Purchaser represents and warrants to, and agrees with, the Issuer and
the Guarantors:
(a) The Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate the
merits and risks of an investment in the Series A Notes.
17
(b) The Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A, and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) The Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act) has
been or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. The Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from (A) Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs, and (B) Regulation S Purchasers, in each case, that agree that (x) the
Series A Notes purchased by them may be resold, pledged or otherwise transferred
within the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as in
effect on the date of the transfer of such Series A Notes, only (I) to the
Issuer or any of the Guarantors, (II) to a person whom the seller reasonably
believes is a QIB purchasing for its own account or for the account of a QIB in
a transaction meeting the requirements of Rule 144A under the Act, (III) in an
offshore transaction (as defined in Rule 902 under the Act) meeting the
requirements of Rule 904 of the Act, (IV) in a transaction meeting the
requirements of Rule 144 under the Act, (V) to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Act) that, prior to such transfer, furnishes the trustee with a signed
letter containing certain representations and agreements relating to the
transfer of the Series A Notes (the form of which can be obtained from the
trustee) and , if such transfer is in respect of an aggregate principal amount
of Series A Notes less than $250,000, an opinion of counsel acceptable to the
Issuer that such transfer is in compliance with the Act, (VI) in accordance with
another exemption from the registration requirements of the Act (and based upon
an opinion of counsel acceptable to the Issuer) or (VII) pursuant to an
effective registration statement and, in each case, in accordance with the
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (y) they will deliver to each Person to whom such
Series A Notes or an interest therein is transferred a notice substantially to
the effect of the foregoing.
(e) The Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes or
the Guarantees thereof.
(f) The Series A Notes offered and sold by the Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by the Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
18
(h) The Initial Purchaser agrees that it has not offered or
sold, and will not offer or sell, the Series A Notes in the United States or to,
or for the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Act (i) as part of its distribution
at any time and (ii) otherwise until 40 days after the later of the commencement
of the offering of the Series A Notes pursuant hereto and the Closing Date,
other than in accordance with Regulation S of the Act or another exemption from
the registration requirements of the Act. The Initial Purchaser agrees that,
during such 40-day restricted period, it will not cause any advertisement with
respect to the Series A Notes (including any "tombstone" advertisement) to be
published in any newspaper or periodical or posted in any public place and will
not issue any circular relating to the Series A Notes, except such
advertisements as permitted by and include the statements required by Regulation
S.
(i) The Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor, dealer or
person receiving a selling concession, fee or other remuneration during the 40-
day restricted period referred to in Rule 903(c)(3) under the Act, it will send
to such distributor, dealer or person receiving a selling concession, fee or
other remuneration notice stating that such distributor, dealer or person
receiving a selling concession, fee or other remuneration is subject to certain
restrictions during such 40-day restricted period.
(j) The Initial Purchaser agrees that the Series A Notes offered
and sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(c)(3) of the
Act and only upon certification of beneficial ownership of such Series A Notes
by non-U.S. persons or U.S. persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
(k) The Initial Purchaser (i) has not offered or sold, and will
not offer or sell, in the United Kingdom, by means of any document, any Series A
Notes other than to persons whose ordinary business it is to buy or sell shares
or debentures, whether as principal or as agent (except in circumstances which
do not constitute an offer to the public within the meaning of the Companies Act
1989 of Great Britain); (ii) has complied and will comply with all applicable
provisions of the Financial Services Act 12986 of the United Kingdom with
respect to anything done by it in relation to the Series A Notes in, from or
otherwise involving the United Kingdom; and (iii) has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issue of the Series A Notes to a person who is of a kind
described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
The Initial Purchaser acknowledges that the Issuer and the
Guarantors and, for purposes of the opinions to be delivered to the Initial
Purchaser pursuant to Section 9 hereof, counsel to the Issuer and the Guarantors
and counsel to the Initial Purchaser will rely upon the accuracy and truth of
the foregoing representations and the Initial Purchaser hereby consents to such
reliance.
8. Indemnification.
---------------
(a) The Issuer and each Guarantor agree, jointly and severally,
to indemnify and hold harmless the Initial Purchaser, its directors, its
officers and each person, if any, who controls such Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any
19
action, that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Issuer or any Guarantor to any holder or prospective
purchaser of Series A Notes pursuant to Section 5(h) or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Initial Purchaser furnished in writing to the Issuer
by the Initial Purchaser, including, but not limited to, the information
furnished by or on behalf of the Initial Purchaser in the section entitled "Plan
of Distribution"; provided, however, that the foregoing indemnity agreement with
respect to any Preliminary Offering Memorandum shall not inure to the benefit of
the Initial Purchaser if the Initial Purchaser fails to deliver a Final Offering
Memorandum, as then amended or supplemented, (so long as the Final Offering
Memorandum and any amendment or supplement thereto was provided by the Issuer to
the Initial Purchaser in the requisite quantity and on a timely basis to permit
proper delivery on or prior to the Closing Date) to the person asserting any
losses, claims, damages, liabilities or judgments caused by any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such material misstatement or omission or
alleged material misstatement or omission was cured in the Final Offering
Memorandum, as so amended or supplemented.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Issuer and the Guarantors, and their respective directors, officers, members,
partners, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Issuer or the Guarantors,
to the same extent as the foregoing indemnity from the Issuer and the Guarantors
to the Initial Purchaser but only with reference to information relating to the
Initial Purchaser furnished in writing to the Issuer by the Initial Purchaser
expressly for use in any Preliminary Offering Memorandum or the Offering
Memorandum, including the information furnished by the Initial Purchaser in the
section entitled "Plan of Distribution."
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
-----------------
against whom such indemnity may be sought (the "indemnifying party") in writing
------------------
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Initial Purchaser shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchaser). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense
20
of such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the parties
indemnified pursuant to Section 8(a), and by the Issuer, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request and the indemnifying party shall not have objected in
writing to such settlement prior to the indemnified party entering into such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuer and the Guarantors, on the one hand, and the Initial Purchaser, on the
other hand, from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Issuer and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Issuer and the
Guarantors, on the one hand and the Initial Purchaser, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (after underwriting discounts and commissions,
but before deducting expenses) received by the Issuer, and the total discounts
and commissions received by the Initial Purchaser bear to the total price to
investors of the Series A Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Issuer and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuer or the Guarantors,
on the one hand, or the Initial Purchaser, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Issuer, the Guarantors and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
21
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
the Initial Purchaser exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
9. Conditions of Initial Purchaser's Obligations. The obligations of the
---------------------------------------------
Initial Purchaser to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuer and the
Guarantors contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred
any downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal of, or
of any review (or of any potential or intended review) for a possible change
that does not indicate the direction of the possible change in, any rating of
the Issuer or any Guarantor or any securities of the Issuer or any Guarantor
(including, without limitation, the placing of any of the foregoing ratings on
credit watch with negative or developing implications or under review with an
uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act, (ii) there shall not have occurred any adverse change, nor shall any
written notice have been given of any potential or intended adverse change, in
the outlook for any rating of the Issuer or any Guarantor or any securities of
the Issuer or any Guarantor by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Series A Notes than that on which
the Series A Notes were marketed.
(c) Since the respective dates as of which information is given in
the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Issuer and the Guarantors,
taken as a whole, (ii) there shall not have been any adverse change or any
development involving a prospective adverse change in the capital stock or in
the long-term debt of the Issuer or any of the Guarantors and (iii) neither the
Issuer nor any of the Guarantors shall have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
22
(d) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by two authorized officers of the Issuer and each of
the Guarantors, confirming the matters set forth in Sections 6(ff), 9(a) and
9(b) and stating that each of the Issuer and the Guarantors has complied in all
material respects with all the agreements and satisfied all of the conditions
herein contained and required to be complied with or satisfied on or prior to
the Closing Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, from Riordan & McKinzie, a Professional Corporation, special California
counsel for the Issuer and the Guarantors, as to certain of the matters set
forth on Exhibit B attached hereto, subject to customary assumptions,
qualifications and limitations. Such opinion shall be rendered to you at the
request of the Issuer and the Guarantors and shall so state therein. In
rendering such opinion, Riordan & McKinzie shall have received and may rely upon
one or more opinions of local counsel reasonably acceptable to the Initial
Purchaser, as they may reasonably request to pass upon such matters.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated as of the
Closing Date, from Reed Smith Shaw & McClay LLP, special New York counsel for
the Issuer, the Guarantors and the Pledgors, as to the matters set forth on
Exhibit B attached hereto that are not covered in the opinion rendered pursuant
to paragraph 9(e) hereof, subject to customary assumptions, qualifications and
limitations. Such opinion shall be rendered to you at the request of the Issuer
and the Guarantors and shall so state therein. In rendering such opinion, Reed
Smith Shaw & McClay LLP shall have received and may rely upon one or more
opinions of local counsel reasonably acceptable to the Initial Purchaser, as
they may reasonably request to pass upon such matters.
(g) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated as of the
Closing Date, from Orrick Herrington & Sutcliffe LLP, special regulatory counsel
for the Issuer and the Guarantors, as to the matters set forth on Exhibit C
attached hereto, subject to customary assumptions, qualifications and
limitations. Such opinion shall be rendered to you at the request of the Issuer
and the Guarantors and shall so state therein. In rendering such opinion, Orrick
Herrington & Sutcliffe LLP shall have received and may rely upon one or more
opinions of local counsel reasonably acceptable to the Initial Purchaser, as
they may reasonably request to pass upon such matters.
(h) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser.
(i) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchaser from KPMG LLP, independent public accountants, containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to the Initial Purchaser with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(j) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Datof the e, as the case may be, in form and substance satisfactory
to the Initial Purchaser from PricewaterhouseCoopers LLP, independent public
accountants, containing the information and statements of the type ordinarily
included in
23
accountants' "comfort letters" to the Initial Purchaser with respect to the
financial statements and certain financial information contained in the Offering
Memorandum.
(k) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
(l) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture and the Depositary Agreement, each of
which shall have been entered into by the Issuer, the Guarantors and the
Trustee.
(m) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Credit Agreements and Security Documents, each in
form and substance reasonably satisfactory to the Initial Purchaser and each of
which shall have been entered into by the Issuer, the Guarantors and the
Pledgors, to the extent each is a named party thereto; and the representations,
warranties and agreements of the Issuer, the Guarantors and the Pledgors
contained in the Credit Agreements and the Security Documents, to the extent
each is a named party thereto, shall be true and correct as of the Closing Date.
(n) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Registration Rights Agreement which shall have
been executed by the Issuer and the Guarantors.
(o) Each of ESCA Limited Partnership, Caithness Navy II Group, L.P.
and Caithness Coso Holdings, L.P. shall have been reorganized as a Delaware
limited liability company and each of the New Pledgors shall have acquired,
assumed or succeeded to all right, title and interest in all of the assets of
its respective predecessor.
(p) Coso Funding Corp. shall have consummated its offer to purchase
for cash any and all of its 8.53% Senior Secured Notes due December 31, 1999 and
its 8.87% Senior Secured Notes due December 31, 2001, made pursuant to an Offer
to Purchase Statement dated April 16, 1999 (as the same has been and may be
amended or extended).
(q) The Issuer and the Guarantors shall have furnished the Initial
Purchaser with such assurance and evidence as the Initial Purchaser may require
to confirm that, as of the Closing Date, all debt owed by the Issuer and the
Guarantors (other than Permitted Indebtedness) will be repaid in full and all
liens and collateral securing such debt shall be released.
(r) On or prior to the Closing Date, the Issuer or the Guarantors
shall have delivered to the Initial Purchaser evidence satisfactory to the
Initial Purchaser and their counsel that title insurance commitments in an
aggregate amount of $200.0 million for policies insuring the Deeds of Trust
executed by the Guarantors have been obtained, each of which title insurance
commitments shall be reasonably satisfactory in form and substance to the
Initial Purchaser and its counsel.
(s) On or prior to the Closing Date, the Deeds of Trust shall have
been delivered to Chicago Title Insurance Company (the "Title Company") for due
-------------
recordation as a mortgage of real estate, and any required filings with respect
to personal property and fixtures subject to the liens of the Deed of Trust
shall have been delivered to the Title Company for filing, in each place in
which such recording or filing is required to protect, preserve and perfect the
liens of the Deed of Trust as a valid and enforceable lien on the real estate
and as a valid and enforceable security interest in the personal property
24
and fixtures covered or purported to be covered by the Deed of Trust, with the
priority purported to be created thereby, in each case subject only to Permitted
Liens, and except for such recordation or filing no further action shall be
required to create, preserve or perfect such liens and security interests. On or
prior to the Closing Date, the Financing Statements shall have been delivered
for filing, recordation and/or registration in each office and in each
jurisdiction where required to create and perfect a valid and enforceable
security interest in the Collateral covered or purported to be covered by the
Security Documents, with the priority purported to be created thereby. All taxes
and recording and filing fees required to be paid with respect to the execution,
recording or filing of the Deeds of Trust and the Financing Statements shall
have been paid or provided for on or prior to the Closing Date. All Collateral
shall be subject to no Liens other than Permitted Liens.
(t) On or prior to the Closing Date, each of the Project Documents,
in the forms previously delivered to the Initial Purchaser or its counsel and as
they exist as executed versions as of the date of this Agreement or in such
forms as shall be satisfactory in form and substance to the Initial Purchaser
and its counsel, shall have been executed and delivered, shall remain in full
force and effect, no default shall have occurred thereunder, all conditions
precedent thereunder shall be satisfied and there shall not have occurred any
event of force majeure thereunder on the Closing Date.
(u) The Independent Engineer shall have consented to the references
to it in the Offering Memorandum and the use of the Independent Engineer's
Report (as defined in the Offering Memorandum) prepared by the Independent
Engineer and contained in Exhibit A to the Offering Memorandum; and since the
date of the Independent Engineer's Report, no event affecting the Independent
Engineer's Report or the matters referred to therein shall have occurred (A)
which shall make untrue or incorrect in any material respect, as of the Closing
Date, any information or statement contained in the Independent Engineer's
Report or in the Offering Memorandum relating to matters referred to in the
Independent Engineer's Report, or (B) which shall not be reflected in the
Offering Memorandum but should be reflected therein in order to make the
statements and information contained in the Independent Engineer's Report, or in
the Offering Memorandum relating to matters in the Independent Engineer's
Report, in light of the circumstances under which they were made, not
misleading, as evidenced by a certificate satisfactory to the Initial Purchaser,
of an authorized officer of the Independent Engineer, dated as of the Closing
Date.
(v) The Energy Markets Consultant shall have consented to the
references to it in the Offering Memorandum and the use of the Energy Markets
Consultant's Report (as defined in the Offering Memorandum) prepared by the
Energy Markets Consultant and contained in Exhibit B to the Offering Memorandum;
and since the date of the Energy Markets Consultant's Report, no event affecting
the Energy Markets Consultant's Report or the matters referred to therein shall
have occurred (A) which shall make untrue or incorrect in any material respect,
as of the Closing Date, any information or statement contained in Energy Markets
Consultant's Report or in the Offering Memorandum relating to matters referred
to in the Energy Markets Consultant's Report, or (B) which shall not be
reflected in the Offering Memorandum but should be reflected therein in order to
make the statements and information contained in the Energy Markets Consultant's
Report, or in the Offering Memorandum relating to matters in the Energy Markets
Consultant's Report, in light of the circumstances under which they were made,
not misleading, as evidenced by a certificate satisfactory to the Initial
Purchaser, of an authorized officer of the Energy Markets Consultant, dated as
of the Closing Date.
(w) The Geothermal Consultant shall have consented to the references
to it in the Offering Memorandum and the use of the Geothermal Consultant's
Report (as defined in the Offering Memorandum) prepared by the Geothermal
Consultant and contained in Exhibit C to the Offering
25
Memorandum; and since the date of the Geothermal Consultant's Report, no event
affecting the Geothermal Consultant's Report or the matters referred to therein
shall have occurred (A) which shall make untrue or incorrect in any material
respect, as of the Closing Date, any information or statement contained in
Geothermal Consultant's Report or in the Offering Memorandum relating to matters
referred to in the Geothermal Consultant's Report, or (B) which shall not be
reflected in the Offering Memorandum but should be reflected therein in order to
make the statements and information contained in the Geothermal Consultant's
Report, or in the Offering Memorandum relating to matters in the Geothermal
Consultant's Report, in light of the circumstances under which they were made,
not misleading, as evidenced by a certificate satisfactory to the Initial
Purchaser, of an authorized officer of the Geothermal Consultant, dated as of
the Closing Date.
(x) Neither the Issuer nor the Guarantors shall have failed at or
prior to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Issuer or the
Guarantors, as the case may be, at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement shall
------------------------------------------
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchaser by written notice to the Issuer if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Chicago Board of Trade, or the NASDAQ National Market
or limitation on prices for securities or other instruments on any such exchange
or the NASDAQ National Market, (iii) the suspension of trading of any securities
of the Issuer or any Guarantor on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects,
or will materially and adversely affect, the business, prospects, financial
condition or results of operations of the Issuer and its subsidiaries, taken as
a whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the financial markets in the
United States and would, in the Initial Purchaser's judgment, make it
impracticable to market the Series A Notes on the terms and in the manner
contemplated.
11. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (i) if to the Issuer or any Guarantor,
to Caithness Coso Funding Corp., 1114 Avenue of the Americas, 41st Floor, New
York, New York 10036-7790 and (ii) if to the Initial Purchaser, Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Issuer, the Guarantors and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for
26
the Series A Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Issuer, any Guarantor, the officers or directors of the Issuer or
any Guarantor, or any person controlling the Issuer or any Guarantor, (ii)
acceptance of the Series A Notes and payment for them hereunder and (iii)
termination of this Agreement.
If this Agreement shall be terminated by the Initial Purchaser because
of the failure or refusal on the part of the Issuer and the Guarantors to comply
with the terms or to fulfill any of the conditions of this Agreement (other than
as a result of any termination of this Agreement pursuant to Section 10), the
Issuer and each Guarantor, jointly and severally, agree to reimburse the Initial
Purchaser for all out-of-pocket expenses (including the fees and disbursements
of counsel to the Initial Purchaser) incurred by it. Notwithstanding any
termination of this Agreement, the Issuer shall be liable for all expenses which
it has agreed to pay pursuant to Section 5(i) hereof. The Issuer and each
Guarantor also agree, jointly and severally, to reimburse the Initial Purchaser
and its officers, directors and each person, if any, who controls such Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act for any and all fees and expenses (including without limitation the
reasonable fees and expenses of counsel) reasonably incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuer, the Guarantors,
the Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors and managers of the Issuer
and the Guarantors, as the case may be, and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of the Series
A Notes from the Initial Purchaser merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Issuer, the Guarantors and the Initial Purchaser.
27
Very truly yours,
CAITHNESS COSO FUNDING CORP.
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
Executive Vice President & Chief Financial Officer
COSO FINANCE PARTNERS,
a California general partnership
By: New CLOC Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
Executive Vice President
By: ESCA Limited Partnership,
a California limited partnership,
its General Partner
By: Caithness Geothermal 1980 Ltd., L.P.
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
Executive Vice President
28
By: ESI Geothermal, Inc.,
a Florida corporation,
its General Partner
By: /s/ John A. Keener
---------------------
Name: John A. Keener
Title: Vice President
COSO ENERGY DEVELOPERS,
a California general partnership
By: New CHIP Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness Coso Holdings, L.P.,
a California limited partnership,
its General Partner
By: Caithness CEA Geothermal, L.P.,
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness BLM Group, L.P.,
a New Jersey limited partnership,
its General Partner
By: Caithness Geothermal 1980 Ltd., L.P.,
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
-----------------------------
Christopher T. McCallion
29
Executive Vice President
By: Caithness Geothermal 1980 Ltd., Special Group I, L.P.,
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
By: West Coast Geothermal Ltd., L.P.,
a Delaware limited partnership
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
By: Pacific Geothermal Ltd., L.P.,
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
By: Mt. Whitney Geothermal Limited Partnership,
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
30
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
By: Mt. Whitney Geothermal-II Limited
Partnership,
a Delaware limited partnership,
its General Partner
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
By: Caithness Power, L.L.C.,
a Delaware limited liability company,
its General Partner
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
COSO POWER DEVELOPERS,
a California general partnership
By: New CTC Company, LLC,
a Delaware limited liability company,
its Managing General Partner
By: /s/ Christopher T. McCallion
------------------------------
Christopher T. McCallion
Executive Vice President
31
SCHEDULE A
Pledgors
Navy I Partners
- ---------------
. ESCA Limited Partnership, a California limited partnership (to be
reorganized on or prior to the Closing Date as a limited liability company
under the laws of the State of Delaware)
. New CLOC Company, LLC, a Delaware limited liability company
Navy II Partners
- ----------------
. Caithness Navy II Group L.P., a Delaware limited partnership (to be
reorganized on or prior to the Closing Date as a limited liability company
under the laws of the State of Delaware)
. New CTC Company, LLC, a Delaware limited liability company
BLM Partners
- ------------
. Caithness Coso Holdings, L.P., a California limited partnership (to be
reorganized on or prior to the Closing Date as a limited liability company
under the laws of the State of Delaware)
. New CHIP Company, LLC, a Delaware limited liability company
CLC Partners
- ------------
. Caithness Acquisition Company, LLC, a Delaware limited liability company
. Caithness Geothermal 1980 Ltd., L.P., a Delaware limited partnership
CLJV Partners
- -------------
. Caithness Acquisition Company, LLC, a Delaware limited liability company
. Caithness Geothermal 1980 Ltd., L.P., a Delaware limited partnership
32