Exhibit 10.12
TRANSACTION AGREEMENT
TEJON INTERESTS
AND
DEVELOPER INTERESTS
April 30, 1999
TABLE OF CONTENTS
Page
Section 1. Project Period....................................................2
Section 2. Obligations of the Developer Interests............................2
2.1 Preparation of the Project AFC....................................2
2.2 ECT Guarantee of Certain Obligations of PEF.......................2
2.3 Nature of Obligations.............................................3
Section 3. Obligations of the Tejon Interests................................3
Section 3. Obligations of the Tejon Interests During the Project Period......3
3.1 Apolitical Support................................................3
3.2 Third Party Real Estate Support...................................3
3.3 Marketing Support.................................................4
3.4 Transaction Agreement Modifications...............................4
3.5 ECT Guarantee of Certain Obligations of PEF.......................4
3.6 Nature of Obligations.............................................4
Section 4. Joint Obligations of the Parties During the Project Period........5
4.1 Labor Issues......................................................5
4.2 Monthly Meetings..................................................5
4.3 Public Disclosure Obligations.....................................5
4.4 Legal Opinions....................................................5
5.1 Exclusivity.......................................................6
(a) Other Projects................................................6
(b) Other Facilities..............................................6
(c) Obligations of Tejon Interests................................6
5.2 Control of Project Activities.....................................6
5.3 CEC Proceedings...................................................7
5.4 Contracts, Permits, Etc...........................................7
5.5 Scheduling; Deployment and Marketing..............................7
5.6 Changes...........................................................7
5.7 Project Financing.................................................7
TABLE OF CONTENTS
Page
Section 6. Transfer of Project-Related Assets................................7
6.1 Tejon Project Assets..............................................7
Section 7. Rights of the Tejon Interests Upon Option Termination.............8
7.1 Reversion of Development Rights...................................8
(a) Option Termination Date.......................................8
(b) Subsequent Development........................................8
7.2 Transfer of Membership Interest...................................8
(a) To Ranchcorp..................................................8
(b) PEF Project Assets............................................9
(c) Assumption of Obligations.....................................9
(c) Payment by the Tejon Interests................................9
7.3 Subsequent Payment by the Tejon Interests........................10
7.4 Acknowledgment...................................................10
Section 8. Representations and Warranties...................................10
8.1 Developer Interests..............................................10
(a) Organization.................................................10
(b) Authority....................................................10
(c) No Violation.................................................10
(d) Authorizations and Consents..................................11
(e) Litigation and Claims........................................11
8.2 Indemnity........................................................11
8.3 Tejon Interests..................................................11
(a) Organization.................................................11
(b) Authority....................................................11
(c) No Violation.................................................11
(d) Authorizations and Consents..................................11
(e) Litigation and Claims........................................12
8.4 Indemnity........................................................12
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TABLE OF CONTENTS
Page
Section 9. Confidentiality..................................................12
Section 10. Force Majeure ...................................................12
10.1 Suspension of Performance........................................12
Section 11. Assignment ......................................................12
11.1 Outright Assignments by the Tejon Interests......................12
11.2 Assignments by the Tejon Interests for Purposes of
Collateral Security..............................................12
11.3 Assignments by the Developer Interests--Outright.................13
(a) In General...................................................13
(b) Project Agreements...........................................13
(c) Qualified Persons............................................13
11.4 Assignments by the Tejon Interests for Purposes of
Collateral Security..............................................13
11.5 Related Definitions..............................................13
11.6 Effect of Assignments............................................14
12.0 Dispute Resolution...............................................15
12.0 Arbitration of Disputes..........................................16
12.0 Other Disputes; Venue............................................17
Section 13 .Acknowledgments of the Parties ..................................17
13.1 Acknowledgments of the Developer Interests.......................17
(a) No Reliance..................................................17
(b) Limited Duties...............................................18
(c) No Such Relationships........................................18
13.2 Acknowledgments of the Tejon Interests...........................18
(a) No Reliance..................................................18
(b) Limited Duties...............................................19
(c) No Such Relationships........................................19
Section 14 Miscellaneous ...................................................19
14.1 No Brokers, Finders, Etc.........................................19
14.2 Expenses.........................................................19
14.3 Complete Agreement; Waiver and Modification, Etc.................19
14.4 Setoff...........................................................20
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TABLE OF CONTENTS
Page
14.5 Communications...................................................20
14.6 Law Governing....................................................21
14.7 Headings; References;............................................21
14.8 Successors and Assigns...........................................21
14.9 Severability.....................................................21
14.10 Survival of Representations and Warranties.......................21
14.11 Further Assurances...............................................21
14.12 Statutory Filings................................................22
14.13 Counterparts; Separate Signature Pages...........................22
14.14 Guarantee Provisions.............................................22
Section 15 Glossary ........................................................22
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This Transaction Agreement is made and entered into in Los Angeles,
California as of April 30, 1999 by and between the following parties:
o Enron Capital & Trade Resources Corp., a Delaware corporation
("ECT");
o Pastoria Energy Facility, LLC, a Delaware limited liability
company of which ECT currently is the sole member ("PEF");
o Tejon Ranch Co., a Delaware corporation ("RanchCo");
o Tejon Ranchcorp, a California corporation of which RanchCo is
currently the sole shareholder ("Ranchcorp"); and
o Pastoria Power Project LLC, a California limited liability
company of which RanchCo and Ranchcorp currently are the sole
members ("PPP LLC").
ECT and PEF are sometimes collectively referred to in this Agreement as the
"Developer Interests." RanchCo, Ranchcorp and PPP LLC are sometimes collectively
referred to in this Agreement as the "Tejon Interests". Other capitalized terms
used in this Agreement have the meanings stated in Section 15 or the provisions
there referred to.
RECITALS
A. PPP LLC is a special purpose entity which was formed by RanchCo and
Ranchcorp to pursue the development of a merchant power plant to be located on a
site (the "Project Site"), and utilizing easements on land, owned by Ranchcorp
in Kern County, California (the "Project").
B. On March 17, 1999, the California Energy Commission ("CEC") granted the
application of PPP LLC to be excused from the requirement to file a notice of
intention with respect to the Project under Section 25502 of the California
Public Resources Code (the "NOI Exemption"), thereby authorizing PPP LLC to
proceed directly with the filing of an application for certification of the
Project (the "Project AFC") pursuant to Section 25523 of the California Public
Resources Code.
C. PEF and Ranchcorp have entered into an Option Agreement of even date
herewith providing for (among other things) an Option in favor of PEF to lease
the Project Site pursuant to the Ground Lease to be executed and delivered by
PEF and Ranchcorp under the Option Agreement in the event the Option is
exercised by PEF (the "Lease"). In addition to providing for the Lease, the
Option Agreement also provides an Option in favor of PEF to obtain certain
easements, including easements for gas, water and transmission lines and other
utilities, necessary for the Project under the terms of the Easement Deed and
Agreement to be executed and delivered by the parties under the Option Agreement
in the event the Option is exercised by PEF (the "Easement Agreement").
D. This Agreement is being entered into by the parties to provide for or
clarify certain rights and obligations in addition to those set forth in the
Option Agreement, the Lease and the
Easement Agreement (which, together with this Agreement, are sometimes
collectively referred to in this Agreement as the "Project Agreements").
NOW THEREFORE, for valuable consideration the receipt and sufficiency of
which are acknowledged, the parties agree as follows:
Section 1. Project Period
The "Project Period" is the period which begins on the date of this
Agreement and ends (i) in the event the Option is not exercised by PEF, on the
Option Termination Date, or (ii) in the event the Option is exercised by PEF, on
the last day of the Lease Term.
Section 2. Obligations of the Developer Interests
2.1 Preparation of the Project AFC. From and after the date of this
Agreement, PEF will proceed in good faith with the preparation of the Project
AFC in accordance with the schedule and budget ("AFC Schedule/Budget") set forth
in Schedule 2.1. In the event the Option Period terminates prior to the filing
of the Project AFC and in the event that, at that date, the Project AFC has not
reached the stage of completion set forth for the month of termination in the
AFC Schedule/Budget, then promptly after such termination PEF will pay PPP LLC
an amount equal to the excess (if any) of (x) the cumulative budgeted amounts
scheduled to be expended on the Project AFC through the month of termination as
set forth in the AFC Schedule Budget, over (y) the actual amounts expended or
committed on the Project AFC through the month of termination. The right of PPP
LLC set forth in the preceding sentence is the sole right and remedy of the
Tejon Interests for any breach of any obligation of either of the Developer
Interests with respect to the Project AFC. Except as expressly set forth in this
Section 2.1, neither of the Developer Interests makes any representation,
warranty or promise of any kind with regard to the Project AFC, including its
sufficiency or suitability for any purpose.
2.2 ECT Guarantee of Certain Obligations of PEF. ECT guarantees the full
and timely performance when due of the following obligations of PEF:
(i) PEF's obligations under Section 2.1 of this Agreement;
(ii) PEF's obligations under Section 7.2(a) of this Agreement;
(iii) PEF's obligations under Section 8.2 of this Agreement first required
to be paid or performed prior to Financial Closing;
(iv) PEF's obligations under Section 2 of the Option Agreement;
(v) PEF's obligations under Section 7.4 of the Option Agreement first
required to be paid or performed prior to the Financial Closing
Date;
(vi) PEF's Obligations under Sections 3.2 and 3.3 of the Lease first
required to be paid or performed prior to the earlier of the
Financial Closing Date and the Commercial Operation Date;
(vii) PEF's obligations under Section 13.1 of the Lease first required to
be paid or performed prior to the Financial Closing Date; and
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(viii) PEF's obligations under Section 14 of the Lease with respect to
liens arising prior to the Commercial Operation Date.
2.3 Nature of Obligations. The obligations of the Developer Interests
under this Agreement are several and not joint. Except as expressly set forth in
Section 2.2, neither of the Developer Interests shall have any liability or
obligation of any kind (and no matter what the theory) for any obligation of the
other Developer Interest under this Agreement or any of the other Project
Agreements; provided, nothing in this Section 2.3 relieves any party or other
Person from any liability which the party or other Person would otherwise have
under any applicable law pertaining to fraudulent conveyances or preferences.
Section 3. Obligations of the Tejon Interests.
The "Project Development Period" is the period which begins on the date of
this Agreement and ends (i) in the event the Option is not exercised by PEF, on
the Option Termination Date, or (ii) in the event the Option is exercised by
PEF, on the Commercial Operation Date.
3.1 Political Support. During the Project Development Period, as
reasonably requested by PEF and if PEF agrees in advance to pay the Tejon
Interests' reasonable out-of-pocket costs incurred in connection therewith, the
Tejon Interests will support the Project in appropriate political and regulatory
forums, including, but not limited to, appearing before the CEC and the Kern
County Board of Supervisors and assisting PEF in obtaining an FWS incidental
take permit, provided the permits and agreements as structured by PEF are
reasonable, are consistent with the Tejon Interests' reputations as the Tejon
Interests may determine, and are not inconsistent with the terms of this
Agreement or any of the other Project Agreements. The Tejon Interests
acknowledge and agree that the construction and operation of a gas-fired
electric generation plant approved by the CEC is and will continue to be
consistent with their reputations for purposes of the preceding sentence. From
and after the Commercial Operation Date and for the balance of the Project
Period, none of the Tejon Interests will take any public position in opposition
to the existence, operation or maintenance of the Project in accordance with the
Final Project Decision, but shall have the right to oppose any modification of
the Final Project Decision which is inconsistent therewith. Nothing in this
Agreement shall prevent any of the Tejon Interests from opposing in any lawful
manner the location of new transmission towers across the mountains on the Tejon
Ranch south of the Project Site or the enlargement of the existing transmission
towers (other than adding additional conductors/wires and associated hardware)
in such location.
3.2 Third-Party Real Estate Support. During the Option Period, as
reasonably requested by PEF and if PEF agrees in advance to pay the Tejon
Interests' reasonable out-of-pocket costs incurred in connection therewith, the
Tejon Interests will assist PEF in securing easements, rights of way,
encroachment permits, franchise agreements and other rights relating to real
property owned by or leased to third parties as required for construction,
operation and maintenance of the Project. After the Option Period, the Tejon
Interests will provide such assistance if PEF agrees in advance to pay the Tejon
Interests' reasonable out-of-pocket costs incurred in connection therewith and
reasonable compensation to the Tejon Interests for such assistance.
3.3 Marketing Support. During the Option Period, as reasonably requested
by PEF and if PEF agrees in advance to pay the Tejon Interests' reasonable
out-of-pocket costs incurred in connection therewith, the Tejon Interests will
assist PEF in marketing direct service
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by the Project to the Wheeler Ridge-Maricopa Water Storage District ("WRM") and
California Department of Water Resources ("DWR") electric loads. After the
Option Period the Tejon Interests will provide such assistance if PEF agrees in
advance to pay the Tejon Interests' reasonable out-of-pocket costs incurred in
connection therewith and reasonable compensation to the Tejon Interests for such
assistance. The Developer Interests acknowledge that Ranchcorp employees
participate on the Board of Directors of WRM and that the foregoing assistance
shall not require that the Tejon Interests or their employees breach any
fiduciary duty owed to WRM or violate any conflict of interest restrictions. In
the event such marketing efforts succeed, the Tejon Interests will facilitate
the direct service, but will not be obligated to incur any unreimbursed costs
related thereto. To the extent such facilitation requires conveyance by
Ranchcorp to PEF, DWR, or WRM of easements (additional to those initially
included in the Easement Agreement), Ranchcorp will convey the required
easements, and PEF will compensate Ranchcorp for the additional easements at the
rate of $2.00 per foot per year, payable in advance annually. If DWR or WRM
place lines for direct service within and along the California Aqueduct right of
way, PEF will compensate Ranchcorp, or cause Ranchcorp to be compensated, at the
rate of $0.50 per foot per year, payable in advance annually. PEF may prepay
compensation at the applicable rate for the entire term of the easement, reduced
to present value using the prevailing interest rate at the date of prepayment
for 30-year U.S. Treasury bonds as the discount rate.
3.4 Transaction Agreement Modifications. Prior to exercising the Option,
PEF may propose modifications of this Agreement or the Lease or both. The
parties agree to consider and negotiate in good faith mutually acceptable
modifications which are reasonably required to facilitate the financing of the
Project (including, without limitation, any required protection of a leasehold
mortgagee's interest) under Outside Financing Agreements or as reasonably may be
required to accommodate amendments, modifications or supplements to the Project
AFC.
3.5 RanchCo and Ranchcorp Guarantee of Certain Obligations. RanchCo and
Ranchcorp each guarantee the full and timely performance when due of the
obligations of each other, and of PPC LLC, under Section 8.4 of this Agreement.
3.6 Nature of Obligations. The obligations of the Tejon Interests under
this Agreement are several and not joint. Except as expressly set forth in
Section 3.5, none of the Tejon Interests shall have any liability or obligation
of any kind (and no matter what the theory) for any obligation of any other
Tejon Interest under this Agreement or any of the other Project Agreements;
provided, nothing in this Section 3.6 relieves any party or other Person from
any liability which the party or other Person would otherwise have under any
applicable law pertaining to fraudulent conveyances or preferences.
Section 4. Joint Obligations of the Parties During the Project Development
Period
4.1 Labor Issues. Commencing no later than June 1, 1999, the parties will
work jointly to obtain reasonable assurances that the Project will not be
opposed by organized labor. PEF will reimburse the Tejon Interests for their
reasonable out-of-pocket costs agreed by PEF in advance and incurred in such
efforts.
4.2 Monthly Meetings. The parties will meet at least monthly. At these
meetings, PEF will report on the status of the development of the Project, its
progress toward completion of the Project AFC including results of biological,
archaeological, and geotechnical studies, and the
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parties will coordinate their respective efforts in connection with the Project
under this Agreement.
4.3 Public Disclosure Obligations. The parties acknowledge the disclosure
obligations of public companies under the federal securities laws. Upon
execution of this Agreement and the other Project Agreements and from time to
time thereafter, the Tejon Interests will issue press releases which will not
state amounts paid or due to be paid to the Tejon Interests. Prior to issuance
of each press release, the Tejon Interest issuing the same will provide PEF an
opportunity to review and comment upon the release. With respect to disclosures
required by securities laws or that may be required by stock exchange rules, the
Tejon Interests will disclose the minimum information required to be disclosed
under those laws and rules in the view of the Tejon Interests' auditors and
counsel. Prior to each such disclosure, PEF will have an opportunity to review
and comment upon the disclosure.
4.4 Legal Opinions. Concurrently with the execution and delivery of this
Agreement and each of the other Project Agreements:
(i) The Tejon Interests will furnish the Developer Interests with an
opinion of legal counsel acceptable to the Developer Interests
substantially in the form of Schedule 4.4(i) with respect to the
agreement(s) then being executed and delivered by any of the Tejon
Interests; provided, the opinion to be furnished upon execution and
delivery of the Lease and the Easement Agreement shall also extend
to the matters covered in Sections 8.3(c) and (d) and may be subject
to such additional assumptions and qualifications as are generally
acceptable at the time for legal opinions in comparable commercial
transactions in the State of California;
(ii) The Developer Interests will furnish the Tejon Interests with an
opinion of legal counsel acceptable to the Tejon Interests
substantially in the form of Schedule 4.4(ii) with respect to the
agreement(s) then being executed and delivered by either of the
Developer Interests; provided, the opinion to be furnished upon
execution and delivery of the Lease shall also extend to the matters
covered in Sections 8.1(c) and (d) and may be subject to such
additional assumptions and qualifications as are generally
acceptable at the time for legal opinions in comparable commercial
transactions in the State of California.
Section 5. Rights of the Developer Interests
5.1 Exclusivity.
(a) Other Projects. The term "Other Project" means any project other than
the Project, wherever located, to generate electric energy for resale.
(b) Other Facilities. The term "Other Facilities" means electric
transmission lines or gas or water pipelines serving any Other Project,
excluding any such electric transmission lines or gas or water pipelines whose
owners and operations are regulated as public utilities by the PUC or which
serve significant uses in addition to the Other Project. An Other Project is
deemed served by an Other Facility if the Other Facility serves the Other
Project directly or indirectly via interconnected facilities.
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(c) Obligations of Tejon Interests. Until the earliest of (x) the first
anniversary of the Commercial Operation Date, (y) April 30, 2005, and (z) the
Option Termination Date, none of the Tejon Interests will solicit, negotiate
for, or commit to any agreement of any kind with respect to, or otherwise assist
or participate in any way (whether as a supplier of rights in real property, as
an equity participant or lender, or as a codeveloper or otherwise) in any Other
Project or Other Facilities located or to be located on the Tejon Ranch.
5.2 Control of Project Activities. Throughout the Project Period, PEF will
have the exclusive right to pursue and control the development, licensing,
financing, construction, supply, management and operation of the Project and the
sale of its output and services (collectively, the "Project Activities"), all as
PEF deems appropriate subject only to the express requirements of this Agreement
and the other Project Agreements. Except as otherwise expressly provided in this
Agreement or any of the other Project Agreements:
(i) None of the Tejon Interests shall have any right of consultation,
review or approval with respect to the Project or any of the Project
Activities or any action taken or omitted, or proposed to be taken
or omitted, by either of the Developer Interests in connection with
any thereof;
(ii) PEF may deal and contract with ECT and its Affiliates freely and
without limitation or restriction of any kind and on such terms and
conditions as PEF and ECT and such Affiliates deem appropriate; and
(iii) Each of the Developer Interests may take or omit to take any action
in connection with the Project or any of the Project Activities for
any or no reason as it deems appropriate.
The phrase "deem(s) appropriate," when used in this Agreement or any of the
other Project Agreements with respect to any decision, action or inaction by
either of the Developer Interests or any of the Tejon Interests, means that the
decision, action or inaction may be made or taken for any or no reason deemed
appropriate in the sole discretion of the applicable Developer Interest or Tejon
Interest and considering only its own interests and not the interests of any
other Person (including, but not limited to, in the case of the Developer
Interests, any of the Tejon Interests, and in the case of the Tejon Interests,
any of the Developer Interests), subject only to any express requirements of
this Agreement and any of the other Project Agreements.
The provisions of Sections 5.3 through 5.7 are illustrative of the rights of the
Developer Interests set forth in this Section 5.2, but shall not be deemed to
limit the generality of this Section 5.3 in any manner.
5.3 CEC Proceedings. Throughout the Project Period, PEF shall have
exclusive control of all proceedings before or involving the CEC with respect to
the NOI Exemption, the Project AFC and otherwise in connection with the Project.
From and after the date of this Agreement, each of the Tejon Interests will take
such steps as reasonably may be requested by PEF to confirm these rights to the
CEC.
5.4 Contracts, Permits, Etc. Throughout the Project Period and subject
only to PEF's obligations with respect to the Project AFC under Section 2.1, PEF
will have the exclusive right to structure, negotiate and execute all
applications, permits, letters of intent, agreements and other documents
relating to the Project and any of the Project Activities with such parties and
on such terms as PEF deems appropriate and, except in the case of letters of
intent, agreements
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and other documents to which any of the Tejon Interests is party, with no right
of consultation, review or approval in favor of any of the Tejon Interests.
5.5 Scheduling; Deployment and Marketing. During the Project Period, PEF
will have exclusive control over the production, scheduling and marketing of
energy, capacity and ancillary services available from the Project, and may
market any or all of these items on such schedule and terms and to any Person
(including ECT or its Affiliates) as PEF deems appropriate. Without limiting the
generality of the foregoing, it is understood PEF is not obligated to operate
the Project on any particular schedule or at all.
5.6 Changes. Throughout the Project Period, PEF may from time to time and
at any time defer, accelerate, temporarily terminate or permanently abandon any
or all of the Project Activities in each case for any or no reason as PEF deems
appropriate, subject only to the obligations of the Developer Interests under
the Project Agreements.
5.7 Project Financing. Unless ECT otherwise elects (which it may determine
not to do for any or no reason as ECT deems appropriate: (i) the Project will be
financed (if at all) only through project financing, and (ii) no such financing,
nor any other financing relating in any way to the Project, will be supported in
any way by the credit of ECT or any of its Affiliates (other than PEF). Nothing
in this Section 5.7 nullifies, diminishes or affects the obligations of ECT set
forth in Section 2.2 of this Agreement.
Section 6. Transfer of Tejon Project Assets
6.1 Tejon Project Assets. Effective as of the date of this Agreement, each
of the Tejon Interests hereby assigns and transfers all of the following assets
(the "Tejon Project Assets") to PEF to the extent transferable under applicable
law and regulation:
(i) All right, title and interest of any of the Tejon Interests in and
to the NOI Exemption; and
(ii) All right, title and interest of any of the Tejon Interests in and
to all applications, permits, studies, analyses, plans, designs,
correspondence and other materials pertaining to the development or
licensing of the Project in whatever form or stage of completion
which have been applied for or issued to any of the Tejon Interests
or which are in the custody or control of any of them excluding
those items which are described in Schedule 6.1(ii).
THE TEJON INTERESTS MAKE NO REPRESENTATIONS OR WARRANTIES (AND DISCLAIM ALL
REPRESENTATIONS AND WARRANTIES WHICH MIGHT OTHERWISE BE IMPLIED BY LAW OR
OTHERWISE) WITH RESPECT TO ANY OF THE TEJON PROJECT ASSETS (INCLUDING BUT NOT
LIMITED TO THEIR SUFFICIENCY OR SUITABILITY FOR ANY PURPOSE), EXCEPT THAT COPIES
OF EACH OF THE TEJON PROJECT ASSETS WHICH HAVE BEEN FILED WITH ANY GOVERNMENTAL
AUTHORITY OR AGENCY HAVE BEEN PROVIDED TO THE DEVELOPER INTERESTS PRIOR TO THE
DATE OF THIS AGREEMENT. Copies of all of the Tejon Project Assets not provided
to the Developer Interests prior to the date of this Agreement will be so
provided within 10 days after the date of this Agreement. From and after the
date of this Agreement, the Tejon Interests will answer questions about and
discuss the Tejon Project Assets as may reasonably be requested from time to
time by either of the Developer Interests.
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Section 7. Rights of the Tejon Interests Upon Option Termination
7.1 Reversion of Development Rights.
(a) Option Termination Date. The "Option Termination Date" is the day on
which the Option Period terminates without the Option being exercised.
(b) Subsequent Development. From and after the Option Termination Date,
the Developer Interests will be deemed to have abandoned all rights to develop
the Project, and the Tejon Interests will have an unfettered right to pursue
development of the Project or any other project on the Tejon Ranch in any manner
they deem appropriate and without any further obligation to ECT or PEF except
for (i) their obligations under this Section 7 and the assumption agreement to
be entered into by them pursuant to Section 7.2(c), and (ii) any obligations of
the Tejon Interests under this Agreement or any of the other Project Agreements
which are required to be paid or performed after the Option Termination Date.
From and after the Option Termination Date, ECT will take such steps as
reasonably may be requested by any of the Tejon Interests to confirm the rights
of the Tejon Interests under this Section 7.1(b) to the CEC.
7.2 Transfer of PEF's Project Assets.
(a) To Ranchcorp. Within 30 days after the Option Termination Date and
upon payment of the amounts (if any) payable by the Tejon Interests under
Section 7.2(d) and delivery by the Tejon Interests of the assumption agreement
referred to in Section 7.2(c), PEF will transfer to Ranchcorp or its designee
any of the assets of PEF which are described in Section 7.2(b) and which the
Tejon Interests have theretofore requested be transferred to Ranchcorp or its
designee ("PEF Project Assets"). This transfer will be without representation,
warranty, indemnity, covenant or other obligation of any kind, except as
follows: (A) ECT and PEF will warrant (i) that PEF is the owner of the PEF
Project Assets, and (ii) that the PEF Project Assets are free and clear of liens
and encumbrances created by PEF or ECT. EXCEPT FOR THE WARRANTIES MADE PURSUANT
TO THE PRECEDING SENTENCE, THE DEVELOPER INTERESTS MAKE NO REPRESENTATIONS OR
WARRANTIES (AND DISCLAIM ALL REPRESENTATIONS AND WARRANTIES WHICH MIGHT
OTHERWISE BE IMPLIED BY LAW OR OTHERWISE) WITH RESPECT TO THE PEF PROJECT ASSETS
(INCLUDING BUT NOT LIMITED TO THE SUFFICIENCY OR SUITABILITY OF ANY PEF PROJECT
ASSET FOR ANY PURPOSE).
(b) PEF Project Assets. The Tejon Interests may select for transfer
pursuant to Section 7.2(a) any of the following assets of PEF:
(i) any emission reduction credits ("ERCs") (A) which the Tejon
Interests request that PEF transfer pursuant to this Section 7.2(b),
and (B) which, under applicable law and regulation and the terms of
the ERCs, may be transferred to Ranchcorp (" ERCs");
(ii) any option rights to acquire any ERCs (A) which the Tejon Interests
request that PEF transfer pursuant to this Section 7.2(b), and (B)
which, under applicable law and regulation and the terms of the
option agreement, may be transferred to Ranchcorp (" Option
Rights");
(iii) PEF's rights in the Project AFC (if theretofore filed) and the Final
Project Decision (if theretofore rendered) to the extent (if any)
the terms thereof and
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applicable law and regulation permit those rights to be transferred
to Ranchcorp ("CEC Assets"); and
(iv) PEF's rights in and copies of any applications, permits, studies,
analyses, plans, designs, correspondence and other materials (other
than contracts and contract rights) pertaining to the development or
licensing of the Project in whatever form or stage of completion
which have been applied for or issued to PEF or which are in PEF's
custody or control to the extent applicable law and regulation and
any applicable contract obligations permit those rights to be
transferred to Ranchcorp, excluding those items which are described
in Schedule 7.2(b)(iv) ("Miscellaneous Rights").
(c) Assumption of Obligations. On the date the PEF Project Assets are
transferred to Ranchcorp or its designee ("Project Asset Transfer Date") and
concurrently with the transfer of the PEF Project Assets, Ranchcorp will assume
(under an assumption agreement in form reasonably acceptable to the parties) all
obligations of PEF arising on or prior to the Project Asset Transfer Date
pertaining to the PEF Project Assets, except for payments of amounts included in
the Recognized Cost of the PEF Project Assets.
(d) Payment by the Tejon Interests. On the Project Asset Transfer Date and
concurrently with the transfer of the PEF Project Assets, the Tejon Interests
will pay PEF an amount equal to the aggregate Recognized Cost of any ERCs and
Option Rights included in the PEF Project Assets or such lesser amount (if any)
as PEF in its sole discretion may elect to accept under this Section 7.2(d). The
term "Recognized Cost," when used with respect to any PEF Project Asset, means
all direct and indirect costs, expenses and liabilities of either ECT or PEF
which were incurred to acquire the asset and which GAAP requires PEF or ECT to
recognize for financial accounting purposes. In the event any of the Tejon
Interests sells or otherwise transfers any ERCs or Option Rights included in the
PEF Project Assets for cash or non-cash consideration in excess of the purchase
price thereof as determined under this Section 7.2(d), the Tejon Interests shall
promptly upon such transfer pay an amount equal to the excess to PEF.
7.3 Subsequent Payment by the Tejon Interests. In the event that any of
the Tejon Interests or any of their Affiliates should, at any time after the
Option Termination Date, participate directly or indirectly in any way (whether
as a supplier of interests in real property, as an equity participant or lender,
or as a codeveloper or otherwise) in the development of a gas fired electric
generation facility of 250 MW or more in the Central Valley watershed on Tejon
Ranch land, and within a period of seven years from the Option Termination Date,
the Tejon Interests will, upon closing of construction financing for that
project, pay the Follow On Payment to PEF. The "Follow On Payment" is an amount
equal to the aggregate Recognized Cost of all PEF Project Assets other than any
ERCs or Option Rights included in the PEF Project Assets, plus interest on that
amount at 10 percent per annum (without compounding) from the Option Termination
Date to the date of payment of the Follow On Payment under this Section 7.3. The
Tejon Interests will keep PEF apprised of the progress of their efforts in
connection with any project in connection with which payment of the Follow On
Payment may be required under this Section 7.3 as may reasonably be requested by
PEF to determine the Tejon Interests' compliance with this Section 7.3.
7.4 Acknowledgment. The parties acknowledge that their rights and
obligations under this Section 7 arise only upon the Option Termination Date (if
any) and not upon the occurrence
9
of any other event (including but not limited to any prior sale or assignment of
the Project or any interest therein).
Section 8. Representations and Warranties.
8.1 Developer Interests. Each of the Developer Interests represents and
warrants as to itself alone and not jointly with or as to the other that the
following facts and circumstances are true and correct at the date of this
Agreement:
(a) Organization. The Developer Interest is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of its respective state of incorporation or organization.
(b) Authority. The Developer Interest has all necessary power and
authority to enter into this Agreement and (in the case of PEF) the Option
Agreement and to perform its obligations hereunder and thereunder; and all
action required to be taken on its part to approve the execution and delivery of
this Agreement and (in the case of PEF) the Option Agreement and the performance
of its obligations hereunder and thereunder has been duly taken; provided, PEF
is not authorized to exercise the Option without approval from ECT. ECT has not
given this approval and may refuse to give it for any or no reason as ECT deems
appropriate. However, PEF will obtain the approval before it exercises the
Option.
(c) No Violation. The execution and delivery of this Agreement and (in the
case of PEF) the Option Agreement by the Developer Interest, and the performance
of its obligations hereunder and thereunder, do not and will not (i) violate, or
conflict with its obligations under, any contract to which it is a party or by
which it is bound, or (ii) violate (and none of such obligations is void or
voidable under) any law, regulation, order, arbitration award, judgment or
decree to which it is a party or to which it is subject;
(d) Authorizations and Consents. No authorization, consent or approval of,
or notice to, any federal, state, county, local or foreign government,
regulatory body or official not already obtained or given is required to be
obtained or given in connection with the execution and delivery of this
Agreement or (in the case of PEF) the Option Agreement by the Developer Interest
or the performance of any of its obligations hereunder or thereunder.
(e) Litigation and Claims. To the knowledge of the Developer Interest,
there is no suit, action, arbitration, or legal, administrative, or other
proceeding, or governmental investigation pending or threatened against or
affecting any of the transactions contemplated by this Agreement or any of the
other Project Agreements.
8.2 Indemnity. Each of the Developer Interests will indemnify the Tejon
Interests, and each of them, against all claims and losses which are incurred or
suffered by any of the Tejon Interests directly or indirectly as a result of any
inaccuracy in any representation or warranty of such Developer Interest in this
Agreement or any of the other Project Agreements.
8.3 Tejon Interests. Each of the Tejon Interests represents and warrants
as to itself alone and not jointly with or as to the other that the following
facts and circumstances are true and correct at the date of this Agreement:
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(a) Organization. The Tejon Interest is a corporation or limited liability
company duly organized, validly existing and in good standing under the laws of
its respective state of incorporation or organization.
(b) Authority. The Tejon Interest has all necessary power and authority to
enter into this Agreement and (in the case of Ranchcorp) the Option Agreement
and to perform its obligations hereunder and thereunder; and all action required
to be taken on its part to approve the execution and delivery of this Agreement
and the performance of its Obligations hereunder and thereunder has been duly
taken.
(c) No Violation. The execution and delivery of this Agreement and (in the
case of Ranchcorp) the Option Agreement by the Tejon Interest, and the
performance of its obligations hereunder and thereunder, do not and will not (i)
violate, or conflict with its obligations under, any contract to which it is a
party or by which it is bound, or (ii) violate (and none of such obligations is
void or voidable under) any law, regulation, order, arbitration award, judgment
or decree to which it is a party or to which it is subject.
(d) Authorizations and Consents. No authorization, consent or approval of,
or notice to, any federal, state, county, local or foreign government,
regulatory body or official not already obtained or given is required to be
obtained or given in connection with the execution and delivery of this
Agreement or (in the case of Ranchcorp) the Option Agreement by the Tejon
Interest or the performance of any of its obligations hereunder or thereunder.
(e) Litigation and Claims. To the knowledge of the Tejon Interest, there
is no suit, action, arbitration, or legal, administrative, or other proceeding,
or governmental investigation pending or threatened against or affecting any of
the transactions contemplated by this Agreement or any of the other Project
Agreements.
8.4 Indemnity. Each of the Tejon Interests will indemnify the Developer
Interests, and each of them, against all claims and losses which are incurred or
suffered by any of the Developer Interests directly or indirectly as a result of
any inaccuracy in any representation or warranty of such Tejon Interest in this
Agreement or any of the other Project Agreements.
Section 9. Confidentiality
The Confidentiality Agreement dated November 11, 1998, between ECT and
Ranchcorp is amended and restated to read as set forth in Schedule 9 to this
Agreement.
Section 10. Force Majeure
10.1 Suspension of Performance. In the event that any of the parties shall
be prevented from rendering substantial performance of any of its obligations
under this Agreement or any of the other Project Agreements by reason of an
Excepted Cause, then that party shall have the right to suspend the performance
of those obligations to the extent (but only to the extent) the party has been
prevented from substantially performing its obligations by such cause; provided,
no party shall ever be entitled under this Section 10.1 to suspend its
obligation to make any payment due to, or accruing in favor of, any other party;
provided further, a party asserting a right to suspend performance by reason of
an Excepted Cause must provide notice thereof to the other parties within
fifteen (15) days of the commencement of the Excepted
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Cause and if it fails to deliver timely notice, the date of the commencement of
the Excepted Cause shall be deemed to have occurred no earlier than fifteen (15)
days prior to the date notice is delivered.
Section 11. Assignment
11.1 Outright Assignments by the Tejon Interests. Upon notice to the
Developer Interests, any of the Tejon Interests may at any time and from time to
time assign any or all of its Project Agreement Rights (i) outright to any
Affiliate of any of the Tejon Interests, and (ii) outright to any purchaser of
the Tejon Ranch or any portion of the Tejon Ranch that includes the Project
Site. Any assignment outright by any of the Tejon Interests of any interest in
any of the Project Agreements shall be accompanied by an assignment to the
assignee of an equal interest in each of the Project Agreements.
11.2 Assignments by the Tejon Interests for Purposes of Collateral
Security. Any of the Tejon Interests may at any time and from time to time
assign any or all of its Project Agreement Rights for purposes of securing
performance of any of its obligations. Any such assignment shall be subject to
the rights of the Developer Interests under each of the Project Agreements. Any
assignment for purposes of security by any of the Tejon Interests of any
interest in any of the Project Agreements shall be accompanied by an assignment
to the assignee of an equal interest in each of the Project Agreements.
11.3 Outright Assignments by the Developer Interests.
(a) In General. Subject to Sections 11.3(b) and (c), upon notice to the
Tejon Interests, either of the Developer Interests may assign any or all of its
Project Agreement Rights or any or all of its rights and interests in the
Project and any improvements or personal property on the Leased Premises, and
any member of PEF may assign or transfer any of its membership interest in PEF,
outright to any Person. Notice of any such assignment or transfer shall be given
to Ranchcorp at least 15 days prior to its consummation and shall include
documentation that the assignment or transfer is not in violation of this
Section 11.3.
(b) Project Agreements. Any assignment outright by either of the Developer
Interests of any interest in any of the Project Agreements shall be accompanied
by an assignment to the assignee of an equal interest in each of the Project
Agreements.
(c) Qualified Persons. At least a 25 percent interest in the Project must
at all times be owned by a Person who or which is Qualified; provided, any
Person taking title to any interest in the Project or PEF from a Project
Financing Entity shall not be subject to this restriction. A Person shall be
deemed to be "Qualified" at the date of the assignment if at that date (i) the
Person is an Affiliate of ECT or any other Person in which ECT or any of its
Affiliates holds an equity interest of no less than 25 percent, or (ii) the
Person is a Project Financing Entity, or (iii) the Person is a Qualified
Developer, or (iv) in the case of assignments made after exercise of the Option,
the Person is a Qualified Owner.
11.4 Assignments by the Developer Interests for Purposes of Collateral
Security. Subject to and in accordance with the provisions of Schedule 11.4,
either of the Developer Interests may at any time and from time to time assign
any or all of its Project Agreement Rights and any or all of its rights and
interests in the Project and any improvements or personal property on the Leased
Premises for purposes of securing performance of any of its obligations to a
Project Financing Entity. The rights and obligations of the parties, and of any
secured party or parties, in connection with any such assignment, are specified
in Schedule 11.4. Any
12
assignment for purposes of security by either of the Developer Interests of any
interest in any of the Project Agreements shall be accompanied by an assignment
to the assignee of an equal interest in each of the Project Agreements.
11.5 Related Definitions. As employed in this Agreement, the term:
"Equity Owner," when used with respect to any Person, means any Person who
owns or holds directly, or indirectly through one or more intermediaries, at
least a 25 percent equity interest in the Person.
"Project Agreement Rights" means any right or interest of any Person under
this Agreement or any of the other Project Agreements, including but not limited
to the leasehold estate and easement rights created in favor of PEF by the Lease
and Easement Agreements.
"Project Financing Agreements" means any documents or instruments relating
to or evidencing or securing any Project Financing.
"Project Financing Entity" means (a) any bank, financial institution or
other Person at any time providing or participating (as lender, lessor, equity
participant or otherwise) in any Project Financing, (b) any lender's special
purpose foreclosure entity that is a holder of any right or interest under any
Project Financing Agreement, and (c) any Person acting as trustee or agent for
any such bank, financial institution or other Person in connection with any
Project Financing.
"Project Financing" means construction, long-term or other financing or
refinancing (whether by publicly or privately placed debt or by lease or other
mechanism) of all or any portion of the Project.
"Qualified Developer," when used with respect to any Person means that at
the date the Person first acquires an interest in the Project or PEF (a) the
Person or one or more of its Affiliates, Equity Owners or General Partners has
the expert, professional and technical capability required to arrange for (i)
necessary government approvals for the Project, and (ii) the financing,
construction, operation and maintenance of the Project, (b) the Person or one or
more of its Affiliates, Equity Owners or General Partners has experience in
developing, operating and maintaining or arranging for the operation and
maintenance of, and arranging for financing for, gas-fired electrical generating
projects with an aggregate capacity of three hundred (300) Mw or more, including
at least one gas-fired electrical generating project with a capacity of at least
one hundred ten (110) Mw, and (c) the Person and its Affiliates, Equity Owners
and General Partners have a combined net worth in excess of $250 million.
"Qualified Owner," when used with respect to any Person means that at the
date the Person first acquires an interest in the Project or PEF (a) the Person
or one or more of its Affiliates, Equity Owners or General Partners has the
expert, professional and technical capability reasonably required to arrange for
the construction, operation and maintenance of the Project, (b) that the Person
or one or more of its Affiliates, Equity Owners or General Partners has
experience in operating and maintaining or arranging for the operation and
maintenance of gas-fired electrical generating projects with an aggregate
capacity of three hundred (300) Mw or more, including at least one gas-fired
electrical generating project with a capacity of at least one hundred ten (110)
Mw, and (c) that the Person and its Affiliates, Equity Owners and General
Partners have a combined net worth in excess of $100 million.
13
11.6 Effect of Assignments. Any assignment of any Project Agreement Rights
not expressly permitted by this Agreement or any of the other Project Agreements
is prohibited. No assignment by any party of any of its Project Agreement Rights
shall relieve the party from any of its obligations under this Agreement or any
of the other Project Agreements. Any assignment by any party of any Project
Agreement Rights other than an assignment under Sections 11.2 or 11.4 shall be
accompanied by an unconditional assumption in writing by the assignee of all
obligations of the assignor under the agreement under which the rights being
assigned arise. Any purported assignment in violation of any of the provisions
of this Section 11 shall be null and void and a material breach of this
Agreement and the Lease.
Section 12. Dispute Resolution
12.1 Mediation of Disputes. If a dispute arises out of this Agreement or
any of the other Project Agreements, or the breach thereof, and if the dispute
cannot be settled through negotiation, the parties agree first to try in good
faith to settle the dispute by mediation administered by the American
Arbitration Association under its Commercial Mediation Rules, before resorting
to arbitration or litigation as provided in this Agreement.
12.2 Limited Rights to Resolve Certain Disputes by Arbitration.
(a) Subject to the conditions specified in Section 12.2(c), a
party may, upon its election, and after completion of
mediation under Section 12.1 of this Agreement, require that
disputes arising only out of the sections of this Agreement or
other Project Agreements specified in Section 12.2(b), be
settled by arbitration administered by the American
Arbitration Association under its Arbitration Rules for the
Real Estate Industry (or the Commercial Arbitration Rules of
the American Arbitration Association if the American
Arbitration Association determines that the dispute would more
appropriately be decided by a commercial arbitration panel
than by a real estate panel), excluding the Expedited
Procedures set forth in such Rules except as provided in
Section 12.4. The locale for arbitration under this Section
shall be Los Angeles.
(b) The parties agree to arbitrate no disputes except the
following (subject to the conditions specified in Section
12.2(c)):
(i) Disputes arising at any time arising out of Sections
3.1; 3.2; 3.3; 5; 6; 7.2; 7.3; or 11 of this Agreement.
(ii) Disputes arising at any time out of Sections 4; 6; 7;
8.2; 8.3; or 11.3 of the Option Agreement
(iii) Disputes arising at any time out of Sections 3.4(f); 5;
8; 9; 11; 12 or 22.8 of the Lease
(iv) Disputes arising at any time out of Sections 10 or 20 of
the Easement Agreement.
(v) Disputes arising before the Commercial Operation Date
arising out of Section 6 of the Lease.
14
(vi) Disputes arising before the Commercial Operation Date
arising out of Sections 1; 5; 7; 8; 9; 11; or 12 of the
Easement Agreement.
(c) Conditions to arbitration: With respect to the disputes
referred to in Section 12.2(b)(i) through and including (vi)
(but not disputes subject to arbitration under Section 12.3),
no party shall be entitled to make more than five demands for
arbitration during the first five years following execution of
the Project Agreement or during any succeeding five-year
period. A party that does not elect to arbitrate a dispute
under Section 12.2 shall have the right to commence an action
in court consistent with Section 12.7 of this Agreement and in
such event the dispute shall not be subject to arbitration
unless prior to the filing of a pleading or motion responding
to the complaint, and consistent with the limits upon
arbitration imposed under Section 12.2, another party demands
arbitration of the same dispute.
12.3 Limited Rights to Resolve Certain Monetary Disputes by Arbitration.
Without regard to the limitation stated in Section 12.2(c) on the number of
arbitration demands, any dispute arising under this Agreement or any of the
other Project Agreements in which the sole relief sought is a monetary award in
an amount less than one million dollars ($1,000,000.00), shall be settled by
arbitration administered by the American Arbitration Association under its Real
Estate Arbitration Rules (or the Commercial Arbitration Rules of the American
Arbitration Association if the American Arbitration Association determines that
the dispute would more appropriately be decided by a commercial arbitration
panel than by a real estate panel), excluding the Expedited Procedures set forth
in such Rules except as provided in Section 12.4, provided, that claims for Rent
under and as defined in the Lease are not subject to settlement by arbitration.
The locale for arbitration under this Section shall be Los Angeles.
12.4 Additional Provisions Concerning Arbitration. Arbitration conducted
under Section 12.2 or Section 12.3 shall be subject to the following additional
provisions: (a) The arbitration panel shall consist of three arbitrators who
have not previously been employed or engaged by any party, and do not have a
direct or indirect interest in any party or the subject matter of the
arbitration. (b) Arbitrators shall be selected pursuant to the Expedited
Procedures of the Real Estate Arbitration Rules (or the Commercial Arbitration
Rules of the American Arbitration Association if the American Arbitration
Association determines that the dispute would more appropriately be decided by a
commercial arbitration panel than by a real estate panel). (c) The hearing shall
be conducted on a confidential basis without continuance or adjournment. (d) Any
offer made or the details of any negotiation of the dispute subject to
arbitration shall not be admissible. (e) Each party shall be entitled to all
rights and privileges granted by the arbitrators to the other party. (f) Each
party shall be entitled to compel the attendance of witnesses or production of
documents, and for this purpose, the arbitrators shall have the power to issue
subpoenas in accordance with the law of the State of California. (g) Each party
shall have the right (upon leave of the arbitrators) to take depositions and
obtain other discovery of the scope and in the manner which the arbitrators deem
reasonably necessary to the preparation and presentation of the party's case.
(h) The arbitrators shall have the power to impose on any party such terms,
conditions, consequences, liabilities, sanctions and penalties as they deem
necessary or appropriate (which shall be as conclusive, final and enforceable as
their award on the merits) to compel or induce compliance with discovery and the
appearance of, or production of documents in the custody of, any officer,
director, agent or employee of a party or its independent contractors or
subcontractors or any party which controls, is controlled by or is under common
control with a party or its independent contractors or subcontractors. (i) The
arbitrators are authorized to award reasonable attorneys' fees and costs, and
the costs of
15
arbitration including the fees charged by the arbitrators and by the American
Arbitration Association, to any substantially prevailing party unless the
arbitrators determine and state in their decision that they have determined that
such an award is inappropriate. (j) The arbitrators are authorized to grant
remedies and relief in accordance with the contract, subject to the provisions
concerning remedies contained in Section 12.8 of this Agreement.
12.5 Arbitral Awards. Judgment on the award rendered by the arbitrators
may be entered in any court of competent jurisdiction and is final and binding
upon the parties except to the extent it may be challenged under law.
12.6 Arbitration of Disputes. NOTICE: BY INITIALING IN THE SPACE BELOW YOU
ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS SPECIFIED IN
SECTIONS 12.2 AND 12.3 DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THIS SECTION 12. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THIS SECTION 12 TO NEUTRAL ARBITRATION.
INITIALS: PEF: -----
ECT: -----
RanchCo: -----
Ranchcorp: -----
PPP LLC: -----
12.7 Other Disputes; Venue. All controversies and claims other than those
that may be settled by mediation under Section 12.1 or by arbitration under
Sections 12.2 or 12.3 shall be resolved in Los Angeles County Superior Court or
the federal district court for the Central District of California. All parties
hereby affirmatively submit to and agree not to challenge such venue or the
personal jurisdiction of such courts.
12.8 Remedies. Specific performance is within the scope of the agreement
of the parties and is among the remedies that may be granted, as determined by
the arbitrators in an arbitral proceeding or the court in any judicial
proceeding, to be appropriate. In an arbitral proceeding the arbitrators are not
empowered to award, and in a judicial proceeding or arbitral proceeding the
parties expressly waive any rights they may have to seek and obtain, any
exemplary, punitive, special, and consequential damages. This Section 12.8 shall
not limit a party's rights of indemnity in respect of claims by Persons who are
not Affiliates of that party.
16
Section 13. Acknowledgments of the Parties
13.1 Acknowledgments of the Developer Interests. The Developer Interests
hereby expressly acknowledge and agree as follows:
(a) No Reliance. The Developer Interests have reviewed and had access to
all documents, records and information which they have desired to review in
connection with their decision to enter into this Agreement and the other
Project Agreements, and to consummate the transactions contemplated hereby and
thereby. The Developer Interests have not relied upon any representation,
warranty, statement, advice, document, projection or other information of any
type provided by any of the Tejon Interests or any of their representatives,
except for those expressly set forth in or identified in this Agreement or any
of the other Project Agreements. None of the Tejon Interests nor any of their
representatives has made, or is making, any representation or warranty, written
or oral, concerning any matter whatsoever, except as expressly set forth in this
Agreement and the other Project Agreements. In deciding to enter into this
Agreement and the other Project Agreements, and to consummate the transactions
contemplated hereby and thereby, the Developer Interests have relied solely upon
their own knowledge, investigation and analysis (and that of their
representatives) and not on any disclosure made by, or any duty (asserted or
unasserted) to disclose on the part of, any of the Tejon Interests or any of
their representatives.
(b) Limited Duties. Any and all duties and obligations which any of the
Tejon Interests may have to any of the Developer Interests are limited to those
expressly stated in this Agreement and the other Project Agreements. Neither the
duties nor obligations of any of the Tejon Interests, nor the rights of the
Developer Interests, shall be expanded beyond the express terms of this
Agreement and the other Project Agreements on the basis of any legal or
equitable principle or on any other basis whatsoever. Neither any equitable nor
legal principle nor any implied obligation of good faith or fair dealing nor any
other matter requires any of the Tejon Interests to incur, suffer or perform any
act, condition or obligation contrary to the express terms of this Agreement and
the other Project Agreements, which define the outer limit of what may be
expected or required from the Tejon Interests under any and all circumstances,
whether existing or not and whether foreseeable or unforeseeable. The Developer
Interests acknowledge that it would be very unfair to increase any of the
obligations of any of the Tejon Interests under this Agreement or any of the
other Project Agreements on the basis of any implied obligation or otherwise.
(c) No Such Relationships. Without in any manner limiting the generality
of Section 13.1(b) or any other provision of this Agreement or any of the other
Project Agreements, none of the Developer Interests or Tejon Interests is or
shall be deemed to be in a relationship of partners or joint venturers with each
other by virtue of this Agreement or any of the other Project Agreements or
otherwise; nor shall any of them be an agent, representative, trustee or
fiduciary of, or have any fiduciary obligations to, any of the other of them.
13.2 Acknowledgments of the Tejon Interests. The Tejon Interests hereby
expressly acknowledge and agree as follows:
(a) No Reliance. The Tejon Interests have reviewed and had access to all
documents, records and information which they have desired to review in
connection with their decision to enter into this Agreement and the other
Project Agreements, and to consummate the transactions contemplated hereby and
thereby. The Tejon Interests have not relied upon any representation, warranty,
statement, advice, document, projection or other information of any
17
type provided by any of the Developer Interests or any of their representatives,
except for those expressly set forth in or identified in this Agreement or any
of the other Project Agreements. None of the Developer Interests nor any of
their representatives has made, or is making, any representation or warranty,
written or oral, concerning any matter whatsoever, except as expressly set forth
in this Agreement and the other Project Agreements. In deciding to enter into
this Agreement and the other Project Agreements, and to consummate the
transactions contemplated hereby and thereby, the Tejon Interests have relied
solely upon their own knowledge, investigation and analysis (and that of their
representatives) and not on any disclosure made by, or any duty (asserted or
unasserted) to disclose on the part of, any of the Developer Interests or any of
their representatives.
(b) Limited Duties. Any and all duties and obligations which any of the
Developer Interests may have to any of the Tejon Interests are limited to those
expressly stated in this Agreement and the other Project Agreements. Neither the
duties nor obligations of any of the Developer Interests, nor the rights of the
Tejon Interests, shall be expanded beyond the express terms of this Agreement
and the other Project Agreements on the basis of any legal or equitable
principle or on any other basis whatsoever. Neither any equitable nor legal
principle nor any implied obligation of good faith or fair dealing nor any other
matter requires any of the Developer Interests to incur, suffer or perform any
act, condition or obligation contrary to the express terms of this Agreement and
the other Project Agreements, which define the outer limit of what may be
expected or required from the Developer Interests under any and all
circumstances, whether existing or not and whether foreseeable or unforeseeable.
The Tejon Interests acknowledge that it would be very unfair to increase any of
the obligations of any of the Developer Interests under this Agreement or any of
the other Project Agreements on the basis of any implied obligation or
otherwise.
(c) No Such Relationships. Without in any manner limiting the generality
of Section 13.2(b) or any other provision of this Agreement or any of the other
Project Agreements, none of the Developer Interests or the Tejon Interests is or
shall be deemed to be in a relationship of partners or joint venturers with each
other by virtue of this Agreement or any of the other Project Agreements or
otherwise; nor shall any of them be an agent, representative, trustee or
fiduciary of, or have any fiduciary obligations to, any of the other of them.
Section 14. Miscellaneous
14.1 No Brokers, Finders, Etc. Except as disclosed in Schedule 14.1, none
of the parties has engaged any agent, broker, finder or investment or commercial
banker in connection with the negotiation, execution or performance of this
Agreement or any of the other Project Agreements or the transactions
contemplated hereby or thereby. The Developer Interests shall indemnify the
Tejon Interests and hold them harmless against and in respect of any claim for
brokerage fees, commissions or other compensation incurred or owing due to any
such engagement or alleged engagement by the Developer Interests. The Tejon
Interests shall indemnify the Developer Interests and hold them harmless against
and in respect of any claim for brokerage fees, commissions or other
compensation incurred or owing due to any such engagement or alleged engagement
by the Tejon Interests.
14.2 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties shall pay their own fees and
expenses incident to the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Project Agreements.
18
14.3 Complete Agreement; Waiver and Modification, Etc. This Agreement and
the other Project Agreements constitute the entire agreement between the parties
hereto and thereto pertaining to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements and understandings of the
parties. There are no representations, warranties, covenants or conditions by or
benefiting any party except those expressly stated or provided for in this
Agreement and the other Project Agreements, any implied representations,
warranties, covenants or conditions being hereby expressly disclaimed. Except as
expressly provided in this Agreement, no Persons other than the parties to this
Agreement have any rights or remedies under or in connection with this
Agreement, except rights or remedies validly assigned hereunder. No amendment,
supplement or termination of or to this Agreement, and no waiver of any of the
provisions hereof, shall require the consent of any Person other than the
parties hereto, nor shall any such amendment, supplement, termination or waiver
be binding on a party to this Agreement unless made in a writing signed by such
party. Except as expressly provided in this Agreement, no Persons other than the
parties to any other Project Agreement have any rights or remedies under or in
connection with that other Project Agreement, except rights or remedies validly
assigned thereunder. No amendment, supplement or termination of or to any other
Project Agreement, and no waiver of any of the provisions thereof, shall require
the consent of any Person other than the parties to that other Project
Agreement, nor shall any such amendment, supplement, termination or waiver be
binding on a party to that other Project Agreement unless made in a writing
signed by such party.
14.4 Setoff. Each party shall be entitled to setoff against any payment
which would otherwise be due and payable to any other party under this Agreement
or any of the other Project Agreements, any amount due and payable to the party
by the other party under any final judgment obtained by the party against the
other party. No other setoffs are permitted.
14.5 Communications. Whether expressly so stated or not, all notices,
demands, requests and other communications required or permitted by or provided
for in this Agreement or any of the other Project Agreements ("Communications")
shall be given in writing to the parties at their respective addresses set forth
below, or at such other address as a party shall designate for itself in writing
in accordance with this Section:
Developer Enron Capital & Trade Resources Corp.
Interests: 101 California Street, Suite 1950
San Francisco, CA 94111
Attn: David Parquet
With a copy to: Enron Capital & Trade Resources Corp.
1400 Smith Street, EB 3879
Houston, Texas 77002
Attn: Sheila Tweed
Tejon Interests: Tejon Ranchcorp
4436 Lebec Road
Lebec, CA 93243
Attn: General Counsel
19
With a copy to: Arnold B. Podgorsky
Michael Thompson
Wright & Talisman, PC
1200 G Street, N.W., Suite 600
Washington, D.C. 20005-3802
Communications may be transmitted (i) by personal delivery, (ii) by delivery by
messenger, express or air courier or similar courier, and (iii) by delivery by
United States first class certified or registered mail, postage prepaid. Except
as otherwise provided in this Agreement, delivery or service of any
Communication shall be deemed effective only upon receipt, and receipt shall be
deemed to have occurred when the Communication was delivered to the specified
address without regard to whether or not a representative of the addressee was
present to receive the Communication; provided, any Communication delivered
after 5:00 P.M. local time of place of receipt, or on a day other than a
Business Day, shall be deemed received on the next succeeding Business Day.
14.6 Law Governing. This Agreement and the other Project Agreements shall
be interpreted in accordance with and governed by the laws of the State of
California, without regard to principles of conflicts of laws. This Agreement
and the other Project Agreements shall each be given a fair and reasonable
construction in accordance with the intention of the parties and without regard
to, or aid of, Section 1654 of the California Civil Code.
14.7 Headings; References; "Hereof," Etc. The Section headings and tables
of contents in this Agreement and the other Project Agreements are provided for
convenience only, and shall not be considered in the interpretation hereof or
thereof. References in this Agreement to Sections or Schedules refer, unless
otherwise specified, to the designated Section of or Schedule to this Agreement.
Terms such as "herein," "hereto" and "hereof" refer to this Agreement as a
whole.
14.8 Successors and Assigns. This Agreement and the other Project
Agreements shall inure to the benefit of and be binding upon the heirs,
executors, administrators, successors and permitted assigns of the parties
hereto and thereto.
14.9 Severability. If for any reason any provision of this Agreement or
any of the other Project Agreements shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then that provision shall
be ineffective only to the extent of that invalidity, illegality or
unenforceability and in that jurisdiction only, without in any manner affecting
the validity, legality or enforceability of the unaffected portion and the
remaining provisions in that jurisdiction or any provision of this Agreement in
any other jurisdiction.
14.10 Survival of Representations and Warranties. Except as otherwise
expressly provided in this Agreement or any of the other Project Agreements, all
representations, warranties, covenants and agreements of the parties contained
in this Agreement and the other Project Agreements shall be considered material
and shall be effective and survive the execution and delivery of this Agreement
and the other Project Agreements and the consummation of the transactions
contemplated hereby and thereby notwithstanding any investigation of the matters
covered thereby by or on behalf of any party benefited by any such
representation, warranty, covenant or agreement or any knowledge (actual or
constructive) on the part of any party benefited by any such representation,
warranty, covenant or agreement as to the truth or accuracy (or falseness or
inaccuracy) thereof.
20
14.11 Further Assurances. From time to time and at any time after the
execution and delivery hereof, each of the parties, at their own expense, shall
execute, acknowledge and deliver any further instruments, documents and other
assurances reasonably requested by another party, and shall take any other
action consistent with the terms of this Agreement and the other Project
Agreements that may reasonably be requested by another party to evidence or
carry out the intent of or to implement this Agreement or any of the other
Project Agreements.
14.12 Statutory Filings. The Tejon Interests shall cooperate with the
Developer Interests in preparing and filing on such schedule as shall reasonably
be specified by the Developer Interests all information and documents deemed
necessary or desirable by the Developer Interests under any statutes or
governmental rules or regulations pertaining to the transactions contemplated by
this Agreement, including but not limited to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules promulgated thereunder.
14.13 Counterparts; Separate Signature Pages. This Agreement and each of
the other Project Agreements may be executed in any number of counterparts, or
using separate signature pages. Each such executed counterpart and each
counterpart to which such signature pages are attached shall be deemed to be an
original instrument, but all such counterparts together shall constitute one and
the same instrument.
14.14 Guarantee Provisions. In the event any obligation of a party under
this Agreement shall be or be construed to be a guarantee of any obligation of
any other Person, the provisions of Schedule 14.14 shall apply to such
obligation.
Section 15. Glossary
AFC Schedule/Budget - Section 2.1.
Affiliate - a Person who directly or indirectly controls, is controlled by
or is under common control with another Person, or who directly or indirectly
owns 25% or more of the voting power in such other Person, or of whose voting
power such other Person (or a Person holding 25% or more of the voting power in
such other Person) owns 25% or more. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Agreement - this Transaction Agreement, including the Schedules hereto, as
originally executed and as modified thereafter from time to time in accordance
with its terms.
CEC - Recital B.
CEC Assets - Section 7.2(b)(iii).
Commercial Operation Date - Section 2.1 of the Lease.
Communications - Section 14.4.
deems appropriate - Section 5.2.
Developer Interests - introductory paragraphs.
DWR - Section 3.3.
21
Easement Agreement - Recital C.
ECT - introductory paragraphs.
Equity Owner - Section 11.5.
ERC Option Rights- Section 7.2(b)(ii).
ERCs - Section 7.2(b)(i).
Event of Default - any event of default under this Agreement or any of the
other Project Agreements.
Excepted Cause - (i) the expropriation, confiscation or requisitioning of
any facility or other property; (ii) the imposition of generally applicable
restrictions or generally applicable regulations by any government or
governmental agency or by any court, not resulting in whole or in part from any
action or activity in support of the adoption thereof by the party seeking to
establish the same as an Excepted Cause; (iii) rationing or allocation imposed
by law; (iv) executive or administrative orders or acts of either general or
particular application of any de jure or de facto government or of any Person
purporting to act under the authority of any such government; (v) illegality, by
reason of the enactment of any applicable law or regulation at any time after
the date of this Agreement, of any obligation of the party seeking to establish
such event as an "Excepted Cause" and not resulting in whole or in part from any
action or activity in support of the enactment thereof by the party seeking to
establish the same as an Excepted Cause; (vi) war or preparation for war; (vii)
acts of God (including ordinary storms and inclement conditions to the extent
they cause delay in the safe and prudent performance of any obligation),
earthquakes, hurricanes, typhoons, and floods, landslides, mudslides and
lightning; (viii) strikes, lockouts or other labor disturbances; (ix)
unavailability of power; (x) riots, insurrection, sabotage, blockades, embargoes
and epidemics; (xi) such explosions, fires and vandalism as are the result of
causes which are reasonably beyond the control of the party seeking to establish
the same as an Excepted Cause; (xii) acts and omissions of the party not seeking
to establish such event as an "Excepted Cause" (other than such acts and
omissions, if any, as this Agreement or any of the other Project Agreements
permits to be taken by that party in exercising any or all of its rights or
duties under this Agreement or any of the other Project Agreements); (xiii) the
short or late delivery to a party of services or materials required for the
party's performance, where it is determined that the party's contracting for
such items was expeditious and prudent, that the party has exercised due
diligence in the performance of any acts required of the party with respect to
such items, that the party has exercised due diligence in monitoring the acts
and circumstances of the vendors of such items and that the party has exercised
due diligence in expediting deliveries under the party's purchase contract or
procuring equivalent substitute performance with respect to such items; (xiv)
default in performance owed to a party under a subcontract where it is
determined that the party's choice of the subcontractor was reasonable and
prudent, that the party has exercised due diligence in the performance of any
acts required of the party with respect to such subcontract, that the party has
exercised due diligence in monitoring the acts and circumstances of such
subcontractor, and that the party has exercised due diligence in expediting
performance, avoiding such default or procuring equivalent substitute
performance; and (xv) delays and nonperformance of carriers by land, sea or air
where it is determined that the party's contracting for such services was
expeditious and prudent, that the party has exercised due diligence in the
performance of any acts required of the party with respect to such services,
that the party has exercised due diligence in monitoring the acts and
circumstances of such carriers, and that the party has exercised due diligence
in
22
procuring equivalent substitute performance; and (xvi) other causes similarly
outside the reasonable control of a party.
Excluded Miscellaneous Rights - Section 7.2(b)(iv).
Final Project Decision - the CEC's final decision with respect to the
Project AFC.
Financial Closing - shall be deemed to have occurred when (i) PEF has
entered into a contract for construction of the Project, and (ii) the first draw
has occurred under any Outside Financing Agreement. The Financial Closing Date
is the date on which these two conditions first are satisfied.
Follow On Payment - Section 7.3.
FWS - the U.S. Fish & Wildlife Service.
GAAP - generally accepted accounting principles applied on a consistent
basis, as set forth in authoritative pronouncements which are applicable to the
circumstances as of the date in question. The requirement that such principles
be applied on a "consistent basis" means that accounting principles observed in
the period in question are comparable in all material respects to those applied
in the preceding periods, except as change is permitted or required under or
pursuant to such accounting principles.
General Partner - any Person who is a general partner of another Person.
Lease - Recital C.
Lease Term - the initial term and any extended term of the Lease.
Leased Premises - the real property which is subject to the Lease or any
of the Easement Agreements.
NOI Exemption - Recital B.
Option - Section 1.3 of the Option Agreement.
Option Agreement - that certain Option Agreement, dated as of the date of
this Agreement, between Ranchcorp and PEF, as originally executed and as amended
from time to time thereafter in accordance with its terms.
Option Period - the Option Period as defined in Section 3 of the Option
Agreement.
Option Rights - Section 7.2(b)(ii).
Option Termination Date - Section 7.1(a).
Outside Financing Agreements - agreements by one or more Persons who are
not Affiliates of ECT to provide debt or equity financing for at least one third
of the funds PEF estimates will be required to finance the engineering and
construction of the Project and associated procurement and payment of PEF's
expenses prior to the Commercial Operation Date.
23
PEF - introductory paragraphs.
PEF Project Assets - Section 7.2(a).
Person - an individual, or a corporation, partnership, limited liability
company, trust, association or other entity of any nature, or a governmental
agency.
PPP LLC - introductory paragraphs.
Project - Recital A.
Project Activities - Section 5.2.
Project AFC - Recital B.
Project Agreement Rights - Section 11.5.
Project Agreements - Recital D.
Project Asset Transfer Date - Section 7.2(c).
Project Development Period - Section 3.
Project Financing - Section 11.5.
Project Financing Agreements - Section 11.5.
24
Project Financing Entity - Section 11.5.
Project Period - Section 1.
Project Site - Recital A.
PUC - the California Public Utilities Commission.
Qualified - Section 11.3(c).
Qualified Developer - Section 11.5.
Qualified Owner - Section 11.5.
RanchCo - introductory paragraphs.
Ranchcorp - introductory paragraphs.
Recognized Cost - Section 7.2(d).
Tejon Interests - introductory paragraphs.
Tejon Project Assets - Section 6.1.
Tejon Ranch - the approximately 270,000 acres of real property in Kern and
Los Angeles counties currently owned by Ranchcorp and known as The Tejon Ranch.
Transaction Agreement Modifications - Section 3.4.
WRM - Section 3.3.
25
IN WITNESS WHEREOF, the parties have executed this Agreement.
ECT: ENRON CAPITAL & TRADE RESOURCES CORP.
By:
-------------------------------------
David Parquet
Vice President
PEF: PASTORIA ENERGY FACILITY LLC,
a Delaware limited liability company
By: Enron Capital & Trade Resources Corp.,
its sole member
By:
-------------------------------------
David Parquet
Vice President
PPP LLC: PASTORIA POWER PROJECT, LLC
By: TEJON RANCHCORP,
its manager and member
By:
----------------------------------
Dennis Mullins
Vice President
RANCHCORP: TEJON RANCHCORP,
a California corporation
By:
-------------------------------------
Dennis Mullins
Vice President
RANCHCO: TEJON RANCH CO.
By:
-------------------------------------
Dennis Mullins
Vice President
26
Schedule 2.1
AFC Schedule/Budget
Schedule 4.4(i)
Form of Tejon Legal Opinion
Schedule 4.4(ii)
Form of ECT Legal Opinion
Schedule 6.1(ii)
Items Which Are Not Tejon Project Assets
Schedule 7.2(b)(iv)
Items Which Are Not PEF Project Assets
1. Any matter protected by the attorney-client privilege or the
attorney work product doctrine.
2. Any material to, from or providing information about the activities
(actual or proposed) of ECT or any of its Affiliates other than the
Project or arrangements (actual or proposed) between ECT and any of
its Affiliates in connection with the Project.
3. Rights pertaining to proprietary models of ECT or any of its
Affiliates pertaining to energy project evaluation, energy or
natural gas price curves or projections and other economic
predictive models.
Schedule 9
Amended and Restated Confidentiality Agreement
[to come]
Schedule 11.4
Collateral Assignments by Developer Interests
And Rights of their Lenders
Schedule 14.1
Brokers, Finders, Etc.
The Developer Interests have engaged Joe Path and Allan Thompson.
Schedule 14.14
Guarantor Waivers, Etc.
[to come]