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Exhibit
10.1
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INDEMNIFICATION
AGREEMENT
THIS INDEMNIFICATION
AGREEMENT (this “ Agreement ”) is made and
entered into as of June 30, 2007. The parties to this
Agreement (the “ Parties ”) are Coral Energy
Holding, L.P., a Delaware limited partnership (“ Coral
Holding ”), Coral Energy Resources, L.P., a Delaware
limited partnership (“ Coral Resources ”), Coral
Power, L.L.C., a Delaware limited liability company (“
Coral Power ”), and Coral Energy Canada Inc., a
corporation of the province of Alberta, Canada (“ Coral
Canada ” and, together with Coral Holding, Coral
Resources and Coral Power, each a “ Coral Entity
” and together the “ Coral Entities ,” all
of which are Affiliates of one another); and Avista Energy, Inc., a
Washington corporation (“ Avista Energy ”),
Avista Energy Canada, Ltd., an amalgamated corporation of the
province of Alberta, Canada (“ Avista Canada ”),
and Avista Turbine Power, Inc., a Washington Corporation (“
Avista Turbine ” and, together with Avista Energy and
Avista Canada, each an “ Avista Entity ” and
together the “ Avista Entities ,” all of which
are Affiliates of one another). Capitalized terms used and not
otherwise defined in this Agreement shall have the meanings given
in the Purchase Agreement (defined below).
RECITALS
| A. |
Avista Energy and Avista Canada, as Sellers, entered into a
Purchase and Sale Agreement dated as of April 16, 2007, with
the Coral Entities, as Purchasers (the “ Purchase
Agreement ”), by which the Coral Entities will purchase
substantially all of the operating assets of Avista Energy and
Avista Canada. |
| B. |
Concurrently with the Parties’ entry into this Agreement
and as of the Effective Time: |
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1. |
Avista Energy, Avista Canada and the Coral Entities may enter
into an Agency Agreement (the “ Agency Agreement
”) pursuant to which Avista Energy and Avista Canada would
appoint certain of the Coral Entities as their agents with respect
to certain of the Assigned Contracts; |
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2. |
Avista Energy, Avista Canada and the Coral Entities are
entering into a Post-Closing Transition Services Agreement (the
“ Transition Services Agreement ”) pursuant to
which Avista Energy and Avista Canada have agreed to provide
certain services to the Coral Entities for a limited period of
time; |
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3. |
Avista Turbine and Coral Power are entering into an Energy
Conversion Agreement (the “ Lancaster Agreement
”) pursuant to which Coral Power is agreeing to purchase from
Avista Turbine the capacity and energy generated from that certain
power generation facility located in Rathdrum, Idaho;
and |
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4. |
Avista Energy and Coral Resources are entering into that
certain Agreement to Temporarily Assign Rights to Use Jackson
Prairie Expansion Capacity (the “ JP Agreement
”) pursuant to which Coral Resources is obtaining from Avista
Energy the right for a limited time to utilize the natural gas
storage capacity held by Avista Energy located in Lewis County,
Washington. |
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| C. |
As part of the Purchase Agreement, the Agency Agreement (if and
when entered into), the Transition Services Agreement, the
Lancaster Agreement and the JP Agreement (collectively, with the
documents and agreements entered into pursuant to such agreements,
the “ Transaction Agreements ”), the Coral
Entities and the Avista Entities are entering into this Agreement
setting forth the terms and conditions under which the Parties are
agreeing to provide indemnification for certain events that may
arise out of or relate to the Transaction Agreements. |
IN CONSIDERATION of the
mutual promises, representations, warranties and covenants set
forth in this Agreement, the Parties, each intending to be legally
bound, agree as follows:
1. Definitions . As
used in this Agreement:
(a) “ Adverse
Consequence ” means any and all damages, assessments,
charges, penalties, fines, costs, payments, Liabilities, debts,
obligations, Taxes, liens, losses, expenses, fees or newly-imposed
business restrictions, including court costs and reasonable
attorneys’ fees and expenses, arising out of or relating to
one or more Claims or Orders.
(b) “ Claim
” means any demand, claim, action, investigation, legal
proceeding (whether at law or in equity) or arbitration of any kind
whatsoever, whether fixed or contingent.
(c) “ Liability
” means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, criminal or civil, or due or to become
due), including any liability for Taxes.
(d) “ Order
” means any order, ruling, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
(e) “
Third-Party ” means any Person (including without
limitation Governmental Authorities) other than the Coral Entities
and their Affiliates or the Avista Entities and their
Affiliates.
2. Indemnification
Provisions for Benefit of the Coral Entities . Avista Energy,
Avista Canada and, with respect to the Lancaster Agreement only,
Avista Turbine, and each of them, jointly and severally, shall
indemnify, defend and hold harmless the Coral Entities and each of
their Affiliates, successors, officers, directors, employees and
agents (each a “ Coral Indemnified Party ”) from
and against the entirety of any Adverse Consequences any of them
may suffer resulting from, arising out of, relating to, in the
nature of, or caused by:
2.1 Breach of
Representations and Warranties . Breach by Avista Energy or
Avista Canada of one or more of its representations and warranties
made in the Purchase Agreement, including, without limitation, any
representation or warranty made in:
(a) Sections 3.1, 3.2 or 3.7
of the Purchase Agreement (the “ Title and Authority
Representations ”);
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(b) Sections 3.14 or 3.15 of
the Purchase Agreement (the “ Tax Representations
”); or
(c) Section 3.17 of the
Purchase Agreement (the “ Environmental
Representations ”).
2.2 Coral Entity
Claims . Claims of any Coral Entity, or Claims against any
Coral Entity by Third Parties, resulting from, arising out of,
relating to, in the nature of or caused by (a) any breach by
(i) an Avista Entity of or default by it under any of its
covenants contained in the Purchase Agreement, Agency Agreement or
Transition Services Agreement, or (ii) any member of the
Avista Group of or default by it under Section 10 of the
Purchase Agreement, in each case as such covenants pertain to
obligations arising or actions to be taken following the Effective
Time, (b) with respect to Third Party Claims only, the
ownership or operation of the Acquired Assets on or prior to the
Effective Time, or (c) the ownership or operation by of the
Excluded Assets or the Retained Liabilities prior to, on or after
the Effective Time.
2.3 Claims under Lancaster
and JP Agreements . Claims of any Coral Entity resulting from,
arising out of, relating to, in the nature of or caused by any
breach by an Avista Entity of or default by it under any of its
representations, warranties and covenants contained in the
Lancaster Agreement or the JP Agreement.
3. Indemnification
Provisions for Benefit of the Avista Entities . The Coral
Entities and each of them, jointly and severally, shall indemnify,
defend and hold harmless the Avista Entities, their Affiliates,
successors, officers, directors, employees and agents (each an
“ Avista Indemnified Party ”) from and against
the entirety of any Adverse Consequences any of them may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by:
3.1 Breach of
Representations and Warranties . Breach by any of the Coral
Entities of one or more of its representations and warranties made
in the Purchase Agreement. The preceding obligations shall include,
without limitation, breach of any representation or warranty made
in Section 4.1 or 4.2 (the “ Coral Authority
Representations ”) or Section 4.7 (the “
Coral Tax Representation ”) of the Purchase
Agreement
3.2 Avista Entity
Claims . Claims of any Avista Entity, or Claims against any
Avista Entity by Third Parties, resulting from, arising out of,
relating to, in the nature of or caused by any breach by a Coral
Entity of or default by it under any of its covenants contained in
the Purchase Agreement, the Agency Agreement or Transition Services
Agreement as such covenants pertain to obligations arising or
actions to be taken following the Effective Time, or the ownership
or operation of the Acquired Assets and assumption of the Assumed
Liabilities by the Coral Entities or their Affiliates after the
Effective Time.
3.3 Claims under Lancaster
and JP Agreements . Claims of any Avista Entity resulting from,
arising out of, relating to, in the nature of or caused by any
breach by a Coral Entity of or default by it under any of its
representations, warranties and covenants contained in the
Lancaster Agreement or the JP Agreement.
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4. Claims for
Indemnification; Matters Involving Third Parties .
4.1 Notice . If any
Coral Indemnified Party or Avista Indemnified Party (the “
Indemnified Party ”) becomes aware of any matter that
may give rise to a Claim for indemnification under this Agreement
(an “ Indemnification Claim ”) against any of
the Avista Entities or Coral Entities, as the case may be (the
“ Indemnifying Party ”), then the Indemnified
Party shall give prompt written notice to the Indemnifying Party of
each such Claim, stating the nature of such Claim in reasonable
detail and indicating the estimated amount, if practicable, of the
loss related thereto. Delay on the part of the Indemnified Party in
providing notice shall not relieve the Indemnifying Party from its
obligations hereunder unless (and then only to the extent that) the
Indemnifying Party is prejudiced or damaged by such
delay.
4.2 Acceptance or
Rejection . If Indemnifying Party does not accept or
affirmatively rejects such Indemnification Claim within thirty
(30) days of the date the Indemnified Party provides written
notice of the Indemnification Claim to the Indemnifying Party, the
Indemnified Party shall be free to seek enforcement of its rights
to indemnification under this Agreement. If the Indemnifying Party
agrees that it has an indemnification obligation but objects that
it is obligated to pay only a lesser amount, the Indemnified Party
shall nevertheless be entitled to recover promptly from the
Indemnifying Party the lesser amount, without prejudice to the
Indemnified Party’s Claim for the difference.
4.3 Third Party Claims
. If the Indemnification Claim results from a Third-Party Claim or
proceeding, the Indemnifying Party will have the right to defend
the Indemnified Party against the Third-Party Claim or proceeding
with counsel of their choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within thirty
(30) days after the Indemnified Party has given notice of the
Indemnification Claim that the Indemnifying Party will indemnify
the Indemnified Party from and against the entirety of any Adverse
Consequences, to the fullest extent required under this Agreement,
the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Indemnification
Claim, (ii) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to
defend against the Indemnification Claim and fulfill its
indemnification obligations under this Agreement, and
(iii) the Indemnifying Party conducts the defense of the
Indemnification Claim actively and diligently.
4.4 Indemnified
Party’s Rights . So long as the Indemnifying Party is
conducting the defense of the Indemnification Claim in accordance
with this Agreement, (i) the Indemnified Party may retain
separate co-counsel, at its sole cost and expense, and participate
in the defense of the Indemnification Claim and (ii) the
Indemnified
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