STOCK AND NOTE PURCHASE AGREEMENT

 

TABLE OF CONTENTS

				Page
ARTICLE I
SALE AND PURCHASE
SECTION 1.1		Sale and Purchase		2
SECTION 1.2		Purchase Price		2
SECTION 1.3		Closing		2
SECTION 1.4		Closing Deliveries		2
SECTION 1.5		Estimated Working Capital Statement		3
SECTION 1.6		Post Closing Payment		4
SECTION 1.7		Purchase Price Deposit		5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS
SECTION 2.1		Organization and Qualification		6
SECTION 2.2		Capital Stock		7
SECTION 2.3		Authority Relative to this Agreement; Enforceability		7
SECTION 2.4		Non-Contravention; Approvals and Consents		8
SECTION 2.5		Financial Statements		8
SECTION 2.6		Absence of Certain Changes or Events; Absence of Undisclosed Liabilities		9
SECTION 2.7		Legal Proceedings		9
SECTION 2.8		Permits; Compliance with Laws		9
SECTION 2.9		Energy Conversion Agreements		10
SECTION 2.10		Taxes		10
SECTION 2.11		Employee Benefit Plans		11
SECTION 2.12		Labor Matters		11
SECTION 2.13		Environmental Matters		12
SECTION 2.14		Intellectual Property		13
SECTION 2.15		Insurance		14
SECTION 2.16		Real Property		14
SECTION 2.17		Affiliate Contracts		14
SECTION 2.18		Brokers or Finders		15
SECTION 2.19		Performance Undertakings		15
SECTION 2.20		Title to Assets		15
SECTION 2.21		Limitations on Representations and Warranties		15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 3.1		Organization		15

i

 

 

SECTION 3.2		Authority Relative to This Agreement; Enforceability		15
SECTION 3.3		Non-Contravention; Approvals and Consents		16
SECTION 3.4		Legal Proceedings; Compliance with Laws		16
SECTION 3.5		Financing		17
SECTION 3.6		Brokers or Finders		17
SECTION 3.7		Investment Intention; Sufficient Investment Expertise; Independent Investigation		17
ARTICLE IV
COVENANTS
SECTION 4.1		Covenants of Sellers		18
SECTION 4.2		Covenants of Buyer		19
SECTION 4.3		Tax Matters		20
SECTION 4.4		No Solicitation		20
SECTION 4.5		Control of the Company’s Business		21
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1		Access to Information		21
SECTION 5.2		Regulatory and Other Approvals		22
SECTION 5.3		Employee Benefit Plans		22
SECTION 5.4		Directors’ and Officers’ Indemnification and Insurance		23
SECTION 5.5		Financial Information		24
SECTION 5.6		Sellers’ Name		24
SECTION 5.7		Tax Matters		24
SECTION 5.8		Certain Acknowledgments		28
SECTION 5.9		Sual Matters		28
SECTION 5.10		Termination of Affiliate Contracts		29
SECTION 5.11		Payment of Indebtedness for Borrowed Money		29
SECTION 5.12		Buyer Deliverables		29
SECTION 5.13		Further Assurances		30
ARTICLE VI
CONDITIONS
SECTION 6.1		Conditions to Each Party’s Obligation to Effect the Closing		30
SECTION 6.2		Conditions to Obligation of Buyer to Effect the Closing		30
SECTION 6.3		Conditions to Obligation of Sellers to Effect the Closing		31
SECTION 6.4		Frustration of Closing Conditions		32

ii

 

 

ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1		Termination		32
SECTION 7.2		Effect of Termination		33
ARTICLE VIII
INDEMNIFICATION AND SURVIVAL
SECTION 8.1		Indemnification		33
SECTION 8.2		Defense of Claims		36
SECTION 8.3		Release of Directors		38
SECTION 8.4		Risk of Loss		38
SECTION 8.5		Power Systems Notes		38
SECTION 8.6		Survival of Obligations		38
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1		Notices		39
SECTION 9.2		Entire Agreement; Incorporation of Exhibits		40
SECTION 9.3		Public Announcements		40
SECTION 9.4		Expenses		40
SECTION 9.5		No Third Party Beneficiary		41
SECTION 9.6		Amendment		41
SECTION 9.7		Waiver		41
SECTION 9.8		No Assignment; Binding Effect		41
SECTION 9.9		Headings		41
SECTION 9.10		Invalid Provisions		41
SECTION 9.11		Governing Law		41
SECTION 9.12		Submission to Jurisdiction; Waivers		42
SECTION 9.13		Enforcement of Agreement		42
SECTION 9.14		No Right of Set-Off		42
SECTION 9.15		Certain Definitions		42
SECTION 9.16		Seller Disclosure Letter		46
SECTION 9.17		Counterparts		46
SECTION 9.18		WAIVER OF JURY TRIAL AND CERTAIN DAMAGES		46
Exhibit A		Form of Working Capital Statement
Exhibit B		Form of Letter of Credit
Exhibit C		Form of Joint Independent Engineer Engagement Letter

 

iii

 

 

Exhibit D		Form of Mirant Corporation Employee Severance Guarantee
Exhibit E		Form of Assignment and Assumption Agreement

 

iv

 

STOCK AND NOTE PURCHASE AGREEMENT

THIS STOCK AND NOTE PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of this 11th day of December, 2006, by and among Mirant Asia-Pacific Ventures, Inc., a Delaware corporation (“ Ventures ”), Mirant Asia-Pacific Holdings, Inc., a Delaware corporation (“ Holdings ” and, each of Ventures and Holdings, a “ Seller ” and together “ Sellers ”), Mirant Sweden International AB (publ), a public limited liability company organized under the laws of Sweden (“ Mirant Sweden ”), and Tokyo Crimson Energy Holdings Corporation, a Cayman Islands corporation (“ Buyer ”).

W I T N E S S E T H:

WHEREAS , Sellers own all of the issued ordinary shares of Hong Kong dollars 6.50 each (the “ Ordinary Shares ”) of Mirant Asia-Pacific Limited, a Bermuda exempted company with limited liability (the “ Company ”);

WHEREAS , Buyer desires to purchase all of the Ordinary Shares from Sellers, and Sellers desire to sell the Ordinary Shares to Buyer, in each case upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS , in connection herewith, Mirant Corporation, a Delaware corporation (“ Seller Parent ”), is entering into a Parent Company Payment Guaranty (the “ Seller Parent Guaranty ”), pursuant to which Seller Parent guarantees the payment obligations of Sellers hereunder in accordance with the terms thereof;

WHEREAS , in connection herewith, each of The Tokyo Electric Power Company, Incorporated, a Japanese corporation (“ TEPCO ”), and Marubeni Corporation, a Japanese corporation (“ Marubeni ” and together with TEPCO, “ Buyer Parents ”) is entering into a Payment Guaranty (each, a “ Buyer Parent Guaranty ”), pursuant to which each Buyer Parent guarantees certain payment obligations of Buyer hereunder in accordance with the terms thereof; and

WHEREAS , Mirant Sweden is the holder of the Intercompany Notes, and Buyer desires to purchase the Intercompany Notes from Mirant Sweden, and Mirant Sweden desires to sell the Intercompany Notes to Buyer, in each case upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE , in consideration of the mutual terms, conditions and other agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

SALE AND PURCHASE

SECTION 1.1                      Sale and Purchase .

(a)                         Upon the terms and subject to the conditions of this Agreement, at the Closing, Buyer shall purchase from each Seller, and each Seller shall sell to Buyer, free from any pledges, restrictions on transfer, proxies and voting or other agreements, liens, claims, charges, mortgages, security interests or other legal or equitable encumbrances, limitations or restrictions of any nature whatsoever, other than restrictions or limitations that arise by operation of law (“ Encumbrances ”), the number of Ordinary Shares set forth opposite such Seller’s name in Section 1.1 of the disclosure letter, delivered to Buyer by Sellers, on the date hereof (the “ Seller Disclosure Letter ”), which in the aggregate are all the Ordinary Shares issued.

(b)                        Upon the terms and subject to the conditions of this Agreement, at the Closing, Buyer shall purchase from Mirant Sweden, and Mirant Sweden shall sell to Buyer, free from any Encumbrances, the Intercompany Notes.

SECTION 1.2                      Purchase Price .

(a)                         The consideration to be paid by Buyer in respect of the purchase of the Intercompany Notes shall be an amount in cash equal to the outstanding balance of the Intercompany Notes on the Closing Date (the “ Intercompany Note Purchase Price ”).

(b)                        The consideration to be paid by Buyer in respect of the purchase of the Ordinary Shares shall be an amount in cash equal to US$3,424,107,821 less the Intercompany Note Purchase Price plus the Estimated Working Capital (together, the “ Estimated Share Purchase Price ”), subject to adjustment as determined pursuant to Section 1.6 (as adjusted, the “ Share Purchase Price ”).

(c)                         The amounts in clause (a) and clause (b), as adjusted, are collectively referred to herein as the “ Purchase Price .”

SECTION 1.3                      Closing .  The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 42 nd  Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong, at 10:00 A.M., local time, as soon as practicable, but in any event not later than the twentieth (20th) Business Day immediately following the date on which the last of the conditions contained in Article VI is fulfilled or waived (except for those conditions which by their nature can only be fulfilled at the Closing, but subject to the fulfillment or waiver of such conditions), or at such other place, time and date (the “ Closing Date ”) as the parties to this Agreement may agree in writing.

SECTION 1.4                      Closing Deliveries .  At the Closing:

(a)                         Each Seller shall transfer to Buyer all of such Seller’s Ordinary Shares pursuant to a duly authorized and executed instrument of transfer, which instrument, together with the share certificate(s) representing such Ordinary Shares, a copy of the board

2

 

resolutions of the Company approving such share transfers and a copy of the Bermuda Monetary Authority Consent, shall be delivered to Buyer.

(b)                        Mirant Sweden shall assign and transfer to Buyer the Intercompany Notes pursuant to a duly authorized and executed instrument of sale, assignment and transfer, which instrument, together with the Intercompany Notes and a copy of the board resolutions of Mirant Sweden approving such sale, assignment and transfer, shall be delivered to Buyer.

(c)                         Buyer shall pay to Ventures an amount in cash equal to the sum of: (i) ninety percent (90%) of the Estimated Share Purchase Price minus (ii) ninety percent (90%) of the Estimated Excess Working Capital (if any), for the Ordinary Shares so delivered by Ventures, by wire transfer of immediately available funds to the bank account or accounts designated by Ventures to Buyer at least two Business Days prior to the Closing Date.

(d)                        Buyer shall pay to Holdings an amount in cash equal to the sum of: (i) ten percent (10%) of the Estimated Share Purchase Price minus (ii) ten percent ( 1 0%) of the Estimated Excess Working Capital (if any), for the Ordinary Shares so delivered by Holdings, by wire transfer of immediately available funds to the bank account or accounts designated by Holdings to Buyer at least two Business Days prior to the Closing Date.

(e)                         Buyer shall pay to Mirant Sweden an amount in cash equal to the Intercompany Note Purchase Price for the sale, assignment and transfer of the Intercompany Notes by Mirant Sweden to Buyer , by wire transfer of immediately available funds to the bank account or accounts designated by Mirant Sweden to Buyer at least two Business Days prior to the Closing Date.

(f)                           Upon receipt of the Intercompany Note Purchase Price, Mirant Sweden shall repay the Senior Secured Credit Facility in full, and (i) obtain and deliver to Buyer a pay-off letter providing that all agreements evidencing the Senior Secured Credit Facility have been terminated and all amounts have been paid in full and (ii) arrangements shall have been made for the termination of all liens granted in connection with the Senior Secured Credit Facility (it being understood and agreed that filings necessary for such termination shall be made after the Closing in accordance with arrangements customary in each relevant jurisdiction).

(g)                        Each party shall deliver the other documents and agreements required to be delivered by it pursuant to Article VI hereof.

SECTION 1.5                      Estimated Working Capital Statement .  Not less than twenty (20) Business Days prior to the Closing Date, Sellers shall deliver to Buyer a written statement (the “ Estimated Working Capital Statement ”) substantially in the form attached hereto as Exhibit A, setting forth in reasonable detail Sellers’ good faith calculation of (i) the estimate of the Working Capital as of the Closing Date (the “ Estimated Working Capital ”) and the estimate of the Excess Working Capital (if any) (the “ Estimated Excess Working Capital ”), which estimates shall be based on Sellers’ review of the financial and other books and records of the Company and its Subsidiaries then available to Sellers, and (ii) the outstanding balance of the Intercompany Notes as of the Closing Date.

3

 

SECTION 1.6                      Post Closing Payment .

(a)                         As promptly as practicable, and in any event not later than sixty (60) days after the Closing Date, Buyer shall prepare and deliver to Sellers a written statement (the “ Working Capital Statement ”) substantially in the form attached hereto as Exhibit A, setting forth Buyer’s calculation of the Working Capital as of the Closing Date, as derived from Buyer’s review of the financial and other books and records of the Company and its consolidated Subsidiaries and, based thereon, a statement of Buyer’s good faith calculation of an amount (positive or negative) equal to (i) the Working Capital Paid at Closing , less (ii) the a c tual Working Capital (the “ Post-Closing Payment ”).

(b)                        Buyer agrees to give Sellers and their Representatives full access to such employees, officers, outside accountants, facilities, books, records, work papers, historical financial information and other materials of Buyer, the Company and its Subsidiaries, as Sellers and their Representatives may request in connection with their review of the Working Capital Statement.

(c)                         Sellers may, in good faith, dispute the Working Capital Statement by delivery of written notice thereof (a “ Dispute Notice ”) to Buyer within sixty (60) days following receipt by Sellers of the Working Capital Statement.  The Dispute Notice shall set forth in reasonable detail all items disputed by Sellers, together with Sellers’ proposed changes thereto, including an explanation in reasonable detail of the basis on which Sellers propose such changes.  If (i) by written notice to Buyer, Sellers accept the Working Capital Statement or (ii) Sellers fail to deliver a Dispute Notice within the prescribed sixty (60)-day period (which failure shall result in Sellers being deemed to have agreed to the Working Capital Statement delivered by Buyer), the Working Capital Statement delivered by Buyer shall become final and binding on Sellers as of the date on which the earlier of the foregoing events occurs.

(d)                        If Sellers have timely delivered a Dispute Notice, then Buyer and Sellers shall attempt to reach agreement on the matters identified in the Dispute Notice.  If, by the thirtieth (30 th ) day following Buyer’s receipt of the Dispute Notice, Buyer and Sellers have not agreed in writing to the resolution of the matters identified in the Dispute Notice, then such matters shall be submitted to the Independent Accountants for resolution.  Buyer and Sellers shall instruct the Independent Accountants to prepare and deliver, within thirty (30) days of such submission, a revised Working Capital Statement (including the calculation of the Post-Closing Payment) taking into account all items not in dispute between Buyer and Sellers and those items requested by Buyer and Sellers to be resolved by the Independent Accountants.  Buyer shall furnish or cause to be furnished to the Independent Accountants access to such employees, officers, outside accountants, facilities, books, records, work papers, historical financial information and other materials as the Independent Accountants may request.  The fees and expenses of the Independent Accountants shall be borne equally by Sellers and Buyer.  The revised Working Capital Statement (including the calculation of the Post-Closing Payment therein) delivered by the Independent Accountants shall be final and binding upon Buyer and Sellers and not be subject to challenge or appeal by either Buyer or Sellers; provided , however , that in no event shall Sellers be obligated to make any payment to Buyer under Section 1.6(e) in excess of the amount that would have been payable using Buyer’s calculation of the Post-Closing Payment as set forth in the Working Capital Statement delivered by Buyer.

(e)                         If the Post-Closing Payment is a negative amount, then Buyer shall (i) pay to Ventures an amount equal to ninety percent (90%) of the Post-Closing Payment and (ii) pay to Holdings an amount equal to ten percent (10%) of the Post-Closing

4

 

Payment, plus in each case interest on such amount from (and including) the Closing Date to (but excluding) the date of payment at the Specified Rate.  If the Post-Closing Payment is a positive amount, then (i) Ventures shall pay to Buyer an amount equal to ninety percent (90%) of the Post-Closing Payment and (ii) Holdings shall pay to Buyer an amount equal to ten percent (10%) of the Post-Closing Payment, plus in each case interest on such amount from (and including) the Closing Date to (but excluding) the date of payment at the Specified Rate.  Each payment (if any) required by this Section 1.6(e) shall be made within five (5) Business Days following the date the Post-Closing Payment is deemed to be finally determined pursuant to this Section 1.6; provided , however , that, following the Closing Date, Buyer shall have the right, upon notice to Sellers, to elect to defer payment of the Excess Working Capital, and Buyer shall pay such Excess Working Capital pursuant to monthly payments of not less than $3,000,000 per month, payable on the tenth (10 th ) Business day of the month, starting with the first full calendar month after the Closing Date, with the balance of the Excess Working Capital being due and payable on the last Business Day of the sixth (6 th ) full calendar month after the Closing Date .  All payments required to be made pursuant to this Section 1.6 shall be made by wire transfer of immediately available funds to the bank account or accounts designated by the party entitled to receive such payment.

SECTION 1.7                      Purchase Price Deposit .  Within one (1) Business Day of the execution of this Agreement and in consideration of the time and expense of Sellers in negotiating and executing this Agreement, Buyer shall procure and deliver to Ventures, on behalf of Sellers, one or more letters of credit (which letters shall be in substantially the same form as set forth in Exhibit B and issued by Sumitomo Mitsui Banking Corporation, New York Branch (the “ Letters of Credit ”) in an aggregate amount equal to One Hundred Million United States Dollars (US$100,000,000) (such amount, the “ Purchase Price Deposit ”). Buyer shall ensure that the Letters of Credit (or similar Letters of Credit issued in replacement of expiring Letters of Credit) remain outstanding until the earlier of (i) the Closing Date and (ii) the date that is thirteen (13) months after the date hereof (the “ Deposit Period ”). If during the Deposit Period a Letter of Credit is not renewed within five (5) Business Days prior to its expiry date, Ventures may draw such Letter of Credit in full (the proceeds of such draw, the “ Expiry Proceeds ”). If the Closing occurs, then the undrawn Letter(s) of Credit shall be returned from Ventures on behalf of Sellers to Buyer (without any draws made thereon) and the Expiry Proceeds (if any) shall be applied to the payment of the Purchase Price at the Closing. If this Agreement is terminated pursuant to Section 7.1(d), then any undrawn Letters of Credit may be drawn against in full by Ventures on behalf of Sellers and, together with the Expiry Proceeds (if any), credited against the costs or expenses (including attorneys’ fees and expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement (“ Damages ”), if any, owed by Buyer to Sellers arising out of breach of this Agreement by Buyer, with the excess of such draw proceeds and any Expiry Proceeds, if any, returned by Ventures on behalf of Sellers to Buyer upon final determination of Damages.  If this Agreement is terminated and Sellers shall not then be entitled to terminate this Agreement pursuant to Section 7.1(d), then no later than ten (10) Business Days following the effective date of such termination, Ventures on behalf of Sellers shall return the undrawn Letter(s) of Credit to Buyer (without any draws made thereon) and refund to Buyer any Expiry Proceeds.  The Purchase Price Deposit shall not be deemed to be a liquidated damages payment, and shall not be deemed the sole remedy, for any breach of this Agreement by Buyer.

5

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES
OF SELLERS

Sellers hereby, jointly and severally, represent and warrant to Buyer that, except as set forth in the Seller Disclosure Letter (which forms part of the representations of Sellers set forth herein):

SECTION 2.1                      Organization and Qualification .

(a)                         Each Seller is duly organized, validly existing and in good standing under the laws of the State of Delaware.  Each of the Company, its Subsidiaries and, to the knowledge of Sellers, each of the Ilijan Entities is duly organized or incorporated, validly existing and in good standing (with respect to jurisdictions which recognize the concept of good standing) under the laws of its jurisdiction of organization or incorporation and has full corporate, limited liability company or partnership, as the case may be, power and authority to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties, except for such failures to be so organized or incorporated, existing and in good standing (with respect to jurisdictions which recognize the concept of good standing) or to have such power and authority that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.  Each of the Company, its Subsidiaries, and, to the knowledge of Sellers, each of the Ilijan Entities is duly qualified, licensed or admitted to do business and is in good standing (with respect to jurisdictions which recognize the concept of good standing) in each jurisdiction in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing (with respect to jurisdictions which recognize the concept of good standing) that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.  Section 2.1 of the Seller Disclosure Letter (i) sets forth the name and jurisdiction of organization or incorporation of each Subsidiary of the Company, (ii) with respect to Subsidiaries that are corporations, lists (A) such Subsidiary’s authorized capital stock, and (B) the number of issued and outstanding shares of such Subsidiary’s capital stock, (iii) with respect to Subsidiaries that are partnerships or limited liability companies, lists the names and ownership interests of the partners or members thereof, and (iv) sets forth, to the knowledge of Sellers, the jurisdiction of organization, the authorized capital stock, the number of issued and outstanding shares of capital stock and the record owners of shares of each Ilijan Entity.  Sellers have previously delivered to Buyer copies of the Organizational Documents as currently in effect of the Company, its Subsidiaries and, to the knowledge of Sellers, each Ilijan Entity.  “ Organizational Documents ” shall mean certificates or articles of incorporation, memorandum or articles of association, bylaws or bye-laws, certificates of formation, limited liability company agreements, partnership or limited partnership agreements, or other formation or governing documents of a particular entity.

(b)                        Except for interests in the Subsidiaries of the Company, and in the Ilijan Entities, as disclosed in Section 2.1 of the Seller Disclosure Letter, none of the Company, any of its Subsidiaries nor, to the knowledge of Sellers, any Ilijan Entity owns, directly or indirectly, any equity or similar interest in, or any interest convertible into or

6

 

exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity.

SECTION 2.2                      Capital Stock .

(a)                         The authorized share capital of the Company is Hong Kong $11,700,000,000, from which 106,124,419 Ordinary Shares are the only issued shares of capital stock of the Company . All of the issued shares of the Company have been validly issued and are fully paid and are owned, directly or indirectly, by Sellers free and clear of all Encumbrances.  There are no outstanding subscriptions, options, warrants, rights (including, but not limited to, stock appreciation rights), preemptive rights or other contracts, commitments, understandings or arrangements, including, but not limited to, any right of conversion or exchange under any outstanding security, instrument or agreement (together, “ Options ”), obligating the Company or any of its Subsidiaries to issue or sell any shares of the Company or to grant, extend or enter into any Option with respect thereto.

(b)                        All of the outstanding shares of capital stock of each material Subsidiary of the Company and, to the knowledge of Sellers, each Ilijan Entity are duly authorized, validly issued, fully paid and nonassessable and are owned, beneficially and of record, by the Company or a Subsidiary wholly owned, directly or indirectly, by the Company, free and clear of any Encumbrances.  There are no (i) outstanding Options obligating the Company or any of its Subsidiaries to issue or sell any shares of capital stock of any Subsidiary of the Company or to grant, extend or enter into any such Option or (ii) voting trusts, proxies or other commitments, understandings, restrictions or arrangements in favor of any person other than the Company or a Subsidiary wholly owned, directly or indirectly, by the Company with respect to the voting of, or the right to participate in dividends or other earnings on, any capital stock of the Company or any Subsidiary of the Company.

SECTION 2.3                      Authority Relative to this Agreement; Enforceability .

(a)                         Each Seller has full corporate power and authority to enter into this Agreement, and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each Seller and the consummation by each of them of the transactions contemplated hereby have been duly and validly approved by their respective Boards of Directors, and no other corporate proceedings on the part of Sellers or any of its affiliates are necessary to authorize the execution, delivery and performance of this Agreement by Sellers and the consummation by Sellers of the transactions contemplated hereby.

(b)                        This Agreement has been duly and validly executed and delivered by Sellers and, assuming the due authorization, execution and delivery of this Agreement by Buyer, constitutes a legal, valid and binding obligation of each of them enforceable against each of them in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

7

 

SECTION 2.4                      Non-Contravention; Approvals and Consents .

(a)                         The execution and delivery of this Agreement by Sellers does not, and the performance by each of them of its obligations hereunder and the consummation of the transactions contemplated hereby will not, conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, result in or give to any person any right of payment or reimbursement, termination, cancellation, modification or acceleration of, trigger any rights of first refusal, or result in the creation or imposition of any Encumbrances upon any of the assets or properties of Sellers, the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities under, any of the terms, conditions or provisions of (i) the Organizational Documents of Sellers, the Company, its Subsidiaries, or the Ilijan Entities, or (ii) (x) any statute, law, rule, regulation or ordinance (together, “ laws ”), or any judgment, decree, order, writ, permit or license (together, “ orders ”), of any court, tribunal arbitrator, authority, agency, commission, official or other instrumentality of the Philippines, the United States, or any other country, state, province, city or other political subdivision (a “ Governmental Authority ”) applicable to Sellers, the Company, its Subsidiaries, the Ilijan Entities or any of their respective assets or properties, or (y) except as provided under Section 2.6 of the Senior Secured Credit Facility, any note, bond, mortgage, security agreement, indenture, license, franchise, permit, concession, contract, lease or other agreement of any kind (together, “ Contracts ”) to which any of them is a party or by which any of them or any of their respective assets or properties is bound, excluding from the foregoing clauses (x) and (y) conflicts, violations, breaches, defaults, rights of payment or reimbursement, terminations, cancellations, modifications, accelerations and creations and impositions of Encumbrances that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect; provided , however , that no representation and warranty is made in this Section 2.4(a) with respect to the Energy Conversion Agreements and the matters addressed therein and in Section 5.8 of this Agreement.

(b)                        Except for the Bermuda Monetary Authority Consent, no consent, approval or action of, filing with or notice to any Governmental Authority is necessary or required by Sellers, the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities under any of the terms, conditions or provisions of any law or order of any Governmental Authority for the execution and delivery of this Agreement by Sellers, the performance by Sellers of their respective obligations hereunder or the consummation of the transactions contemplated hereby, other than such consents, approvals, actions, filings and notices which the failure to make or obtain, as the case may be, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect; provided , however , that no representation and warranty is made in this Section 2.4(b ) with respect to the Energy Conversion Agreements and the matters addressed therein and in Section 5.8 of this Agreement.

SECTION 2.5                      Financial Statements .  Sellers have provided to Buyer copies of (a) the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2005, and the related audited consolidated income statement, statement of changes in equity and cash flow statement of the Company and its consolidated Subsidiaries for the year then ended, together with the report thereon of KPMG, independent auditors, and (b) the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at September 30, 2006, and the related consolidated income statement, statement of changes in equity and cash flow statement of the Company and its consolidated Subsidiaries for the nine months then ended (the “ Financial Statements ”).  The Financial Statements have been prepared in accordance with IFRS consistently applied

8

 

throughout the periods covered thereby and fairly present in all material respects the consolidated financial condition , results of operations and cash flow of the Company (except, in the case of the unaudited Financial Statements, for normal and recurring year-end adjustments and for the absence of footnote disclosure) as at December 31, 2005, and September 30, 2006, and for the year and nine months then ended, respectively.

SECTION 2.6                                              Absence of Certain Changes or Events; Absence of Undisclosed Liabilities .

(a)                         Since September 30, 2006, there has not been any change, event or development of which Sellers have knowledge that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect. Buyer agrees that (i) the matters set forth in Section 2.6 (a)(i) of the Seller Disclosure Letter do not constitute a Company Material Adverse Effect , and (ii) absent any material and adverse change, event or development in respect of the matters referenced in Section 2.6 (a)(ii) of the Seller Disclosure Letter occurring after the date hereof, the matters set forth in Section 2.6 (a)(ii) of the Seller Disclosure Letter do not constitute a Company Material Adverse Effect.

(b)                        Since September 30, 2006, neither the Company nor its Subsidiaries has incurred any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except those which (i) are accrued or reserved against in the Financial Statements or reflected in the notes thereto, (ii) would not reasonably be expected to have a Company Material Adverse Effect, (iii) were non-current liabilities categorized as “Deferred Revenue” or “Deferred Tax Liabilities” in accordance with IFRS , (iv) have been or will be discharged or paid in full on or prior to the Closing Date or included in the Working Capital, (v) are of a nature not required to be reflected in the f inancial s tatements of the Company prepared in accordance with IFRS or (vi) are set forth in Section 2.6 of the Seller Disclosure Letter.

SECTION 2.7                                              Legal Proceedings .  Except for tax matters, which are the subject of Section 2.10, employee benefits matters, which are the subject of Section 2.11, and environmental matters, which are the subject of Section 2.13, there are no actions, suits, arbitrations or proceedings (including, without limitation, Governmental Authority investigations or audits), pending or, to the knowledge of Sellers, threatened against Sellers, the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities or any of their assets and properties that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.

SECTION 2.8                                              Permits; Compliance with Laws .

(a)                         The Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities hold all permits, licenses, authorizations, franchises, variances, exemptions, orders and approvals of all Governmental Authorities (other than environmental permits that are the subject of Section 2.13) necessary for the lawful conduct of their respective businesses as currently conducted (the “ Company Permits ”), except for failures to hold such Company Permits that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.  The Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities are in compliance with the terms of the Company Permits, except failures so to comply that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.  Each of t he Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities has not received any

9

 

written notification from any Governmental Authority alleging that it is in material violation of any Company Permit.

(b)                        The Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities are not in violation of or default under any law of any Governmental Authority, except for violations or defaults that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.  This Section 2.8(b) does not relate to tax matters, which are the subject of Section 2.10, employee benefits matters, which are the subject of Section 2.11, or environmental matters, which are the subject of Section 2.13.

SECTION 2.9                                              Energy Conversion Agreements .  Sellers have provided or made available to Buyer true, correct and complete copies by their terms of all Energy Conversion Agreements, including all express written amendments and material waivers thereto.  Each Energy Conversion Agreement is in full force and effect, and is the valid and binding obligation of the Subsidiary of the Company party thereto, in each case except as limited by laws affecting the enforcement of creditors’ rights generally or by general equitable principles.  None of the Subsidiaries or, to the knowledge of Sellers, National Power Corporation (“ NPC ”) is in material breach, which breach has not been waived, under the terms of any such Energy Conversion Agreement, and, to the knowledge of Sellers, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute a material breach thereunder; provided, however, that no representation and warranty is made in this Section 2.9 with respect to the matters addressed in Section 5.8 of this Agreement.

SECTION 2.10                                       Taxes .  Each of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities has timely filed, or has joined in the timely filing of, all Tax Returns required to be filed by it, or requests for extensions to file such Tax Returns have been timely filed or granted and have not expired, except to the extent that such failures to either file or to have extensions granted are not material.  All such Tax Returns of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities are complete and accurate in all material respects.  The Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities have paid all Taxes shown as due on such Tax Returns.  No material deficiencies for any Taxes have been proposed, asserted or assessed against the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities that are not in the reasonable judgment of Sellers in accordance with IFRS adequately reserved for.  No requests for waivers or extensions of the time to assess any Taxes against the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities have been granted or are pending, except for requests with respect to such Taxes that in the reasonable judgment of Sellers in accordance with IFRS have been adequately reserved for in the Financial Statements or are not material.  None of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities has any material liability for the Taxes of any Person (other than Taxes of the Company and its Subsidiaries) (i) under Treasury regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. Each of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.  Further, (i) no Tax Return of the Company, its Subsidiaries and, to the

10

 

knowledge of Sellers, the Ilijan Entities is under audit or examination by any taxing authority, and no written notice of an audit or examination by any taxing authority has been received by the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities, (ii) there are no material Tax sharing agreements to which the Company is a party that will be in effect after the Closing Date, and (iii) none of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities has received a written notice from any Governmental Authority in a jurisdiction in which it does not file a Tax Return stating that it is or may be subject to taxation by that jurisdiction.

SECTION 2.11                                       Employee Benefit Plans .

(a)                         Section 2.11(a) of the Seller Disclosure Letter contains a true and complete list of each material employment, bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit-sharing, pension, or retirement plan, program, agreement or arrangement, and each other employee benefit plan, program, agreement or arrangement, exclusive of any such plan, program, agreement or arrangement maintained exclusively pursuant to and consistent with the requirements of applicable law (all such listed plans, programs, agreements or arrangements collectively, the “ Benefit Plans ”), currently maintained or contributed to or required to be contributed to by the Company or any Subsidiary of the Company, for the benefit of any current or former employee or director of the Company or any Subsidiary of the Company.

(b)                        With respect to each of the Benefit Plans, the Company has made available to Buyer a complete copy of such Benefit Plan (including all material amendments thereto) and, if such Benefit Plan is funded through a trust or any third party funding vehicle, the trust or other funding agreement (including all amendments thereto) and the latest financial statements available with respect to the reporting period ended most recently preceding the date hereof.

(c)                         Except as would not reasonably be expected to have a Company Material Adverse Effect, each Benefit Plan has been operated and administered in all material respects in accordance with its terms and applicable law.

(d)                        Except as would not reasonably be expected to have a Company Material Adverse Effect, there are no pending or, to the knowledge of Sellers, threatened claims by or on behalf of any of the Benefit Plans, by any employee or beneficiary covered under any Benefit Plan or otherwise involving any Benefit Plan (other than routine claims for benefits).

SECTION 2.12                                       Labor Matters .

(a)                         (i) As of the date hereof, n either the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor agreement with any union or labor organization, and (ii) there has been no work stoppage or strike by employees of the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities, except for such work stoppages or strikes, individually or in the aggregate, as would not reasonably be expected to have a Company Material Adverse Effect.

(b)                        To the knowledge of Sellers, none of the Company, its Subsidiaries nor the Ilijan Entities is in violation of any labor laws in any country (or political subdivision thereof) in which they transact business except for such violations, individually or in the aggregate, as would not reasonably be expected to have a Company Material Adverse Effect.

11

 

SECTION 2.13                                       Environmental Matters .  Except as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect:

(a)                         (i) Each of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities is in compliance with all applicable Environmental Laws; and (ii) n either the Company, its Subsidiaries nor, to the knowledge of Sellers, the Ilijan Entities has received any written communication from any person or Governmental Authority that alleges that any of the Company, its Subsidiaries or the Ilijan Entities is not in such compliance with applicable Environmental Laws, except for any such non-compliance that has been settled or otherwise fully resolved.

(b)                        Each of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities has obtained or maintains all permits and governmental authorizations required under applicable Environmental Laws (collectively, the “ Environmental Permits ”) necessary for the conduct of its operations as currently conducted, as applicable, and all such Environmental Permits are valid, in full force and effect, final and non-appealable. W here applicable a renewal application or an application for any new operations has been timely filed and is pending agency approval, and in such case, to the knowledge of Sellers, there are no facts or circumstances that would adversely affect such entity’s ability to obtain such permits in a timely fashion and on terms and conditions not materially inconsistent with those for operations as currently conducted. T he Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities are in compliance with all terms and conditions of the Environmental Permits.

(c)                         There is no Environmental Claim pending:

(i)              against the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities; or

(ii)           against any real or personal property or operations which the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities currently owns, leases or manages, in whole or in part.

(d)                        To the knowledge of Sellers, there have not been any Releases of any Hazardous Material at any real property which the Company, its Subsidiaries or the Ilijan Entities owns or operates, and there are no other facts or circumstances to the Sellers’ knowledge that would be reasonably likely to form the basis of any Environmental Claim against the Company, its Subsidiaries or the Ilijan Entities.

(e)                         As used in this Section 2.13:

“ Environmental Claims ” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or written notices of noncompliance, liability or violation by any person or entity (including, but not limited to, any Governmental Authority) alleging potential liability of the Company, its Subsidiaries or the Ilijan Entities (including, without limitation, potential responsibility or liability for enforcement, investigatory costs, cleanup costs, governmental response costs, removal costs, remedial costs, natural resources damages, property damages, personal injuries or penalties) arising out of, based on or resulting from:

12

 

(i)                                      the presence, or Release or threatened Release into the environment, of any Hazardous Materials at any location, whether or not owned, operated, leased or managed by the Company, its Subsidiaries or the Ilijan Entities, or any other harm or injury to persons, property or the environment from environmental matters associated with operations at any real property which the Company, its Subsidiaries or, to the knowledge of the Sellers, the Ilijan Entities own or operate; or

(ii)                                   circumstances forming the basis of any violation, or alleged violation, of any Environmental Law;

“ Environmental Laws ” means all laws, rules and regulations relating to pollution, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata or rare, threatened or endangered species and critical habitat), or protection of human health as it relates to the Release of Hazardous Materials and other laws and regulations relating to Releases or threatened Releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials;

“ Hazardous Materials ” means (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls; (b) any chemicals, materials or substances which are now defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, or words of similar import, under any Environmental Law; and (c) any other chemical, substance or waste, exposure to which is now prohibited, limited or regulated under any Environmental Law in a jurisdiction in which the Company or any of its Subsidiaries operates or any jurisdiction which has received such chemical, substance or waste from the Company or its Subsidiaries; and

“ Release ” means any release, spill, emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching or migration into the atmosphere, soil, surface water, groundwater or real or tangible property.

(f)                           This Section 2.13, together with the Seller Disclosure Letter, contains the sole and exclusive representations and warranties of Sellers with respect to environmental matters arising under any Environmental Law or relating to Hazardous Materials.

SECTION 2.14                                       Intellectual Property .  The Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities have all right, title and interest in, or a valid and binding license to use, all Intellectual Property, individually or in the aggregate, material to the conduct of their businesses as currently conducted, except for such failures to have right, title, interest or license to use that, individually or in the aggregate, would not be reasonably expected to have a Company Material Adverse Effect.  None of the Company, its

13

 

Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities is in default (or with the giving of notice or lapse of time or both, would be in default) under any license to use such Intellectual Property and, to the knowledge of Sellers, such Intellectual Property is not being infringed by any third party, and none of the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities is infringing any Intellectual Property of any third party, except for such defaults and infringements that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.  For purposes of this Agreement, “ Intellectual Property ” means patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, copyrights and copyright rights and other proprietary intellectual property rights and all pending applications for and registrations of any of the foregoing.

SECTION 2.15                                       Insurance .  Section 2.15 of the Seller Disclosure Letter identifies the material insurance policies under which any of the Company or its Subsidiaries, or their assets or business activities, are covered.  Sellers have made available to Buyer true and correct copies of each insurance policy identified in Section 2.15 of the Seller Disclosure Letter.  Each of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities is insured with financially responsible insurers in such amounts and against such risks and losses as are customary in all material respects for companies conducting the business conducted by the Company, its Subsidiaries, and the Ilijan Entities during such time period.  Neither the Company, any of its Subsidiaries nor, to the knowledge of Sellers, any of the Ilijan Entities has received any written notice of cancellation or termination with respect to any material insurance policy of the Company, its Subsidiaries, or the Ilijan Entities. The material insurance policies of the Company, its Subsidiaries and, to the knowledge of Sellers, the Ilijan Entities are valid and enforceable policies.

SECTION 2.16                                       Real Property .

(a)                         Section 2.16 of the Seller Disclosure Letter lists all material real property leases to which the Company or its Subsidiaries is a party (the “ Leased Real Property ”) and all material real property owned by the Company or its Subsidiaries (the “ Owned Real Property ”).

(b)                        T he Company and its Subsidiaries have valid title to, or a valid leasehold interest in (or have analogous property rights under applicable law), all of the Leased Real Property and Owned Real Property used or owned by such entity , except to the extent such absence of valid title or leasehold right would not materially interfere with or prevent the operation of the Facilities in the ordinary course of business .

(c)                         None of the Company, its Subsidiaries or, to the knowledge of Sellers, the Ilijan Entities has received written notice from any Governmental Authority of any pending or threatened proceeding to condemn or take by power of eminent domain or otherwise all or any material part of the Facilities that would materially interfere with or prevent the operation of the Facilities in the ordinary course of business.

SECTION 2.17                                       Affiliate Contracts .  Section 2.17 of the Seller Disclosure Letter contains a true and complete list of each material agreement or contract between (i) the MAPL Group on one hand, and (ii) Sellers and any affiliate thereof (other than the MAPL Group), on the other (collectively, the “ Affiliate Contracts ”).

14

 

SECTION 2.18                                       Brokers or Finders .  None of Sellers, the Company or its Subsidiaries has entered into any agreement or arrangement entitling any agent, broker, investment banker, financial advisor or other firm or person to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except Credit Suisse Securities (USA) LLC, whose fees and expenses will be paid by Sellers in accordance with Sellers’ agreements with such firm.

SECTION 2.19                                       Performance Undertakings .  Sellers have provided or made available to Buyer true, correct and complete copies of all Performance Undertakings, including all express written amendments thereto.  To the knowledge of Sellers, each Performance Undertaking is in full force and effect and has not been repudiated by the Republic of the Philippines.  To the knowledge of Sellers, the Republic of the Philippines is not in breach of the terms of any such Performance Undertaking, and, to the knowledge of Sellers, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute a breach thereof.

SECTION 2.20                                       Title to Assets .  Except as would not reasonably be expected to have a Company Material Adverse Effect, the Company and its Subsidiaries together own or have the right to use all assets used or held for use in, and necessary and sufficient for, the operation of the Facilities as currently operated.

SECTION 2.21                                       Limitations on Representations and Warranties .  Except for the representations and warranties contained in this Article II, neither Sellers nor any other person or entity acting on behalf of Sellers makes any representation or warranty, express or implied, concerning the Ordinary Shares or the business, finances, operations, assets, liabilities, prospects or any other aspect of the Company, its Subsidiaries and the Ilijan Entities.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers that:

SECTION 3.1                                              Organization .  Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the Cayman Islands.

SECTION 3.2                                              Authority Relative to This Agreement; Enforceability .

(a)                         Buyer has full power and corporate authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Buyer, and no other corporate proceedings on the part of Buyer or its shareholders are necessary to authorize the execution, delivery and performance of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby.

(b)                        This Agreement has been duly and validly executed and delivered by Buyer and, assuming the due authorization, execution and delivery of this

15

 

Agreement by Sellers, constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

SECTION 3.3                                              Non-Contravention; Approvals and Consents .

(a)                         The execution and delivery of this Agreement by Buyer do not, and the performance by Buyer of its obligations hereunder and the consummation of the transactions contemplated hereby will not, conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, result in or give to any person any right of payment or reimbursement, termination, cancellation, modification or acceleration of, or result in the creation or imposition of any Encumbrance upon any of the assets or properties of Buyer or any of its Subsidiaries under any of the terms, conditions or provisions of (i) the Organizational Documents of Buyer or any of its Subsidiaries, or (ii) (x) any laws or orders of any Governmental Authority applicable to Buyer or any of its Subsidiaries or any of their respective assets or properties, or (y) any Contracts to which Buyer or any of its Subsidiaries is a party or by which Buyer or any of its Subsidiaries or any of their respective assets or properties is bound, excluding from the foregoing clauses (x) and (y) conflicts, violations, breaches, defaults, rights of payment or reimbursement, terminations, modifications, accelerations and creations and impositions of Encumbrances that, individually or in the aggregate, would not reasonably be expected to prevent, delay or impair Buyer’s ability to perform its obligations hereunder or consummate the transactions contemplated by this Agreement.

(b)                        Except for the Bermuda Monetary Authority Consent, no consent, approval or action of, filing with or notice to any Governmental Authority is necessary or required under any of the terms, conditions or provisions of any law or order of any Governmental Authority for the execution and delivery of this Agreement by Buyer, the performance of its obligations hereunder or its consummation of the transactions contemplated hereby, other than such consents, approvals, actions, filings and notices which the failure to make or obtain, as the case may be, individually or in the aggregate, would not reasonably be expected to prevent, delay or impair Buyer’s ability to perform its obligations hereunder or consummate the transactions contemplated by this Agreement.

SECTION 3.4                                              Legal Proceedings; Compliance with Laws .

(a)                         T here are no actions, suits, arbitrations or proceedings (including, without limitation, Governmental Authority investigations or audits) pending or, to the knowledge of Buyer, threatened against, relating to or affecting Buyer or any of its Subsidiaries that would prevent, delay or impair Buyer’s ability to perform its obligations hereunder or consummate the transactions contemplated by this Agreement.

(b)                        Buyer is not in violation of or default under any law of any Governmental Authority, except for violations or defaults that, individually or in the aggregate, would not reasonably be expected to prevent, delay or impair Buyer’s ability to perform its obligations hereunder or consummate the transactions contemplated by this Agreement.

16

 

SECTION 3.5                                              Financing .  Buyer has available cash and credit capacity, either through binding and enforceable credit arrangements or borrowing facilities, or executed financing commitments, and will have sufficient cash on or prior to the Closing Date to (a) pay the Purchase Price and any Post-Closing Payment, (b) perform all of its other obligations hereunder, and (c) provide sufficient working capital after the Closing for Buyer and its Subsidiaries, including the Company (such matters under (a), (b) and (c), collectively, the “ Funding Obligations ” and such sufficient cash, the “ Funds ”).  Neither the Company nor any of its Subsidiaries will be required to assume or have any obligation or liability under the financing agreements to be entered into by Buyer to provide the Funds (the “ Financing Agreements ”) prior to the time immediately following the Closing.  Buyer has provided to Sellers a description of the Financing Agreements and a true and complete copy of any related commitment letters and all exhibits, annexes and attachments thereto.  To the extent that this Agreement must be in a form acceptable to any lender providing Funds, such lender or lenders have approved this Agreement.

SECTION 3.6                                              Brokers or Finders .  None of Buyer or its affiliates has entered into any agreement or arrangement entitling any agent, broker, investment banker, financial advisor or other firm or person to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except any such firm whose fees and expenses will be paid by Buyer in accordance with Buyer’s agreements with such firm.

SECTION 3.7                                              Investment Intention; Sufficient Investment Expertise; Independent Investigation .  Buyer is acquiring the Ordinary Shares and the Intercompany Notes for investment and not with a view toward, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the Ordinary Shares or Intercompany Notes.  Buyer is able to bear the economic risk of holding the Ordinary Shares and Intercompany Notes for an indefinite period and has knowledge and experience in financial and business matters such that it is capable of evaluating the risks of the investment in the Ordinary Shares and Intercompany Notes.  Buyer acknowledges that it has completed its own independent investigation, review and analysis of the business, assets, and results of operations, condition (financial or otherwise) of the Company, its Subsidiaries and the Ilijan Entities, as it has deemed appropriate or necessary.  In entering into this Agreement, Buyer acknowledges that it has relied upon its own investigation, review and analysis and not on any factual representations of Sellers or their Representatives (except the specific representations and warranties of Sellers set forth in this Agreement or in any certificate provided by a Seller), and Buyer acknowledges that none of Sellers or any of their directors, officers, shareholders, employees, affiliates, controlling persons, or Representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including materials furnished in the confidential information memorandum, dated August 1, 2006, Sellers’ data room, presentations by the Company’s management and Representatives, financial projections or otherwise) provided or made available to Buyer or its directors, officers, employees, affiliates, controlling persons or Representatives.

17

 

ARTICLE IV

COVENANTS

SECTION 4.1                                              Covenants of Sellers .  After the date hereof and prior to the Closing or earlier termination of this Agreement, except as set forth in Section 4.1 of the Seller Disclosure Letter and except (i) as contemplated in or permitted by this Agreement, (ii) as provided for in the operating budgets or capital budgets (copies of which, in their current form, have been made available to Buyer) for the Company and its Subsidiaries (the “ Company Budget ”), (iii) as may be required to comply with the Energy Conversion Agreements, (iv) in connection with necessary or prudent repairs due to breakdown or casualty, or other actions taken in response to a business emergency or other unforeseen operational matters, (v) as required by applicable law, or (vi) to the extent Buyer shall otherwise consent, which decision regarding consent shall be made promptly and which consent shall not be unreasonably withheld, conditioned or delayed, Sellers shall exercise the voting, governance and contractual powers available to them to cause the Company to, the Company shall and shall cause its Subsidiaries to, and shall, to the extent reasonably possible, exercise the voting, governance and contractual powers available to the Company and its Subsidiaries to cause the Ilijan Entities to (but subject in each case to any contractual, fiduciary or similar obligation of Sellers, the Company, its Subsidiaries or the Ilijan Entities):

(a)                         not amend its Organizational Documents, other than amendments that are ministerial in nature or otherwise immaterial;

(b)                        not (i) split, combine or reclassify their respective capital stock, (ii) redeem, repurchase or otherwise acquire any shares of its capital stock or any Options with respect thereto or (iii) issue, deliver or sell any shares of its capital stock or any Options with respect thereto;

(c)                         not, other than in the ordinary and usual course of business, make any acquisition of, or investment in, assets or stock of any other person or entity in excess of $5,000,000 in the aggregate in any calendar year;

(d)                        not, other than in the ordinary and usual course of business, sell, lease, license, encumber or otherwise dispose of any of its assets in excess of $5,000,000 in the aggregate in any calendar year;

(e)                         not incur any indebtedness other than (i) borrowings in the ordinary course of business, (ii) borrowings under existing credit facilities as such facilities may be amended or replaced, or (iii) in an aggregate amount not to exceed $5,000,000;

(f)                           not, other than in the ordinary and usual course of business or as may be required by applicable law, enter into, amend in any material respect or terminate any material Benefit Plan, increase in any material respect the compensation or fringe benefits of any current or former employee, or pay any benefit not required by any plan or arrangement in effect as of the date hereof to any current or former employee;

(g)                        not make any commitments for or make capital expenditures in the aggregate in excess of 120% of the amount of capital expenditures budgeted in the Company Budget in any calendar year;

18

 

(h)                        not make any material changes in their accounting methods, except as required by law, rule, regulation or IFRS;

(i)                            not adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization (other than the transactions contemplated by this Agreement);

(j)                            maintain insurance with financially responsible or internationally recognized insurers in such amounts and against such risks and losses as are consistent with existing market conditions and the insurance maintained in respect of similar power generation facilities ;

(k)                         use commercially reasonable efforts to cause the satisfaction of the condition set forth in Section 6.2(d) and not permit Mirant Sual to enter into any material and adverse amendment or supplement to, or make any material and adver