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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 10-Q


ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                 

COMMISSION FILE NUMBER 001-34691

ATLANTIC POWER CORPORATION
(Exact name of registrant as specified in its charter)

British Columbia, Canada
(State or other jurisdiction of
incorporation or organization)
  55-0886410
(I.R.S. Employer
Identification No.)

One Federal Street, 30 th  Floor
Boston, MA

(Address of principal executive offices)

 

02110
(Zip code)

(617) 977-2400
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý     No  o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ý   Accelerated filer  o   Non-accelerated filer  o
(Do not check if a
smaller reporting company)
  Smaller reporting company  o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  ý

        The number of shares outstanding of the registrant's Common Stock as of May 6, 2013 was 119,817,192.

   


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ATLANTIC POWER CORPORATION

FORM 10-Q

THREE MONTHS ENDED MARCH 31, 2013

Index

 

General:

  3

 

PART I—FINANCIAL INFORMATION

  4

ITEM 1.

 

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

  4

 

Consolidated Balance Sheets as of March 31, 2013 (unaudited) and
December 31, 2012

  4

 

Consolidated Statements of Operations for the three month periods ended March 31, 2013 and March 31, 2012 (unaudited)

  5

 

Consolidated Statements of Comprehensive Income (Loss) for the three month periods ended March 31, 2013 and March 31, 2012 (unaudited)

  6

 

Consolidated Statements of Cash Flows for the three month periods ended March 31, 2013 and March 31, 2012 (unaudited)

  7

 

Notes to Consolidated Financial Statements (unaudited)

  8

ITEM 2.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  38

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  58

ITEM 4.

 

CONTROLS AND PROCEDURES

  61

 

PART II—OTHER INFORMATION

  62

ITEM 1.

 

LEGAL PROCEEDINGS

  62

ITEM 1A.

 

RISK FACTORS

  63

ITEM 6.

 

EXHIBITS

  65

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GENERAL

        In this Quarterly Report on Form 10-Q, references to "Cdn$" and "Canadian dollars" are to the lawful currency of Canada and references to "$" and "US$" and "U.S. dollars" are to the lawful currency of the United States. All dollar amounts herein are in U.S. dollars, unless otherwise indicated.

        Unless otherwise stated, or the context otherwise requires, references in this Quarterly Report on Form 10-Q to "we," "us," "our," "Atlantic Power" and the "Company" refer to Atlantic Power Corporation, those entities owned or controlled by Atlantic Power Corporation and predecessors of Atlantic Power Corporation.

3


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PART I—FINANCIAL INFORMATION

        

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

        


ATLANTIC POWER CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions of U.S. dollars)

 
  March 31,
2013
  December 31,
2012
 
 
  (unaudited)
   
 

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 85.7   $ 60.2  

Restricted cash

    43.5     28.6  

Accounts receivable

    78.4     58.5  

Current portion of derivative instruments asset (Notes 5 and 6)

    9.0     9.5  

Inventory

    20.0     16.9  

Prepayments and other current assets

    16.5     13.4  

Security deposits

    1.2     19.0  

Assets held for sale (Note 10)

    346.8     351.4  

Refundable income taxes

    3.6     4.2  
           

Total current assets

    604.7     561.7  

Property, plant, and equipment, net of accumulated depreciation of $104.2 million and $79.2 million at March 31, 2013 and December 31, 2012, respectively

   
2,020.0
   
2,055.5
 

Equity investments in unconsolidated affiliates

    411.1     428.7  

Other intangible assets, net of accumulated amortization of $92.3 million and $76.9 million at March 31, 2013 and December 31, 2012, respectively

    505.7     524.9  

Goodwill

    334.7     334.7  

Derivative instruments asset (Notes 5 and 6)

    5.8     11.1  

Other assets

    57.4     86.1  
           

Total assets

  $ 3,939.4   $ 4,002.7  
           

Liabilities

             

Current liabilities:

             

Accounts payable

  $ 14.4   $ 17.8  

Accrued interest

    30.0     19.0  

Other accrued liabilities

    43.0     73.7  

Revolving credit facility (Note 4)

    64.1     67.0  

Current portion of long-term debt (Note 4)

    121.7     121.2  

Current portion of derivative instruments liability (Notes 5 and 6)

    25.9     33.0  

Dividends payable

    3.9     11.5  

Liabilities associated with assets held for sale (Note 10)

    205.3     189.0  

Other current liabilities

    1.8     3.3  
           

Total current liabilities

    510.1     535.5  

Long-term debt (Note 4)

   
1,474.1
   
1,459.1
 

Convertible debentures

    418.2     424.2  

Derivative instruments liability (Notes 5 and 6)

    110.2     118.1  

Deferred income taxes

    159.1     164.0  

Power purchase and fuel supply agreement liabilities, net of accumulated amortization of $5.4 million and $4.4 million at March 31, 2013 and December 31, 2012, respectively

    42.5     44.0  

Other non-current liabilities

    70.0     71.4  

Commitments and contingencies (Note 13)

         
           

Total liabilities

    2,784.2     2,816.3  

Equity

             

Common shares, no par value, unlimited authorized shares; 119,783,366 and 119,446,865 issued and outstanding at March 31, 2013 and December 31, 2012, respectively (Note 11)

    1,285.3     1,285.5  

Preferred shares issued by a subsidiary company (Note 11)

    221.3     221.3  

Accumulated other comprehensive income (loss)

    (2.4 )   9.4  

Retained deficit

    (583.5 )   (565.2 )
           

Total Atlantic Power Corporation shareholders' equity

    920.7     951.0  

Noncontrolling interests (Note 11)

    234.5     235.4  
           

Total equity

    1,155.2     1,186.4  
           

Total liabilities and equity

  $ 3,939.4   $ 4,002.7  
           

See accompanying notes to consolidated financial statements.

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ATLANTIC POWER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions of U.S. dollars, except per share amounts)

(Unaudited)

 
  Three months ended
March 31,
 
 
  2013   2012  

Project revenue:

             

Energy sales

  $ 69.0   $ 60.0  

Energy capacity revenue

    44.8     37.0  

Other

    26.4     21.7  
           

    140.2     118.7  

Project expenses:

             

Fuel

    49.6     46.2  

Operations and maintenance

    28.3     24.7  

Development

    1.7      

Depreciation and amortization

    41.3     26.5  
           

    120.9     97.4  

Project other income (expense):

             

Change in fair value of derivative instruments (Notes 5 and 6)

    12.6     (57.2 )

Equity in earnings of unconsolidated affiliates (Note 3)

    7.2     2.9  

Interest, net

    (8.0 )   (4.0 )
           

    11.8     (58.3 )
           

Project income (loss)

    31.1     (37.0 )

Administrative and other expenses (income):

             

Administration

    8.3     7.7  

Interest, net

    25.9     22.0  

Foreign exchange loss (gain) (Note 6)

    (7.5 )   1.0  
           

    26.7     30.7  
           

Income (loss) from continuing operations before income taxes

    4.4     (67.7 )

Income tax benefit (Note 7)

    (2.5 )   (16.9 )
           

Income (loss) from continuing operations

    6.9     (50.8 )

Income from discontinued operations, net of tax (Note 10)

    0.9     11.6  
           

Net income (loss)

    7.8     (39.2 )

Net loss attributable to noncontrolling interests

    (1.9 )   (0.1 )

Net income attributable to preferred shares dividends of a subsidiary company

    3.2     3.2  
           

Net income (loss) attributable to Atlantic Power Corporation

  $ 6.5   $ (42.3 )
           

Basic earnings (loss) per share: (Note 9)

             

Income (loss) from continuing operations attributable to Atlantic Power Corporation

  $ 0.04   $ (0.47 )

Income from discontinued operations, net of tax

    0.01     0.10  
           

Net income (loss) attributable to Atlantic Power Corporation

  $ 0.05   $ (0.37 )

Diluted earnings (loss) per share: (Note 9)

             

Income (loss) from continuing operations attributable to Atlantic Power Corporation

  $ 0.04   $ (0.47 )

Income from discontinued operations, net of tax

    0.01     0.10  
           

Net income (loss) attributable to Atlantic Power Corporation

  $ 0.05   $ (0.37 )

Weighted average number of common shares outstanding: (Note 9)

             

Basic

    119.5     113.6  

Diluted

    119.9     113.6  

   

See accompanying notes to consolidated financial statements.

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ATLANTIC POWER CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions of U.S. dollars)

(Unaudited)

 
  Three months ended
March 31,
 
 
  2013   2012  

Net income (loss)

  $ 7.8   $ (39.2 )

Other comprehensive income (loss), net of tax:

             

Net amount reclassified to earnings

    0.3     0.3  
           

Net unrealized losses on derivatives

    0.3     0.3  

Foreign currency translation adjustments

   
(12.1

)
 
17.2
 
           

Other comprehensive (loss) income, net of tax

    (11.8 )   17.5  
           

Comprehensive loss

    (4.0 )   (21.7 )
           

Less: Comprehensive income attributable to noncontrolling interests

    1.3     3.1  
           

Comprehensive loss attributable to Atlantic Power Corporation

  $ (5.3 ) $ (24.8 )
           

   

See accompanying notes to consolidated financial statements.

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ATLANTIC POWER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions of U.S. dollars)

(Unaudited)

 
  Three months ended
March 31,
 
 
  2013   2012  

Cash flows from operating activities:

             

Net income (loss)

  $ 7.8   $ (39.2 )

Adjustments to reconcile to net cash provided by operating activities:

             

Depreciation and amortization

    49.1     36.5  

Reserve related to sale of discontinued operations

    27.5      

Long-term incentive plan expense

    0.3     1.1  

Equity in earnings from unconsolidated affiliates

    (7.2 )   (2.9 )

Distributions from unconsolidated affiliates

    8.9     0.3  

Unrealized foreign exchange (gain) loss

    (5.0 )   12.9  

Change in fair value of derivative instruments

    (21.1 )   58.1  

Change in deferred income taxes

    (4.1 )   (17.7 )

Change in other operating balances

             

Accounts receivable

    (4.6 )   19.5  

Inventory

    0.9     0.8  

Prepayments, refundable income taxes and other assets

    39.7     (14.9 )

Accounts payable

    (8.0 )   6.6  

Accruals and other liabilities

    (10.0 )   5.5  
           

Cash provided by operating activities

    74.2     66.6  

Cash flows used in investing activities:

             

Change in restricted cash

    (18.7 )   (6.4 )

Biomass development costs

        (0.1 )

Construction in progress

    (9.7 )   (163.5 )

Purchase of property, plant and equipment

    (2.2 )   (0.7 )
           

Cash used in investing activities

    (30.6 )   (170.7 )

Cash flows (used in) provided by financing activities:

             

Proceeds from project-level debt

    20.8     184.2  

Repayment of project-level debt

    (2.6 )   (2.7 )

Offering costs related to tax equity

    (0.6 )    

Payments for revolving credit facility borrowings

    (2.9 )   (8.0 )

Proceeds from revolving credit facility borrowings

        22.8  

Equity contribution from noncontrolling interest

    2.0      

Deferred financing costs

        (10.2 )

Dividends paid

    (36.3 )   (36.0 )
           

Cash (used in) provided by financing activities

    (19.6 )   150.1  

Net increase in cash and cash equivalents

   
24.0
   
46.0
 

Less cash at discontinued operations

    (5.0 )    

Cash and cash equivalents at beginning of period at discontinued operations

    6.5      

Cash and cash equivalents at beginning of period

    60.2     60.6  
           

Cash and cash equivalents at end of period

  $ 85.7   $ 106.6  
           

Supplemental cash flow information

             

Interest paid

  $ 17.1   $ 18.0  

Income taxes paid, net

  $ 1.4   $ 0.6  

Accruals for construction in progress

  $ 1.6   $ 3.7  

   

See accompanying notes to consolidated financial statements.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of presentation and summary of significant accounting policies

General

        Atlantic Power owns and operates a diverse fleet of power generation and infrastructure assets in the United States and Canada. Our power generation projects sell electricity to utilities and other large commercial customers largely under long-term power purchase agreements ("PPAs"), which seek to minimize exposure to changes in commodity prices. As of March 31, 2013, our power generation projects in operation had an aggregate gross electric generation capacity of approximately 2,965 megawatts ("MW") in which our aggregate ownership interest is approximately 2,046 MW. These totals exclude Auburndale Power Partners, L.P. ("Auburndale"), Lake CoGen, Ltd. ("Lake") and Pasco CoGen, Ltd. ("Pasco") projects (collectively, the "Florida Projects") and the Path 15 transmission line, including Atlantic Path 15 Transmission, LLC, Atlantic Holdings Path 15, LLC and Atlantic Path 15, LLC (collectively, "Path 15"), each of which are designated as held for sale at March 31, 2013, our 17.1% interest in Gregory Power Partners, L.P. ("Gregory") for which we entered into an agreement to sell in April 2013, and our 40% interest in the Delta-Person generating station ("Delta-Person") for which we entered into an agreement to sell in December 2012. Our current portfolio of continuing operations consists of interests in twenty-eight operational power generation projects across ten states in the United States and two provinces in Canada. In addition, we have one 53 MW biomass project in Georgia, which achieved commercial operations in April 2013. In December 2012, we acquired a wind and solar development company, Ridgeline Energy Holdings, Inc. ("Ridgeline"), located in Seattle, Washington, which has enhanced our ability to develop, construct, and operate wind and solar energy projects across the United States and Canada. We also own a majority interest in Rollcast Energy Inc. ("Rollcast"), a biomass power plant developer in North Carolina. Twenty-three of our projects are wholly owned subsidiaries.

        Atlantic Power is a corporation established under the laws of the Province of Ontario, Canada on June 18, 2004 and continued to the Province of British Columbia on July 8, 2005. Our shares trade on the Toronto Stock Exchange under the symbol "ATP" and on the New York Stock Exchange under the symbol "AT." Our registered office is located at 355 Burrard Street, Suite 1900, Vancouver, British Columbia V6C 2G8 Canada and our headquarters is located at One Federal Street, 30 th  Floor, Boston, Massachusetts 02110, USA. Our telephone number in Boston is (617) 977-2400 and the address of our website is www.atlanticpower.com. Information contained on Atlantic Power's website or that can be accessed through its website is not incorporated into and does not constitute a part of this Quarterly Report on Form 10-Q. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website. We make available, free of charge, on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission ("SEC"). Additionally, we make available on our website our Canadian securities filings, which are not incorporated by reference into our Exchange Act filings.

        The interim consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with the SEC regulations for interim financial information and with the instructions to Form 10-Q. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012. Interim results are not necessarily indicative of results for the full year.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

1. Basis of presentation and summary of significant accounting policies (Continued)

        In our opinion, the accompanying unaudited interim consolidated financial statements present fairly our consolidated financial position as of March 31, 2013, the results of operations, comprehensive income and our cash flows for the three month periods ended March 31, 2013 and 2012. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included.

Use of estimates

        The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. During the periods presented, we have made a number of estimates and valuation assumptions, including the fair values of acquired assets, the useful lives and recoverability of property, plant and equipment, intangible assets and liabilities related to PPAs and fuel supply agreements, the recoverability of equity investments, the recoverability of deferred tax assets, tax provisions, the valuation of shares associated with our Long-Term Incentive Plan ("LTIP") and the fair value of financial instruments and derivatives. In addition, estimates are used to test long-lived assets and goodwill for impairment and to determine the fair value of impaired assets. These estimates and valuation assumptions are based on present conditions and our planned course of action, as well as assumptions about future business and economic conditions. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2012. As better information becomes available or actual amounts are determinable, the recorded estimates are revised. Should the underlying valuation assumptions and estimates change, the recorded amounts could change by a material amount.

Recently issued accounting standards

Adopted

        In July 2012, the Financial Accounting Standards Board ("FASB") issued changes to the testing of indefinite-lived intangible assets for impairment, similar to the goodwill changes issued in September 2011. These changes provide an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the fair value of an indefinite-lived intangible asset is less than its carrying amount. Such qualitative factors may include the following: macroeconomic conditions; industry and market considerations; cost factors; overall financial performance; and other relevant entity-specific events. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the existing two-step quantitative impairment test, otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the two-step quantitative impairment test. These changes became effective for us for any indefinite-lived intangible asset impairment test performed on January 1, 2013 or later. The adoption of these changes did not impact the consolidated financial statements.

        In December 2011, the FASB issued changes to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

1. Basis of presentation and summary of significant accounting policies (Continued)

and transactions subject to an agreement similar to a master netting arrangement. The enhanced disclosures will enable users of an entity's financial statements to understand and evaluate the effect or potential effect of master netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. These changes became effective for us on January 1, 2013. Other than the additional disclosure requirements, the adoption of these changes did not impact the consolidated financial statements.

        On January 1, 2012, we adopted changes issued by the FASB to conform existing guidance regarding fair value measurement and disclosure between U.S generally accepted accounting principles ("GAAP") and International Financial Reporting Standards. These changes both clarify the FASB's intent about the application of existing fair value measurement and disclosure requirements and amend certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity's shareholders' equity, and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity's use of a nonfinancial asset in a way that differs from the asset's highest and best use, and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only. The adoption of these changes had no impact on the consolidated financial statements.

        On January 1, 2012, we adopted changes issued by the FASB to the presentation of comprehensive income. These changes give an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the option to present components of other comprehensive income as part of the statement of changes in shareholders' equity was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. We elected to present the two-statement option. Other than the change in presentation, the adoption of these changes had no impact on the consolidated financial statements.

Issued

        In February 2013, the FASB issued changes to the accounting for obligations resulting from joint and several liability arrangements. These changes require an entity to measure such obligations for which the total amount of the obligation is fixed at the reporting date as the sum of (i) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and (ii) any additional amount the reporting entity expects to pay on behalf of its co-obligors. An entity will also be required to disclose the nature and amount of the obligation as well as other information about those obligations. Examples of obligations subject to these requirements are debt arrangements and settled litigation and judicial rulings. These changes become effective for us on January 1, 2014. We have

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

1. Basis of presentation and summary of significant accounting policies (Continued)

determined that the adoption of these changes will not have an impact on the consolidated financial statements.

        In March 2013, the FASB issued changes to a parent entity's accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. A parent entity is required to release any related cumulative foreign currency translation adjustment from accumulated other comprehensive income into net income in the following circumstances: (i) a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided; (ii) a partial sale of an equity method investment that is a foreign entity; (iii) a partial sale of an equity method investment that is not a foreign entity whereby the partial sale represents a complete or substantially complete liquidation of the foreign entity that held the equity method investment; and (iv) the sale of an investment in a foreign entity. These changes become effective for us on January 1, 2014. We have determined that the adoption of these changes will not have an impact on the consolidated financial statements.

2. Acquisitions and divestments

2012 Acquisitions

(a)
Canadian Hills

        On January 31, 2012, Atlantic Oklahoma Wind, LLC ("Atlantic OW"), a Delaware limited liability company and our wholly owned subsidiary, entered into a purchase and sale agreement with Apex Wind Energy Holdings, LLC, a Delaware limited liability company ("Apex"), pursuant to which Atlantic OW acquired a 51% interest in Canadian Hills Wind, LLC, an Oklahoma limited liability company ("Canadian Hills") for a nominal sum. Canadian Hills is the owner of a 300 MW wind energy project in the state of Oklahoma.

        On March 30, 2012, we completed the purchase of an additional 48% interest in Canadian Hills for a nominal amount, bringing our total interest in the project to 99%. Apex retained a 1% interest in the project. We also closed a $310 million non-recourse, project-level construction financing facility for the project, which included a $290 million construction loan and a $20 million 5-year letter of credit facility. In July 2012 we funded approximately $190 million of our equity contribution (net of financing costs). In December 2012, the project received tax equity investments in aggregate of $225 million from a consortium of four institutional tax equity investors along with an approximately $44 million tax equity investment of our own. On May 2, 2013, we sold our tax equity ownership in Canadian Hills to an institutional investor and received net cash proceeds of $42.1 million. The cash proceeds will be held for general corporate purposes and to invest in future accretive growth opportunities. The project's outstanding construction loan was repaid by the proceeds from these tax equity investors, decreasing the project's short-term debt by $265 million as of December 31, 2012. Canadian Hills has no debt at March 31, 2013.

        The acquisition of Canadian Hills was accounted for as an asset purchase and is consolidated in our consolidated balance sheets at March 31, 2013 and December 31, 2012. We own 99% of the project and consolidate it in our consolidated financial statements. Income attributable to the tax equity investors is classified as noncontrolling interests and is allocated utilizing the hypothetical liquidation book value method ("HLBV").

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2. Acquisitions and divestments (Continued)

2013 Divestments

(a)
Gregory

        On April 2, 2013 we and the other owners of Gregory, entered into a purchase and sale agreement with an affiliate of NRG Energy, Inc. to sell the project for approximately $272.8 million including working capital adjustments. We expect to receive net cash proceeds for our ownership interest of approximately $33.7 million in the aggregate, after repayment of project-level debt and transaction expenses. We intend to use the net proceeds from the sale for general corporate purposes and to invest in future accretive growth opportunities. We expect the sale of Gregory to close in the third quarter of 2013.

(b)
Auburndale, Lake and Pasco

        On January 30, 2013, we entered into a purchase and sale agreement for the sale of our Florida Projects for approximately $140 million, with working capital adjustments. The sale closed on April 12, 2013 and we received net cash proceeds of approximately $117 million in the aggregate, after repayment of project-level debt at Auburndale and settlement of all outstanding natural gas swap agreements at Lake and Auburndale. This includes approximately $92 million received at closing and cash distributions from the Florida Projects of approximately $25 million received since January 1, 2013. We used a portion of the net proceeds from the sale to fully repay our senior credit facility, which had an outstanding balance of approximately $64.1 million on the closing date. The Florida Projects are accounted for as assets held for sale in the consolidated balance sheets at March 31, 2013 and December 31, 2012 and as a component of discontinued operations in the consolidated statements of operations for the three months ended March 31, 2013 and 2012. See Note 10, Assets held for sale , for further information.

(c)
Path 15

        On March 11, 2013 we entered into a purchase and sale agreement with Duke-American Transmission Company, a joint venture between Duke Energy Corporation and American Transmission Co., to sell our interests in Path 15. The sale closed on April 30, 2013 and we received net cash proceeds from the sale, including working capital adjustments, of approximately $52 million, plus a management agreement termination fee of $4.0 million, for a total sale price of approximately $56 million. The cash proceeds will be held for general corporate purposes and to invest in future accretive growth opportunities. In April 2013, we recorded a gain on sale of approximately $7.0 million. All project level debt issued by Path 15, totaling $137.2 million as of March 31, 2013, transferred with the sale. Path 15 is accounted for as an asset held for sale in the consolidated balance sheets at March 31, 2013 and December 31, 2012 and as a component of discontinued operations in the consolidated statements of operations for the three months ended March 31, 2013 and 2012. See Note 10, Assets held for sale , for further information.

2012 Divestments

(d)
Primary Energy Recycling Corporation

        On February 16, 2012, we entered into an agreement with Primary Energy Recycling Corporation ("Primary Energy" or "PERC"), whereby PERC agreed to purchase our 7,462,830.33 common membership interests in Primary Energy Recycling Holdings, LLC ("PERH") (14.3% of PERH total interests) for approximately $24.2 million, plus a management agreement termination fee of approximately $6.0 million, for a total sale price of $30.2 million. The transaction closed in May 2012 and we recorded a $0.6 million gain on sale of our equity investment.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3. Equity method investments

        The following summarizes the operating results for the three months ended March 31, 2013 and 2012, respectively, for earnings in our equity method investments:

 
  Three months ended
March 31,
 
(in millions)
  2013   2012  

Project revenue

             

Chambers

  $ 13.2   $ 13.2  

Other

    39.4     40.1  
           

    52.6     53.3  

Project expenses

             

Chambers

    9.6     9.8  

Other

    33.7     35.7  
           

    43.3     45.5  

Project other expenses

             

Chambers

    (0.6 )   (1.2 )

Other

    (1.5 )   (3.7 )
           

    (2.1 )   (4.9 )

Project income

             

Chambers

    3.0     2.2  

Other

    4.2     0.7  
           

    7.2     2.9  

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. Long-term debt

        Long-term debt consists of the following:

(in millions)
  March 31,
2013
  December 31,
2012
  Interest Rate

Recourse Debt:

               

Senior unsecured notes, due 2018

  $ 460.0   $ 460.0   9.0%

Senior unsecured notes, due June 2036 (Cdn$210.0)

    206.7     211.1   6.0%

Senior unsecured notes, due July 2014

    190.0     190.0   5.9%

Series A senior unsecured notes, due August 2015

    150.0     150.0   5.9%

Series B senior unsecured notes, due August 2017

    75.0     75.0   6.0%

Non-Recourse Debt:

               

Epsilon Power Partners term facility, due 2019

    32.7     33.5   7.4%

Cadillac term loan, due 2025

    37.2     37.8   6.0% – 8.0%

Piedmont construction loan, due 2013

    127.6 (1)   127.4   Libor plus 3.5%

Meadow Creek term loan, due 2030

    229.3 (2)   208.7   1.3% – 5.1%

Rockland term loan, due 2031

    86.5     86.5   6.4%

Other long-term debt

    0.8     0.3   5.5% – 6.7%

Less current maturities

    (121.7 )   (121.2 )  
             

Total long-term debt

  $ 1,474.1   $ 1,459.1    
             

        Current maturities consist of the following:

 
  March 31,
2013
  December 31,
2012
  Interest Rate

Current Maturities:

               

Epsilon Power Partners term facility, due 2019

  $ 3.5   $ 3.0   7.4%

Cadillac term loan, due 2025

    2.3     2.4   6.0% – 8.0%

Piedmont construction loan, due 2013

    55.1 (1)   55.1   Libor plus 3.5%

Meadow Creek term loan, due 2013

    59.5 (2)   59.5   1.3% – 5.1%

Rockland term loan, due 2031

    1.2     1.2   6.4%

Other current maturities

    0.1       5.5% – 6.7%
             

Total current maturities

  $ 121.7   $ 121.2    
             

(1)
The terms of the Piedmont project-level debt financing include a $51.0 million bridge loan, a portion of which we expect to repay with the proceeds from the stimulus grant expected to be received from the U.S. Treasury, and an $82.0 million construction loan that we expect to convert to a term loan. While we fully expect the construction loan to convert to a term loan in second quarter 2013 based on the project meeting specified milestone requirements, if it does not, we have the option of amending or refinancing the construction loan or infusing additional equity into the project. On April 19, 2013, Piedmont achieved commercial operations and expects to submit an application under the 1603 federal grant program within 60 days from this date to recover approximately 30% of its capital cost, subject to the potential impact of the federal sequester on spending which we estimate to be an approximate $2.0 million shortfall. The $51.0 million bridge loan is expected to be repaid by end of third quarter of 2013 and repayment of the expected $82.0 million term loan would commence in 2013.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. Long-term debt (Continued)

(2)
Meadow Creek debt consists of $172.8 million drawn on a construction loan which converted to a term loan in March 2013 and a $56.5 million cash grant loan. The cash grant loan was repaid in April 2013 with $49.0 million of proceeds from the 1603 grant with the U.S. Treasury, $4.7 million from the former owners to cover the shortfall resulting from the federal sequester on spending and a $2.8 million contribution from us to cover the shortfall from lower grant-eligible costs, primarily as a result of lower project cost versus budget.

    Non-Recourse Debt

        Project-level debt of our consolidated projects is secured by the respective project and its contracts with no other recourse to us. Project-level debt generally amortizes during the term of the respective revenue generating contracts of the projects. The loans have certain financial covenants that must be met. At March 31, 2013, Delta-Person and Gregory had not achieved the levels of debt service coverage ratios required by the project-level debt arrangements as a condition to make distributions and were therefore restricted from making distributions to us. None of these covenant failures create an event of default or result in the non-recourse debt being callable at March 31, 2013.

    Senior Credit Facility

        We have a senior credit facility of $300.0 million on a senior secured basis (the "senior credit facility"), $200.0 million of which may be utilized for letters of credit. Borrowings under the facility are available in U.S. dollars and Canadian dollars and bear interest at a variable rate equal to the U.S. Prime Rate, the London Interbank Offered Rate or the Canadian Prime Rate, as applicable, plus an applicable margin of between 0.8% and 3.0% that varies based on our corporate credit rating. The senior credit facility matures on November 4, 2015.

        On November 2, 2012, we amended the senior credit facility in order to change certain financial and leverage ratio covenants. These changes involved the better accommodation of construction stage projects with no historical financial performance, the better accommodation of the possibility of certain asset sales, including our Florida Projects, by waiving a material disposition covenant and permitting inclusion of the disposed assets' trailing twelve months EBITDA for covenant calculations, and the better accommodation of the same possible asset sales by temporarily modifying the Total Leverage Ratio. See Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012 for further information.

        At March 31, 2013, $64.1 million has been drawn under the senior credit facility and the applicable margin was 2.8%. The balance was repaid in full on April 15, 2013 with a portion of the proceeds from the sale of the Florida Projects. As of March 31, 2013, $111.6 million was issued in letters of credit, but not drawn, to support contractual credit requirements at several of our projects. On April 30, 2013, letters of credit issued, but not drawn, were reduced to $82.5 million resulting from the sale of the Florida Projects and Path 15.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. Fair value of financial instruments

        The following represents the recurring measurements of fair value hierarchy of our financial assets and liabilities that were recognized at fair value as of March 31, 2013 and December 31, 2012. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

 
  March 31, 2013  
(in millions)
  Level 1   Level 2   Level 3   Total  

Assets:

                         

Cash and cash equivalents

  $ 85.7   $   $   $ 85.7  

Restricted cash

    43.5             43.5  

Derivative instruments asset

        14.8         14.8  
                   

Total

  $ 129.2   $ 14.8   $   $ 144.0  
                   

Liabilities:

                         

Derivative instruments liability

  $   $ 136.1   $   $ 136.1  
                   

Total

  $   $ 136.1   $   $ 136.1  
                   

 

 
  December 31, 2012  
 
  Level 1   Level 2   Level 3   Total  

Assets:

                         

Cash and cash equivalents

  $ 60.2   $   $   $ 60.2  

Restricted cash

    28.6             28.6  

Derivative instruments asset

        20.6         20.6  
                   

Total

  $ 88.8   $ 20.6   $   $ 109.4  
                   

Liabilities:

                         

Derivative instruments liability

  $   $ 151.1   $   $ 151.1  
                   

Total

  $   $ 151.1   $   $ 151.1  
                   

        The carrying amounts for cash and cash equivalents and restricted cash approximate fair value due to their short-term nature.

        The fair values of our derivative instruments are based upon trades in liquid markets. Valuation model inputs can generally be verified and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 2 of the fair value hierarchy. We use our best estimates to determine the fair value of commodity and derivative contracts we hold. These estimates consider various factors including closing exchange prices, time value, volatility factors and credit exposure. The fair value of each contract is discounted using a risk free interest rate.

        We also adjust the fair value of financial assets and liabilities to reflect credit risk, which is calculated based on our credit rating and the credit rating of our counterparties. As of March 31, 2013, the credit valuation adjustments resulted in a $16.7 million net increase in fair value, which consists of

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. Fair value of financial instruments (Continued)

a $0.9 million pre-tax gain in other comprehensive income and a $15.8 million gain in change in fair value of derivative instruments. As of December 31, 2012, the credit valuation adjustments resulted in an $18.4 million net increase in fair value, which consists of a $1.1 million pre-tax gain in other comprehensive income and a $13.8 million gain in change in fair value of derivative instruments, offset by a $3.6 million related to interest rate swaps assumed in the acquisition of Ridgeline.

6. Derivative instruments and hedging activities

        We recognize all derivative instruments on the balance sheet as either assets or liabilities and measure them at fair value each reporting period. For certain contracts designated as cash flow hedges, we defer the effective portion of the change in fair value of the derivatives in accumulated other comprehensive income (loss), until the hedged transactions occur and are recognized in earnings. The ineffective portion of a cash flow hedge is immediately recognized in earnings.

        For derivatives that are not designated as cash flow hedges, the changes in the fair value are immediately recognized in earnings. The guidelines apply to our natural gas swaps, interest rate swaps, and foreign exchange contracts.

    Gas purchase agreements

        On March 12, 2012, we discontinued the application of the normal purchase normal sales ("NPNS") exemption on gas purchase agreements at our North Bay, Kapuskasing and Nipigon projects. On that date, we entered into an agreement with a third party that resulted in the gas purchase agreements no longer qualifying for the NPNS exemption. The agreements at North Bay and Kapuskasing expire on December 31, 2016. These gas purchase agreements are derivative financial instruments and are recorded in the consolidated balance sheets at fair value and the changes in their fair market value are recorded in the consolidated statements of operations.

        In May 2012, the Nipigon project entered into a long-term contract for the purchase of natural gas beginning on January 1, 2013 and expiring on December 31, 2022. This contract is accounted for as a derivative financial instrument and is recorded in the consolidated balance sheet at fair value at December 31, 2012. Changes in the fair market value of the contract are recorded in the consolidated statements of operations.

    Natural gas swaps

        Our strategy to mitigate a portion of the future exposure to changes in natural gas prices at our projects consists of periodically entering into financial swaps that effectively fix the price of natural gas expected to be purchased at these projects. These natural gas swaps are derivative financial instruments and are recorded in the consolidated balance sheets at fair value and the changes in their fair market value are recorded in the consolidated statements of operations.

        The operating margin at our 50% owned Orlando project is exposed to changes in natural gas prices following the expiration of its fuel contract at the end of 2013. We have entered into natural gas swaps to effectively fix the price of 3.2 million Mmbtu of future natural gas purchases, or approximately

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Derivative instruments and hedging activities (Continued)

64% of our share of the expected natural gas purchases at the project during 2014 and 2015. We also entered into natural gas swaps to effectively fix the price of 1.3 million Mmbtu of future natural gas purchases representing approximately 25% of our share of the expected natural gas purchases at the project during 2016 and 2017.

    Interest rate swaps

        Cadillac Renewable Energy, LLC ("Cadillac") has an interest rate swap agreement that effectively fixes the interest rate at 6.0% from February 16, 2011 to February 15, 2015, 6.1% from February 16, 2015 to February 15, 2019, 6.3% from February 16, 2019 to February 15, 2023, and 6.4% thereafter. The notional amount of the interest rate swap agreement matches the outstanding principal balance over the remaining life of Cadillac's debt. This swap agreement, which qualifies for and is designated as a cash flow hedge, is effective through June 2025 and the effective portion of the changes in the fair market value is recorded in accumulated other comprehensive income (loss).

        The Piedmont Green Power project ("Piedmont") has interest rate swap agreements to economically fix its exposure to changes in interest rates related to its variable-rate debt. The interest rate swap agreement effectively converts the floating rate debt to a fixed interest rate of 1.7% plus an applicable margin ranging from 3.5% to 3.8% through February 29, 2016. From February 2016 until November 2017, the fixed rate of the swap is 4.5% and the applicable margin is 4.0%, resulting in an all-in rate of 8.5%. The swap continues at the fixed rate of 4.5% from the maturity of the debt in November 2017 until November 2030. The notional amounts of the interest rate swap agreements match the estimated outstanding principal balance of Piedmont's cash grant bridge loan and the construction loan facility that will convert to a term loan. The interest rate swaps were executed on October 21, 2010 and November 2, 2010 and expire on February 29, 2016 and November 30, 2030, respectively. The interest rate swap agreements are not designated as hedges, and changes in their fair market value are recorded in the consolidated statements of operations.

        Epsilon Power Partners ("Epsilon") has an interest rate swap to economically fix the exposure to changes in interest rates related to the variable-rate non-recourse debt. The interest rate swap agreement effectively converted the floating rate debt to a fixed interest rate of 7.4% and has a maturity date of July 2019. The notional amount of the swap matches the outstanding principal balance over the remaining life of Epsilon's debt. This interest rate swap agreement is not designated as a hedge and changes in its fair market value are recorded in the consolidated statements of operations.

        Rockland Wind Farm, LLC ("Rockland") entered into interest rate swaps to manage interest rate risk exposure. These swaps effectively modify the project's exposure by converting the project's floating rate debt to a fixed basis. The interest rate swaps are with various counterparties and swap 100% of the expected interest payments from floating LIBOR to fixed rates structured in two tranches. The first tranche is for the notional amount due on the term loan commencing on December 30, 2011 and ending December 31, 2026 and fixes the interest rate at 4.2%. The second tranche is the post-term portion of the loan, or the balloon payment and commences on December 31, 2026 and ends on December 31, 2031, fixing the interest rate at 5.1%. This interest rate swap agreement is not designated as a hedge and changes in its fair market value are recorded in the consolidated statements of operations.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Derivative instruments and hedging activities (Continued)

        The Meadow Creek project ("Meadow Creek") has interest rate swap agreements to economically fix its exposure to changes in interest rates related to its variable-rate debt. The interest rate swap agreement effectively converted the floating rate debt to a fixed interest rate of 5.1% from December 31, 2012 to December 31, 2024. From December 2024 until the maturity of the debt in December 2030, the fixed rate of the swap is 6.7%. The notional amounts of the interest rate swap agreements match the estimated outstanding principal balance of Meadow Creek's term loan. The interest rate swaps were both executed on September 17, 2012 and expire on December 31, 2024 and December 31, 2030, respectively. The interest rate swap agreements are not designated as hedges, and changes in their fair market value are recorded in the consolidated statements of operations.

    Foreign currency forward contracts

        We use foreign currency forward contracts to manage our exposure to changes in foreign exchange rates, as we generate cash flow in U.S. dollars and Canadian dollars but pay dividends to shareholders and interest on our Canadian dollar denominated convertible debentures and long-term debt predominantly in Canadian dollars. We have a hedging strategy for the purpose of mitigating the currency risk impact on the future payments of dividends to shareholders. We have executed this strategy by entering into forward contracts to purchase Canadian dollars at a fixed rate to hedge an average of approximately 112% of our expected dividend and convertible debenture interest payments through 2015. Changes in the fair value of the forward contracts more than offset foreign exchange gain or losses on the U.S. dollar equivalent of our Canadian dollar obligations. At March 31, 2013, the forward contracts consist of (1) monthly purchases through the end of 2013 of Cdn$6.0 million at an exchange rate of Cdn$1.134 per U.S. dollar and (2) contracts assumed in our acquisition of Atlantic Power Limited Partnership (formerly, Capital Power Income L.P.) (the "Partnership") with various expiration dates through December 2015 to purchase a total of Cdn$99.7 million at an average exchange rate of Cdn$1.14 per U.S. dollar. It is our intention to periodically consider extending the length or terminating these forward contracts. The foreign currency forward contracts are not designated as hedges, and changes in their market value are recorded in the consolidated statements of operations.

        In April 2013 we terminated various foreign currency forward contracts with expiration dates through June 2015 assumed in our acquisition of the Partnership resulting in proceeds of $9.4 million. Subsequent to the termination, cash flows from our projects that generate Canadian dollars and our remaining forward contracts to purchase Canadian dollars at a fixed rate, hedge an average of approximately 75% of our expected dividend, Canadian dollar denominated long-term debt and convertible debenture interest payments through 2015.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Derivative instruments and hedging activities (Continued)

    Volume of forecasted transactions

        We have entered into derivative instruments in order to economically hedge the following notional volumes of forecasted transactions as summarized below, by type, excluding those derivatives that qualified for the NPNS exemption as of March 31, 2013 and December 31, 2012:

 
  Units   March 31,
2013
  December 31,
2012
 

Natural gas swaps

  Natural Gas (MMBtu)     8.6     10.6  

Gas purchase agreements

  Natural Gas (GJ)     46.8     49.8  

Interest rate swaps

  Interest (US$)     170.6     172.0  

Foreign currency forwards

  Cdn$     153.7     176.6  

Fair value of derivative instruments

        The fair value of our derivative assets and liabilities under counterparty master netting agreement are disclosed net on the consolidated balance sheets at March 31, 2013 and December 31, 2012. In the following table, we have elected to disclose derivative instrument assets and liabilities on a trade-by-trade basis and do not offset amounts at the counterparty master agreement level. The following table summarizes the fair value of our derivative assets and liabilities:

 
  March 31, 2013  
 
  Derivative
Assets
  Derivative
Liabilities
 
 
  (in millions)
 

Derivative instruments designated as cash flow hedges:

             

Interest rate swaps current

  $   $ 1.3  

Interest rate swaps long-term

        4.7  
           

Total derivative instruments designated as cash flow hedges

        6.0  
           

Derivative instruments not designated as cash flow hedges:

             

Interest rate swaps current

        9.6  

Interest rate swaps long-term

    0.4     21.7  

Foreign currency forward contracts current

    8.9     0.1  

Foreign currency forward contracts long-term

    5.7     0.1  

Natural gas swaps current

    0.2     0.3  

Natural gas swaps long-term

    0.2     3.4  

Gas purchase agreements current

        14.7  

Gas purchase agreements long-term

        80.8  
           

Total derivative instruments not designated as cash flow hedges

    15.4     130.7  
           

Total derivative instruments

  $ 15.4   $ 136.7  
           

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Derivative instruments and hedging activities (Continued)

 

 
  December 31, 2012  
 
  Derivative
Assets
  Derivative
Liabilities
 

Derivative instruments designated as cash flow hedges:

             

Interest rate swaps current

  $   $ 1.3  

Interest rate swaps long-term

        5.2  
           

Total derivative instruments designated as cash flow hedges

        6.5  
           

Derivative instruments not designated as cash flow hedges:

             

Interest rate swaps current

        7.3  

Interest rate swaps long-term

    0.1     27.7  

Foreign currency forward contracts current

    9.5      

Foreign currency forward contracts long-term

    11.0      

Natural gas swaps current

         

Natural gas swaps long-term

    0.1     3.9  

Gas purchase agreements current

    0.1     24.5  

Gas purchase agreements long-term

        81.4  
           

Total derivative instruments not designated as cash flow hedges

    20.8     144.8  
           

Total derivative instruments

  $ 20.8   $ 151.3  
           

    Accumulated other comprehensive income

        The following table summarizes the changes in the accumulated other comprehensive income (loss) ("OCI") balance attributable to derivative financial instruments designated as a hedge, net of tax:

For the three months ended March 31, 2013
  Interest Rate
Swaps
  Natural Gas
Swaps
  Total  
 
  (in millions)
 

Accumulated OCI balance at December 31, 2012

  $ (1.5 ) $ 0.1   $ (1.4 )

Realized from OCI during the period

    0.3         0.3  
               

Accumulated OCI balance at March 31, 2013

  $ (1.2 ) $ 0.1   $ (1.1 )
               

 

For the three months ended March 31, 2012
  Interest Rate
Swaps
  Natural Gas
Swaps
  Total  

Accumulated OCI balance at December 31, 2011

  $ (1.7 ) $ 0.3   $ (1.4 )

Realized from OCI during the period

    0.3         0.3  
               

Accumulated OCI balance at March 31, 2012

  $ (1.4 ) $ 0.3   $ (1.1 )
               

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Derivative instruments and hedging activities (Continued)

    Impact of derivative instruments on the consolidated statements of operations

        The following table summarizes realized (gains) and losses for derivative instruments not designated as cash flow hedges:

 
   
  Three months ended
March 31,
 
 
  Classification of (gain) loss
recognized in income
 
 
  2013   2012  

Gas purchase agreements

  Fuel   $ 16.3   $ 10.8  

Foreign currency forwards

  Foreign exchange loss (gain)     (2.5 )   (11.9 )

Interest rate swaps

  Interest, net     2.6     1.1  

        The following table summarizes the unrealized gains and losses resulting from changes in the fair value of derivative financial instruments that are not designated as cash flow hedges:

 
   
  Three months ended
March 31,
 
 
  Classification of (gain) loss
recognized in income
 
 
  2013   2012  

Natural gas swaps

  Change in fair value of derivatives   $ (0.4 ) $ 0.9  

Gas purchase agreements

  Change in fair value of derivatives     (8.1 )   57.9  

Interest rate swaps

  Change in fair value of derivatives     (4.1 )   (1.6 )
               

Total change in fair value of derivative instruments

      $ (12.6 ) $ 57.2  
               

Foreign currency forwards

  Foreign exchange loss (gain)   $ 6.0   $ 9.2  
               

7. Income taxes

        Income tax benefit from continuing operations for the three months ended March 31, 2013 was $2.5 million. The difference between the actual tax benefit of $2.5 million for the three months ended March 31, 2013 and the expected income tax expense of $1.1 million, based on the Canadian enacted statutory rate of 25%, is primarily due to $1.8 million related to operating projects in higher tax rates in various tax jurisdictions, $2.3 million in foreign exchange and $2.4 million in other permanent differences, partially offset by a $2.9 million change in the valuation allowance.

 
  Three months ended
March 31,
 
 
  2013   2012  

Current income tax expense

  $ 2.0   $ 1.4  

Deferred tax benefit

    (4.5 )   (18.3 )
           

Total income tax benefit

  $ (2.5 ) $ (16.9 )
           

        As of March 31, 2013, we have recorded a valuation allowance of $118.2 million. This amount is comprised primarily of provisions against available Canadian and U.S. net operating loss carryforwards. In assessing the recoverability of our deferred tax assets, we consider whether it is more likely than not

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7. Income taxes (Continued)

that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon projected future taxable income in the United States and in Canada and available tax planning strategies.

8. Employee incentive programs

    Long-Term Incentive Program

        The following table summarizes the changes in LTIP notional units during the three months ended March 31, 2013:

(Units in thousands)
  Units   Grant Date
Weighted-Average
Price per Unit
 

Outstanding at December 31, 2012

    492,535   $ 13.9  

Granted

    482,384     4.9  

Additional units from dividends

    9,906     13.8  

Forfeited

    (42,000 )   12.3  

Vested

    (200,697 )   13.6  
           

Outstanding at March 31, 2013

    742,128   $ 8.2  
           

        Certain awards have a market condition based on our total shareholder return during the performance period compared to a group of peer companies. Compensation expense for notional units granted in 2013 is recorded net of estimated forfeitures. See Note 14 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012 for further details. Cash payments made for vested notional units for the three months ended March 31, 2013 was $0.9 million.

        The calculation of simulated total shareholder return under the Monte Carlo model for the remaining time in the performance period for awards with market conditions included the following assumptions as of March 31, 2013 and December 31, 2012:

 
  March 31, 2013   December 31, 2012  

Weighted average risk free rate of return

    0.1%     0.1 – 0.3%  

Dividend yield

    8.0%     10.1%  

Expected volatility—Atlantic Power

    48.6%     22.5%  

Expected volatility—peer companies

    11.9 – 72.8%     11.9 – 97.1%  

Weighted average remaining measurement period

    0.9 years     1.4 years  

9. Basic and diluted earnings (loss) per share

        Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average common shares outstanding during their respective period. Diluted earnings (loss) per share are computed including dilutive potential shares as if they were outstanding shares during the year. Dilutive potential shares include shares that would be issued if all of the convertible debentures were converted into shares at January 1, 2013. Dilutive potential shares also include the weighted average

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. Basic and diluted earnings (loss) per share (Continued)

number of shares, as of the date such notional units were granted, that would be issued if the unvested notional units outstanding under the LTIP were vested and redeemed for shares under the terms of the LTIP.

        The following table sets forth the diluted net income and potentially dilutive shares utilized in the per share calculation for the three months ended March 31, 2013 and 2012:

 
  Three months ended
March 31,
 
 
  2013   2012  

Numerator:

             

Income (loss) from continuing operations attributable to Atlantic Power Corporation

  $ 5.6   $ (53.9 )

Income from discontinued operations, net of tax

    0.9     11.6  
           

Net loss attributable to Atlantic Power Corporation

  $ 6.5   $ (42.3 )

Denominator:

             

Weighted average basic shares outstanding

    119.5     113.6  

Dilutive potential shares:

             

Convertible debentures

    27.7     13.3  

LTIP notional units

    0.4     0.5  
           

Potentially dilutive shares

    147.6     127.4  
           

Diluted loss per share from continuing operations attributable to Atlantic Power Corporation

  $ 0.04   $ (0.47 )

Diluted earnings per share from discontinued operations

    0.01     0.10  
           

Diluted loss per share attributable to Atlantic Power Corporation

  $ 0.05   $ (0.37 )
           

        Potentially dilutive shares from convertible debentures have been excluded from fully diluted shares for the three months ended March 31, 2013 because their impact would be anti-dilutive and potentially dilutive shares from convertible debentures and LTIP notional units have been excluded from fully diluted shares for the three months ended March 31, 2012 because their impact would be anti-dilutive.

10. Assets held for sale

        Path 15 and the Florida Projects have been classified as assets held for sale based on our intention to sell the projects within the next twelve months. We approved a plan to sell these assets prior to December 31, 2012. Accordingly, the assets and liabilities of Path 15 and the Florida Projects have been classified separately as held for sale in the consolidated balance sheets at March 31, 2013 and December 31, 2012 and the projects' net income is recorded as income from discontinued operations, net of tax in the statements of operations for the three months ended March 31, 2013 and 2012. The Florida Projects and Path 15 sales closed on April 12, 2013 and April 30, 2013, respectively.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. Assets held for sale (Continued)

        We recorded a $27.5 million reserve related to the sale of the Florida Projects that is included in liabilities associated with assets held for sale on the consolidated balance sheets at March 31, 2013 and in income from discontinued operations on the consolidated statements of operation for the three months ended March 31, 2013. The reserve was recorded as a prepayment of the closing price of the sale transaction resulting from the cash distributions we received from the Florida Projects during the three months ended March 31, 2013.

        The following tables summarize the revenue, income from operations, and income tax expense of Path 15, Auburndale, Lake, and Pasco for the three months ended March 31, 2013 and 2012 as well as the assets and liabilities held for sale at March 31, 2013 and December 31, 2012:

 
  Three months ended
March 31,
 
(in millions)
  2013   2012  

Revenue

  $ 63.2   $ 49.0  
           

Income from operations of discontinued businesses

    1.3     12.2  
           

Income tax expense

    0.4     0.6  
           

Income from operations of discontinued businesses, net of tax

  $ 0.9   $ 11.6  
           

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. Assets held for sale (Continued)

        Basic and diluted earnings per share related to income from discontinued operations for the Path 15, Auburndale, Lake and Pasco projects was $0.01 and $0.10 for the three months ended March 31, 2013 and 2012, respectively.

(in millions)
  March 31, 2013   December 31, 2012  

Current assets:

             

Cash and cash equivalents

  $ 5.0   $ 6.5  

Restricted cash

    16.5     12.6  

Accounts receivable

    22.6     21.9  

Other current assets

    5.6     6.3  
           

    49.7     47.3  

Non-current assets assets:

             

Property, plant & equipment

    110.1     111.9  

Transmission system rights

    170.5     172.4  

Goodwill

    8.9     8.9  

Other assets

    7.6     10.9  
           

Assets held for sale

    346.8     351.4  

Current liabilities:

             

Accounts payable and other accrued liabilities

  $ 15.5   $ 16.5  

Current portion of long-term debt

    13.0     14.3  

Current portion of derivative instruments liability

    11.5     20.0  

Other liabilities

    27.8     0.5  
           

    67.8     51.3  

Long term liabilities

             

Long-term debt

    137.5     137.7  
           

Liabilities held for sale

    205.3     189.0  

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

11. Equity

        The following table provides a reconciliation of the beginning and ending equity attributable to shareholders of Atlantic Power, preferred shares issued by a subsidiary company, noncontrolling interests and total equity as of March 31, 2013 and 2012:

 
  Three months ended March 31, 2013  
(in millions)
  Total Atlantic
Power Corporation
Shareholders'
Equity
  Preferred shares
issued by a
subsidiary
company
  Noncontrolling
Interests
  Total Equity  

Balance at January 1

  $ 729.7   $ 221.3   $ 235.4   $ 1,186.4  

Net income (loss)

    6.5     3.2     (1.9 )   7.8  

Realized and unrealized loss on hedging activities, net of tax

    0.3             0.3  

Foreign currency translation adjustment, net of tax

    (12.1 )           (12.1 )

Common shares issued for LTIP

    0.3             0.3  

Contribution by noncontrolling interest

            2.0     2.0  

Costs associated with tax equity raise

    (0.7 )           (0.7 )

Dividends paid to noncontrolling interest

            (1.0 )   (1.0 )

Dividends declared on common shares

    (24.6 )           (24.6 )

Dividends declared on preferred shares of a subsidiary company

        (3.2 )       (3.2 )
                   

Balance at March 31

  $ 699.4   $ 221.3   $ 234.5   $ 1,155.2  
                   

 

 
  Three months ended March 31, 2012  
 
  Total Atlantic
Power Corporation
Shareholders'
Equity
  Preferred shares
issued by a
subsidiary
company
  Noncontrolling
Interests
  Total Equity  

Balance at January 1

  $ 891.5   $ 221.3   $ 3.0   $ 1,115.8  

Net income (loss)

    (42.3 )   3.2     (0.2 )   (39.3 )

Realized and unrealized loss on hedging activities, net of tax

    0.2             0.2  

Foreign currency translation adjustment, net of tax

    17.2             17.2  

Common shares issued for LTIP

    0.2             0.2  

Dividends declared on common shares

    (32.4 )           (32.4 )

Dividends declared on preferred shares

                         

of a subsidiary company

        (3.2 )       (3.2 )
                   

Balance at March 31

  $ 834.4   $ 221.3   $ 2.8   $ 1,058.5  
                   

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. Segment and geographic information

        Our operating segments are Northeast, Northwest, Southeast, Southwest and Un-allocated Corporate. Our segments align with management's resource allocation and assessment of performance and reflect our current operating focus. The segment classified as Un-allocated Corporate includes activities that support the executive offices, capital structure and costs of being a public registrant in the United States and Canada. Un-allocated Corporate also includes Rollcast, a 60% owned company, which develops, owns and operates renewable power plants that use wood or biomass fuel and Ridgeline, which develops and operates wind and solar power projects. These costs are not allocated to the operating segments when determining segment profit or loss.

        We analyze the performance of our operating segments based on Project Adjusted EBITDA which is defined as project income plus interest, taxes, depreciation and amortization (including non-cash impairment charges) and changes in fair value of derivative instruments. Project Adjusted EBITDA is not a measure recognized under GAAP and does not have a standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. We use Project Adjusted EBITDA to provide comparative information about project performance without considering how projects are capitalized or whether they contain derivative contracts that are required to be recorded at fair value. Path 15, a component of the Southwest segment, and the Auburndale, Lake and Pasco projects, which are components of the Southeast segment, are included in the income from discontinued operations line item in the table below. We have adjusted prior periods to reflect this reclassification. A reconciliation of project income to Project Adjusted EBITDA is included in the tables below.

 
  Northeast   Southeast   Northwest   Southwest   Un-allocated
Corporate
  Consolidated  

Three months ended March 31, 2013

                                     

Project revenues

  $ 67.8   $   $ 24.7   $ 48.0   $ (0.3 ) $ 140.2  

Segment assets

    1,147.1     372.6     1,192.6     1,143.8     83.3     3,939.4  

Project Adjusted EBITDA

  $ 45.9   $ 2.1   $ 21.3   $ 16.0   $ (4.7 )   80.6  

Change in fair value of derivative instruments

    (8.1 )   (1.3 )   (3.0 )       0.9     (11.5 )

Depreciation and amortization

    20.1     1.5     15.8     15.0         52.4  

Interest, net

    4.4         4.7     0.2     0.2     9.5  

Other project (income) expense

    0.4                 (1.3 )   (0.9 )
                           

Project income (loss)

    29.1     1.9     3.8     0.8     (4.5 )   31.1  

Administration

                    8.3     8.3  

Interest, net

                    25.9     25.9  

Foreign exchange gain

                    (7.5 )   (7.5 )
                           

Income (loss) from continuing operations before income taxes

    29.1     1.9     3.8     0.8     (31.2 )   4.4  

Income tax benefit

                    (2.5 )   (2.5 )
                           

Net income (loss) from continuing operations

    29.1     1.9     3.8     0.8     (28.7 )   6.9  

Income from discontinued operations

        0.3         0.6         0.9  
                           

Net income (loss)

  $ 29.1   $ 2.2   $ 3.8   $ 1.4   $ (28.7 ) $ 7.8  
                           

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. Segment and geographic information (Continued)


 
  Northeast   Southeast   Northwest   Southwest   Un-allocated
Corporate
  Consolidated  

Three months ended March 31, 2012

                                     

Project revenues

  $ 67.2   $   $ 15.3   $ 35.5   $ 0.7   $ 118.7  

Segment assets

    1,198.7     431.0     825.0     940.7     80.3     3,475.7  

Project Adjusted EBITDA

  $ 42.4   $ 2.1   $ 13.4   $ 12.1   $ (3.4 )   66.6  

Change in fair value of derivative instruments

    58.0     (0.5 )               57.5  

Depreciation and amortization

    17.4     1.4     10.4     10.6     0.1     39.9  

Interest, net

    4.7         1.1         0.2     6.0  

Other project (income) expense

    0.2             0.1     (0.1 )   0.2  
                           

Project (loss) income

    (37.9 )   1.2     1.9     1.4     (3.6 )   (37.0 )

Administration

                    7.7     7.7  

Interest, net

                    22.0     22.0  

Foreign exchange loss

                    1.0     1.0  
                           

Income (loss) from continuing operations before income taxes

    (37.9 )   1.2     1.9     1.4     (34.3 )   (67.7 )

Income tax benefit

                    (16.9 )   (16.9 )
                           

Net income (loss) from continuing operations

    (37.9 )   1.2     1.9     1.4     (17.4 )   (50.8 )

Income from discontinued operations

        10.6         1.0         11.6  
                           

Net income (loss)

  $ (37.9 ) $ 11.8   $ 1.9   $ 2.4   $ (17.4 ) $ (39.2 )
                           

        The tables below provide information, by country, about our consolidated operations. Revenue is recorded in the country in which it is earned and assets are recorded in the country in which they are located.

 
   
   
  Property, Plant and
Equipment, net of
accumulated depreciation
 
 
  Project Revenue
Three months ended
March 31,
 
 
  March 31, 2013   December 31, 2012  
 
  2013   2012  

United States

  $ 72.7   $ 55.4   $ 1,489.5   $ 1,504.8  

Canada

    67.5     63.3     530.5     550.7  
                   

Total

  $ 140.2   $ 118.7   $ 2,020.0   $ 2,055.5  
                   

        The Ontario Electricity Financial Corp ("OEFC") and British Columbia Hydro and Power Authority ("BC Hydro") provided for approximately 36.0% and 12.1%, respectively, of total consolidated revenues for the three months ended March 31, 2013 and approximately 40.3% and 12.9%, respectively, of total consolidated revenues for the three months ended March 31, 2012. OEFC purchases electricity from the Calstock, Kapuskasing, Nipigon, North Bay and Tunis projects in the Northeast segment and BC Hydro purchases electricity from the Mamquam, Moresby Lake and Williams Lake projects in the Northwest segment.

13. Commitments and contingencies

        We are party to numerous legal proceedings, including securities class actions, from time to time. In particular, we and/or certain of our current and former officers have been named as defendants in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

13. Commitments and contingencies (Continued)

various class action lawsuits. Due to the nature of these proceedings, the lack of precise damage claims and the type of claims we are subject to, we are unable to determine the ultimate or maximum amount of monetary liability or financial impact, if any, to us in these legal matters, which unless otherwise specified, seek damages from the defendants of material or indeterminate amounts.

    Shareholder class action lawsuits

        On March 8, 14, 15 and 25, 2013 and April 23, 2013, five purported securities fraud class action complaints were filed by alleged investors in Atlantic Power common shares in the United States District Court for the District of Massachusetts (the "District Court") against Atlantic Power and Barry E. Welch, our President and Chief Executive Officer and a Director of Atlantic Power, in each of the actions, and, in addition to Mr. Welch, some or all of Patrick J. Welch, our former Chief Financial Officer, Lisa Donahue, our former interim Chief Financial Officer, and Terrence Ronan, our current Chief Financial Officer, in certain of the actions (the "Individual Defendants," and together with Atlantic Power, the "Defendants") (the "U.S. Actions"). On March 19, 2013 and April 2, 2013, two notices of action relating to Canadian securities class action claims against the Defendants were also issued by alleged investors in Atlantic Power common shares, and in one of the actions, holders of Atlantic Power convertible debentures, with the Ontario Superior Court of Justice in the Province of Ontario and on April 8, 2013, a similar claim issued by alleged investors in Atlantic Power common shares seeking to initiate a class action against the Defendants was filed with the Superior Court of Quebec in the Province of Quebec (the "Canadian Actions"). On May 2, 2013, a statement of claim relating to the April 2, 2013 notice of action was filed with the Ontario Superior Court of Justice in the Province of Ontario.

        The District Court complaints differ in terms of the identities of the Individual Defendants they name, as noted above, the named plaintiffs, and the purported class period they allege (July 23, 2010 to March 4, 2013 in three of the District Court actions and August 8, 2012 to February 28, 2013 in the other two District Court actions), but in general each alleges, among other things, that in Atlantic Power's press releases, quarterly and year-end filings and conference calls with analysts and investors, Atlantic Power and the Individual Defendants made materially false and misleading statements and omissions regarding the sustainability of Atlantic Power's common share dividend that artificially inflated the price of Atlantic Power's common shares. The District Court complaints assert claims under Section 10(b) and, against the Individual Defendants, under Section 20(a) of the Securities Exchange Act of 1934, as amended. The allegations in the Canadian Actions are essentially the same as those asserted in the District Court actions.

        The parties to each District Court action have filed joint motions requesting that the District Court set a schedule in the District Court actions, including: (i) setting a deadline for the lead plaintiff to file a consolidated amended class action complaint (the "Amended Complaint"), after the appointment of lead plaintiff and counsel; (ii) setting a deadline for Defendants to answer, file a motion to dismiss or otherwise respond to the Amended Complaint (and for subsequent briefing regarding any such motion to dismiss); and (iii) confirming that Defendants need not answer, move to dismiss or otherwise respond to any of the five District Court complaints prior to the filing of the Amended Complaint. Pursuant to the Private Securities Litigation Reform Act of 1995, all discovery is stayed in the five District Court actions. As of May 6, 2013, the plaintiffs have not specified an amount

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

13. Commitments and contingencies (Continued)

of alleged damages in the respective U.S. and Canadian Actions other than in the Canadian Actions filed on March 19, 2013 and April 2, 2013 (including the related statement of claim filed on May 2, 2013), in which the plaintiffs have alleged damages of Cdn$1,100,000,000 and Cdn$208,500,000, respectively, plus interest and costs. However, because both the U.S. and Canadian Actions are in their early stages, Atlantic Power is unable to reasonably estimate the possible loss or range of losses, if any, arising from these litigations. Atlantic Power intends to defend vigorously against these actions.

    Morris

        On May 29, 2011, our Morris facility was struck by lightning. As a result, steam and electric deliveries were interrupted to our host Equistar Chemicals, LP. ("Equistar"). We believed the interruption constituted a force majeure under the energy services agreement with Equistar. Equistar disputed this interpretation and initiated arbitration proceedings under the relevant agreement for recovery of resulting lost profits and equipment damage among other items. The Equistar arbitration claim has now been fully resolved. The lost profits portion of the claim was dismissed by the Arbitration Panel and all claims for equipment damage were resolved by the parties and their insurers through mediation on April 11 and 12, 2013, and a definitive Settlement Agreement and Mutual Release was executed effective as of April 30, 2013.

    Other

        Other than as described above, there were no material changes to legal proceedings disclosed in "Item 3. Legal Proceedings" of our Annual Report on Form 10-K for the year ended December 31, 2012.

        In addition to the other matters listed, from time to time, Atlantic Power, its subsidiaries and the projects are parties to disputes and litigation that arise in the normal course of business. We assess our exposure to these matters and record estimated loss contingencies when a loss is likely and can be reasonably estimated. With respect to such other matters arising in the normal course of business, there are no matters pending which are expected to have a material adverse impact on our financial position or results of operations or have been reserved for as of March 31, 2013.

14. Guarantees and condensed consolidating financial information

        In connection with the tax equity investments in our Canadian Hills project, we have expressly indemnified the investors for certain representations and warranties made by a wholly-owned subsidiary with respect to matters which we believe are remote and improbable to occur. The expiration dates of these guarantees vary from less than one year through the indefinite termination date of the project. Our maximum undiscounted potential exposure is limited to the amount of tax equity investment less cash distributions made to the investors and any amount equal to the net federal income tax benefits arising from production tax credits.

        We and our subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part of our business activities. Examples of these contracts include asset purchases and sale agreements, joint venture agreements, operation and maintenance agreements, and other types of contractual agreements with vendors and other third parties, as well as affiliates. These

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Guarantees and condensed consolidating financial information (Continued)

contracts generally indemnify the counterparty for tax, environmental liability, litigation and other matters, as well as breaches of representations, warranties and covenants set forth in these agreements.

        As of March 31, 2013 and December 31, 2012, we had $460.0 million of Senior Notes. These notes are guaranteed by certain of our wholly owned subsidiaries, or guarantor subsidiaries. These guarantees are joint and several.

        Unless otherwise noted below, each of the following 100% owned guarantor subsidiaries fully and unconditionally guaranteed the Senior Notes as of March 31, 2013:

        Atlantic Power Limited Partnership, Atlantic Power GP Inc. , Atlantic Power (US) GP, Atlantic Oklahoma Wind LLC, Atlantic Power Corporation, Atlantic Power Generation, Inc., Atlantic Power Transmission, Inc., Atlantic Power Holdings, Inc,. Atlantic Power Services Canada GP Inc., Atlantic Power Services Canada LP, Atlantic Power Services, LLC, Atlantic Rockland Holdings, LLC, Teton Power Funding, LLC, Harbor Capital Holdings, LLC, Epsilon Power Funding, LLC, Atlantic Auburndale, LLC, Auburndale LP, LLC, Auburndale GP, LLC, Atlantic Cadillac Holdings, LLC, Atlantic Idaho Wind Holdings, LLC, Atlantic Idaho Wind C, LLC, Baker Lake Hydro, LLC, Olympia Hydro, LLC, Teton East Coast Generation, LLC, NCP Gem, LLC, NCP Lake Power, LLC, Lake Investment, LP, Teton New Lake, LLC, Lake Cogen Ltd., Atlantic Renewables Holdings, LLC, Orlando Power Generation I, LLC, Orlando Power Generation II, LLC, NCP Dade Power, LLC, NCP Pasco LLC, Dade Investment, LP, Pasco Cogen, Ltd., Atlantic Piedmont Holdings LLC, Teton Selkirk, LLC, Teton Operating Services, LLC, Atlantic Ridgeline Holdings, LLC, Ridgeline Energy Holdings, Inc., Ridgeline Energy LLC, Pah Rah Holding Company LLC, Lewis Ranch Wind Project LLC, Hurricane Wind LLC, Ridgeline Power Services LLC, Ridgeline Eastern Energy LLC, Ridgeline Alternative Energy LLC, Frontier Solar LLC, Ridgeline Energy Solar LLC, Pah Rah Project Company LLC, Monticello Hills Wind LLC, Dry Lots Wind LLC, Smokey Avenue Wind LLC, Saunders Bros. Transportation Corporation, Bruce Hill Wind LLC, South Mountain Wind LLC, Great Basin Solar Ranch LLC, Goshen Wind Holdings LLC, Meadow Creek Holdings LLC, Ridgeline Holdings Junior Inc., Rockland Wind Ridgeline Holdings LLC and Meadow Creek Intermediate Holdings LLC.

        The following condensed consolidating financial information presents the financial information of Atlantic Power, the guarantor subsidiaries, and Curtis Palmer, LLC ("Curtis Palmer") (our non-guarantor subsidiary) in accordance with Rule 3-10 under the SEC's Regulation S-X. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiaries or Curtis Palmer operated as independent entities.

        In this presentation, Atlantic Power consists of parent company operations. Guarantor subsidiaries of Atlantic Power are reported on a combined basis. For companies acquired, the fair values of the assets and liabilities acquired have been presented on a push-down accounting basis.

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Guarantees and condensed consolidating financial information (Continued)


ATLANTIC POWER CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2013

(in millions of U.S. dollars)
(Unaudited)

 
  Guarantor
Subsidiaries
  Curtis
Palmer
  Atlantic
Power
  Eliminations   Consolidated
Balance
 

Assets

                               

Current assets:

                               

Cash and cash equivalents

  $ 79.4   $   $ 6.3   $   $ 85.7  

Restricted cash

    43.5                 43.5  

Accounts receivable

    142.5     14.5     2.1     (80.7 )   78.4  

Prepayments, supplies, and other current assets

    43.9     1.1     6.3     (1.0 )   50.3  

Asset held for sale

    346.8                 346.8  
                       

Total current assets

    656.1     15.6     14.7     (81.7 )   604.7  

Property, plant, and equipment, net

    1,849.0     172.3         (1.3 )   2,020.0  

Equity investments in unconsolidated affiliates

    4,692.1         1,001.3     (5,282.3 )   411.1  

Other intangible assets, net

    350.6     155.1             505.7  

Goodwill

    276.5     58.2             334.7  

Other assets

    523.6         438.6     (899.0 )   63.2  
                       

Total assets

  $ 8,347.9   $ 401.2   $ 1,454.6   $ (6,264.3 ) $ 3,939.4  
                       

Liabilities

                               

Current liabilities:

                               

Accounts payable and accrued liabilities

  $ 87.9   $ 16.5   $ 63.7   $ (80.7 ) $ 87.4  

Revolving credit facility

    44.1         20.0         64.1  

Current portion of long-term debt

    121.7                 121.7  

Liabilities held for sale

    205.3                 205.3  

Other current liabilities

    28.7         3.9     (1.0 )   31.6  
                       

Total current liabilities

    487.7     16.5     87.6     (81.7 )   510.1  

Long-term debt

   
824.1
   
190.0
   
460.0
   
   
1,474.1
 

Convertible debentures

            418.2         418.2  

Other non-current liabilities

    1,217.0     8.4     0.5     (844.1 )   381.8  

Equity

                               

Common shares

    5,082.0     186.3     1,285.3     (5,268.3 )   1,285.3  

Preferred shares issued by a subsidiary company

    256.7             (35.4 )   221.3  

Accumulated other comprehensive loss

    (2.4 )               (2.4 )

Retained deficit

    248.3         (797.0 )   (34.8 )   (583.5 )
                       

Total Atlantic Power Corporation shareholders' equity

    5,584.6     186.3     488.3     (5,338.5 )   920.7  

Noncontrolling interests

   
234.5
   
   
   
   
234.5
 
                       

Total equity

    5,819.1     186.3     488.3     (5,338.5 )   1,155.2  
                       

Total liabilities and equity

  $ 8,347.9   $ 401.2   $ 1,454.6   $ (6,264.3 ) $ 3,939.4  
                       

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Guarantees and condensed consolidating financial information (Continued)


ATLANTIC POWER CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three months ended March 31, 2013

(in millions of U.S. dollars)

 
  Guarantor
Subsidiaries
  Curtis
Palmer
  Atlantic
Power
  Eliminations   Consolidated
Balance
 

Project revenue:

                               

Total project revenue

  $ 131.6   $ 8.8   $   $ (0.2 ) $ 140.2  

Project expenses:

                               

Fuel

    49.6                 49.6  

Operations and maintenance

    26.5     1.6     0.3     (0.1 )   28.3  

Development

    1.7                 1.7  

Depreciation and amortization

    37.5     3.8             41.3  
                       

    115.3     5.4     0.3     (0.1 )   120.9  

Project other income (expense):

                               

Change in fair value of derivative instruments

    12.6                 12.6  

Equity in earnings of unconsolidated affiliates

    7.2                 7.2  

Interest, net

    (5.2 )   (2.8 )           (8.0 )
                       

    14.6     (2.8 )           11.8  
                       

Project income (loss)

    30.9     0.6     (0.3 )   (0.1 )   31.1  

Administrative and other expenses (income):

                               

Administration

    4.6         3.7         8.3  

Interest, net

    19.3         6.6         25.9  

Foreign exchange gain

    (2.5 )       (5.0 )       (7.5 )
                       

    21.4         5.3         26.7  
                       

Income (loss) from continuing operations before income taxes

    9.5     0.6     (5.6 )   (0.1 )   4.4  

Income tax benefit

    (2.5 )               (2.5 )
                       

Net income (loss) from continuing operations

    12.0     0.6     (5.6 )   (0.1 )   6.9  

Net income from discontinued operations

    0.9                 0.9  
                       

Net income (loss)

    12.9     0.6     (5.6 )   (0.1 )   7.8  

Net income (loss) attributable to noncontrolling interest

    (1.9 )           3.2     1.3  
                       

Net income (loss) attributable to Atlantic Power Corporation

  $ 14.8   $ 0.6   $ (5.6 ) $ (3.3 ) $ 6.5  
                       

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Guarantees and condensed consolidating financial information (Continued)


ATLANTIC POWER CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

Three months ended March 31, 2013

(in millions of U.S. dollars)

 
  Guarantor
Subsidiaries
  Curtis
Palmer
  Atlantic
Power
  Eliminations   Consolidated
Balance
 

Net income (loss)

  $ 12.9   $ 0.6   $ (5.6 ) $ (0.1 ) $ 7.8  

Other comprehensive income (loss):

                               

Net amount reclassified to earnings

    0.3                 0.3  
                       

Net unrealized losses on derivatives

    0.3                 0.3  

                             

Foreign currency translation adjustments

   
(12.1

)
 
   
   
   
(12.1

)
                       

Other comprehensive loss, net of tax

    (11.8 )               (11.8 )
                       

Comprehensive income (loss)

    1.1     0.6     (5.6 )   (0.1 )   (4.0 )
                       

Less: Comprehensive income attributable to noncontrolling interests

    1.3                 1.3  
                       

Comprehensive income (loss) attributable to Atlantic Power Corporation

  $ (0.2 ) $ 0.6   $ (5.6 ) $ (0.1 ) $ (5.3 )
                       

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ATLANTIC POWER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Guarantees and condensed consolidating financial information (Continued)


ATLANTIC POWER CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2013

(in millions of U.S. dollars)

 
  Guarantor
Subsidiaries
  Curtis
Palmer
  Atlantic
Power
  Eliminations   Consolidated
Balance
 

Net cash provided by operating activities

  $ 51.3   $ 0.2   $ 22.7   $   $ 74.2  

Cash flows used in investing activities:

                               

Acquisitions and investments, net of cash acquired

    3.0         (3.0 )        

Construction in progress

    (9.7 )               (9.7 )

Change in restricted cash

    (18.7 )               (18.7 )

Purchase of property, plant and equipment

    (2.0 )   (0.2 )           (2.2 )
                       

Net cash used in investing activities

    (27.4 )   (0.2 )   (3.0 )       (30.6 )

Cash flows provided by financing activities:

                               

Offering costs related to tax equity

    (0.6 )               (0.6 )

Repayment for long-term debt

    (2.6 )               (2.6 )

Proceeds from project-level debt

    20.8                 20.8  

Payments for revolving credit facility borrowings

    (2.9 )               (2.9 )

Equity contribution from noncontrolling interest

            2.0         2.0  

Dividends paid

    (4.0 )       (32.3 )       (36.3 )
                       

Net cash provided by (used in) financing activities

    10.7         (30.3 )       (19.6 )
                       

Net increase (decrease) in cash and cash equivalents

    34.6         (10.6 )       24.0  

Less cash at discontinued operation

    (5.0 )               (5.0 )

Cash and cash equivalents at beginning of period at discontinued operations

    6.5                 6.5  

Cash and cash equivalents at beginning of period

    43.3         16.9         60.2  
                       

Cash and cash equivalents at end of period

  $ 79.4   $   $ 6.3   $   $ 85.7  
                       

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FORWARD-LOOKING INFORMATION

        Certain statements in this Quarterly Report on Form 10-Q constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook," "objective," "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "plans," "continue," or similar expressions suggesting future outcomes or events. Examples of such statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements with respect to the following:

    our ability to generate sufficient amounts of cash and cash equivalents to maintain our operations and meet obligations as they become due; and

    the impact of legislative, regulatory, competitive and technological changes.

        Such forward-looking statements reflect our current expectations regarding future events and operating performance and speak only as of the date of this Quarterly Report on Form 10-Q. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to the assumption that the projects will operate and perform in accordance with our expectations. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf.

        Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. In addition, a number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors included in the filings Atlantic Power makes from time to time with the SEC and the risk factors described under "Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2012. Our business is both highly competitive and subject to various risks.

        These risks include, without limitation:

    the expiration or termination of power purchase agreements;

    the dependence of our projects on their electricity, thermal energy and transmission services customers;

    exposure of certain of our projects to fluctuations in the price of electricity or natural gas;

    projects not operating according to plan;

    the dependence of our projects on third-party suppliers;

    the effects of weather, which affects demand for electricity and fuel as well as operating conditions;

    the dependence of our windpower projects on suitable wind and associated conditions;

    U.S., Canadian and/or global economic conditions and uncertainty;

    risks beyond our control, including but not limited to acts of terrorism or related acts of war, geopolitical crisis, natural disasters or other catastrophic events;

    the adequacy of our insurance coverage;

    the impact of significant energy, environmental and other regulations on our projects;

    increased competition, including for acquisitions;

    our limited control over the operation of certain minority owned projects;

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    transfer restrictions on our equity interests in certain projects;

    construction risks;

    labor disruptions;

    our ability to retain, motivate and recruit executives and other key employees;

    unstable capital and credit markets;

    our indebtedness and financing arrangements;

    compliance with our senior credit facility and our ability to obtain requested waivers and/or amendments;

    changes in our creditworthiness; and

    the outcome of certain shareholder class action lawsuits.

        Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information include third party projections of regional fuel and electric capacity and energy prices or cash flows that are based on assumptions about future economic conditions and courses of action. Although the forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon what are believed to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. Certain statements included in this Quarterly Report on Form 10-Q may be considered "financial outlook" for the purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this Quarterly Report on Form 10-Q. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and, except as expressly required by applicable law, we assume no obligation to update or revise them to reflect new events or circumstances.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion of the financial condition and results of operations of Atlantic Power should be read in conjunction with the interim consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. All dollar amounts discussed below are in millions of U.S. dollars except per share amounts, or unless otherwise stated. The interim financial statements have been prepared in accordance with GAAP.

OVERVIEW

        Atlantic Power owns and operates a diverse fleet of power generation and infrastructure assets in the United States and Canada. Our power generation projects sell electricity to utilities and other large commercial customers largely under PPAs, which seek to minimize exposure to changes in commodity prices. As of March 31, 2013, our power generation projects in operation had an aggregate gross electric generation capacity of approximately 2,965 MW in which our aggregate ownership interest is approximately 2,046 MW. As of May 6, 2013, our power generation projects in operation had an aggregate gross electric generation capacity of approximately 3,018 MW in which our aggregate ownership interest is approximately 2,098 MW. These totals exclude the Florida Projects and Path 15 which are designated as held for sale at March 31, 2013, our 17.1% interest in Gregory for which we entered into an agreement to sell in April 2013, and our 40% interest in the Delta-Person for which we entered into an agreement to sell in December 2012. Our current portfolio of continuing operations consists of interests in twenty-nine operational power generation projects across eleven states in the United States and two provinces in Canada. This includes Piedmont, our 53 MW biomass project in Georgia, which achieved commercial operations in April 2013. In December 2012, we acquired a wind

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and solar development company, Ridgeline, located in Seattle, Washington, which has enhanced our ability to develop, construct, and operate wind and solar energy projects across the United States and Canada. We also own a majority interest in Rollcast, a biomass power plant developer in North Carolina. Twenty-three of our projects are wholly owned subsidiaries.

        We sell the capacity and energy from our power generation projects under PPAs to a variety of utilities and other parties. Under the PPAs, which have expiration dates ranging from August 2013 to December 2037, we receive payments for electric energy sold to our customers (known as energy payments), in addition to payments for electric generation capacity (known as capacity payments). We also sell steam from a number of our projects to industrial purchasers under steam sales agreements. Sales of electricity are generally higher during the summer and winter months, when temperature extremes create demand for either summer cooling or winter heating.

        Our power generation projects generally have long-term fuel supply agreements, typically accompanied by fuel transportation arrangements. In most cases, the term of the fuel supply and transportation arrangements correspond to the term of the relevant PPAs and many of the PPAs and steam sales agreements provide for the indexing or pass-through of fuel costs to our customers. In cases where there is no pass-through of fuel costs, we often attempt to mitigate the market price risk of changing commodity costs through the use of hedging strategies.

        We directly operate and maintain more than half of our power generation projects. We also partner with recognized leaders in the independent power industry to operate and maintain our other projects, including Colorado Energy Management ("CEM"), Power Plant Management Services ("PPMS") and Delta Power Services ("DPS"). Under these operation, maintenance and management agreements, the operator is typically responsible for operations, maintenance and repair services.

        Effective April 2, 2013, we appointed Edward Hall as Executive Vice President—Chief Operating Officer of Atlantic Power.

RECENT DEVELOPMENTS

    Canadian Hills Tax Equity

        On May 2, 2013, we sold our tax equity ownership in Canadian Hills to an institutional investor and received cash proceeds of $42.1 million. The cash proceeds received were based on our initial tax equity investment of $44.1 million less distributions received from Canadian Hills resulting in no gain or loss on the sale. The cash proceeds will be held for general corporate purposes and to invest in future accretive growth opportunities. We continue to own 99% of the project and consolidate it in our consolidated financial statements. Income attributable to the tax investors is recorded as a component of noncontrolling interests.

    Piedmont Commercial Operations

        On April 19, 2013, Piedmont achieved commercial operation under its PPA with Georgia Power Company at a declared capacity of 53.5 MW. Piedmont and its engineering, procurement and construction ("EPC") contractor, Zachry Industrial, Inc. ("Zachry"), are disputing certain issues under the EPC agreement regarding the condition and performance of the project, during which time Piedmont is withholding the amount still retained under the agreement.

        Piedmont expects to submit an application under the federal 1603 grant program within 60 days from commercial operation. The project's outstanding $51 million bridge loan is expected to be repaid largely from the proceeds of the 1603 grant with a possible contribution from the Company of approximately $2.0 million to cover the shortfall created by the U.S. federal budget sequestration. Piedmont's construction loan in the amount of $82 million ($76.6 million at March 31, 2013) is expected to be converted into a term loan. While we fully expect the construction loan to convert to a

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term loan in second quarter 2013 based on the project meeting specified milestone requirements, if it does not, we have the option of amending or refinancing the construction loan or infusing additional equity into the project.

    Sale of Gregory

        On April 2, 2013 we and the other owners of Gregory entered into a purchase and sale agreement with an affiliate of NRG Energy, Inc. to sell the project for approximately $272.8 million including working capital adjustments. We expect to receive net cash proceeds from our ownership interest of approximately $33.7 million in the aggregate, after repayment of project-level debt and transaction expenses. We intend to use the net proceeds from the sale for general corporate purposes and to invest in future accretive growth opportunities. We expect the sale of Gregory to close in the third quarter of 2013.

    Sale of Path 15

        On March 11, 2013 we entered into a purchase and sale agreement with Duke-American Transmission Company, a joint venture between Duke Energy Corporation and American Transmission Co., to sell our interests in Path 15. The sale closed on April 30, 2013 and we received net cash proceeds from the sale, including working capital adjustments, of approximately $52 million, plus a management agreement termination fee of $4.0 million, for a total sale price of approximately $56 million. The cash proceeds will be held for general corporate purposes and to invest in future accretive growth opportunities. On April 30, 2013, we recorded a gain on sale of approximately $7.0 million. All project level debt issued by Path 15, totaling $137.2 million as of March 31, 2013, transferred with the sale. Path 15 is accounted for as an asset held for sale in the consolidated balance sheets at March 31, 2013 and December 31, 2012 and as a component of discontinued operations in the consolidated statements of operations for the three months ended March 31, 2013 and 2012.

    Sale of Florida Projects

        On January 30, 2013, we entered into a purchase and sale agreement for the sale of Auburndale, Lake and Pasco, our Florida Projects, for approximately $140 million, with working capital adjustments. The sale closed on April 12, 2013 and we received net cash proceeds of approximately $117 million in the aggregate, after repayment of project-level debt at Auburndale and settlement of all outstanding natural gas swap agreements at Lake and Auburndale. This includes approximately $92 million received at closing and cash distributions from the projects of approximately $25 million received since January 1, 2013. We used a portion of the net proceeds from the sale to fully repay our senior credit facility, which had an outstanding balance of approximately $64.1 million on the closing date.

OUR POWER PROJECTS

        The table on the following page outlines our portfolio of power generating assets in operation as of May 6, 2013, including our interest in each facility. Management believes the portfolio is well diversified in terms of electricity and steam buyers, fuel type, regulatory jurisdictions and regional power pools, thereby partially mitigating exposure to market, regulatory or environmental conditions specific to any single region.

        Our customers are generally large utilities and other parties with investment-grade credit ratings, as measured by Standard & Poor's ("S&P"). Customers that have assigned ratings at the top end of the range have, in the opinion of the rating agency, the strongest capability for payment of debt or payment of claims, while customers at the bottom end of the range have the weakest capacity. Agency ratings are subject to change, and there can be no assurance that a ratings agency will continue to rate the customers, and/or maintain their current ratings. A security rating is not a recommendation to buy, sell or hold securities, it may be subject to revision or withdrawal at any time by the rating agency, and

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each rating should be evaluated independently of any other rating. We cannot predict the effect that a change in the ratings of the customers will have on their liquidity or their ability to pay their debts or other obligations.


 
Project
  Location
  Type
  MW
  Economic
Interest

  Net
MW

  Primary Electric Purchasers
  Power
Contract
Expiry

  Customer
Credit
Rating
(S&P)


 
Northeast Segment                                        

 
Cadillac   Michigan   Biomass     40     100.00 %   40   Consumers Energy     December 2028   BBB

 
Chambers   New Jersey   Coal     262     40.00 %   89   Atlantic City Elec.     December 2024   BBB+
                         
 
                          16   DuPont     December 2024   A

 
Kenilworth   New Jersey   Natural Gas     30     100.00 %   30   Merck, & Co., Inc.     July 2012 (1)   AA

 
Curtis Palmer   New York   Hydro     60     100.00 %   60   Niagara Mohawk Power Corperation     December 2027   A-

 
Selkirk   New York   Natural Gas     345     18.50 %   15   Merchant     N/A   N/R
                         
 
                          49   Consolidated Edison     August 2014   A-

 
Calstock   Ontario   Biomass     35     100.00 %   35   Ontario Electricity Financial Corp     June 2020   AA-

 
Kapuskasing   Ontario   Natural Gas     40     100.00 %   40   Ontario Electricity Financial Corp     December 2017   AA-

 
Nipigon   Ontario   Natural Gas     40     100.00 %   40   Ontario Electricity Financial Corp     December 2022   AA-

 
North Bay   Ontario   Natural Gas     40     100.00 %   40   Ontario Electricity Financial Corp     December 2017   AA-

 
Tunis   Ontario   Natural Gas     43     100.00 %   43   Ontario Electricity Financial Corp     December 2014   AA-

 
Southeast Segment                                        

 
Orlando   Florida   Natural Gas     129     50.00 %   46   Progress Energy Florida     December 2023   BBB+
                         
 
                          19   Reedy Creek Improvement District (2)     December 2013   A

 
Piedmont (3)   Georgia   Biomass     53     98.0 %   52   Georgia Power     December 2032   A

 
Northwest Segment                                        

 
Mamquam   British Columbia   Hydro     50     100.00 %   50   British Columbia Hydro and Power Authority     September 2027   AAA

 
Moresby Lake   British Columbia   Hydro     6     100.00 %   6   British Columbia Hydro and Power Authority     August 2022   AAA

 
Williams Lake   British Columbia   Biomass     66     100.00 %   66   British Columbia Hydro and Power Authority     March 2018   AAA

 
Idaho Wind   Idaho   Wind     183     27.56 %   50   Idaho Power Co.     December 2030   BBB

 
Rockland   Idaho   Wind     80     50.00 %   40   Idaho Power Co.     December 2036   BBB

 
Goshen North   Idaho   Wind     125     12.50 %   16   Southern California Edison     November 2030   BBB+

 
Meadow Creek   Idaho   Wind     120     100.00 %   120   PacifiCorp     December 2032   A-

 
Frederickson   Washington   Natural Gas     250     50.15 %   50   Benton Co. PUD     August 2022   A+
                         
 
                          45   Grays Harbor PUD     August 2022   A
                         
 
                          30   Franklin, Co. PUD     August 2022   A

 
Koma Kulshan   Washington   Hydro     13     49.80 %   6   Puget Sound Energy     December 2037   BBB

 
Southwest Segment                                        

 
Naval Station   California   Natural Gas     47     100.00 %   47   San Diego Gas & Electric     December 2019   A

 
Naval Training Center   California   Natural Gas     25     100.00 %   25   San Diego Gas & Electric     December 2019   A

 
North Island   California   Natural Gas     40     100.00 %   40   San Diego Gas & Electric     December 2019   A

 
Oxnard   California   Natural Gas     49     100.00 %   49   Southern California Edison     May 2020   BBB+

 
Greeley   Colorado   Natural Gas     72     100 %   72   Public Service Company of Colorado     August 2013 (4)   A-

 
Manchief   Colorado   Natural Gas     300     100 %   300   Public Service Company of Colorado     October 2022   A-

 
Morris   Illinois   Natural Gas     177     100 %   77   Merchant     N/A   N/R
                         
 
                          100   Equistar Chemicals, LP     November 2023   BBB

 
Canadian Hills   Oklahoma   Wind     298     99.0 %   199   Southwestern Electric Power Company     December 2037   BBB
                         
 
                          48   Oklahoma Municipal Power Authority     December 2037   A
                         
 
                          48   Grand River Dam Authority     December 2032   A

 
(1)
The Kenilworth Energy Service Agreement ("ESA"), under which Kenilworth sells electricity and steam to Merck expired on July 31, 2012 and was extended on a month-to month basis by agreement with the purchaser. We are currently in negotiations with the purchaser regarding the renewal of the ESA with plans on signing a new contract in the second quarter of 2013.

(2)
Upon the expiry of the Reedy Creek PPA, the associated capacity and energy will be sold to Progress Energy Florida under the terms of the current agreement.

(3)
Piedmont achieved commercial operations on April 19, 2013.

(4)
We are currently considering various options regarding Greeley for the PPA expiry in August 2013.

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Consolidated Overview and Results of Operations

Performance highlights

        The following table provides a summary of our consolidated results of operations for the three months ended March 31, 2013 and 2012 which are analyzed in greater detail below:

 
  Three months ended
March 31,
 
 
  2013   2012  

Project income (loss)

  $ 31.1   $ (37.0 )

Income (loss) from continuing operations

    4.4     (67.7 )

Income from discontinued operations, net of tax

    0.9     11.6  

Net income (loss) attributable to Atlantic Power Corporation

    6.5     (42.3 )

Basic and diluted earnings (loss) per share from continuing operations

  $ 0.04   $ (0.47 )

Project Adjusted EBITDA (1)

    80.6     66.6  

Cash Available for Distribution (1)

    66.2     59.9  

(1)
See reconciliation and definition below under Supplementary Non-GAAP Financial Information.

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    Three months ended March 31, 2013 compared to the three months ended March 31, 2012

        The following table provides our consolidated results of operations:

 
  Three months ended March 31,  
 
  2013   2012   $ change   % change  

Project revenue:

                         

Energy sales

  $ 69.0   $ 60.0     9.0     15.0 %

Energy capacity revenue

    44.8     37.0     7.8     21.1 %

Other

    26.4     21.7     4.7     21.7 %
                   

    140.2     118.7     21.5     18.1 %

Project expenses:

                         

Fuel

    49.6     46.2     3.4     7.4 %

Operations and maintenance

    28.3     24.7     3.6     14.6 %

Development

    1.7         1.7     NM  

Depreciation and amortization

    41.3     26.5     14.8     55.8 %
                   

    120.9     97.4     23.5     24.1 %

Project other income (expense):

                         

Change in fair value of derivative instruments

    12.6     (57.2 )   69.8     NM  

Equity in earnings of unconsolidated affiliates

    7.2     2.9     4.3     NM  

Interest, net

    (8.0 )   (4.0 )   (4.0 )   NM  
                   

    11.8     (58.3 )   70.1     NM  
                   

Project income (loss)

    31.1     (37.0 )   68.1     NM  

Administrative and other expenses (income):

                         

Administration

    8.3     7.7     0.6     7.8 %

Interest, net

    25.9     22.0     3.9     17.7 %

Foreign exchange (gain) loss

    (7.5 )   1.0     (8.5 )   NM  
                   

    26.7     30.7     (4.0 )   -13.0 %
                   

Income (loss) from continuing operations before income taxes

    4.4     (67.7 )   72.1     NM  

Income tax benefit

    (2.5 )   (16.9 )   14.4     85.2 %
                   

Income (loss) from continuing operations

    6.9     (50.8 )   57.7     NM  

Income from discontinued operations, net of tax

    0.9     11.6     (10.7 )   -92.2 %
                   

Net income (loss)

    7.8     (39.2 )   47.0     NM  

Net loss attributable to noncontrolling interests

    (1.9 )   (0.1 )   (1.8 )   NM  

Net income attributable to preferred shares dividends of a subsidiary company

    3.2     3.2         NM  
                   

Net income (loss) attributable to Atlantic Power Corporation

  $ 6.5   $ (42.3 )   48.8     115.4 %
                   

Project Income (loss) by Segment

        We have five reportable segments: Northeast, Southeast, Northwest, Southwest and Un-allocated Corporate. The segment classified as Un-allocated Corporate includes activities that support the executive offices, capital structure, costs of being a public registrant in the United States and Canada, costs to develop future projects and intercompany eliminations. Unallocated Corporate also includes Rollcast, a 60% owned company, which develops, owns and operates renewable power plants that use wood or biomass fuel and Ridgeline, which develops and operates wind and solar renewable projects. These costs are not allocated to the operating segments when determining segment profit or loss.

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Project income (loss) is the primary GAAP measure of our operating results and is discussed below by reportable segment. A significant non-cash item that impacts project income (loss) and is subject to potentially significant fluctuations is the change in fair value of certain derivative financial instruments. These instruments are required by GAAP to be revalued at each balance sheet date (see Item 3. "Quantitative and Qualitative Disclosures About Market Risk" for additional information).

 
  Three months ended March 31, 2013  
 
  Northeast   Southeast (1)   Northwest   Southwest (2)   Un-allocated
Corporate
  Consolidated
Total
 

Project revenue:

                                     

Energy sales

  $ 36.0   $   $ 17.4   $ 15.7   $ (0.1 ) $ 69.0  

Energy capacity revenue

    22.7             21.9     0.2     44.8  

Other

    9.1         7.3     10.4     (0.4 )   26.4  
                           

    67.8         24.7     48.0     (0.3 )   140.2  

Project expenses:

                                     

Fuel

    25.3         3.3     21.0         49.6  

Operations and maintenance

    8.1         5.8     12.2     2.2     28.3  

Development

                    1.7     1.7  

Depreciation and amortization

    15.2         11.7     14.4         41.3  
                           

    48.6         20.8     47.6     3.9     120.9  

Project other income (expense):

                                     

Change in fair value of derivative instruments

    8.4     1.3     2.8         0.1     12.6  

Equity in earnings of unconsolidated affiliates

    5.5     0.6     0.7     0.6     (0.2 )   7.2  

Interest, net

    (4.0 )       (3.6 )   (0.2 )   (0.2 )   (8.0 )
                           

    9.9     1.9     (0.1 )   0.4     (0.3 )   11.8  
                           

Project income (loss)

  $ 29.1   $ 1.9   $ 3.8   $ 0.8   $ (4.5 ) $ 31.1  
                           

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  Three months ended March 31, 2012  
 
  Northeast   Southeast (1)   Northwest   Southwest (2)   Un-allocated
Corporate
  Consolidated
Total
 

Project revenue:

                                     

Energy sales

  $ 38.3   $   $ 8.8   $ 12.9   $   $ 60.0  

Energy capacity revenue

    22.4             14.6         37.0  

Other

    6.5         6.5     8.0     0.7     21.7  
                           

    67.2         15.3     35.5     0.7     118.7  

Project expenses:

                                     

Fuel

    26.2         3.8     16.2         46.2  

Operations and maintenance

    8.8         3.8     7.8     4.3     24.7  

Depreciation and amortization

    12.2         6.4     7.9         26.5  
                           

    47.2         14.0     31.9     4.3     97.4  

Project other income (expense):

                                     

Change in fair value of derivative instruments

    (57.9 )   1.4             (0.7 )   (57.2 )

Equity in earnings of unconsolidated affiliates

    3.9     (0.2 )   0.6     (2.2 )   0.8     2.9  

Interest, net

    (3.9 )               (0.1 )   (4.0 )
                           

    (57.9 )   1.2     0.6     (2.2 )       (58.3 )
                           

Project income (loss)

  $ (37.9 ) $ 1.2   $ 1.9   $ 1.4   $ (3.6 ) $ (37.0 )
                           

(1)
Excludes the Florida Projects which are designated as discontinued operations.

(2)
Excludes Path 15 which is designated as discontinued operations.

    Northeast

        Project income for the three months ended March 31, 2013 increased $67.0 million from the comparable 2012 period primarily due to:

    increased project income from Kapuskasing of $30.8 million due primarily to a positive $32 million non-cash change in the fair value of gas purchase agreements that were accounted for as derivatives;

    increased project income from North Bay of $31.4 million due primarily to a positive $32 million non-cash change in the fair value of gas purchase agreements that were accounted for as derivatives; and

    increased project income from Nipigon of $3.2 million due primarily to a positive $1.8 million non-cash change in the fair value of gas purchase agreements that were accounted for as derivatives.

    Southeast

        Project income for the three months ended March 31, 2013 increased $0.7 million from the comparable 2012 period due to increased project income of $0.8 million at the Orlando project. This increase is primarily attributable to a positive $0.5 million non-cash change in fair value of natural gas swap derivative instruments.

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        Project income for the Southeast segment excludes the Florida Projects which are accounted for as assets held for sale and as a component of discontinued operations and did not change materially for the three months ended March 31, 2013 from the comparable 2012 period.

    Northwest

        Project income for the three months ended March 31, 2013 increased $1.9 million from the comparable 2012 period primarily due to:

    increased project income from Williams Lake of $2.3 million due to increased generation; and

    increased project income from Rockland of $0.9 million attributable to an ownership percentage increase from 30% to 50% resulting from the Ridgeline acquisition during the fourth quarter of 2012.

        These increases were partially offset by:

    a project loss from Meadow Creek, which was acquired in December 2012, of $1.1. The loss was primarily due to $3.6 million of depreciation and amortization, $2.2 million of interest expense and $1.0 million of operating expense, partially offset by project revenues of $4.1 million and a $1.6 million non-cash increase in the fair value of the project's interest rate swaps accounted for as derivatives.

    Southwest

        Project income for the three months ended March 31, 2013 decreased $0.6 million from the comparable 2012 period primarily due to:

    decreased project income from Morris of $3.1 million due to a $3.3 million increase in maintenance costs, lower revenue and higher fuel costs.

        This decrease was partially offset by:

    increased project income of $2.1 million at Gregory primarily attributable to increased generation and decreased maintenance costs resulting from an outage during the first quarter of 2012.

        Project income for the Southwest segment excludes the Path 15 project which is accounted for as an asset held for sale and as a component of discontinued operations. Project income for Path 15 was $1.0 million and $1.8 million for the three months ended March 31, 2013 and 2012, respectively and did not change materially.

    Un-allocated Corporate

        Total project loss increased $0.9 million for the three months ended March 31, 2013 from the comparable 2012 period primarily due to higher general and administrative expenses.

Administrative and other expenses (income)

        Administrative and other expenses (income) include the income and expenses not attributable to our projects and are allocated to the Un-allocated Corporate segment. These costs include the activities that support the executive offices, capital structure, costs of being a public registrant in the United States and Canada, costs to develop future projects, interest costs on our corporate obligations, the impact of foreign exchange fluctuations and corporate tax. Significant non-cash items that impact Administrative and other expenses (income), which are subject to potentially significant fluctuations, include the non-cash impact of foreign exchange fluctuations from period to period on the U.S. dollar

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equivalent of our Canadian dollar-denominated obligations and the related deferred income tax expense (benefit) associated with these non-cash items.

    Administration

        The $0.6 million or 7.8% increase to administration expense from the comparable 2012 period was not material.

    Interest, net

        Interest expense increased $3.9 million or 17.7% from the comparable 2012 period primarily due to the issuance of the $130 million principal amount of convertible debentures in July of 2012 and issuance of the Cdn$100 million principal amount of convertible debentures in December of 2012.

    Foreign exchange (gain) loss

        Foreign exchange gain increased $8.5 million primarily due to a $14.7 million increase in unrealized gain in the revaluation of instruments denominated in Canadian dollars and a $3.2 million decrease in unrealized loss on foreign exchange forward contracts, offset by a $9.4 million decrease in realized gains on the settlement of foreign currency forward contracts. The U.S. dollar to Canadian dollar exchange rate was 1.016 at March 31, 2013 and increased by 2.1% in 2013 compared to a decrease of 1.9% in the comparable 2012 period.

    Income tax benefit

        Income tax benefit for the three months ended March 31, 2013 was $2.5 million. The difference between the actual tax benefit of $2.5 million and the expected income tax expense of $1.1 million, based on the Canadian enacted statutory rate of 25%, is primarily due to $1.8 million related to operating projects in higher tax jurisdictions, $2.3 million in foreign exchange and $2.4 million in other permanent differences. These amounts are partially offset by $2.9 million change in the valuation allowance. For the three months ended March 31, 2012, the actual and expected income tax benefit from continuing operations was $16.9 million. Items impacting the tax rate during the period include $2.6 million relating to operating projects in higher tax rate jurisdictions and $10.9 million from a change in estimates of equity method investments and various other permanent differences, entirely offset by $2.6 million in foreign exchange and a $12.4 million change in the valuation allowance.

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Generation and Availability

 
  Three months ended March 31,  
 
  2013   2012   % change
2013 vs. 2012
 

Aggregate power generation (Net MWh)

                   

Northeast

    697,776     665,193     4.9 %

Southeast (1)

    104,963     104,727     0.3 %

Northwest

    352,356     248,048     42.0 %

Southwest (2)

    757,339     474,630     59.6 %
               

Total

    1,912,424     1,492,598     28.1 %

Weighted average availability

                   

Northeast

    97.2 %   98.6 %   -1.4 %

Southeast (1)

    99.9 %   100.0 %   -0.1 %

Northwest

    91.4 %   93.2 %   -1.9 %

Southwest (2)

    95.0 %   97.3 %   -2.4 %
               

Total

    95.6 %   97.4 %   -1.8 %

(1)
Excludes the Florida Projects which are designated as discontinued operations.

(2)
Excludes the Delta-Person and Gregory projects for which we entered into agreements to sell.

    Three months ended March 31, 2013 compared with three months ended March 31, 2012

        Aggregate power generation for the three months ended March 31, 2013 increased 28.1% from the comparable 2012 period primarily due to:

    increased generation in the Northwest segment due to Meadow Creek, which achieved commercial operations in late December 2012, as well as generation from Goshen North and increased ownership of Rockland, both of which resulted from our December 2012 acquisition of Ridgeline; and

    increased generation in the Southwest segment due to Canadian Hills, which achieved commercial operations in late December 2012.

        Weighted average availability decreased from 97.4% for the three months ended March 31, 2012 to 95.6% for the three months ended March 31, 2013 period primarily due to:

    decreased availability in the Southwest segment resulting from maintenance at Morris during the first quarter of 2013; and

    decreased availability in the Northeast segment resulting from maintenance at Curtis Palmer to replace a turbine in the first quarter of 2013 as well as decreased availability at Kapuskasing, Calstock and Tunis, all of which underwent minor maintenance during the first quarter of 2013.

        Generation and availability statistics for the Southeast segment exclude the Florida Projects which are accounted for as assets held for sale and a component of discontinued operations. Total generation for Auburndale was 269,394 MWh and 190,186 MWh and availability was 98.8% and 99.1% for the three months ended March 31, 2013 and 2012, respectively. Total generation for Lake was 240,427 MWh and 118,069 MWh and availability was 97.3% and 98.2% for the three months ended March 31, 2013 and 2012, respectively. Total generation for Pasco was 39,270 MWh and 46,290 MWh and availability was 91.6% and 97.6% for the three months ended March 31, 2013 and 2012, respectively.

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Supplementary Non-GAAP Financial Information

        A key measure we use to evaluate the results of our business is Cash Available for Distribution. Cash Available for Distribution is not a measure recognized under GAAP, does not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. We believe Cash Available for Distribution is a relevant supplemental measure of our ability to pay dividends to our shareholders. A reconciliation of cash flows from operating activities, the most directly comparable GAAP measure, to Cash Available for Distribution is set out below under "Cash Available for Distribution." Investors are cautioned that we may calculate this measure in a manner that is different from other companies.

        The primary factor influencing Cash Available for Distribution is cash distributions received from the projects. These distributions received are generally funded from Project Adjusted EBITDA generated by the projects, reduced by project-level debt service, capital expenditures, dividends paid on preferred shares of a subsidiary company and adjusted for changes in project-level working capital and cash reserves. Project Adjusted EBITDA is defined as project income (loss) plus interest, taxes, depreciation and amortization (including non-cash impairment charges) and changes in fair value of derivative instruments. Project Adjusted EBITDA is not a measure recognized under GAAP and does not have a standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. We use Project Adjusted EBITDA to provide comparative information about project performance without considering how projects are capitalized or whether they contain derivative contracts that are required to be recorded at fair value. A reconciliation of project income (loss) to Project Adjusted EBITDA is set out below by segment under "Project Adjusted EBITDA" and a reconciliation of project income (loss) by segment to Project Adjusted EBITDA by segment is set out in Note 12 to the consolidated financial statements. Investors are cautioned that we may calculate this measure in a manner that is different from other companies.

Project Adjusted EBITDA

 
  Three months ended
March 31,
 
 
  2013   2012  
 
  (unaudited)
 

Project Adjusted EBITDA by Segment

             

Northeast

  $ 45.9   $ 42.4  

Southeast (1)

    2.1     2.1  

Northwest

    21.3     13.4  

Southwest (2)

    16.0     12.1  

Un-allocated corporate

    (4.7 )   (3.4 )
           

Total

    80.6     66.6  

Reconciliation to project income (loss)

             

Depreciation and amortization

    52.4     39.9  

Interest, net

    9.5     6.0  

Change in the fair value of derivative instruments

    (11.5 )   57.5  

Other (income) expense

    (0.9 )   0.2  
           

Project income (loss)

    31.1     (37.0 )

(1)
Excludes the Florida Projects which are designated as discontinued operations.

(2)
Excludes Path 15 which is designated as discontinued operations.

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    Northeast

        The following table summarizes Project Adjusted EBITDA for our Northeast segment for the periods indicated:

 
  Three months ended March 31,  
 
  2013   2012   % change
2013 vs. 2012
 

Northeast

                   

Project Adjusted EBITDA

  $ 45.9   $ 42.4     8 %

    Three months ended March 31, 2013 compared with three months ended March 31, 2012

        Project Adjusted EBITDA for the three months ended March 31, 2013 increased $3.5 million or 8% from the comparable 2012 period primarily due to increases in Project Adjusted EBITDA of:

    $1.6 million at Calstock primarily attributable to increased generation and higher capacity revenues resulting from escalation adjustments under its PPA; and

    $1.7 million at Nipigon primarily attributable to higher generation and capacity revenues resulting from escalation adjustments under its PPA as well as lower maintenance costs resulting from an inspection in 2012.

        These increases were partially offset by decreases in Project Adjusted EBITDA of:

    $1.8 million at Curtis Palmer primarily attributable to lower revenues resulting from lower water flows from the comparable 2012 period and maintenance to replace a turbine during the first quarter of 2013.

    Southeast

        The following table summarizes Project Adjusted EBITDA for our Southeast segment for the periods indicated:

 
  Three months ended March 31,
 
  2013   2012   % change
2013 vs. 2012

Southeast

               

Project Adjusted EBITDA

  $ 2.1   $ 2.1   NM

    Three months ended March 31, 2013 compared with three months ended March 31, 2012

        Project Adjusted EBITDA in the Southeast segment did not change materially.

        Project Adjusted EBITDA for the Southeast segment excludes the Florida Projects which are accounted for as a component of discontinued operations. Project Adjusted EBITDA for Auburndale was $10.5 million and $10.6 million for the three months ended March 31, 2013 and 2012, respectively and did not change materially.

        Project Adjusted EBITDA for Lake was $13.1 million and $8.0 million for the three months ended March 31, 2013 and 2012, respectively.

    The increase is due primarily to a combination of increased generation, higher average energy prices, and higher capacity revenues resulting from contract escalation clauses.

        Project Adjusted EBITDA for Pasco was $1.1 million and $0.9 million for the three months ended March 31, 2013 and 2012, respectively and did not change materially.

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    Northwest

        The following table summarizes Project Adjusted EBITDA for our Northwest segment for the periods indicated:

 
  Three months ended March 31,  
 
  2013   2012   % change
2013 vs. 2012
 

Northwest

                   

Project Adjusted EBITDA

  $ 21.3   $ 13.4     59 %

    Three months ended March 31, 2013 compared with three months ended March 31, 2012

        Project Adjusted EBITDA for the three months ended March 31, 2013 increased by $7.9 million or 59% from the comparable 2012 period primarily due to increases in Project Adjusted EBITDA of:

    $1.7 million at Rockland attributable to an ownership percentage increase from 30% to 50% resulting from the Ridgeline acquisition during the fourth quarter of 2012;

    $3.1 million at Meadow Creek which was acquired in December 2012; and

    $2.3 million at Williams Lake attributable to higher revenues from increased generation and lower fuel costs.

    Southwest

        The following table summarizes Project Adjusted EBITDA for our Southwest segment for the periods indicated:

 
  Three months ended March 31,  
 
  2013   2012   % change
2013 vs. 2012
 

Southwest

                   

Project Adjusted EBITDA

  $ 16.0   $ 12.1     32 %

    Three months ended March 31, 2013 compared with three months ended March 31, 2012

        Project Adjusted EBITDA for the three months ended March 31, 2013 increased by $3.9 million from the comparable 2012 period primarily due to increases in Project Adjusted EBITDA of:

    $6.7 million at Canadian Hills, which became commercially operational during the fourth quarter of 2012; and

    $2.0 million at Gregory attributable to $1.3 million decrease in maintenance costs resulting from an expected outage during the first quarter of 2012.

        These increases were partially offset by decreases in Project Adjusted EBITDA of:

    $2.9 million at Morris attributable to an increase in maintenance costs, lower revenue and higher fuel costs.

        Project Adjusted EBITDA for the Southwest segment excludes the Path 15 project which is accounted for as a component of discontinued operations. Project Adjusted EBITDA for Path 15 was $6.2 million and $6.7 million for the three months ended March 31, 2013 and 2012, respectively and did not change materially.

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Cash Available for Distribution

        The payout ratio associated with the cash dividends declared to shareholders was 38% and 55% for the three months ended March 31, 2013 and 2012, respectively. On February 28, 2013, we announced a reduction in the dividend level from a monthly dividend level of Cdn$0.09583 to Cdn$0.03333 commencing with the March 2013 dividend to shareholders of record on March 28, 2013. The payout ratio for 2013 was positively impacted primarily by reduced cash dividends declared to shareholders as well as the inclusion of operating results from Canadian Hills and Meadow Creek which achieved commercial operations in late December 2012. The payout ratio for the three months ended March 31, 2012 was positively impacted by an increase in working capital associated with the Ontario plants acquired in the Partnership acquisition as well as reducing our combined foreign currency forward positions as a result of the acquisition of the Partnership. Due to the timing of numerous working capital adjustments and the cash payments associated with our corporate level interest payments, our payout ratio will fluctuate from quarter to quarter. For example, the interest payments on the $460 million Senior Notes are due semi-annually (May and November) and will impact our payout ratios in the second and fourth quarters.

        The table below presents our calculation of Cash Available for Distribution for the three months ended March 31, 2013 and 2012, and the reconciliation to cash flows from operating activities, the most directly comparable GAAP measure:

 
  Three months ended
March 31,
 
(in millions of U.S. dollars, except as otherwise stated)
  2013   2012  
 
  (unaudited)
 

Cash flows from operating activities

  $ 74.2   $ 66.6  

Project-level debt repayments

    (2.6 )   (2.7 )

Purchases of property, plant and equipment

    (2.2 )   (0.8 )

Dividends on preferred shares of a subsidiary company

    (3.2 )   (3.2 )
           

Cash Available for Distribution (1)

    66.2     59.9  

Total cash dividends declared to shareholders

    25.2     32.8  

Payout ratio

    38 %   55 %

(1)
Cash Available for Distribution is not a recognized measure under GAAP and does not have any standardized meaning prescribed by GAAP. Therefore, this measure may not be comparable to similar measures presented by other companies. See "Supplementary Non-GAAP Financial Information" above.

Consolidated Cash Flows

        At March 31, 2013, cash and cash equivalents increased $25.5 million from December 31, 2012 to $85.7 million. The increase in cash and cash equivalents was due to $74.2 million provided by operating activities offset by $19.6 million of cash used in financing activities and $30.6 million of cash used for investing activities. The operating, investing and financing activities include the Florida Projects and Path 15 assets held for sale. There was $5.0 million and $6.5 million of cash located at these projects at March 31, 2013 and December 31, 2012, respectively.

        At March 31, 2012, cash and cash equivalents increased $46.0 million from December 31, 2011 to $106.6 million. The increase in cash and cash equivalents was primarily due to $66.6 million provided

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by operating activities and $150.1 million of cash provided by financing activities, offset by $170.7 million of cash used in investing activities.

 
  Three months ended March 31,  
 
  2013   2012   $ Change
2013 vs. 2012
 

Net cash provided by operating activities

  $ 74.2   $ 66.6   $ 7.6  

Net cash used in investing activities

    (30.6 )   (170.7 )   140.1  

Net cash (used in) provided by financing activities

    (19.6 )   150.1     (169.7 )

Operating Activities

        Our cash flow from the projects may vary from year to year based on working capital requirements and the operating performance of the projects, as well as changes in prices under the PPAs, fuel supply and transportation agreements, steam sales agreements and other project contracts, changes in regulated transmission rates and the transition to market or re-contracted pricing following the expiration of PPAs. Project cash flows may have some seasonality and the pattern and frequency of distributions to us from the projects during the year can also vary, although such seasonal variances do not typically have a material impact on our business.

        Cash flow from operating activities increased by $7.6 million for the three months ended March 31, 2013 over the comparable period in 2012. The change from the prior year is primarily attributable to the increases in Project Adjusted EBITDA noted above.

Investing Activities

        Cash flow from investing activities includes changes in restricted cash. Restricted cash fluctuates from period to period in part because non-recourse project-level financing arrangements typically require all operating cash flow from the project to be deposited in restricted accounts and then released at the time that principal payments are made and project-level debt service coverage ratios are met. As a result, the timing of principal payments on project-level debt causes significant fluctuations in restricted cash balances, which typically benefits investing cash flow in the second and fourth quarters of the year and decreases investing cash flow in the first and third quarters of the year.

        Cash flow used in investing activities includes cash used to fund acquisitions in North American markets. Cash flows used in investing activities for the three months ended March 31, 2013 were $30.6 million compared to cash flows used in investing activities of $170.7 million for the three months ended March 31, 2012. The change is due to a $153.8 million decrease in construction in progress related to the Piedmont and Canadian Hills projects which have both recently completed construction and achieved commercial operations, partially offset by a $12.4 increase in the change in restricted cash.

Financing Activities

        Cash provided by financing activities for the three months ended March 31, 2013 resulted in a net outflow of $19.6 million compared to a net inflow of $150.1 million for the same period in 2012. The change from the prior year is due to a $163.4 million decrease in the proceeds from long-term debt primarily attributable to $176.1 construction loan proceeds received for the Canadian Hills construction loan in the three months ended March 31, 2012.

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Liquidity and Capital Resources

(in millions of U.S. dollars, except as otherwise stated)
  March 31,
2013
  December 31,
2012
 

Cash and cash equivalents

  $ 85.7   $ 60.2  

Restricted cash

    43.5     28.6  
           

Total

    129.2     88.8  

Revolving credit facility availability

    124.3     120.1  
           

Total liquidity

  $ 253.5   $ 208.9  
           

Overview

        Our primary sources of liquidity are distributions from our projects and availability under our revolving credit facility. Substantially all of the cash received from project distributions is used to pay dividends to our shareholders and interest on our outstanding convertible debentures, senior notes and other corporate-level debt. Our liquidity depends in part on our ability to successfully enter into new PPAs at facilities where PPAs expire or terminate. PPAs in our portfolio have expiration dates ranging from August 2013 to 2037. When a PPA expires or is terminated, it may be difficult for us to secure a new PPA, if at all, or the price received by the project for power under subsequent arrangements may be reduced significantly, which may reduce the cash received from project distributions. We may fund future acquisitions with a combination of cash on hand, the issuance of additional corporate debt or equity securities and the incurrence of privately-placed bank or institutional non-recourse operating level debt. Cash and cash equivalents and restricted cash at March 31, 2013 exclude $16.5 million related to the Florida Projects and Path 15 which are classified as assets held for sale.

        We do not expect any material unusual requirements for cash outflows during the remainder of 2013 for capital expenditures or other required investments. In addition as of May 6, 2013, there are no debt instruments with maturities in 2013 other than the cash grant loan at Piedmont, which will be repaid mostly by the 1603 Grant and some cash on hand. In April 2013, we utilized a portion of the net proceeds received from the sale of the Florida Projects to fully repay our senior credit facility which had an outstanding balance of $64.1 million at close of the transaction. The senior credit facility matures on November 4, 2015. As of March 31, 2013, $111.6 million was issued in letters of credit, but not drawn, to support contractual credit requirements at several of our projects. On April 30, 2013, letters of credit issued, but not drawn, were reduced to $82.5 million resulting from the sale of the Florida Projects and Path 15. We must meet certain financial covenants under the terms of our senior credit facility, which are generally based on ratios as described in Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012. As of May 6, 2013, we were in compliance with these ratios. After further review of our currently forecasted results for the remainder of the year, we anticipate that, it is likely we will not meet the covenant in our senior credit facility requiring that our ratio of Consolidated EBITDA to Consolidated Interest Expense (as described in the senior credit facility) exceeds 2.25, with respect to the quarter-end testing date for one or more of the remaining quarterly periods in the balance of the 2013 fiscal year. We are currently in discussions with our lenders to obtain a waiver of compliance with this ratio for the balance of the fiscal year and/or an amendment to the senior credit facility. We anticipate receiving a waiver for this possible default or an amendment to the applicable ratio, although no assurance can be given that we will be successful in this regard. In addition to securing such waiver and/or amendment, we plan to seek a broader amendment of our senior credit facility to take into account changes in the business development plans at Atlantic Power, which would also take into account the potential for a breach of our Leverage Ratio in early 2014, as more fully described in "Item 1A. Risk Factors", and intend to initiate discussions with our lenders in this regard. In the unlikely event that we're not successful in obtaining such waiver or amendment, based on our available cash resources, we expect to have the

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ability to cash collateralize the outstanding letters of credit under the senior credit facility and terminate the senior credit facility prior to any default (which would eliminate such facility as a source of liquidity).

        We believe that we will be able to generate sufficient amounts of cash and cash equivalents to maintain our operations and meet obligations as they become due for the next 12 months.

Corporate Debt

        The following table summarizes the maturities of our corporate debt at March 31, 2013:

 
  Interest Rates   Total Remaining Principal Repayments   2013   2014   2015   2016   2017   Thereafter  

Atlantic Power Corporation Notes

  9.0%   $ 460.0   $   $   $   $   $   $ 460.0  

Atlantic Power US (GP) Note

  6.0%     150.0             150.0              

Atlantic Power US (GP) Note

  5.9%     75.0                     75.0      

Atlantic Power Income LP Note

  6.0%     206.7                         206.7  

Convertible Debenture

  6.5%     44.1         44.1                  

Convertible Debenture

  6.3%     66.4                     66.4      

Convertible Debenture

  5.6%     79.2                     79.2      

Convertible Debenture

  5.8%     130.0                         130.0  

Convertible Debenture

  6.0%     98.4                         98.4  
                                   

Total Corporate Debt

      $ 1,309.8   $   $ 44.1   $ 150.0   $   $ 220.6   $ 895.1  
                                   

Project-Level Debt

        The following table summarizes the maturities of project-level debt. The amounts represent our share of the non-recourse project-level debt balances at March 31, 2013 and exclude any purchase accounting adjustments recorded to adjust the debt to its fair value at the time the project was acquired. Certain of the projects have more than one tranche of debt outstanding with different maturities, different interest rates and/or debt containing variable interest rates. Project-level debt agreements contain covenants that restrict the amount of cash distributed by the project if certain debt service coverage ratios are not attained. As of March 31, 2013, the covenants at the Gregory and Delta-Person are temporarily preventing those projects from making cash distributions to us. All project-level debt is non-recourse to us and substantially all of the principal is amortized over the life of the projects' PPAs. The non-recourse holding company debt relating to our investment in Chambers is held at Epsilon Power Partners, our wholly owned subsidiary.

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        The range of interest rates presented represents the rates in effect at March 31, 2013. The amounts listed below are in thousands of U.S. dollars, except as otherwise stated.

 
  Range of
Interest Rates
  Total
Remaining
Principal
Repayments
  2013   2014   2015   2016   2017   Thereafter  

Consolidated Projects:

                                               

Epsilon Power Partners

  7.4%   $ 32.7   $ 2.3   $ 5.0   $ 5.8   $ 6.0   $ 6.3   $ 7.3  

Piedmont (1)

  3.8% – 5.2%     127.6     55.1     4.5     4.5     3.4     2.9     57.2  

Path 15 (2)

  7.9% – 9.0%     137.2     9.4     8.1     8.7     9.5     8.2     93.3  

Auburndale (3)

  7.9% – 9.0%     3.7     3.7                      

Cadillac

  6.0% – 8.0%     37.2     1.8     2.0     3.9     2.5     3.0     24.0  

Rockland

  6.4%     86.5     1.2     1.5     1.8     1.9     2.2     77.9  

Curtis Palmer (4)

  5.9%     190.0         190.0                  

Meadow Creek (5)

  1.3 – 5.1%     229.3     59.5     4.9     4.6     5.3     5.3     149.7  
                                   

Total Consolidated Projects

        844.2     133.0     216.0     29.3     28.6     27.9     409.4  

Equity Method Projects:

                                               

Chambers

  0.6% – 7.2%     49.5     8.2     1.0     0.2     0.1         40.0  

Delta-Person (6)

  1.9%     7.5     1.0     1.3     1.4     1.5     1.1     1.2  

Gregory (7)

  2.3% – 7.7%     10.1     1.5     2.1     2.2     2.4     1.9      

Goshen

  3.0% – 6.6%     24.6     0.3     0.4     0.5     0.7     0.9     21.8  

Idaho Wind

  5.6%     48.3     1.6     2.4     2.6     2.5     2.7     36.5  
                                   

Total Equity Method Projects

        140.0     12.6     7.2     6.9     7.2     6.6     99.5  
                                   

Total Project-Level Debt

      $ 984.2   $ 145.6   $ 223.2   $ 36.2   $ 35.8   $ 34.5   $ 508.9  
                                   

(1)
As of March 31, 2013 the balance of $127.6 million on the Piedmont debt is funded by the related bridge loan of $51.0 million and $76.6 million funded by the construction loan that we expect to convert to a term loan. The terms of the Piedmont project-level debt financing include a $51.0 million bridge loan, a portion of which we expect to repay with the proceeds of the stimulus grant expected to be received from the U.S. Treasury, and an $82.0 million construction loan. While we fully expect the construction loan to convert to a term loan in second quarter 2013 based on the project meeting specified milestone requirements, if it does not, we have the option of amending or refinancing the construction loan or infusing additional equity into the project. Piedmont achieved commercial operations on April 19, 2013 and expects to submit an application under the 1603 federal grant program within 60 days from this date to recover approximately 30% of its capital cost, subject to the potential impact of the federal sequester on spending which we estimate to be a $2.0 million shortfall. The $51.0 million bridge loan is expected to be repaid by end of third quarter of 2013 and repayment of the expected $82.0 million term loan would commence in 2013.

(2)
Path 15 is classified as an asset held for sale as of March 31, 2013. Accordingly, the outstanding debt is recorded as a component of liabilities associated with an asset held for sale on the consolidated balance sheet at March 31, 2013.

(3)
Auburndale is classified as an asset held for sale as of March 31, 2013. Accordingly, the outstanding debt is recorded as a component of liabilities associated with an asset held for sale on the consolidated balance sheet at March 31, 2013.

(4)
The Curtis Palmer Notes are not considered non-recourse project-level debt as these notes are guaranteed by the Partnership. Interest expense associated with the Curtis Palmer notes are recorded as a component of project income.

(5)
Meadow Creek debt consists of $172.8 million drawn on a construction loan which converted to a term loan in March 2013 and a $56.5 million cash grant loan. The cash grant loan was repaid in April 2013 with $49.0 million of proceeds from the 1603 grant with the U.S. Treasury, $4.7 million from the former owners to cover the shortfall resulting from the federal sequester on spending and a $2.8 million contribution from us to cover the shortfall from lower grant-eligible costs, primarily as a result of lower project cost versus budget.

(6)
We have entered into an agreement to sell our interest in the Delta-Person project with plans to close the sale in the third quarter of 2013.

(7)
We have entered into an agreement to sell our interest in the Gregory project with plans to close the sale in the third quarter of 2013.

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Uses of Liquidity

        Our requirements for liquidity and capital resources, other than operating our projects, consist primarily of dividend payments to our common shareholders and preferred shareholders of a subsidiary company, interest on our outstanding convertible debentures, Senior Notes and other corporate and project level debt and capital expenditures, including major maintenance and business development costs. We may fund future acquisitions with a combination of cash on hand, the issuance of additional corporate debt or equity securities and the incurrence of privately placed bank or institutional non-recourse operating level debt, although we can provide no assurances regarding the availability of public or private financing on acceptable terms or at all.

Capital and Major Maintenance Expenditures

        Capital expenditures and maintenance expenses for the projects are generally paid at the project level using project cash flows and project reserves. Therefore, the distributions that we receive from the projects are made net of capital expenditures needed at the projects. The operating projects which we own consist of large capital assets that have established commercial operations. On-going capital expenditures for assets of this nature are generally not significant because most major expenditures relate to planned repairs and maintenance and are expensed when incurred.

        We expect to reinvest approximately $30 to $35 million in 2013 in our project portfolio in the form of capital expenditures and major maintenance expenses. As explained above, this investment is generally paid at the project level. We believe one of the benefits of our diverse fleet is that plant overhauls and other major expenditures do not occur in the same year for each facility. Recognized industry guidelines and original equipment manufacturer recommendations allow us to predict major maintenance events and balance the funds necessary for these expenditures over time. Future capital expenditures and major maintenance expenses may exceed the level in 2012 or the projected level in 2013 as a result of the timing of more infrequent events such as steam turbine overhauls and/or gas turbine and hydroelectric turbine upgrades.

        In all cases, scheduled maintenance outages during the three months ended March 31, 2013 and 2012 occurred at such times that did not adversely impact the facilities' availability requirements under their respective PPAs.

Recently Adopted and Recently Issued Accounting Guidance

        See Note 1 to the consolidated financial statements in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

        As of March 31, 2013, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices, will affect our cash flows or the value of our holdings of financial instruments. The objective of market risk management is to minimize the impact that market risks have on our cash flows as described in the following paragraphs.

        Our market risk-sensitive instruments and positions have been determined to be "other than trading." Our exposure to market risk as discussed below includes forward-looking statements and represents an estimate of possible changes in fair value or future earnings that would occur assuming hypothetical future movements in fuel and electricity commodity prices, currency exchange rates or interest rates. Our views on market risk are not necessarily indicative of actual results that may occur and do not represent the maximum possible gains and losses that may occur, since actual gains and losses will differ from those estimated based on actual fluctuations in fuel commodity prices, currency exchange rates or interest rates and the timing of transactions. See Note 6 to the consolidated financial statements, Derivative instruments and hedging activities for additional information.

Fuel Commodity Market Risk

        Our current and future cash flows are impacted by changes in electricity, natural gas and coal prices. See "Item 1A. Risk Factors—Risks Related to Our Business and Our Projects—Our projects depend on third-party suppliers under fuel supply agreements, and increases in fuel costs may adversely affect the profitability of the projects" in our Annual Report on Form 10-K for the year ended December 31, 2012. The combination of long-term energy sales and fuel purchase agreements is generally designed to mitigate the impacts to cash flows of changes in commodity prices by passing through changes in fuel prices to the buyer of the energy.

        The operating margin at our 50% owned Orlando project is also exposed to changes in natural gas prices following the expiration of its fuel contract at the end of 2013. As of May 6, 2013, we have entered into natural gas swaps in order to effectively fix approximately 74% of our share of the expected natural gas purchases at the project during 2014 and 2015 and approximately 38% of our share of the expected natural gas purchases at the project during 2016 and 2017.

        The Tunis project is exposed to changes in natural gas prices under spot purchases through the expiration of its PPA in 2014. The projected annual cash distributions at Tunis in 2013 would change by approximately $1.9 million per $1.00/MMBtu change in the price of natural gas based on the current level of natural gas volumes used by the project.

Electricity Commodity Market Risk

        Our current and future cash flows are impacted by changes in electricity prices when our projects operate with no PPA or projects that operate with PPAs that are based on spot market pricing. Our most significant exposure to market power prices is at the Chambers and Morris projects. At Chambers, our utility customer has the right to sell a portion of the plant's output into the spot power market if it is profitable to do so, and the Chambers project shares in the profits from these sales. In addition, during periods of low spot electricity prices the utility takes less generation, which negatively affects the project's operating margin. In 2013, projected cash distributions at Chambers would change by approximately $0.6 million per 10% change in the spot price of electricity based on a forecasted level of approximately $42/MWh and certain other assumptions. Our equity investment in the Chambers project is 40%. At Morris, the facility can sell approximately 100MW above the off-taker's demand into the grid at market prices. If market prices do not justify the increased generation the project has no requirement to sell power in excess of the off-taker's demand which can negatively impact operating margins. In 2013, projected cash distributions at Morris would change by approximately $1.0 million per 20% change in the spot price of electricity based on the current level of

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approximately 300,000 MWh grid sales and all other variables being held constant. We own 100% of the Morris project. See Item 1A. "Risk Factors—Risks Related to Our Business and Our Projects—Certain of our projects are exposed to fluctuations in the price of electricity, which may have a material adverse effect on the operating margin of these projects and on our business, results of operations and financial condition" in our Annual Report on Form 10-K for the year ended December 31, 2012.

        On April 30, 2013, we entered into a contract for the purchase of natural gas beginning on November 1, 2013 and expiring on March 31, 2014 for the Tunis project in order to fix approximately 50% of the expected natural gas purchase requirement during that period. Adjusted for this transaction, projected annual cash distributions at Tunis in 2013 would change by approximately $1.6 million per $1.00/MMBtu change in the price of natural gas based on the current level of natural gas volumes used by the project.

        When a PPA expires or is terminated, it is possible that the price received by the project for power under subsequent arrangements may be reduced and in some cases, significantly. Our projects may not be able to secure a new agreement and could be exposed to sell power at spot market prices. See Item 1A. "Risk Factors—Risks Related to Our Business and Our Projects—The expiration or termination of our power purchase agreements could have a material adverse impact on our business; results of operations and financial condition" in our Annual Report on Form 10-K for the year ended December 31, 2012. It is possible that subsequent PPAs or the spot markets may not be available at prices that permit the operation of the project on a profitable basis. If this occurs, the affected project may temporarily or permanently cease operations. Our current exposure in 2013 to these future agreements or spot market pricing is at the Greeley project. This exposure is not material.

Foreign Currency Exchange Risk

        We use foreign currency forward contracts to manage our exposure to changes in foreign exchange rates, as many of our projects generate cash flow in U.S. dollars and Canadian dollars but we pay dividends to shareholders and interest on corporate level long-term debt and convertible debentures predominantly in Canadian dollars. We have a hedging strategy for the purpose of mitigating the currency risk impact on future payments of dividends to shareholders. We have executed this strategy utilizing cash flows from our projects that generate Canadian dollars and by entering into forward contracts to purchase Canadian dollars at a fixed rate to hedge an average of approximately 112% of our expected dividend, long-term debt and convertible debenture interest payments through 2015. Changes in the fair value of the forward contracts partially offset foreign exchange gain or losses on the U.S. dollar equivalent of our Canadian dollar obligations. At March 31, 2013, the forward contracts consist of (1) monthly purchases through the end of 2013 of Cdn$6.0 million at an exchange rate of Cdn$1.134 per U.S. dollar and (2) contracts assumed in our acquisition of the Partnership with various expiration dates through December 2015 to purchase a total of Cdn$99.7 million at an average exchange rate of Cdn$1.14 per U.S. dollar. It is our intention to periodically consider extending or terminating the length of these forward contracts.

        In April 2013, we terminated various foreign currency forward contracts with expiration dates through June 2015 assumed in our acquisition of the Partnership resulting in proceeds of $9.4 million. Subsequent to the termination, cash flows from our projects that generate Canadian dollars and our remaining forward contracts to purchase Canadian dollars at a fixed rate, hedge an average of approximately 75% of our expected dividend, Canadian dollar denominated long-term debt and convertible debenture interest payments through 2015.

        The foreign exchange forward contracts are recorded at estimated fair value based on quoted market prices and the estimation of the counter-party's credit risk. Changes in the fair value of the foreign currency forward contracts are recorded in foreign exchange (gain) loss in the consolidated statements of operations.

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        The following table contains the components of recorded foreign exchange (gain) loss for the three months ended March 31, 2013 and 2012:

 
  Three months ended
March 31,
 
 
  2013   2012  

Unrealized foreign exchange (gain) loss:

             

Convertible debentures and other

  $ (11.0 ) $ 3.7  

Forward contracts

    6.0     9.2  
           

    (5.0 )   12.9  

Realized foreign exchange gains on forward contract settlements

    (2.5 )   (11.9 )
           

Total foreign exchange (gain) loss

  $ (7.5 ) $ 1.0  
           

        The U.S dollar to Canadian dollar exchange rate was 1.016 at March 31, 2013. The following table illustrates the impact on the fair value of our financial instruments of a 10% hypothetical change in the value of the U.S. dollar compared to the Canadian dollar as of March 31, 2013:

Convertible debentures denominated in Canadian dollars, at carrying value

  $ (26.2 )

Foreign currency forward contracts

  $ 14.0  

Interest Rate Risk

        Changes in interest rates do not have a significant impact on cash payments that are required on our debt instruments as approximately 90% of our debt, including our share of the project-level debt associated with equity investments in affiliates, either bears interest at fixed rates or is financially hedged through the use of interest rate swaps. After considering the impact of interest rate swaps described below, a hypothetical change in the average interest rate of 100 basis points would change annual interest costs, including interest at equity investments, by approximately $2.5 million.

    Cadillac

        We have an interest rate swap at our consolidated Cadillac project to economically fix its exposure to changes in interest rates related to the variable-rate debt. The interest rate swap agreement was designated as a cash flow hedge of the forecasted interest payments under the project-level Cadillac debt and changes in their fair market value are recorded in other comprehensive income (loss). The interest rate swap expires on September 30, 2025.

        In accounting for the cash flow hedge, gains and losses on the derivative contract are reported in other comprehensive income (loss), but only to the extent that the gains and losses from the change in value of the derivative contracts can later offset the loss or gain from the change in value of the hedged future cash flows during the period in which the hedged cash flows affect net income (loss). That is, for cash flow hedge, all effective components of the derivative contract's gains and losses are recorded in other comprehensive income (loss), pending occurrence of the expected transaction. Other comprehensive income (loss) consists of those financial items that are included in "Accumulated other comprehensive loss" in our accompanying consolidated balance sheets but not included in our net income (loss). Thus, in highly effective cash flow hedges, where there is no ineffectiveness, other comprehensive income changes by exactly as much as the derivative contracts and there is no impact on net income (loss) until the expected transaction occurs.

    Piedmont

        We executed two interest rate swaps at our consolidated Piedmont project to economically fix its exposure to changes in interest rates related to its variable-rate debt. The interest rate swap agreements are not designated as hedges and changes in their fair market value are recorded in the statements of operations. The interest rate swaps expire on February 29, 2016 and November 30, 2030, respectively.

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    Epsilon Power Partners

        Epsilon Power Partners, a wholly owned subsidiary, has an interest rate swap to economically fix the exposure to changes in interest rates related to the variable-rate non-recourse debt. The interest rate swap agreement effectively converted the floating rate debt to a fixed interest rate of 7.4% and a maturity date of July 2019. The notional amount of the swap matches the outstanding principal balance over the remaining life of Epsilon Power Partners' debt. This interest rate swap agreement is not designated as a hedge and changes in its fair market value are recorded in the consolidated statements of operations.

    Meadow Creek

        Meadow Creek executed interest rate swaps that we assumed in our acquisition to economically fix the exposure to changes in interest rates related to 62% of the outstanding variable-rate non-recourse debt. These swaps effectively modify the project's exposure by converting the project's floating rate debt to a fixed basis. The interest rate swaps are with various counterparties and swap the expected interest payments from floating LIBOR to fixed rates structured in two tranches. The first tranche is for the notional amount due of the term loan commencing on December 30, 2012 and ending December 31, 2024 and fixes the interest rate at 5.1%. The second tranche is the post-term portion of the loan, or the balloon payment and commences on December 31, 2024 and ends on December 31, 2030 fixing the interest rate at 6.7%.

    Rockland

        The Rockland project entered into interest rate swaps to manage interest rate risk exposure. These swaps effectively modify the project's exposure by converting the project's floating rate debt to a fixed basis. The interest rate swaps are with various counterparties and swap 100% of the expected interest payments from floating LIBOR to fixed rates structured in two tranches. The first tranche is for the notional amount due on the term loan commencing on December 30, 2011 and ending December 31, 2026 and fixes the interest rate at 4.2%. The second tranche is the post-term portion of the loan, or the balloon payment and commences on December 31, 2026 and ends on December 31, 2031 fixing the interest rate at 5.1%.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

        Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

Changes in Internal Control over Financial Reporting

        There have been no changes in internal control over financial reporting during the three months ended March 31, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting

        Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the control may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.

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PART II—OTHER INFORMATION

        

ITEM 1.    LEGAL PROCEEDINGS

        We are party to numerous legal proceedings, including securities class actions, from time to time. In particular, we and/or certain of our current and former officers have been named as defendants in various class action lawsuits. Due to the nature of these proceedings, the lack of precise damage claims and the type of claims we are subject to, we are unable to determine the ultimate or maximum amount of monetary liability or financial impact, if any, to us in these legal matters, which unless otherwise specified, seek damages from the defendants of material or indeterminate amounts.

Shareholder class action lawsuits

        On March 8, 14, 15 and 25, 2013 and April 23, 2013, five purported securities fraud class action complaints were filed by alleged investors in Atlantic Power common shares in the United States District Court for the District of Massachusetts (the "District Court") against Atlantic Power and Barry E. Welch, our President and Chief Executive Officer and a Director of Atlantic Power, in each of the actions, and, in addition to Mr. Welch, some or all of Patrick J. Welch, our former Chief Financial Officer, Lisa Donahue, our former interim Chief Financial Officer, and Terrence Ronan, our current Chief Financial Officer, in certain of the actions (the "Individual Defendants," and together with Atlantic Power, the "Defendants") (the "U.S. Actions"). On March 19, 2013 and April 2, 2013, two notices of action relating to Canadian securities class action claims against the Defendants were also issued by alleged investors in Atlantic Power common shares, and in one of the actions, holders of Atlantic Power convertible debentures, with the Ontario Superior Court of Justice in the Province of Ontario and on April 8, 2013, a similar claim issued by alleged investors in Atlantic Power common shares seeking to initiate a class action against the Defendants was filed with the Superior Court of Quebec in the Province of Quebec (the "Canadian Actions"). On May 2, 2013, a statement of claim relating to the April 2, 2013 notice of action was filed with the Ontario Superior Court of Justice in the Province of Ontario.

        The District Court complaints differ in terms of the identities of the Individual Defendants they name, as noted above, the named plaintiffs, and the purported class period they allege (July 23, 2010 to March 4, 2013 in three of the District Court actions and August 8, 2012 to February 28, 2013 in the other two District Court actions), but in general each alleges, among other things, that in Atlantic Power's press releases, quarterly and year-end filings and conference calls with analysts and investors, Atlantic Power and the Individual Defendants made materially false and misleading statements and omissions regarding the sustainability of Atlantic Power's common share dividend that artificially inflated the price of Atlantic Power's common shares. The District Court complaints assert claims under Section 10(b) and, against the Individual Defendants, under Section 20(a) of the Securities Exchange Act of 1934, as amended. The allegations in the Canadian Actions are essentially the same as those asserted in the District Court actions.

        The parties to each District Court action have filed joint motions requesting that the District Court set a schedule in the District Court actions, including: (i) setting a deadline for the lead plaintiff to file a consolidated amended class action complaint (the "Amended Complaint"), after the appointment of lead plaintiff and counsel; (ii) setting a deadline for Defendants to answer, file a motion to dismiss or otherwise respond to the Amended Complaint (and for subsequent briefing regarding any such motion to dismiss); and (iii) confirming that Defendants need not answer, move to dismiss or otherwise respond to any of the five District Court complaints prior to the filing of the Amended Complaint. Pursuant to the Private Securities Litigation Reform Act of 1995, all discovery is stayed in the five District Court actions. As of May 6, 2013, the plaintiffs have not specified an amount of alleged damages in the respective U.S. and Canadian Actions other than in the Canadian Actions filed on March 19, 2013 and April 2, 2013 (including the related statement of claim filed on May 2,

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2013), in which the plaintiffs have alleged damages of Cdn$1,100,000,000 and Cdn$208,500,000, respectively, plus interest and costs. However, because both the U.S. and Canadian Actions are in their early stages, Atlantic Power is unable to reasonably estimate the possible loss or range of losses, if any, arising from these litigations. Atlantic Power intends to defend vigorously against these actions.

Morris

        On May 29, 2011, our Morris facility was struck by lightning. As a result, steam and electric deliveries were interrupted to our host Equistar Chemicals, LP. ("Equistar"). We believed the interruption constituted a force majeure under the energy services agreement with Equistar. Equistar disputed this interpretation and initiated arbitration proceedings under the relevant agreement for recovery of resulting lost profits and equipment damage among other items. The Equistar arbitration claim has now been fully resolved. The lost profits portion of the claim was dismissed by the Arbitration Panel and all claims for equipment damage were resolved by the parties and their insurers through mediation on April 11 and 12, 2013, and a definitive Settlement Agreement and Mutual Release was executed effective as of April 30, 2013.

Other

        From time to time, Atlantic Power, its subsidiaries and the projects are parties to disputes and litigation that arise in the normal course of business. We assess our exposure to these matters and record estimated loss contingencies when a loss is likely and can be reasonably estimated. With respect to such other matters arising in the normal course of business, there are no matters pending as of March 31, 2013 that are expected to have a material impact on our financial position or results of operations or have been reserved for as of March 31, 2013.

        Other than as described above, there were no material changes to legal proceedings disclosed in "Item 3. Legal Proceedings" of our Annual Report on Form 10-K for the year ended December 31, 2012.

ITEM 1A.    RISK FACTORS

        Other than as described below, there were no material changes to the risk factors disclosed in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2012 (except to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations").

        The fifth paragraph in the risk factor "Our indebtedness and financing arrangements, and any failure to comply with the covenants contained therein, could negatively impact our business and our projects and could render us unable to make cash distributions, acquisitions or investments or issue additional indebtedness we otherwise would seek to do" in our Annual Report on Form 10-K for the year ended December 31, 2012 has been updated as follows:

        Our senior credit facility contains financial covenants, covenants requiring us to take certain actions and negative covenants restricting our ability to take certain actions. As of May 6, 2013, we were in compliance with all covenant ratios. After further review of our currently forecasted results for the remainder of the year, we anticipate that, it is likely we will not meet the covenant in our senior credit facility requiring that our ratio of Consolidated EBITDA (as defined in the senior credit facility) to Consolidated Interest Expense (as defined in the senior credit facility) exceeds 2.25, with respect to the quarter-end testing date for one or more of the remaining quarterly periods in the balance of the 2013 fiscal year, and we may not meet the covenant in our senior credit facility requiring that our ratio of Consolidated Total Net Debt (as defined in the senior credit facility) to Consolidated EBITDA (as defined in the senior credit facility) remains below 7.50 to 1.00 or 7.25 to 1.00 (the "Leverage Ratio"), as applicable, with respect to the quarter-end testing dates in 2014. If we are unable to meet these ratio

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covenants or other adverse events occur which may result in a breach of the ratios contained in our senior credit facility, a default under the senior credit facility would result or we may be prevented from taking certain actions that are not permitted under the senior credit facility unless certain ratios are met, including making distributions, making certain acquisitions, investments or capital expenditures, and refinancing or issuing debt, that we otherwise would seek to do. In such case, we may be required to seek waivers or consents from our lenders or amendments to our senior credit facility, or may be required to seek to refinance our senior credit facility. We are currently in discussions with our lenders to obtain a waiver of compliance with the Consolidated EBITDA to Consolidated Interest Expense ratio for the balance of the fiscal year and/or an amendment to the senior credit facility. We can provide no assurances that we will be able to obtain the waiver on terms acceptable to us or at all, and we will otherwise be in default under our senior credit facility, which would enable lenders thereunder to accelerate the repayment of amounts outstanding and exercise remedies with respect to collateral. Our ability to amend our senior credit facility or otherwise obtain waivers from our lenders depends on matters that are outside of our control and there can be no assurance that we will be successful in that regard. In addition to securing such waiver and/or amendment, we plan to seek a broader amendment of our senior credit facility to take into account changes in the business development plans at Atlantic Power, which would also take into account the anticipated breach of our Leverage Ratio in early 2014 as described above, and intend to initiate discussions with our lenders in this regard. In the event we are not able to refinance our senior credit facility or obtain waivers or amendments, our business may be materially adversely affected, including with respect to our ability to take the actions described above. In the event that we are not successful in obtaining such waiver or amendment, based on our available cash resources, we expect to have the ability to cash collateralize the outstanding letters of credit under the senior credit facility and terminate the senior credit facility prior to any default (which would eliminate such facility as a source of liquidity).

         We are subject to significant pending civil litigation, which if decided against us, could require us to pay substantial judgments or settlements and incur expenses that could have a material adverse effect on our business, results of operations, financial condition and liquidity.

        In addition to being subject to litigation in the ordinary course of business, we are party to numerous legal proceedings, including securities class actions, from time to time. On March 8, 14, 15 and 25, 2013 and April 23, 2013, five purported securities fraud class action complaints related to, among other things, claims that we made materially false and misleading statements and omissions regarding the sustainability of our common share dividend that artificially inflated the price of our common shares were filed in the United States District Court for the District of Massachusetts against us and certain of our current and former executive officers. On March 19, 2013 and April 2, 2013, two notices of action relating to purported Canadian securities class action claims were also issued by alleged investors in Atlantic Power common shares, and in one of the actions, holders of Atlantic Power convertible debentures, in the Ontario Superior Court of Justice in the Province of Ontario and on April 8, 2013, a similar claim, issued by alleged investors in Atlantic Power common shares, seeking to initiate a purported class action was filed in the Superior Court of Quebec in the Province of Quebec against us and certain of our current and former executive officers. On May 2, 2013, a statement of claim relating to the April 2, 2013 notice of action was filed with the Ontario Superior Court of Justice in the Province of Ontario. The allegations of these purported class actions are essentially the same as those asserted in the United States.

        These litigations may be time consuming, expensive and distracting from the conduct of our daily business. Due to the nature of these proceedings, the lack of precise damage claims (other than in certain Canadian Actions, as defined in "Item 1. Legal Proceedings") and the type of claims we are subject to, we are unable to determine the ultimate or maximum amount of monetary liability or financial impact, if any, to us in these legal matters, which unless otherwise described in "Item 1. Legal Proceedings", seek damages from the defendants of material or indeterminate amounts. As a result, we

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are also unable to reasonably estimate the possible loss or range of losses, if any, arising from these litigations. Although we are unable at this time to estimate what our ultimate liability in these matters may be, it is possible that we will be required to pay substantial judgments or settlements and incur expenses that could have a material adverse effect on our business, results of operations, financial condition and liquidity. We intend to defend vigorously against these actions. For additional information with respect to these unresolved matters, see "Item 1. Legal Proceedings".

ITEM 6.    EXHIBITS


EXHIBIT INDEX

Exhibit
No.
  Description
  4.1   Sixth Supplemental Indenture, dated as of March 22, 2013, between the Company and Computershare Trust Company of Canada (incorporated by reference to our Current Report on Form 8-K filed on March 26, 2013)
  4.2   Advance Notice Policy, dated April 1, 2013 (incorporated by reference to our Current Report on Form 8-K filed on April 3, 2013)
  4.3   Shareholder Rights Plan Agreement, dated effective as of February 28, 2013, between the Company and Computershare Investor Services Inc., as Rights Agent, which includes the Form of Right Certificate as Exhibit A (incorporated by reference to our Current Report on Form 8-K filed on March 1, 2013)
  10.1 * Purchase and sale agreement, dated as of January 30, 2013 among Quantum Lake LP, LLC, Quantum Lake GP, LLC, Quantum Pasco LP, LLC, Quantum Pasco GP, LLC, Quantum Auburndale LP, LLC, and Quantum Auburndale GP, LLC (as "Buyers") and Lake Investment, LP, NCP Lake Power, LLC, Teton New Lake, LLC, NCP Dade Power, LLC, Dade Investment, LP, Auburndale, LLC and Auburndale GP, LLC (as "Sellers")
  10.2   Modification and Joinder Agreement, dated as of January 15, 2013, among Atlantic Power Corporation, Atlantic Power Generation, Inc., Atlantic Power Transmission, Inc., Ridgeline Energy LLC, PAH RAH Holding Company LLC, Ridgeline Eastern Energy LLC, Ridgeline Energy Solar LLC, Lewis Ranch Wind Project LLC, Hurricane Wind LLC, Ridgeline Power Services LLC, Ridgeline Energy Holdings, Inc., Ridgeline Alternative Energy LLC, Frontier Solar LLC, PAH RAH Project Company LLC, Monticello Hills Wind LLC, Dry Lots Wind LLC, Smokey Avenue Wind LLC, Saunders Bros. Transportation Corporation, Bruce Hill Wind LLC, South Mountain Wind LLC, Great Basin Solar Ranch LLC, Goshen Wind Holdings LLC, Meadow Creek Holdings LLC, Ridgeline Holdings Junior Inc., Rockland Wind Ridgeline Holdings LLC, Meadow Creek Intermediate Holdings LLC and the other Subsidiaries party thereto in favor of Bank of Montreal, as Administrative Agent (incorporated by reference to our Annual Report on Form 10-K filed on March 1, 2013)
  10.3   Consent and Release, dated as of January 15, 2013, among Atlantic Power Corporation, Atlantic Power Generation, Inc., Atlantic Power Transmission, Inc., the Subsidiaries signatory thereto, the Lenders signatory thereto and Bank of Montreal, as Administrative Agent and Collateral Agent (incorporated by reference to our Annual Report on Form 10-K filed on March 1, 2013)
  12.1 * Statement re: Computation of Ratios
  31.1 * Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934

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Exhibit
No.
  Description
  31.2 * Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
  32.1 ** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.2 ** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  101.INS   XBRL Instance Document.
  101.SCH   XBRL Taxonomy Extension Schema.
  101.CAL   XBRL Taxonomy Extension Calculation Linkbase.
  101.DEF   XBRL Taxonomy Extension Definition Linkbase.
  101.LAB   XBRL Taxonomy Extension Label Linkbase.
  101.PRE   XBRL Taxonomy Extension Presentation Linkbase.

*
Filed herewith.

**
Furnished herewith.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 8, 2013

  Atlantic Power Corporation

 

By:

 

/s/ TERRENCE RONAN


      Name:   Terrence Ronan

      Title:   Chief Financial Officer (Duly Authorized
Officer and Principal Financial Officer)

67




Exhibit 10.1

 

Execution Version

 

PURCHASE AND SALE AGREEMENT

 

by and among

 

QUANTUM LAKE LP, LLC,
QUANTUM LAKE GP, LLC,
QUANTUM PASCO LP, LLC,
QUANTUM PASCO GP, LLC,
 QUANTUM AUBURNDALE LP, LLC and
QUANTUM AUBURNDALE GP, LLC,

 

as Buyers,

 

QUANTUM UTILITY GENERATION, LLC,
as Buyer Representative,

 

LAKE INVESTMENT, LP,
NCP LAKE POWER, LLC,
TETON NEW LAKE, LLC,
NCP DADE POWER, LLC,
DADE INVESTMENT, LP,
AUBURNDALE LP, LLC and
AUBURNDALE GP, LLC,

 

as Sellers,

 

and

 

ATLANTIC POWER CORPORATION,
as Seller Representative

 

dated as of

 

January 30, 2013

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

Article I DEFINITIONS AND RULES OF CONSTRUCTION

2

Section 1.1

Definitions

2

Section 1.2

Rules of Construction

15

Article II PURCHASE AND SALE; PURCHASE PRICE; CLOSING

15

Section 2.1

Purchase and Sale of Interests

15

Section 2.2

Purchase Price

15

Section 2.3

Deliverables upon Execution

16

Section 2.4

The Closing

16

Section 2.5

Closing Payment Estimates

18

Section 2.6

Post-Closing Payment Reconciliation

19

Article III REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS

21

Section 3.1

Organization

21

Section 3.2

Authorization; Enforceability

21

Section 3.3

No Conflict

22

Section 3.4

Litigation

22

Section 3.5

Brokers’ Fees

22

Section 3.6

Ownership of Interests

23

Article IV REPRESENTATIONS AND WARRANTIES RELATING TO THE PORTFOLIO COMPANIES

23

Section 4.1

Organization

23

Section 4.2

No Conflict

23

Section 4.3

Capitalization; Subsidiaries

24

Section 4.4

Financial Statements; No Undisclosed Liabilities

25

Section 4.5

Real Property

26

Section 4.6

Litigation

26

Section 4.7

Taxes

26

Section 4.8

Contracts

27

Section 4.9

Permits; Compliance with Laws

30

Section 4.10

No Employees

30

Section 4.11

Environmental Matters

30

Section 4.12

Insurance

32

Section 4.13

Personal Property

32

 

i



 

Section 4.14

Business

32

Section 4.15

Bank Accounts

32

Section 4.16

Regulatory Status

33

Section 4.17

Intellectual Property

33

Section 4.18

Books and Records

34

Section 4.19

No Other Representations and Warranties

34

Article V REPRESENTATIONS AND WARRANTIES RELATING TO THE BUYERS

34

Section 5.1

Organization

34

Section 5.2

Authorization; Enforceability

34

Section 5.3

No Conflict

35

Section 5.4

Financial Ability; Solvency

35

Section 5.5

Investment Representation

35

Section 5.6

Broker’s Fees

36

Section 5.7

Litigation

36

Section 5.8

Regulatory Status

36

Section 5.9

HSR Act Matters

36

Article VI COVENANTS

36

Section 6.1

Conduct of Business (Pre-Closing)

36

Section 6.2

Access

38

Section 6.3

Confidentiality; Public Announcements

39

Section 6.4

Third-Party Approvals

40

Section 6.5

Closing Conditions; Regulatory Filings

40

Section 6.6

No Solicitation

42

Section 6.7

Update Information

42

Section 6.8

Permits

42

Section 6.9

Survey and Title

43

Section 6.10

Applicable Agreements

43

Section 6.11

Off-Site Assets

44

Section 6.12

Reserved

44

Section 6.13

Records

44

Section 6.14

Insurance

44

Section 6.15

Casualty

44

Section 6.16

Condemnation

46

Section 6.17

Affiliate Contracts; Intercompany Obligations

48

 

ii



 

Section 6.18

Further Assurances

48

Section 6.19

Release

48

Section 6.20

GE Turbine Blades

49

Section 6.21

Closing Consents

50

Article VII TAX MATTERS

50

Section 7.1

Tax Returns

50

Section 7.2

Cooperation

51

Section 7.3

Transfer Taxes

51

Section 7.4

Tax Proceedings

51

Section 7.5

Purchase Price Allocation

52

Section 7.6

Resolution of Disputed Purchase Price Allocation Schedule Items

53

Section 7.7

Termination of Tax Sharing Agreements

54

Section 7.8

Survival

54

Article VIII CONDITIONS TO OBLIGATIONS

54

Section 8.1

Conditions to the Obligations of the Transaction Parties

54

Section 8.2

Conditions to Obligations of the Buyers

54

Section 8.3

Conditions to the Obligations of the Sellers

55

Section 8.4

Frustration of Closing Conditions

56

Article IX INDEMNIFICATION

56

Section 9.1

Survival of Representations, Warranties and Covenants

56

Section 9.2

Indemnification

57

Section 9.3

Indemnification Procedures

59

Section 9.4

Limitations on Liability

61

Section 9.5

Purchase Price Adjustment

62

Section 9.6

Mitigation

62

Section 9.7

Exclusive Remedy

63

Section 9.8

Directors and Officer’s Indemnification

63

Article X TERMINATION

63

Section 10.1

Termination

63

Section 10.2

Effect of Termination

65

Article XI MISCELLANEOUS

66

Section 11.1

Seller Representative

66

Section 11.2

Buyer Representative

68

Section 11.3

Notices

69

 

iii



 

Section 11.4

Assignment

70

Section 11.5

Rights of Third Parties

70

Section 11.6

Expenses

70

Section 11.7

Counterparts

70

Section 11.8

Entire Agreement

70

Section 11.9

Disclosure Schedules

71

Section 11.10

Amendments

71

Section 11.11

Publicity

71

Section 11.12

Severability

71

Section 11.13

Governing Law; Jurisdiction

72

Section 11.14

Specific Performance

72

Section 11.15

No Consequential Damages

73

 

Exhibits

 

Exhibit A

 

Form of Assignment and Assumption Agreement

 

 

 

Exhibit B

 

Form of Letter of Credit

 

 

 

Exhibit C

 

Form of Seller Guaranty

 

 

 

Exhibit D

 

Form of Transition Services Agreement

 

iv



 

Disclosure Schedules

 

Schedule 1.1(a)

 

 

Applicable Agreements

Schedule 1.1(b)

 

 

Current Assets

Schedule 1.1(c)

 

 

Current Liabilities

Schedule 1.1(d)

 

 

Knowledge Parties

Schedule 1.1(e)

 

 

Net Working Capital

Schedule 1.1(f)

 

 

Permitted Liens

Schedule 1.1(g)

 

 

Revenue Agreements

Schedule 3.3(a)

 

 

Seller and Portfolio Company Approvals

Schedule 3.3(b)

 

 

Lender Consents

Schedule 4.1(a)

 

 

Organizational Documents

Schedule 4.3

 

 

Capitalization; Subsidiaries

Schedule 4.4

 

 

Company Financial Statements

Schedule 4.4(a)

 

 

Certain Changes

Schedule 4.4(c)

 

 

Actions Since Financial Statement Date

Schedule 4.5

 

 

Real Property and Real Property Agreements

Schedule 4.6

 

 

Litigation

Schedule 4.7

 

 

Taxes

Schedule 4.8

 

 

Disclosed Contracts

Schedule 4.8(a)

 

 

Derivative Contracts

Schedule 4.9

 

 

Permits; Compliance with Laws

Schedule 4.10

 

 

Teton O&M Agreements

Schedule 4.11(a)

 

 

Environmental Reports

Schedule 4.11(b)

 

 

Environmental Issues

Schedule 4.11(c)

 

 

Environmental Permits

Schedule 4.11(d)

 

 

Environmental Emission Allocations, Allowances and Credits

Schedule 4.12

 

 

Company Policies

Schedule 4.13

 

 

Excluded Personal Property

Schedule 4.14

 

 

Sufficiency of Assets

Schedule 4.15

 

 

Bank Accounts

Schedule 4.16(c)

 

 

Non-Wholesale Sales

Schedule 4.17

 

 

Intellectual Property

Schedule 5.3

 

 

Buyer Approvals

Schedule 6.1(h)

 

 

Conduct of Business; Contracts

Schedule 6.1(k)

 

 

Conduct of Business; Capital Expenditures

Schedule 6.1(m)

 

 

Conduct of Business; Contingent Liabilities

Schedule 6.5

 

 

Regulatory Approvals

Schedule 6.8

 

 

Permits

Schedule 6.9

 

 

Property Covered by Title Commitments

Schedule 6.10

 

 

Credit Support Obligations

Schedule 6.12

 

 

O&M Agreements

Schedule 6.17

 

 

Affiliate Contracts

Schedule 6.21

 

 

Closing Consents

 

v


 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “ Agreement ”), dated as of January 30, 2013, is entered into by and among:

 

(a)           (i) LAKE INVESTMENT, LP, a Delaware limited partnership (“ Lake Investment ”), (ii) NCP LAKE POWER, LLC, a Delaware limited liability company (“ NCP Lake ”), (iii) TETON NEW LAKE, LLC, a Delaware limited liability company (“ Teton New Lake ”), (iv) NCP DADE POWER, LLC, a Delaware limited liability company (“ NCP Dade ”), (v) DADE INVESTMENT, LP, a Delaware limited partnership (“ Dade Investment ”), (vi) AUBURNDALE LP, LLC, a Delaware limited liability company “( Auburndale LP ”), and (vii) AUBURNDALE GP, LLC, a Delaware limited liability company (“ Auburndale GP ”);

 

(b)           ATLANTIC POWER CORPORATION, a corporation continued under the laws of the Province of British Columbia, Canada (“ ATP ,” or the “ Seller Representative ”);

 

(c)           (i) QUANTUM LAKE LP, LLC, a Delaware limited liability company (“ Quantum Lake LP ”), (ii) QUANTUM LAKE GP, LLC, a Delaware limited liability company (“ Quantum Lake GP ”), (iii) QUANTUM PASCO LP, LLC, a Delaware limited liability company (“ Quantum Pasco LP ”), (iv) QUANTUM PASCO GP, LLC, a Delaware limited liability company (“ Quantum Pasco GP ”), (v) QUANTUM AUBURNDALE LP, LLC, a Delaware limited liability company (“ Quantum Auburndale LP ”) and (vi) QUANTUM AUBURNDALE GP, LLC, a Delaware limited liability company (“ Quantum Auburndale GP ”); and

 

(d)           Quantum Utility Generation, LLC, a Delaware limited liability company (the “ Buyer Representative ”).

 

Each of Quantum Lake LP, Quantum Lake GP, Quantum Pasco LP, Quantum Pasco GP, Quantum Auburndale LP and Quantum Auburndale GP is referred to herein individually as a “ Buyer ” and collectively as the “ Buyers .”  Each of Lake Investment, NCP Lake, Teton New Lake, NCP Dade, Dade Investment, Auburndale LP and Auburndale GP is referred to herein individually as a “ Seller ” and collectively as the “ Sellers .” Each of the Sellers and the Buyers are referred to herein individually as a “ Transaction Party ” and collectively as the “ Transaction Parties .”  Each of the Transaction Parties, the Seller Representative and the Buyer Representative are referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

 

WHEREAS, ATP indirectly owns 100% of the issued and outstanding equity interests in each of the Sellers;

 

WHEREAS, Lake Investment owns a 48.9% limited partner interest in Lake Cogen, Ltd., a Florida limited partnership (“ Lake ”), NCP Lake owns a 1% general partner interest in Lake, and Teton New Lake owns a 50.1% limited partner interest in Lake (collectively, the “ Lake Interests ”);

 



 

WHEREAS, NCP Dade owns a 2% general partner interest in Pasco Cogen, Ltd., a Florida limited partnership (“ Pasco ”), and Dade Investment owns a 98% limited partner interest in Pasco (collectively, the “ Pasco Interests ”);

 

WHEREAS, Auburndale GP owns a 1% general partner interest in Auburndale Power Partners, Limited Partnership, a Delaware limited partnership (“ Auburndale ,”), and Auburndale LP owns a 99% limited partner interest in Auburndale (collectively, the “ Auburndale Interests ” and, together with the Lake Interests and the Pasco Interests, the “ Interests ”);

 

WHEREAS, Lake is the owner of an approximately 121 MW (as defined herein) dual-fuel, combined-cycle, cogeneration facility located in Umatilla, Florida (the “ Lake Facility ”); Pasco is the owner of an approximately 121 MW dual-fuel, combined-cycle facility located in Dade City, Florida (the “ Pasco Facility ”); and Auburndale is the owner of an approximately 155 MW dual-fuel, combined-cycle, cogeneration facility located in Polk County, Florida (the “ Auburndale Facility ” and together with the Lake Facility and the Pasco Facility, each a “ Facility ” and collectively, the “ Facilities ”);

 

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Sellers desire to sell to the Buyers, and the Buyers desire to purchase from the Sellers, all of the Interests.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION

 

Section 1.1            Definitions .  As used herein, the following terms shall have the following meaning:

 

Adjustment Statement ” has the meaning provided in Section 2.6(a) .

 

Administrative Services Agreement ” means that certain Third Amended and Restated Administrative Services Agreement dated as of September 30, 2009, by and among Atlantic Power Holdings, Inc., a Delaware corporation (as successor in interest to Atlantic Power Holdings, LLC) and Caithness Atlantic Services, as amended by that certain First Amendment to Third Amended and Restated Administrative Services Agreement dated as of December 29, 2011 (and as may be further amended, modified or supplemented from time to time).

 

Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such specified Person through one or more intermediaries or otherwise.  For the purposes of this definition, “control” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

 

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Affiliate Losses ” has the meaning provided such term in Section 9.2(a)(iii) .

 

Agreement ” has the meaning provided such term in the preamble to this Agreement.

 

Applicable Agreement ” means any Contract that relates to any of the Facilities or the Business pursuant to which credit support is currently being provided by a Portfolio Company or any Affiliate of such Portfolio Company as of the date hereof, all of which are set forth on Schedule 1.1(a) .

 

Applicable Portfolio Company ” means (i) Lake, with respect to each of Lake Investment, NCP Lake and Teton New Lake, (ii) Pasco, with respect to each of NCP Dade and Dade Investment, and (iii) Auburndale, with respect to each of Auburndale LP and Auburndale GP.

 

Assignment and Assumption Agreement ” means the Assignment and Assumption Agreement to be executed by each of the Sellers and each of the Buyers at the Closing, substantially in the form attached hereto as Exhibit A .

 

ATP ” has the meaning provided such term in the preamble to this Agreement.

 

Auburndale ” has the meaning provided such term in the recitals of this Agreement.

 

Auburndale Credit Agreement ” means that certain Credit Agreement dated as of November 21, 2008, between Auburndale and Union Bank of California, N.A.

 

Auburndale Facility ” has the meaning provided such term in the recitals of this Agreement.

 

Auburndale GP ” has the meaning provided such term in the preamble to this Agreement.

 

Auburndale Interests ” has the meaning provided such term in the recitals of this Agreement.

 

Auburndale LP ” has the meaning provided such term in the preamble to this Agreement.

 

Audited Financial Statements ” has the meaning provided such term in Section 4.4 .

 

Base Purchase Price ” has the meaning provided such term in Section 2.2 .

 

Bill of Sale ” means that certain Bill of Sale dated as of the date hereof by and between Atlantic Power Generation, Inc., a Delaware corporation, and Lake for the purchase of an automobile by Lake from Atlantic Power Generation, Inc.

 

Books and Records ” means all books and records relating to the Portfolio Companies, the Facilities or the Business, whether maintained at the Facilities or at any other location and whether in the possession or control of the Sellers, the Portfolio Companies or any of their respective Affiliates, including (a) sales and business records of the Portfolio Companies, (b) minute books of the Portfolio Companies, (c) operating and maintenance records for the

 

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Facilities, (d) operating, safety and maintenance guides and manuals for the Facilities, (e) engineering and design plans for the Facilities, (f) blueprints and as-built plans for the Facilities, (g) records relating to Intellectual Property owned by the Portfolio Companies, (h) service and warranty records, (i) Permits, (j) records and filings made with any Governmental Authority regarding the Business, (k) environmental reports, (l) NERC Documentation, (m) financial and accounting records of the Portfolio Companies (which includes any available supporting documentation such as invoices for operations and equipment, journal entries, bank statements and details related to fixed assets), (n) customer materials and records, (o) equipment logs, (p) records relating to Taxes and the preparation of Tax Returns and (q) any and all bid or offer materials or information relating to the Portfolio Companies or the Facilities.

 

Business ” means the business of owning and operating the Facilities in the manner in which they are owned and operated by the Portfolio Companies, including the generation and sale of electricity by the Portfolio Companies at or from the Facilities, the receipt by the Portfolio Companies of natural gas and the conduct of other activities by the Portfolio Companies incidental to the foregoing.

 

Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in the city of Houston, Texas or Boston, Massachusetts, are required or authorized by Law to remain closed.

 

Buyer ” or “ Buyers ” has the meaning provided such term in the preamble to this Agreement.

 

Buyer Approvals ” has the meaning provided such term in Section 5.3 .

 

Buyer Fundamental Representations ” has the meaning provided such term in Section 9.4(b) .

 

Buyer Indemnified Parties ” has the meaning provided such term in Section 9.2(a) .

 

Buyer Representative ” has the meaning provided such term in the preamble to this Agreement.

 

Caithness ” means Caithness Teton Operating Services, LLC, a Delaware limited liability company, Caithness Atlantic Services, and their Affiliates.

 

Caithness Atlantic Services ” means Caithness Atlantic Services Company, LLC, a Delaware limited liability company.

 

Capital Expenditures ” means expenditures made by any of the Sellers or any of the Portfolio Companies to maintain the fixed assets, plant or equipment (including any renewals, improvements or replacements) associated with any of the Facilities, in each instance as typically capitalized by the Applicable Portfolio Company and consistent with past practices.

 

CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq .

 

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Claim Notice ” has the meaning provided such term in Section 9.3(a) .

 

Closing ” has the meaning provided such term in Section 2.4(a) .

 

Closing Adjustment ” has the meaning provided such term in Section 2.5 .

 

Closing Date ” has the meaning provided such term in Section 2.4(a) .

 

Closing Net Working Capital ” has the meaning provided such term in Section 2.6(a) .

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Company Financial Statements ” has the meaning provided such term in Section 4.4 .

 

Company Policies ” has the meaning provided such term in Section 4.12 .

 

Condemnation Value ” has the meaning provided such term in Section 6.16(a) .

 

Confidential Information ” has the meaning provided such term in Section 6.3(a) .

 

Confidentiality Agreement ” means that certain Confidentiality Agreement, dated as of August 23, 2012, by and between ATP, an affiliate of the Sellers, and Quantum Utility Generation, LLC, an affiliate of the Buyers.

 

Contract ” means any legally binding agreement, arrangement, commitment, lease, license or contract.

 

Current Assets ” means the current assets of each of the respective Portfolio Companies, calculated in the same way and using the same methods as the applicable line items on the respective balance sheet of each Portfolio Company, specifically excluding: (i) any insurance policies of or on behalf of the Portfolio Companies, (ii) any derivative assets, including interest rate swap assets or interest rate swap settlements, and (iii) any spare parts and fuel inventory of the Portfolio Companies.  Attached as Schedule 1.1(b) , solely for illustrative purposes, is a sample calculation of Current Assets for each of the Portfolio Companies prepared by the Parties as of the Financial Statement Date.

 

Current Liabilities ” means the current liabilities of each of the respective Portfolio Companies, calculated in the same way and using the same methods as the applicable line items on the respective balance sheet of each Portfolio Company, specifically excluding: (i) any non-cash liabilities associated with derivative instruments, including interest rate swap assets or interest rate swap settlements, (ii) intercompany payables among the Sellers and their Affiliates, (iii) current indebtedness of Auburndale pursuant to the Auburndale Credit Agreement and (iv) accrued interest.  Attached as Schedule 1.1(c) , solely for illustrative purposes, is a sample calculation of Current Liabilities for each of the Portfolio Companies prepared by the Parties as of the Financial Statement Date.

 

Dade Investment ” has the meaning provided such term in the preamble to this Agreement.

 

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Data Room ” means the electronic documentation “file transfer protocol” (or “FTP”) site established by ATP on behalf of the Sellers and made available to the Buyers as of the last Business Day prior to the date hereof.

 

Disclosed Contracts ” has the meaning provided such term in Section 4.8(a) .

 

Disclosure Schedules ” means the disclosure schedules attached hereto.

 

Disputed Item ” has the meaning provided such term in Section 7.6 .

 

Dollars ” and “ $ ” mean the lawful currency of the United States.

 

Employee Benefit Plan ” means the following: (a) any plan, fund or program that provides health, medical, surgical, hospital or dental care or other welfare benefits, or benefits in the event of sickness, accident or disability, or death benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, (b) any plan, fund or program that provides retirement income to employees or results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, (c) any plan, fund or program that provides severance, unemployment, vacation or fringe benefits (including dependent and health care accounts), (d) any incentive compensation plan, deferred compensation plan, stock option or stock-based incentive or compensation plan, or stock purchase plan, or (e) any other “employee benefit plan” (as defined in Section 3(3) of ERISA, whether or not subject to ERISA), and any other written or oral plan, agreement or arrangement involving direct or indirect compensation including insurance coverage, severance benefits, disability benefits, fringe benefits, pension or retirement plans, profit sharing, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation.

 

Environmental Claim ” means any claim, action, cause of action, investigation or notice by any Person alleging liability or potential liability (including potential liability for investigatory tests, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (i) the presence or Release of any Hazardous Materials at any location, or (ii) any other circumstance forming the basis of any violation, or alleged violation, of, or liability or alleged liability under, any Environmental Law.

 

Environmental Law ” means any applicable Law relating to the protection of public health and the environment and natural resources, including any applicable provisions of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. , the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. , the Clean Water Act, 33 U.S.C. § 1251 et seq. , the Clean Air Act, 42 U.S.C. § 7401 et seq. , the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. , the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq. , the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. , the Emergency Planning and Community Right-to-Know Act of 1986 42 USC Section 11001 et seq. and all applicable analogous state or local statutes or ordinances, including any applicable provisions of the Florida

 

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Electrical Power Plant Siting Act, 403.501-403.518 et seq., Florida Statutes, and the regulations promulgated pursuant thereto.

 

Environmental Permits ” has the meaning provided such term in Section 4.11(b)(i) .

 

Environmental Reports ” has the meaning provided such term in Section 4.11(a) .

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

Estimated Closing Net Working Capital ” has the meaning provided such term in Section 2.5 .

 

Facility ” or “ Facilities ” has the meaning provided such term in the recitals of this Agreement.

 

FERC ” has the meaning provided such term in Section 4.16(a) .

 

Final Adjustment Statement ” has the meaning provided such term in Section 2.6(c) .

 

Final Closing Net Working Capital ” has the meaning provided such term in Section 2.6(c) .

 

Final Reconciliation Disputes ” has the meaning provided such term in Section 2.6(c) .

 

Financial Statement Date ” means September 30, 2012.

 

FPA ” has the meaning provided such term in Section 4.16(b) .

 

FPSC ” means the Florida Public Service Commission.

 

GAAP ” means generally accepted accounting principles as in effect from time to time in the United States.

 

GE ” has the meaning provided in Section 6.20(a) .

 

GE CSA ” has the meaning provided in Section 6.20(a) .

 

GE Turbine Blades ” has the meaning provided in Section 6.20(a) .

 

Governmental Authority ” means any foreign, federal, national, regional, state, municipal or local government, any political subdivision or any governmental, judicial, public or statutory instrumentality, independent system operator, electric reliability organization, tribunal, court, arbitral panel, agency, or other regulatory bureau, authority, body or entity having legal jurisdiction over the matter or Person in question.

 

Hazardous Materials ” means any hazardous waste as defined by 42 U.S.C. § 6903(5), any hazardous substance as defined by 42 U.S.C. § 9601(14), any pollutant or contaminant as defined by 42 U.S.C. § 9601(33) or any toxic substance, pollutant, contaminant, oil or hazardous

 

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material (including friable asbestos, urea formaldehyde insulation or polychlorinated biphenyls), in each case regulated by any Environmental Laws.

 

HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

Indemnified Party ” has the meaning provided such term in Section 9.3(a) .

 

Indemnifying Party ” has the meaning provided such term in Section 9.3(a) .

 

Indenture ” means that certain Indenture, dated as of November 4, 2011, by and among ATP, the guarantors named therein and Wilmington Trust, National Association.

 

Independent Auditor ” means a nationally recognized independent auditor that is not the independent auditor for any Party or its respective Affiliates.

 

Initial Reconciliation Disputes ” has the meaning provided such term in Section 2.6(b) .

 

Intellectual Property ” means the following intellectual property rights, both statutory and, if applicable, common law rights: (a) registered and unregistered copyrights, and applications for registration thereof, (b) registered and unregistered trademarks, service marks, trade names, slogans, domain names, logos, trade dress, and applications for registrations thereof, (c) patents, as well as any reissued and reexamined patents and extensions corresponding to the patents, and any patent applications, as well as any related continuation, continuation in part and divisional applications and patents issuing therefrom, (d) trade secrets, (e) know-how, and (f) any license, sub-license or other authorization or right to use any of the foregoing.

 

Interests ” has the meaning provided such term in the recitals of this Agreement.

 

Interim Period ” has the meaning provided such term in Section 6.1 .

 

IRS ” means the United States Internal Revenue Service.

 

Knowledge ” or “ Known ” means actual knowledge of those individuals set forth on Schedule 1.1(d) , as applicable, after reasonable investigation of the applicable Person’s direct reports.

 

Lake ” has the meaning provided such term in the recitals of this Agreement.

 

Lake Facility ” has the meaning provided such term in the recitals of this Agreement.

 

Lake Interests ” has the meaning provided such term in the recitals of this Agreement.

 

Lake Investment ” has the meaning provided such term in the preamble to this Agreement.

 

Law ” means any applicable law, rule, regulation, ordinance, order, judgment or decree of a Governmental Authority.

 

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Lender Consents ” has the meaning provided such term in Section 3.3(b).

 

Letter Agreement ” means that certain Letter Agreement, dated as of the date hereof, by and among the Parties.

 

Letter of Credit ” means the letter of credit, substantially in the form attached hereto as Exhibit B , issued to the Sellers on behalf of the Buyers in the amount of $10,000,000.

 

LIBOR ” means the rate for any one-month loan appearing on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London, England time) two (2) Business Days prior to commencement of any period for which interest may be due under this Agreement.

 

Lien ” means any charge, lien, pledge, option, encumbrance, mortgage, deed of trust, hypothecation or security interest.

 

Litigation ” means any investigation or inquiry (in each case, with respect to which written notice has been provided), action, claim, suit or proceeding by or before any Governmental Authority.

 

Losses ” means all actual liabilities, losses, damages, fines, penalties, judgments, settlements, awards, costs and expenses (including reasonable fees and expenses of counsel, court or arbitration fees, and other costs and expenses of investigation or defense).

 

Material Adverse Effect ” means, with respect to the Portfolio Companies, a material adverse effect on the Business, operations, assets or condition (financial or otherwise) of the Portfolio Companies, taken as a whole; provided , however , that “Material Adverse Effect” shall exclude any adverse effect that results or arises from: (i) any change generally affecting the industries or markets in which any of the Portfolio Companies operates or conducts business, including any changes generally affecting the markets for commodities or supplies of the type used or produced by the applicable Facilities, (ii) any change in national or international regulatory, economic or political conditions, including (A) any engagement in or escalation of hostilities, whether or not pursuant to the declaration of a national emergency or war, armed hostilities, sabotage and the occurrence of any military or terrorist attack or changes or additional security measures imposed by a Governmental Authority in connection therewith, and (B) any general change in the financial, banking, securities, currency, or financial markets, (iii) changes in industry standards, Laws, regulatory policies or GAAP, (iv) changes in Tax or accounting requirements or principles or the interpretation thereof, (v) any action taken by any of the Portfolio Companies or their Affiliates at the request or with the consent of the Buyers, (vi) any casualty loss or condemnation event subject to Section 6.15 or Section 6.16 , respectively, or (vii) the expiration of any Contract according to its terms; provided , that “Material Adverse Effect” shall not exclude any adverse effect described in clause (i), (ii), (iii) or (iv) that has had a disproportionate effect on the Portfolio Companies as compared to others similarly situated.

 

MW ” means megawatt, a standard term of measurement for bulk electricity.

 

NCP Dade ” has the meaning provided such term in the preamble to this Agreement.

 

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NCP Lake ” has the meaning provided such term in the preamble to this Agreement.

 

NERC ” means the North American Energy Reliability Corporation.

 

NERC Documentation ” means all documents related to or required by NERC with respect to the Portfolio Companies or the Business, including any such documentation providing evidence of NERC compliance (including descriptions of and manuals for procedures and the compliance thereof).

 

Net Working Capital ” means an amount (which may be positive or negative) equal to (a) Current Assets minus (b) Current Liabilities, all as calculated in accordance with GAAP applied using the accounting principles, practices and methods that were used in the preparation of the Company Financial Statements and consistent with the methodology for each of the Portfolio Companies set forth on Schedule 1.1(e) , in each case, consistently applied.  Attached as Schedule 1.1(e) , solely for illustrative purposes, is a sample calculation of Net Working Capital for each of the Portfolio Companies prepared by the Parties as of the Financial Statement Date.

 

Organizational Documents ” means any charter, certificate of incorporation, certificate of formation, certificate of limited partnership, articles of association, bylaws, operating agreement, partnership agreement, limited liability company agreement or similar formation or governing documents and instruments.

 

Outside Date ” has the meaning provided such term in Section 10.1(f) .

 

Party ” or “ Parties ” has the meaning provided such term in the preamble to this Agreement.

 

Pasco ” has the meaning provided such term in the recitals of this Agreement.

 

Pasco Facility ” has the meaning provided such term in the recitals of this Agreement.

 

Pasco Interests ” has the meaning provided such term in the recitals of this Agreement.

 

Percentage Ownership ” means each Seller’s ownership percentage in its Applicable Portfolio Company, as follows:  (i) with respect to Lake Investment, a 48.9% limited partnership interest in Lake, (ii) with respect to NCP Lake, a 1% general partnership interest in Lake, (iii) with respect to Teton New Lake, a 50.1% limited partnership interest in Lake, (iv) with respect to NCP Dade, a 2% general partnership interest in Pasco, (v) with respect to Dade Investment, a 98% limited partnership interest in Pasco, (vi) with respect to Auburndale LP, a 99% limited partnership interest in Auburndale, and (vii) with respect to Auburndale GP, a 1% general partnership interest in Auburndale.

 

Permits ” means authorizations, licenses, permits, certificates, registrations or filings issued by any Governmental Authority and necessary to conduct the Business; provided , however , that rights of way and similar rights set forth in the Real Property Agreements are not included in the definition of Permits.

 

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Permitted Liens ” means (a) Liens for current Taxes, impositions, assessments, fees, rents or other governmental charges levied or assessed or imposed (i) not yet due as of the Closing Date or (ii) being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) statutory Liens (including construction, materialmen’s, warehousemen’s, mechanic’s, repairmen’s, landlord’s and other similar Liens) arising in the ordinary course of business securing payments (i) not yet delinquent or (ii) being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (c) restrictive covenants, easements, rights-of-way, including utility rights-of-way, servitudes and similar burdens and defects, imperfections or irregularities of title that do not, individually or in the aggregate, materially interfere with the use of the property burdened thereby, (d) purchase-money Liens arising in the ordinary course of business, (e) Liens reflected in the Company Financial Statements, (f) pledges or deposits under workers’ compensation legislation, unemployment insurance Laws or similar Laws, (g) Liens set forth on Schedule 1.1(f) , (h) Liens created by the Buyers or their successors or assigns, and (i) other imperfections of title or Liens, if any, that do not, individually or in the aggregate, materially detract from the value of, or materially interfere with, the present use and enjoyment of the asset or property subject thereto or affected thereby or the conduct of the Business.

 

Person ” means any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.

 

Portfolio Companies ” means, collectively, Lake, Pasco and Auburndale.

 

Portfolio Company Approvals ” has the meaning provided such term in Section 4.2 .

 

Portfolio Company Lender Consents ” has the meaning provided such term in Section 4.2(b) .

 

Pre-Closing Tax Period ” has the meaning provided such term in Section 7.1(a) .

 

Progress Energy ” means Florida Power Corporation, d/b/a Progress Energy Florida Inc.

 

Prudent Industry Practices ” means those practices, methods, equipment, techniques, specifications and standards of safety and performance that are commonly used by electric generation stations in the United States of America as good, safe and prudent engineering and operating practices, which, in the exercise of reasonable judgment in light of facts known at the time a particular decision was made, would reasonably be expected to accomplish a desired result at a reasonable cost in connection with the operation, maintenance, repair and use of electric generating and other equipment, facilities and improvements of such electric generation stations, with commensurate standards of safety, performance, dependability, efficiency and economy having due regard for applicable Laws, approvals from any Governmental Authority, recommendations or requirements of original equipment manufacturers, requirements of any warranty coverage and in compliance with all contractual obligations of the Portfolio Companies and their Affiliates, and considering the state in which the Facility is located and the type and size of the Facility.  “Prudent Industry Practices” is not intended to be limited to the optimum

 

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practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, applicable Laws and approvals from any Governmental Authority.

 

Purchase Price ” has the meaning provided such term in Section 2.2 .

 

Purchase Price Allocation Schedule ” has the meaning provided such term in Section 7.5(a) .

 

Quantum Auburndale GP ” has the meaning provided such term in the preamble to this Agreement.

 

Quantum Auburndale LP ” has the meaning provided such term in the preamble to this Agreement.

 

Quantum Lake GP ” has the meaning provided such term in the preamble to this Agreement.

 

Quantum Lake LP ” has the meaning provided such term in the preamble to this Agreement.

 

Quantum Pasco GP ” has the meaning provided such term in the preamble to this Agreement.

 

Quantum Pasco LP ” has the meaning provided such term in the preamble to this Agreement.

 

Real Property ” has the meaning provided such term in Section 4.5(a) .

 

Real Property Agreements ” has the meaning provided such term in Section 4.5(b) .

 

Reference Date ” means (i) with respect to Lake, November 18, 2004, (ii) with respect to Pasco, November 18, 2004, and (iii) with respect to Auburndale, November 21, 2008.

 

Reimbursable Operating Expenses ” means (i) any and all amounts payable by the Applicable Portfolio Company to the Teton Operator pursuant to the applicable Teton O&M Agreement, including without limitation, all management fees, operating expenses, and any reimbursable expenses, and (ii) any administrative services fees and any reimbursable expenses payable by any Affiliate of the Sellers to Caithness Atlantic Services pursuant to the Administrative Services Agreement to the extent that such amount is reimbursed to such Affiliate by the Applicable Portfolio Company, in each case consistent with past practices.

 

Release ” means any release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials in the outdoor environment, including the movement of Hazardous Materials through or in the air, soil, surface water, ground water or property.

 

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Representatives ” means, as to any Person, its officers, directors, stockholders, members, partners, employees, counsel, accountants, financial advisors, consultants and other representatives of such Person and such Person’s Affiliates.

 

Resolution Period ” has the meaning provided such term in Section 2.6(c) .

 

Restoration Cost ” has the meaning provided such term in Section 6.15(a) .

 

Revenue Agreements ” means any tolling agreements, power purchase agreements, steam agreements and other similar revenue-generating agreements to which a Portfolio Company or any Affiliate of such Portfolio Company is a party that relates to the Facilities or the Business, all of which are set forth on Schedule 1.1(g) .

 

Schedule Supplement ” has the meaning provided such term in Section 6.7 .

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

SEC ” has the meaning provided such term in Section 6.3(b) .

 

Seller ” or “ Sellers ” has the meaning provided such term in the preamble to this Agreement.

 

Seller Approvals ” has the meaning provided such term in Section 3.3 .

 

Seller Fundamental Representations ” has the meaning provided such term in Section 9.4(a) .

 

Seller Guaranty ” means a guaranty substantially in the form of Exhibit C .

 

Seller Guarantor ” means ATP.

 

Seller Indemnified Parties ” has the meaning provided such term in Section 9.2(b) .

 

Seller Representative ” has the meaning provided such term in the preamble to this Agreement.

 

Straddle Period ” has the meaning provided such term in Section 7.1(b) .

 

Survival Period ” has the meaning provided such term in Section 9.1 .

 

Tax ” or “ Taxes ” means (a) all federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs, duties, capital stock, franchise, margins, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, escheat, registration, value added, wealth, net wealth, net worth, alternative or add-on minimum, estimated or any other taxes, unclaimed property liabilities, any payments in lieu of taxes or other similar payments, charges, fees, fines, levies, imposts, customs or duties of any kind, whatsoever, including any interest, penalty, fines,

 

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or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person or (b) any liability for the payment of any taxes, interest, penalty, addition to tax or like additional amount resulting from the application of Treasury Regulation Section 1.1502-6 or comparable federal, state or local Law.

 

Tax Authority ” means any Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax.

 

Tax Contest ” has the meaning provided such term in Section 7.4 .

 

Tax Proceeding ” has the meaning provided such term in Section 7.2 .

 

Tax Return ” means any return, declaration, report, claim for refund, property rendition or information return or statement relating to Taxes, including any schedule or attachment thereto and including any amendment thereof.

 

Transaction Party ” or “ Transaction Parties ” has the meaning provided such term in the preamble to this Agreement.

 

Transition Services Agreement ” means the Transition Services Agreement by and among the Parties, Atlantic Power Holdings, Inc., a Delaware corporation, and the Portfolio Companies, including the Letter Agreement attached thereto as Exhibit A, by and among Caithness Teton Operating Services, LLC and Caithness Atlantic Services, on the one hand, and certain Affiliates of the Sellers, on the other hand, each substantially in the form attached hereto as Exhibit D .

 

Teton New Lake ” has the meaning provided such term in the preamble to this Agreement.

 

Teton O&M Agreements ” has the meaning provided such term in Section 4.10 .

 

Teton Operator ” means Teton Operating Services, LLC, a Delaware limited liability company.

 

Third-Party Claim ” has the meaning provided such term in Section 9.3(a) .

 

Third Party ” means any Person other than (a) the Portfolio Companies, (b) any Party, or (c) any Affiliate of the Portfolio Companies or any Party.

 

Treasury Regulations ” means the regulations promulgated by the United States Treasury Department under the Code.

 

Unaudited Financial Statements ” has the meaning provided such term in Section 4.4 .

 

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Section 1.2            Rules of Construction .

 

(a)           All article, section, schedule and exhibit references used in this Agreement are to articles, sections, schedules and exhibits of or to this Agreement unless otherwise specified.  The schedules and exhibits attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.  All references to “schedules” or “Schedules” herein shall be deemed to be references to the Disclosure Schedules (or portion thereof, if applicable) unless otherwise specified.

 

(b)           If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Terms defined in the singular have the corresponding meanings in the plural, and vice versa.  Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa.  The term “includes” or “including” shall mean “including without limitation.”  The words “hereof,” “hereto,” “hereby,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular section or article in which such words appear.  The word “or” shall not be exclusive.

 

(c)           This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the drafting Party or any Party causing any instrument to be drafted.

 

(d)           The captions and headings in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

 

(e)           All references to currency herein shall be to, and all payments required hereunder shall be paid in, Dollars.

 

(f)            All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

 

(g)           Any event hereunder requiring the payment of cash or cash equivalents on a day that is not a Business Day shall be deferred until the next Business Day.

 

ARTICLE II
PURCHASE AND SALE; PURCHASE PRICE; CLOSING

 

Section 2.1            Purchase and Sale of Interests .  At the Closing, upon the terms and subject to the conditions set forth in this Agreement, the Buyers agree to purchase and acquire from the Sellers, and the Sellers agree to sell, convey, assign, transfer and deliver to the Buyers, all of the Sellers’ respective rights, title and interests in and to the Interests, free and clear of all Liens.

 

Section 2.2            Purchase Price .  The aggregate consideration (the “ Purchase Price ”) to be paid by the Buyers to the Sellers hereunder shall be $122,000,000 (the “ Base Purchase Price ”), as adjusted pursuant to Section 2.5 and Section 2.6 .  The Purchase Price shall be payable to the Sellers in consideration for the Interests.

 

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Section 2.3            Deliverables upon Execution .  Prior to or simultaneously with the execution of this Agreement, (i) the Buyers shall have caused the delivery of the Letter of Credit to the Seller Representative, which Letter of Credit may be delivered by facsimile or electronic .pdf format; provided , that the original Letter of Credit shall subsequently be delivered to the Seller Representative within one (1) Business Day of execution of this Agreement; (ii) Seller Guarantor shall have executed and delivered the Seller Guaranty to the Buyer Representative, and such Seller Guaranty shall be in full force and effect, and the representations and warranties of Seller Guarantor thereunder shall be true and correct in all material respects; and (iii) all of the parties to the Transition Services Agreement shall have executed and delivered to the other parties the Transition Services Agreement, including Exhibit A thereto, and it shall be in full force and effect.

 

Section 2.4            The Closing .

 

(a)           The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Andrews Kurth LLP, 600 Travis Street, Suite 4200, Houston, Texas 77002, commencing at 10:00 a.m. Houston time on the day that is two (2) Business Days after the date on which the last of the conditions set forth in Article VIII below has been satisfied or waived (other than those conditions that by their nature cannot be satisfied until the Closing, but subject to the satisfaction or waiver of such conditions) or such other date as the Buyer Representative and the Seller Representative may mutually determine, or at such other time and place as shall be agreed by the Buyer Representative and the Seller Representative (such date, the “ Closing Date ”).  The Closing shall be deemed to have been consummated at 12:01 a.m. Eastern time on the Closing Date.

 

(b)           At the Closing, the Seller Representative shall deliver, or cause to be delivered, on behalf of and at the direction of the Sellers, to the Buyers the following:

 

(i)            the Assignment and Assumption Agreement, duly executed by each of the Sellers;

 

(ii)           copies of the Organizational Documents of each of the Sellers and copies of the resolutions of the governing body of each of the Sellers authorizing the consummation of the transactions contemplated by this Agreement, in each case certified as of the Closing Date by an authorized officer of each of the Sellers;

 

(iii)          certification of non-foreign status for, and executed by, Atlantic Power Holdings, Inc., a Delaware corporation, in accordance with U.S. Treasury Regulation § 1.1445-2(b)(2), in a form reasonably acceptable to the Buyers;

 

(iv)          owners title insurance policies for each of the Facilities, as described in Section 6.9(b) ;

 

(v)           the Letter of Credit and written notice from ATP and the Sellers confirming their consent to the termination of the Letter of Credit in form and substance reasonably acceptable to the Buyers;

 

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(vi)          evidence, in form and substance reasonably satisfactory to the Buyers of the release of each of Lake and Pasco as a guarantor under the Indenture;

 

(vii)         evidence, in form and substance reasonably satisfactory to the Buyers, of (A) the release of each of the Portfolio Companies, the Interests and the assets of each of the Portfolio Companies from any Liens under ATP’s revolving credit facility, including any Liens created pursuant to the terms of any pledge agreements, which release shall include (1) the filing of any UCC-3 termination statements in respect thereof and (2) to the extent that any certificated securities are held as security, return of possession of certificated securities and (B) a termination of such Portfolio Companies’ guaranties;

 

(viii)        (A) payoff letters or other evidence, in form and substance satisfactory to the Buyers, evidencing that a portion of the funds delivered by the Buyer Representative pursuant to Section 2.4(c)(ii) will satisfy all liabilities under the Auburndale Credit Agreement at Closing and (B) releases effective upon receipt of such funds in customary forms and otherwise in form and substance reasonably satisfactory to the Buyers of all Liens relating to the Auburndale Credit Agreement;

 

(ix)          (A) a good standing certificate or certificate of “active status,” as applicable, of each of the Sellers and each of the Portfolio Companies, issued by the Secretary of State of the applicable governing jurisdiction of each of the Sellers and each of the Portfolio Companies and (B) a certificate from the Secretary of State of the State of Florida stating that Auburndale is registered as a foreign entity to do business in the State of Florida and has active status therein, each certificate delivered pursuant to clauses (A) and (B) to be as of a recent date not more than ten (10) days prior to the Closing Date;

 

(x)           the certificate referred to in Section 8.2(k) ;

 

(xi)          executed documents, in form and substance reasonably satisfactory to the Buyers, evidencing the resignation of, and release by, all officers, directors, managers and similar Persons of the Portfolio Companies;

 

(xii)         an affidavit in recordable form signed by Auburndale stating that the reference to “Auburndale Power Partners, L.P.” in the deed for the real property owned in fee by Auburndale was an error and that Auburndale is the same entity as “Auburndale Power Partners, L.P.”;

 

(xiii)        releases in customary forms and otherwise in form and substance reasonably satisfactory to the Buyers of all Liens relating to any derivative Contracts that any Portfolio Company is a party to, including any interest rate swap Contracts; and

 

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(xiv)        such other certificates, instruments and documents as may be reasonably requested by any Buyer to carry out the intent and purposes of this Agreement.

 

(c)           At the Closing, the Buyer Representative shall deliver, or cause to be delivered, on behalf of and at the direction of the Buyers, to the Sellers the following:

 

(i)            the Assignment and Assumption Agreement, duly executed by each of the Buyers;

 

(ii)           payment of an amount equal to the Base Purchase Price, as adjusted pursuant to Section 2.5 , by wire transfer of immediately available funds, in Dollars, to the account or accounts designated by the Sellers to the Buyers in writing at least two (2) Business Days prior to the Closing Date in accordance with Section 2.2 and Section 2.5 ;

 

(iii)          the certificate referred to in Section 8.3(g) ; and

 

(iv)          such other certificates, instruments and documents as may be reasonably requested by any Seller to carry out the intent and purposes of this Agreement.

 

Section 2.5            Closing Payment Estimates .     At least five (5) Business Days prior to the Closing Date, the Seller Representative shall prepare and deliver or cause to be prepared and delivered to the Buyer Representative a statement containing the Sellers’ good faith calculation, of the Net Working Capital as of December 31, 2012 for each of the Portfolio Companies, based on the Company Financial Statements (updated to include information from and including the Financial Statement Date through December 31, 2012) and consistent with the methodology for each of the Portfolio Companies set forth on Schedule 1.1(e) , (collectively, the “ Estimated Closing Net Working Capital ”).  The Sellers’ calculation of the Estimated Closing Net Working Capital shall be determined in accordance with GAAP applied using the accounting principles, practices and methods that were used in the preparation of the Company Financial Statements and consistent with the methodology for each of the Portfolio Companies set forth on Schedule 1.1(e) .  The “ Closing Adjustment ” shall be an amount equal to the Estimated Closing Net Working Capital for the Portfolio Companies, (x) less the sum of (i) any distributions or dividends paid by the Portfolio Companies between, and including, January 1, 2013 and the Closing Date, (ii) any payments made by any of the Portfolio Companies to any of their Affiliates between, and including, January 1, 2013 and the Closing Date to settle intercompany account obligations (including indebtedness) but excluding Reimbursable Operating Expenses and any amounts paid pursuant to the Bill of Sale, (iii) any payments of principal and interest made by any of the Portfolio Companies between, and including, January 1, 2013 and the Closing Date to repay indebtedness of Auburndale pursuant to the Auburndale Credit Agreement, (iv) any payments made by any of the Portfolio Companies between, and including, January 1, 2013 and the Closing Date in connection with any derivative Contracts, (v) any payments made by the Portfolio Companies between, and including, January 1, 2013 and the Closing Date in connection with the retention of any employees or staff of the Sellers, Caithness or any of their Affiliates that provide services to the Facilities that have not been approved by the

 

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Buyers, and (vi) the amount of the actual rental expense for the leased units incurred by any of the Portfolio Companies relating to the GE Turbine Blades but in any event not to exceed $165,000 and (y) plus any capital contributions made to any of the Portfolio Companies by any of the Sellers between, and including, January 1, 2013 and the Closing Date. If the Closing Adjustment is a positive number, the Base Purchase Price shall be increased by the amount of the Closing Adjustment.  If the Closing Adjustment is a negative number, the Base Purchase Price shall be reduced by the absolute value of the amount of the Closing Adjustment.

 

Section 2.6            Post-Closing Payment Reconciliation .

 

(a)           Prior to or on the date that is ninety (90) days after the Closing Date, the Buyer Representative shall prepare and deliver or cause to be prepared and delivered to the Seller Representative a statement (the “ Adjustment Statement ”) that shall set forth the Buyers’ good faith calculation of the Net Working Capital as of December 31, 2012 for each of the Portfolio Companies, based on the Company Financial Statements (updated to include information from and including the Financial Statement Date through December 31, 2012) and consistent with the methodology for each of the Portfolio Companies set forth on Schedule 1.1(e)  (collectively, the “ Closing Net Working Capital ”).  The Buyers’ calculation of the Closing Net Working Capital shall be determined in accordance with GAAP applied using the accounting principles, practices and methods that were used in the preparation of the Company Financial Statements and consistent with the methodology for each of the Portfolio Companies set forth on Schedule 1.1(e) .

 

(b)           After receipt of the Adjustment Statement, the Seller Representative shall have thirty (30) days to review the factual basis, mathematical calculations and accounting methods used therein.  On or prior to the thirtieth (30th) day after receipt of the Adjustment Statement, the Seller Representative shall deliver written notice to the Buyer Representative specifying any disputed items (the “ Initial Reconciliation Disputes ”) and the basis therefor and amount thereof.  If the Seller Representative fails to notify the Buyer Representative of any Initial Reconciliation Disputes on or prior to the thirtieth (30th) day after receipt of the Adjustment Statement, then all calculations and valuations of the Closing Net Working Capital set forth on the Adjustment Statement shall be deemed accepted by the Seller Representative and the Sellers and shall be final, binding, conclusive and nonappealable for all purposes of this Agreement.

 

(c)           If the Seller Representative notifies the Buyer Representative of any Initial Reconciliation Disputes in accordance with Section 2.6(b) , then the Buyer Representative and the Seller Representative shall, over the fifteen (15) days following the date of such notice (the “ Resolution Period ”), attempt in good faith to resolve the Initial Reconciliation Disputes, and any written resolution by them as to any disputed item shall be final, binding, conclusive and nonappealable for all purposes of this Agreement.  If, at the conclusion of the Resolution Period, the Buyer Representative and the Seller Representative have not reached an agreement on the disputed items, then all Initial Reconciliation Disputes then remaining in dispute (the “ Final Reconciliation Disputes ”) shall be submitted by the Seller Representative and the Buyer Representative to an Independent Auditor upon which the Buyer Representative and the Seller Representative shall reasonably agree prior to expiration of the Resolution Period.  All fees and expenses

 

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relating to the work, if any, to be performed by such Independent Auditor pursuant to this Section 2.6 shall be borne by the Sellers, on the one hand, and by the Buyers, on the other hand, based upon the percentage that the amount not ultimately awarded to such Transaction Parties by such Independent Auditor bears to the amount actually contested by such Transaction Parties in the Final Reconciliation Disputes.  Except as provided in the preceding sentence, all other costs and expenses incurred by the Transaction Parties in connection with resolving any Final Reconciliation Disputes hereunder before such Independent Auditor shall be borne by the Transaction Party incurring such cost and expense.  With respect to each disputed line item of the Closing Net Working Capital, such Independent Auditor’s final determination, if not in accordance with the position of either the Seller Representative, on the one hand, or the Buyer Representative, on the other hand, will not be in excess of the higher, nor less than the lower, of the amounts advocated by the Buyer Representative in its calculation of the Closing Net Working Capital or the corresponding amounts claimed by the Seller Representative in the initial notice of any Initial Reconciliation Disputes delivered by the Seller Representative pursuant to Section 2.6(b) .  For the avoidance of doubt, the Independent Auditor shall not review any line item or make any determination with respect to any matter other than the Final Reconciliation Disputes.  The Transaction Parties shall instruct the Independent Auditor to render its reasoned written decision, acting as an expert and not as an arbitrator, as soon as practicable but in no event later than sixty (60) days after its engagement (which engagement shall be made no later than ten (10) Business Days after the end of the Resolution Period).  Such decision shall be determined in accordance with GAAP applied using the accounting principles, practices and methods that were used in the preparation of the Company Financial Statements and consistent with the methodology for each of the Portfolio Companies set forth on Schedule 1.1(e) , shall be set forth in a written statement delivered to the Seller Representative and the Buyer Representative and shall be final, binding, conclusive and nonappealable for all purposes hereunder.  Notwithstanding anything else contained herein, no Party may assert that any award issued by the Independent Auditor is unenforceable because it has not been timely rendered.  The term “Final Adjustment Statement” shall mean the definitive Adjustment Statement setting forth the final determination of the Closing Net Working Capital (the “ Final Closing Net Working Capital ”) and resulting from (i) agreement by the Seller Representative and the Buyer Representative during the Resolution Period or otherwise, (ii) a deemed acceptance pursuant to Section 2.6(b)  or (iii) the determination by an Independent Auditor in accordance with this Section 2.6(c) .

 

(d)           If the Final Closing Net Working Capital is greater than the Estimated Closing Net Working Capital, then the Buyers shall pay to the Sellers an amount equal to such excess in the manner set forth in Section 2.6(f) .  Conversely, if the Final Closing Net Working Capital is less than the Estimated Closing Net Working Capital, then the Sellers shall pay to the Buyers an amount equal to such difference in the manner set forth in Section 2.6(f) .

 

(e)           For purposes of calculating Closing Net Working Capital and without limiting the provisions of Section 2.6(a)  and the generality of Section 6.2 , during the period of any dispute contemplated in this Section 2.6 , the Buyers shall, and shall cause their Affiliates to, provide the Seller Representative and its Representatives with

 

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reasonable access to the relevant Books and Records, facilities and employees, and their accountants’ work papers, schedules and other supporting data during normal business hours as may be reasonably requested by the Seller Representative.

 

(f)           Any payment required pursuant to Section 2.6(d)  shall be made by wire transfer of immediately available funds, in Dollars, to the account or accounts designated by the Seller Representative or the Buyer Representative, as the case may be, within five (5) Business Days after the Final Adjustment Statement is determined by (i) agreement by the Seller Representative and the Buyer Representative during the Resolution Period or otherwise, (ii) a deemed acceptance pursuant to Section 2.6(b)  or (iii) the determination by an Independent Auditor in accordance with Section 2.6(c) .  Payments due pursuant to Section 2.6(d)  shall be paid to the applicable Parties together with interest on the amount owed at a rate of interest equal to LIBOR (determined, as applicable, at the Closing Date and at the end of each 30-day period thereafter) plus two percent (2%) thereon (such interest accruing for the period commencing on, and including, the Closing Date and continuing until, and excluding, the date of payment).

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS

 

Each of the Sellers, severally and not jointly, hereby represents and warrants to the Buyers solely with respect to itself, except with respect to references to a specifically identified Seller, in which case only such specifically identified Seller so represents and warrants, as of the date of this Agreement and as of the Closing Date (except, in each case, where such representation and warranty is made as of another specific date) as follows:

 

Section 3.1            Organization .  The Seller is a limited partnership or limited liability company, as applicable, duly organized, validly existing and in good standing under the Laws of the state of its formation.

 

Section 3.2            Authorization; Enforceability .  The Seller has the requisite corporate, limited liability company or limited partnership, as applicable, power and authority to conduct its business and to own, lease and operate its properties, as presently conducted, owned or leased, and is duly qualified to do business in each jurisdiction in which the nature of its business or the location of its assets requires it to be so qualified.  The Seller has the requisite corporate, limited liability company or limited partnership, as applicable, power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by all requisite corporate, limited liability company or limited partnership, as applicable, action on the part of the Seller, and no other authorization on the part of the Seller is necessary to authorize this Agreement.  This Agreement has been duly and validly executed and delivered by the Seller and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to or affecting creditors’ rights generally or general principles of equity.

 

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Section 3.3            No Conflict .

 

(a)           The execution, delivery and performance of this Agreement by the Seller and the consummation of the transactions contemplated hereby by the Seller, assuming all required filings, consents, approvals, authorizations and notices required to be made, given or obtained by the Seller, as set forth on Schedule 3.3 (collectively, the “ Seller Approvals ”), have been so made, given or obtained, except with respect to any consent set forth on Schedule 6.21 , do not and will not:

 

(i)            conflict with or result in a violation of any provision of the Organizational Documents of the Seller;

 

(ii)           violate any Law applicable to the Seller or the Business or require any filing with, consent, approval or authorization of, or notice to, any Governmental Authority, except for any filings required by FERC in its order granting approval under FPA Section 203;

 

(iii)          require any consent under, constitute (with or without notice or lapse of time or both) a default under, result in any breach or violation of, or give any Person any rights of termination, acceleration or cancellation of, any Contract to which the Seller or any of its Affiliates or any of its or their assets, properties or businesses is bound; or

 

(iv)          result (with or without notice or lapse of time or both) in the creation of any Lien on any of the Interests in the Seller’s Applicable Portfolio Company;

 

(v)           except, with respect to clauses (b) and (c), for such violations, defaults, terminations, accelerations, cancellations, conflicts, breaches or defaults, or failures to make any such filing, obtain any such consent, approval or authorization, or provide any such notice, which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Seller to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

(b)           Schedule 3.3(b)  sets forth a list of all consents and waivers from lenders and creditors of the Seller and its Affiliates required to consummate the transactions contemplated herein (the “ Lender Consents ”) and all such Lender Consents have been obtained by the Seller.

 

Section 3.4            Litigation .  There is no Litigation pending or, to the Knowledge of the Seller or its Applicable Portfolio Company, threatened, that seeks to prevent the consummation of the transactions contemplated hereby or that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Seller to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

Section 3.5            Brokers’ Fees .  No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the

 

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transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Seller, any of its Affiliates or its Applicable Portfolio Company.

 

Section 3.6            Ownership of Interests .  The Seller holds of record and owns beneficially, and holds good and valid title to, its respective Interests, free and clear of any Liens.  The Interests constitute all of the partnership interests of the Seller in its Applicable Portfolio Company and have been duly authorized and validly issued and are fully paid and non-assessable.  The Seller is not a party to any agreement or obligation (contingent or otherwise) to sell or deliver any of the Interests, except as contemplated by this Agreement.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES
RELATING TO THE PORTFOLIO COMPANIES

 

Each of the Sellers, severally and not jointly, hereby represents and warrants to the Buyers, except with respect to references to a specifically identified Seller, in which case only such specifically identified Seller so represents and warrants, as of the date of this Agreement and as of the Closing Date (except, in each case, where such representation or warranty is made as of another specific date) as follows:

 

Section 4.1            Organization .  The Applicable Portfolio Company is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware or has active status under the Laws of the State of Florida, as applicable, and has the requisite limited partnership power and authority to own, lease and operate its assets and to conduct its portion of the Business.  The Applicable Portfolio Company is duly qualified or licensed to do business and is in good standing or has active status, as applicable, in each jurisdiction in which the ownership or operation of its assets or the character of its activities is such as to require such Portfolio Company to be so qualified or licensed, and, in particular, Auburndale is duly qualified or licensed to do business and has active status in the State of Florida.  Schedule 4.1(a)  lists each of the Organizational Documents of the Applicable Portfolio Company.

 

Section 4.2            No Conflict .

 

(a)           The execution, delivery and performance of this Agreement by the Seller and the consummation of the transactions contemplated hereby by the Seller, assuming all filings, consents, approvals, authorizations and notices required to be made, given or obtained by the Applicable Portfolio Company, as set forth on Schedule 3.3(a)  (collectively, the “ Portfolio Company Approvals ”), do not and will not:

 

(i)            conflict with or result in a violation of any provision of the Organizational Documents of the Applicable Portfolio Company;

 

(ii)           violate any Law applicable to the Applicable Portfolio Company or require any filing with, consent, approval or authorization of, or notice to, any Governmental Authority, except for any filings required by FERC in its order granting approval under FPA Section 203;

 

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(iii)          require any consent under, constitute (with or without notice or lapse of time or both) a default under, result in any breach or violation of, or give any Person any rights of termination, acceleration or cancellation of, any Contract to which the Applicable Portfolio Company, or any of its assets, properties or businesses, is bound; or

 

(iv)          result (with or without notice or lapse of time or both) in the creation of any Lien under any Contract to which the Applicable Portfolio Company, or any of its assets, properties or businesses, is bound;

 

except, with respect to clauses (b) and (c), for such violations, defaults, terminations, accelerations, cancellations, conflicts, breaches or defaults, or failures to make any such filing, obtain any such consent, approval or authorization, or provide any such notice, which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)           Schedule 3.3(b)  sets forth a list of all consents and waivers from lenders and creditors of the Applicable Portfolio Company and its Affiliates required to consummate the transactions contemplated herein (the “ Portfolio Company Lender Consents ”) and all such Portfolio Company Lender Consents have been obtained by the Applicable Portfolio Company.

 

Section 4.3            Capitalization; Subsidiaries .

 

(a)           The Seller’s Interests in the Applicable Portfolio Company, as well as the Applicable Portfolio Company’s legal name and place of formation, are set forth on Schedule 4.3 .  The Interests in the Applicable Portfolio Company constitute all of the issued and outstanding partnership interests in such Applicable Portfolio Company, and no Interests in the Applicable Portfolio Company have been reserved for issuance upon exercise of outstanding options, warrants or other similar rights.  There are no outstanding obligations of the Applicable Portfolio Company to repurchase, redeem or otherwise acquire any of the Interests in the Applicable Portfolio Company.  There are no options, warrants, convertible securities, unit appreciation, phantom unit, profit participation or other similar rights, agreements, arrangements or commitments relating to the partnership interests (or other securities) of the Applicable Portfolio Company that obligate the Applicable Portfolio Company to issue or sell any partnership interests (or other securities) of the Applicable Portfolio Company.  There are no voting trusts, voting agreements or similar agreements or understandings with respect to any of the Interests in the Applicable Portfolio Company.  Neither the Seller nor the Applicable Portfolio Company has violated in any material respect any applicable federal or state securities laws in connection with the offer, sale or issuance of any of the Interests in the Applicable Portfolio Company.

 

(b)           The Applicable Portfolio Company does not have any subsidiaries or own any equity interests in any other Person.

 

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Section 4.4            Financial Statements; No Undisclosed Liabilities Schedule 4.4 sets forth true and complete copies of (a) the audited balance sheet and related audited statements of operations, partners’ capital and cash flows for Auburndale as of and for the fiscal years ended December 31, 2011 and 2010, (b) the audited balance sheet and related audited statements of operations, partners’ capital and cash flows for Lake as of and for the fiscal year ended December 31, 2011 (the financial statements referenced in subparagraphs (a) and (b) collectively, the “ Audited Financial Statements ”), (c) the unaudited balance sheet and related unaudited statements of operations for Pasco as of and for the fiscal year ended December 31, 2011 and (d) the unaudited balance sheet and related unaudited statements of operations of the respective Portfolio Companies as of and for the period from January 1, 2012 through the Financial Statement Date (the financial statements referenced in clauses (c) and (d) collectively, the “Unaudited Financial Statements,” and together with the Audited Financial Statements, the “ Company Financial Statements ”), in each case prepared in accordance with GAAP.  Except as described in the notes thereto, the Company Financial Statements, together with the related notes and schedules, have been prepared in conformity with GAAP applied on a consistent basis and fairly present, in all material respects, the financial position, results of operation and cash flows of each of the Portfolio Companies as of the respective dates thereof or for the respective periods set forth therein; provided , however , that the Unaudited Financial Statements are subject to normal and recurring year-end adjustments and do not contain all of the footnotes and schedules contained in the Audited Financial Statements.  Except as set forth on Schedule 4.4(a) , the Applicable Portfolio Company has no debts, liabilities or obligations, secured or unsecured (whether accrued or unaccrued, absolute, liquidated or unliquidated, executory, contingent or otherwise and whether due or to become due) of a type required to be reflected on a balance sheet (or the footnotes thereto) prepared in accordance with GAAP, except (i) those that are reflected or reserved in the Unaudited Financial Statements as of the Financial Statement Date and (ii) those that have been incurred in the ordinary course of business since the Financial Statement Date and which are not material in amount.  Since the Financial Statement Date:

 

(a)           Except as set forth on Schedule 4.4(a) , no event, change, fact, condition, circumstance, damage, destruction or loss (whether or not covered by insurance) affecting the Business or the Applicable Portfolio Company has occurred which has had, or would reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect.

 

(b)           Except as specifically contemplated by this Agreement, the Applicable Portfolio Company has carried on its business in all material respects in the ordinary and usual course of business consistent with past practices.

 

(c)           Except as set forth on Schedule 4.4(c)  and other than entering into any intercompany obligations with any Affiliates that have been terminated as of December 31, 2012, the Applicable Portfolio Company has not taken any action or omitted to take any action that would have required any of the Buyers’ consent pursuant to Section 6.1 of this Agreement if such provisions had been in effect at all times since the Financial Statement Date.

 

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Section 4.5            Real Property .

 

(a)           Schedule 4.5 sets forth, as of the date of this Agreement, a complete and correct list of all real property owned in fee by the Applicable Portfolio Company (the “ Real Property ”).  Except as set forth on Schedule 4. 5, (i) the Applicable Portfolio Company owns good and marketable title to its Real Property, free and clear of Liens, except Permitted Liens, (ii) with respect to the Real Property, the Applicable Portfolio Company has not leased or otherwise granted any Person the right to use or occupy such Real Property or any material portion thereof that is still in effect and (iii) the Applicable Portfolio Company has not granted any outstanding options, rights of first refusal, rights of first offer, rights of reverter or other third party rights to purchase any of the Real Property.

 

(b)           Schedule 4.5 sets forth, as of the date of this Agreement, a complete and correct list of all leases, easements and access agreements used by the Applicable Portfolio Company in the conduct of the Business (the “ Real Property Agreements ”).  Except as set forth on Schedule 4.5 : (i) each Real Property Agreement constitutes a valid, binding and enforceable obligation of the Applicable Portfolio Company, and to the Knowledge of the Applicable Portfolio Company and the Seller, each other party thereto, subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to or affecting creditors’ rights generally or general principles of equity, (ii) the Applicable Portfolio Company is not in material default or breach under any Real Property Agreement and, to the Knowledge of the Applicable Portfolio Company and the Seller, no other party thereto is in material default or breach under any Real Property Agreement and no condition exists which, with notice or lapse of time or both, would constitute a default under any Real Property Agreement or by the Applicable Portfolio Company or, to the Knowledge of the Applicable Portfolio Company or the Seller, any other party thereto, (iii) the Applicable Portfolio Company has not subleased or otherwise granted to any Person the right to use or occupy any property leased under any Real Property Agreements, (iv) there are no claims affecting any such Real Property Agreement made by the Seller or of which the Seller has received notice, and (v) the Applicable Portfolio Company has good and valid rights in the Real Property Agreements, free and clear of Liens, except Permitted Liens.

 

Section 4.6            Litigation .  Except as set forth on Schedule 4.6 , (a) there is no Litigation pending or, to the Knowledge of the Applicable Portfolio Company or the Seller, threatened by any Person against or affecting the Applicable Portfolio Company or any assets or properties thereof, and (b) to the Knowledge of the Applicable Portfolio Company or the Seller, there is no injunction, order or judgment issued by any Governmental Authority pending against the Applicable Portfolio Company.

 

Section 4.7            Taxes .  Except as set forth on Schedule 4.7 , (a) all material Tax Returns required to be filed by the Applicable Portfolio Company have been timely filed, all such Tax Returns have been prepared in material compliance with all Laws and are true, correct and complete in all material respects, (b) all Taxes required to be paid by the Applicable Portfolio Company (whether or not shown to be due on such Tax Returns) have been timely paid, (c) there are no Liens on any of the assets of the Applicable Portfolio Company that have arisen as a result

 

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of any failure to pay any Taxes, other than any Permitted Liens, (d) the Applicable Portfolio Company has withheld and paid all Taxes required to be withheld and paid by it in connection with amounts paid or owing to any employee, independent contractor, shareholder, member, partner or creditor of the Applicable Portfolio Company, and all forms (including forms W-2 and 1099) required with respect thereto have been properly completed and timely filed, (e) there is no written claim pending by any applicable Tax Authority in connection with any Tax Return of the Applicable Portfolio Company or its assets and neither the Seller nor the Applicable Portfolio Company has any Knowledge of any threatened audit, examination, investigation, or claim by any Tax Authority against the Applicable Portfolio Company or its assets, (f) there are no agreements or waivers providing for an extension of time with respect to the filing of any Tax Returns of the Applicable Portfolio Company and none of the Seller and the Applicable Portfolio Company has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax, imposed on the Applicable Portfolio Company, (g) at Closing, the Applicable Portfolio Company will be classified for federal income Tax purposes (and, where applicable, state income Tax purposes) as a disregarded entity within the meaning of Treasury Regulations Section 301.7701-2(c)(2), (h) no power of attorney that is currently in force has been granted with respect to any matter relating to Taxes of the Applicable Portfolio Company, (i) all of the property of the Applicable Portfolio Company that is subject to property Tax has been properly listed and described, in all material respects, on the property Tax rolls of the appropriate taxing jurisdiction for all periods prior to Closing, and no portion of any of the Applicable Portfolio Company’s property constitutes omitted property for property Tax purposes, (j) no claim has ever been made by a Tax Authority in a jurisdiction where the Applicable Portfolio Company does not file Tax Returns that the Applicable Portfolio Company is or may be subject to taxation by that jurisdiction or the Applicable Portfolio Company’s assets are or may be subject to such taxation, (k) the Applicable Portfolio Company has not been a party to a transaction that is or is substantially similar to a “reportable transaction,” within the meaning of Treasury Regulation Section 1.6011-4(b), or any other transaction requiring disclosure under analogous provisions of United States, state, local or foreign Tax Law, (l) the entity or entities that own the Portfolio Companies that are not classified as disregarded entities for federal income Tax purposes (and where applicable, state income Tax purposes) are not foreign persons within the meaning of Section 1445 of the Code, (m) there is no property or obligation of the Applicable Portfolio Company, including uncashed checks to vendors, customers or employees, non-refunded overpayments or credits, that is escheatable or payable to any state or municipality under any applicable escheatment or unclaimed property Laws or that may at any time become escheatable to any state or municipality under any such Laws, (n) the Applicable Portfolio Company has not elected at any time to be classified as an association taxable as a corporation within the meaning of Treasury Regulation Section 301.7701-3(a), and (o) the Applicable Portfolio Company does not have any liability for the Taxes of any other Person as a transferee, by contract or otherwise.

 

Section 4.8            Contracts .

 

(a)           Except as set forth on Schedule 4.8 or as entered into after the date hereof in accordance with Section 6.1 , there are no outstanding Contracts (other than the Real Property Agreements) to which the Applicable Portfolio Company is a party or by which the Applicable Portfolio Company is bound (or to which an Affiliate of the Applicable Portfolio Company is a party or by which it is bound and that relates to the applicable

 

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Facility, other than any Contracts that shall be terminated on or prior to closing pursuant to Section 6.17 ): (i) other than Contracts addressed by Section 4.8(a)(vii) , (viii)  and (xi)  below, (A) that provide for the purchase or sale of any asset or that grant a right or option to purchase or sell any asset, other than in each case Contracts relating to assets with a nominal value of less than $100,000 individually or $500,000 in the aggregate, and (B) for the provision or receipt of any services or that grant a right or option to provide or receive any services, other than in each case Contracts relating to services with a nominal value of less than $100,000 individually or $500,000 in the aggregate, (ii) that contain a covenant not to compete or other agreement restricting the Applicable Portfolio Company from competing or engaging in any line of business or competing in any geographic area, (iii) under which the Applicable Portfolio Company has (A) created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) any indebtedness for borrowed money, (B) granted a Lien (other than a Permitted Lien) on its assets, whether tangible or intangible, or agreed to any restriction or limitation on distributions, dividends or return on equity, or extended credit to any Person (excluding trade receivables in the ordinary course of business) or (C) given any guaranty of payment or performance or any agreement to provide credit support or otherwise make capital contributions, loans or advances, (iv) that constitute any current Contract to which the Applicable Portfolio Company is a party for the purchase or sale of any business, corporation, partnership, joint venture or other business organization or that grant any Person a right of first refusal, right of first offer or other preferential right to purchase any asset of the Applicable Portfolio Company, (v) that are between or among the Applicable Portfolio Company, on the one hand, and the Seller, any Affiliate of the Seller (other than the Portfolio Companies) or any current or former officer, director, equity owner or employee of the Seller or any of its Affiliates, on the other hand, (vi) that provide employment, non-compete, severance, retention, change of control, termination pay or other arrangements with any individual or employee, excluding any that will terminate at or prior to Closing and that will not have any financial or other impact on the Applicable Portfolio Company following Closing, (vii) that provide the Applicable Portfolio Company the future right to purchase, exchange or sell natural gas, (viii) that provide the Applicable Portfolio Company the future right to purchase, exchange or sell electric power or ancillary services, (ix) that constitute interconnection Contracts, (x) that constitute transmission Contracts, (xi) that are for the transportation or storage of natural gas, (xii) that are outstanding futures, swap, collar, put, call, floor, cap, option or other similar Contracts, all of which are set forth on Schedule 4.8 , (xiii) under which the Applicable Portfolio Company has created, incurred, assumed or guaranteed any capitalized lease obligation, (xiv) that relate to material Intellectual Property, (xv) that are for consulting services that, individually or through a series of Contracts, involve payments to any Person (or its Affiliates) of more than Fifty Thousand Dollars ($50,000) over any one-year period and that are not terminable by their terms, without penalty, on ninety (90) days or less notice, (xvi) that have been entered into with any Governmental Authority and that relate to the payment or nonpayment of any Taxes, (xvii) that settle or relate to the settlement of any litigation with customers, (xviii) pursuant to which a Portfolio Company or any Affiliate of such Portfolio Company has provided credit support with respect to the Portfolio Companies or the Facilities, and (xix) that are any amendment, supplement, restatement or other modification relating to any of the foregoing.  Except as set forth on Schedule

 

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4.8 or as entered into after the date hereof in accordance with Section 6.1 , there are no outstanding Contracts to which an Affiliate of the Applicable Portfolio Company is a party or by which it is bound and that relates to the applicable Facility, other than any Contracts that shall be terminated on or prior to closing pursuant to Section 6.17 .  Contracts identified on Schedule 4.8 are hereafter referred to as the “ Disclosed Contracts .”

 

(b)           Except as set forth on Schedule 4.8 , (i) each Disclosed Contract constitutes a valid, binding and enforceable obligation of the Applicable Portfolio Company or, to the Knowledge of the Seller and the Applicable Portfolio Company, each other party thereto, subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to or affecting creditors’ rights generally or general principles of equity, and (ii) none of the Applicable Portfolio Company, any of its Affiliates or, to the Knowledge of the Seller or the Applicable Portfolio Company, any other signatory is in default or breach under any such Disclosed Contract.  Except as set forth on Schedule 4.8 , there does not exist any event that, with the giving of notice or the passage of time or both, would constitute a breach or default by the Applicable Portfolio Company, any of its Affiliates or, to the Knowledge of the Seller or the Applicable Portfolio Company, any other signatory under any Disclosed Contract.  No circumstance exists under or by virtue of any Disclosed Contract that (with or without notice or lapse of time) would cause the creation of any material Lien affecting the Applicable Portfolio Company or its assets.  All credit support obligations of the Applicable Portfolio Company or any Affiliates of the Applicable Portfolio Company with respect to the Applicable Portfolio Company or the applicable Facility that are required by any Disclosed Contract are set forth on Schedule 6.10 and such Schedule sets forth such credit support obligations that are outstanding as of the date of this Agreement.

 

(c)           The Seller has made available to the Buyers complete and correct copies of all Disclosed Contracts.

 

(d)           There are no material obligations under any Disclosed Contract relating to prior periods of time that are due and owing and that have not been performed.

 

(e)           The Applicable Agreements contain all credit support obligations that are necessary to conduct the Business as currently conducted.

 

(f)            The Revenue Agreements are the only tolling agreements, power purchase agreements, steam agreements or other similar revenue-generating agreements that the Applicable Portfolio Company is a party to, and the Applicable Portfolio Company and the applicable purchasing utilities have received all required approvals from any Governmental Authority, including but not limited to the FPSC necessary (x) to enter into such Revenue Agreements and (y) to allow, pursuant to the terms of such approvals and the Revenue Agreements, full recovery by the applicable purchasing utility party from its customers of all payments that such purchasing utility party is required to make to the Applicable Portfolio Company pursuant to the terms of such Revenue Agreements.

 

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Section 4.9            Permits; Compliance with Laws Schedule 4.9 sets forth all material Permits (other than Environmental Permits) held by the Applicable Portfolio Company that are required for the Business.  Except as set forth on Schedule 4.9 , (a) such Permits constitute all of the material Permits required for the Business, (b) all such Permits are in full force and effect, any necessary renewals have been timely filed, and no action, claim or proceeding is pending, nor to the Knowledge of the Seller or the Applicable Portfolio Company, threatened, to suspend, revoke, or terminate any such Permit or declare any such Permit invalid, (c) the Applicable Portfolio Company has complied with all such Permits and has otherwise complied with all applicable Laws, in each case, in all material respects, (d) the Applicable Portfolio Company has not received any written notification alleging it is in violation of any of such Permits or Laws, and (e) the Seller has provided the Buyers with complete and correct copies of all such Permits.

 

Section 4.10          No Employees .  The Applicable Portfolio Company does not have, nor will the Applicable Portfolio Company on the Closing Date have, nor since the Reference Date has the Applicable Portfolio Company had, any employees.  To the Knowledge of the Seller and the Applicable Portfolio Company, the Applicable Portfolio Company has not at any time prior to the Reference Date had any employees.  Except for any obligations of the Portfolio Companies for operator-related costs specifically referenced by section as set forth on Schedule 4.10 , pursuant to those certain operations and maintenance agreements between the Portfolio Companies and certain of the Sellers’ Affiliates, all of which are set forth on Schedule 4.10 (the “ Teton O&M Agreements”) , the Applicable Portfolio Company (a) does not have, nor can it reasonably be expected to have, and since the Reference Date, the Applicable Portfolio Company has not had, any liability with respect to any employees or former employees, whether of the Seller, any of its Affiliates or otherwise, (b) does not have, nor since the Reference Date has the Applicable Portfolio Company had, any liability under any Employee Benefit Plan, and (c) is not subject to, nor can it reasonably be expected to be subjected to, and since the Reference Date has not been subject to, any Lien or liability under Title IV of ERISA.

 

Section 4.11          Environmental Matters .

 

(a)           The Seller has made available to the Buyers copies of all material environmental reports in the possession of Seller or any of its Affiliates relating to the applicable Facility, which reports are identified on Schedule 4.11(a)  (the “ Environmental Reports ”).  To the Knowledge of the Seller, there are no material environmental reports relating to the Facilities other than the Environmental Reports.

 

(b)           Since the Reference Date, and at any time prior to the Reference Date to the Knowledge of the Seller and the Applicable Portfolio Company, except as set forth on Schedule 4.11(b)  or as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

 

(i)            The Applicable Portfolio Company and the applicable Facility have complied and currently are in compliance with all applicable Environmental Laws, which compliance includes the possession of and compliance with the terms and conditions of any Permits required under applicable Environmental Laws to operate the Business as currently operated (collectively, “ Environmental Permits ”).  There are not any proceedings pending, or, to the Knowledge of the

 

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Applicable Portfolio Company or the Seller, threatened against any Applicable Portfolio Company or its Affiliates in respect of any of the Environmental Permits.

 

(ii)           The Applicable Portfolio Company is not subject to, there is not now and there has not been, any pending or, to the Knowledge of the Applicable Portfolio Company or the Seller, threatened Environmental Claim (i) against the Applicable Portfolio Company directly or indirectly or (ii) relating to the Facilities or the Real Property, in each case, for which such Environmental Claim remains unresolved.

 

(iii)          No Release of Hazardous Materials has occurred or to the Knowledge of the Applicable Portfolio Company or the Seller, is threatened at, on, under or from any location currently owned or leased by the Applicable Portfolio Company or as a result of activities of the Applicable Portfolio Company, in violation of any Environmental Laws, or in a manner that would reasonably be expected to result in liability to the Applicable Portfolio Company under any Environmental Law.

 

(iv)          The applicable Facility is not listed or proposed for listing on the National Priorities List pursuant to CERCLA, or listed on the Comprehensive Environmental Response Compensation Liability Information System List, or any similar state list of sites.

 

(v)           The Applicable Portfolio Company is not subject to any settlement agreements, consent orders, judgments and decrees in connection with any alleged liability or violation arising under Environmental Law.

 

(c)           Schedule 4.11(c)  sets forth all material Environmental Permits, and the Seller has delivered to the Buyers complete and correct copies of all such material Environmental Permits.

 

(d)           Schedule 4.11(d)  sets forth all material environmental emission allocations, allowances and credits held by, or attributable to, the Applicable Portfolio Company as of a date not more than five (5) Business Days in advance of the date of this Agreement.  Except as set forth on Schedule 4.11(d)  or as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (A) all Environmental Permits held by the Applicable Portfolio Company are in full force and effect, any necessary renewals have been timely filed, and no action, claim or proceeding is pending, nor to the Knowledge of the Applicable Portfolio Company or the Seller, threatened, to suspend, revoke or terminate any Environmental Permit or declare any Environmental Permit invalid, (B) since the Reference Date, and at any time prior to the Reference Date to the Knowledge of the Seller and the Applicable Portfolio Company, the Applicable Portfolio Company has complied with all Environmental Permits held by the Applicable Portfolio Company other than any such non-compliance that has been resolved, and (C) since the Reference Date, and at any time prior to the Reference Date to the Knowledge of the Seller and the Applicable Portfolio Company, the Applicable

 

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Portfolio Company has not received any written notification alleging it is in violation of any of such Environmental Permits other than any such non-compliance that has been resolved.

 

The representations and warranties of the Seller in this Section 4.11 are the sole and exclusive representations and warranties of the Seller with respect to environmental matters, Environmental Laws, Environmental Permits and Hazardous Materials.

 

Section 4.12          Insurance Schedule 4.12 sets forth a list of all of the policies of insurance carried as of the date of this Agreement by or on behalf of the Applicable Portfolio Company that directly insure the Applicable Portfolio Company, the applicable Facility, the Business or any material assets of the Applicable Portfolio Company (collectively, the “ Company Policies ”).  Schedule 4.12 sets forth a list of all pending claims under any Company Policies.  All premiums due and payable under the Company Policies as of the date of this Agreement have been paid in a timely manner, and the holders of such policies are otherwise in material compliance with the terms and conditions of each of the Company Policies.  No notice of cancellation or non-renewal of any Company Policy has been received by the holders of such policies and there is no claim under any Company Policy as to which coverage has been denied or disputed by the underwriters or issuers thereof.

 

Section 4.13          Personal Property .  Except as otherwise indicated on Schedule 4.13 , (i) all tangible personal property used or held for use by the Applicable Portfolio Company that is material to the Business is owned or leased by the Applicable Portfolio Company, (ii) as to such tangible personal property that is owned by the Applicable Portfolio Company, the Applicable Portfolio Company has good and marketable title to such property, free and clear of all Liens except Permitted Liens, and (iii) as to such tangible personal property that is leased by the Applicable Portfolio Company, the Applicable Portfolio Company has valid leasehold interests in such property, and no event has occurred that constitutes, or that with the giving of notice or the passage of time or both would constitute, a default by the Applicable Portfolio Company or any other party thereto under any such lease.

 

Section 4.14          Business .  The Business is the only business operation carried on by the Applicable Portfolio Company.  Except as set forth on Schedule 4.14 , the Applicable Portfolio Company has, and as of the Closing will have, all assets and rights necessary to conduct the Business in a manner substantially consistent with the Applicable Portfolio Company’s past practices during 2011 and 2012.  Except as set forth on Schedule 4.14 , the applicable Facility and the machinery and equipment related to such Facility are in good and working order, subject to normal wear and tear.

 

Section 4.15          Bank Accounts Schedule 4.15 sets forth an accurate and complete list of the names and locations of banks, trust companies and other financial institutions at which the Applicable Portfolio Company maintains bank accounts or safe deposit boxes and the names of all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto.  Unless otherwise requested by the Buyers, each such Person will no longer have such authority as of the Closing.

 

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Section 4.16          Regulatory Status .

 

(a)           Pasco is an “exempt wholesale generator” within the meaning of the Public Utility Holding Company Act of 2005, as amended, and Part 366 of the regulations of the Federal Energy Regulatory Commission (“ FERC ”).  To the Knowledge of the Applicable Portfolio Company or the Seller, there are no facts that are reasonably likely to cause Pasco to lose its status as an “exempt wholesale generator” within the meaning of the Public Utility Holding Company Act of 2005, as amended, and Part 366 of FERC’s regulations.

 

(b)           Each of the Lake Facility and the Auburndale Facility is a “qualifying facility” as such term is defined in Section 3(17)(A) of the Federal Power Act, as amended (the “ FPA ”) pursuant to the self-recertifications filed on July 11, 2008 in FERC Docket No. QF92-198 and on December 19, 2008 in FERC Docket No. QF93-29, respectively.  To the Knowledge of the Applicable Portfolio Company or the Seller, there are no facts that are reasonably likely to cause the applicable Facility to lose its status as a “qualified facility” within the meaning of Part 292 of FERC’s regulations.

 

(c)           Except as set forth on Schedule 4.16(c) , all electrical output from each of the Pasco Facility, the Lake Facility and the Auburndale Facility is sold at wholesale, and none of the electrical output from the Facilities is sold at retail to an ultimate consumer of electricity, such as a residential consumer, a commercial or industrial consumer, or a governmental or institutional consumer.

 

(d)           The Applicable Portfolio Company has received authorization from FERC to charge market-based rates for wholesale sales of electric power, capacity and ancillary services in a final order, no longer subject to rehearing or appeal.  The Applicable Portfolio Company’s market-based rate authority is not subject to any pending challenge, investigation, complaint or other proceeding, and the Applicable Portfolio Company is in compliance in all material respects with the requirements under the FPA, applicable to a “public utility” with authority to sell wholesale electric power, capacity and ancillary services at market-based rates.  To the Knowledge of the Applicable Portfolio Company, there has been no action or conduct by any Person that would serve as the basis for an investigation, complaint or proceeding against the Applicable Portfolio Company or the applicable Facility before FERC.

 

Section 4.17          Intellectual Property .  Except as set forth on Schedule 4.17 , the Applicable Portfolio Company owns all right, title and interest in and to, or has valid licenses to use in the manner in which currently being used, any Intellectual Property that is material to the Business, in each case free and clear of all Liens except Permitted Liens.  The Applicable Portfolio Company has not received any written claim, notice or correspondence alleging that Applicable Portfolio Company or the Business is infringing or violating, or has infringed, violated or misappropriated, any Intellectual Property, or challenging the Applicable Portfolio Company’s ownership or use of, or rights to, any Intellectual Property used in or material to the Business.  Neither the Applicable Portfolio Company nor the Business is infringing or violating, or has infringed, violated or misappropriated, any material Intellectual Property of any Third Party and, to the Knowledge of the Applicable Portfolio Company or the Seller, no Third Party is infringing

 

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or violating, or has infringed, violated or misappropriated, any material Intellectual Property of the Applicable Portfolio Company.

 

Section 4.18          Books and Records .  The Seller has made available to the Buyers a true, complete and correct copy of the Books and Records of the Applicable Portfolio Company.  The Books and Records have been kept and maintained in all material respects as required by applicable Laws.

 

Section 4.19          No Other Representations and Warranties . Except for the representations and warranties of the Seller contained in this Agreement (including the related portions of the Disclosure Schedules), neither the Seller nor the Applicable Portfolio Company has made or makes any other express or implied representation or warranty, either written or oral, on behalf of the Seller or the Applicable Portfolio Company or otherwise, including any representation or warranty as to the accuracy or completeness of any information regarding the Applicable Portfolio Company furnished or made available to the Buyers and their Representatives (including any information, documents or material made available to the Buyers in the Data Room, management presentations or in any other form in expectation of the transactions contemplated hereby) or as to the future revenue, profitability or success of the Applicable Portfolio Company, or any representation or warranty arising from statute or otherwise in Law.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES RELATING TO THE BUYERS

 

Each of the Buyers, jointly and severally, hereby represents and warrants to the Sellers as of the date of this Agreement and as of the Closing Date (except where such representation or warranty is made as of another specific date) as follows:

 

Section 5.1            Organization .  Each of the Buyers is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has the requisite limited liability company power and authority to own, lease and operate its assets and to conduct its business as now being conducted.  Each of the Buyers is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the ownership or operation of its assets or the character of its activities is such as to require such Buyer to be qualified or licensed, except where the failure to be so qualified or licensed would not reasonably be expected to have a material adverse effect on each of the Buyers’ ability to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

Section 5.2            Authorization; Enforceability .  Each of the Buyers has the requisite limited liability company power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform its obligations hereunder.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by all requisite limited liability company action on the part of each of the Buyers, and no other authorization on the part of any of the Buyers is necessary to authorize this Agreement.  This Agreement has been duly and validly executed and delivered by each of the Buyers and constitutes its valid and binding obligation, enforceable against it in accordance with its terms,

 

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subject to applicable bankruptcy, insolvency, moratorium or other similar Laws relating to or affecting creditors’ rights generally or general principles of equity.

 

Section 5.3            No Conflict .  The execution, delivery and performance of this Agreement by each of the Buyers and the consummation of the transactions contemplated hereby by each of the Buyers, assuming all required filings, consents, approvals, authorizations and notices set forth on Schedule 5.3 (collectively, the “ Buyer Approvals ”) required to be made, given or obtained by it have been so made, given or obtained, do not and will not:

 

(a)           conflict with or result in a violation of any provision of the Organizational Documents of any of the Buyers;

 

(b)          violate any Law applicable to any of the Buyers or require any filing with, consent, approval or authorization of, or notice to, any Governmental Authority, except for any filings required by FERC in its order granting approval under FPA Section 203; or

 

(c)           require any consent under, constitute (with or without notice or lapse of time or both) a default under, result in any breach or violation of, or give any Person any rights of termination, acceleration or cancellation of, any Contract to which any of the Buyers or any of their respective assets, properties or businesses is bound;

 

except, with respect to clauses (b) and (c), for such violations, defaults, terminations, accelerations, cancellations, conflicts, breaches or defaults, or failures to make any such filing, obtain any such consent, approval or authorization, or provide any such notice, which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of any of the Buyers to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

Section 5.4            Financial Ability; Solvency .  At Closing, the Buyers will have sufficient immediately available funds to pay in cash the amount of the Purchase Price and to consummate all of the transactions contemplated to occur at Closing.

 

Section 5.5            Investment Representation .

 

(a)           The Buyers are acquiring the Interests for their own account as an investment and not with a view towards any unlawful public distribution thereof, including to sell, transfer or otherwise distribute all or any part thereof to any other Person in any transaction that would constitute a “distribution” within the meaning of the Securities Act.  The Buyers acknowledge that they can bear the economic risk of their investment in the Interests, and are capable of evaluating the merits and risks or an investment in all of the Interests.  The Buyers understand and acknowledge that neither the offer nor sale of the Interests has or will have been registered pursuant to the Securities Act or any applicable state securities Laws or any other applicable securities Laws, that all of the Interests will be characterized as “restricted securities” under federal securities Laws and that, under such Laws and applicable regulations, none of the Interests can be sold or otherwise disposed of without registration under the Securities Act or an exemption thereunder.

 

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(b)           Each of the Buyers acknowledges that (i) it has been afforded access to and the opportunity to inspect the Facilities and other due diligence items made available by the Sellers with respect to the Portfolio Companies, (ii) it has received materials that it deems necessary to make its determination whether to proceed with the transactions contemplated hereby, and (iii) it is not relying on any statements, representations or warranties made by the Sellers or any Affiliate of the Sellers, whether in writing or orally, other than the express representations and warranties of the Sellers in this Agreement.

 

Section 5.6            Broker’s Fees .  No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any of the Buyers or any of their Affiliates.

 

Section 5.7            Litigation . There is no Litigation pending or, to the Knowledge of any of the Buyers, threatened, that seeks to prevent the consummation of the transactions contemplated hereby or that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of each of the Buyers to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

Section 5.8            Regulatory Status .  The Buyers are not public utility holding companies within the meaning of the Public Utility Holding Company Act of 2005 or, if the Buyers are public utility holding companies, each of the Buyers is a public utility holding company solely by virtue of its ownership in exempt wholesale generators, foreign utility companies or qualifying facilities.  The Buyers are not public utilities within the meaning of the Federal Power Act.

 

Section 5.9            HSR Act Matters .  The Ultimate Parent Entities (UPEs) of the Buyers, as defined under 16 C.F.R. § 801.1(a)(3), which were newly formed for purposes of the transactions contemplated by this Agreement, do not satisfy the thresholds described in 15 U.S.C. § 18a(a)(2)(B)(ii).

 

ARTICLE VI
COVENANTS

 

Section 6.1            Conduct of Business (Pre-Closing) .  During the period from the date of this Agreement and continuing until the earlier of termination of this Agreement pursuant to Section 10.1 or the Closing (the “ Interim Period ”), the Sellers shall, and shall cause each of the Portfolio Companies to, operate the Business in the ordinary course and use commercially reasonable efforts to preserve intact the Business and relationships with Governmental Authorities, employees, customers, suppliers and others having business relationships with the Sellers, any of the Portfolio Companies and their Affiliates related to the Business.  Notwithstanding the first sentence of this Section 6.1 , during the Interim Period, except as necessary to comply with requirements under Auburndale Credit Agreement, without the prior written consent of the Buyers (which consent shall not be unreasonably withheld, conditioned or delayed), each of the Sellers shall not, and shall cause its Affiliates not to, permit any Portfolio Company to:

 

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(a)           amend its Organizational Documents;

 

(b)           liquidate, dissolve, recapitalize or otherwise wind up such Portfolio Company or any substantial portion of the Business;

 

(c)           change its accounting methods, policies or practices, except as required by GAAP;

 

(d)           sell, assign, transfer, lease or otherwise dispose of any material assets, except in the ordinary course of business;

 

(e)           merge or consolidate with, or purchase substantially all of the assets or businesses of, or equity interests in, or make an investment in, any Person;

 

(f)            issue or sell any equity interests, notes, bonds or other securities of such Portfolio Company, or any option, warrant or right to acquire the same;

 

(g)           declare, set aside, make or pay any dividends or distributions, except cash dividends or cash distributions;

 

(h)           except (i) as required in case of any emergency, (ii) as required to operate the Facilities in accordance with Prudent Industry Practices and applicable Law or (iii) as set forth on Schedule 6.1(h) , enter into any Contract that if in effect on the date hereof would be a Disclosed Contract or Real Property Agreement or terminate or materially amend, or settle or compromise any material claim under any Disclosed Contract or Real Property Agreement;

 

(i)            amend any Tax Returns, or make any election, or take any position in any Tax Returns of any of the Portfolio Companies that is inconsistent with any such election or position previously made, adopted or taken with respect to any of the Portfolio Companies, if such amendment, election, adoption or other action reasonably could be expected to have an adverse Tax impact on a Portfolio Company or any of the Buyers in a Tax period or portion thereof beginning after the Closing Date;

 

(j)            amend or modify any material Permit (including any Environmental Permit);

 

(k)           agree to make any Capital Expenditure, other than (i) Capital Expenditures made in the ordinary course of business prior to Closing and not in excess of $200,000, individually or in the aggregate, or (ii) any Capital Expenditures set forth on Schedule 6.1(k) ;

 

(l)            enter into any Contract with any of its Affiliates;

 

(m)          except as set forth on Schedule 6.1(m) , incur any indebtedness or become contingently liable for any contingency or liability of others;

 

(n)           enter into a new line of business;

 

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(o)           fail to maintain in full force and effect insurance policies covering the Facilities, in the form and amounts consistent with past practice;

 

(p)           enter into, or authorize Caithness or any of its Affiliates to enter into, any Contract in connection with the retention of employees or staff of the Sellers, Caithness or any of their Affiliates that provide services to the Facilities that would create any obligations or liabilities of the Portfolio Companies;

 

(q)           terminate the Transition Services Agreement; or

 

(r)            agree, whether in writing or otherwise, to do any of the foregoing.

 

Section 6.2            Access .

 

(a)           Prior to the Closing Date, or if earlier, until the date this Agreement is terminated pursuant to Section 10.1, each of the Sellers shall afford (and shall cause their Affiliates and the Portfolio Companies to afford) to the Buyers and their authorized Representatives reasonable access, during normal business hours, to the properties (including the Facilities), books, contracts and records of the Sellers and the Portfolio Companies with respect to the Business, and to the appropriate officers and employees of the Sellers and their Affiliates, in each case, as reasonably requested by the Buyer Representative; provided , however , that such access shall only be upon reasonable advance written notice to the Seller Representative and shall not unreasonably disrupt personnel or operations of the Business and shall be at the Buyers’ sole cost and expense and shall not include any invasive sampling of any environmental media without the prior written consent of the Seller Representative, which consent shall not be unreasonably withheld, conditioned or delayed.  During the Interim Period, each of the Buyers and each of the Sellers shall cooperate to allow the Buyers and their authorized Representatives to visit the Facilities during normal business hours and confirm the presence of the spare parts and equipment at the Facilities.  Knowledge acquired by the Buyers in exercising their right to access pursuant to this Section 6.2 shall not affect the Buyers’ right to claim indemnification in accordance with Section 9.2(a)(i) .  To the extent the Buyers, in exercising their rights of access pursuant to this Section 6.2 , obtain any third-party reports in connection with any invasive sampling, the Buyers shall promptly provide copies of such reports to the Seller Representative.

 

(b)           The Buyers shall indemnify, defend and hold harmless the Seller Indemnified Parties, from and against any Losses incurred by such Seller Indemnified Parties, as a result of, in respect of, or arising out of any injury to any Person or property resulting from or relating to the activities of the Buyer Representative  or its Representatives under this Section 6.2 , other than Losses resulting from or arising out of the gross negligence or willful misconduct of such Seller Indemnified Party or the discovery of conditions or defects by the Seller Indemnified Parties that already existed on or with respect to the assets or properties of the Portfolio Companies at the time of access by the Buyers (excluding any exacerbation of any such condition or defect caused by any of the Buyers or their Representatives).

 

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Section 6.3            Confidentiality; Public Announcements .

 

(a)           The terms of the Confidentiality Agreement are hereby incorporated by reference, and subject to Section 6.3(b)  and Section 6.3(c)  of this Agreement, the Confidentiality Agreement shall continue in full force and effect in accordance with its terms until the Closing, when it shall be automatically terminated.  From and after the Closing, each of the Sellers shall, and shall cause each of their Affiliates to, (i) treat and hold as confidential any information concerning the business and affairs (including know-how and trade secrets) of the Portfolio Companies (the “ Confidential Information ”), except (A) as expressly permitted hereunder, (B) to the extent such information comes into the public domain after the Closing through no fault of any of the Sellers, any of their Affiliates or any Person to whom any of the Sellers released or disclosed such information, or (C) to the extent such information was or becomes available to any of the Sellers or any of their Affiliates after the Closing Date on a non-confidential basis from a source other than one of the Portfolio Companies or any of the Buyers or their Affiliates, (ii) refrain from using any of the Confidential Information other than to prepare Taxes and pursue rights under this Agreement, and (iii) deliver promptly to the Buyer Representative or destroy, at the request and option of the Buyer Representative, all tangible embodiments of the Confidential Information that are in the possession or under the control of any of the Sellers or any of their Affiliates, and shall certify such delivery or destruction upon request in a written certificate given by an officer of each of the Sellers.  Each of the Sellers and their Affiliates acknowledges and agrees that the Confidential Information is the property of the Portfolio Companies; provided that the Sellers may retain one copy of the Confidential Information that it shall treat as confidential pursuant to the terms of this Section 6.3 .  In the event that any of the Sellers or their Affiliates is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, such Person shall notify the Buyer Representative promptly of the request or requirement so that the Buyer Representative may seek an appropriate protective order or waive compliance with the provisions of this Section 6.3 .  If, in the absence of a protective order or the receipt of a waiver hereunder, such Person is, on the advice of counsel, compelled to disclose any Confidential Information to any Governmental Authority or else stand liable for contempt, such Person may disclose such Confidential Information to the tribunal; provided that the Sellers shall use their commercially reasonable efforts to obtain, at the expense and request of the Buyers or the Portfolio Companies, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as the Buyers or the Portfolio Companies shall designate.

 

(b)           Notwithstanding anything to the contrary in this Agreement or the Confidentiality Agreement, the Seller Representative, the Sellers, or any of their Affiliates may file with the U.S. Securities and Exchange Commission (the “ SEC ”) any summary or other information regarding this Agreement in any Form 8-K or other SEC filing provided that the Seller Representative, the Sellers or any of their Affiliates provide the Buyer Representative a reasonable opportunity to review and provide comments thereon, and any of the Seller Representative, the Sellers, or any of their Affiliates may, if

 

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required by Form 8-K, Form 10-Q or Form 10-K, file this Agreement (and any exhibits hereto) as an exhibit to such Form 8-K, Form 10-Q or Form 10-K, as applicable; provided , however , that the Disclosure Schedules to this Agreement shall not be filed with the SEC unless such filing is required by the SEC.

 

(c)           Without giving at least five (5) Business Days’ prior notice and obtaining the prior written approval of the Seller Representative (in the case of a release or statement by any Buyer) or the Buyer Representative (in the case of a release or statement by any Seller), no Party will issue, or permit any agent or Affiliate of such Party to issue, any press releases or otherwise make, cause or allow any agent or Affiliate of such Party to make, any public statements with respect to this Agreement and the transactions contemplated hereby or use the name of any Seller or Buyer or any of their respective Affiliates (whether in connection with this transaction or otherwise), except when such release or statement is deemed in good faith by the releasing Party to be required by Applicable Law or under the applicable rules and regulations of a stock exchange or market on which the securities of the releasing Party or any of its Affiliates are listed.  In each case to which such exception applies, the releasing Party will use its reasonable efforts to provide a copy of such release or statement to the non-releasing Party prior to issuing such release or statement and incorporate any reasonable changes which are suggested by the Buyer Representative or the Seller Representative, as applicable.

 

Section 6.4            Third-Party Approvals .  From the date hereof through the Closing Date, each of the Buyers and the Sellers shall, and shall each cause their respective Affiliates to, use commercially reasonable efforts to obtain all of the Buyer Approvals, Portfolio Company Approvals and Seller Approvals, and maintain such approvals in full force and effect once obtained.  Notwithstanding the foregoing or any other provision of this Agreement, none of the Buyers or any of their Affiliates shall be obligated to make any payments or otherwise pay any consideration to any Person, to commence or participate in any Litigation or to offer or grant any accommodation to any Third Party in connection with any such Buyer Approvals, Portfolio Company Approvals or Seller Approvals.  Each Transaction Party shall use its commercially reasonable efforts to cooperate with the reasonable requests of any other Transaction Party in seeking to obtain as promptly as practicable all such Buyer Approvals, Portfolio Company Approvals or Seller Approvals.  Neither the Sellers nor the Buyers shall take, or cause to be taken, any action that they are aware or should reasonably be aware would have the effect of delaying, impairing or impeding the receipt of any such Buyer Approvals, Portfolio Company Approvals or Seller Approvals.

 

Section 6.5            Closing Conditions; Regulatory Filings .  From the date of this Agreement until the Closing, each of the Buyers and the Sellers shall, and shall cause their respective Affiliates to, use commercially reasonable efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in this Agreement and to cause the Closing to occur, as promptly as practicable, including to: (a) make or cause to be made the filings required of such Transaction Party or any of its Affiliates under any Laws with respect to the transactions contemplated by this Agreement, all of which are set forth on Schedule 6.5 as promptly as is reasonably practicable, and in any event within ten (10) Business Days after the date hereof, and to pay any fees due from it in connection with such filings, (b) cooperate with

 

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the other Parties and furnish all information in such Transaction Party’s possession or in the possession of such Transaction Party’s Affiliates that is necessary in connection with any other Transaction Party’s filings, (c) use commercially reasonable efforts to cause the expiration of the notice or waiting periods under the HSR Act, if applicable, and any other Laws with respect to the transactions contemplated by this Agreement as promptly as is reasonably practicable, (d) promptly inform the other Parties of any communication from or to, and any proposed understanding or agreement with, any Governmental Authority in respect of such filings, and permit the other Transaction Parties to review in advance any proposed communication by such Transaction Party or its Affiliates to any Governmental Authority, (e) consult and cooperate with the other Transaction Parties in connection with any analyses, appearances, presentations, memoranda, briefs, arguments and opinions made or submitted by or on behalf of any Transaction Party or its Affiliates in connection with all meetings, actions and proceedings with Governmental Authorities relating to such filings, (f) comply, promptly as is reasonably practicable, with any requests received by such Transaction Party or any of its Affiliates for additional information, documents or other materials in connection with such filings, (g) use commercially reasonable efforts to resolve any objections as may be asserted by any Governmental Authority with respect to the transactions contemplated by this Agreement, and (h) use commercially reasonable efforts to contest and resist any action or proceeding instituted (or threatened in writing to be instituted) by any Governmental Authority challenging the transactions contemplated by this Agreement as being in violation of any Law.  In connection with filings to be made and actions taken under the HSR Act, if any, the Buyers, on the one hand, and the Sellers, on the other hand, shall each bear half of the filing fees with respect thereto; provided, however, each Transaction Party shall bear its own attorneys’ fees and expenses otherwise incurred in connection with any filings, including as a result of any investigation or Litigation initiated by the Department of Justice Antitrust Division or the Federal Trade Commission.  None of the Transaction Parties to this Agreement shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry unless it consults with the other Transaction Parties in advance and, to the extent permitted by such Governmental Authority, gives the other Transaction Parties the opportunity to attend and participate at such meeting.  Subject to the Confidentiality Agreement, (i) prior to transmitting any material to any Governmental Authority or members of its staff, each Transaction Party shall permit counsel for the other Transaction Parties a reasonable opportunity to review and provide comments thereon, and consider in good faith the views of the other Transaction Parties in connection with, any proposed written communication to any Governmental Authority (or members of their respective staffs) to the extent permitted by Law, and (ii) the Transaction Parties will provide each other with copies of all correspondence, filings or communications between them or any of their representatives, on the one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to this Agreement and the transactions contemplated hereby; provided, however, that each Transaction Party may redact from any filings provided to the other Transaction Parties hereunder, and shall not be required to provide any materials or information hereunder, to the extent such filings, materials or information relate solely to the redacting Transaction Party and not to the Portfolio Companies or the transactions contemplated hereby.  Notwithstanding any other provisions of this Agreement, no Transaction Party or its Affiliates will have any obligation to resolve any objections of any Governmental Authority to the transactions contemplated hereby, to agree to any divestitures of the assets, properties or rights of the Portfolio Companies, such Transaction

 

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Party or any Affiliates of either of the foregoing, or to enter into any “hold separate” or similar agreements or agree to any other changes to the business, operations or activities of such Party or any of its Affiliates.

 

Section 6.6            No Solicitation .  During the Interim Period, each of the Sellers shall not and shall cause their Affiliates and officers, directors and employees not to, and each of the Sellers shall direct and use their commercially reasonable efforts to cause their and their Affiliates’ other Representatives not to, directly or indirectly, initiate, solicit, entertain or negotiate, enter into an agreement with respect to, or provide nonpublic or confidential information to facilitate, any proposal or offer with respect to any sale, redemption, disposition, reorganization, exchange, consolidation or similar transaction directly or indirectly involving the Portfolio Companies, or any purchase of any voting or other securities or partnership interests of the Portfolio Companies in a single transaction or a series of related transactions, or any combination of the foregoing.

 

Section 6.7            Update Information .  Prior to the Closing, the Buyer Representative, on the one hand, and the Seller Representative, on the other hand, shall give the other Party prompt written notice of any development that is reasonably likely to result in a failure of a condition to the Closing.  From time to time prior to the Closing, the Sellers shall supplement or amend the Disclosure Schedules hereto with respect to any matter (regardless of whether such matter arose prior to, on or after the date hereof) if necessary to remedy any inaccuracy of any representation or warranty of any of the Sellers (each a “ Schedule Supplement ”); provided that, except as specifically provided in this Section 6.7, no Schedule Supplement shall be deemed to be incorporated into or to supplement, amend or modify the Disclosure Schedules.  In the event the Sellers notify the Buyer Representative that such event, development or occurrence which is the subject of the Schedule Supplement arose after the date of this Agreement and was not the result of a breach of this Agreement by the Sellers and constitutes or relates to something that has had a Material Adverse Effect, then the Buyers shall have the right to terminate this Agreement for failure to satisfy the closing condition set forth in Section 8.2(b) ; provided , that if the Buyers have the right to, but do not elect to terminate this Agreement and the Closing occurs, then (i) the Buyers shall be deemed to have irrevocably waived any right to terminate this Agreement with respect to the matters specifically set forth in such Schedule Supplement that constituted or otherwise had a Material Adverse Effect, (ii) such Schedule Supplement shall be deemed to be incorporated into and to supplement, amend and modify the Disclosure Schedules, and (iii) the Buyers shall have irrevocably waived their rights to indemnification under Section 9.2 solely with respect to the matters specifically set forth in such Schedule Supplement.  For purposes of clarity, the Buyers and the Sellers acknowledge and agree that any Schedule Supplement that reflects an event, development or underlying occurrence that either (A) occurred prior to the execution of this Agreement and should have been set forth on the Disclosure Schedules as of the execution of this Agreement or (B) that does not give the Buyers the right to terminate the Agreement for failure to satisfy the closing condition set forth in Section 8.2(b)  shall be deemed to have been provided for information purposes only and shall not be deemed to cure any breach of this Agreement or affect the conditions to Closing or indemnification rights set forth in this Agreement.

 

Section 6.8            Permits .  Each Transaction Party shall promptly provide all notices and otherwise take all commercially reasonable actions required to transfer or reissue the Permits set

 

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forth on Schedule 6.8 , which constitute all of the Permits (including Environmental Permits) that need to be transferred or reissued so that the Portfolio Companies can operate the Business upon the Closing in a manner consistent with the Portfolio Companies’ past practices during 2011 and 2012.  Each Transaction Party shall use commercially reasonable efforts to effect any such transfer or reissuance, including cooperating with the other Transaction Parties and furnishing all information in such Transaction Party’s possession that is necessary in connection therewith.

 

Section 6.9            Survey and Title .

 

(a)           Each of the Sellers shall cause to be procured and delivered to the Portfolio Companies and the Buyers as soon as reasonably practicable following the execution of this Agreement one or more plats of survey prepared and certified in accordance with (i) the Florida minimum technical standards for surveying and mapping and (ii) the Minimum Standard Detail for ALTA/ACSM Land Title Surveys (2012) in respect of the Real Property, including (x) Table A items 1, 2, 3, 4, 6(b), 7, 8, 9, 11(b), 13, 16, 17, 18, 19, 20 and 21 and (y) the Real Property Agreements and the plant improvements located on the Real Property and the real property subject to the Real Property Agreements.  The Sellers, on the one hand, and the Buyers, on the other hand, shall each bear fifty percent (50%) of any costs and expenses associated with the preparation and delivery of such surveys.

 

(b)           As soon as reasonably practicable following the execution of this Agreement, each of the Sellers shall cause a commitment for title insurance for each of the Portfolio Companies to be issued by a nationally recognized title company reasonably acceptable to the Buyers, addressing the status of title of the Real Property and the Real Property Agreements described on Schedule 6.9 for the Applicable Portfolio Company.  Such commitments for title insurance (i) shall be subject to no condition to the issuance of title policies thereunder other than payment of the initial premium, (ii) shall include endorsements for survey coverage, access, contiguity and such other endorsements as may be reasonably requested by the Buyers, and (iii) shall include a nonimputation endorsement for matters known to the Sellers with the Sellers providing, or causing to be provided, to the title company the necessary owner affidavits and nonimputation indemnity required to provide nonimputation coverage to the Buyers under the applicable owners title insurance policies.  The Buyers on the one hand, and the Sellers, on the other hand, shall each bear half of the costs, expenses and premiums associated with procuring an owners title insurance policy for each of the Portfolio Companies in an amount to be mutually agreed upon by the Parties (and in the aggregate for all Portfolio Companies in an amount equal to the Base Purchase Price) issued pursuant to such commitments for title insurance or otherwise.

 

Section 6.10          Applicable Agreements .  The Buyers recognize that certain Affiliates of the Portfolio Companies have provided credit support with respect to the Portfolio Companies or the Facilities in satisfaction of the credit support obligations under the Applicable Agreements, all of which support obligations that are outstanding as of the date hereof being set forth on Schedule 6.10 .  On or prior to the Closing Date, the Buyers shall, or shall cause their Affiliates to, provide replacement credit support on behalf of the Portfolio Companies with respect to such Applicable Agreements, all on terms and conditions required pursuant to the respective

 

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Applicable Agreement and reasonably acceptable to the counterparty to such Applicable Agreement; provided , that, if any counterparty to such Applicable Agreement has not accepted the Buyers’ replacement credit support, then the Buyers shall have the right to extend the Outside Date as provided for in Section 10.1 .  The Buyers shall use their commercially reasonable efforts to (i) provide to the Seller Representative, on or prior to the Closing Date, written evidence of acceptance of such replacement credit support by the counterparty to such Applicable Agreement in exchange for the existing credit support and (ii) provide to the Seller Representative, on or prior to the Closing Date, evidence of arrangements for the prompt return of the existing credit support to the Seller Representative.  The Sellers shall, and shall cause their Affiliates to, use commercially reasonable efforts to assist and cooperate with the Buyers in interacting with the applicable counterparties for the purpose of the Buyers, or their Affiliates, providing the replacement credit support on behalf of the Portfolio Companies with respect to any of the Applicable Agreements.

 

Section 6.11          Off-Site Assets .  Each of the Sellers shall deliver or cause to be delivered to the Facilities prior to the Closing Date all spare parts, equipment, inventory and other assets allocated for use by the Facilities that are not located at the Facilities, other than any spare parts, equipment, inventory and other assets that may be under the custody and control of a third party service provider for purposes of storage, repair or maintenance; provided , that such assets are held by such third party service provider for the benefit of, and use by, the Facilities.

 

Section 6.12          Reserved .

 

Section 6.13          Records .  As soon as reasonably practicable following the Closing Date, but in no event more than ten (10) days after the Closing Date, the Seller Representative shall deliver to the Buyer Representative or cause to be present at the Facilities, all Books and Records; provided , however , that each of the Sellers shall cause all NERC Documentation required to be maintained in respect of the Facilities to be present at the Facilities on the Closing Date.

 

Section 6.14          Insurance .  Each of the Sellers shall, and shall cause their Affiliates to, maintain or cause to be maintained in full force and effect the insurance policies described on Schedule 4.12 until the Closing Date.  All such insurance coverage shall be terminated as of the Closing Date.  The Buyers shall be solely responsible for providing insurance to the Portfolio Companies for any claims related to events or occurrences after the Closing Date.  Upon the Closing, the Buyers shall be entitled to any cash recoveries received by ATP, its Affiliates or the Portfolio Companies with respect to any of the Portfolio Companies after the date of this Agreement.

 

Section 6.15          Casualty .

 

(a)           If any assets or properties of the Portfolio Companies are damaged or destroyed by any casualty loss event or events after the date hereof and prior to the Closing Date, and the total cost of restoring such damaged or destroyed assets or properties to a condition reasonably comparable to their prior condition (such costs with respect to such assets or properties, along with all expected lost revenues of the Portfolio Companies associated with such casualty loss constituting capacity payments under the

 

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Revenue Agreements, after giving effect to any Third-Party insurance coverage under which the insurer has accepted the claim for such costs, the “ Restoration Cost ”) is greater than Five Hundred Thousand Dollars ($500,000) but does not exceed ten percent (10%) of the Base Purchase Price and such restoration can be made without material uninsured impairment to the Business, the Seller Representative may elect, by written notice to the Buyer Representative delivered before the Outside Date, to:

 

(i)            reduce the amount of the Purchase Price by the estimated Restoration Cost (as determined by the Seller Representative and reasonably confirmed by the Buyer Representative; provided that the Buyers or the Portfolio Companies receive the benefit of all insurance proceeds taken into account in determining the Restoration Cost, or such amounts are added back to determine the estimated Restoration Cost), or

 

(ii)          restore such damaged or destroyed assets or properties to a condition equivalent to their prior condition.

 

If the Seller Representative makes the election contemplated by Section 6.15(a)(i) , then, subject to the satisfaction or waiver of the conditions set forth in Article VIII , the Closing shall occur on or before the Outside Date and the Purchase Price shall be so reduced.  If the Seller Representative makes the election contemplated by Section 6.15(a)(ii) , then, subject to the satisfaction or waiver of the conditions set forth in Article VIII , the Closing shall occur on or before the Outside Date.  If the Seller Representative does not make either such election before the Outside Date, then any Transaction Party may terminate this Agreement by written notice to the other Parties.

 

(b)           If the Restoration Cost is in excess of ten percent (10%) of the Base Purchase Price or such restoration cannot be made without material uninsured impairment to the Business, the Seller Representative may elect, by written notice to the Buyer Representative delivered promptly after determining the Restoration Cost to:

 

(i)            reduce the amount of the Purchase Price by the estimated Restoration Cost (as determined by the Seller Representative and reasonably confirmed by the Buyer Representative; provided that the Buyers or the Portfolio Companies receive the benefit of all insurance proceeds taken into account in determining the Restoration Cost, or such amounts are added back to determine the estimated Restoration Cost), or

 

(ii)          restore such damaged or destroyed assets or properties to a condition equivalent to their prior condition.

 

If the Seller Representative makes the election contemplated by Section 6.15(b)(i) , then, subject to the satisfaction or waiver of the conditions set forth in Article VIII , the Closing shall occur on or before the Outside Date and the Purchase Price shall be so reduced; provided that the Buyers may terminate this Agreement, by written notice to the Seller Representative, within thirty (30) days of receipt by the Buyer Representative of the Seller Representative’s notice regarding such election.  If the Seller Representative makes the election contemplated by Section 6.15(b)(ii) , the

 

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Closing shall occur on or before the Outside Date, subject to the satisfaction or waiver of the conditions set forth in Article VIII .  If the Seller Representative does not elect either option within thirty (30) days after the casualty loss, then any Transaction Party may terminate this Agreement by written notice to the other Parties.

 

(c)           If the Restoration Cost is Five Hundred Thousand Dollars ($500,000) or less, then (i) none of the Buyers or the Sellers shall have the right or option to terminate this Agreement under this Section 6.15 and (ii) there shall be no reduction in the amount of the Purchase Price as a direct result thereof; however, the Buyers or the Portfolio Companies shall receive the benefit of all insurance proceeds related to such casualty event.

 

(d)           If the Buyer Representative, in the exercise of reasonable judgment, does not confirm the Seller Representative’s calculation of the Restoration Costs, then it shall promptly, but not less than ten (10) Business Days after receipt of the Seller Representative’s calculation, deliver written notice to the Seller Representative setting forth the Buyer Representative’s calculation of the Restoration Costs.  If the Buyer Representative fails to timely deliver such notice, then the Seller Representative’s calculation of the Restoration Costs shall be deemed final, binding and conclusive for all purposes of this Agreement.  If the Buyer Representative so notifies the Seller Representative in accordance with this Section 6.15(d) , then the Buyer Representative and the Seller Representative shall, over the next ten (10) Business Days, attempt in good faith to resolve the disputed calculations, and any written resolution by them as to the agreed calculation of the Restoration Costs shall be deemed final, binding and conclusive for all purposes of this Agreement.  If, at the conclusion of the ten (10) Business Day resolution period, the Buyer Representative and the Seller Representative have not agreed on the calculation of Restoration Costs, then the Restoration Costs shall be estimated by a qualified firm reasonably acceptable to the Buyer Representative and the Seller Representative.  Subject to the limitations set forth in Section 10.1(f) , the Outside Date shall be extended on a day-for-day basis while the procedures set forth in this Section 6.15(d)  are followed.

 

Section 6.16          Condemnation .

 

(a)           If any of the assets or properties of the Portfolio Companies are taken or noticed for taking by a condemnation event after the date hereof and prior to the Closing Date and such assets or properties have a condemnation value (such value with respect to any such assets or properties after giving effect to any condemnation proceeds awarded to the Portfolio Companies for such condemnation event, the “ Condemnation Value ”) greater than Five Hundred Thousand Dollars ($500,000) but not in excess of ten percent (10%) of the Base Purchase Price, any Transaction Party may elect, by written notice to the other Transaction Parties delivered before the Outside Date, to reduce the amount of the Purchase Price by the estimated Condemnation Value (as determined by the Seller Representative and reasonably confirmed by the Buyer Representative).  If any Transaction Party makes the election contemplated by the foregoing sentence, then, subject to the satisfaction or waiver of the conditions set forth in Article VIII , the Closing shall occur on or before the Outside Date and the Purchase Price shall be so reduced.  If

 

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none of the Transaction Parties makes such election before the Outside Date, then any Transaction Party may terminate this Agreement by written notice to the other Parties.

 

(b)           If the Condemnation Value is in excess of ten percent (10%) of the Base Purchase Price, the Seller Representative may elect, by written notice to the Buyer Representative delivered before the Outside Date, to:

 

(i)            reduce the amount of the Purchase Price by the estimated Condemnation Value (as determined by the Seller Representative and reasonably confirmed by the Buyer Representative), or

 

(ii)           terminate this Agreement.

 

If the Seller Representative makes the election contemplated by Section 6.16(b)(i) , then, subject to the satisfaction or waiver of the conditions set forth in Article VIII , the Closing shall occur on or before the Outside Date and the Purchase Price shall be so reduced; provided that the Buyers may terminate this Agreement, by written notice to the Seller Representative, within thirty (30) days of receipt by the Buyer Representative of the Seller Representative’s notice regarding such election.  If the Seller Representative makes the election contemplated by Section 6.16(b)(ii) , then this Agreement shall terminate.

 

(c)           If the Condemnation Value is Five Hundred Thousand Dollars ($500,000) or less, then (i) neither the Buyers nor the Sellers shall have the right or option to terminate this Agreement under this Section 6.16 and (ii) there shall be no reduction in the amount of the Purchase Price as a direct result thereof.

 

(d)           If the Buyer Representative, in the exercise of reasonable judgment, does not confirm the Seller Representative’s calculation of the Condemnation Value, then it shall promptly, but not less than five (5) Business Days after receipt of the Seller Representative’s calculation, deliver written notice to the Seller Representative setting forth the Buyer Representative’s calculation of the Condemnation Value.  If the Buyer Representative fails to timely deliver such notice, then the Seller Representative’s calculation of the Condemnation Value shall be deemed final, binding and conclusive for all purposes of this Agreement.  If the Buyer Representative so notifies the Seller Representative in accordance with this Section 6.16(d) , then the Buyer Representative and the Seller Representative shall, over the next five (5) Business Days, attempt in good faith to resolve the disputed calculations, and any written resolution by them as to the agreed calculation of the Condemnation Value shall be deemed final, binding and conclusive for all purposes of this Agreement.  If, at the conclusion of the five (5) Business Day resolution period, the Buyer Representative and the Seller Representative have not agreed on the calculation of Condemnation Value, then the Condemnation Value shall be estimated by a qualified firm reasonably acceptable to the Buyer Representative and the Seller Representative.  Subject to the limitations set forth in Section 10.1(f) , the Outside Date shall be extended on a day-for-day basis while the procedures set forth in this Section 6.16(d)  are followed.

 

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Section 6.17                              Affiliate Contracts; Intercompany Obligations .

 

(a)                                  At or prior to the Closing, each of the Sellers shall terminate or cause to be terminated any Contract, other than any Contracts referenced in the Transition Services Agreement, between the Portfolio Companies, on one hand, and any of the Sellers, their Affiliates or any current or former officer, director, equity owner or employee of any of the foregoing, on the other hand, all of which are set forth on Schedule 6.17 , and the Sellers shall ensure that none of the Portfolio Companies has any liability or obligations under any such Contracts from and after the applicable termination dates of such Contracts.

 

(b)                                  At or prior to the Closing, each of the Sellers shall cause all intercompany account obligations (including indebtedness) involving any of the Sellers or any of their Affiliates and the Portfolio Companies to be settled, at the election of the Sellers, by either causing such accounts and obligations to be (a) paid and discharged, including by netting of payables and receivables involving the same parties, or (b) with respect to payables by the Portfolio Companies, cancelled without any of the Sellers or any of the Portfolio Companies paying any consideration therefor or any of the Portfolio Companies incurring any additional liability to any Person.

 

(c)                                At or prior to the Closing, each of the Sellers shall, and shall cause its Affiliates to, assign, or cause to be assigned, all environmental emission allowances and credits associated with the Facilities, including those set forth on Schedule 4.11(d) , to the Portfolio Companies on a cost-free basis, such that the Portfolio Companies own such allowances and credits free and clear of all Liens, except Permitted Liens.

 

Section 6.18                              Further Assurances .  Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at the request of the Buyers or any of the Sellers, and without further consideration, the other Transaction Parties shall execute and deliver to the requesting Transaction Party such other instruments of sale, transfer, conveyance, assignment and confirmation and provide such materials and information and take such other actions and execute and deliver such other documents as the requesting Transaction Party may reasonably request in order to consummate and to make effective the transactions contemplated by this Agreement.

 

Section 6.19                              Release .  Effective as of the Closing, each of the Sellers hereby remises, releases and forever discharges, for themselves and their Affiliates and their respective successors, assigns, directors, officers, employees, agents, representatives, parent corporations, and subsidiary corporations, the Portfolio Companies from and against any and all claims and actions whatsoever, whether known or unknown and whether arising in law or in equity, which any of the Sellers or such Affiliates and such other persons have had, now have or hereafter will or may have against the Portfolio Companies arising from, relating to, or otherwise founded upon the indemnification obligations of any of the Portfolio Companies pursuant to the Organizational Documents of any of the Portfolio Companies or otherwise.

 

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Section 6.20                              GE Turbine Blades .

 

(a)                                  During the Interim Period, except (i) as required in case of any emergency, (ii) as required to operate the Facilities in accordance with Prudent Industry Practices and applicable Law, (iii) as required pursuant to Section 6.20(b)  below, or (iv) with the prior written consent of the Buyers (which consent shall not be unreasonably withheld, conditioned or delayed), none of the Sellers shall, and the Sellers shall cause their respective Affiliates not to, make any outage, repair, inspection or operational decision related to the High Pressure Turbine Stage 1 blades on engine 191-315 or the High Pressure Turbine Stage 2 nozzles on engine 191-235 or any associated components (the “ GE Turbine Blades ”) that would be reasonably expected to cause any warranty provided by General Electric International Inc. (“ GE ”) under its existing warranty coverage policy applicable to the GE Turbine Blades or that certain Contractual Service Agreement between Lake and GE dated as of May 5, 2003, as amended (the “ GE CSA ”), to be reduced, rendered void or unavailable.

 

(b)                                  During the Interim Period, the Sellers shall, and shall each cause their respective Affiliates to (i) perform any and all inspections related to the GE Turbine Blades requested of or recommended to the Sellers or any of their Affiliates by GE in writing, (ii) perform one borescope inspection per month (iii) take all actions recommended in writing to the Sellers or any of their Affiliates by GE with respect to continued operations, repair, inspection and maintenance of the GE Turbine Blades, and (iv) afford the Buyers an opportunity to participate in any discussions with GE regarding the GE Turbine Blades or the CSA.  If the Sellers or any of their Affiliates receive any suggestions or recommendations in writing by GE with respect to the GE Turbine Blades, the Sellers shall (x) promptly notify the Buyer Representative of any such suggestions or recommendations and (y) afford the Buyers the reasonable opportunity to participate in discussions with GE and to provide input and suggestions with respect to any course of action to be taken by the Sellers or their Affiliates as a result of such suggestions or recommendations; provided , that none of the Sellers or any of their Affiliates shall undertake any outage, repair, inspection or operational decision arising out of such suggestions or recommendations pursuant to Section 6.20(b)(iii)  above with respect to the GE Turbine Blades without the written consent of the Buyers, which shall not be unreasonably withheld, conditioned or delayed; provided further that if the Buyers or the Buyer Representative fail to respond to a notice provided pursuant to clause (x) above within three (3) days of receipt of such notice, then the Buyers and the Buyer Representative shall have been deemed to have consented to the actions of the Sellers or any of their Affiliates set forth in such notice in undertaking any outage, repair, inspection or operational decision arising out of such suggestions or recommendations; provided , however , that for purposes of this Section 6.20(b) , any notices delivered after 5:00 pm Eastern Time on any day shall be deemed given on the next succeeding day.

 

(c)                                   The Sellers shall promptly provide to the Buyer Representative copies of all written inspection reports, documents and other communications related to the GE Turbine Blades.

 

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Section 6.21                              Closing Consents .   The Sellers shall use commercially reasonable efforts to obtain the consents and approvals set forth on Schedule 6.21 at or prior to the Closing.

 

ARTICLE VII
TAX MATTERS

 

Section 7.1                                     Tax Returns .

 

(a)                                  The Seller Representative shall prepare, or cause to be prepared, and file, or cause to be filed, subject to the review and reasonable approval of the Buyer Representative, all Tax Returns of the Portfolio Companies for all periods ending on or prior to the Closing Date (each such period a “ Pre-Closing Tax Period ”) that are required to be filed after the Closing Date.  The Sellers shall reimburse, or cause to be reimbursed, the Buyers for Taxes of the Portfolio Companies with respect to all periods within fifteen (15) days before payment by the Buyers and/or the Portfolio Companies of such Taxes, but only to the extent that the Taxes were not taken into account in the Final Adjustment Statement.  All such Tax Returns shall be prepared in a manner that is consistent with the past custom and practice of the Portfolio Companies, except as required by a change in applicable Law.

 

(b)                                  The Buyer Representative shall prepare, or cause to be prepared, and file, or cause to be filed, subject to the review and reasonable approval of the Seller Representative, any Tax Returns of the Portfolio Companies for Tax periods which begin before the Closing Date and end after the Closing Date (each such period a “ Straddle Period ”).  All such Tax Returns shall be prepared in a manner that is consistent with the past custom and practice of the Portfolio Companies, except as required by a change in applicable Law.  The Sellers shall pay, or cause to be paid, to the Buyers, within fifteen (15) days before the date on which Taxes are to be paid with respect to such Straddle Periods, an amount equal to the portion of such Taxes that relates to the portion of such Straddle Period ending on the Closing Date.  For purposes of this Section 7.1 and Section 9.2 , in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax that relates to the portion of such Straddle Period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income, gains or receipts (including sales and use Taxes), or employment or payroll Taxes, be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the Straddle Period ending on the date immediately prior to the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and (y) in the case of any Tax based upon or related to income, gains or receipts (including sales and use Taxes), or employment or payroll Taxes, be deemed equal to the amount that would be payable if the relevant Straddle Period ended on the date immediately prior to the Closing Date.  All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with reasonable prior practice of the Portfolio Companies.

 

(c)                                   The Buyer Representative shall prepare or cause to be prepared and file or cause to be filed all other Tax Returns of the Portfolio Companies.

 

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Section 7.2                                     Cooperation .  The Buyer Representative and the Seller Representative shall cooperate fully, and the Buyers shall cause the Portfolio Companies to cooperate fully, as and to the extent reasonably requested by the other Transaction Party, in connection with the preparation and filing of Tax Returns pursuant to Section 7.1 and any audit, litigation or other proceeding (each, a “ Tax Proceeding ”) with respect to Taxes.  Such cooperation shall include access to, the retention and (upon the other Party’s request) the provision of records and information that are reasonably relevant to any such Tax Return or Tax Proceeding, and the making available of employees on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  The Seller Representative shall and shall cause the Sellers to, and the Buyers shall and shall cause the Portfolio Companies to, retain all books and records with respect to Tax matters pertinent to the Portfolio Companies relating to any taxable period beginning before the Closing Date until the later of six (6) years after the Closing Date and the expiration of the applicable statute of limitations of the respective taxable periods, and to abide by all record retention agreements entered into with any Tax Authority.  The Seller Representative shall provide the Buyer Representative reasonable written notice prior to the Sellers transferring, destroying or discarding any books and records, and, if the Buyer Representative so requests, the Sellers shall allow the Buyer Representative to take possession of such books and records at the Buyers’ expense.  The Buyers and the Sellers each agree, upon request, to use commercially reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

 

Section 7.3                                     Transfer Taxes .  All state and local transfer, sales, use, stamp, registration or other similar Taxes, if any, resulting from the transactions contemplated by this Agreement shall be borne and paid fifty percent (50%) by the Buyers and fifty percent (50%) by the Sellers.  The Buyer Representative shall, at the Buyers’ expense, timely file any Tax Return or other document with respect to such Taxes (and the Seller Representative and each of the Sellers shall cooperate with respect thereto as necessary).  The Buyers and the Sellers shall cooperate in good faith to minimize, to the extent permissible under applicable Law, the amount of any such Taxes.

 

Section 7.4                                     Tax Proceedings .  The Buyer Representative shall inform the Seller Representative of the commencement of any audit, examination or proceeding (“ Tax Contest ”) relating in whole or in part to Taxes for which the Buyers may be entitled to indemnity from the Sellers hereunder.  With respect to any Tax Contest for which the Seller Representative acknowledges in writing that the Sellers are liable under Article IX for all Losses relating thereto the Seller Representative shall be entitled to control, in good faith, all proceedings taken in connection with such Tax Contest; provided , however , that (i) the Seller Representative shall promptly notify the Buyer Representative in writing of its intention to control such Tax Contest, (ii) in the case of a Tax Contest relating to Taxes of the Portfolio Companies for a Straddle Period, the Seller Representative and the Buyer Representative shall jointly control all proceedings taken in connection with any such Tax Contest and (iii) if any Tax Contest solely controlled by the Seller Representative could reasonably be expected to have an adverse effect on the Buyers, the Portfolio Companies, or any of their related Persons in any Tax period beginning after the Closing Date, the Tax Contest shall not be settled or resolved without the Buyer Representative’s consent, which consent shall not be unreasonably withheld, conditioned or delayed.  Notwithstanding the foregoing, if notice is given to the Seller Representative  of the commencement of any Tax Contest and the Seller Representative does not, within twenty (20)

 

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Business Days after the Buyer Representative’s notice is given, give notice to the Buyer Representative of the Seller Representative’s election to assume the defense thereof (and in connection therewith, acknowledge in writing the indemnification obligations hereunder of the Sellers), the Sellers shall be bound by any determination made in such Tax Contest or any compromise or settlement thereof effected by the Buyer Representative; provided , however , that if any Tax Contest solely controlled by the Buyer Representative could reasonably be expected to have an adverse effect on the Sellers or any of their related Persons for any Tax period, the Tax Contest shall not be settled or resolved without the Seller Representative’s consent, which consent shall not be unreasonably withheld, conditioned or delayed.  The failure of the Buyer Representative to give reasonably prompt notice of any Tax Contest shall not release, waive or otherwise affect the Sellers’ obligations with respect thereto except to the extent that the Sellers can demonstrate actual loss and prejudice as a result of such failure.  The Buyers and the Portfolio Companies shall use their commercially reasonable efforts to provide the Seller Representative with such assistance as may be reasonably requested by the Seller Representative in connection with a Tax Contest controlled solely or jointly by the Seller Representative.  The Seller Representative shall, and shall cause the Sellers and their Affiliates to, use their commercially reasonable efforts to provide the Buyers with such assistance as may reasonably be requested by the Buyers in connection with a Tax Contest controlled solely or jointly by the Buyers.

 

Section 7.5                                     Purchase Price Allocation .  The purchase and sale of the Interests under this Agreement shall be treated for federal and all applicable state and local income Tax purposes as a deemed sale of the assets of the Portfolio Companies.

 

(a)                                  The Purchase Price shall be allocated among the assets acquired by the Buyers under this Agreement in accordance with an allocation schedule (the “ Purchase Price Allocation Schedule ”) agreed upon by the Buyer Representative and the Seller Representative.  The Buyer Representative shall prepare the initial draft of the Purchase Price Allocation Schedule in the manner required by Section 1060 of the Code and any other applicable Law and shall deliver it to the Seller Representative at least fifteen (15) days before the scheduled Closing Date (or such shorter period as the Parties may mutually agree) for review and comment by the Sellers.  The Transaction Parties shall revise the Purchase Price Allocation Schedule to the extent necessary to reflect any post-Closing payments or adjustments made under or in connection with this Agreement and report any adjustments in accordance with Treasury Regulation Section 1.1060-1(c).  In the case of any payment or adjustment referred to in the preceding sentence, the Buyer Representative shall propose a revised Purchase Price Allocation Schedule within forty-five (45) days after the payment or adjustment (or such shorter period as the Parties may mutually agree), and the Transaction Parties shall follow the procedures outlined in Section 7.5(b)  with respect to review, dispute and resolution of such revision.

 

(b)                                  If the Transaction Parties are unable to agree upon the Purchase Price Allocation Schedule within five (5) days before the scheduled Closing Date, then either Transaction Party may refer the dispute to an Independent Auditor and such Independent Auditor shall conclusively determine the Purchase Price Allocation Schedule (including any valuations) in accordance with Section 7.6 .

 

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(c)                                   The Sellers and the Buyers shall each prepare, or cause to be prepared, mutually acceptable and substantially identical IRS Forms 8594 consistent with the Purchase Price Allocation Schedule, which the Transaction Parties shall use to report the transaction pursuant to this Agreement to the applicable Tax Authorities; provided , however , that (i) the Buyers’ cost for the assets that they are deemed to acquire may differ from the total amount allocated hereunder to reflect the inclusion in the total cost of items (for example, capitalized acquisition costs) not included in the amount so allocated and (ii) the amount realized by the Sellers or their Affiliates may differ from the total amount allocated hereunder to reflect transaction costs that reduce the amount realized for federal income tax purposes.  Each Transaction Party shall promptly provide the other Transaction Party with any other information required to complete Form 8594.  Neither Transaction Party, without the consent of the other Transaction Party, shall take a position on any Tax Return, or before any Tax Authority in connection with the examination of any Tax Return or in any subsequent judicial proceeding, that is in any manner inconsistent with the terms of the Purchase Price Allocation Schedule unless specifically required by a determination of an applicable Tax Authority.  The Transaction Parties shall promptly advise each other of the existence of any Tax audit, controversy or litigation related to any allocation under this Section 7.5 .

 

Section 7.6                                     Resolution of Disputed Purchase Price Allocation Schedule Items .  The Independent Auditor reasonably agreed by the Transaction Parties pursuant to Section 7.5 shall determine, if required by Section 7.5 , any disputes involving the Purchase Price Allocation Schedule (including any valuations) (such disputed document or amount (a “ Disputed Item ”), in accordance with the following:

 

(a)                                  The Independent Auditor shall be instructed to deliver to the Buyer Representative and the Seller Representative a written determination of the Disputed Item within ten (10) days from the date the matter is referred to it.

 

(b)                                  The Independent Accountant may determine the issues in dispute with respect to any Disputed Item following those procedures, consistent with the provisions of this Agreement, that it deems appropriate in the circumstances and with reference to the amounts in issue.  The Transaction Parties do not intend to impose any particular procedures upon such Independent Auditor, it being the desire of the Transaction Parties that any such disagreement will be resolved as expeditiously and inexpensively as reasonably practicable.

 

(c)                                   The Independent Auditor shall have no liability to the Transaction Parties in connection with its services, except for acts of bad faith, willful misconduct or gross negligence, and the Transaction Parties shall provide indemnification to the Independent Auditor as it may reasonably request.

 

(d)                                  All fees and expenses relating to the work, if any, to be performed by the Independent Auditor pursuant to this Section 7.6 shall be borne equally by the Sellers, on the one hand, and the Buyers, on the other hand.

 

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Section 7.7                                     Termination of Tax Sharing Agreements .  Any tax allocation, indemnity, sharing or other similar agreement or arrangement, whether or not written, that may have been entered into by the Sellers or any of their Affiliates (other than the Portfolio Companies), on the one hand, and any of the Portfolio Companies, on the other hand, shall be terminated as to the Portfolio Companies as of the Closing Date, and no payments that are owed by or to the Portfolio Companies pursuant thereto shall be payable thereafter.

 

Section 7.8                                     Survival .  The covenants contained in this Article VII shall survive until sixty (60) days following the expiration of the applicable statute of limitations.

 

ARTICLE VIII
CONDITIONS TO OBLIGATIONS

 

Section 8.1                                     Conditions to the Obligations of the Transaction Parties .  The obligations of the Transaction Parties to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions, any one or more of which may be waived in writing by the Transaction Parties:

 

(a)                                  There shall not be in force any Law restraining or prohibiting the consummation of the transactions contemplated by this Agreement;

 

(b)                                  All waiting periods (and any extensions thereof) applicable to the consummation of the transactions contemplated by this Agreement by Law shall have expired or been terminated; and

 

(c)                                   All approvals set forth on Schedule 6.5 shall have been duly made, given or obtained and shall be in full force and effect.

 

Section 8.2                                     Conditions to Obligations of the Buyers .  The obligation of the Buyers to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions, any one or more of which may be waived in writing by the Buyer Representative:

 

(a)                                  The Seller Representative shall have delivered to the Buyers all agreements, instruments and documents required to be delivered by the Seller Representative pursuant to Section 2.4(b) ;

 

(b)                                  Each of the representations and warranties of each of the Sellers contained in this Agreement shall be true and correct as of the Closing Date as though made at and as of such time (other than representations and warranties that speak as of another specific date or time (including, for the avoidance of doubt, any representation or warranty specified herein as being made as of or through the date of this Agreement), which need only be true and correct as of such date or time), except to the extent that any and all failures of such representations and warranties to be so true and correct, taken as a whole, would not have a Material Adverse Effect or reasonably be expected to have a material adverse effect on the ability of any of the Sellers to perform its obligations hereunder or to consummate the transactions contemplated hereby;

 

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(c)                                   Each of the Sellers shall have performed or complied, in all material respects, with all of the covenants and agreements required by this Agreement to be performed or complied with by each of the Sellers at or before the Closing;

 

(d)                                  There shall have been no Material Adverse Effect since the date of this Agreement;

 

(e)                                   The form of surveys contemplated by Section 6.9(a)  shall be in form and substance reasonably satisfactory to the Buyers in all respects;

 

(f)                                    The form of the owners title insurance policy as contemplated by Section 6.9(b)  shall be in form and substance reasonably satisfactory to the Buyers in all respects and shall contain all endorsements reasonably requested by the Buyers;

 

(g)                                   Each of the Portfolio Companies shall have no debt;

 

(h)                                  All Seller Approvals and Portfolio Company Approvals shall have been duly made, given or obtained and shall be in full force and effect;

 

(i)                                      The Buyers or their Affiliates shall have provided the replacement credit support on behalf of the Portfolio Companies pursuant to the Applicable Agreements as contemplated in Section 6.10 ;

 

(j)                                     The Lender Consents and the Portfolio Company Lender Consents shall be effective, shall not have been suspended, revoked, or stayed, and all conditions therein shall have been met;

 

(k)                                  Each of the Sellers shall have delivered to the Buyers a certificate, dated as of the Closing Date, certifying that the conditions specified in Section 8.2(b)  and Section 8.2(c)  have been fulfilled;

 

(l)                                      The Transition Services Agreement, including Exhibit A thereto, shall be in full force and effect and shall not have been modified or amended without the prior written consent of the Buyers; and

 

(m)                              Any derivative Contracts, including interest rate swap Contracts, of any of the Portfolio Companies shall have been terminated and none of the Portfolio Companies shall have any further obligations or liabilities with respect to such derivative Contracts except for any obligations or liabilities that are subtracted from the amount of the Estimated Net Working Capital in the calculation of the Closing Adjustment as set forth in Section 2.5 (iv) .

 

Section 8.3                                     Conditions to the Obligations of the Sellers .  The obligation of the Sellers to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions, any one or more of which may be waived in writing by the Sellers:

 

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(a)                                  The Buyer Representative shall have delivered to the Sellers all agreements, instruments, documents and funds required to be delivered by the Buyer Representative pursuant to Section 2.4(c) ;

 

(b)                                  Each of the representations and warranties of the Buyers contained in this Agreement shall be true and correct as of the Closing Date as though made at and as of such time (other than representations and warranties that speak as of another specific date or time (including, for the avoidance of doubt, any representation or warranty specified herein as being made as of or through the date of this Agreement), which need only be true and correct as of such date or time), except to the extent that any and all failures of such representations and warranties to be so true and correct, taken as a whole, would not reasonably be expected to have a material adverse effect on the Buyers’ ability to perform their obligations hereunder or to consummate the transactions contemplated hereby;

 

(c)                                   The Buyers shall have performed or complied, in all material respects, with all of the covenants and agreements required by this Agreement to be performed or complied with by the Buyers on or before the Closing;

 

(d)                                  All the Buyer Approvals shall have been duly made, given or obtained and shall be in full force and effect;

 

(e)                                   The Sellers and their Affiliates shall have satisfied all conditions set forth in any Lender Consent or Portfolio Company Lender Consent;

 

(f)                                    The Buyers shall have delivered to the Seller Representative written evidence of acceptance of the replacement credit support in satisfaction of the credit support obligations under the Applicable Agreements by the counterparty to each such Applicable Agreement in exchange for the existing credit support as contemplated in Section 6.10 ; and

 

(g)                                   The Buyers shall have delivered to the Sellers a certificate, dated as of the Closing Date, certifying that the conditions specified in Section 8.3(b)  and Section 8.3(c)  have been fulfilled.

 

Section 8.4                                     Frustration of Closing Conditions .  None of the Transaction Parties may rely on the failure of any condition set forth in Section 8.1 , Section 8.2 or Section 8.3 , as the case may be, to be satisfied if such failure was caused by such Transaction Party’s failure to act in good faith or to use its commercially reasonable efforts to cause the Closing to occur, as required by Section 6.5 .

 

ARTICLE IX
INDEMNIFICATION

 

Section 9.1                                     Survival of Representations, Warranties and Covenants .  The respective representations and warranties of the Parties contained in this Agreement (or in any certificate delivered in connection herewith), and all waivers, disclaimers and limitations of the Parties’ liability contained in this Agreement, shall survive the Closing for a period of eighteen (18) months after the Closing Date (other than the representations and warranties in Section 3.1

 

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(Organization), Section 3.2 (Authorization; Enforceability), Section 3.5 (Brokers’ Fees), Section 3.6 (Ownership of Interests), Section 4.1 (Organization), and Section 4.3 (Capitalization; Subsidiaries), which shall survive the Closing Date indefinitely, Section 4.7 (Taxes), which shall survive until sixty (60) days following the expiration of the applicable statute of limitations, Section 4.11 (Environmental Matters), which shall survive for a period of three (3) years after the Closing Date.  The respective covenants and agreements of the Parties contained in this Agreement that by their terms do not contemplate performance after the Closing shall survive the Closing for a period of eighteen (18) months after the Closing Date and the remaining covenants and agreements (including those contained in Section 7.8 ) shall survive in accordance with their respective terms until such covenant or agreement has been performed, plus ninety (90) days thereafter.  The applicable period set forth above for each such representation, warranty, covenant and agreement is referred to herein as the “ Survival Period ”.  No Party shall have any liability for indemnification claims made under this Article IX with respect to any such representation, warranty, covenant or agreement after the applicable Survival Period, unless a written notice of claim (describing in reasonable detail the claim, including an estimate of Losses attributable to such claim) is provided prior to the expiration of such applicable Survival Period.

 

Section 9.2                                     Indemnification .

 

(a)                                  Subject to the provisions of this Article IX , from and after the Closing, each of the Sellers, jointly and severally, shall indemnify and hold harmless the Buyers, each of the Buyers’ Affiliates (which includes, for the avoidance of doubt, the Portfolio Companies from and after the Closing) and their respective Representatives (collectively, the “ Buyer Indemnified Parties ”) from and against all Losses that the Buyer Indemnified Parties incur arising from or out of or relating to:

 

(i)                                      any breach of any representation or warranty of any of the Sellers in this Agreement made as of the date of this Agreement or as if such representation or warranty were made on and as of the Closing Date (or in any certificate delivered in connection herewith);

 

(ii)                                   any breach of any covenant of any of the Sellers in this Agreement (or in any certificate delivered in connection herewith);

 

(iii)                                any Contract that is terminated on or prior to the Closing Date pursuant to Section 6.17 (“ Affiliate Losses ”);

 

(iv)                               all Taxes of the Sellers or their Affiliates, as applicable, and the Portfolio Companies for all Pre-Closing Tax Periods;

 

(v)                                  with respect to any Straddle Period, all Taxes of the Sellers or its Affiliates, as applicable, and the Portfolio Companies attributable to the portion of such Straddle Period that ends on or prior to the Closing Date;

 

(vi)                               all Taxes of any Person imposed on any of the Portfolio Companies as a transferee or successor, by contract or pursuant to any Law (including, but not limited to, Treasury Regulation Section 1.1502-6) with respect to obligations

 

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or relationships existing on or prior to the Closing Date or by agreements entered into or transactions entered into on or prior to the Closing Date;

 

(vii)                            all Taxes on any income resulting from any election by any of the Sellers or its Affiliates, as applicable, and the Portfolio Companies under Section 108(i) of the Code prior to the Closing Date; and

 

(viii)                         any and all claims incurred by any of the Portfolio Companies or the Buyer Indemnified Parties attributable to the Taxes described in the preceding clauses (iv)  through (vii) .

 

(b)                                  Subject to the provisions of this Article IX , from and after the Closing, the Buyers, jointly and severally, shall indemnify and hold harmless each of the Sellers, each of the Sellers’ Affiliates and their respective Representatives (collectively, the “ Seller Indemnified Parties ”) from and against all Losses that the Seller Indemnified Parties incur arising from or out of or relating to:

 

(i)                                      any breach of any representation or warranty of any of the Buyers in this Agreement made as of the date of this Agreement or as if such representation or warranty were made on and as of the Closing Date (or in any certificate delivered in connection herewith);

 

(ii)                                   any breach of any covenant of any of the Buyers in this Agreement (or in any certificate delivered in connection herewith);

 

(iii)                                otherwise arising out of any Contract entered into by the Buyers after the Closing Date;

 

(iv)                               all Taxes of the Buyers and the Portfolio Companies for all periods after the Closing Date (other than any Straddle Period);

 

(v)                                  with respect to any Straddle Period, all Taxes of the Buyers and the Portfolio Companies attributable to the portion of such Straddle Period that begins after the Closing Date;

 

(vi)                               all Taxes of any Person imposed on any of the Portfolio Companies as a transferee or successor, by contract or pursuant to any Law (including, but not limited to, Treasury Regulation Section 1.1502-6) with respect to obligations or relationships created after the Closing Date or by agreements entered into or transactions entered into after the Closing Date;

 

(vii)                            all Taxes on any income resulting from any election by any of the Buyers and the Portfolio Companies under Section 108(i) of the Code after the Closing Date; and

 

(viii)                         any and all claims incurred by any of the Portfolio Companies or the Seller Indemnified Parties attributable to the Taxes described in the preceding clauses (iv)  through (vii) .

 

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None of the Sellers or its Affiliates shall have any right to seek contribution from any of the Portfolio Companies with respect to all or any part of any of the Sellers’ indemnification obligations hereunder.

 

(c)                                   THE INDEMNIFICATION PROVISIONS IN THIS SECTION 9.2 SHALL BE ENFORCEABLE REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION OR ANY OTHER PERSON .

 

(d)                                  The Transaction Parties have agreed upon a threshold (as provided in Section 9.4(a) ) and a deductible (as provided in Section 9.4(b) ) as a means of applying a materiality standard to the amount of any post-Closing claim that (x) any Buyer Indemnified Party may have against any of the Sellers resulting from a breach of a representation or warranty by any of the Sellers, or (y) any Seller Indemnified Party may have against any of the Buyers resulting from a breach of a representation or warranty by any of the Buyers.  Therefore, for purposes of (i) applying the post-closing indemnification remedies provided in this Article IX , (ii) determining whether any breach of a representation or warranty of any of the Sellers or Buyers, as applicable, has occurred and (iii) calculating the amount any Losses relating thereto, the Sellers’ or Buyers’, as applicable, representations and warranties shall be considered and applied without regard to any reference as to materiality, materially, material respects, Material Adverse Effect or similar materiality qualifiers set forth therein, except for Section 4.11(c) ; provided , however , that this Section 9.2 shall in no respect modify the other provisions of this Agreement for purposes of determining whether any conditions to Closing have been satisfied.

 

Section 9.3                                     Indemnification Procedures .  Claims for indemnification under this Agreement shall be asserted and resolved as follows:

 

(a)                                  Any Buyer Indemnified Party or Seller Indemnified Party claiming indemnification under this Agreement (an “ Indemnified Party ”) with respect to any claim asserted against the Indemnified Party by a Third Party (a “ Third-Party Claim ”) in respect of any matter that is subject to indemnification under Section 9.2 shall promptly (i) notify the other Party (the “ Indemnifying Party ”) of the Third-Party Claim and (ii) transmit to the Indemnifying Party a written notice (a “ Claim Notice ”) describing in reasonable detail the nature of the Third-Party Claim, a copy of all papers served with respect to such Third-Party Claim (if any), the Indemnified Party’s best estimate of the amount of Losses attributable to the Third-Party Claim and the basis of the Indemnified Party’s request for indemnification under this Agreement.  Failure to timely provide such Claim Notice shall not affect the right of the Indemnified Party’s indemnification hereunder, except to the extent the Indemnifying Party is materially prejudiced by such delay or omission.

 

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(b)                                  Following receipt of the Claim Notice, and unless (i) the control of the defense by the Indemnifying Party would be inappropriate due to a conflict of interest, (ii) such Third-Party Claim (or the facts or allegations related to such Third-Party Claim) involves criminal allegations or seeks equitable or injunctive relief, (iii) such Third-Party Claim, if adversely determined, could reasonably be expected to materially adversely affect the business or reputation of the Indemnified Party or its Affiliates or (iv) such Third-Party Claim, if adversely determined, could reasonably be expected to result in Losses exceeding the applicable limitations set forth in Section 9.4(c) , the Indemnifying Party shall have the right to control the defense of the Indemnified Party against such Third-Party Claim in accordance with the following.  If the Indemnifying Party notifies the Indemnified Party that the Indemnifying Party elects to assume the defense of the Third-Party Claim within five (5) Business Days following receipt of the Claim Notice, then the Indemnifying Party shall have the right to defend such Third-Party Claim with counsel selected by the Indemnifying Party (who shall be reasonably satisfactory to the Indemnified Party), by all appropriate proceedings, to a final conclusion or settlement at the discretion of the Indemnifying Party in accordance with this Section 9.3(b) .  The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided , however , that the Indemnifying Party shall not enter into any settlement agreement without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed); provided , further , that such consent shall not be required if (x) the settlement agreement contains a complete and unconditional release by the Third Party asserting the Third-Party Claim of the Indemnified Party, (y) the settlement agreement obligates the Indemnifying Party to pay the full amount of any Losses attributable to the Indemnified Party in connection with the Third-Party Claim, and (z) the settlement agreement does not contain any direct or indirect requirements upon or provisions for the Indemnified Party.  If requested by the Indemnifying Party the Indemnified Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate reasonably with the Indemnifying Party and its counsel in contesting any Third-Party Claim the defense of which is being controlled by the Indemnifying Party pursuant hereto.  The Indemnified Party may otherwise participate in, but not control, any defense or settlement of any Third-Party Claim controlled by the Indemnifying Party pursuant to this Section 9.3(b) , and the Indemnified Party shall bear its own costs and expenses with respect to such participation.

 

(c)                                   If the Indemnifying Party (i) does not have the right to control the defense of the Indemnified Party pursuant to Section 9.3(b)  or (ii) does not notify the Indemnified Party within five (5) Business Days following receipt of the Claim Notice that the Indemnifying Party elects to defend the Indemnified Party pursuant to Section 9.3(b) , then the Indemnified Party shall have the right to defend, and be reimbursed for its reasonable costs and expenses in regard to the Third-Party Claim with counsel selected by the Indemnified Party (who shall be reasonably satisfactory to the Indemnifying Party), by all appropriate proceedings.  In such circumstances, the Indemnified Party shall have full control of the defense of such Third-Party Claim.  The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this Section 9.3(c) , and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.

 

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(d)                                  Subject to the other provisions of this Article IX , in the event that an Indemnified Party determines that it has a claim for indemnifiable Losses against an Indemnifying Party hereunder (other than as a result of a Third-Party Claim), the Indemnified Party shall give written notice thereof to the Indemnifying Party, specifying, in reasonable detail, the amount of such claim, the nature and basis of the alleged breach or act giving rise to such claim and all relevant facts and circumstances relating thereto.  The Indemnified Party shall provide the Indemnifying Party with full access to its books and records (and, if the Sellers are the Indemnifying Party, the Portfolio Companies’ books and records) during normal business hours for the purpose of allowing the Indemnifying Party a reasonable opportunity to verify any such claim for indemnifiable Losses.  The Indemnifying Party shall notify the Indemnified Party within thirty (30) days following its receipt of such notice and granting of such access if the Indemnifying Party disputes its liability to the Indemnified Party under this Article IX .  If the Indemnifying Party does not so notify the Indemnified Party, the claim specified by the Indemnified Party in such notice shall be a liability of the applicable Indemnifying Party under this Article IX , and the Indemnifying Party shall pay the amount of such claim to the Indemnified Party on demand or, in the case of any notice in which the amount of the claim (or any portion of the claim) is estimated, on such later date when the amount of such claim (or such portion of such claim) becomes finally determined.  If the Indemnifying Party has timely disputed its liability with respect to such claim as provided above, the Indemnifying Party and the Indemnified Party shall negotiate in good faith to resolve such dispute.  Promptly following the final determination of the amount of indemnifiable Losses to which the Indemnified Party is entitled (whether determined in accordance with this Section 9.3(d)  or by a court of competent jurisdiction), the Indemnifying Party shall pay such indemnifiable Losses to the Indemnified Party by wire transfer or certified check made payable to the order of the Indemnified Party.

 

Section 9.4                                     Limitations on Liability .  Notwithstanding anything to the contrary stated in this Agreement:

 

(a)                                  a breach of any representation or warranty of any of the Sellers in this Agreement (or in any certificate delivered in connection with this Agreement), subject to the provisions of Section 9.1 , in connection with any single item or group of related items that results in Losses of less than Fifty Thousand Dollars ($50,000) shall be deemed, for all purposes of this Article IX not to be a breach of such representation or warranty; provided , however , that the limitation set forth in this Section 9.4(a)  shall not apply to Losses arising from (i) any breach of any of the Sellers’ representations and warranties contained in Section 3.1 , Section 3.2 , Section 3.5 , Section 3.6 , Section 4.1 , Section 4.3 , and Section 4.7 (collectively, the “ Seller Fundamental Representations ”), or Section 4.11 or (ii) the matters described in Section 9.2(a)(ii) , (iii) , (iv) , (v) , (vi) , (vii) , or (viii) ;

 

(b)                                  the Sellers shall have no liability arising out of or relating to Section 9.2(a)  and the Buyers shall have no liability arising out of or relating to Section 9.2(b)  except if the aggregate Losses actually incurred by the Buyer Indemnified Parties or the Seller Indemnified Parties, as applicable, exceed 0.75% of the Purchase Price respectively (and then, subject to Section 9.4(c) , only to the extent such aggregate Losses exceed such amount); provided , however , that the limitation set forth in this Section 9.4(b)  shall not

 

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apply to Losses arising from (i) any breach of any of the Sellers’ representations and warranties contained in the Seller Fundamental Representations or Section 4.11 (in the case of the Sellers), or Section 5.1 , Section 5.2 or Section 5.6 (collectively, the “ Buyer Fundamental Representations ”) (in the case of the Buyers) or (ii) the matters described in Section 9.2(a)(ii) , (iii) , (iv) , (v) , (vi) , (vii) , or (viii) ;

 

(c)                                   (i) neither the Sellers’ liability arising out of or relating to Section 9.2(a)(i)  (other than breaches of the Seller Fundamental Representations or Section 4.11 ) nor the Buyers’ liability arising out of or relating to Section 9.2(b)(i)  (other than breaches of the Buyer Fundamental Representations) shall exceed fifteen percent (15%) of the Purchase Price, (ii) the Sellers’ liability for breaches of the representations and warranties contained in Section 4.11 shall not exceed twenty percent (20%) of the Purchase Price, and (iii) neither the Sellers’ liability for breaches of any of the Seller Fundamental Representations nor the Buyers’ liability for breaches of any of the Buyer Fundamental Representations shall exceed the Purchase Price; provided , however , that in no event shall either the Sellers’ aggregate liability or the Buyers’ aggregate liability for breaches of any representation, warranty, covenant or agreement in this Agreement exceed the Purchase Price; and

 

(d)                                  the amount of any Losses subject to indemnification under this Article IX shall be reduced or reimbursed, as the case may be, by the amount of any Third-Party insurance coverage the proceeds of which have been collected by the Portfolio Companies with respect to any such Losses, or third-party indemnity, third-party contribution or similar payments or other similar recovery or offset actually realized, directly or indirectly, by the Indemnified Party with respect to any such Losses, net of expenses paid to third parties in procuring such contributions or recovery, including materially increased premiums or deductibles, and net of any non-indemnifiable amounts related to such claim (e.g., any amounts not recoverable as a result of the limitations set forth in this Article IX ), but such recoveries shall not count against the caps, deductibles or other limitations described in this Section 9.4 .  If a Buyer Indemnified Party or Seller Indemnified Party, as applicable, receives an amount under Third-Party insurance coverage or receives or realizes, directly or indirectly, third party indemnity, third party contribution or similar payments with respect to Losses that were the subject of indemnification under this Article IX at any time subsequent to indemnification provided hereunder, then such Buyer Indemnified Party or Seller Indemnified Party, as applicable, shall promptly reimburse the Buyers or the Sellers, as applicable, to the extent of the amount received.

 

Section 9.5                                     Purchase Price Adjustment .  The Transaction Parties agree to treat all payments made pursuant to Section 2.6(d)  and this Article IX as adjustments to the Purchase Price for Tax purposes.

 

Section 9.6                                     Mitigation .  Each Indemnified Party shall use, and cause its Affiliates to use, commercially reasonable efforts to mitigate any Losses that may be subject to indemnification under this Article IX upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise to such Losses, solely to the extent that such Party would attempt to mitigate such Losses in the ordinary course of business if such Party did

 

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not have a right to indemnification hereunder; provided , that such obligation to mitigate on the part of the Buyers or the Portfolio Companies (from and after the Closing Date) (i) shall not require the Buyers, the Portfolio Companies or their respective Affiliates to take any action inconsistent with the past practices of the Sellers and (ii) shall arise only at such time as the Buyers’ management has actual knowledge of the event, fact, circumstance or matter giving rise to such Losses.

 

Section 9.7                                     Exclusive Remedy .  From and after the Closing, and except in the event of fraud or willful misconduct, the indemnification and remedies set forth in this Article IX shall constitute the sole and exclusive remedies of the Transaction Parties with respect to any breach of representation or warranty or non-performance, partial or total, of any covenant or agreement contained in this Agreement (or in any certificate delivered in connection herewith); provided , however , that nothing in this Section 9.7 shall prevent any Transaction Party from seeking injunctive or equitable relief in pursuit of its indemnification claims under this Article IX ; and provided , further , that in the event a Transaction Party should assert rights or obligations in connection with the transactions contemplated by this Agreement under any Law or cause of action not based on the interpretation or application of this Agreement, the Parties agree that the provisions of this Article IX shall in all instances apply to such claim or cause of action.  Except with respect to claims identified above in this Article IX , and to the extent allowed by applicable Law, each Transaction Party hereby waives, releases, acquits and forever discharges the other Party and their respective Affiliates and Representatives from any and all claims, actions, causes of action, demands, rights, damages, costs, expenses, Losses or compensation whatsoever, whether direct or indirect, known or unknown, foreseen or unforeseen, that such Party may have following the Closing against the other Transaction Parties and their respective Affiliates and Representatives with respect to the transactions contemplated by this Agreement.

 

Section 9.8                                     Directors and Officer’s Indemnification .  For a period of not less than six (6) years after the Closing Date, the Buyers shall cause the Organizational Documents of each Portfolio Company to contain provisions substantially similar to the provisions concerning the exculpation, indemnification, advancement of expenses to, and holding harmless of, all past and present employees, officers or agents of such Portfolio Company for acts or omissions occurring at or prior to the Closing as are contained in such documents as of the date of execution of this Agreement, and the Buyers shall cause each Portfolio Company to honor all such provisions, including making any indemnification payments and expense advancement thereunder.  In the event that any indemnifiable claim is asserted or made within such six-year period, all rights to indemnification and advancement of expenses in respect of such claim shall continue to the extent currently permitted under the relevant Portfolio Company’s Organizational Documents until such claim is disposed of, or all orders, injunctions, judgments, decrees, ruling, writs, assessments or arbitration awards in connection with such claim are fully satisfied.

 

ARTICLE X
TERMINATION

 

Section 10.1                              Termination Prior to the Closing, this Agreement may be terminated and the transactions contemplated hereby abandoned:

 

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(a)                                  by the mutual consent of each of the Buyers and the Sellers as evidenced in a writing signed by each of the Buyer Representative and the Seller Representative;

 

(b)                                  by the Buyers (provided the Buyers are not then in material breach of any of their obligations under this Agreement), if there has been a material breach by (i) any of the Sellers of any representation, warranty or covenant contained in this Agreement such that the conditions set forth in Section 8.1 or Section 8.2 would not be satisfied as of the time of such termination or (ii) ATP under the Seller Guaranty, and any such breach under clauses (i) or (ii) is incapable of being cured or has not been cured by any of the Sellers or ATP, as applicable, within twenty (20) days after written notice thereof from the Buyers;

 

(c)                                   by the Sellers (provided the Sellers are not then in material breach of any of their obligations under this Agreement), if (i) there has been a material breach by the Buyers of any representation, warranty or covenant contained in this Agreement (x) such that the conditions set forth in Section 8.1 or Section 8.3 would not be satisfied as of the time of such termination and (y) such breach is incapable of being cured or has not been cured by the Buyers within twenty (20) days after written notice thereof from the Sellers, or (ii) each of the conditions set forth in Section 8.1 and Section 8.2 (other than those conditions that are to be satisfied at Closing and the condition in Section 8.2(j)  that all conditions in the Lender Consents and the Portfolio Company Lender Consents have been met solely to the extent that such conditions are to be satisfied at Closing, though any such conditions in Section 8.2 or in the Lender Consents and the Portfolio Company Lender Consent are then able to be satisfied (A) solely by making delivery thereof if the Closing were then to occur, and (B) as to Section 8.2(j) , assuming for the purposes of this Clause (B) only, that the Buyers have or would have satisfied the conditions in Section 8.3(f) ) are satisfied and the Buyers fail to satisfy as of the Outside Date (as such date may be extended pursuant to Section 10.1(f) ) each of the conditions set forth in Section 8.3 (other than the conditions in Section 8.3(e)  and Section 8.3(f)  and the conditions that are to be satisfied at Closing, though such conditions that are to be satisfied at Closing are then able to be satisfied solely by making delivery thereof if the Closing were then to occur, but, as to Section 8.3(f) , only to the extent that the Buyers have delivered the replacement credit support contemplated in, and otherwise satisfied the requirements of clauses (i) and (ii) of, Section 6.10 ) and not otherwise waived in writing by the Sellers; provided , however , that in any event, the Sellers cannot terminate under clause (ii) above based upon the Buyers’ failure to pay the Purchase Price if the sole reason for such failure to pay the Purchase Price is due to the Sellers’ failure to satisfy the conditions in Section 8.2(j)  and the Buyers have delivered the replacement credit support contemplated in, and otherwise satisfied the requirements of clauses (i) and (ii) of, Section 6.10.

 

(d)                                  by either the Buyers or the Sellers if any Governmental Authority having competent jurisdiction has issued a final and non-appealable order, decree, ruling or injunction (other than a temporary restraining order) or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement;

 

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(e)                                   by either the Buyers or the Sellers in accordance with Section 6.15 or Section 6.16 , or as otherwise contemplated by Section 6.15 or Section 6.16 ; or

 

(f)                                    by either the Buyers or the Sellers if the Closing has not occurred on or before April 30, 2013 (as such date may be adjusted pursuant to this Section 10.1(f) , the “ Outside Date ”) or such later date as the Parties may agree upon; provided , however , that the Outside Date may be extended for a period not to exceed sixty (60) days by either the Buyers or the Sellers by written notice to the other Parties if the transactions contemplated by this Agreement shall not have been consummated as a result of the conditions set forth in Section 8.1(b)  and Section 8.1(c)  failing to have been satisfied and the Transaction Parties requesting such extension reasonably believe(s) that the relevant approvals will be obtained during such extension period; provided , further , that the Outside Date may be extended for a period not to exceed sixty (60) days in the aggregate by the Sellers in the event that a casualty loss event has occurred for which the Sellers has elected to restore damaged or destroyed assets or properties pursuant to Section 6.15 and has commenced and is reasonably pursuing restoration; provided , further , that the Outside Date may be extended for a period not to exceed sixty (60) days in the aggregate by the Sellers in the event that a condemnation event has occurred for which the Sellers are entitled to make an election pursuant to Section 6.16 and have not yet done so; provided , further , that the Outside Date may be extended for a period not to exceed sixty (60) days in the aggregate by the Buyers by written notice to the Seller Representative if the transactions contemplated by this Agreement shall not have been consummated solely as a result of the condition set forth in Section 8.3(f)  failing to have been satisfied (but only to the extent that the Buyers have delivered the replacement credit support contemplated in, and otherwise satisfied the requirements of clauses (i) and (ii) of, Section 6.10 ) and such conditions are not otherwise waived by the Sellers, in which case the Buyers and the Sellers shall use commercially reasonable efforts to cause the applicable counterparty to any Applicable Agreement to provide a written evidence of acceptance; provided , further , that the right to terminate this Agreement under this Section 10.1(f)  shall not be available to any Seller on the one hand or any Buyer on the other hand, if the failure of any Seller or Buyer, respectively, to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to the Outside Date.

 

Section 10.2                              Effect of Termination .

 

(a)                                  In the event of termination and abandonment of this Agreement pursuant to Section 10.1 , this Agreement shall forthwith become null and void and have no effect, and the obligations of the Parties under this Agreement shall terminate, except for the obligations set forth in this Section 10.2(a)  and the provisions set forth in Article XI , each of which shall survive termination of this Agreement; provided , however , that (i) if this Agreement is validly terminated by the Buyers pursuant to Section 10.1(b) , the Buyers shall be entitled to all rights and remedies available at Law or in equity, and (ii) if this Agreement is validly terminated by the Sellers pursuant to Section 10.1(c) , the Seller Representative, on behalf of the Sellers, shall be entitled to draw under the Letter of Credit in the full amount of $10,000,000, and such amount drawn under the Letter of Credit shall constitute a termination fee paid by the Buyers to the Sellers.  The Parties

 

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acknowledge and agree that the termination fee provided under the Letter of Credit is a reasonable determination of losses in the event of termination of this Agreement pursuant to Section 10.1(c)  and upon termination, none of the Buyers shall have any other liability or obligation to any of the Sellers, the Seller Representative or their Affiliates related to this Agreement or the transactions contemplated hereby.  In the event (i) the Parties are disputing whether this Agreement has been validly terminated by the Sellers and the Letter of Credit is set to expire within five (5) Business Days or (ii) the Letter of Credit is set to expire within five (5) Business Days and such date is prior to the Outside Date, as may be extended pursuant to  Section 10.1(f) , then the Seller Representative, on behalf of the Sellers, may draw under the Letter of Credit and hold such proceeds pending resolution of such dispute in the case of clause (i), or until the earlier of the Closing Date or termination of this Agreement in the case of clause (ii), whereupon any amount of such proceeds to which the Sellers are not entitled shall be promptly refunded to the Buyers; provided , however , that the Buyers shall have the right to extend or replace the Letter of Credit at any time prior to its expiration. Further, if termination of this Agreement occurs other than pursuant to Section 10.1(c) , the Seller Representative shall deliver to the Buyer Representative the Letter of Credit and written notice from the Sellers confirming their consent to the termination of the Letter of Credit in form and substance reasonably acceptable to the Buyer Representative.

 

(b)                                  Except as otherwise provided by Law, no delay or forbearance by a Party in the exercise or enforcement of any right or remedy hereunder shall be deemed a waiver by such Party of its right hereunder to exercise or enforce such right or remedy.  For the avoidance of doubt, as an alternative to termination of this Agreement pursuant to the provisions of Section 10.1 and the exercise of any right or remedy pursuant to this Section 10.2 , the Parties shall have the right to seek specific performance pursuant to the provisions of Section 11.14 .

 

(c)                                   No termination of this Agreement shall affect the obligations of the Parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms.

 

ARTICLE XI
MISCELLANEOUS

 

Section 11.1                              Seller Representative .

 

(a)                                  The Seller Representative is hereby constituted and appointed as exclusive proxy, representative, agent and attorney-in-fact for and on behalf of each of the Sellers, with full power of substitution, to make all decisions and determinations and to act and execute, deliver and receive all documents, instruments and consents on behalf of and as agent for each of the Sellers at any time in connection with, and that may be necessary or appropriate to accomplish the intent and implement the provisions of this Agreement. Without limiting the generality of the foregoing, the Seller Representative has full power and authority, on behalf of each Seller and its successors and assigns, to (i) interpret the terms and provisions of this Agreement and the documents to be executed and delivered by the Sellers in connection herewith, (ii) execute and deliver and receive deliveries of all

 

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agreements, certificates, statements, notices, approvals, extensions, waivers, undertakings, amendments and other documents required or permitted to be given in connection with the consummation of the transactions contemplated by this Agreement, (iii) receive service of process in connection with any claims under this Agreement, (iv) agree to, negotiate and enter into settlements and compromises of, assume the defense of claims and comply with orders with respect to such claims, and to take all actions necessary or appropriate in the judgment of the Seller Representative for the accomplishment of the foregoing, (v) give and receive notices and communications, (vi) take all actions necessary or appropriate in the judgment of the Seller Representative on behalf of the Sellers in connection with this Agreement, and (vii) make any determinations and settle any matters in connection with the adjustments to the Purchase Price in Section 2.5 and Section 2.6 . By executing this Agreement, the Seller Representative accepts the appointment, authority and power contemplated by this Section 11.1 .

 

(b)                                  The Seller Representative will not be liable for any act done or omitted under this Agreement as Seller Representative while acting at the direction of the Sellers or otherwise in good faith, and any act taken or omitted to be taken pursuant to the advice of counsel will be conclusive evidence of such good faith. Each of the Buyers agrees that it will not look to the personal assets of the Seller Representative, acting in such capacity, for the satisfaction of any obligations to be performed by any of the Sellers and the Seller Representative will not look to the Buyers or, post-Closing, any of the Portfolio Companies for any of the Sellers’ indemnification obligations hereunder. In performing any of its obligations under this Agreement or any agreements or documents executed and delivered in connection herewith, the Seller Representative will not be liable to the Sellers for any losses that such Person may incur as a result of any act, or failure to act, by the Seller Representative under this Agreement or any agreements or documents executed and delivered in connection herewith, and the Seller Representative will be indemnified and held harmless by the Sellers for all losses, except to the extent that the actions or omissions of the Seller Representative were taken or omitted not at the direction of the Sellers or otherwise in good faith. The limitation of liability and indemnification provisions of this Section 11.1(b)  will survive the termination of this Agreement.  For the avoidance of doubt, the provisions herein relating to ATP’s obligations and limitations on liability in its capacity as the Seller Representative shall not affect or limit ATP’s obligations or liabilities as a guarantor under the Seller Guaranty.  If the Seller Representative is dissolved or for any other reason cannot fulfill the obligations set forth in this Section 11.1 , the Sellers agree to appoint a new entity as the successor Seller Representative within ten (10) Business Days of the dissolution or incapacity of the original Seller Representative.

 

(c)                                   The appointment of the Seller Representative is coupled with an interest and may not be revoked in whole or in part. Such appointment shall be binding upon the officers, directors, security holders, successors and assigns of each of the Sellers. All decisions of the Seller Representative shall be final and binding on all of the Sellers and no securityholder shall have the right to object, dissent, protest or otherwise contest the same. The Buyers shall be entitled to rely upon, without independent investigation, any act, notice, instruction or communication from the Seller Representative and any

 

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document executed by the Seller Representative on behalf of any of the Sellers and shall be fully protected in connection with any action or inaction taken or omitted to be taken in reliance thereon.

 

Section 11.2                              Buyer Representative .

 

(a)                                  The Buyer Representative is hereby constituted and appointed as exclusive proxy, representative, agent and attorney-in-fact for and on behalf of each of the Buyers, with full power of substitution, to make all decisions and determinations and to act and execute, deliver and receive all documents, instruments and consents on behalf of and as agent for each of the Buyers at any time in connection with, and that may be necessary or appropriate to accomplish the intent and implement the provisions of this Agreement. Without limiting the generality of the foregoing, the Buyer Representative has full power and authority, on behalf of each Buyer and its successors and assigns, to (i) interpret the terms and provisions of this Agreement and the documents to be executed and delivered by the Buyers in connection herewith, (ii) execute and deliver and receive deliveries of all agreements, certificates, statements, notices, approvals, extensions, waivers, undertakings, amendments and other documents required or permitted to be given in connection with the consummation of the transactions contemplated by this Agreement, (iii) receive service of process in connection with any claims under this Agreement, (iv) agree to, negotiate and enter into settlements and compromises of, assume the defense of claims and comply with orders with respect to such claims, and to take all actions necessary or appropriate in the judgment of the Buyer Representative for the accomplishment of the foregoing, (v) give and receive notices and communications, (vi) take all actions necessary or appropriate in the judgment of the Buyer Representative on behalf of the Buyers in connection with this Agreement, and (vii) make any determinations and settle any matters in connection with the adjustments to the Purchase Price in Section 2.5 and Section 2.6 . By executing this Agreement, the Buyer Representative accepts the appointment, authority and power contemplated by this Section 11.2 .

 

(b)                                  The Buyer Representative will not be liable for any act done or omitted under this Agreement as Buyer Representative while acting at the direction of the Buyers or otherwise in good faith, and any act taken or omitted to be taken pursuant to the advice of counsel will be conclusive evidence of such good faith. Each of the Sellers agrees that it will not look to the personal assets of the Buyer Representative, acting in such capacity, for the satisfaction of any obligations to be performed by the any of the Buyers and the Buyer Representative will not look to the Sellers for any of the Buyers’ indemnification obligations hereunder. In performing any of its obligations under this Agreement or any agreements or documents executed and delivered in connection herewith, the Buyer Representative will not be liable to the Buyers for any losses that such Person may incur as a result of any act, or failure to act, by the Buyer Representative under this Agreement or any agreements or documents executed and delivered in connection herewith, and the Buyer Representative will be indemnified and held harmless by the Buyers for all losses, except to the extent that the actions or omissions of the Buyer Representative were taken or omitted not at the direction of the Buyers or otherwise in good faith. The limitation of liability and indemnification provisions of this Section 11.1(b)  will survive the

 

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termination of this Agreement.  In the event the Buyer Representative dissolves, is no longer an Affiliate of the Portfolio Companies or for any other reason cannot fulfill the obligations set forth in this Section 11.2 , the Buyers agree to appoint a new entity as the successor Buyer Representative within ten (10) Business Days of such event.

 

(c)                                   The appointment of the Buyer Representative is coupled with an interest and may not be revoked in whole or in part. Such appointment shall be binding upon the officers, directors, security holders, successors and assigns of each of the Buyers. All decisions of the Buyer Representative shall be final and binding on all of the Buyers and no securityholder shall have the right to object, dissent, protest or otherwise contest the same. The Buyers shall be entitled to rely upon, without independent investigation, any act, notice, instruction or communication from the Buyer Representative and any document executed by the Buyer Representative on behalf of any of the Buyers and shall be fully protected in connection with any action or inaction taken or omitted to be taken in reliance thereon.

 

Section 11.3                              Notices .  All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given or made by delivery in person by an internationally recognized courier service, by facsimile or electronic mail with receipt confirmed (followed by delivery of an original via an internationally recognized courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other addresses for a Party as shall be specified in a notice given in accordance with this Section 11.3 ):

 

If to the Seller Representative or any of the Sellers, to:

 

Atlantic Power Corporation
One Federal Street, 30th Floor
Boston, MA 02110
Attention: Jeffrey S. Levy
Fax: (617) 977-2410
Email: jlevy@atlanticpower.com

 

with a copy (which shall not constitute notice) to:

 

Morgan, Lewis & Bockius LLP
225 Franklin Street, 16th Floor
Boston, MA 02110
Attention: Mitchell D. Carroll
Fax: (617) 341-7701
Email: mcarroll@morganlewis.com

 

If to the Buyer Representative or any of the Buyers or, after
Closing, the Portfolio Companies, to:

 

Quantum Utility Generation, LLC

1401 McKinney St., Suite 1800

 

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Houston, TX 77010
Attention: W. Lance Schuler, General Counsel
Fax: (713) 485-8641
Email: lschuler@quantumug.com

 

with a copy (which shall not constitute notice) to:

 

Andrews Kurth LLP
600 Travis, Suite 4200
Houston, TX 77002
Attention: Jon W. Daly
Fax: (713) 238-7492
Email: jondaly@akllp.com

 

Section 11.4                              Assignment .  No Party shall assign this Agreement or any part hereof, by operation of law or otherwise, without the prior written consent of the other Parties.  Notwithstanding the foregoing, (i) the Buyers may, without the prior written consent of the other Parties, assign their rights and obligations under this Agreement in whole or in part to any one or more Affiliates of the Buyers, but in no event shall such assignment relieve the Buyers of any of their obligations under this Agreement, and (ii) each of the Sellers may, without the prior written consent of the other Parties, assign its rights and obligations under this Agreement in whole or in part to any one or more Affiliates of such Seller, provided that any such Affiliate assumes all of the obligations of such Seller under this Agreement and only if the Seller Guarantor guarantees all obligations of such Affiliate under this Agreement.  Any attempted assignment in violation of this Section 11.4 shall be void.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns.

 

Section 11.5                              Rights of Third Parties .  Except for the provisions of Article IX , which are intended to be enforceable by the Persons respectively referred to therein, nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the Parties and their permitted successors and assigns, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 11.6                              Expenses .  Except as otherwise provided herein, each Party shall bear its own expenses incurred in connection with this Agreement and the transactions contemplated hereby whether or not such transactions shall be consummated, including all fees of its legal counsel, financial advisors and accountants.

 

Section 11.7                              Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Any facsimile or electronic copies hereof or signatures hereon shall, for all purposes, be deemed originals.

 

Section 11.8                              Entire Agreement .  This Agreement (together with the Disclosure Schedules and exhibits to this Agreement), the Letter Agreement and the Confidentiality Agreement constitute the entire agreement among the Parties and supersede any other agreements, whether written or oral, that may have been made or entered into by or among any

 

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of the Parties or any of their respective Affiliates relating to the transactions contemplated hereby.  No representations, warranties, covenants, understandings or agreements, oral or otherwise, relating to the transactions contemplated by this Agreement exist between the Buyers or their Affiliates, on the one hand, and the Sellers or their Affiliates, on the other hand, except as expressly set forth in this Agreement or in any document delivered at Closing.

 

Section 11.9                              Disclosure Schedules .  Unless the context otherwise requires, all capitalized terms used in the Disclosure Schedules shall have the respective meanings assigned to such terms in this Agreement.  No reference to or disclosure of any item or other matter in the Disclosure Schedules shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in the Disclosure Schedules.  No disclosure in the Disclosure Schedules relating to any possible breach or violation of any agreement or Law shall be construed as an admission or indication that any such breach or violation exists or has actually occurred.  The inclusion of any information in the Disclosure Schedules shall not be deemed to be an admission or acknowledgment by the Sellers that in and of itself, such information is material to or outside the ordinary course of the business of the Portfolio Companies or is required to be disclosed on the Disclosure Schedules.  Each numbered Schedule in the Disclosure Schedules qualifies only the correspondingly numbered representation, warranty or covenant to the extent specified therein and such other representations, warranties or covenants to the extent a matter in such numbered Schedule is disclosed in such a way as to make its relevance to such other representation, warranty or covenant reasonably apparent.

 

Section 11.10                       Amendments .  This Agreement may be amended or supplemented at any time by additional written agreements signed by each Party hereto, as may mutually be determined by the Parties to be necessary, desirable or expedient to further the purpose of this Agreement or to clarify the intention of the Parties.

 

Section 11.11                       Publicity .  No Party or any Affiliate or Representative of such Party shall issue or cause the publication of any press release or public announcement or otherwise communicate with any news media in respect of this Agreement or the transactions contemplated hereby without the prior written consent of the other Parties (which consent shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law or applicable securities exchange rules and except with respect to customary investor and analyst presentations, meetings and conference calls, in which case, the Party issuing or publishing such press release or making such public announcement shall provide, to the extent reasonably practicable, the other Parties with a copy of such press release or public announcement (including any slides or transcripts to be used in any investor or analyst presentation or conference) in advance of its issuing or publishing such press release or making such public announcement, as applicable.

 

Section 11.12                       Severability .  If any term or other provision of this Agreement is illegal, invalid or unenforceable under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any Party.  Upon such determination that any term or other provision contained herein is, to any extent, invalid or unenforceable in any respect under the

 

71



 

Laws governing this Agreement, the Parties to this Agreement shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.

 

Section 11.13                       Governing Law; Jurisdiction .

 

(a)                                  This Agreement shall be governed by and construed in accordance with the Laws of the State of New York (without regard to the conflict of laws principles thereof).  Each of the Parties irrevocably agrees that any legal action or proceeding with respect to this Agreement or the transactions contemplated hereby shall be brought and determined in any state or federal court in the Borough of Manhattan, New York, New York, and each of the Parties hereto irrevocably submits to the exclusive jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement.  The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts; provided , however , that the foregoing shall not limit the rights of the Parties to obtain execution of judgment in any other jurisdiction.  The Parties further agree, to the extent permitted by Law, that a final and unappealable judgment against a Party in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment.  The Parties agree that all judicial determinations or findings by a state or federal court in the Borough of Manhattan, New York, New York with respect to any matter under this Agreement shall be binding.

 

(b)                                  To the extent that any Party hereto has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each such Party hereby irrevocably (i) waives such immunity in respect of its obligations with respect to this Agreement and (ii) submits to the personal jurisdiction of any court described in this Section 11.13 .

 

(c)                                   THE PARTIES HERETO AGREE THAT THEY HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS AGREEMENT.

 

Section 11.14                       Specific Performance .  Each Party agrees that the other Parties would suffer irreparable damage in the event that there has been a material breach by such Party of any representation, warranty or covenant contained in this Agreement and that any remedy at law for any such breach would be inadequate.  Accordingly, it is agreed that in the event of such a breach, the non-breaching Party shall be entitled to an injunction or injunctions to enforce specifically the terms and provisions hereof in any state or federal court in the Borough of Manhattan, New York, New York, in addition to any other remedies it may have at law or in equity.

 

72



 

Section 11.15                       No Consequential Damages .   NOTWITHSTANDING ANYTHING TO THE CONTRARY STATED IN THIS AGREEMENT OR AS PROVIDED FOR UNDER ANY APPLICABLE LAW, NO PARTY SHALL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES, WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM ANY OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT; PROVIDED THAT THE FOREGOING SHALL NOT APPLY TO THIRD PARTY CLAIMS FOR WHICH ONE PARTY IS OBLIGATED TO INDEMNIFY THE OTHER PARTY HEREUNDER.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each Party as of the date first above written.

 

 

SELLERS:

 

 

 

LAKE INVESTMENT, LP

 

By:

NCP Lake Power, LLC, its General Partner

 

 

By:

Teton East Coast Generation, LLC, its Sole Member

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

 

 

NCP LAKE POWER, LLC

 

By:

Teton East Coast Generation, LLC, its Sole Member

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

 

 

TETON NEW LAKE, LLC

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

 

 

NCP DADE POWER, LLC

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

 

 

DADE INVESTMENT, LP

 

By:

NCP Dade Power, LLC, its General Partner

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

Signature Page to Purchase and Sale Agreement

 



 

 

AUBURNDALE LP, LLC

 

By:

Atlantic Auburndale, LLC, its Sole Member

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

 

 

 

 

AUBURNDALE GP, LLC

 

By:

Auburndale LP, LLC, its Sole Member

 

 

By:

Atlantic Auburndale, LLC, its Sole Member

 

 

 

By:

/s/ Terrence Ronan

 

Name:

Terrence Ronan

 

Title:

Vice President

 

 

 

SELLER REPRESENTATIVE:

 

 

 

ATLANTIC POWER CORPORATION

 

solely in its capacity as Seller Representative

 

 

 

By:

/s/ Barry E. Welch

 

Name:

Barry E. Welch

 

Title:

President and Chief Executive Officer

 

Signature Page to Purchase and Sale Agreement

 



 

 

BUYERS:

 

 

 

 

 

QUANTUM LAKE LP, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

QUANTUM LAKE GP, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

QUANTUM PASCO LP, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

QUANTUM PASCO GP, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

QUANTUM AUBURNDALE LP, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

QUANTUM AUBURNDALE GP, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

Signature Page to Purchase and Sale Agreement

 



 

 

BUYER REPRESENTATIVE:

 

 

 

QUANTUM UTILITY GENERATION, LLC

 

 

 

By:

/s/ Larry M. Kellerman

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

Signature Page to Purchase and Sale Agreement

 



 

EXHIBIT A

 

Form of Assignment and Assumption Agreement

 

A-1



 

EXHIBIT A

 

FORM OF

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made and entered into this          day of                     , 2013 (the “ Effective Date ”), by and between                               , a                                (“ Assignor ”), and                               , a                                (“ Assignee ”).  Each of Assignor and Assignee may be referred to collectively as the “ Parties ” or individually as a “ Party ”.

 

RECITALS

 

WHEREAS, Assignor owns a       % [limited] [general] partner interest (the “ Partnership Interests ”) in                               , a [Delaware] [Florida] limited partnership (the “ Partnership ”);

 

WHEREAS, upon the terms and subject to the conditions set forth in that certain Purchase and Sale Agreement, dated as of January 30, 2013, by and among Assignee, Assignor and the other parties named therein (the “ Purchase Agreement ”), Assignor has agreed to sell to Assignee, and Assignee has agreed to purchase from Assignor, the Partnership Interests;

 

WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement; and

 

WHEREAS, this Agreement is executed and delivered by Assignor and Assignee in connection with the Closing under, and in accordance with, the Purchase Agreement.

 

NOW, THEREFORE, BE IT KNOWN THAT:

 

1.             Conveyance and Assignment .  For good and valuable consideration as set forth in the Purchase Agreement, effective as of 12:01 a.m. Eastern time on the Effective Date, Assignor does hereby ASSIGN, TRANSFER, SET OVER, DELIVER AND CONVEY to Assignee, free and clear of all Liens, all of the rights, benefits, and privileges of Assignor in the Partnership Interests, including, without limitation, (a) all of Assignor’s [limited] [general] partner interest in the Partnership, (b) all of Assignor’s right to receive allocations of income, gain, loss, deduction or credit, as well as future distributions, of the Partnership, in liquidation or otherwise, (c) all of Assignor’s rights to consent to, approve of or vote on any decisions of the Partnership attributable to the Partnership Interests, (d) all of Assignor’s direct or indirect interest in the assets of the Partnership and (e) all other rights, titles, interests and benefits of whatsoever kind or character now or hereafter accruing to the Partnership Interests.

 

2.             Assumption .  Effective as of 12:01 a.m. Eastern time on the Effective Date, Assignee accepts the assignment, transfer, set over, delivery and conveyance of the Partnership Interests as set forth above and agrees to become [a] [the sole] [limited] [general] partner of the Partnership and to be bound by all of the provisions of the certificate of limited partnership and agreement of limited partnership of the Partnership.  The Parties hereby acknowledge and agree that Assignor shall not be liable for any obligation of a [limited] [general] partner of the

 

A-2



 

Partnership under the agreement of limited partnership of the Partnership which may arise from and after the Effective Date.

 

3.             Conflict Among Agreements .  In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of the Purchase Agreement, the terms and conditions of the Purchase Agreement shall govern, supersede and prevail.

 

4.             Captions and Headings .  The captions and headings in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

 

5.             Successors and Assigns .  This Agreement shall bind and benefit the respective successors and permitted assigns of the Parties.

 

6.             Counterparts .  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Any facsimile or electronic copies hereof or signatures hereon shall, for all purposes, be deemed originals.

 

7.             Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of New York (without regard to the conflict of laws principles thereof).

 

[SIGNATURE PAGE FOLLOWS]

 

A-3



 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each Party as of the date first written above.

 

 

 

ASSIGNOR:

 

 

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

ASSIGNEE:

 

 

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Signature Page to Assignment and Assumption Agreement

 

A-4



 

EXHIBIT B

 

Form of Letter of Credit

 

B-1



 

EXHIBIT B

 

Form of Letter of Credit

 

Citibank, N.A.

 

Date:  January 30, 2013

 

Beneficiary:

 

Atlantic Power Corporation

One Federal Street, 30th Floor

Boston, MA 02110

Attention:  Paul Rapisarda

Fax: (617) 977-2410

Email: prapisarda@atlanticpower.com

 

Applicant:

 

Quantum Energy Partners V, LP

1401 McKinney St., Suite 2700

Houston, Texas  77010

 

Gentlemen:

 

By order of our client, Quantum Energy Partners V, LP (the “Applicant”), we, Citibank, N.A. having its business address at [                                   ADDRESS] (“Issuer”), hereby issue this Irrevocable Standby Letter of Credit No. [                        ], in favor of Atlantic Power Corporation (“Beneficiary”) for an amount not to exceed USD 10,000,000.00 (Ten Million and No/100 United States Dollars), effective immediately and expiring on the earlier of (1) 5:00 p.m. Eastern time on June 29, 2013 or (2) our receipt of written confirmation from you indicating your consent to the termination of this Irrevocable Standby Letter of Credit along with the return of this original Irrevocable Standby Letter of Credit.

 

Issuer undertakes to Beneficiary to pay Beneficiary’s demand for payment upon presentation of Beneficiary’s sight draft in the form of Exhibit “A” hereto, accompanied by Beneficiary’s written and dated statement, signed by an officer of Beneficiary’s company, in the form of Exhibit “B” hereto.  Presentation of such drawing documents may be made (a) by fax transmission to 813-604-7187 or such other fax number identified by Issuer in a written notice to Beneficiary or (b) at the office of Issuer’s servicer, Citicorp North America, Inc., at 3800 Citibank Center, Building B, 3rd Floor, Tampa, Florida 33610, Attn:  U.S. Standby Dept., or such other office as Issuer may advise Beneficiary by written notice from time to time (the “Office”).

 

B-2



 

To the extent a presentation is made by fax transmission, Beneficiary should (i) provide telephone notification thereof to Citibank, N.A. to 866-498-8670 prior to or simultaneously with the sending of such fax transmission and (ii) send the original of such drawing document(s) to Citibank, N.A., c/o Citicorp North America, Inc., at the same address provided above for presentation of documents, provided, however, that Citibank, N.A.’s receipt of such telephone notice or original document(s) shall not be a condition to payment hereunder.

 

Issuer hereby agrees with Beneficiary to honor each draft drawn under and in compliance with the terms and conditions of this Irrevocable Standby Letter of Credit if presented, together with the documents specified above, at this office on or before the stated expiration time.  If the requisite documents are presented in any manner provided herein before expiration of this Irrevocable Standby Letter of Credit, Issuer will honor the draft(s) drawn under and in compliance with the terms of this Irrevocable Standby Letter of Credit upon presentation, and payment will be effected within one business day after such presentation by wire transfer to a duly requested account of Beneficiary.

 

As used herein “business day” shall mean any day other than a Saturday or Sunday or a day on which banking institutions in New York City are authorized or required to close by law.

 

Should Beneficiary have occasion to communicate with Issuer regarding this Irrevocable Standby Letter of Credit, Beneficiary should direct any correspondence to Issuer at the Office, making specific mention of the Irrevocable Standby Letter of Credit Number indicated above.

 

Except as otherwise expressly stated herein, this Irrevocable Standby Letter of Credit is subject to the International Standby Practices (“ISP98”), International Chamber of Commerce, Publication No. 590, and as to matters not governed by the ISP98, shall be governed by and construed in accordance with the laws of the State of New York and applicable U.S. Federal Law.

 

 

 

 

 

Authorized Signature(s)

 

Citibank, N.A.

 

B-3



 

EXHIBIT “A”
TO IRREVOCABLE STANDBY LETTER OF CREDIT
NO. [                ]
SIGHT DRAFT

 

[DATE]

 

Citibank, N.A.

c/o Its Servicer, Citicorp North America, Inc.

3800 Citibank Center, Building B, 3rd Floor

Tampa, Florida  33610

 

Attn:  US Standby Dept.

 

Re:                              Irrevocable Standby Letter of Credit No. [                        ]

 

On Sight

 

Demand is hereby made upon you for payment to the undersigned Beneficiary of                                                        United States Dollars (USD                       ) in immediately available funds by deposit to our Account No.                     at [Insert Name of Bank and Wire Transfer Details] on or before the first business day following the date hereof, pursuant to Irrevocable Standby Letter of Credit No. [                        ] of Citibank, N.A.

 

 

ATLANTIC POWER CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

B-4



 

EXHIBIT “B”
TO IRREVOCABLE STANDBY LETTER OF CREDIT
NO. [              ]

 

[DATE]

 

Citibank, N.A.

c/o Its Servicer, Citicorp North America, Inc.

3800 Citibank Center, Building B, 3rd Floor

Tampa, Florida  33610

 

Attn:  US Standby Dept.

 

Re:                              Irrevocable Standby Letter of Credit No. [                        ]

 

Gentlemen:

 

This is a Certificate presented in accordance with your Irrevocable Standby Letter of Credit No. [                        ] held by the undersigned Beneficiary.

 

The undersigned Beneficiary hereby certifies as follows:

 

Atlantic Power Corporation (“ATP”) is entitled to draw under the Irrevocable Standby Letter of Credit No. [                        ] in the amount set forth in the Sight Draft accompanying this Certificate for amounts payable pursuant to Section 10.2 of the Purchase and Sale Agreement, dated as of January 30, 2013, by and among (i) LAKE INVESTMENT, LP, (ii) NCP LAKE POWER, LLC, (iii) TETON NEW LAKE, LLC, (iv) NCP DADE POWER, LLC, (v) DADE INVESTMENT, LP, (vi) AUBURNDALE LP, LLC, (vii) AUBURNDALE GP, LLC, (viii) QUANTUM LAKE LP, LLC, (ix) QUANTUM LAKE GP, LLC, (x) QUANTUM PASCO LP, LLC, (xi) QUANTUM PASCO GP, LLC, (xii) QUANTUM AUBURNDALE LP, LLC, (xiii) QUANTUM AUBURNDALE GP, LLC, (xiv) ATP, solely in its capacity as the Seller Representative, and (xv) Quantum Utility Generation, LLC, solely in its capacity as the Buyer Representative.

 

IN WITNESS WHEREOF, this Certificate has been executed and delivered by a duly authorized officer of the undersigned on the date first above written.

 

B-5



 

 

ATLANTIC POWER CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

B-6


 

EXHIBIT C

 

Form of Seller Guaranty

 

C-1



 

EXECUTION COPY

 

GUARANTY AGREEMENT

 

This Guaranty Agreement (this “ Guaranty ”) is made as of January 30, 2013 by Atlantic Power Corporation, a corporation continued under the laws of the Province of British Columbia, Canada (“ Guarantor ”), in favor of each of Quantum Lake LP, LLC, a Delaware limited liability company (“ Quantum Lake LP ”), Quantum Lake GP, LLC, a Delaware limited liability company (“ Quantum Lake GP ”), Quantum Pasco LP, LLC, a Delaware limited liability company (“ Quantum Pasco LP ”), Quantum Pasco GP, LLC, a Delaware limited liability company (“ Quantum Pasco GP ”), Quantum Auburndale LP, LLC, a Delaware limited liability company (“ Quantum Auburndale LP ”), Quantum Auburndale GP, LLC, a Delaware limited liability company (“ Quantum Auburndale GP ”) and Quantum Utility Generation, LLC, a Delaware limited liability company (the “ Buyer Representative ”).  Each of Quantum Lake LP, Quantum Lake GP, Quantum Pasco LP, Quantum Pasco GP, Quantum Auburndale LP and Quantum Auburndale GP is referred to herein individually as a “ Beneficiary ” and collectively the “ Beneficiaries .”  Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase and Sale Agreement (defined below).

 

RECITALS

 

WHEREAS, each of the Beneficiaries, the Buyer Representative, solely in its capacity as the Buyer Representative, Lake Investment, LP, a Delaware limited partnership (“ Lake Investment ”), NCP Lake Power, LLC, a Delaware limited liability company (“ NCP Lake ”), Teton New Lake, LLC, a Delaware limited liability company (“ Teton New Lake ”), NCP Dade Power, LLC, a Delaware limited liability company (“ NCP Dade ”), Dade Investment, LP, a Delaware limited partnership (“ Dade Investment ”), Auburndale LP, LLC, a Delaware limited liability company (“ Auburndale LP ”), Auburndale GP, LLC, a Delaware limited liability company (“ Auburndale GP ”), and Guarantor, solely in its capacity as the Seller Representative, have entered into that certain (a) Purchase and Sale Agreement of even date herewith (the “ Purchase and Sale Agreement ”), pursuant to which the Buyers shall acquire from the Sellers one hundred percent (100%) of the outstanding general and limited partnership interests in each of (i) Lake Cogen, Ltd., a Florida limited partnership (“ Lake ”), (ii) Pasco Cogen, Ltd., a Florida limited partnership (“ Pasco ”), and (iii) Auburndale Power Partners, Limited Partnership, a Delaware limited partnership (“ Auburndale ”, and together with Lake and Pasco, the “ Portfolio Companies ”) and (b) Letter Agreement relating to the Purchase and Sale Agreement of even date herewith (the “ Letter Agreement ”);

 

WHEREAS, Guarantor indirectly owns 100% of the issued and outstanding equity interests in each of Lake Investment, NCP Lake, Teton New Lake, NCP Date, Dade Investment, Auburndale LP and Auburndale GP (each a “ Seller ” and collectively, the “ Sellers ”) and will therefore receive financial and other benefits from the transactions contemplated by the Purchase and Sale Agreement and the Letter Agreement;

 

WHEREAS, in connection with the Purchase and Sale Agreement, the Beneficiaries, the Buyer Representative, solely in its capacity as Buyer Representative, the Portfolio Companies, Atlantic Power Holdings, Inc., a Delaware corporation (“ APH ”), the Sellers and the Guarantor, solely in its capacity as Seller Representative, have entered into that certain Transition Services

 

C-2



 

Agreement of even date herewith (the “ Transition Services Agreement ”);

 

WHEREAS, the Buyers have required as a condition, among others, to entering into the Purchase and Sale Agreement and the Letter Agreement that Guarantor execute and deliver this Guaranty to the Buyer Representative; and

 

WHEREAS, Guarantor has agreed to enter into this Guaranty to provide assurance for the payment obligations of (i) each of the Sellers in connection with the Purchase and Sale Agreement, the Letter Agreement and the Transition Services Agreement and (ii) APH in connection with the Transition Services Agreement, and to induce each of the Buyers to enter into the Purchase and Sale Agreement and Letter Agreement.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                                       Guaranty.

 

(a)                                                                                  For value received and in consideration of the transactions contemplated by the Purchase and Sale Agreement and the Letter Agreement, Guarantor absolutely, unconditionally and irrevocably guarantees for the benefit of each of the Beneficiaries and their permitted successors and assigns, the full and prompt payment of all payment obligations of (i) the Sellers under the Purchase and Sale Agreement, the Letter Agreement and the Transition Services Agreement, and (ii) APH under the Transition Services Agreement (collectively, the “ Guaranteed Obligations ”) as and when the same shall become due in accordance with the Purchase and Sale Agreement, the Letter Agreement and the Transition Services Agreement, as applicable.  Guarantor hereby agrees that this Guaranty is an absolute guaranty of payment and is not a guaranty of collection.

 

(b)                                                                                  Any and all payments by Guarantor hereunder shall be made free and clear of, and without reduction for, any and all taxes, levies, imposts, deductions, charges, withholdings, and all stamp or documentary taxes, excise taxes, ad valorem taxes and other taxes, charges or levies which arise from the payment of Guarantor hereunder.

 

(c)                                                                                   Notwithstanding anything herein to the contrary:

 

(i)                                      Guarantor shall not be required to make a payment in respect of any Guaranteed Obligation while the validity and existence of such Guaranteed Obligation is being disputed in good faith by any Seller in accordance with the relevant provisions of the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement, as applicable; and

 

(ii)                                   Guarantor’s liability in respect of any Guaranteed Obligation shall not exceed the liability of any Seller with respect to such Guaranteed Obligation under the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement, as applicable.

 

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2.                                       Obligations Absolute and Unconditional.   Guarantor hereby agrees that its obligations under this Guaranty shall be irrevocable, continuing, absolute, and unconditional, irrespective of, and the Guaranteed Obligations of Guarantor shall not be discharged or impaired or otherwise effected by, and Guarantor hereby irrevocably waives any defenses to enforcement it may have (now in the future) by reason of:

 

(a)                                                                                  the illegality, lack of validity, enforceability, avoidance, or subordination of any of the Guaranteed Obligations, the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement;

 

(b)                                                                                  the absence of any attempt by, or on behalf of, any of the Beneficiaries, to collect, or to take any other action to enforce, all or any part of the Guaranteed Obligations whether from or against any Seller or any other Person;

 

(c)                                                                                   the election of any remedy available under the Purchase and Sale Agreement, the Letter Agreement, the Transition Services Agreement or applicable Laws by, or on behalf of, any of the Beneficiaries with respect to all or any part of the Guaranteed Obligations;

 

(d)                                                                                  the waiver, consent, extension, forbearance or granting of any indulgence by, or on behalf of, any of the Beneficiaries, with respect to any provision of the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement;

 

(e)                                                                                   any change in the legal or beneficial ownership, or the existence or structure as a partnership or other entity, of any Seller or any other Person now or hereafter liable with respect to any of the Guaranteed Obligations (including, without limitation, any consolidation or amalgamation with, any merger with or into, or any transfer of all or substantially all the assets of such Seller or such other Person to, another Person);

 

(f)                                                                                    the disallowance, under Section 502 of the Chapter 11 of the United States Bankruptcy Code (the “ Bankruptcy Code ”), of all or any portion of the claims against any Seller held by any of the Beneficiaries, for payment of all or any part of the Guaranteed Obligations;

 

(g)                                                                                   the operation of the automatic stay under Section 362(a) of the Bankruptcy Code with respect to any Seller; or

 

(h)                                                                                  to the fullest extent permitted by applicable Law, any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor.

 

3.                                       Enforcement; Application of Payments.   In the case of any failure by any Seller to pay any Guaranteed Obligation in accordance with the terms of the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement, as applicable, Guarantor hereby agrees that, upon receipt of written notice from the Buyer Representative, on behalf of the Beneficiaries, of such failure, Guarantor will promptly make payment of such Guaranteed Obligations owing to the Beneficiaries to the Buyer Representative for the benefit of the Beneficiaries, without first proceeding against such Seller or any other Person.  Any amounts

 

C-4



 

received by the Buyer Representative hereunder shall be applied to the Guaranteed Obligations.

 

4.                                       Waivers and Acknowledgments.

 

(a)                                                                                  Guarantor unconditionally and irrevocably hereby waives any right to revoke this Guaranty, diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any Seller or any other Person (other than Guarantor to the extent required by the Bankruptcy Code), protest or notice with respect to the Guaranteed Obligations, all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance of this Guaranty, and all other notices or demands whatsoever (and shall not require that the same be made on any Seller as a condition precedent to Guarantor’s obligations hereunder).

 

(b)                                                                                  The Beneficiaries and the Buyer Representative are hereby authorized, without notice or demand and without affecting the liability of Guarantor hereunder, from time to time, (i) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the Guaranteed Obligations, or to otherwise modify, amend or change the terms of the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement (including, in each case, the addition or substitution of any Person now or hereafter liable with respect to any Guaranteed Obligation); (ii) to accept partial payments on all or any part of the Guaranteed Obligations; (iii) to take and hold security or collateral for the payment of all or any part of the Guaranteed Obligations, this Guaranty, or any other guaranties of all or any part of the Guaranteed Obligations; (iv) to exchange, enforce, waive and release any such security or collateral; (v) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; and (vi) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of the Guaranteed Obligations or any other guaranty of all or any part of the Guaranteed Obligations, and any security or collateral for the Guaranteed Obligations or for any such guaranty, irrespective of the effect on the contribution or subrogation rights of Guarantor.  Any of the foregoing may be done in any manner, without affecting or impairing the obligations of Guarantor hereunder.

 

5.                                       Reinstatement.   Guarantor further agrees that, to the extent that any Seller makes a payment or payments of Guaranteed Obligations to any of the Beneficiaries or to the Buyer Representative for the benefit of the Beneficiaries, which payment or payments of Guaranteed Obligations, or any part thereof are subsequently rescinded, invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to such Seller, or its trustee, receiver or any other party, including, without limitation, Guarantor under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the part of the Guaranteed Obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction.

 

6.                                       Subrogation.   Guarantor will not exercise any rights that it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all of the Guaranteed Obligations shall have been paid in full.  If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Guaranteed

 

C-5



 

Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Beneficiaries and shall forthwith be paid to the Buyer Representative for the benefit of the Beneficiaries to be credited and applied to such Guaranteed Obligations in accordance with the terms of the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement, as applicable.  If (i) Guarantor shall make payment to the Buyer Representative of all or any part of the Guaranteed Obligations and (ii) all of the Guaranteed Obligations shall be paid in full, the Buyer Representative, on behalf of the Beneficiaries, will, at Guarantor’s request and expense, execute and deliver, or will cause to be executed and delivered, to Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to Guarantor of an interest in the Guaranteed Obligations resulting from such payment by Guarantor.

 

7.                                       Enforcement; Amendments; Waivers.   No delay on the part of any Beneficiary or the Buyer Representative in the exercise of any right or remedy arising under this Guaranty, the Purchase and Sale Agreement, the Letter Agreement, the Transition Services Agreement or otherwise with respect to all or any part of the Guaranteed Obligations shall operate as a waiver thereof, and no single or partial exercise by any Beneficiary or the Buyer Representative of any such right or remedy shall preclude any further exercise thereof.  No modification or waiver of any of the provisions of this Guaranty shall be binding upon the Beneficiaries, the Buyer Representative or Guarantor, except as expressly set forth in a writing duly signed and delivered by the Buyer Representative, on behalf of the Beneficiaries, and Guarantor.  Failure by the Beneficiaries or the Buyer Representative at any time or times hereafter to require strict performance by any Seller of all or any part of the Guaranteed Obligations or any other Person of any of the provisions, warranties, terms and conditions contained in the Purchase and Sale Agreement, the Letter Agreement or the Transition Services Agreement, as applicable, shall not waive, affect or diminish any right of the Beneficiaries or the Buyer Representative at any time or times hereafter to demand strict performance thereof and such right shall not be deemed to have been waived by any act or knowledge of any Beneficiary or the Buyer Representative (or their agents, officers or employees), unless such waiver is contained in an instrument in writing from the Buyer Representative, directed and delivered to such Seller or Guarantor, as applicable, specifying such waiver, and is signed by the Buyer Representative on behalf of such Beneficiary.  No waiver of any default in the Guaranteed Obligations by the Buyer Representative or the Beneficiaries shall operate as a waiver of any other default of the Guaranteed Obligations or the same default of the Guaranteed Obligations on a future occasion.

 

8.                                       Effectiveness; Termination.   This Guaranty shall become effective against Guarantor upon its execution by Guarantor and shall continue in full force and effect and may not be terminated or otherwise revoked until (and, notwithstanding anything contrary continued herein, Guarantor shall be automatically released and this Guaranty shall be automatically terminated without further act of Guarantor, the Beneficiaries, or the Buyer Representative upon) the earliest to occur of (i) payment in full of the Guaranteed Obligations, subject to automatic reinstatement if any payment by the Sellers in respect of the Guaranteed Obligations is rescinded or returned, (ii) the date on which all indemnification obligations of the Sellers and APH, as applicable, have been terminated pursuant to the terms of the Purchase and Sale Agreement, the Letter Agreement and the Transition Services Agreement, (iii) the date of termination of the Purchase and Sale Agreement if terminated pursuant to Section 10.1(c) thereof, and (iv) the date

 

C-6



 

of termination of this Guaranty in writing by and among Guarantor and the Buyer Representative.

 

9.                                       Successors and Assigns.   This Guaranty shall be binding upon Guarantor and upon the successors and permitted assigns of Guarantor and shall inure to the benefit of the Beneficiaries, the Buyer Representative and their respective successors and permitted assigns under and in accordance with the terms of the Purchase and Sale Agreement, the Letter Agreement and the Transition Services Agreement.

 

10.                                Consent to Assignment; Exceptions.   Guarantor may not assign its rights or delegate its obligations under this Guaranty, in whole or in part, without the prior written consent of Buyer Representative, on behalf of the Beneficiaries, and any purported assignment or delegation absent such consent is void, except for an assignment and delegation of all of Guarantor’s rights and obligations hereunder in whatever form Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise.  Upon any such delegation and assumption of obligations, Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption.

 

11.                                Governing Law. This Guaranty shall be governed by and construed in accordance with the Laws of the State of New York, without regard to any conflict of laws provisions thereof that would result in the application of the Law of another Jurisdiction.

 

12.                                Certain Consents and Waivers.

 

(a)                                  Jurisdiction and Venue.   Each of Guarantor, the Beneficiaries and the Buyer Representative hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of any state or federal court in the Borough of Manhattan, New York, New York, in any action or proceeding arising out of or relating to this Guaranty.  Each of Guarantor, the Beneficiaries and the Buyer Representative waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto.  Each of Guarantor, the Beneficiaries and the Buyer Representative agrees that service of summons and complaint or any other process that might be served in any action or proceeding may be made on such party by sending or delivering a copy of the process to the party to be served at the address of the party and in the manner provided for the giving of notices in Section 13 .  Nothing in this Section 12 , however, shall affect the right of any party to serve legal process in any other manner permitted by Law.  Each of Guarantor, the Beneficiaries and the Buyer Representative agrees that a final, non-appealable judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by Law.

 

(b)                                  Waiver of Jury Trial .  EACH OF GUARANTOR, THE BENEFICIARIES AND THE BUYER REPRESENTATIVE WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT

 

C-7



 

OF ANY CLAIM BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

13.                                Notices.   All notices and other communications required or desired to be served, given or delivered hereunder shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered United States mail or sent by telecopier or other electronic means as follows:

 

(i)                                      if to Guarantor, to:

 

Atlantic Power Corporation
One Federal Street, 30th Floor
Boston, MA 02110

Facsimile No.: 617-977-2410

Attention:  Jeffrey S. Levy, Vice President, Legal

Email: jlevy@atlanticpower.com

 

with a copy (which shall not constitute notice) to:

 

Morgan, Lewis & Bockius LLP

225 Franklin Street, 16th Floor

Boston, MA 02110

Facsimile No.: 617-341-7701

Attention: Mitchell D. Carroll

Email: mcarroll@morganlewis.com

 

(ii)                                   if to the Buyer Representative or any Beneficiary, to:

 

Quantum Utility Generation, LLC

1401 McKinney St., Suite 1800

Houston, TX 77010

Facsimile: (713) 485-8641

Attention: W. Lance Schuler, General Counsel

Email: lschuler@quantumug.com

 

with a copy (which shall not constitute notice) to:

 

Andrews Kurth LLP

600 Travis, Suite 4200

Houston, TX 77002

Facsimile: (713) 238-7492

Attention: Jon W. Daly

Email: jondaly@akllp.com

 

or, as to each party, at such other address as designated by such party in a written notice to the other party.  Notice given by personal delivery, mail or overnight courier pursuant to this Section 13 shall be effective upon physical receipt.  Notice given by facsimile or electronic

 

C-8



 

means pursuant to this Section 13 shall be effective as of (i) the date of confirmed delivery if delivered before 5:00 p.m. Eastern Time on any Business Day or (ii) the next succeeding Business Day if confirmed delivery is after 5:00 p.m. Eastern Time on any Business Day or during any non-Business Day; provided, in each case, such transmission is promptly confirmed by either personal delivery, mail or overnight courier.

 

14.                                Severability.   Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Guaranty shall be prohibited by or invalid under such Law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty.

 

15.                                Merger.   This Guaranty represents the final agreement of Guarantor and the Buyer Representative, on behalf of the Beneficiaries, with respect to the matters contained herein and may not be contradicted by evidence of prior or contemporaneous agreements, or subsequent oral agreements, by and among Guarantor, the Beneficiaries and the Buyer Representative.

 

16.                                Execution in Counterparts.   This Guaranty may be executed by the parties hereto in multiple counterparts and shall be effective as of the date set forth above when each party shall have executed and delivered a counterpart hereof, whether or not the same counterpart is executed and delivered by each party.  When so executed and delivered, each such counterpart shall be deemed an original, and all such counterparts shall be deemed one and the same document.  Transmission of images of signed signature pages by facsimile, e-mail or other electronic means shall have the same effect as the delivery of manually signed documents in person.

 

[Signature pages follow.]

 

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IN WITNESS WHEREOF, this Guaranty has been duly executed as of the date and year first set forth above.

 

 

GUARANTOR:

 

 

 

 

 

ATLANTIC POWER CORPORATION

 

 

 

 

 

 

By:

 

 

 

 

Barry E. Welch

 

 

 

President

 

[Signature Page to Guaranty]

 



 

 

ACCEPTED AND AGREED TO BY THE BENEFICIARIES:

 

 

 

 

 

QUANTUM LAKE LP, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

QUANTUM LAKE GP, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

QUANTUM PASCO LP, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

QUANTUM PASCO GP, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

QUANTUM AUBURNDALE LP, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

QUANTUM AUBURNDALE GP, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

Signature Page to Seller Guaranty

 



 

 

ACCEPTED AND AGREED TO BY THE BUYER REPRESENTATIVE:

 

 

 

 

QUANTUM UTILITY GENERATION, LLC

 

 

 

 

By:

 

 

Name:

Larry M. Kellerman

 

Title:

Chief Executive Officer

 

Signature Page to Seller Guaranty

 


 

EXHIBIT D

 

Form of Transition Services Agreement

 

D-1



 

EXHIBIT D

 

FORM OF

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (this “ Agreement ”) is made and entered into as of January 30, 2013, by and among:

 

(A) Lake Investment LP, a Delaware limited partnership, NCP Lake Power, LLC, a Delaware limited liability company, Teton New Lake, LLC, a Delaware limited liability company, NCP Dade Power, LLC, a Delaware limited liability company, Dade Investment, LP, a Delaware limited partnership, Auburndale LP, LLC, a Delaware limited liability company, and Auburndale GP, LLC, a Delaware limited liability company (collectively, the “ Sellers ”), and Atlantic Power Corporation, a corporation continued under the laws of the Province of British Columbia, Canada (the “ Seller Representative ”);

 

(B) Atlantic Power Holdings, Inc., a Delaware corporation (“ APH ”);

 

(C) Lake Cogen, Ltd., a Florida limited partnership (“ Lake ”), Pasco Cogen, Ltd., a Florida limited partnership (“ Pasco ”), and Auburndale Power Partners, Limited Partnership, a Delaware limited partnership (“ Auburndale ”, and together with Lake and Pasco, the “ Portfolio Companies ”); and

 

(D) Quantum Lake LP, LLC, a Delaware limited liability company, Quantum Lake GP, LLC, a Delaware limited liability company, Quantum Pasco LP, LLC, a Delaware limited liability company, Quantum Pasco GP, LLC, a Delaware limited liability company, Quantum Auburndale LP, LLC, a Delaware limited liability company, and Quantum Auburndale GP, LLC, a Delaware limited liability company (collectively, the “ Buyers ”), and Quantum Utility Generation, LLC, a Delaware limited liability company (the “ Buyer Representative ”).

 

Each of the Sellers, the Seller Representative, APH, the Portfolio Companies, the Buyers and the Buyer Representative are each sometimes referred to herein as a “ party ” and collectively, as the “ parties .”  Capitalized terms used herein but not otherwise defined shall have the meanings assigned such terms in the Purchase Agreement (as defined below).

 

RECITALS

 

A.                                     The Sellers, the Seller Representative, the Buyers, and the Buyer Representative have entered into that certain Purchase and Sale Agreement (the “ Purchase Agreement ”), dated as of the date hereof, whereby each of the Sellers has agreed to sell to the Buyers, effective on the Closing Date, 100% of the outstanding limited and general partner interests held by each of the Sellers, as applicable, in each of the Portfolio Companies, all on the terms and subject to the conditions set forth in the Purchase Agreement.

 

B.                                     (i) Lake owns an approximately 121 megawatt (“ MW ”) dual-fuel, combined-cycle, cogeneration facility located in Umatilla, Florida (the “ Lake Facility ”);

 

(ii) Pasco owns an approximately 121 MW dual fuel, combined-cycle facility located in Dade City, Florida (the “ Pasco Facility ”); and

 

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(iii) Auburndale owns an approximately 155 MW dual-fuel, combined-cycle, cogeneration facility located in Polk County, Florida (the “ Auburndale Facility ”) (each of the Auburndale Facility, Lake Facility and Pasco Facility being referred to herein as a “ Facility ” and collectively, the “ Facilities ”).

 

C.                                     (i)  Pasco is a party to that certain Cogeneration Facility Operation and Maintenance Agreement between Pasco and GPU Generation Services — Pasco, Inc. (“ GPU ”), dated July 1, 1999, as assigned pursuant to that certain Assignment and Assumption Agreement (Pasco Operation and Maintenance Agreement) among Aquila Services Inc. (“ Aquila ”, as successor to GPU), Teton Operating Services, LLC (“ TOS ”) and Teton Power Funding LLC (“ Funding ”) dated May 6, 2004 (as it may be further amended or modified from time to time, the “ Pasco O&M Agreement ”);

 

(ii) Lake is a party to that certain Facilities Operation, Maintenance and Marketing Agreement between Lake and Aquila dated December 31, 2002, as assigned pursuant to that certain Operator Assignment, Acknowledgement and Assumption Agreement among Aquila, Funding, TOS, Lake, The Bank of New York, as owner trustee under the Trust Agreement described therein, and TIFD III-C Inc., a Delaware corporation, dated March 12, 2004, and as amended pursuant to (x) that Letter Agreement re: Renewal of Facilities Operation, Maintenance and Marketing Agreement for Lake Cogen Project dated June 9, 2004, (y) that Letter Agreement re: Renewal of Facilities Operation, Maintenance and Marketing Agreement for Lake Cogen Project dated December 31, 2004, and (z) that First Amendment to Facilities Operation, Maintenance and Marketing Agreement between Lake and TOS dated June 15, 2005 (as it may be further amended or modified from time to time, the “ Lake O&M Agreement ”); and

 

(iii) Auburndale is a party to that certain Operation and Maintenance Agreement between Auburndale and TOS dated November 21, 2008 (as it may be amended from time to time, the “ Auburndale O&M Agreement ”, and together with the Pasco O&M Agreement and the Lake O&M Agreement, the “ O&M Agreements ” and the services performed by TOS and Funding under the O&M Agreements, the “ O&M Services ”).  The O&M Services and those transition services set forth on Exhibit B attached hereto and incorporated herein by reference, the “ Services ”.

 

D.                                     Caithness Teton Operating Services, LLC, a Delaware limited liability company (“ CTOS ”), has been engaged to perform each of the O&M Agreements pursuant to:

 

(i) the Fourth Amended and Restated Operations and Maintenance Agreement among Funding, TOS and CTOS dated September 30, 2009, as amended by First Amendment to Fourth Amended and Restated Operations and Maintenance Agreement dated December 29, 2011 (as it may be further amended or modified from time to time, the “ Lake Engagement Agreement ”);

 

(ii) the Second Amended and Restated Pasco Operations and Maintenance Agreement among Funding, TOS and CTOS dated January 1, 2007, as amended by First Amendment to Second Amended and Restated Pasco Operations and Maintenance Agreement dated December 29, 2011 (as it may be further amended or modified from time to time, the “ Pasco Engagement Agreement ”); and

 

(iii) the Auburndale Operations and Maintenance Agreement among TOS,

 

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Atlantic Power Holdings, LLC and CTOS dated November 21, 2008, as amended by First Amendment to Auburndale Operations and Maintenance Agreement dated December 29, 2011 (as it may be further amended or modified from time to time, the “ Auburndale Engagement Agreement ”, and together with the Lake Engagement Agreement and the Pasco Engagement Agreement, the “ Engagement Agreements ”, and the services performed by CTOS thereunder, the “ Caithness O&M Services ”).

 

E.                                      Caithness Atlantic Services Company, LLC, a Delaware limited liability company (“ CASC ”), and APH have entered into that certain Third Amended and Restated Administrative Services Agreement, dated September 30, 2009, as amended by First Amendment to Third Amended and Restated Administrative Services Agreement dated December 29, 2011 (as it may be further amended from time to time, the “ Administrative Services Agreement ”), wherein CASC has agreed to perform certain administrative services on behalf of the Portfolio Companies, among other properties and projects owned, controlled or invested in by APH.  The services performed by CASC under the Administrative Services Agreement on behalf of the Portfolio Companies are referred to herein as the “ Caithness Administrative Services ”, and the Caithness O&M Services and the Caithness Administrative Services are referred to herein together as the “ Caithness Services ”.

 

F.                                       APH, Funding and TOS have entered into that certain Letter Agreement (the “ Caithness Side Letter ”) with CTOS and CASC (CASC and CTOS, collectively “ Caithness ”), dated as of even date herewith and attached hereto and incorporated herein by reference as Exhibit A , whereby Caithness has agreed to (i) waive its rights to terminate any of the Engagement Agreements or the Administrative Services Agreement upon giving effect to the consummation of the transactions contemplated under the Purchase Agreement, (ii) continue to provide (x) the Caithness Services to the Facilities pursuant to the Engagement Agreements and (y) the Caithness Administrative Services to the Facilities pursuant to the Administrative Service Agreement, until the end of the Service Period (as defined below).  The Caithness Side Letter, the Administrative Services Agreement (solely insofar as it relates to the Caithness Administrative Services), the O&M Agreements and the Engagement Agreements are herein referred to as the “ Caithness Operative Agreements ”.

 

G.                                     In connection with the transactions contemplated by the Purchase Agreement, and subject to the terms and conditions of this Agreement, the parties agree that each of the Sellers, APH and, as necessary, certain of their and its Affiliates (collectively, the “ Service Provider ”) will provide Services to the Buyers and the Portfolio Companies, and, to the full extent permitted under the Caithness Operative Agreements, cause the Caithness Services to be provided by Caithness to the Buyers and the Portfolio Companies, in each case, in order to facilitate the transition of such services to the Buyers and as may be reasonably necessary for the operation of the Facilities by the Buyers until the end of the Service Period (as defined below).

 

AGREEMENT

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained in this Agreement and in the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

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1.                                       Term and Services .

 

(a)                                  This Agreement shall become effective as of the date hereof, except for the provisions of Sections 1(b), 1(c) (other than the last sentence thereof, which shall become effective as of the date hereof), 2, 3(a), 3(b), 4(a), 4(b) and 7 of this Agreement, which shall become effective as of the Closing Date, unless otherwise specifically provided in this Agreement, and, unless sooner terminated as hereinafter provided, shall continue until, and including, the earlier of (i) June 30, 2013 or (ii) the date all Services of Service Provider and Caithness Services of Caithness are terminated pursuant to Section 4.

 

(b)                                  During the period from the Closing Date until, and including June 30, 2013 (the “ Service Period ”), (i) Service Provider shall provide to the Buyers and each of the Portfolio Companies the Services, and (ii) APH, Funding and TOS shall use commercially reasonable efforts to cause Caithness to continue to provide the Caithness O&M Services to the Facilities pursuant to the Engagement Agreements (but in no event past the Applicable O&M Services End Date, as defined below) and the Caithness Administrative Services to the Facilities pursuant to the Administrative Services Agreement, as applicable.

 

(c)                                   From and after the Closing Date, each of the Sellers, the Seller Representative and APH hereby waives, on behalf of each of the Sellers and any of their Affiliates party thereto, any obligations of Caithness set forth in the Caithness Operative Agreements with respect to confidentiality (including any confidentiality obligations specifically related to the Books and Records of the Portfolio Companies or the Facilities) solely to the extent necessary to provide information to the Buyers relating to any services that Caithness has performed under the Caithness Operative Agreements for the Portfolio Companies or the Facilities.  Following the Closing Date, each of the Sellers, the Seller Representative and APH shall use its commercially reasonable efforts to have Caithness and its Affiliates provide to the Buyers as soon as reasonably practicable but by no later than twenty (20) days following the Closing Date all Books and Records of the Portfolio Companies and other information relating to any services that Caithness has performed for the Portfolio Companies or the Facilities under the Caithness Operative Agreements; provided , that Caithness shall have the right to retain, or be given access to, all such Books and Records required by Caithness to perform the Caithness Services until the end of the Service Period (or, with respect to the Caithness O&M Services, if earlier, until the date the Caithness O&M Services are terminated with respect to the Lake Facility, the Pasco Facility, or the Auburndale Facility, as applicable (the “ Applicable O&M Services End Date ”)), and Caithness shall not be liable for failure to perform any Caithness Services for which such Books and Records would be required and are not available to Caithness as a result of its obligation to turn over such books and records to the Buyers.  From and after the Closing Date, each of the Sellers, the Seller Representative and APH agrees to provide and agrees that Caithness may provide, and hereby waives any restrictions set forth in the Caithness Operative Agreements that would restrict Caithness from providing information relating to any services that Caithness has performed under the Caithness Operative Agreements for the Portfolio Companies or the Facilities.  At all times from the date hereof until the end of the Service Period or, if earlier, the Applicable O&M Services End Date, the Sellers and APH shall, and shall use their commercially reasonable efforts to cause Caithness to, grant the Buyers access to the employees of Caithness or its Affiliates performing any of the Caithness O&M Services

 

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for the purpose of interviewing, making offers and otherwise transitioning such employees to the Buyers or the Buyers’ selected service provider.

 

2.                                       Fees, Reimbursable Costs and Payment .

 

(a)                                  Fees .  The Buyers shall pay, or cause the Portfolio Companies to pay, to the Seller Representative, a flat fee of $2,500 per Service Month (as hereinafter defined) for each Service Month following the Closing Date (the “ Fees ”).  As used herein, the term “ Service Month ” shall mean the thirty (30) day period beginning on the Closing Date and each successive thirty (30) day period thereafter until the end of the Service Period.  If, due to early termination of this Agreement, a Service Month is less than thirty (30) days, the Fees with respect to such Service Month shall be payable on a pro rata basis based on the number of days in such Service Month.

 

(b)                                  Reimbursable Costs .  The Buyers shall pay, or cause the Portfolio Companies to pay, (i) to the Seller Representative, the reasonable out-of-pocket costs and expenses actually incurred by Service Provider during each Service Month related to the Services provided to the Buyers or the Portfolio Companies, and (ii) to Caithness, (x) all amounts due and owing to Caithness from or on behalf of the Sellers, APH, TOS, Funding, the Portfolio Companies or the Buyers pursuant to the Caithness Side Letter, including without limitation pursuant to Section 3, Section 5, Section 6 and Section 7 thereof, except for that amount identified in Section 6.d. of the Caithness Side Letter payable to Caithness to cover a portion of Mr. Collins’ severance benefits, the amount of any liabilities of the Sellers, APH, TOS, Funding or any of their Affiliates related to or arising out of the breach of their obligations under the Caithness Operative Agreements or claims made by the Buyers or their Affiliates in connection with the Caithness Services and $25,000 of that amount identified in Section 7 of the Caithness Side Letter payable to Caithness for services provided by Caithness to the Sellers outside the scope of the Caithness Services, and (y) the reasonable out-of-pocket costs and expenses actually incurred by Caithness during such Service Month related to the Caithness Services provided to the Buyers or the Portfolio Companies, including (1) any costs, fees and expenses arising pursuant to the Caithness Operative Agreements (to extent not duplicative of (x) above), and (2) such costs arising out of and including the transfer of connectivity and information technology infrastructure (including the procurement system, work management system and inventory system, but not including any such connectivity or infrastructure provided by the Buyers) used to perform the Services or the Caithness Services (the “ Reimbursable Costs ”), accompanied by commercially reasonable documentation supporting the Reimbursable Costs.  The Reimbursable Costs shall be due and payable in accordance with Section 2(c)  below.  The Seller Representative shall provide advance written notice to the Buyers if Service Provider engages any third party to help provide Services or Caithness engages any third party to help provide Caithness Services, in each case where the costs and expenses of such third party would constitute Reimbursable Costs.

 

(c)                                   Payment .  Within five (5) days after the end of each Service Month, the Seller Representative shall submit to the Buyer Representative a written invoice relating to the Fees and the Reimbursable Costs.  The Buyers shall pay, or cause the Portfolio Companies to pay, within thirty (30) days following the date of receipt of such invoice, all invoiced amounts related to the Services directly to the Service Provider.  The Buyers shall pay, or cause the

 

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Portfolio Companies to pay, (i) all amounts due Caithness pursuant to Section 2(b)(ii)(x) and Section 5 of this Agreement (to extent not duplicative) directly to Caithness in accordance with the terms and conditions of the Caithness Side Letter, and (ii) pursuant to the terms and conditions of the Caithness Operative Agreements and in any event, no later than twenty (20) days following receipt of such invoice.

 

(d)                                  Audit .  Each of the Sellers, the Seller Representative and APH shall, for one (1) year after the expiration or termination of this Agreement, maintain records and other evidence sufficient to accurately and properly reflect the performance of the Services and the amounts invoiced by the Seller Representative to the Buyers and the Portfolio Companies with respect thereto.  The Buyers shall have access at all reasonable times during such one (1) year period to examine and obtain copies of such records for the purpose of auditing and verifying the accuracy of the invoices submitted by the Seller Representative regarding the amounts due the Sellers and APH.  Any such audits performed by or on behalf of any of the Buyers or the Portfolio Companies shall be at the Buyers’ sole cost and expense.

 

3.                                       Covenants .

 

(a)                                  Standards for the Provision of Services and Caithness Services .  During the Service Period (but with respect to the Caithness O&M Services, in no event past the Applicable O&M Services End Date), t he Sellers and APH shall (i) devote to the performance of the Services the personnel historically necessary to perform such Services, and (ii) use commercially reasonable efforts to cause Caithness to devote to the performance of (x) the Caithness Services, the personnel historically necessary to perform such Caithness Services, and (y) the Caithness Administrative Services, the personnel historically necessary to perform such Caithness Administrative Services.  During the Service Period (but with respect to the Caithness O&M Services, in no event past the Applicable O&M Services End Date), the Services shall be performed by Service Provider in a diligent and prudent manner, with the degree of skill and judgment normally exercised by persons performing services of a similar nature, and in a manner and quality that are substantially consistent with Service Provider’s past practice in performing the Services for the Sellers’ benefit.  The Sellers and APH shall use commercially reasonable efforts to cause Caithness to perform the Caithness Services during the Service Period (but with respect to the Caithness O&M Services, in no event past the Applicable O&M Services End Date) in a diligent and prudent manner, with the degree of skill and judgment normally exercised by persons performing services of a similar nature, and in a manner and quality that are substantially consistent with Caithness’s past practice in performing the Caithness Services for the Sellers’ benefit.  Unless otherwise agreed in writing by the parties, during the Service Period (but with respect to the Caithness O&M Services, in no event past the Applicable O&M Services End Date), t he Service Provider shall, and the Sellers and APH shall use commercially reasonable efforts to cause Caithness to, (a) furnish everything necessary and proper for, and incidental to, the performance of the Services or the Caithness Services, as applicable, including all labor, supervision, materials, equipment and related services, (b) secure all necessary third-party consents, permits and governmental approvals required to provide the Services or the Caithness Services, as applicable, and (c) report and pay all Taxes, including payroll, sales, use, excise and occupational taxes, applicable to the Services or the Caithness Services, as applicable.  In addition, Service Provider shall, and the Sellers and APH shall use commercially reasonable efforts to cause Caithness to, at all times during the Service Period (but with respect to the

 

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Caithness O&M Services, in no event past the Applicable O&M Services End Date), comply with (x) as may be provided under the O&M Agreements or the Caithness Operative Agreements, as applicable, the written instructions and policies of any of the Buyers, the Portfolio Companies or the Buyer Representative which have been provided to the Seller Representative and (y) any applicable Permits and Laws relating to the Services or the Caithness Services, as applicable, provided hereunder and shall promptly notify the Buyers upon receiving notice of any investigation or notice regarding any noncompliance or alleged violation with respect thereto.  The Buyer Representative shall furnish, or cause to be furnished, to the Seller Representative and Caithness, as applicable, such access, information, documentation, services and materials as are reasonably requested by Service Provider or Caithness to enable Service Provider or Caithness to perform the Services and the Caithness Services, as applicable.

 

(b)                                  DISCLAIMER .  EXCEPT AS SET FORTH IN SECTION 3(a) , NONE OF THE SELLERS NOR APH MAKES ANY REPRESENTATION, WARRANTY OR GUARANTY, EXPRESS OR IMPLIED, OF ANY KIND CONCERNING THE SERVICES OR THE CAITHNESS SERVICES OR ANY RESULTS AND SPECIFICALLY MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND NONE SHALL BE IMPLIED.  ALL OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES, WRITTEN OR ORAL, EXPRESS OR IMPLIED IN FACT OR IN LAW, AND WHETHER OR NOT BASED ON STATUTE ARE HEREBY DISCLAIMED AND EXCLUDED.

 

(c)                                   APH shall, and shall cause each of TOS and Funding to, comply with its and their obligations under, and enforce, the Caithness Operative Agreements in accordance with their respective terms and shall promptly notify the Buyer Representative of any default by APH, TOS, Funding or Caithness thereunder.  APH shall not, and shall cause each of TOS and Funding not to, amend, modify, grant any waiver under or terminate the Caithness Operative Agreements without the prior written consent of the Buyer Representative in its sole discretion.  APH shall not, and shall cause each of TOS and Funding not to, terminate pursuant to the Caithness Operative Agreements the provision by Caithness of any of the Caithness Services to the Facilities unless such termination is requested in writing by the Buyer Representative.  APH shall, and shall cause each of TOS and Funding to, copy the Buyer Representative on, or promptly provide the Buyer Representative with copies of, any correspondence regarding the foregoing that it or they may have with Caithness.  The Buyers acknowledge and agree that the Service Provider’s compliance with and enforcement of the terms of the Caithness Operative Agreements shall constitute sufficient use of its commercially reasonable efforts to cause Caithness to undertake all actions contemplated in this Agreement relating to Caithness and the Caithness Services.

 

4.                                       Termination of the Services .

 

(a)                                  Option to Terminate Services .  The Buyers may elect for any reason, by giving written notice to Service Provider at least thirty (30) days in advance, to terminate the provision by Service Provider or Caithness of all or any category of the Services or the Caithness Services, as applicable, provided to the Buyers and the Portfolio Companies; provided that any termination of any category of the Caithness O&M Services or the Caithness Administrative Services, as applicable, shall not reduce the fees payable to Caithness hereunder and under the

 

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Caithness Operative Agreements during the Service Period; provided , further , that, in the event of any termination of the Caithness O&M Services or the Caithness Administrative Services with respect to a particular Facility, the Buyers shall have no obligation to pay for such Caithness O&M Services or Caithness Administrative Services with respect to such Facility hereunder.

 

(b)                                  Buyers’ Right to Terminate the Agreement . The Buyers shall have the right to terminate this Agreement in the event that any of the Sellers or APH has failed to perform or observe any material term, covenant or agreement contained in this Agreement, and any such failure shall not have been cured within ten (10) days after delivery of written notice of such failure to the Seller Representative.

 

(c)                                   Sellers’ and APH’s Right to Suspend Performance .  The Sellers and APH shall have the rights to suspend the performance of the Services and to cause the suspension of the performance of the Caithness Services in the event of the failure of the Buyers and the Portfolio Companies to make payments due and owing or to perform or observe any material term, covenant or agreement contained in this Agreement that have not been cured within ten (10) days after delivery of written notice of such failure to the Buyer Representative.

 

(d)                                  Automatic Termination .  This Agreement shall automatically terminate in the event that the Purchase Agreement is terminated pursuant to its terms, and the obligations of the parties hereunder shall terminate.

 

(e)                                   Effect of Termination .  Applicable provisions of this Agreement shall survive expiration or early termination of this Agreement to the extent necessary to enforce or complete the duties, obligations or responsibilities of the parties arising prior to such expiration or termination and, as applicable, to provide for final billings related to the period prior to expiration or termination and indemnification obligations provided in this Agreement.

 

5.                                       Employee Transfer .

 

(a)                                  The Buyers (or an entity designated by the Buyers) (the “ New O&M Provider ”) shall offer employment to each of the employees of Caithness Generation Services, LLC (“ CGS ”) as set forth on Exhibit A to the Caithness Side Letter (the “ Employees ”) no later than thirty (30) days, or such longer notice period required by law, prior to the first to occur of (i) the Applicable O&M Services End Date and (ii) the Services End Date (as defined in the Caithness Side Letter) (as to each such respective Employee, the “ Transfer Date ”), with annual compensation and benefits that are, in the aggregate, substantially similar to each such respective Employee’s compensation and benefits as of the date of this Agreement on an overall economic basis; provided , that the Buyers (or an entity designed by the Buyers) shall have no obligation to offer employment, to any Employee set forth on Exhibit A to the Caithness Side Letter who (A) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of his or her duties, (B) has willfully engaged in conduct that is injurious to the Portfolio Companies (monetarily or otherwise), (C) has failed to adhere to the employment policies and standards of the Portfolio Companies, (D) has committed an act of fraud, embezzlement or willful breach of a fiduciary duty to the Portfolio Companies, (E) has been convicted of, pled guilty to, or pleaded no contest to, a crime involving fraud, dishonesty or moral turpitude, (F) has failed any drug test administered by the Buyers (or the Buyers’ selected

 

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service provider) or (G) is on long-term disability; provided , that with respect to any Employee on short-term disability, the Buyers’ offer of employment to such Employee may be conditioned upon their return to regular employment prior to the Applicable O&M Services End Date.  The parties hereby acknowledge that the Buyers will perform background checks on the Employees and, if any issue arises with respect to any Employee in connection with such background check, the Buyers will consider such issue in good faith in conjunction with the Sellers.  Upon such consideration, if the Buyers decide not to hire such Employee, the Sellers shall pay to Caithness the amount contemplated in clause (ii) below of this Section 5(a) with respect to such Employee.  Each Employee who accepts such offer (the “ Transferred Employees ”) shall be transferred to the New O&M Provider effective not later than the Transfer Date applicable to such Employee.  The Buyers agree and acknowledge that any Employee who is not made an offer, does not accept such offer or is otherwise not transferred to the New O&M Provider shall be terminated by CGS as of the Applicable O&M Services End Date (as defined in the Caithness Side Letter) (“ Terminated Employees ”).  Buyers agree and acknowledge that if the Buyers do not offer employment to an Employee in accordance with the terms of this paragraph (each such Employee, a “ Non-Offer Employee ”), then CGS shall notify each such Employee no later than thirty (30) days, or such longer notice period required by law, prior to the date such Non-Offer Employee’s employment shall be terminated in accordance with the terms of the Caithness Side Letter.  In such case, the Buyers shall (i) continue to pay, or cause to be paid to, Caithness an amount representing pay and benefits for each Non-Offer Employee through the date that such Non-Offer Employee’s employment is terminated in accordance with the terms of the Caithness Side Letter; and (ii) shall pay, or cause to be paid to, Caithness an amount for each Non-Offer Employee equal to the product of (x) one week of pay and benefits for each such Non-Offer Employee, and (y) the number of years of service of such Non-Offer Employee, in each instance of (i) and (ii), in readily available funds, on the date such Non-Offer Employee’s employment is terminated in accordance with the terms of the Caithness Side Letter.  Exhibit A to the Caithness Side Letter sets forth a list of all employees who provide services to the Facilities pursuant to the Caithness Operative Agreements.

 

(b)                                  From the date of this Agreement though the Services End Date (as defined in the Caithness Side Letter), each of the Sellers and APH shall, and shall use their commercially reasonable efforts to cause Caithness to, only incur compensation, severance, benefits costs and related payroll costs relating to the Employees, Transferred Employees and Terminated Employees that are in the ordinary course of business and consistent with the Sellers, APH’s and Caithness’ past practices with respect to the Employees, and the Sellers and APH shall use their commercially reasonable efforts to cause Caithness to seek any consents of APH, TOS or Funding required under the Caithness Operative Agreements; provided, that, other than the severance for Non-Offer Employees from Caithness described in Section 6.a(ii) of the Caithness Side Letter, the Seller and APH shall not, and shall use their commercially reasonable efforts to cause Caithness not to, incur any severance costs, retention bonus costs or any related costs, in the case of the Sellers and APH, without the prior written consent of the Buyer Representative, and in the case of Caithness, without the prior written consent of APH, TOS or Funding.  The Buyers shall pay to Caithness all compensation, severance, benefit costs and related payroll costs relating to the Employees, Transferred Employees and Terminated Employees, including but not limited to all pre-Transfer Date costs and any post-termination costs, solely to the extent such costs are incurred in accordance with the terms of the Caithness Side Letter , and the Buyers shall

 

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indemnify Service Provider from and against such costs and any Losses relating to such Employees, Transferred Employees and Terminated Employees.

 

(c)                                   The Buyers acknowledge and agree that Service Provider shall not be deemed to be in violation of this Agreement if Service Provider is unable to cause Caithness to provide the Caithness Services under this Agreement consistent with past practices as a result of any Employee resigning his or her employment prior to the Transfer Date; provided , that neither Service Provider nor Caithness shall have caused or induced such Employee to resign.

 

(d)                                  The Buyers, or an entity designated by the Buyers, shall consider hiring Kevin Collins, an employee of Caithness Corporation, with compensation and benefits for Mr. Collins that are, in the aggregate, substantially similar to his current compensation and benefits.  The parties acknowledge that the Buyers shall not have an obligation to make such an offer, or hire, Mr. Collins.

 

6.                                       Relationships Among the Parties .  Service Provider shall be an independent contractor with respect to the Services it provides hereunder.  Nothing in this Agreement shall cause the relationship between Service Provider, on the one hand, and the Buyers, the Portfolio Companies and the Buyer Representative, on the other hand, to be deemed to constitute an agency, partnership or joint venture, or to cause any of Service Provider, the Buyers, the Portfolio Companies or the Buyer Representative to be treated as a co-employer with respect to employees, or to cause any of the Sellers or APH or any of their Affiliates to have any burdens or obligations of ownership or similar responsibilities with respect to the Facilities after the Closing.  None of the Sellers, APH, any of their or its Affiliates or any of their respective officers or employees shall have any right, power or authority to make any warranty or representation on behalf of any of the Buyers or, after the Closing, the Portfolio Companies, contract for the Buyers or, after the Closing, the Portfolio Companies, or commit the Buyers or, after the Closing, the Portfolio Companies to any obligation or undertaking other than actions taken reasonably by the Sellers or APH in connection with an emergency situation of which any of the Sellers or APH notify the Buyer Representative within a reasonable time after its occurrence (and the Buyers or the Portfolio Companies shall indemnify the Sellers and APH for all reasonable and necessary out-of-pocket costs, expenses and liabilities incurred in connection with such emergency response).

 

7.                                       Indemnity .

 

(a)                                  Indemnification by the Buyers and the Portfolio Companies .  Each of the Buyers shall or shall cause the Portfolio Companies to indemnify, defend and hold harmless the Sellers, APH, the Seller Representative and their and its Affiliates and their respective officers, directors, employees and agents (each, a “ Seller Indemnified Party ”) from and against any and all Losses (as defined below) arising from or in connection with (i) a breach of this Agreement by the Buyers or, after the Closing, the Portfolio Companies or (ii) a third party claim arising out of the Services, EVEN IF SUCH LOSSES ARISE OUT OF THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY SELLER INDEMNIFIED PARTY, BUT EXCLUDING SUCH LOSSES TO THE EXTENT RESULTING FROM THE FRAUD, BREACH OF CONTRACT OR WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED PARTY.  “ Losses ” means any and all liabilities, claims, losses,

 

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damages, reasonable and out-of-pocket costs and expenses, causes of action or judgments of any kind or character, including any interest, penalty, reasonable attorneys’ fees, investigation expenses and other costs and expenses incurred in connection therewith or in the defense thereof.

 

(b)                                  Indemnification by the Sellers and APH .  Each of the Sellers and APH shall indemnify, defend and hold harmless the Buyers, the Portfolio Companies, the Buyer Representative and any of their Affiliates and their respective officers, directors, employees and agents (each, a “ Buyer Indemnified Party ”) from and against any and all Losses arising from or in connection with a breach of this Agreement by any of the Sellers, the Seller Representative, APH or Service Provider, EVEN IF SUCH LOSSES ARISE OUT OF THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY BUYER INDEMNIFIED PARTY, BUT EXCLUDING SUCH LOSSES TO THE EXTENT RESULTING FROM THE FRAUD, BREACH OF CONTRACT OR WILLFUL MISCONDUCT OF ANY BUYER INDEMNIFIED PARTY.

 

(c)                                   Remedy .  EXCEPT AS SET FORTH IN SECTION 4 AND FOR SEEKING EQUITABLE RELIEF, THE SOLE REMEDY OF A PARTY IN CONNECTION WITH ANY FAILURE BY A PARTY TO PERFORM OR OBSERVE ANY TERM, PROVISION, COVENANT OR AGREEMENT ON THE PART OF SUCH PARTY TO BE PERFORMED OR OBSERVED UNDER THIS AGREEMENT SHALL, IN EACH CASE, BE AS SET FORTH IN THIS SECTION 6 .

 

(d)                                  Limit on Liability .  THE AGGREGATE LIABILITY OF THE SELLERS, APH AND ANY OTHER SERVICE PROVIDER UNDER THIS AGREEMENT TO THE BUYER INDEMNIFIED PARTIES, FOR ANY ACT, OMISSION OR OTHERWISE OF THE SELLERS, APH OR ANY OTHER SERVICE PROVIDER (OTHER THAN WITH RESPECT TO FRAUD, WILLFUL MISCONDUCT OR BREACH OF THIS AGREEMENT), SHALL NOT EXCEED THE AGGREGATE AMOUNT OF FEES RECEIVED BY THE SELLER REPRESENTATIVE PURSUANT TO SECTION 2(A) FOR THE SERVICES (EXCLUDING PAYMENTS RECEIVED BY THE SELLER REPRESENTATIVE IN REIMBURSEMENT OF PAYMENTS MADE OR TO BE MADE BY THE SELLERS AND APH TO CAITHNESS FOR THE CAITHNESS SERVICES, VENDORS AND OTHER THIRD PARTIES).

 

(e)                                   Waiver .  IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANOTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES, DAMAGES OR EXPENSES (INCLUDING LOST PROFITS) ARISING FROM THIS AGREEMENT OR THE PERFORMANCE OR NON-PERFORMANCE OF SERVICES OR CAUSING OR FAILING TO CAUSE THE PERFORMANCE OR NON-PERFORMANCE OF THE CAITHNESS SERVICES HEREUNDER, OTHER THAN TO THE EXTENT SUCH DAMAGES ARE AWARDED PURSUANT TO THIRD PARTY CLAIMS FOR WHICH ONE PARTY IS OBLIGATED TO INDEMNIFY THE OTHER PARTY HEREUNDER, AND EACH OF THE BUYERS, THE SELLERS, THE PORTFOLIO COMPANIES AND APH EXPRESSLY WAIVE ANY RIGHTS EACH OF THEM MAY HAVE TO SEEK OR CLAIM ANY SUCH AMOUNTS.

 

D-12



 

8.                                       Miscellaneous Provisions .

 

(a)                                  Entire Agreement .  This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof, and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations among the parties with respect to the subject matter hereof, except for the Purchase Agreement, the documents and instruments and other agreements specifically referred to therein or delivered pursuant thereto, including the Exhibits, Schedules and ancillary agreements thereto insofar as they are applicable with respect to the parties.

 

(b)                                  Notices .  All notices, requests, claims, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given or made by delivery in person by an internationally recognized courier service, by facsimile or electronic mail with receipt confirmed (followed by delivery of an original via an internationally recognized courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or such other addresses for a party as shall be specified in a notice given in accordance with this Section 7(b) ):

 

If to APH, the Seller Representative or any Seller, to:

 

Atlantic Power Corporation
One Federal Street, 30th Floor
Boston, MA 02110
Attention:  Jeffrey S. Levy
Fax:  (617) 977-2410

 

with a copy (which shall not constitute notice) to:

 

Morgan, Lewis & Bockius LLP

225 Franklin Street, 16th Floor

Boston, MA 02110

Attention: Mitchell D. Carroll

Fax: (617) 341-7701

Email: mcarroll@morganlewis.com

 

If to any Buyer, the Buyer Representative or any Portfolio Company, to:

 

Quantum Utility Generation, LLC

1401 McKinney St., Suite 1800
Houston, TX 77010
Attention:  Sean O’Donnell
Fax:  (713) 485-8621
Email:  sodonnell@quantumug.com

 

Copy to: Dirk Straussfeld

Fax:  (713) 485-8651

Email: dstraussfeld@quantumug.com

 

D-13



 

(c)                                   Force Majeure .  Service Provider’s obligations to provide Services and t he Sellers and APH obligations to use commercially reasonable efforts to cause Caithness to provide the Caithness Services, shall be suspended during the period, and to the extent that Service Provider or Caithness, as applicable, is prevented or hindered, in whole or in part, from complying therewith by any cause beyond its reasonable control, including, without limitation, extreme weather, fire, flood, earthquakes, other elements of nature or acts of God, civil disturbances, riots, rebellions, revolutions, accidents, labor disputes, court orders, acts of a governmental entity, acts of war, terrorist activity, or conditions arising out of or attributable to war (whether declared or undeclared) or terrorist activity, significant spread of contagious disease(s), or shortages of equipment, materials, labor or other resources (in each case, a “ Force Majeure Event ”).  In such event, Service Provider shall give written notice of suspension to the Buyers and the Portfolio Companies, as soon as reasonably practicable, specifying the Force Majeure Event and the Services or Caithness Services affected and stating the date and extent of such suspension.  Service Provider shall use commercially reasonable efforts to resume, and Sellers and APH shall use commercially reasonable efforts to cause Caithness to use commercially reasonable efforts to resume, the suspended Services or Caithness Services, as applicable, as soon as reasonably practicable, and shall notify the Buyers and the Portfolio Companies in writing of the date of resumption of the provision of the Services or Caithness Services, as applicable.

 

(d)                                  Transfer and Assignment; Successors .  Without the prior written consent of the other parties, which consent may be withheld in such other party’s sole discretion, this Agreement and the rights and obligations hereunder shall not be assigned by any party.  This Agreement shall be binding upon, and inure to the benefit of, the respective successors and permitted assigns of each of the parties.

 

(e)                                   Headings .  The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

(f)                                    Governing Law .

 

i.                                           This Agreement shall be governed by and construed in accordance with the Laws of the State of New York (without regard to the conflict of laws principles thereof).  Each of the parties irrevocably agrees that any legal action or proceeding with respect to this Agreement or the transactions contemplated hereby shall be brought and determined in any state or federal court in the Borough of Manhattan, New York, New York, and each of the parties irrevocably submits to the exclusive jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement.  The parties further agree that the parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts; provided , however , that the foregoing shall not limit the rights of the parties to obtain execution of judgment in any other jurisdiction.  The parties further agree, to the extent permitted by Law, that a final and unappealable judgment against a party in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment.  Except to the extent that a different

 

D-14



 

determination or finding is mandated due to the applicable Law being that of a different jurisdiction, the parties agree that all judicial determinations or findings by a state or federal court in the Borough of Manhattan, New York, New York with respect to any matter under this Agreement shall be binding.

 

ii.                                        To the extent that any party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each such party hereby irrevocably (x) waives such immunity in respect of its obligations with respect to this Agreement and (y) submits to the personal jurisdiction of any court described in this Section 7(f) .

 

iii.                                     THE PARTIES HERETO AGREE THAT THEY HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS AGREEMENT.

 

(g)                                   Amendments; Waiver .  This Agreement cannot be terminated, altered or amended except pursuant to an instrument in writing signed by all the parties.  No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving.  No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

(h)                                  Buyer Representative . The Buyer Representative is signing this Agreement solely for the purpose of giving and receiving notices hereunder on behalf of the Buyers and the Portfolio Companies.  Any notice given by the Buyer Representative hereunder shall have the same force and effect as if given by the party on whose behalf the Buyer Representative is providing such notice.  Each party hereby releases and waives the Buyer Representative from any and all liabilities, losses and claims arising under or with respect to this Agreement.

 

(i)                                      No Third Party Beneficiaries .  Except for the provisions of Sections 6(a) and 6(b) , which are intended to be enforceable by the Seller Indemnified Parties and the Buyer Indemnified Parties respectively referred to therein, nothing in this Agreement is intended or shall be construed to give any person, other than the parties, their successors and permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

 

(j)                                     Negotiated Agreement .  This Agreement has been negotiated by the parties and the fact that any draft will have been prepared by any party shall not give rise to any presumption for or against any party or be used in any respect or forum in the construction or interpretation of this Agreement or any of its provisions.

 

(k)                                  Reasonable Cooperation .  Each of the parties shall reasonably cooperate with each other to perform its obligations under this Agreement.

 

D-15



 

(l)                                      Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument.  Any facsimile or electronic copies hereof or signatures hereon shall, for all purposes, be deemed originals.

 

(m)                              Further Assurances .  In connection with this Agreement and all transactions contemplated by this Agreement, by execution of this Agreement each party agrees to execute and deliver such additional documents and instruments as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement.

 

[Signatures appear on next page]

 

D-16



 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each party as of the date first above written.

 

 

 

SELLERS:

 

 

 

LAKE INVESTMENT, LP

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

NCP LAKE POWER, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

TETON NEW LAKE, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

NCP DADE POWER, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

DADE INVESTMENT, LP

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

AUBURNDALE LP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

AUBURNDALE GP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Signature Page to Transition Services Agreement (ATP)

 



 

 

SELLER REPRESENTATIVE:

 

 

 

ATLANTIC POWER CORPORATION

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

APH:

 

 

 

ATLANTIC POWER HOLDINGS, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Signature Page to Transition Services Agreement (ATP)

 



 

 

PORTFOLIO COMPANIES:

 

 

 

LAKE COGEN, LTD.

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

PASCO COGEN, LTD.

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

AUBURNDALE POWER PARTNERS, LIMITED PARTNERSHIP

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Signature Page to Transition Services Agreement (ATP)

 



 

 

BUYERS:

 

 

 

QUANTUM LAKE LP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

QUANTUM LAKE GP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

QUANTUM PASCO LP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

QUANTUM PASCO GP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

QUANTUM AUBURNDALE LP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

QUANTUM AUBURNDALE GP, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

BUYER REPRESENTATIVE:

 

 

 

QUANTUM UTILITY GENERATION, LLC

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Signature Page to Transition Services Agreement (ATP)

 




Exhibit 12.1

 

Computation of Ratio of Earnings to Fixed Charges

Atlantic Power Corporation

 

The following table sets forth the ratio of earnings to fixed charges for the periods indicated below.

 

 

 

 

Three Months Ended

 

Year Ended December 31,

 

(in millions of U.S. dollars)

 

March 31, 2013

 

2012

 

2011

 

2010

 

2009

 

2008

 

Earnings (loss) from continuing operations before income taxes

 

$

4.4

 

$

(144.8

)

$

(82.9

)

$

(12.0

)

$

(82.7

)

$

(2.6

)

Loss attributable to noncontrolling interest

 

(1.9

)

0.6

 

0.5

 

0.1

 

 

 

Distributions from equity investments

 

8.9

 

38.3

 

21.9

 

16.8

 

27.8

 

41.0

 

Interest capitalized

 

 

(16.9

)

(2.9

)

(5.0

)

 

 

Preferred share dividends of a subsidiary company

 

(3.2

)

(13.0

)

(3.2

)

 

 

 

Fixed charges (from below)

 

41.4

 

147.8

 

52.1

 

34.3

 

74.7

 

61.0

 

 

 

$

49.6

 

$

12.0

 

$

(14.5

)

$

34.2

 

$

19.8

 

$

99.4

 

Preferred share dividends of a subsidiary company

 

$

3.2

 

$

13.0

 

$

3.2

 

$

 

$

 

$

 

Project level interest

 

$

12.3

 

$

44.9

 

$

22.9

 

$

22.6

 

$

18.7

 

$

17.7

 

Corporate level interest

 

25.9

 

89.9

 

26.0

 

11.7

 

56.0

 

43.3

 

 

 

$

41.4

 

$

147.8

 

$

52.1

 

$

34.3

 

$

74.7

 

$

61.0

 

Ratio of earnings to fixed charges

 

1.20

 

 

(1)

 

(1)

1.00

 

 

(1)

1.63

 

 


(1)          Our ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For these purposes, “earnings” is the amount resulting from adding together earnings (loss) from continuing operations before income taxes, distributions from equity investments and fixed charges and subtracting loss attributable to noncontrolling interests, interest capitalized and preferred share dividends of a subsidiary company. “Fixed charges” is the amount resulting from adding together preferred share dividends of a subsidiary company, project level interest (including interest capitalized and interest from discontinued operations) and corporate level interest expenses. Earnings were insufficient to cover fixed charges by US$135.8 million, US$66.6  million and US$54.9 million for the years ended December 31, 2012, 2011 and 2009, respectively, due to a loss from continuing operations before taxes of US$ 144.8, US$82.9 and US$82.7, for the years ended December 31, 2012, 2011 and 2009, respectively.

 




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Exhibit 31.1

Certifications

I, Barry E. Welch, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Atlantic Power Corporation;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2013   /s/ BARRY E. WELCH

Barry E. Welch
President and Chief Executive Officer



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Exhibit 31.2

Certifications

I, Terrence Ronan, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Atlantic Power Corporation;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2013   /s/ TERRENCE RONAN

Terrence Ronan
Chief Financial Officer



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Exhibit 32.1


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

        The undersigned officer of Atlantic Power Corporation (the "Company") hereby certifies to his knowledge that the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2013 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 8, 2013    

 

 

/s/ BARRY E. WELCH

Barry E. Welch
President and Chief Executive Officer



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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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Exhibit 32.2


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

        The undersigned officer of Atlantic Power Corporation (the "Company") hereby certifies to his knowledge that the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2013 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 8, 2013    

 

 

/s/ TERRENCE RONAN

Terrence Ronan
Chief Financial Officer



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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002