Document:

Exhibit 10.1 

 

 

EXECUTION VERSION

 

THE INTERPUBLIC GROUP OF COMPANIES, INC.

4.75% Convertible Senior Notes Due 2023

 

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of November 20, 2007 by and between The Interpublic Group of Companies, Inc., a Delaware corporation (the “Company”), and UBS Securities LLC, as the dealer manager (the “Dealer Manager”), in connection with an offer by the Company of up to $200 million aggregate principal amount of its 4.75% Convertible Senior Notes due 2023 (the “ New Notes”) to certain holders of the Company’s 4.50% Convertible Senior Notes due 2023 (the “Existing Notes”) in exchange transactions exempt from the registration requirements of the Securities
Act, pursuant to the Dealer Manager Agreement, dated as of November 14, 2007, between the Company and the Dealer Manager (the “Dealer Manager Agreement”).  The New Notes are issued pursuant to an indenture, dated as of November 15, 2006, between the Company and The Bank of New York, as trustee (the “Trustee”), as amended and supplemented by a second supplemental indenture thereto, dated as of November 20, 2007 (the “Indenture”).  In order to induce the Dealer Manager to enter into the Dealer Manager Agreement, the Company has agreed to provide the registration rights set forth in this Agreement.  The execution of this Agreement is a condition to the closing under the Dealer Manager Agreement.

	
             
  	
            1.
 	
            Certain Definitions.
 

For purposes of this Registration Rights Agreement, the following terms shall have the following meanings:

 

(a)   “Additional Amounts” has the meaning assigned thereto in Section 2(d).

(b)   “Additional Amounts Payment Date” has the meaning assigned thereto in Section 2(d).

(c)   “Affiliate” shall have the meaning specified in Rule 405 under the Securities Act and the terms “controlling” and “controlled” shall have meanings correlative thereto.

(d)   “Agreement” has the meaning specified in the first paragraph of this Agreement.

(e)   “Applicable Conversion Price” means, as of any date of determination, $1,000 divided by the Conversion Rate in effect as of such date of determination. 

(f)   “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close.

 

	
       
	
       
	
       

 

 

 

(g)   “Commission” means the Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.

(h)   “Company” has the meaning specified in the first paragraph of this Agreement.

(i)    “Conversion Rate” shall have the meaning assigned such term in the Indenture.

(j)    “Dealer Manager” has the meaning specified in the first paragraph of this Agreement.

(k)   “Dealer Manager Agreement” has the meaning specified in the first paragraph of this Agreement.

(l)     “Deferral Notice” has the meaning assigned thereto in Section 3(b).

(m)   “Deferral Period” has the meaning assigned thereto in Section 3(b).

(n)   “Effective Period” has the meaning assigned thereto in Section 2(a).

(o)   “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(p)   “Exchange Date” means the date on which the New Notes are initially issued.

(q)   “Exempted Exchange Material” has the meaning specified in the Dealer Manager Agreement.

(r)    “Exempted Exchanges” has the meaning specified in the Dealer Manager Agreement.

(s)   “Existing Notes” has the meaning specified in the first paragraph of this Agreement.

(t)   “Filing Deadline” has the meaning assigned thereto in Section 2(a).

(u)   “FINRA” shall mean the Financial Industry Regulatory Authority.

(v)   “FINRA Rules” shall mean the Conduct Rules and the By-Laws of the Financial Industry Regulatory Authority.

(w)   “Holder” means each holder, from time to time, of Registrable Securities.

(x)   “Indenture” has the meaning specified in the first paragraph of this Agreement.

(y)   “Losses” has the meaning assigned thereto in Section 6(d).

 

	
       
	
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(z)   “Material Event” has the meaning assigned thereto in Section 3(a)(iv).

(aa)        “Majority Holders” shall mean, on any date, holders of the majority of the Shares constituting Registrable Securities; for the purposes of this definition, Holders of Notes constituting Registrable Securities shall be deemed to be the Holders of the number of Shares into which such Notes are or would be convertible as of such date.

(bb)       “New Notes” has the meaning specified in the first paragraph of this Agreement.  

(cc)        “Notice and Questionnaire” means a written notice delivered to the Company containing substantially the information called for by the Form of Selling Securityholder Notice and Questionnaire attached as Annex A to the Offering Memorandum.

(dd)       “Notice Holder” means, on any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date.

(ee)        “Offering Memorandum” means the Offering Memorandum dated November 15, 2007.

(ff)         “Person” means a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency.

(gg)       “Prospectus” means the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A or Rule 430B under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus.

(hh)       “Registrable Securities” means the Securities; provided, however, that such Securities shall cease to be Registrable Securities when (i) in the circumstances contemplated by Section 2(a), a registration statement registering such Securities under the Securities Act has been declared or becomes effective and such Securities have been sold or otherwise transferred by the Holder thereof pursuant to such effective registration statement; (ii) such Securities are sold pursuant to Rule 144 under circumstances in which any legend borne by such Securities relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed; (iii) such Securities are eligible to be sold pursuant to Rule 144(k) or any successor provision thereto or any other provision
that the Commission may promulgate that would permit a Holder who is not an Affiliate to resell the Securities without any restrictions on transferability; or (iv) such Securities shall cease to be outstanding (including, in the case of the New Notes, upon conversion into Shares).

(ii)       “Registration Default” has the meaning assigned thereto in Section 2(d).

 

	
       
	
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(jj)       “Registration Expenses” has the meaning assigned thereto in Section 5.

(kk)     “Rule 144,” “Rule 405,” “Rule 415” and “Rule 462(e)” means, in each case, such rule as promulgated under the Securities Act.

(ll)        “Securities” means, collectively, the New Notes and the Shares.

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

(nn)       “Shares” means the shares of common stock of the Company, par value $0.10 per share, into which the New Notes are convertible or that have been issued upon any conversion from New Notes into common stock of the Company.

(oo)       “Shelf Registration Statement” means the shelf registration statement referred to in Section 2(a), as amended or supplemented by any amendment or supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Shelf Registration Statement.

(pp)       “Trust Indenture Act” means the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time.

(qq)       “Trustee” shall have the meaning assigned such term in the Indenture.

Unless the context otherwise requires, any reference herein to a “Section” or “clause” refers to a Section or clause, as the case may be, of this Agreement, and the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision.  Unless the context otherwise requires, any reference to a statute, rule or regulation refers to the same (including any successor statute, rule or regulation thereto) as it may be amended from time to time.

 

	
             
  	
            2.
 	
            Registration Under the Securities Act.
 

(a)   The Company agrees to file under the Securities Act as promptly as practicable but in any event no later than 120 days after the Exchange Date (the “Filing Deadline”) a shelf registration statement providing for the registration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission.  In the event the Shelf Registration Statement is not automatically effective at the time of its filing pursuant to Rule 462(e), the Company agrees to use its reasonable efforts to cause the Shelf Registration Statement to become or be declared effective within 120 days after the Filing Deadline and to keep such Shelf Registration Statement continuously effective until the earlier of (i) the date that is two years after
the filing of the Shelf Registration Statement or (ii) such time as all of the Securities cease to be Registrable Securities (the “Effective Period”).  None of the Company’s securityholders (other than Holders of 

 

	
       
	
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Registrable Securities) shall have the right to include any of the Company’s securities in the Shelf Registration Statement.  

(b)   The Company further agrees that it shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement or such amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act; and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading, and the Company agrees to furnish to the Holders of the Registrable Securities copies of any supplement or amendment prior to its being used or promptly following its filing with the Commission.  If the Shelf Registration
Statement, as amended or supplemented from time to time, ceases to be effective for any reason at any time during the Effective Period (other than because all Registrable Securities registered thereunder shall have been sold pursuant thereto or shall have otherwise ceased to be Registrable Securities), the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof.

(c)   Each Holder of Registrable Securities agrees that if such Holder wishes to sell Registrable Securities pursuant to the Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(c) and Section 3(b).  The Company shall notify The Depository Trust Company and all Notice Holders of the filing and effectiveness of the Shelf Registration Statement.  In order to be named as a selling securityholder in the Prospectus at the time of effectiveness, each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to the Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire, together with such other information as the Company may reasonably request, to the Company at least five (5) Business Days prior to the effectiveness of the Shelf
Registration Statement. From and after the date the Shelf Registration Statement becomes or is declared effective, each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to the Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company prior to any intended distribution of Registrable Securities under the Shelf Registration Statement.  From and after the date the Shelf Registration Statement becomes or is declared effective, the Company shall, as promptly as is practicable and commercially reasonable after the date a Notice and Questionnaire is delivered (i) if required by applicable law, file with the Commission a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder
delivering such Notice and Questionnaire is named as a selling security holder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to comply with applicable prospectus delivery requirements and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use its reasonable best efforts to cause such post-effective amendment to become or be declared effective under the Securities Act as promptly as is practicable; (ii) provide such Notice Holder copies of any documents filed pursuant to Section 2(c)(i); and (iii) notify 

 

	
       
	
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such Notice Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment or any amendment or supplement to the Prospectus, each filed pursuant to Section 2(c)(i); provided, however, that with respect to clause (i) above, the Company will not be obligated to file more than one such post-effective amendment to the Shelf Registration Statement or supplement to the related Prospectus in any 30-day period; provided further, that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Notice Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(b).  Notwithstanding anything contained herein to the contrary, the Company shall be under no obligation
to name any Holder that is not a Notice Holder as a selling securityholder in any Shelf Registration Statement or related Prospectus; provided, however, that any Holder that becomes a Notice Holder pursuant to the provisions of this Section 2(c) (whether or not such Holder was a Notice Holder at the time the Shelf Registration Statement became or was declared effective) shall be named as a selling securityholder in the Shelf Registration Statement or related Prospectus in accordance with the requirements of this Section 2(c).

(d)   If any of the following events (any such event a “Registration Default”) shall occur, then liquidated damages (the “Additional Amounts”) shall become payable to Holders in respect of the Securities as follows:

(i)           if the Shelf Registration Statement is not filed with the Commission within 120 days following the Exchange Date, then commencing on the 121st day after the Exchange Date, Additional Amounts shall accrue on the principal amount of the outstanding New Notes that are Registrable Securities and on the Applicable Conversion Price of any outstanding Shares that are Registrable Securities at a rate of 0.25% per annum for the first 30 days following such 121st day and at a rate of 0.50% per annum thereafter; or

(ii)          if the Shelf Registration Statement is not declared effective by the Commission within 120 days following the Filing Deadline (if not automatically effective), then commencing on the 121st day after the Filing Deadline, Additional Amounts shall accrue on the principal amount of the outstanding New Notes that are Registrable Securities and on the Applicable Conversion Price of any outstanding Shares that are Registrable Securities at a rate of 0.25% per annum for the first 30 days following such 121st day and at a rate of 0.50% per annum thereafter; or

(iii)        if the Shelf Registration Statement has become or been declared effective but such Shelf Registration Statement ceases to be effective at any time during the Effective Period (other than pursuant to Section 3(b) hereof), then commencing on the day such Shelf Registration Statement ceases to be effective, Additional Amounts shall accrue on the principal amount of the outstanding New Notes that are Registrable Securities and on the Applicable Conversion Price of any outstanding Shares that are Registrable Securities at a rate of 0.25% per 

 

	
       
	
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annum for the first 30 days following such date on which the Shelf Registration Statement ceases to be effective and at a rate of 0.50% per annum thereafter; or

(iv)         if the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(b) hereof, then commencing on the day the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period (and again on the first day of any subsequent Deferral Period during such period), Additional Amounts shall accrue on the principal amount of the outstanding Notes that are Registrable Securities and on the Applicable Conversion Price of any outstanding Shares that are Registrable Securities at a rate of 0.25% per annum for the first 30 days and at a rate of 0.50% per annum thereafter; 

provided, however, that the Additional Amounts rate on the Securities shall not exceed in the aggregate 0.50% per annum and shall not be payable under more than one clause above for any given period of time, except that if Additional Amounts would be payable under more than one clause above, but at a rate of 0.25% per annum under one clause and at a rate of 0.50% per annum under the other, then the Additional Amounts rate shall be the higher rate of 0.50% per annum; provided further, however, that (1) upon the filing of the Shelf Registration Statement (in the case of clause (i) above), (2) upon the effectiveness of the Shelf
Registration Statement (in the case of clause (ii) above), (3) upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii) above), (4) upon the termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods in a period set forth in Section 3(b) to be exceeded (in the case of clause (iv) above) or (5) upon the termination of certain transfer restrictions on the Securities as a result of the application of Rule 144(k) or any successor provision, Additional Amounts on the Securities as a result of such clause, as the case may be, shall cease to accrue.

 

Additional Amounts on the Securities, if any, will be payable in cash on March 15 and September 15 of each year (the “Additional Amounts Payment Date”) to holders of record of outstanding Registrable Securities on each preceding March 1 and September 1.  The date of determination of the Applicable Conversion Price of any outstanding Shares that are Registrable Securities shall be the Business Day immediately preceding the Additional Amounts Payment Date; provided that, any Additional Amounts accrued with respect to any New Notes or portion thereof called for redemption on a redemption date or converted into Shares on a conversion date prior to the Registration Default shall, in any such event, be paid instead to the Holder who submitted such New Notes or portion thereof
for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion).  Following the cure of all Registration Defaults requiring the payment of Additional Amounts by the Company to the Holders of Registrable Securities pursuant to this Section, the accrual of Additional Amounts will cease (without in any way limiting the effect of any subsequent Registration Default requiring the payment of Additional Amounts by the Company).  

 

	
       
	
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The Trustee shall be entitled, on behalf of Holders of Securities, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Additional Amounts.  Notwithstanding the foregoing, the parties agree that the sole monetary damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be as set forth in this Section 2(d). Nothing shall preclude a Notice Holder or Holder of Registrable Securities from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement. 

 

	
             
  	
            3.
 	
            Registration Procedures.
 

The following provisions shall apply to the Shelf Registration Statement filed pursuant to Section 2:

 

	
             
  	
            (a)
 	
            The Company shall:
 

(i)           prepare and file with the Commission a registration statement with respect to the shelf registration on any form which may be utilized by the Company and which shall permit the disposition of the Registrable Securities in accordance with the intended method or methods thereof, as specified in writing by the Holders of the Registrable Securities, and use its reasonable efforts to cause such registration statement to become effective in accordance with Section 2(a) above;

(ii)          before filing any Shelf Registration Statement or Prospectus or any amendments or supplements thereto with the Commission, furnish to the Dealer Manager copies of all such documents  proposed to be filed and use reasonable efforts to reflect in each such document when so filed with the Commission such comments as the Dealer Manager reasonably shall propose within three (3) Business Days of the delivery of such copies to the Dealer Manager;

(iii)        use its reasonable efforts to prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement and file with the Commission any other required document as may be necessary to keep such Shelf Registration Statement continuously effective until the expiration of the Effective Period; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all Securities covered by such Shelf Registration Statement during the Effective Period in accordance with the intended methods of disposition by the sellers thereof set
forth in such Shelf Registration Statement as so amended or such Prospectus as so supplemented;

(iv)         promptly notify the Notice Holders of Registrable Securities (A) when such Shelf Registration Statement or the Prospectus included therein or any amendment or supplement to the Prospectus or post-effective amendment has been filed with the Commission, and, with respect to such Shelf Registration 

 

	
       
	
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Statement or any post-effective amendment, when the same has become effective, (B) of any request, following the effectiveness of the Shelf Registration Statement, by the Commission or any other Federal or state governmental authority for amendments or supplements to the Shelf Registration Statement or related Prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or the initiation or written threat of any proceedings for that purpose, (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or written threat of any proceeding for such purpose, (E) of the occurrence of (but not the nature of or details concerning) any event or the existence of any fact (a
“Material Event”) as a result of which any Shelf Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Company shall be required pursuant to this clause (E) in the event that the Company either promptly files a Prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Shelf Registration Statement, which, in either case, contains the requisite information with respect to such Material Event that results in such Shelf Registration
Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading), (F) of the determination by the Company that a post-effective amendment to the Shelf Registration Statement will be filed with the Commission, which notice may, at the discretion of the Company (or as required pursuant to Section 3(b)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(b) shall apply or (G) at any time when a Prospectus is required to be delivered under the Securities Act, that the Shelf Registration Statement, Prospectus, amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder;

(v)          prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use reasonable efforts to register or qualify or cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire); prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use its reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the Effective Period in connection with
such Notice Holder’s offer and sale of 

 

	
       
	
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Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the Shelf Registration Statement and the related Prospectus; provided, that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject;

(vi)         use its reasonable best efforts to prevent the issuance of, and if issued, to obtain the withdrawal of, any order suspending the effectiveness of the Shelf Registration Statement or any post-effective amendment thereto, and to lift any suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in each case at the earliest practicable date;

(vii)       upon reasonable notice, for a reasonable period prior to the filing of the Shelf Registration Statement, and throughout the Effective Period, make available at reasonable times at the Company’s principal place of business or such other reasonable place for inspection by a representative appointed by the Notice Holders in connection with an underwritten offering (or any underwriter, placement agent or counsel acting on their behalf), who shall certify to the Company that they have a current intention to sell their Registrable Securities pursuant to the Shelf Registration Statement, such financial and other information and books and records of the Company, and cause the officers, directors, employees and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably
necessary, in the judgment of the counsel to such Notice Holders, to conduct a reasonable “due diligence” investigation; provided, however, that each such representative appointed by the Notice Holders in connection with an underwritten offering shall be required to maintain in confidence and not to disclose to any other Person any information or records reasonably designated by the Company in writing as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in the Shelf Registration Statement or otherwise) or (B) such Person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such Person shall have given the Company prompt prior written notice of such requirement and the opportunity to contest the same or
seek an appropriate protective order);

(viii)      if reasonably requested by the Dealer Manager or any Notice Holder, promptly incorporate in a Prospectus supplement or post-effective amendment to the Shelf Registration Statement such information as the Dealer Manager or such Notice Holder shall, on the basis of a written opinion of nationally-recognized counsel experienced in such matters, determine to be 

 

	
       
	
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required to be included therein by applicable law and make any required filings of such Prospectus supplement or such post-effective amendment; provided that the Company shall not be required to take any actions under this Section 3(a)(viii) that are not, in the reasonable opinion of counsel for the Company, in compliance with applicable law;

(ix)         promptly furnish to each Notice Holder and the Dealer Manager, upon their request and without charge, at least one (1) conformed copy of the Shelf Registration Statement and any amendments thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder or the Dealer Manager, as the case may be); and

(x)          during the Effective Period, deliver to each Notice Holder in connection with any sale of Registrable Securities pursuant to the Shelf Registration Statement, without charge, as many copies of the Prospectus relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein.

(b)   Upon (A) the issuance by the Commission of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any Material Event as a result of which the Shelf Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of
any corporate development that, in the discretion of the Company, makes it appropriate to suspend the availability of the Shelf Registration Statement and the related Prospectus, the Company will (i) in the case of clause (B) above, subject to the third sentence of this provision, as promptly as practicable prepare and file a post-effective amendment to such Shelf Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Shelf Registration Statement and Prospectus so that such Shelf Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which 

 

	
       
	
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they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to the Shelf Registration Statement, subject to the third sentence of this provision, use reasonable efforts to cause it to become or be declared effective as promptly as is practicable, and (ii) give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a “Deferral Notice”).  Upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration Statement until such Notice Holder’s receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus.  The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter and (z) in the case of clause (C) above, as soon as, in the discretion of the Company, such suspension is no longer appropriate; provided that the period during which the availability of the Shelf Registration Statement and any Prospectus is suspended (the “Deferral Period”), without the Company incurring any obligation to pay liquidated damages pursuant to Section 2(d), shall not exceed one hundred and twenty
(120) days in the aggregate in any twelve (12) month period.

(c)   Each Holder of Registrable Securities agrees that upon receipt of any Deferral Notice from the Company, such Holder shall forthwith discontinue (and cause any placement or sales agent or underwriters acting on their behalf to discontinue) the disposition of Registrable Securities pursuant to the registration statement applicable to such Registrable Securities until such Holder (i) shall have received copies of such amended or supplemented Prospectus and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such Holder’s possession of the Prospectus covering such Registrable Securities at the time of receipt of such notice or (ii) shall have received notice from the Company that the disposition of Registrable Securities pursuant to the
Shelf Registration Statement may continue.

(d)   The Company may require each Holder of Registrable Securities as to which any registration pursuant to Section 2(a) is being effected to furnish to the Company such information regarding such Holder and such Holder’s intended method of distribution of such Registrable Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act.  Each such Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Holder to the Company or of the occurrence of any event in either case as a result of which any Prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder’s intended
method of disposition of such Registrable Securities or omits to state any material fact regarding 

 

	
       
	
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such Holder or such Holder’s intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(e)   The Company shall comply with all applicable rules and regulations of the Commission and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of the Shelf Registration Statement, which statements shall cover said 12-month periods.

(f)    The Company shall provide a CUSIP number for all Registrable Securities covered by the Shelf Registration Statement not later than the effective date of such Shelf Registration Statement and provide the Trustee for the New Notes and the transfer agent for the Shares with printed certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company.

(g)   The Company shall use its reasonable efforts to provide such information as is required for any filings required to be made with the FINRA.

(h)   Until the expiration of two years after the Exchange Date or such other period as the Commission may promulgate that would change the period of restrictions on transferability pursuant to Rule 144 or any similar or successor provision, the Company will not, and will not permit any of its “affiliates” (as defined in Rule 144) to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act.

(i)    The Company shall cause the Indenture to be qualified under the Trust Indenture Act in a timely manner.

(j)    The Company shall enter into such customary agreements and take all such other necessary and lawful actions in connection therewith (including those requested by the Majority Holders of the Registrable Securities being sold) in order to expedite or facilitate disposition of such Registrable Securities.

	
             
  	
            4.
 	
            Holder’s Obligations.
 

Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to the Shelf Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(c) 

 

	
       
	
      13
	
       

 

 

 

hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence.  Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as may be required to be disclosed in the Shelf Registration Statement under applicable law or pursuant to Commission comments.  Each Holder further agrees not to sell any Registrable Securities pursuant to the Shelf Registration Statement without complying with applicable prospectus delivery requirements, and, following termination of the Effective Period, to notify the Company, within 10 business days of a request by the Company, of the amount of
Registrable Securities sold pursuant to the Shelf Registration Statement and, in the absence of a response, the Company may assume that all of the Holder’s Registrable Securities were so sold.

 

	
             
  	
            5.
 	
            Registration Expenses.
 

The Company agrees to bear and to pay or cause to be paid promptly upon request being made therefor all expenses incident to the Company’s performance of or compliance with this Agreement, including (a) all Commission and any FINRA registration and filing fees and expenses, (b) all fees and expenses in connection with the qualification of the Securities for offering and sale under the State securities and Blue Sky laws referred to in Section 3(a)(v) hereof, including reasonable fees and disbursements of one counsel for the placement agent or underwriters, if any, in connection with such qualifications, (c) all expenses relating to the preparation, printing, distribution and reproduction of the Shelf Registration Statement, the related Prospectus, each amendment or supplement to each of the foregoing, the certificates representing the Securities and all other documents relating hereto, (d) fees and expenses of the Trustee under the Indenture, any escrow agent or
custodian, and of the registrar and transfer agent for the Shares, (e) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or “comfort” letters required by or incident to such performance and compliance) and (f) reasonable fees, disbursements and expenses of one counsel for the Holders of Registrable Securities retained in connection with the Shelf Registration Statement, as selected by the Company (unless reasonably objected to by the Majority Holders of the Registrable Securities being registered, in which case the Majority Holders shall select such counsel for the Holders), and fees, expenses and disbursements of any other Persons, including special experts, retained by the Company in connection with such registration (collectively, the “Registration Expenses”).  To the extent that any Registration Expenses are incurred,
assumed or paid by any Holder of Registrable Securities or any placement agent therefor or underwriter thereof, the Company shall reimburse such Person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a documented request therefor.  Notwithstanding the foregoing, the Holders of the Registrable Securities being registered shall pay all placement agent fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such Holders (severally or jointly), other than the counsel and experts specifically referred to above.

 

	
       
	
      14
	
       

 

 

 

	
             
  	
            6.
 	
            Indemnification and Contribution.
 

(a)   The Company agrees to indemnify and hold harmless each Holder of Securities covered by any Shelf Registration Statement, the directors, officers, employees, Affiliates and agents of each such Holder and each Person who controls any such Holder within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any
preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any preliminary Prospectus or the Prospectus, in the light of the circumstances under which they were made), and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information relating to the party claiming
indemnification furnished to the Company by or on behalf of the party claiming indemnification specifically for inclusion therein.  This indemnity agreement shall be in addition to any liability that the Company may otherwise have.

The Company also agrees to indemnify as provided in this Section 6(a) or contribute as provided in Section 6(d) hereof to Losses of each underwriter, if any, of Securities registered under the Shelf Registration Statement, its directors, officers, employees, Affiliates or agents and each Person who controls such underwriter on substantially the same basis as that of the indemnification of the selling Holders provided in this paragraph (a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement.

(b)   Each Holder of Securities covered by the Shelf Registration Statement severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Shelf Registration Statement and each Person who controls the Company within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity.  This indemnity agreement will be in addition to any liability which any such Holder may otherwise have.

(c)   Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect 

 

	
       
	
      15
	
       

 

 

 

thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above.  The indemnifying party shall be entitled to appoint counsel (including local counsel) of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel, other than local counsel if not appointed by the indemnifying party, retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party.  Notwithstanding the indemnifying party’s election to appoint counsel (including local counsel) to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party.  An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.

(d)   In the event that the indemnity provided in paragraph (a) or (b) of this Section 6 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending such loss, claim, liability, damage or action) (collectively “Losses”) to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Exempted Exchanges and the Shelf Registration Statement which resulted in such Losses; provided,
however, that in no case shall any subsequent Holder of any Securities be responsible, in the aggregate, for any amount in excess of the fees 

 

	
       
	
      16
	
       

 

 

 

payable to the Dealer Manager applicable to such Security, as set forth in the Exempted Exchange Material, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Shelf Registration Statement which resulted in such Losses.  If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations.  Benefits received by the Company shall be deemed to be equal to the sum of
(x) the aggregate principal amount of the Existing Notes exchanged in the Exempted Exchanges (before deducting expenses) as set forth in the Exempted Exchange Material and (y) the total amount of Additional Amounts which the Company was not required to pay as a result of registering the Securities covered by the Shelf Registration Statement which resulted in such Losses.  Benefits received by the Dealer Manager shall be deemed to be equal to the aggregate amount of fees paid by the Company in connection with the Exempted Exchanges under the Dealer Manager Agreement, and benefits received by any other Holders shall be deemed to be equal to the value of receiving the Securities registered under the Securities Act.  Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Shelf Registration Statement which resulted in such Losses.  Relative fault shall be
determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.  The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above.  Notwithstanding the provisions of this paragraph (d), no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.  For purposes of this Section 6, each Person who controls a Holder within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each Person who controls the Company within the meaning of either the Securities Act or the Exchange Act, each officer of the Company who shall have signed the Shelf Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

(e)   The provisions of this Section 6 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the indemnified Persons referred to in this Section 6, and shall survive the sale by a Holder of securities covered by the Shelf Registration Statement.

 

	
       
	
      17
	
       

 

 

 

	
             
  	
            7.
 	
            Rule 144.
 

The Company covenants to the Holders of Registrable Securities that the Company shall use its reasonable efforts to timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission.  Upon the request of any Holder of Registrable Securities in connection with that
Holder’s sale pursuant to Rule 144, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements.

 

	
             
  	
            8.
 	
            Inconsistent Agreements.
 

The Company has not entered into, and agrees not to enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or that otherwise conflict with the provisions hereof.

 

	
             
  	
            9.
 	
            Miscellaneous.
 

(a)   Entire Agreement; Amendments.  This Agreement and the other writings referred to herein (including the Indenture) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties and supersedes all prior agreements and understandings between the parties with respect to its subject matter.  This Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the Majority Holders of the Registrable Securities at the time outstanding. 

(b)   Notices.  All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: 

(i)           If to the Company, to it at 1114 Avenue of the Americas, 19th Floor, New York, New York, 10036, Attention:  General Counsel; 

(ii)          If to the Dealer Manager, to the address set forth in the Dealer Manager Agreement; and

(iii)        If to a Holder, to the address of such Holder set forth in the security register, the Notice and Questionnaire or other records of the Company,

 

	
       
	
      18
	
       

 

 

 

or to such other address as the Company, the Dealer Manager or any such Holder may have furnished to the other parties in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

(c)   Remedies.  Nothing shall preclude a Notice Holder or Holder of Registrable Securities from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement.

(d)   Successors.  This Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto.  In the event that any transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a party hereto for all purposes and such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by and to perform, all of the applicable terms and provisions of this Agreement.

(e)   Survival.  The respective indemnities, agreements, representations, warranties and each other provision set forth in this Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any Holder of Registrable Securities, any director, officer or partner of such Holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Exempted Exchange Material and the transfer and registration of Registrable Securities by such Holder.

(f)    Applicable Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SAID STATE.  

(g)   Headings.  The descriptive headings of the several Sections and paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

(h)   Counterparts.  This Agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.

(i)    Severability.  In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of 

 

	
       
	
      19
	
       

 

 

 

any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law.

(j)    Securities Held by the Company, etc.  Whenever the consent or approval of Holders of a specified percentage of Securities is required hereunder, Securities held by the Company or its Affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

 

	
       
	
      20
	
       

 

 

 

Agreed to and accepted as of the date referred to above.

 

 

 

	 	Very truly yours,
	 	THE INTERPUBLIC GROUP OF COMPANIES, INC.
	
             
 	
      By:          /s/ Nicholas J. Camera                
          
	 	Name:	Nicholas J. Camera
	 	Title:	Senior Vice President, General Counsel

      and Secretary      

 

	
       
	
       
	
       

 

 

 

UBS SECURITIES LLC

	
            By:            /s/ Timothy Lu          

	Name:	Timothy Lu
	Title:	Managing Director
	 	 
	 	 
	
        By:            /s/ Hu Yang              

	Name:	Hu Yang
	Title:	Executive Directorexv4w7

 

Exhibit 4.7

     “[**]” indicates where text has been omitted pursuant to a request for confidential treatment.
The omitted text has been filed separately with the Securities and Exchange Commission.

EXECUTION COPY

PURCHASE AGREEMENT

by and among

HQ
PUNO LTD.

and

HYDRO-QUÉBEC INTERNATIONAL TRANSMISIÓN SUDAMÉRICA S.A.,

as Sellers,

HYDRO-QUÉBEC INTERNATIONAL INC.,

as Sellers Guarantor,

RENTAS ELÉCTRICAS IV LIMITADA,

as Purchaser,

and

RENTAS ELÉCTRICAS III LIMITADA,

as Purchaser Guarantor

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I SALE AND PURCHASE
	 	 	2	 
	 
	 	 	 	 
	1.1 Sale and Purchase
	 	 	2	 
	1.2 Purchase Price
	 	 	2	 
	1.3 Closing
	 	 	3	 
	1.4 Closing Deliveries
	 	 	3	 
	1.5 Deposit
	 	 	3	 
	1.6 Working Capital Adjustment to Purchase Price
	 	 	4	 
	1.7 VI Adjustment to Purchase Price
	 	 	6	 
	1.8 Transition Period Adjustment to Purchase Price
	 	 	7	 
	 
	 	 	 	 
	ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
	 	 	9	 
	 
	 	 	 	 
	2.1 Organization and Qualification; Authority; Non-Contravention; Statutory Approvals
	 	 	9	 
	2.2 Right and Title to Subject Shares, Norte Shares and Minority Norte Shares
	 	 	10	 
	2.3 IFC Shares
	 	 	10	 
	2.4 Litigation
	 	 	11	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS RELATING TO THE TRANSELEC
ENTITIES
	 	 	11	 
	 
	 	 	 	 
	3.1 Organization and Qualification; Authority; Non-Contravention; Statutory Approvals
	 	 	11	 
	3.2 Equity Interests; Capitalization
	 	 	12	 
	3.3 Financial Statements of Transelec
	 	 	13	 
	3.4 Absence of Certain Changes or Events; Absence of Undisclosed Liabilities
	 	 	13	 
	3.5 Taxes
	 	 	14	 
	3.6 Litigation
	 	 	15	 
	3.7 Compliance With Laws
	 	 	15	 
	3.8 Permits
	 	 	16	 
	3.9 Real Property
	 	 	16	 
	3.10 Contracts
	 	 	17	 
	3.11 Environmental Matters
	 	 	18	 
	3.12 Intellectual Property
	 	 	19	 
	3.13 Title to Assets
	 	 	19	 
	3.14 Insurance
	 	 	20	 
	3.15 Books and Records
	 	 	20	 
	3.16 Labor
	 	 	21	 
	3.17 Benefit Plans
	 	 	21	 
	3.18 Organizational Documents
	 	 	22	 
	3.19 Accounts and Notes Receivable and Payable
	 	 	22	 
	3.20 Certain Payments
	 	 	22	 

i 

 

	 	 	 	 	 
	 	 	Page
	3.21 Brokers and Finders
	 	 	23	 
	3.22 No Other Representation
	 	 	23	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	24	 
	 
	 	 	 	 
	4.1 Organization and Qualification
	 	 	24	 
	4.2 Authority; Non-Contravention; Statutory Approvals
	 	 	24	 
	4.3 Financing
	 	 	25	 
	4.4 Purchaser Equity
	 	 	25	 
	4.5 Litigation
	 	 	25	 
	4.6 Brokers and Finders
	 	 	26	 
	 
	 	 	 	 
	ARTICLE V COVENANTS
	 	 	26	 
	 
	 	 	 	 
	5.1 Conduct of Transelec Business
	 	 	26	 
	5.2 Regulatory Approvals
	 	 	29	 
	5.3 Required Consents
	 	 	30	 
	5.4 Access
	 	 	30	 
	5.5 Publicity
	 	 	30	 
	5.6 Fees and Expenses
	 	 	31	 
	5.7 Survival of Affiliate Contracts
	 	 	31	 
	5.8 Further Assurances
	 	 	31	 
	5.9 Financing
	 	 	32	 
	5.10 Tax Matters
	 	 	32	 
	5.11 Change of Corporate Names
	 	 	34	 
	5.12 Exclusivity
	 	 	34	 
	5.13 Drag-Along Right
	 	 	34	 
	5.14 HQ International Mobility Program
	 	 	35	 
	5.15 Notification of Certain Matters
	 	 	35	 
	5.16 Public Announcement of Intention to Acquire Control of the Transelec Entities
	 	 	35	 
	 
	 	 	 	 
	ARTICLE VI CONDITIONS TO CLOSING
	 	 	35	 
	 
	 	 	 	 
	6.1 Conditions to the Obligations of the Parties
	 	 	35	 
	6.2 Conditions to the Obligation of Purchaser
	 	 	36	 
	6.3 Conditions to the Obligation of Sellers
	 	 	37	 
	 
	 	 	 	 
	ARTICLE VII TERMINATION
	 	 	39	 
	 
	7.1 Termination
	 	 	39	 
	7.2 Effect of Termination
	 	 	40	 
	 
	ARTICLE VIII INDEMNIFICATION
	 	 	41	 
	 
	 	 	 	 
	8.1 Indemnification by Sellers
	 	 	41	 
	8.2 Amount of Damages
	 	 	41	 

ii 

 

	 	 	 	 	 
	 	 	Page
	8.3 Indemnification by Purchaser
	 	 	41	 
	8.4 Indemnification Process
	 	 	41	 
	8.5 Limitations on Claims
	 	 	43	 
	8.6 Characterization of Indemnification Payments
	 	 	45	 
	8.7 Limitation on Damages
	 	 	45	 
	 
	 	 	 	 
	ARTICLE IX GUARANTEES
	 	 	45	 
	 
	 	 	 	 
	9.1 Purchaser Guaranty
	 	 	45	 
	9.2 Sellers Guaranty
	 	 	47	 
	 
	 	 	 	 
	ARTICLE X DEFINITIONS AND INTERPRETATION
	 	 	49	 
	 
	 	 	 	 
	10.1 Defined Terms
	 	 	49	 
	10.2 Definitions
	 	 	51	 
	10.3 Interpretation
	 	 	56	 
	 
	 	 	 	 
	ARTICLE XI GENERAL PROVISIONS
	 	 	57	 
	 
	 	 	 	 
	11.1 Survival of Representations, Warranties, Covenants and Agreements
	 	 	57	 
	11.2 Notices
	 	 	57	 
	11.3 Binding Effect
	 	 	59	 
	11.4 Assignment; Successors; Third-Party Beneficiaries
	 	 	59	 
	11.5 Amendment; Waivers; Etc.
	 	 	60	 
	11.6 Entire Agreement
	 	 	60	 
	11.7 Interpretation; Schedules
	 	 	60	 
	11.8 Severability
	 	 	61	 
	11.9 Counterparts
	 	 	61	 
	11.10 Governing Law
	 	 	61	 
	11.11 Venue
	 	 	61	 
	11.12 Waiver of Jury Trial; Waiver of Immunity
	 	 	61	 
	11.13 Enforcement
	 	 	62	 
	11.14 Non-Recourse
	 	 	62	 
	11.15 No Right of Set-Off
	 	 	62	 
	11.16 Currency
	 	 	62	 
	11.17 Interest
	 	 	63	 
	11.18 Non-Competition; Non-Solicitation; Confidentiality
	 	 	63	 

iii 

 

SCHEDULES

	 
	Sellers Disclosure Schedule

	 

	Purchaser Disclosure Schedule

	 

	Schedule 1.7 Sample of VI Adjustment Amount Calculation

	Schedule 1.8 Sample of Transition Period Adjustment Amount Calculation

	Schedule 5.1 Conduct of Transelec Business

	Schedule 5.7 Survival of Affiliate Contracts

	Schedule 10.2(a) Transelec Entities Knowledge Group

	Schedule 10.2(b) Sellers Knowledge Group

	Schedule 10.2(c) Purchaser Knowledge Group

	Schedule 10.2(d) Sample of Working Capital Calculation

i 

 

EXHIBITS

	 
	Exhibit A            Form of Assignment Agreement

	Exhibit B            Form of Termination and Release Agreement

	Exhibit C            Form of Hydro-Québec Letter of Guarantee

	Exhibit D            Form of Drag-Along Notice

ii 

 

PURCHASE AGREEMENT

     PURCHASE AGREEMENT (this “Agreement”), dated as of June 16, 2006, is
entered into by and among HQ Puno Ltd., a corporation organized under the laws of Canada
(“Puno”), Hydro-Québec International Transmisión Sudamérica S.A., a sociedad anónima
organized under the laws of the Republic of Chile (“Transmisión,” and with Puno, each
individually a “Seller” and, collectively, “Sellers”), Hydro-Québec International
Inc., a company incorporated under the laws of the Province of Québec (“Sellers
Guarantor”), Rentas Eléctricas IV Limitada, a sociedad de responsabilidad limitada organized
under the laws of the Republic of Chile (“Purchaser”), Rentas Eléctricas III Limitada, a
sociedad de responsabilidad limitada organized under the laws of the Republic of Chile
(“Purchaser Guarantor”). Each of Purchaser, Sellers Guarantor, Purchaser Guarantor and
Sellers is sometimes referred to individually herein as a “Party” and collectively as the
“Parties”. Certain other terms are defined throughout this Agreement and in
Section 10.2 hereof.

W I T N E S S E T H:

     WHEREAS, Sellers Guarantor, directly or indirectly, owns all the issued and outstanding shares
of Puno and Transmisión;

     WHEREAS, Sellers own 920,000 ordinary shares (the “Subject Shares”) of HQI Transelec
Chile S.A. (“Transelec”), representing 92% of the total issued and outstanding capital
stock of Transelec;

     WHEREAS, the International Finance Corporation (“IFC”) owns 80,000 ordinary shares of
Transelec, representing 8% of the total issued and outstanding capital stock of Transelec;

     WHEREAS, Transelec owns 750,050 ordinary shares (the “Norte Shares”) of HQI Transelec
Norte S.A. (“Norte”), representing approximately 99.99% of the total issued and outstanding
capital stock of Norte;

     WHEREAS, Transmisión owns 75 ordinary shares (the “Minority Norte Shares”) of Norte,
representing approximately 0.01% of the total issued and outstanding capital stock of Norte;

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

     WHEREAS, Purchaser desires to purchase from Transmisión, and Transmisión desires to sell to
Purchaser, all of the Minority Norte Shares, upon the terms and subject to the conditions set forth
in this Agreement;

     WHEREAS, Purchaser has confirmed to Sellers that it intends to hold, directly or indirectly,
the Subject Shares, the Norte Shares and the Minority Norte Shares for medium- or long-term
investment purposes;

1

 

     WHEREAS, Brookfield Asset Management Inc. (“Brookfield”), one of the principal
indirect shareholders of Purchaser has confirmed to Sellers that it has been involved in the power
sector in Latin America for over 100 years and currently is the owner and operator of transmission
assets in Canada;

     WHEREAS, Brookfield has confirmed to Sellers that it will be actively involved in supervising
the management and operation of Transelec;

     WHEREAS, Purchaser, through its indirect shareholders, has confirmed to Sellers that it has
the experience and expertise necessary to ensure that Transelec maintains its existing
qualification to operate the Transelec Business, including having Transelec employ or utilize
personnel with the technical expertise and training necessary to operate the Transelec Business in
compliance with the best applicable industry standards in Chile, all applicable Laws and in a safe
and reliable manner;

     WHEREAS, Sellers Guarantor desires to guarantee the obligations of Sellers under this
Agreement as set forth herein; and

     WHEREAS, Purchaser Guarantor desires to guarantee the obligations of Purchaser under this
Agreement as set forth herein.

     NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and
warranties made in this Agreement and of the mutual benefits to be derived therefrom, the Parties
agree as follows:

ARTICLE I

SALE AND PURCHASE

     1.1 Sale and Purchase. Upon the terms and subject to the conditions of this Agreement, at
the Closing:

          (a) Purchaser shall purchase from Sellers, and Sellers shall sell to Purchaser, all of the
Subject Shares, free and clear of any and all Liens, except under the Shareholders Agreement.

          (b) Purchaser shall purchase from Transmisión, and Transmisión shall sell to Purchaser, all of
the Minority Norte Shares, free and clear of all Liens (clauses (a) and (b) are
collectively referred to as the “Transaction”)

          (c) In order to allow each of Transelec and Norte to maintain two shareholders at the Closing
in compliance with applicable Chilean corporate Laws, Purchaser Guarantor may purchase from Sellers
0.01% of the Subject Shares.

     1.2 Purchase Price. The aggregate consideration to be paid by Purchaser in respect of the
purchase of the (a) Subject Shares shall be an amount in cash equal to $1,550,000,000 (the
“Purchase Price”), as adjusted pursuant to Sections 1.6, 1.7 and
1.8, and (b) Minority Norte

2

 

Shares shall be an amount in cash equal to $6,000 (the “Minority Norte Purchase Price”).
Pursuant to Article 79 of the Chilean Tax Law, Purchaser shall withhold an amount equal to 17% of
Puno’s capital gains realized from the sale of the Subject Shares (such amount to be provided by
the Auditors to Purchaser prior to the Closing) for the purpose of paying applicable Chilean
withholding Taxes and complying with applicable Chilean Tax Law. Purchaser shall remit such amount
to the appropriate Taxing Authority within the time period specified in Article 79 of the Chilean
Tax Law. Immediately upon payment of the withholding tax by Purchaser on behalf of Puno, Purchaser
shall provide Sellers with the original receipt for the corresponding Tax payment.

     1.3 Closing. The closing of the Transaction (the “Closing”) shall take place at
the offices of Sellers’ Counsel, at 10:00 a.m., local time, on the later of (i) the tenth
(10th) Business Day following the date hereof or (ii) the second Business Day
immediately following the date on which the last of the conditions contained in Article VI
is fulfilled or waived (except for those conditions which by their nature can only be fulfilled at
the Closing, but subject to the fulfillment or waiver of such conditions), or at such other place,
time and date as the Parties may mutually agree (the “Closing Date”); provided,
however, that the Closing Date shall occur no earlier than July 5, 2006, unless otherwise
agreed to between the Parties.

     1.4 Closing Deliveries. At the Closing:

          (a) Purchaser shall pay to Sellers the Purchase Price and Minority Norte Purchase Price by
wire transfer of immediately available funds to the bank account or accounts designated by Sellers
prior to the Closing.

          (b) Sellers shall deliver a duly executed Traspaso de Acciones to Purchaser transferring
(i) all the Subject Shares and (ii) all the Minority Norte Shares to Purchaser and, in accordance
with Section 1.1(c), Purchaser Guarantor in form and substance attached hereto as Exhibit A
(each an “Assignment Agreement”), and such other documents as Purchaser shall reasonably
request to transfer such Subject Shares and Minority Norte Shares to Purchaser. In addition,
Sellers shall surrender to Transelec or Norte, as the case may be, for registration of transfer all
certificates evidencing the Subject Shares and the Minority Norte Shares, as applicable, which
shall be marked “Cancelled”, and Transelec or Norte, as the case may be, shall issue new
certificates evidencing the Subject Shares and the Minority Norte Shares, as applicable, to
Purchaser and/or its designees.

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

     1.5 Deposit. Simultaneously with the execution of this Agreement, Purchaser shall deposit
into escrow with McCarthy Tétrault LLP, as escrow agent (the “Escrow Agent”) an amount
equal to $50,000,000 (such deposit, plus any interest earned thereon from (and including) the date
hereof to (but excluding) the Closing Date or date of earlier termination of this Agreement being
referred to as the “Escrow Amount”) pursuant to the escrow agreement (the “Escrow
Agreement”) being executed in connection herewith. At the Closing, the Escrow Amount shall be
transferred by the Escrow Agent to Sellers and credited against the Purchase

3

 

Price. In the event that this Agreement is duly and validly terminated pursuant to any of
Section 7.1(a), Section 7.1(b), Section 7.1(c) or Section 7.1(d),
then, in such event the Escrow Agent shall transfer the Escrow Amount to Purchaser within five
Business Days of such termination. In the event that this Agreement is duly and validly terminated
by Sellers pursuant to either Section 7.1(e) or Section 7.1(f), then, in such
event, within five Business Days of such termination, the Escrow Agent shall transfer to Sellers
the Escrow Amount. The Escrow Amount shall not be deemed to be a liquidated damages payment, and,
subject to Section 7.2 of this Agreement, shall not be deemed the sole remedy or election
of remedies, for any breach by Purchaser of this Agreement.

     1.6 Working Capital Adjustment to Purchase Price

          (a) Not less than three (3) Business Days before the Closing, Sellers shall deliver to
Purchaser an estimate of the Actual Closing Date Working Capital (as defined below) (the
“Estimated Closing Date Working Capital”) which shall be prepared consistent with the basis
of the preparation of the Working Capital Sellers Statement as provided in the fourth sentence of
Section 1.6(b). For the purposes of determining the Estimated Closing Date Working Capital,
any amount denominated in a currency other than in United States Dollars shall be converted into
United States Dollars based on the exchange rate, determined pursuant to Section 11.16, as
of the date such estimate is delivered to the Purchaser. If the Estimated Closing Date Working
Capital is greater than the Agreed Working Capital, Purchaser shall pay at Closing (in addition to
the Purchase Price, which shall be paid to Sellers) to Sellers an amount equal to 92% of the excess
of the Estimated Closing Date Working Capital over the Agreed Working Capital (a “Positive
Estimated Working Capital Adjustment”). If the Estimated Closing Date Working Capital is less
than the Agreed Working Capital, at Closing, Purchaser shall withhold from the Purchase Price an
amount equal to 92% of the amount the Estimated Closing Date Working Capital falls short of the
Agreed Working Capital (a “Negative Estimated Working Capital Adjustment”).

          (b) As promptly as practicable after Closing, but in no event more than 45 days thereafter,
Sellers shall prepare or cause to be prepared and shall deliver to Purchaser a reasonably detailed
statement (the “Working Capital Sellers Statement”) and all relevant documentation setting
forth the actual Working Capital of the Transelec Entities, as of the close of business on the
Closing Date (the “Actual Closing Date Working Capital”). For the purposes of determining
the Actual Closing Date Working Capital, any amount denominated in a currency other than in United
States Dollars shall be converted into United States Dollars based on the exchange rate, determined
pursuant to Section 11.16, as of the Closing Date. For greater certainty, the Parties
agree that the Estimated Closing Date Working Capital and the Actual Closing Date Working Capital
shall exclude any amounts classified as non-current as of December 31, 2005 in the Transelec
Financial Statements with respect to provisional toll revenue differential. Sellers will prepare
the Working Capital Sellers Statement consistent with the basis of the preparation of the Transelec
Financial Statements and substantially in the form set out in Schedule 10.2(d). Unless,
within 15 Business Days after its receipt of the Working Capital Sellers Statement, Purchaser
delivers to Sellers a reasonably detailed statement describing Purchaser’s objections to the
Working Capital Sellers Statement (a “Working Capital Statement of Objection”), the amount
of the Actual Closing Date Working Capital shall be final and

4

 

binding on the Parties and the Working Capital Sellers Statement shall be the final statement
hereunder (the “Working Capital Closing Date Statement”).

          (c) If Purchaser has delivered to Sellers a timely Working Capital Statement of Objection,
Purchaser and Sellers shall negotiate in good faith and use commercially reasonable efforts to
resolve any disputes. If a resolution is reached, such resolution shall be final and binding on
the Parties. If a final resolution is not reached within 15 Business Days after Purchaser has
submitted a Working Capital Statement of Objection, any remaining disputes shall be resolved by the
Auditors. The Auditors shall be instructed to resolve any matters in dispute as promptly as
practicable, but in no event more than 10 Business Days after submission, and set forth their
resolution in a statement setting forth the Actual Closing Date Working Capital (the “Working
Capital Accountant Statement”). In such event, the determination of the Auditors shall be
final and binding on the Parties and the Working Capital Accountant Statement shall be the Working
Capital Closing Date Statement.

          (d) In the event that the difference between the Actual Closing Date Working Capital
determined by the Auditors as set forth on the Working Capital Accountant Statement and the Actual
Closing Date Working Capital as set forth in the Working Capital Sellers Statement is more than
10%, then all fees and expenses of the Auditors shall be borne by Sellers; otherwise all fees and
expenses of the Auditors shall be borne by Purchaser. Purchaser and Sellers shall cooperate with
each other and the Auditors in connection with the matters contemplated by this
Section 1.6, including Sellers’ preparation of and Purchaser review of the Working Capital
Closing Date Statement, including by furnishing such information and access to books, records
(including accountants’ work papers), personnel and properties as may be reasonably requested.

          (e) If the Actual Closing Date Working Capital as shown on the Working Capital Closing Date
Statement differs from the Agreed Working Capital, then the Purchase Price shall be (i) increased
by an amount equal to 92% of the amount the Actual Closing Date Working Capital exceeds the Agreed
Working Capital (the “Positive Final Working Capital Adjustment”) or (ii) decreased by an
amount equal to 92% of the amount the Actual Closing Date Working Capital falls short of the Agreed
Working Capital (the “Negative Final Working Capital Adjustment”).

          (f) Within five (5) Business Days after the Actual Closing Date Working Capital is final and
binding on the Parties, payments shall be made by wire transfer in immediately available funds as
follows:

               (i) If there was a Positive Estimated Working Capital Adjustment and there is a
Positive Final Working Capital Adjustment and the amount of the Positive Final Working
Capital Adjustment is larger than the amount of the Positive Estimated Working Capital
Adjustment, Purchaser shall pay the excess of the amount of the Positive Final Working
Capital Adjustment over the amount of the Positive Estimated Working Capital Adjustment to
Sellers.

               (ii) If there was a Positive Estimated Working Capital Adjustment and there is a
Positive Final Working Capital Adjustment and the amount of the Positive Final

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Working Capital Adjustment is less than the amount of the Positive Estimated Working
Capital Adjustment, Sellers shall pay the excess of the amount of the Positive Estimated
Working Capital Adjustment over the amount of the Positive Final Working Capital Adjustment
to Purchaser.

               (iii) If there was a Positive Estimated Working Capital Adjustment and there is a
Negative Final Working Capital Adjustment, Sellers shall pay an amount equal to the sum of
the Positive Estimated Working Capital Adjustment and the absolute value of the Negative
Final Working Capital Adjustment to Purchaser.

               (iv) If there was a Negative Estimated Working Capital Adjustment and there is a
Positive Final Working Capital Adjustment, Purchaser shall pay an amount equal to the sum of
the absolute value of the Negative Estimated Working Capital Adjustment and the Positive
Final Working Capital Adjustment to Sellers.

               (v) If there was a Negative Estimated Working Capital Adjustment and there is a
Negative Final Working Capital Adjustment and the absolute value of the Negative Estimated
Working Capital Adjustment is larger than the absolute value of the Negative Final Working
Capital Adjustment, Purchaser shall pay the excess of the absolute value of the Negative
Estimated Working Capital Adjustment over the absolute value of the Negative Final Working
Capital Adjustment to Sellers.

               (vi) If there was a Negative Estimated Working Capital Adjustment and there is a
Negative Final Working Capital Adjustment and the absolute value of the Negative Estimated
Working Capital Adjustment is less than the absolute value of the Negative Final Working
Capital Adjustment, Sellers shall pay to Purchaser the excess of the absolute value of the
Negative Final Working Capital Adjustment over the absolute value of the Negative Estimated
Working Capital Adjustment.

     1.7 VI Adjustment to Purchase Price

          (a) As promptly as practicable after the publication in the Official Gazette of the Supreme
Decree of the Ministerio de Economía, Fomento y Reconstrucción referred to in Article 71-20 of the
Electricity Act of 1982 (as amended by the Short Law) but in no event more than 30 days after such
publication, Sellers shall prepare or cause to be prepared and shall deliver to Purchaser a
reasonably detailed statement (the “VI Adjustment Sellers Statement”) and all relevant
documentation setting forth the amount obtained by multiplying (A) the difference between (y) the
VI attributable to the Regulated Trunk Transmission Assets under the 2006 Trunk Transmission Study
as provided in Schedule 1.7 and (z) the VI attributable to the Regulated Trunk Transmission
Assets indicated in Schedule 1.7 by (B) 1.45 (the “VI Adjustment”). Sellers will
prepare the VI Adjustment Sellers Statement substantially in the form set out in
Schedule 1.7. Unless, within 15 Business Days after its receipt of the VI Adjustment
Sellers Statement, Purchaser delivers to Sellers a reasonably detailed statement describing
Purchaser’s objections to the VI Adjustment Sellers Statement (a “VI Adjustment Statement of
Objection”), the amount of the VI Adjustment shall be final and binding on the Parties and the
VI Adjustment Sellers Statement shall be the final statement hereunder (the “VI Adjustment
Statement”).

6

 

          (b) If Purchaser has delivered to Sellers a timely VI Adjustment Statement of Objection,
Purchaser and Sellers shall negotiate in good faith and use commercially reasonable efforts to
resolve any disputes. If a resolution is reached, such resolution shall be final and binding on
the Parties. If a final resolution is not reached within 15 Business Days after Purchaser has
submitted a VI Adjustment Statement of Objection, any remaining disputes shall be resolved by the
Auditors. The Auditors shall be instructed to resolve any matters in dispute as promptly as
practicable, but in no event more than 10 Business Days after submission, and set forth their
resolution in a statement setting forth the VI Adjustment (the “VI Adjustment Accountant
Statement”). In such event, the determination of the Auditors shall be final and binding on
the Parties and the VI Adjustment Accountant Statement shall be the VI Adjustment Statement.

          (c) In the event that the difference between the VI Adjustment determined by the Auditors as
set forth on the VI Adjustment Accountant Statement and the VI Adjustment as set forth in the VI
Adjustment Sellers Statement is more than 10%, then all fees and expenses of the Auditors shall be
borne by Sellers; otherwise all fees and expenses of the Auditors shall be borne by Purchaser.
Purchaser and Sellers shall cooperate with each other and the Auditors in connection with the
matters contemplated by this Section 1.7, including Sellers’ preparation of and Purchaser
review of the VI Adjustment Sellers Statement, including by furnishing such information and access
to books, records (including accountants’ work papers), personnel and properties as may be
reasonably requested.

          (d) The Purchase Price shall be (I) increased by an amount equal to 92% of the VI Adjustment,
if such amount is positive, or (II) decreased by an amount equal to 92% of the VI Adjustment, if
such amount is negative (the “VI Adjustment Amount”).

          (e) The VI Adjustment Amount must be paid to Sellers (rateably in accordance with the
allocation of the Purchase Price hereunder) or Purchaser, as the case may be, within five (5)
Business Days after the date the VI Adjustment Statement becomes final and binding on the Parties.

          (f) For purposes of payment of the VI Adjustment Amount in accordance with the provisions of
this Section 1.7, any amount denominated in a currency other than in United States Dollars
shall be converted into United States Dollars based on the exchange rate, determined pursuant to
Section 11.16; provided, however, that if the applicable Party fails to
timely pay the VI Adjustment Amount in accordance with Section 1.7(e), then the exchange
rate to be applied for purposes of converting such amount into United States Dollars shall be the
exchange rate that is the most favorable to the recipient of the VI Adjustment Amount between the
exchange rate (i) as at the date payment is due and (ii) as at the date payment is made.

     1.8 Transition Period Adjustment to Purchase Price

          (a) Sellers shall include in the VI Adjustment Sellers Statement a statement setting forth the
absolute value of the difference between (A) Transelec regulated revenue attributable to the
Regulated Trunk Transmission Assets for the period from (and including) March 13, 2004 to (and
excluding) the Closing Date (the “Transition Period”) as determined in the 2006 Trunk
Transmission Study and (B) Transelec regulated revenue attributable to the

7

 

Regulated Trunk Transmission Assets for the Transition Period, such difference calculated on
the basis and in the form set out in Schedule 1.8 (the “Transition Period Adjustment
Amount”). Purchaser and Sellers shall cooperate with each other in connection with the matters
contemplated by Section 1.7 and this Section 1.8, including Sellers’ calculation of
the Transition Period Adjustment Amount, including by furnishing such information and access to
books, records (including accountants’ work papers), personnel and properties as may be reasonably
requested. Subject to the limitations and conditions set forth in this Section 1.8, the
Transition Period Adjustment Amount set forth in the VI Adjustment Statement shall be final and
binding on the Parties as it relates to the Transition Period Adjustment Amount, subject to any
Transition Period Adjustment Costs that may arise or be imposed after the determination of the
Transition Period Adjustment Amount as reflected in the VI Adjustment Statement.

          (b) The Purchase Price shall be (I) increased by an amount equal to 92% of any Transition
Period Adjustment Amount, as adjusted pursuant to Section 1.8(c), actually collected by
Transelec as specified in Section 1.8(c) below, if such amount is positive, or (II)
decreased by an amount equal to 92% of any Transition Period Adjustment Amount, as adjusted
pursuant to Section 1.8(c), required to be paid by Transelec as specified in Section
1.8(c) below, if such amount is negative.

          (c) The Transition Period Adjustment Amount, and any and all payments, in whole or in part,
with respect to any Transition Period Adjustment Amount, shall (i) be reduced by the aggregate of
(I) any reasonable out-of-pocket expenses (including attorney’s, accountants’ and similar fees) and
other amounts (including interest, fees, penalties or surcharges) incurred by the Transelec
Entities, in each case, as evidenced by written invoices, associated with the collection,
remittance or rebate of Transelec regulated revenue attributable to the Regulated Trunk
Transmission Assets for the Transition Period or that may arise or be imposed after the
determination of the Transition Period Adjustment Amount and (II) the amount equal to 17% of the
sum of the Transition Period Adjustment Amount and the expenses described above in clause (I), and
(ii) only be made (I) in the case of such Transition Period Adjustment Amount being positive, by
Purchaser to Sellers within five (5) Business Days of actual receipt (whether by collection,
set-off or otherwise) by Transelec or its Affiliates of any amounts from clients directly relating
to their use during the Transition Period of Regulated Trunk Transmission Assets that have been
paid to Transelec as required under the Short Law as a result of the VI Adjustment (such payment to
be accompanied by the written invoices referred to at Section 1.8(c)(i)(I), or (II) in the
case of such Transition Period Adjustment Amount being negative, by Sellers to Purchaser (or at
Purchaser’s sole discretion, payment directly to Transelec) within five (5) Business Days of
receipt of written notice from Purchaser stating that Transelec or any of its Affiliates is
required under the Short Law as a result of the VI Adjustment to remit or rebate funds to
Transelec’s clients that used Regulated Trunk Transmission Assets during the Transition Period,
provided, however, that such notice may not be delivered by Purchaser to Sellers
more than ten (10) Business Days prior to the date Transelec is required to remit or rebate such
funds. Purchaser shall cause Transelec and its subsidiaries to use their commercially reasonable
efforts to collect from clients the Transition Period Adjustment Amount, if any, payable to Sellers
pursuant to Section 1.8(b)(I).

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          (d) For purposes of payment of any amount of the Transition Period Adjustment Amount in
accordance with the provisions of this Section 1.8, any amount denominated in a currency
other than in United States Dollars shall be converted into United States Dollars based on the
exchange rate, determined pursuant to Section 11.16; provided, however,
that if the applicable Party fails to timely pay in accordance with Section 1.8(c) the
amount established pursuant to such Section, then the exchange rate to be applied for purposes of
converting such amount into United States Dollars shall be the exchange rate that is the most
favorable to the recipient of the such amount between the exchange rate (i) as at the date payment
is due and (ii) as at the date payment is made.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLERS

     Sellers, jointly and severally, represent and warrant to Purchaser as follows in this
Article II:

     2.1 Organization and Qualification; Authority; Non-Contravention; Statutory Approvals

          (a) Organization and Qualification. Each of Sellers is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization. Each of Sellers
has full power and authority to own, lease and operate its assets and properties and to conduct its
business as presently conducted. Each Seller is duly qualified to do business and in good standing
in all jurisdictions in which such qualification is necessary under applicable Law as a result of
the conduct of its business or the ownership of its properties, except for those jurisdictions
where failure to have such power and authority or to be so qualified or in good standing would not
reasonably be expected to have, individually or in the aggregate, a Sellers Material Adverse
Effect.

          (b) Authority. Each of Sellers has full corporate power and authority to enter into
this Agreement and the Transaction Documents to which it is or will be a party, and, subject to
receipt of the Sellers Required Statutory Approvals, to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by each of Sellers of this Agreement
and the Transaction Documents to which each of Sellers is or will be a party, the performance of
its obligations hereunder and thereunder and the consummation by each of Sellers of the
transactions contemplated hereby and thereby have been duly and validly authorized by all requisite
corporate action on the part of each of Sellers, and no other corporate proceedings or approvals on
the part of each of Sellers are necessary to authorize and approve this Agreement or the
Transaction Documents or to consummate the transactions contemplated hereby or thereby. This
Agreement and the Transaction Documents to which each of Sellers is or will be a party have been
duly authorized, and this Agreement has been, and the Transaction Documents to which each of
Sellers is or will be a party, have been or will be, prior to the Closing, duly executed and
delivered by each of Sellers and, assuming the due authorization, execution and delivery hereof by
each other Party, constitutes, or will constitute the legal, valid and binding obligation of each
of Sellers, enforceable against each of Sellers in accordance with

9

 

their respective terms, except as limited by Laws affecting the enforcement of creditors’
rights generally or by general equitable principles.

          (c) Non-contravention. Each Sellers’ execution and delivery of this Agreement and the
Transaction Documents to which such Seller is or will be a party, and the performance of its
obligations hereunder and thereunder does not, and the consummation of the transactions
contemplated hereby and thereby will not conflict with, result in any Violation (with or without
notice or lapse of time, or both) of, or result in the creation of any Lien upon the Subject
Shares, the Minority Norte Shares or the Norte Shares pursuant to any provision of: (i) the
Organizational Documents of such Seller (subject to obtaining the third party Consents set forth in
Section 2.1(c) of the Sellers Disclosure Schedule (the “Sellers Required
Consents”)); (ii) any agreement, contract, lease, mortgage, indenture, note, bond, deed of
trust, license, commitment or other arrangement, understanding, undertaking commitment or
obligation, instrument or agreement of any kind (“Contract”) to which it is a party or by
which it may be bound (subject to obtaining the Sellers Required Consents); or (iii) any Law,
Permit or Governmental Order applicable to it (subject to obtaining the Sellers Required Statutory
Approvals), other than, in the case of clauses (ii) and (iii) above, any such Violation or Lien
which would not reasonably be expected to have, individually or in the aggregate, a Sellers
Material Adverse Effect or a Transelec Material Adverse Effect.

          (d) Statutory Approvals. Except for the filings or approvals (i) set forth in
Section 2.1(d) of the Sellers Disclosure Schedule (the “Sellers Required Statutory
Approvals”) and (ii) as may be required due to the regulatory or corporate status of Purchaser
or Purchaser Guarantor, no Material Consent of any Governmental Entity is required to be made or
obtained by each of Sellers in connection with the execution and delivery of this Agreement and the
Transaction Documents or the consummation by each of Sellers of the transactions contemplated
hereby or thereby.

     2.2 Right and Title to Subject Shares, Norte Shares and Minority Norte Shares

          (a) Transmisión is the record and beneficial owner of 919,900 ordinary shares of Transelec.
Puno is the record and beneficial owner of 100 ordinary shares of Transelec. Sellers, directly or
indirectly, own all of the Subject Shares, and such Subject Shares constitute 92% of the
outstanding Equity Interests of Transelec. Upon completion of the Closing, Sellers shall have
conveyed to Purchaser good and marketable title to the Subject Shares, free and clear of any and
all Liens, except under the Shareholders Agreement.

          (b) Transelec is the record and beneficial owner of 750,050 ordinary shares of Norte.
Transmisión is the record and beneficial owner of 75 ordinary shares of Norte. Transelec and
Transmisión own all the Norte Shares and the Minority Norte Shares respectively and such shares
constitute 100% of the outstanding Equity Interest of Norte. Upon completion of the Closing,
Sellers, directly or indirectly, shall have conveyed to Purchaser good and marketable title to the
Minority Norte Shares, free and clear of any and all Liens.

     2.3 IFC Shares. As of the date hereof, IFC owns 80,000 ordinary shares of Transelec (the
“IFC Shares”), representing 8% of the total outstanding shares of Transelec. All Series B

10

 

preferred shares previously held beneficially or of record by IFC have been converted to ordinary
shares of Transelec.

     2.4 Litigation. There is no action, claim, suit or proceeding at law or in equity
(including, without limitation, Governmental Entity investigations, proceedings or audits) pending
or, to the Knowledge of Sellers, threatened against any of Sellers that would reasonably be
expected to have, individually or in the aggregate, a Sellers Material Adverse Effect or a
Transelec Material Adverse Effect. Subject to obtaining the Sellers Required Statutory Approvals,
there are no Governmental Orders of or by any Governmental Entity applicable to any of Sellers
except for such that would not reasonably be expected to have, individually or in the aggregate, a
Sellers Material Adverse Effect or a Transelec Material Adverse Effect.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

SELLERS RELATING TO THE TRANSELEC ENTITIES

     Sellers, jointly and severally, represent and warrant to Purchaser as follows in this
Article III:

     3.1 Organization and Qualification; Authority; Non-Contravention; Statutory Approvals

          (a) Organization and Qualification. Each of Transelec and Norte (collectively, the
“Transelec Entities”) is duly organized, validly existing and in good standing under the
laws of Chile. Each of the Transelec Entities has full power and authority to own, lease and
operate its assets and properties and to conduct its business as presently conducted. The
Transelec Entities are each duly qualified to do business and in good standing in all jurisdictions
in which such qualification is necessary under applicable Law as a result of the conduct of its
business or the ownership of its properties, except for those jurisdictions where failure to have
such power and authority or to be so qualified or in good standing would not reasonably be expected
to have, individually or in the aggregate, a Transelec Material Adverse Effect.

          (b) Non-contravention. The consummation of the transactions contemplated hereby and in
the Transaction Documents will not conflict with, result in any Violation of (with or without
notice or lapse of time, or both), or result in the creation of any Lien upon, any of the
properties or assets of the Transelec Entities pursuant to any provision of: (i) the Organizational
Documents of any of the Transelec Entities (subject to obtaining the third-party Consents set forth
in Section 3.1(b) of the Sellers Disclosure Schedule (the “Transelec Required
Consents”)); (ii) except as set forth in Section 3.1(b) of the Sellers Disclosure
Schedule, any Contract (including any Insurance Policy) to which any of the Transelec Entities is a
party or by which the Transelec Entities may be bound (subject to obtaining the Transelec Required
Consents and the Sellers Required Consents); or (iii) any Law, Permit or Governmental Order
applicable to the Transelec Entities (subject to obtaining the Sellers Required Statutory Approvals
and the Transelec Required Statutory Approvals), other than in the case of clauses (ii) and (iii)
above,

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any such Violation or Lien which would not reasonably be expected to have, individually or in
the aggregate, a Transelec Material Adverse Effect.

          (c) Statutory Approvals. Except for the filings or approvals (i) set forth in
Section 3.1(c) of the Sellers Disclosure Schedule (the “Transelec Required Statutory
Approvals”) and (ii) as may be required due to the regulatory or corporate status of Purchaser
or Purchaser Guarantor, no Consent of any Governmental Entity is required to be made or obtained by
the Transelec Entities in connection with the execution and delivery of this Agreement and the
Transaction Documents or the consummation by the Transelec Entities of the transactions
contemplated hereby or thereby.

     3.2 Equity Interests; Capitalization

          (a) No Other Equity Interests. The Transelec Entities do not own, directly or
indirectly, any Equity Interests in any Person other than in any of the Transelec Entities and the
7.1429% Equity Interest held by Transelec in Centro de Despacho Económico de Carga del Sistema
Eléctrico Interconectado Central CDEC-SIC Limitada and the 14.29% Equity Interest held by Norte in
Centro de Despacho Económico de Carga del Sistema Eléctrico Interconectado del Norte Grande
CDEC-SING Limitada.

          (b) Capitalization. The authorized capital stock of Transelec consists of 1,000,000
ordinary shares. As of the date hereof, there are 1,000,000 ordinary shares of Transelec issued
and outstanding. The ordinary shares of Transelec are the only class of capital stock of Transelec
authorized, issued or outstanding and there are no Series B preferred shares authorized, issued or
outstanding. All of the issued and outstanding ordinary shares of Transelec have been duly
authorized, validly issued and fully paid. Except as set forth in Section 3.2(b) of the
Sellers Disclosure Schedule and except as provided for in the Organizational Documents of the
Transelec Entities or under applicable Law, there are no:

               (i) subscriptions, options, warrants, calls, conversion, exchange, purchase right or
other Contracts, obligating, directly or indirectly, the Transelec Entities to issue,
transfer, sell or otherwise dispose of, or cause to be issued, transferred, sold or
otherwise disposed of, any Equity Interests of the Transelec Entities or any securities
convertible into or exchangeable for any such Equity Interests;

               (ii) agreements, limited liability company agreements, partnership agreements, voting
trusts, proxies or other Contracts to which any of the Transelec Entities is a party, or by
which the Transelec Entities are bound, relating to the voting of any shares of the Equity
Interests of the Transelec Entities; or

               (iii) dividends, distributions or other amounts that have been declared and payable or
in arrears and there exists no preemptive or similar right in respect of any such Equity
Interests.

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     3.3 Financial Statements of Transelec

          (a) Sellers have provided to Purchaser copies of the consolidated audited balance sheet of
Transelec as of December 31, 2005 and related consolidated audited statements of income and cash
flows for the year then ended (collectively, such financial statements, including the related notes
and schedules thereto, are referred to herein as the “Transelec Financial Statements”).
The Transelec Financial Statements are complete and correct in all material respects, have been
prepared in accordance with Chilean GAAP consistently applied by the Transelec Entities without
modification of the accounting principles used in the preparation thereof throughout the period
presented and present fairly in all Material respects the consolidated financial position, results
of operations and cash flows of Transelec as at the date and for the period indicated therein.
Sellers have provided to the Purchaser copies of all issued auditors’ report, letters to management
regarding accounting practices and systems of internal controls, and all responses to such letters
from management related to the Transelec Financial Statements.

          (b) Sellers have provided to Purchaser copies of the consolidated audited balance sheet of
Transelec as of December 31, 2004 and related consolidated audited statements of income and cash
flows for the year then ended, all of which are complete and correct in all material respects, have
been prepared in accordance with Chilean GAAP consistently applied by the Transelec Entities
without modification of the accounting principles used in the preparation thereof throughout the
period presented and present fairly in all Material respects the consolidated financial position,
results of operations and cash flows of Transelec as at the date and for the period indicated
therein.

          (c) Except as set forth in the audited balance sheet of Transelec as of December 31, 2005, on
Section 3.3(c) of the Sellers Disclosure Schedule and pursuant to the agreements listed in
paragraph 3.10(c)(xii) of the Sellers Disclosure Schedule or as expressly permitted by
Section 5.1(d), at the Closing, none of the Transelec Entities shall have any indebtedness
for borrowed money. The aggregate outstanding principal amount of all indebtedness for borrowed
money of the Transelec Entities as of the date hereof, without taking into account Transelec
Liabilities pursuant to the agreements listed in paragraph 3.10(c)(xii) of the Sellers
Disclosure Schedule and indebtedness for borrowed money between Transelec and Norte, is
(i) $465,000,000, with respect to long-term bonds denominated in Dollars, (ii) zero, with respect
to credit line facilities and long-term bonds denominated in Chilean Pesos; and (iii) UF 9,200,000,
with respect to long-term bonds denominated in Unidades de Fomento.

     3.4 Absence of Certain Changes or Events; Absence of Undisclosed Liabilities

          (a) Since December 31, 2005, except as set forth in Section 3.4(a) of the Sellers
Disclosure Schedule, other than in connection with the transactions contemplated by this Agreement,
none of the Transelec Entities has taken any of the actions set forth in Section 5.1, that,
if taken after the execution and delivery of this Agreement, would require the consent of Purchaser
pursuant to Section 5.1.

          (b) Except as set forth on Section 3.4(b) of the Sellers Disclosure Schedule, since
December 31, 2005, there has not been any change, event, condition, circumstance,

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occurrence or development, and no event, condition or circumstance exists, which has had, or
would reasonably be expected to have, individually or in the aggregate, a Transelec Material
Adverse Effect.

          (c) Since December 31, 2005, none of the Transelec Entities has incurred any Liability that
has had, or would reasonably be expected to have, individually or in the aggregate, a Transelec
Material Adverse Effect.

     3.5 Taxes. Except as set forth in Section 3.5 of the Sellers Disclosure Schedule
and other than in the cases of clauses (i), (ii), (v), (vi) and (viii) below, any such Violation
which would not reasonably be expected to have, individually or in the aggregate, a Transelec
Material Adverse Effect:

               (i) each of the Transelec Entities has (A) timely filed (or there has been filed on its
behalf) with the appropriate Governmental Entity all Tax Returns required to have been filed
by it, and all such Tax Returns were true, accurate and complete in all material respects
when filed, (B) duly paid in full or made provision in accordance with applicable Tax Laws,
Chilean GAAP and the Ordinary Course of Business, as the case may be, (or there has been
paid or provision has been made on its behalf) for the payment of all Taxes shown as due or
payable on such Tax Returns, (C) made all required estimated advance Tax payments as
required by applicable Laws, (D) paid on or before the Closing Date, or has established or
will establish on or before the Closing Date (or Sellers will reflect in the Working Capital
Sellers Statement) a current accrual for the payment of all Taxes due with respect to any
event occurring or period ending on or prior to the Closing Date in accordance with
applicable Tax Laws, Chilean GAAP and the Ordinary Course of Business, (E) maintained all
material documents and records relating to such Tax Returns as are required by applicable
Law and (F) complied in all material respects with all applicable Laws relating to the
withholding and remittance of Taxes and deposited with the applicable Governmental Entity
any amount that may be required for any disputed or claimed Taxes or has accrued a reserve
for the amount of any such disputed or claimed Taxes (including any related interest and
penalty costs);

               (ii) no audits or other administrative proceedings or court proceedings are pending, or
to the Knowledge of the Transelec Entities, threatened with regard to any Taxes due from or
Tax Returns filed by the Transelec Entities (including any proposals to reassess any Taxes
due from the Transelec Entities), in respect of Taxes for any period ending on or prior to
the Closing Date;

               (iii) none of the Transelec Entities has waived the applicable statute of limitations
or agreed to any extension of the period for the assessment, reassessment or collection of
any Taxes or executed or filed any power of attorney with respect to Taxes;

               (iv) there are no Liens for Taxes on any assets of the Transelec Entities, except to
the extent of statutory Liens existing for any Taxes accruing but not yet due and payable or
which are being contested in good faith by appropriate proceedings;

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               (v) all transactions entered into by any Transelec Entity with any related party have
been carried out at arm’s length and in accordance with applicable Law, and each Transelec
Entity has complied with all applicable transfer pricing rules, reporting or other
requirements;

               (vi) (i) no Tax is or will be payable by any Transelec Entity as a result of the
consummation of the transactions contemplated by this Agreement and the other Transaction
Documents; and (ii) none of the Sellers or their respective Affiliates have undertaken any
reorganization, restructuring or any similar action in anticipation of, or in connection
with, the transactions contemplated by this Agreement that would result in any Tax being
incurred or becoming payable by any of the Transelec Entities;

               (vii) no event, transaction, act or omission has occurred prior to the Closing Date
which could result in any Transelec Entity becoming liable to pay or to bear any Taxes as a
transferee, successor, joint and several obligor, or otherwise which is primarily or
directly chargeable or attributable to any other Person (other than withholding Taxes with
respect to employees), nor does any Transelec Entity have any actual or contingent liability
to any other Person in respect of any actual, contingent, or deferred liability of such
person for Taxes (other than withholding Taxes with respect to employees); and

               (viii) the Transelec Entities have delivered to Purchaser complete and accurate copies
of all (i) Tax Returns filed by all Transelec Entities with respect to any taxable period
ending after December 31, 2002 and prior to the date hereof and (ii) all assessments and
related statements received from any Tax Authority relating to any Tax Return filed by any
Transelec Entity with respect to any taxable period ending after December 31, 2002 and prior
to the date hereof.

     3.6 Litigation. Except as set forth in Section 3.6 of the Sellers Disclosure
Schedule, there is no action, claim, suit or other proceeding at law or in equity (including,
without limitation, Governmental Entity investigations, proceedings or audits) pending or, to the
Knowledge of the Transelec Entities, threatened against the Transelec Entities or affecting the
assets or properties of the Transelec Entities that would reasonably be expected to have,
individually or in the aggregate, a Transelec Material Adverse Effect.

     3.7 Compliance With Laws

          (a) Except as set forth in Section 3.7 of the Sellers Disclosure Schedule, none of the
Transelec Entities has been given written notice of or been charged with any Violation of, or, to
the Knowledge of Sellers and the Transelec Entities, is in Violation of or is under investigation
with respect to any Violation of, any Law or Governmental Order, except in each case for Violations
which would not reasonably be expected to have, individually or in the aggregate, a Transelec
Material Adverse Effect. Section 3.7 of the Sellers Disclosure Schedule contains a list of
all Governmental Orders to which any of the Transelec Entities is a party. All notices, consents,
registrations, compliance filings and periodic reports to be filed by the Transelec Entities with
the applicable Governmental Entities required to be filed and necessary for the operation of its
business as currently conducted have been filed by the Transelec Entities,

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as applicable, each of which were true and correct in all material respects and did not
contain any Material misstatement or omission when filed, and complied with the requirements of
applicable Law, except when failure to do so would not reasonably be expected to have, individually
or in the aggregate, a Transelec Material Adverse Effect.

          (b) This Section 3.7 does not relate to tax matters, which are instead the subject of
Section 3.5, Transelec Permits, which are instead the subject of Section 3.8, or
(except to the extent set forth in the final sentence of Section 3.7(a)) environmental
matters, which are instead the subject of Section 3.11, or labor matters, which are instead
the subject of Section 3.16.

     3.8 Permits

          (a) Except as set forth in Section 3.8(a) of the Sellers Disclosure Schedule, each of
the Transelec Entities has all Permits that are necessary for it to own, lease and operate its
assets and properties and conduct its operations in the manner in which they are presently
conducted, other than any such Permits the failure of which to have would not reasonably be
expected to have, individually or in the aggregate, a Transelec Material Adverse Effect
(collectively, the “Transelec Permits”). Except as set forth in Section 3.8(a) of
the Sellers Disclosure Schedule, each Transelec Permit held by a Transelec Entity is in full force
and effect other than any failure to be in full force and effect which would not reasonably be
expected to have, individually or in the aggregate, a Transelec Material Adverse Effect. The
Transelec Entities are in compliance with the terms of the Transelec Permits, and to the Knowledge
of the Transelec Entities, no event, fact or circumstance has occurred which, with notice or the
lapse of time or both, would constitute a default or violation, in any material respect of any
term, condition or provision of any Transelec Permit, except failures so to comply which would not
reasonably be expected to have, individually or in the aggregate, a Transelec Material Adverse
Effect. None of the Transelec Entities has received any written notice of any modification,
suspension or cancellation of any of the Transelec Permits, or, to the Knowledge of the Transelec
Entities, threatened or otherwise, except where the modification, suspension or cancellation of any
of the Transelec Permits, individually or in the aggregate, has not had, and would not reasonably
be expected to have a Transelec Material Adverse Effect. None of the Transelec Permits will be
impaired or in any way adversely affected in any material respect by the consummation of the
transactions contemplated by this Agreement.

          (b) This Section 3.8 does not relate to environmental matters, which are instead the
subject of Section 3.11.

     3.9 Real Property

          (a) Except as would not reasonably be expected to have, individually or in the aggregate, a
Transelec Material Adverse Effect, each of the Transelec Entities has good and valid title to, or a
valid leasehold interest in (or has analogous property rights under applicable Law), all real
property owned by the Transelec Entities (the “Owned Real Property”), all easements
benefiting the Transelec Entities (the “Easements”) and all real property leases to which
the Transelec Entities are a party (the “Leased Real Property”), as the case may be, used
in and

16

 

necessary for the conduct of the businesses and operations of the Transelec Entities as
currently conducted, free and clear of all Liens, other than Permitted Liens.

          (b) None of the Transelec Entities has received written notice of a proceeding in eminent
domain or other similar proceedings affecting any of the Owned Real Property, the Easements or the
Leased Real Property that would reasonably be expected to have, individually or in the aggregate, a
Transelec Material Adverse Effect.

          (c) Except as set forth in Section 3.9 of the Sellers Disclosure Schedule, there are
no material claims related to any of the Owned Real Property, Easements or Leased Real Property,
without regard as to whether the ownership or possession of the real property is related to the
operation of the Transelec Business.

     3.10 Contracts

          (a) Set forth in Section 3.10(a) of the Sellers Disclosure Schedule is, as of the date
hereof, a list of all Material Agreements (as defined in Section 3.10(c) below) to which
any of the Transelec Entities is a party or by which any of their respective properties or assets
are bound (the Material Agreements set forth in Section 3.10(a) of the Sellers Disclosure
Schedule are referred to herein as the “Transelec Material Contracts”).

          (b) Sellers made available to Purchaser complete and correct copies of all Transelec Material
Contracts. Except as set forth in Section 3.10(b)(i) of the Sellers Disclosure Schedule,
each Transelec Material Contract is the valid, binding and enforceable obligation of the Transelec
Entities party thereto, in full force and effect, and, to the Knowledge of the Transelec Entities,
of each other party thereto, except as limited by Laws affecting the enforcement of creditors’
rights generally or by general equitable principles. Except for disputes or litigations disclosed
in Section 3.7 of the Sellers Disclosure Schedules, each of the Transelec Entities has
complied with its obligations under each Transelec Material Contract to which it is a party, except
for any failures to comply which (A) have been consented to or waived, directly or indirectly, by
the counterparty or counterparties thereto or (B) would not reasonably be expected to have,
individually or in the aggregate, a Transelec Material Adverse Effect. Except as set forth above
and in Section 3.10(b)(ii) of the Sellers Disclosure Schedule, none of the Transelec
Entities is in breach or default under any Transelec Material Contract, which breach or default has
not been waived, and, to the Knowledge of the Transelec Entities, no other party to any Transelec
Material Contract is in breach or default, except in each case, for any breach or default that
would not reasonably be expected to have, individually or in the aggregate, a Transelec Material
Adverse Effect.

          (c) For the purposes of this Section 3.10, “Material Agreements” mean any and
all (i) Contracts under which a Transelec Entity has payment obligations, or has the right to
receive payments, in an amount exceeding $[**] per year or is obliged to make payments for an
aggregate amount exceeding $[**]; (ii) Contracts with any Sellers or any current officer, director,
shareholder or Affiliate of any of the Transelec Entities; (iii) Contracts with any labor union or
similar association representing any employee of the Transelec Entities; (iv) Contracts for the
sale of any assets of the Transelec Entities other than those sales in the Ordinary Course of
Business, (v) Contracts for joint ventures, strategic alliances, partnerships, licensing

17

 

arrangements, or sharing of profits or proprietary information, or any shareholder or similar
agreements; (vi) Contracts containing covenants of the Transelec Entities not to compete in any
line of business or with any Person in any geographic area or not to solicit or hire any person;
(vii) Contracts relating to the acquisition by the Transelec Entities of any operating business or
material assets of any other Person in excess of $[**]; (viii) Contracts relating to the
incurrence, assumption or guarantee of any indebtedness or imposing a Lien (other than Permitted
Liens) on any of the assets of the Transelec Entities in excess of $[**]; (ix) Contracts with any
director or executive employee of the Transelec Entities providing for severance, retention, change
in control, retirement arrangements, golden parachute, incentive compensation, profit sharing or
deferred compensation or other similar payments; (x) Contracts for the employment providing for
annual compensation in excess of $[**]; (xi) outstanding Contracts of surety or indemnification by
the Transelec Entities in excess of $[**]; or (xii) outstanding forwards, swap, collar, put, call,
floor, cap, option or other Contracts that are intended to benefit from or reduce or eliminate the
risk of fluctuations in the price of commodities, including electric power, gas or securities.

     3.11 Environmental Matters. Except as set forth in Section 3.11 of the Sellers
Disclosure Schedule, or as would not reasonably be expected to have, individually or in the
aggregate, a Transelec Material Adverse Effect:

          (a) the Transelec Entities are in compliance with all applicable Environmental Laws, including
having and complying with the terms and conditions of all Permits required pursuant to applicable
Environmental Laws;

          (b) none of the Transelec Entities (i) has received from any Governmental Entity any written
notice of Violation of, alleged Violation of, non-compliance with, or Liability or potential
Liability pursuant to, any Environmental Law, other than notices with respect to matters that have
been resolved and for which the Transelec Entities have no further obligations outstanding or
(ii) is subject to any outstanding Governmental Order, “consent order” or other agreement
with regard to any Violation, non-compliance or Liability under any Environmental Law;

          (c) no judicial proceeding or governmental or administrative action is pending, or to the
Knowledge of the Transelec Entities, threatened, under any applicable Environmental Law pursuant to
which any of the Transelec Entities is a party;

          (d) to the Knowledge of the Transelec Entities, no Hazardous Substances have been Released
into the soil, surface water, sediments or ground water at, on, or under any of the Transelec
Entities’ current facilities or have been abandoned at such facilities, (i) such that the Transelec
Entities would be obligated to remove, remediate or otherwise respond to Releases of such Hazardous
Substances pursuant to any Environmental Law or (ii) that would reasonably be expected to result in
claims against the Transelec Entities by other Persons under any Environmental Law (including
claims for damage or injury to persons, property or natural resources);

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          (e) the Transelec Entities have adequately stored and/or disposed of any and all transformers
and condensers used in the Transelec Business in compliance with applicable Environmental Law; and

          (f) Notwithstanding any of the representations and warranties contained elsewhere in this
Agreement, all environmental matters shall be governed exclusively by this Section 3.11 and
to the extent set forth in the final sentence of Section 3.7(a).

     3.12 Intellectual Property

          (a) Except as disclosed in Section 3.12(a) of the Sellers Disclosure Schedule, the
Transelec Entities own, or have the right to use, all patents, patent rights (including patent
applications and licenses), know-how, trade secrets, trademarks (including trademark applications),
licenses, trademark rights, trade names, trade name rights, service marks, service mark rights,
copyrights and other proprietary intellectual property rights (collectively, “Intellectual
Property”) used in and necessary for the conduct of the businesses of the Transelec Entities as
currently conducted;

          (b) to the Knowledge of the Transelec Entities, the use of the Intellectual Property used in
the businesses of the Transelec Entities as currently conducted does not infringe or otherwise
violate the Intellectual Property rights of any third party;

          (c) to the Knowledge of the Transelec Entities, no third party is challenging, infringing,
misusing or otherwise violating any right of the Transelec Entities in any Intellectual Property
used for the conduct of the businesses of the Transelec Entities as currently conducted and no such
claims have been made against any Person by the Transelec Entities;

          (d) there are no Governmental Orders to which the Transelec Entities is a party or by which
the Transelec Entities is bound which restrict, in any material respect, the right to use any of
the Intellectual Property; and

          (e) none of the Transelec Entities has received any written notice of any pending claim that
Intellectual Property used in and necessary for the conduct of the businesses of the Transelec
Entities as currently conducted infringes or otherwise violates the Intellectual Property rights of
any third party.

     3.13 Title to Assets. Except as would not reasonably be expected to have, individually or
in the aggregate, a Transelec Material Adverse Effect, or as set forth in Section 3.13 of
the Sellers Disclosure Schedule (i) each of the Transelec Entities owns and has good and valid
title to, or in the case of leased assets or leased property has a valid leasehold interest in
(other than any such leases whose scheduled terms have expired subsequent to the date hereof), all
of its personal assets and personal properties used in and necessary for the conduct of the
businesses and operations of the Transelec Entities as currently conducted, free and clear of all
Liens, except for Permitted Liens, (ii) all such assets and property are in good condition and in a
state of good maintenance and repair (ordinary wear and tear excepted) and are suitable for the
purposes used, and (iii) the assets, rights and properties owned by or leased by the Transelec
Entities constitute all of the Material tangible and intangible properties used by the Transelec
Entities and

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sufficient and necessary to the conduct of the Transelec Entities’ businesses and operations as
they are currently being conducted.

     3.14 Insurance

          (a) All the Insurance Policies of the Transelec Entities are in full force and effect, all
insurance premiums due thereon have been paid in full when due and no written notice of
cancellation, non renewal or termination, or any written notice threatening cancellation, non
renewal or termination, has been received by the Transelec Entities. Set forth in
Section 3.14 of the Sellers Disclosure Schedule is a list of all policies of insurance (the
“Insurance Policies”) under which any of the Transelec Entities’ assets or business
activities are covered. The Transelec Entities have made available to Purchaser copies of the
Insurance Policies together with riders and amendments thereto or, in the case of such policies
which have been recently renewed or are currently in the process of being renewed, such other
documentation evidencing such policies. The Transelec Entities are in compliance with the terms
and conditions of the Insurance Policies, except for failures so to comply which would not
reasonably be expected to have, individually or in the aggregate, a Transelec Material Adverse
Effect. No event has occurred, including the failure by the Transelec Entities to give any notice
or information or the Transelec Entities giving any inaccurate or erroneous notice or information,
which limits or impairs the rights of the Transelec Entities under any such insurance policies,
except in each case, for any event or failure that would not reasonably be expected to have,
individually or in the aggregate, a Transelec Material Adverse Effect.

          (b) Except as set forth in Section 3.14 of the Sellers Disclosure Schedule, to the
Knowledge of the Transelec Entities, no event relating to the Transelec Entities has occurred which
could reasonably be expected to result in a retroactive upward adjustment in premiums under any
such insurance policies or which could reasonably be expected to result in a prospective upward
adjustment in such premiums. Excluding insurance policies that have expired and been replaced in
the ordinary course of business, no insurance policy has been cancelled within the last two years
and, to the Knowledge of the Transelec Entities, no threat has been made to cancel any insurance
policy of the Company or any of the Subsidiaries during such period. To the Knowledge of the
Transelec Entities, no event has occurred, including the failure by the Transelec Entities to give
any notice or information or the Transelec Entities giving any inaccurate or erroneous notice or
information, which limits or impairs the rights of the Transelec Entities under any such insurance
policies. Except as set forth in Section 3.14 of the Sellers Disclosure Schedule, all
Material properties and risks associated with the Transelec Business of the Transelec Entities are
covered by the Insurance Policies that are of such types and amounts as are consistent with
customary practices and standards in the industry of the Transelec Entities.

     3.15 Books and Records. The books, records and accounts of the Transelec Entities,
including financial records, that have been previously delivered or made available by Sellers and
the Transelec Entities to Purchaser are complete and correct copies of such books, records and
accounts.

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     3.16 Labor. Except as set forth on Section 3.16 of the Sellers Disclosure
Schedule:

          (a) no employees are represented by any labor organization. No labor organization or group of
employees has made a pending demand for recognition, proceedings or petitions seeking a
representation proceeding presently pending or, to the Knowledge of the Transelec Entities,
threatened to be brought or filed, with the applicable labor relations tribunal. To the Knowledge
of the Transelec Entities, there is no organizing activity involving the Transelec Entities pending
or threatened by any labor organization or group of employees.

          (b) As of the date hereof, there are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or, to the Knowledge of
the Transelec Entities, threatened against or involving the Transelec Entities. Except as set
forth at Section 3.16 of the Sellers Disclosure Schedule, there are no unfair labor
practice charges, grievances or complaints pending or, to the Knowledge of the Transelec Entities,
threatened by or on behalf of any employee or group of employees, except for such practice,
grievances or complaints which would not reasonably be expected to have, individually or in the
aggregate, a Transelec Material Adverse Effect.

          (c) There are no complaints, charges or claims against the Transelec Entities pending or, to
Knowledge of the Transelec Entities, threatened that could be brought or filed, with any
Governmental Entity based on, arising out of, in connection with or otherwise relating to the
employment or termination of employment of or failure to employ, any individual, except for
complaints, changes based on rights established by applicable Laws or claims which would not
reasonably be expected to have, individually or in the aggregate, a Transelec Material Adverse
Effect. Each of the Transelec Entities is in compliance with all Laws relating to the employment
of labor, including all such Laws relating to wages, hours, collective bargaining, discrimination,
civil rights, safety and health, workers’ compensation, loans (including loans made to any director
of the Transelec Entities) and the collection and payment of withholding and/or retirement taxes
and any similar tax, except for such breaches which would not reasonably be expected to have,
individually or in the aggregate, a Transelec Material Adverse Effect.

     3.17 Benefit Plans Except as set forth in Section 3.17 of the Sellers Disclosure
Schedule:

          (a) to the extent required, each Benefit Plan is and has been established, registered,
qualified, administered and invested, in material compliance with applicable Law and none of the
Transelec Entities has received any written notice from any Person alleging to the contrary;

          (b) to the extent required, all Liabilities under the Benefit Plans (whether pursuant to the
terms thereof or applicable Law) as of December 31, 2005 have been fully satisfied or funded or
have been fully provided for in the December 31, 2005 balance sheet that forms part of the
Transelec Financial Statements; and

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          (c) there have been no material amendments, modifications or restatements of any Benefit Plan
made, or any improvements in benefits promised, under the Benefit Plans since the December 31, 2005
balance sheet that forms part of the Transelec Financial Statements.

     3.18 Organizational Documents

          (a) The Transelec Entities have delivered to Purchaser true, correct and complete copies of
the certificates of incorporation (each certified by the appropriate notary or official of the
Republic of Chile) and by-laws (each certified by the secretary, assistant secretary or other
appropriate officer) or comparable organizational documents of the Transelec Entities in each case
as amended and in effect on the due date hereof, including all amendments thereto.

          (b) The minute books of the Transelec Entities previously made available to Purchaser contain
true, correct and complete records of all meetings and accurately reflect all other Material
corporate action of the shareholders and board of directors (including committees thereof) of the
Transelec Entities. The stock certificate books and stock transfer ledgers of the Transelec
Entities previously made available to Purchaser are true, correct and complete. All stock transfer
taxes levied, if any, or payable with respect to all transfers of shares of the Transelec Entities
prior to the date hereof have been paid and appropriate transfer tax stamps affixed.

     3.19 Accounts and Notes Receivable and Payable

          (a) All accounts and notes receivable of the Transelec Entities have arisen from bona fide
transactions in the Ordinary Course of Business and are payable on ordinary trade terms, except for
accounts and notes the non-payment of which would not reasonably be expected to have, individually
or in the aggregate, a Transelec Material Adverse Effect. All accounts and notes receivable of the
Transelec Entities reflected on the Transelec Financial Statements are good and collectible at the
aggregate recorded amounts thereof, net of any applicable reserve for returns or doubtful accounts
reflected thereon, except for accounts and notes the non-payment of which would not reasonably be
expected to have, individually or in the aggregate, a Transelec Material Adverse Effect.

          (b) All accounts payable of the Transelec Entities reflected in the Transelec Financial
Statements or arising after the date thereof for transactions that have occurred prior to the date
hereof are the result of bona fide transactions in the Ordinary Course of Business and have been
paid or are not yet due and payable, except for accounts payable the non-payment of which would not
reasonably be expected to have, individually or in the aggregate, a Transelec Material Adverse
Effect.

     3.20 Certain Payments. None of the Transelec Entities or any Seller nor, to the Knowledge
of the Transelec Entities or Sellers, any director, officer, employee, or other Person acting on
behalf of any of them, has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable treatment in securing
business for the Transelec Entities, (ii) to pay for favorable treatment for business secured by
the Transelec Entities (iii) to obtain special concessions or for special concessions

22

 

already obtained, for or in respect of the Transelec Entities, or (iv) in violation of any Law, or
(b) established or maintained any fund or asset with respect to the Transelec Entities that has not
be recorded in the books and records of the Transelec Entities.

     3.21 Brokers and Finders. None of Sellers and the Transelec Entities has entered into any
agreement or arrangement entitling any agent, broker, investment banker, financial advisor or other
firm or Person to any broker’s or finder’s fee or any other commission or similar fee payable by
Purchaser, Purchaser Guarantor or the Transelec Entities in connection with any of the transactions
contemplated by this Agreement.

     3.22 No Other Representation. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN
ARTICLE II AND ARTICLE III OR IN ANY OF THE TRANSACTION DOCUMENTS, NONE OF SELLERS, THE TRANSELEC
ENTITIES, OR THEIR RESPECTIVE AFFILIATES NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, CONTROLLING PERSONS, AGENTS, ADVISORS OR REPRESENTATIVES, MAKES OR HAS MADE, AND
SELLERS, THE TRANSELEC ENTITIES AND THEIR RESPECTIVE AFFILIATES AND ALL OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, CONTROLLING PERSONS, AGENTS, ADVISORS OR REPRESENTATIVES HEREBY
NEGATE AND DISCLAIM, ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, STATUTORY, EXPRESS OR
IMPLIED, CONCERNING THE EQUITY INTERESTS, THE BUSINESS, ASSETS OR LIABILITIES OF THE TRANSELEC
ENTITIES, THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY OTHER MATTER. IN CONNECTION WITH
PURCHASER’S INVESTIGATION OF THE TRANSELEC ENTITIES, PURCHASER HAS RECEIVED AND MAY CONTINUE TO
RECEIVE FROM SELLERS, THE TRANSELEC ENTITIES OR THEIR RESPECTIVE REPRESENTATIVES CERTAIN ESTIMATES,
PROJECTIONS AND OTHER FORECASTS FOR THE TRANSELEC ENTITIES AND CERTAIN PLAN AND BUDGET INFORMATION.
PURCHASER ACKNOWLEDGES THAT THERE ARE UNCERTAINTIES INHERENT IN ATTEMPTING TO MAKE SUCH
PROJECTIONS, FORECASTS, PLANS AND BUDGETS, THAT PURCHASER IS TAKING FULL RESPONSIBILITY FOR MAKING
ITS OWN EVALUATION OF THE ADEQUACY AND ACCURACY OF ALL ESTIMATES, PROJECTIONS, FORECASTS, PLANS AND
BUDGETS SO FURNISHED TO IT, AND THAT PURCHASER IS NOT RELYING ON ANY ESTIMATES, PROJECTIONS,
FORECASTS, PLANS OR BUDGETS FURNISHED BY SELLERS, THE TRANSELEC ENTITIES, THEIR RESPECTIVE
AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES, AND PURCHASER SHALL NOT HOLD ANY SUCH PERSON LIABLE
WITH RESPECT THERETO. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY OF THE TRANSACTION
DOCUMENTS, PURCHASER ACKNOWLEDGES THAT NONE OF SELLERS, THE TRANSELEC ENTITIES AND THEIR RESPECTIVE
AFFILIATES AND NONE OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, CONTROLLING PERSONS,
AGENTS, ADVISORS OR REPRESENTATIVES HAS MADE, AND SELLERS AND THE TRANSELEC ENTITIES HEREBY
EXPRESSLY DISCLAIM AND NEGATE, AND PURCHASER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE, USES OR OTHERWISE RELATING TO, AND
PURCHASER HEREBY EXPRESSLY WAIVES AND RELINQUISHES ANY AND

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ALL RIGHTS, CLAIMS AND CAUSES OF ACTION AGAINST SELLERS, THE TRANSELEC ENTITIES AND THEIR
RESPECTIVE AFFILIATES AND ALL OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, SUBSIDIARIES,
CONTROLLING PERSONS, AGENTS, ADVISORS OR REPRESENTATIVES (OTHER THAN ANY SUCH RIGHTS, CLAIMS OR
CAUSES OF ACTION ARISING OUT OF FRAUD OR INTENTIONAL OR WILLFUL MISCONDUCT OF ANY SUCH PERSONS) IN
CONNECTION WITH, THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED TO PURCHASER OR ITS AFFILIATES, ADVISORS OR REPRESENTATIVES
PRIOR TO, ON OR AFTER THE DATE HEREOF BY TRANSELEC ENTITIES OR ON BEHALF OF SELLERS OR THE
TRANSELEC ENTITIES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, REPRESENTATIONS, WARRANTIES
AND COVENANTS CONTAINED HEREIN MADE BY OR ON BEHALF OF A PARTY ARE MADE SOLELY AND EXCLUSIVELY BY
OR ON BEHALF OF SUCH PARTY AND NOT BY OR ON BEHALF OF SUCH PARTY’S REPRESENTATIVES (INCLUDING
EMPLOYEES) OR ANY OTHER PERSON.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser represents and warrants to Sellers as follows in this Article IV:

     4.1 Organization and Qualification. Purchaser is a sociedad de responsabilidad limitada,
duly organized, validly existing and in good standing under the laws of the Republic of Chile and
has full power and authority to own, lease and operate its assets and properties and to conduct its
business as presently conducted. Purchaser is duly qualified to do business and in good standing
in all jurisdictions in which such qualification is necessary under applicable Law as a result of
the conduct of its business or the ownership of its properties, except for those jurisdictions
where failure to be so qualified or in good standing would not reasonably be expected to have,
individually or in the aggregate, a Purchaser Material Adverse Effect.

     4.2 Authority; Non-Contravention; Statutory Approvals

          (a) Authority. Purchaser has full power and authority to enter into this Agreement
and the Transaction Documents to which it is or will be a party and, subject to receipt of the
Purchaser Required Statutory Approvals, to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by Purchaser of this Agreement and the
Transaction Documents to which it is or will be a party, the performance of its obligations
hereunder and thereunder and the consummation by Purchaser of the transactions contemplated hereby
and thereby have been duly and validly authorized by all requisite action on the part of Purchaser,
and no other proceedings or approvals on the part of Purchaser are necessary to authorize this
Agreement and the Transaction Documents or to consummate the transactions contemplated hereby or
thereby. This Agreement and the Transaction Documents to which Purchaser is or will be a party
have been duly authorized, and this Agreement has been, and the Transaction Documents to which
Purchaser is or will be a party, have been or will be at

24

 

or prior to Closing, duly executed and delivered by Purchaser and, assuming the due
authorization, execution and delivery hereof by each other Party, constitutes, or will constitute
at or prior to Closing, the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with their respective terms, except as limited by Laws affecting the
enforcement of creditors’ rights generally or by general equitable principles.

          (b) Non-contravention. Except as set forth in Section 4.2(b) of the Purchaser
Disclosure Schedule, the execution and delivery by Purchaser of this Agreement and the Transaction
Documents to which Purchaser is or will be a party, and the performance of its obligations
hereunder and thereunder does not, and the consummation of the transactions contemplated hereby and
thereby will not conflict with, result in any Violation of (with or without notice or lapse of
time, or both), or result in the creation of any Lien upon, any of the properties or assets of
Purchaser, pursuant to any provision of (i) the Organizational Documents of Purchaser; (ii) any
Contract to which Purchaser is a party or by which Purchaser may be bound (subject to obtaining the
third-party Consents set forth in Section 4.2(b) of the Purchaser Disclosure Schedule (the
“Purchaser Required Consents”)); or (iii) any Law, Permit or Governmental Order applicable
to Purchaser (subject to obtaining the Purchaser Required Statutory Approvals), other than in the
case of clauses (ii) and (iii) above, for any such Violation or Lien which would not reasonably be
expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

          (c) Statutory Approvals. Except for the filings or approvals (i) set forth in
Section 4.2(c) of the Purchaser Disclosure Schedule (the “Purchaser Required Statutory
Approvals”) and (ii) as may be required due to the regulatory or corporate status of Sellers or
the Transelec Entities, no Material Consent of any Governmental Entity is required to be made or
obtained by Purchaser in connection with the execution and delivery of this Agreement or the
consummation by Purchaser of the transactions contemplated hereby.

     4.3 Financing. Purchaser will have at Closing available cash and credit capacity, either
in its accounts, through binding and enforceable credit arrangements or borrowing facilities or
otherwise, sufficient to (i) pay the Purchase Price at the Closing and (ii) perform all of its
obligations hereunder including, without limitation, its obligations under Section 5.9 (the
“Financing Arrangements”), and none of the Transelec Entities will be required to assume or
become liable for such Financing Arrangements prior to the Closing. Prior to the date of this
Agreement, Purchaser has provided Sellers with copies of all relevant documentation that has been
entered into on or prior to the date hereof relating to the Financing Arrangements, including any
commitment letters for any of the foregoing, which Purchaser intends to utilize to make the
payments described in this Section 4.3.

     4.4 Purchaser Equity. Purchaser Guarantor will have a net equity of at least $[**] on the
Closing Date.

     4.5 Litigation. Except as set forth in Section 4.5 of the Purchaser Disclosure
Schedule, there is no action, claim, suit or proceeding at law or in equity pending or, to the
Knowledge of Purchaser, threatened against Purchaser or any of its subsidiaries or affecting any of
their respective assets or properties that would reasonably be expected to have, individually or

25

 

in the aggregate, a Purchaser Material Adverse Effect. There are no Governmental Orders of or by
any Governmental Entity applicable to Purchaser or any of its subsidiaries except for such that
would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material
Adverse Effect.

     4.6 Brokers and Finders. Purchaser has not entered into any agreement or arrangement
entitling any agent, broker, investment banker, financial advisor or other firm or Person to any
broker’s or finder’s fee or any other commission or similar fee payable by Sellers or the Transelec
Entities in connection with any of the transactions contemplated by this Agreement. 

ARTICLE V

COVENANTS

     5.1 Conduct of Transelec Business. Subject to the limitations set forth below, after the
date hereof and prior to the Closing or earlier termination of this Agreement, except as set forth
in Schedule 5.1 and except (i) as contemplated in or permitted by this Agreement, (ii) as
may be required to comply with any Transelec Material Contract, (iii) in connection with necessary
or prudent repairs due to breakdown or casualty, or other actions taken in response to a business
emergency or other unforeseen operational matters, (iv) in connection with necessary or prudent
maintenance consistent with manufacturer’s recommendations and warranties, (v) as required by
applicable Law (including, without limitation, pursuant to any administrative orders, decisions or
directions of the Independent System Operators (also known as the Economic Local Dispatch Centers
or “CDEC”), or (vi) to the extent Purchaser shall otherwise consent, which decision
regarding consent shall be made promptly and which consent shall not be unreasonably withheld,
conditioned or delayed, Sellers shall exercise the voting, governance and contractual powers
available to them to cause each of the Transelec Entities to, and each of the Transelec Entities
shall:

          (a) (i) carry on its business and operations only in the Ordinary Course of Business, (ii) use
all commercially reasonable efforts consistent with past practices and policies to preserve intact
the Transelec Entities’ present business organization, and (iii) maintain the Transelec Entities’
real property and tangible personal property in good repair, order and condition (subject to normal
wear and tear) consistent with the Ordinary Course of Business and not delay the making of timely
capital expenditures contemplated in that regard;

          (b) not (i) amend its Organizational Documents; (ii) split, combine or reclassify its
outstanding Equity Interests; or (iii) repurchase, redeem or otherwise acquire Equity Interests or
any securities convertible into or exchangeable or exercisable for any Equity Interests;

          (c) not issue, sell, or dispose of any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to
acquire, any of its Equity Interests;

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          (d) not incur any indebtedness other than (i) borrowings in the Ordinary Course of Business or
(ii) borrowings under existing credit facilities as such facilities may be amended or replaced, and
with respect to (i) or (ii) above, (A) for bonafide business purpose where such borrowed funds are
immediately expended for the Transelec Business and (B) in an aggregate amount not to exceed $[**];

          (e) not make any commitments for or make capital expenditures, individually or in the
aggregate (i) in excess of $[**], except as otherwise specifically provided for in the approved
capital expenditure budget for 2006 of the Transelec Entities attached at Section 5.1(e) of the
Sellers Disclosure Schedule discussed with Purchaser (and only where such commitments or capital
expenditures are for the same category or line item in such business plan), and (ii) in any event
not in excess of $[**];

          (f) not, other than in the Ordinary Course of Business, make any acquisition of, or investment
in, assets or stock of any other Person;

          (g) not, other than in the Ordinary Course of Business, sell, lease, license, encumber or
otherwise dispose of any of its assets;

          (h) not change any Material financial or Material Tax accounting method, policies, practices
or election, except as required by Chilean GAAP or applicable Law;

          (i) not adopt a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization (other than the Transaction);

          (j) not settle or compromise any pending or threatened litigation or other Proceeding
requiring payment of an amount in excess of the reserves established therefore, or waive, release
or assign any claims, in each case other than in an amount not to exceed $3,000,000 in the
aggregate;

          (k) not (i) amend or modify any Transelec Material Contract or Permit in any material respect,
(ii) terminate any Transelec Material Contract or Permit, or (iii) enter into any Contract that
would have been required to be set forth in Section 3.7(a) of the Sellers Disclosure
Schedule had it been entered into prior to the date of this Agreement, in each case, other than in
the Ordinary Course of Business;

          (l) not (i) increase the salary or other compensation of any director or senior executive of
any Transelec Entity, except for normal year-end increases in the Ordinary Course of Business, (ii)
grant any unusual or extraordinary bonus, benefit or other direct or indirect compensation to any
director senior executive, (iii) increase the coverage or benefits available under any (or create
or enter into any new) bonus, incentive or deferred compensation, pension, retirement,
profit-sharing, savings, employment, consulting, compensation, stock purchase, stock option,
phantom stock or other equity-based compensation, severance pay, termination, change-in-control,
retention, salary continuation, vacation, sick leave, disability, death benefit, group insurance,
hospitalization, medical, dental, life, loan, educational assistance or other fringe benefit plans,
programs, agreements and arrangements for the benefit of any current director or executive employee
of the Transelec Entities;

27

 

          (m) not, unless not available on commercially reasonable terms: fail to maintain its current
insurance policies; provided that any of the Transelec Entities shall notify Purchaser promptly of
any changes to any of the (x) properties or assets or (y) such policies related thereto or any
intention to make a claim thereunder;

          (n) not make any declaration, setting aside or payment of any dividend or other distribution
in respect of any shares of capital stock of any of the Transelec Entities;

          (o) not fail to comply in all material respects with all applicable Laws;

          (p) not change or modify its credit, collection or payment policies, procedures or practices,
including acceleration of collections or receivables (whether or not past due) or fail to pay or
delay payment of payables or other liabilities;

          (q) not fail to pay and discharge current Liabilities or other Liabilities in the Ordinary
Course of Business, except where disputed in good faith by appropriate proceedings;

          (r) not issue, create, incur, assume, guarantee, endorse or otherwise become liable with
respect to (whether directly, contingently or otherwise) any Liabilities of any Person (other than
the Transelec Entities) or cancel or compromise any debt, claim or other Liability or waive or
release any material right of the Transelec Entities, except in the Ordinary Course of Business;

          (s) not enter into any transaction, agreement or arrangement that may be characterized as an
off-balance sheet arrangement under Chilean GAAP;

          (t) not (i) make, change or revoke any Tax election, settle or compromise any Tax claim,
liability, assessment or reassessment or enter into a settlement or compromise, or change (or make
a request to any Tax Authority to change) any Material aspect of its method of accounting for Tax
purposes, (ii) prepare or file any Tax Return (or any amendment thereof) unless such Tax Return
shall have been prepared in a manner consistent with past practice and the Transelec Entity shall
have provided Purchaser a copy thereof (together with supporting papers) at least three (3)
Business Days prior to the due date thereof for Purchaser to review and approve (such approval not
to be unreasonably withheld, delayed or conditioned), or (iii) fail to pay any Taxes relating to
the Transelec Entities when due subject to the right of such Transelec Entity to timely contest the
payment of any such Tax, so long as Purchaser is provided with prompt written notice of such
contest and it is done in good faith and a reasonable position under applicable Law exists in the
case of contesting the payment of any Tax;

          (u) notify Purchaser promptly of any Material damage to any of the Transelec Entities’ assets
and any actions taken with respect to such damage; and

          (v) not commit to take any of the actions set forth in subsections (b) to (t) of this
Section 5.1.

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     5.2 Regulatory Approvals

          (a) Regulatory Approvals. Each Party shall cooperate and use commercially reasonable
efforts to prepare and file as soon as practicable all applications, notices, petitions, filings
and other documents necessary to obtain, and shall use commercially reasonable efforts to obtain,
the Sellers Required Statutory Approvals, the Transelec Required Statutory Approvals and the
Purchaser Required Statutory Approvals. The Parties further agree to use commercially reasonable
efforts (i) to take any act, make any undertaking or receive any clearance or approval required by
any Governmental Entity or applicable Law and (ii) to satisfy any conditions imposed by any
Governmental Entity in all Final Orders, in each case in order to consummate the transactions
contemplated hereby as soon as reasonably possible. Each of the Parties shall (i) respond as
promptly as practicable to any inquiries or requests received from any Governmental Entity for
additional information or documentation and (ii) not enter into any agreement with any Governmental
Entity that would reasonably be expected to adversely affect the Parties’ ability to consummate the
transactions contemplated by this Agreement, except with the prior consent of the other Parties
(which shall not be unreasonably withheld or delayed). Each of the Parties shall use commercially
reasonable efforts to avoid or eliminate each and every impediment under any antitrust,
competition, or trade or energy regulation law that may be asserted by any Governmental Entity with
respect to the transactions contemplated hereby so as to enable the Closing Date to occur as soon
as reasonably possible. Notwithstanding the foregoing, none of the Parties, nor any of their
respective Affiliates shall be required to: (i) compensate any third party, commence or
participate in a proceeding or offer or grant any accommodation (financial or otherwise) to any
third party to obtain any authorization, consent, order or approval (except for filing fees, other
administrative charges and other reasonable out-of-pocket expenses) in satisfaction of its
conditions under Article VI, or (ii) dispose of, hold separate or otherwise restrict their
respective enjoyment of any of their respective assets, properties or business, or to propose,
negotiate, commit to or effect by consent decree, hold separate order, or otherwise, the sale or
divestiture, licensing or disposition of any assets, properties or businesses.

          (b) Communications.

               (i) The Parties shall promptly provide the other Parties with copies of all filings
made with, and inform one another of any communications received from, any Governmental
Entity in connection with this Agreement and the transactions contemplated hereby, except as
prohibited by applicable Law.

               (ii) None of Sellers shall, and Sellers shall cause each of the Transelec Entities, any
other Affiliates of Sellers and their respective representatives not to, without having
informed and discussed with Purchaser, file or issue any written submission with any Person
or Governmental Entity regarding rate calculations, the VI Adjustment or any changes to the
Short Law or other regulatory framework applicable to the Transelec Business (the
“Restricted Matters”). Sellers shall inform Purchaser in advance of any (A) board
meeting of the Transelec Entities or (B) any formal scheduled meetings with any Governmental
Entity, in each case convened to discuss matters relating to the Restricted Matters, and
shall afford Purchaser and its representatives the opportunity to comment, prior to such
meeting, on the particulars to be discussed at the meeting. Sellers agree to

29

 

provide Purchaser and its representatives with full and detailed information with
respect to any written comments Sellers, any of the Transelec Entities, any other Affiliates
of Sellers or their respective representatives may receive from any Person or Governmental
Entity with respect to the Restricted Matters.

     5.3 Required Consents. Sellers shall use commercially reasonable efforts and shall cause
the Transelec Entities to use commercially reasonable efforts to obtain the Sellers Required
Consents and the Transelec Required Consents. Purchaser shall use commercially reasonable efforts
to obtain the Purchaser Required Consents. The Parties shall cooperate with each other in
connection with the foregoing.

     5.4 Access. After the date hereof and prior to the Closing, Sellers agree that the
Transelec Entities shall permit Purchaser and its respective employees, counsel, accountants and
other representatives, including lenders and financial advisors, to have reasonable access, upon
reasonable advance notice, during regular business hours, to the assets, employees (including
employees of Sellers who have responsibility for the Transelec Entities), accountants, properties,
books and records, accounts, businesses and operations to the extent relating to the Transelec
Entities as Purchaser may reasonably request, provided, however, that in no event
shall Sellers or the Transelec Entities be obligated to provide any access or information if
Sellers or the Transelec Entities determine, in good faith after consultation with counsel, that
providing such access or information may violate applicable Law, cause either of Sellers or the
Transelec Entities to breach a confidentiality obligation by which it is bound or jeopardize any
recognized privilege available to either of Sellers or the Transelec Entities. Purchaser agrees to
indemnify and hold Sellers and the Transelec Entities harmless from any and all claims and
liabilities, including costs and expenses for loss, injury to or death of any representative of
Purchaser, and any loss, damage to or destruction of any property owned by either of Sellers or the
Transelec Entities or others (including claims or liabilities for loss of use of any property)
resulting directly or indirectly from the action or inaction of any of the employees, counsel,
accountants, advisors and other representatives of Purchaser during any visit to the business or
property sites of the Transelec Entities prior to the Closing Date, whether pursuant to this
Section 5.4 or otherwise. During any visit to the business or property sites of the
Transelec Entities Purchaser shall, and shall cause its employees, counsel, accountants, advisors
and other representatives accessing such properties to, comply with all applicable Laws and all of
the Transelec Entities’ safety and security procedures and conduct itself in a manner that could
not be reasonably expected to interfere with the operation, maintenance or repair of the assets of
the Transelec Entities. Each Party shall, and shall cause its Affiliates and representatives to,
hold in strict confidence all documents and information concerning the other furnished to it in
connection with the transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement.

     5.5 Publicity. Prior to the Closing, none of Sellers, the Transelec Entities or Purchaser
or any of their respective Affiliates shall, without the express written approval of HQI and
Purchaser, make any press release or other public announcements concerning the transactions
contemplated by this Agreement, except as and to the extent that any such Party shall be so
obligated by applicable Law or pursuant to any listing agreement or rules of any national
securities exchange, in which case the other Parties shall be advised
and the Parties shall use their commercially reasonable efforts to cause mutually agreeable releases or announcements to
be issued.

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     5.6 Fees and Expenses

          (a) Purchaser Expenses. Purchaser shall pay all out-of pocket fees, costs and
expenses, including fees and expenses of counsel, financial advisors and accountants, incurred by
Purchaser or Purchaser Guarantor incident to or in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby, whether or not the Closing shall have occurred.

          (b) Sellers’ Expenses. Sellers shall pay all out-of-pocket fees, costs and expenses,
including fees and expenses of counsel, financial advisors (including, all fees and expenses of
UBS) and accountants, incurred by Sellers, Sellers Guarantor or any of the Transelec Entities
incident to or in connection with the negotiation, preparation, execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby, whether or not the
Closing shall have occurred; provided that, with respect to the Transelec Entities, Sellers
shall be responsible for and pay for only such costs incurred by the Transelec Entities for
services rendered up to and including the Closing Date.

          (c) Other Transaction Expenses. Notwithstanding anything to the contrary set forth in
this Agreement, (i) Purchaser shall pay any out-of-pocket fees, costs and expenses incurred in
connection with obtaining all Purchaser Required Statutory Approvals, and (ii) Sellers shall pay
any out-of-pocket fees, costs and expenses incurred in connection with obtaining all Sellers
Required Statutory Approvals and the Transelec Required Statutory Approvals (other than, in each
case, the Parties’ legal fees and expenses which are the subject of Sections 5.6(a) and
5.6(b)).

     5.7 Survival of Affiliate Contracts. Except as set forth in Schedule 5.7 and
except as agreed to in writing by Sellers and Purchaser, Sellers shall cause all Affiliate
Contracts, including any agreements or understandings (written or oral) with respect thereto, to
terminate or be deemed terminated on the Closing without any further action on the part of the
parties thereto or of the Parties.

     5.8 Further Assurances. Each of Sellers, Sellers Guarantor, Purchaser and Purchaser
Guarantor agrees that, from time to time before and after the Closing Date, they will execute and
deliver, or cause their respective Affiliates to execute and deliver such further instruments, and
take, or cause their respective Affiliates to take, such other action, as may be reasonably
necessary to carry out the purposes and intents of this Agreement. Purchaser, Purchaser Guarantor,
Sellers Guarantor and Sellers agree to use commercially reasonable efforts, or cause their
respective Affiliates to use commercially reasonable efforts, to refrain from taking any action
which could reasonably be expected to prevent or materially delay the consummation of the
Transaction. From time to time after the Closing Date, Sellers agree to cooperate with Purchaser
upon the reasonable request of Purchaser in making available to Purchaser information in its
possession relating to the conduct of the Transelec Business prior to the Closing;
provided, however, that Sellers shall not be obligated to make any disclosure that
(i) is prohibited by applicable Law, (ii) may cause any of Sellers to breach a confidentiality
obligation by which it is

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bound or (iii) may jeopardize any recognized privilege available to any of Sellers or that would
result in the loss of any applicable legal privilege.

     5.9 Financing. Notwithstanding anything contained in this Agreement to the contrary,
Purchaser expressly acknowledges and agrees that Purchaser’s obligations hereunder are not
conditioned in any manner whatsoever upon Purchaser obtaining any financing. Purchaser shall keep
Sellers apprised of all material developments or material changes relating to the Financing
Arrangements and the financing contemplated thereby. In the event that the Financing Arrangements
shall cease to be in full force and effect at any time or the lenders party thereto shall indicate
in writing to Purchaser any unwillingness to provide the financing contemplated thereby, or for any
reason Purchaser otherwise no longer believes in good faith that it will be able to obtain the
financing contemplated thereby, then Purchaser shall promptly notify Sellers and use best efforts
to obtain replacement financing arrangements or commitment letters as soon as reasonably
practicable. Purchaser shall not, or permit any of its subsidiaries to, without the prior written
consent of Sellers, take any action or enter into any transaction, including any merger,
acquisition, joint venture, disposition, lease, contract or debt or equity financing that would
reasonably be expected to impair, delay or prevent the financing contemplated by the Financing
Arrangements, other than as permitted under the terms of such Financing Agreements (provided that
this does not delay the Closing).

     5.10 Tax Matters

          (a) Transfer Taxes. Purchaser shall be responsible for the timely payment of all
Transfer Taxes, if any, arising out of or in connection with the transactions contemplated by this
Agreement. Purchaser shall prepare and file all necessary documentation and Tax Returns with
respect to such Transfer Taxes; provided, however, that Sellers shall cooperate
with Purchaser and take any action reasonably requested by Purchaser (at no cost to Sellers) in
order to minimize such Transfer Taxes.

          (b) Tax Returns. Except as otherwise provided in Section 5.10(a) above,

               (i) Sellers shall prepare and file or cause to be prepared and filed when due all Tax
Returns that are required to be filed by or with respect to the Transelec Entities for
taxable years or periods ending on or before the Closing Date, and Sellers shall remit or
cause to be remitted any Taxes due in respect of such Tax Returns. All such Tax Returns
shall be prepared in a manner consistent with past practice.

               (ii) Purchaser shall prepare and file or cause to be prepared and filed when due all
Tax Returns that are required to be filed by or with respect to the Transelec Entities for
taxable years or periods ending after the Closing Date, and Purchaser shall remit or cause
to be remitted any Taxes due in respect of such Tax Returns. All such Tax Returns shall be
prepared in a manner consistent with past practice in compliance with applicable Laws.
Purchaser shall not amend claims for discretionary deductions or credits in Tax Returns of
the Transelec Entities for taxable years or periods ending on or before the Closing Date,
without the approval of Sellers Guarantor (which approval shall not be unreasonably
withheld, delayed or conditioned if such amendments are specifically required by a Tax
Authority and necessary to comply with applicable Laws).

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          (c) Assistance and Cooperation. After the Closing Date, each of Sellers and Purchaser
shall (and shall cause their respective Affiliates to) (i) assist the other Party in preparing any
Tax Returns which such other Party is responsible for preparing and filing in accordance with
Section 5.10(b), and (ii) reasonably cooperate in preparing for any audits of, or disputes
with, any Governmental Entity regarding any Tax Returns of the Transelec Entities.

          (d) Control of Tax Returns. Purchaser must not, and must procure that each of its
Affiliates does not, without the prior consent of Sellers (such consent not to be unreasonably
withheld or delayed): (i) file any Tax Returns contemplated in Section 5.10(b)(i) above;
(ii) amend, or request or permit the amendment of, or make or lodge any objection or appeal in
relation to any such Tax Returns; (iii) apply to any Tax Authority for any binding or non-binding
opinion, ruling or other determination in relation to any act, matter or transaction covered by any
such Tax Returns or to any act, matter or transaction occurring on or before the Closing Date; or
(iv) furnish to any Tax Authority any information (in writing or otherwise) in relation to any such
Tax Returns or to any act, matter or transaction occurring on or before the Closing Date.

          (e) Tax Audit or Tax Assessment. If any Tax Authority undertakes an audit of any of
the Transelec Entities, or issues an assessment to any of the Transelec Entities, which relates to
any Tax Returns filed by any of the Transelec Entities prior to the date hereof, any of the Tax
Returns contemplated in Section 5.10(b)(i) above or to any act, matter or transaction occurring on
or before the Closing Date, including during the period from January 1, 2006 to the Closing Date,
notwithstanding Section 8.4 below: (i) Purchaser shall promptly give Sellers Guarantor written
notice of such audit or assessment (together with copies of all documents received from the Tax
Authority) and provide Sellers Guarantor with full written relevant details of the audit or
assessment; (ii) Sellers Guarantor at its own cost and expense shall have the conduct and control
(in consultation with Purchaser) of all action taken by Purchaser in respect of the audit or
assessment within five Business Days of receipt by Sellers Guarantor of such notice;
(iii) Purchaser must, at the cost of Sellers (provided that Sellers Guarantor will only be liable
for reasonable out-of-pocket expenses), procure all assistance Sellers Guarantor may reasonably
require in relation to action taken in respect of such audit or assessment; and (iv) Purchaser must
procure that Sellers Guarantor is authorized to take such action on behalf and in the name of each
of the Transelec Entities as Sellers Guarantor may reasonably require in respect of such audit or
assessment, including, without limitation, responding (in writing or otherwise) to any audit
inquiry from any Tax Authority, attending and conducting interviews, meetings, discussions and
negotiations with any Tax Authority, negotiating and concluding compromises, agreements and
settlements with any Tax Authority, lodging requests for ruling, opinions or determinations with
any Tax Authority or lodging or instituting objections, applications, appeals and other litigations
with any Tax Authority, tribunal or court; provided, however, that in controlling
the conduct of such audit or assessment, Sellers Guarantor must: (x) keep Purchaser fully informed
regarding the status and progress of such audit or assessment; (y) provide to Purchaser drafts of
any material correspondence to any Tax Authority and consider in good faith any comments of
Purchaser (or its advisors) on the correspondence; and (z) allow Purchaser and its advisors to
attend any material meeting or discussion with the Tax Authority; provided,
further, however, that if the results of such audit or assessment involves an issue
that would change the Transelec Entities’ past reporting practices and would have an

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adverse impact on the Transelec Entities in taxable periods after the Closing Date, then all
actions taken in connection with any such audit or assessment shall require the consent (any such
consent not to be unreasonably withheld, delayed or conditioned) of Purchaser.

          (f) Excess Taxes. Notwithstanding anything to the contrary herein, in the event that
any Taxes paid by the Transelec Entities after the Closing Date for the period prior to and
including the Closing Date (net of any Tax refund received by the Transelec Entities for such
period) exceed the amount of Taxes reflected, and accrued and reserved for, in the Actual Closing
Date Working Capital, any such excess Taxes shall constitute Damages to the Purchaser Indemnified
Parties (calculated in the same manner and treated for all purposes hereunder, including any such
amounts payable being determined in accordance with Section 8.5(d)(iv), as if such Damages
had arisen from a breach of Section 5.10 of this Agreement) that may be claimed against the Sellers
pursuant to the indemnification provisions set forth in Article VIII of this Agreement.
Notwithstanding anything to the contrary in this Agreement, the determination and payment of the
Actual Closing Date Working Capital shall not preclude Purchaser from making any claims for Damages
against Sellers pursuant to this Section 5.10(f).

          (g) Other Obligations. Nothing in Sections 5.10(d), (e) and
(f) and shall limit any obligations of the Parties under other provisions of this
Agreement.

     5.11 Change of Corporate Names. Promptly after the Closing Date, but in any event within
30 days following the Closing Date, Purchaser shall or shall cause the Transelec Entities to
execute and file with the relevant authorities all necessary forms and documents to replace the
names of the Transelec Entities by alternative corporate names, which names must not include the
words “HQI”, “HQ” or “Hydro-Quebec” or any word or name which is
substantially identical or deceptively similar to or likely to be mistaken for or confused with the
words “HQI”, “HQ” or “Hydro-Quebec”.

     5.12 Exclusivity. From and after the date hereof, through the earlier of the Closing Date
and the termination of this Agreement, Sellers agree that they will not, and their subsidiaries
will not, nor will they authorize or permit any of their respective officers, directors, employees,
agents and representatives (including, without limitation, any investment banker, attorney or
accountant retained by it or any of its subsidiaries or any of the foregoing) to, directly or
indirectly, encourage, initiate or solicit (including by way of furnishing information) or take any
other action to facilitate any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) which constitutes or may reasonably be
expected to lead to an Alternative Proposal from any person or engage in any discussion or
negotiations concerning, or provide any non-public information or data to make or implement, an
Alternative Proposal.

     5.13 Drag-Along Right. Pursuant to the terms and conditions of that certain Shareholders
Agreement among Inversiones HQI Chile Holding Limitada (the previous name of Transmisión), Puno,
Transelec and IFC, dated as of April 25, 2003 (as amended, modified or supplemented from time to
time in accordance with its terms, the “Shareholders Agreement”), Sellers, directly or
indirectly, have a drag-along right with respect to the IFC Shares pursuant to Section 3.04
thereof, and Sellers have on or prior to the date hereof delivered the requisite notice

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in the form attached hereto as Exhibit D (the “Drag-Along Notice”) to IFC to
effectively and timely exercise such right prior to the Closing in a manner consistent with the
terms and conditions set forth therein. Sellers shall take all commercially reasonable actions
(including, if necessary, appropriate legal actions at Purchaser’s cost to enforce the Shareholders
Agreement) as may be necessary under the terms of the Shareholders Agreement to exercise such
drag-along right in accordance with the terms of the Shareholders Agreement and cause IFC to,
simultaneously with the Closing, sell and deliver to Purchaser and/or its designee(s) the IFC
Shares, on the same terms and conditions set forth herein; provided, however, that
IFC shall only be required to give the representations and warranties set forth in Section 3.04(c)
of the Shareholders Agreement.

     5.14 HQ International Mobility Program. Sellers hereby agree that they shall be
responsible for any and all payments and costs related to the Hydro Québec International Mobility
Program for any agreements with any officers, directors, employees or consultants of the Transelec
Entities; provided, however, that Purchaser or the Transelec Entities shall be
responsible for all such costs relating to the current Chief Executive Officer and Chief Financial
Officer of Transelec who remain employed for more than six (6) months following Closing. For a
period of up to six (6) months following Closing, Purchaser, or any of the Transelec Entities if
designated by Purchaser, will pay to Sellers Guarantor an amount of $[**] and $[**] per month while
the Chief Executive Officer and Chief Financial Officer, respectively, of Transelec remain employed
by Transelec respectively.

     5.15 Notification of Certain Matters. Sellers shall give notice to Purchaser and Purchaser
shall give notice to Sellers, as promptly as reasonably practicable upon becoming aware of (a) any
fact, change, condition, circumstance, event, occurrence or non-occurrence that has caused or is
reasonably likely to cause any representation or warranty in this Agreement made by it to be untrue
or inaccurate in any respect at any time after the date hereof and prior to the Closing, (b) any
Material failure on its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder or (c) the institution of or the threat of institution
of any Proceeding against any of Sellers, the Transelec Entities, the Seller Guarantor, the
Purchaser or the Purchaser Guarantor, as the case may be, or the transactions contemplated hereby;
provided that the delivery of any notice pursuant to this Section 5.15 shall not
limit or otherwise affect the remedies available hereunder to the Party receiving such notice, or
the representations or warranties of, or the conditions to the obligations of, the Parties.

     5.16 Public Announcement of Intention to Acquire Control of the Transelec Entities.
Immediately after the execution of this Agreement, Purchaser shall comply with the provisions of
Article 54 of the Securities Act of the Republic of Chile and publish its intention to acquire
control of the Transelec Entities.

ARTICLE VI

CONDITIONS TO CLOSING

     6.1 Conditions to the Obligations of the Parties. The obligations of the Parties to effect
the Closing shall be subject to the satisfaction or waiver (to the
extent permitted by Law) by Purchaser and Sellers, on or prior to the Closing Date, of each of the following conditions
precedent:

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          (a) Statutory Approvals. The Sellers Required Statutory Approvals, the Transelec
Required Statutory Approvals and the Purchaser Required Statutory Approvals set forth in
Section 2.1(d) of the Sellers Disclosure Schedule, Section 3.1(c) of the Sellers
Disclosure Schedule and Section 4.2(c) of the Purchaser Disclosure Schedule shall have been
obtained and approved in a form and substance reasonably satisfactory to each of the Parties.

          (b) No Injunction. No statute, rule or regulation shall have been enacted or
promulgated by any Governmental Entity which prohibits the consummation of the transactions
contemplated hereby and there shall be no order or injunction of a court of competent jurisdiction
in effect precluding or prohibiting the consummation of the transactions contemplated hereby;
provided, however, that the Parties shall use commercially reasonable efforts to
have any such order or injunction vacated or lifted.

     6.2 Conditions to the Obligation of Purchaser. The obligation of Purchaser to effect the
Closing shall be subject to the satisfaction or waiver by Purchaser on or prior to the Closing Date
of each of the following conditions:

          (a) Performance of Obligations of Sellers. Sellers shall have performed in all
material respects their agreements and covenants contained in or contemplated by this Agreement
which are required to be performed by them at or prior to the Closing.

          (b) Representations and Warranties. The representations and warranties of Sellers (A)
set forth in Sections 2.2, 3.2(b), and 3.4(b) shall be true and correct in
all respects (i) on and as of the date hereof and (ii) on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of the Closing Date
and (B) set forth in this Agreement (other than in Sections 2.2, 3.2(b), and
3.4(b)) shall be true and correct in all respects (i) on and as of the date hereof and
(ii) on and as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for representations and warranties
that expressly speak only as of a specific date or time which need only be true and correct as of
such date or time), except in each of clauses (B)(i) and (B)(ii) for such failures
of representations and warranties to be true and correct (without giving effect to
“Material,” “material,” “materiality,” “Sellers Material Adverse
Effect”, “Transelec Material Adverse Effect” or any other qualification or limitation
of similar import contained in any such representations and warranties) which would not reasonably
be expected to have, individually or in the aggregate, a Transelec Material Adverse Effect or a
Sellers Material Adverse Effect.

          (c) Required Consents. The Sellers Required Consents set forth in
Section 2.1(c) and the Transelec Required Consents set forth in Section 3.1(b) of
the Sellers Disclosure Schedule shall have been obtained, each in form and substance reasonably
acceptable to Purchaser, and Sellers shall provide Purchaser with written notification of receipt
of such consents no later than 10 Business Days following receipt of each such consent.

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          (d) Officer’s Certificate. Purchaser shall have received a certificate from an
authorized officer of each Seller, in each case acting on behalf of the corresponding Seller and
not in his/her personal capacity, dated the Closing Date, to the effect that the conditions set
forth in Sections 6.2(a) and 6.2(b) have been satisfied.

          (e) Resignations of Directors. Purchaser shall have received the resignations of the
directors of the Transelec Entities, in form and substance attached hereto as Exhibit B
(the “Termination and Release Agreement”) which shall provide for mutual release.

          (f) Assignment Agreement. Sellers shall have delivered to Purchaser a duly executed
Assignment Agreement transferring (i) the Subject Shares, (ii) the Minority Norte Shares and (iii)
any other documents contemplated by Section 1.4 to Purchaser.

          (g) Release. Purchaser shall have received written evidence, reasonably satisfactory
to Purchaser, that Sellers and its Affiliates have irrevocably and unconditionally released
Purchaser and the Transelec Entities from any and all Liabilities to the Sellers and their
Affiliates (except Liabilities under this Agreement and under Contracts listed in Schedule 5.8)
(the “Release Letter”).

          (h) Legal Opinions. Sellers shall have delivered to Purchaser a legal opinion of (i)
McCarthy Tétrault LLP, special Canadian counsel to Sellers and Sellers Guarantor regarding the
enforceability of this Agreement and the HQ Letter of Guarantee (as defined below) and certain
related matters with respect to Sellers and Sellers Guarantor, and (ii) Claro y Cia, special
Chilean counsel to Sellers with respect to Transmisión and Transelec, in each case, in form and
substance reasonably acceptable to Purchaser and Sellers.

          (i) HQ Guarantee. Sellers shall have delivered to Purchaser a letter of guarantee
duly executed by Hydro-Québec in the form attached hereto as Exhibit C (the “HQ Letter
of Guarantee”).

          (j) Other Certificates. Corporate resolutions duly adopted by the Board of Directors
of each Seller and the Sellers Guarantor or evidence of any actions required by each Seller and the
Sellers Guarantor for the execution and delivery by such Seller or the Sellers Guarantor of this
Agreement and each other Transaction Document to which it is a party and the performance by such
Seller or the Sellers Guarantor of the transactions contemplated hereby and thereby, duly certified
by the Secretary or an Assistant Secretary of such Seller or the Sellers Guarantor, and an
incumbency certificate, certifying the names and true signatures of the officers of each Seller and
the Sellers Guarantor authorized to execute and deliver this Agreement, each other Transaction
Document to which it is a party and any other document or certificate delivered hereunder or
thereunder.

     6.3 Conditions to the Obligation of Sellers. The obligation of Sellers to effect the
Closing shall be subject to the satisfaction or waiver by Sellers on or prior to the Closing Date
of each of the following conditions:

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          (a) Performance of Obligations of Purchaser. Purchaser shall have performed in all
material respects its agreements and covenants contained in or contemplated by this Agreement which
are required to be performed by it at or prior to the Closing.

          (b) Representations and Warranties. The representations and warranties of Purchaser
and Purchaser Guarantor set forth in this Agreement shall be true and correct in all respects
(i) on and as of the date hereof and (ii) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date or time which need
only be true and correct as of such date or time), except in each of cases (i) and (ii) for such
failures of representations and warranties to be true and correct (without giving effect to
“Material,” “material,” “materiality” or “Purchaser Material Adverse
Effect” or any other qualification or limitation of similar import contained in any such
representations and warranties) which would not reasonably be expected to have, individually or in
the aggregate, a Purchaser Material Adverse Effect.

          (c) Purchaser Required Consents. The Purchaser Required Consents set forth in
Section 4.2(c) of the Purchaser Disclosure Schedule shall have been obtained.

          (d) Officer’s Certificate. Sellers shall have received a certificate from an
authorized officer of Purchaser, acting on behalf of the Purchaser and not in his/her personal
capacity, dated the Closing Date, to the effect that the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.

          (e) Release. Sellers shall have received written evidence, reasonably satisfactory to
Sellers, that the Transelec Entities have irrevocably and unconditionally released each of Sellers
and their Affiliates from any and all Liabilities to the Transelec Entities (except Liabilities
under this Agreement and under Contracts listed in Schedule 5.7) (the “Release
Letter”).

          (f) Legal Opinions. Purchaser shall have delivered to Sellers a legal opinion of (i)
Stikeman Elliott LLP, special Canadian counsel to Purchaser and Purchaser Guarantor regarding the
enforceability of this Agreement and certain related matters with respect to Purchaser and
Purchaser Guarantor, and (ii) Philippi Yrarrazaval, Pulido & Brunner, special Chilean counsel to
Purchaser and Purchaser Guarantor, in each case, in form and substance reasonably acceptable to
Purchaser and Sellers.

          (g) Other Certificates. Corporate resolutions duly adopted by the Board of Directors
of each of Purchaser and Purchaser Guarantor or evidence of any actions required by Purchaser and
Purchaser Guarantor for the execution and delivery by Purchaser and Purchaser Guarantor of this
Agreement and each other Transaction Document to which it is a party and the performance by
Purchaser and Purchaser Guarantor of the transactions contemplated hereby and thereby, duly
certified by the Secretary or an Assistant Secretary of Purchaser and Purchaser Guarantor, and an
incumbency certificate, certifying the names and true signatures of the officers of Purchaser and
Purchaser Guarantor authorized to execute and deliver this Agreement, each other Transaction
Document to which it is a party and any other document or certificate delivered hereunder or
thereunder.

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          (h) Brookfield Letter. Brookfield shall have delivered to Sellers a letter reasonably
satisfactory to Sellers whereby Brookfield agrees to ensure that Purchaser or Purchaser Guarantor
has sufficient funds to pay the VI Adjustment Amount and the Transition Period Adjustment Amount as
contemplated in this Agreement.

ARTICLE VII

TERMINATION

     7.1 Termination. This Agreement may be terminated at any time prior to the Closing Date:

          (a) by the mutual written agreement of Purchaser and Sellers Guarantor (on behalf of the
Sellers);

          (b) by Purchaser or Sellers Guarantor (on behalf of the Sellers), if (i) a statute, rule,
regulation or executive order shall have been enacted, entered or promulgated prohibiting the
consummation of the transactions contemplated hereby or (ii) an order, decree, ruling or injunction
shall have been entered permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such order, decree, ruling or injunction
shall have become final and non-appealable and the Party seeking to terminate this Agreement
pursuant to this Section 7.1(b)(ii) shall have used commercially reasonable efforts to
remove such order, decree, ruling or injunction;

          (c) by Purchaser or Sellers Guarantor (on behalf of the Sellers), by written notice, if the
Closing shall not have occurred on or before August 31, 2006 (the “Initial Termination
Date”); provided, however, that the right to terminate the Agreement under this
Section 7.1(c) shall not be available to any Party whose failure to fulfill any obligation
under this Agreement shall have caused or resulted in the failure of the Closing Date to occur on
or before such date; and provided, further, that if on the Initial Termination Date
the conditions to the Closing set forth in Section 6.1(a) and/or Section 6.1(b)
have not been fulfilled but all other conditions to the Closing (other than those conditions that,
by their terms, cannot be satisfied until the Closing) have been fulfilled (or waived) or are
capable of being fulfilled by such date that is 30 days following the Initial Termination Date (the
“Final Termination Date”), then no Party shall have the right to terminate this Agreement
pursuant to this Section 7.1(c) prior to the Final Termination Date;

          (d) by Purchaser, so long as Purchaser is not then in Material breach of any of its
representations, warranties, covenants or agreements hereunder, by written notice to Sellers, if
there shall have been a breach of any representation or warranty of Sellers, or a breach of any
covenant or agreement of Sellers hereunder, which breaches would be reasonably expected to have,
individually or in the aggregate, a Transelec Material Adverse Effect, and such breach shall not
have been remedied within 30 days after receipt by Sellers of notice in writing from Purchaser (a
“Breach Notice”), specifying the nature of such breach and requesting that it be remedied
or Purchaser shall not have received adequate assurance of a cure of such breach within such
thirty-day period or Sellers shall not have made a capital contribution to the Transelec Entities
in an amount equal to the expected damages from such breach, provided
that Sellers shall have no obligation to make any such capital contribution pursuant to this
Section 7.1(d);

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          (e) by Sellers (acting together), so long as none of Sellers is then in Material breach of any
of its representations, warranties, covenants or agreements hereunder, by written notice to
Purchaser, if there shall have been a breach of any representation or warranty, or a breach of any
covenant or agreement of Purchaser hereunder, which breaches would reasonably be expected to have,
individually or in the aggregate, a Purchaser Material Adverse Effect, and such breach shall not
have been remedied within 30 days after receipt by Purchaser of notice in writing from Sellers,
specifying the nature of such breach and requesting that it be remedied or Sellers shall not have
received adequate assurance of a cure of such breach within such thirty-day period; or

          (f) by Sellers (acting together), so long as none of Sellers is then in Material breach of any
of its representations, warranties, covenants or agreements hereunder, by written notice to
Purchaser, if the Financing Arrangements have been terminated or cease to be in effect and
Purchaser is not able to secure replacement financing arrangements or commitment letters at or
prior to the later of (i) the Initial Termination Date and (ii) 30 days after receipt by Purchaser
of notice in writing from Sellers of their intention to terminate this Agreement pursuant to this
Section 7.1(f).

     7.2 Effect of Termination. No termination of this Agreement pursuant to
Section 7.1 shall be effective until notice thereof is given to the non-terminating Parties
specifying the provision hereof pursuant to which such termination is made. If validly terminated
pursuant to Section 7.1, this Agreement shall, except as provided in Section 1.5 or
this Section 7.2, become wholly void and of no further force and effect without liability
to any Party or to any Affiliate, or their respective members or shareholders, directors, officers,
employees, agents, advisors or representatives, and following such termination no Party shall have
any liability under this Agreement or relating to the transactions contemplated by this Agreement
to any other Party; provided that no such termination shall relieve Purchaser and
Sellers from liability for fraud or any willful or intentional breach of any provision of this
Agreement prior to such termination. In the event of the termination of this Agreement as provided
in Section 7.1, Purchaser shall redeliver to Sellers or the Transelec Entities, as the case
may be, and will cause its agents to redeliver to Sellers or the Transelec Entities, as the case
may be, all documents, workpapers and other materials of Sellers or the Transelec Entities relating
to any of them and the transactions contemplated hereby, whether obtained before or after the
execution hereof and Purchaser shall comply with all of its obligations under the Confidentiality
Agreement.

ARTICLE VIII

INDEMNIFICATION

     8.1 Indemnification by Sellers. Subject to the provisions of this Article VIII,
Sellers, jointly and severally, agree to indemnify, defend and hold harmless the Purchaser
Indemnified Parties from and against any and all, subject to the limitations in
Section 8.5, Liabilities, demands, claims, suits, actions, or causes of action, losses,
costs, expenses, damages and

40

 

judgments, whether or not resulting from third party claims, (including reasonable fees and
expenses of attorneys and accountants) (collectively, “Damages”) arising out of or relating
to any inaccuracy or breach of any representation, warranty or covenant (in each case, without
regard to any limitation or qualification as to “Material,” “material,”
“materiality,” “Sellers Material Adverse Effect”, “Transelec Material Adverse
Effect” or any other qualification or limitation of similar import contained in such
representation, warranty or covenant) of Sellers or Sellers Guarantor contained herein, in any
Transaction Document or in any certificate delivered under this Agreement.

     8.2 Amount of Damages. Notwithstanding anything to the contrary in this Agreement, the
Damages incurred by the Purchaser Indemnified Parties (including for greater certainty Damages
suffered by the Transelec Entities) arising out of or relating to any inaccuracy or breach of any
representation or warranty of Sellers contained in Article III with respect to the
Transelec Entities shall be limited to, and shall not, exceed, 92% of the Damages incurred by the
Transelec Entities arising out of or relating to such inaccuracy or breach of any such
representation or warranty contained in Article III. For the avoidance of doubt, the
limitations in this Section 8.2 shall not apply to any Damages directly incurred or
suffered by Purchaser (including any Damages in respect of a breach of Sections 2.2 or
3.2(b)).

     8.3 Indemnification by Purchaser. Subject to the provisions of this Article VIII,
Purchaser agrees to indemnify, defend and hold harmless the Sellers Indemnified Parties, from and
against any and all, subject to the limitations in Section 8.5, Damages arising out of or
relating to any inaccuracy or breach of any representation, warranty or covenant (in each case,
without regard to any limitation or qualification as to “Material,” “materiality,”
“material,” “Purchaser Material Adverse Effect” or any other qualification or
limitation of similar import contained in such representation, warranty or covenant) of Purchaser
or Purchaser Guarantor contained herein, in any Transaction Document or in any certificate
delivered under this Agreement.

     8.4 Indemnification Process

          (a) A party making a claim for indemnification under this Article VIII shall be, for
the purposes of this Agreement, referred to as an “Indemnified Party” and a party against
whom such claims are asserted under this Article VIII shall be, for the purposes of this
Agreement, referred to as an “Indemnifying Party”. All claims by any Indemnified Party
under this Article VIII shall be asserted and resolved as set forth below.

          (b) In the event that (i) any action, application, suit, demand, claim or legal,
administrative, arbitration or other alternative dispute resolution proceeding, hearing or
investigation (each, a “Proceeding”) is asserted or instituted by any Person other than the
Parties or their Affiliates which could give rise to Damages for which an Indemnifying Party could
be liable to an Indemnified Party under this Agreement (such Proceeding, a “Third Party
Claim”) or (ii) any Indemnified Party under this Agreement shall have a claim to be indemnified
by any Indemnifying Party under this Agreement which does not involve a Third Party Claim (such
claim, a “Direct Claim” and, together with Third Party Claims, “Claims”), the
Indemnified Party shall, promptly after it becomes aware of a Third Party Claim, or facts
supporting a Direct

41

 

Claim, send to the Indemnifying Party a written notice specifying the nature of such
Proceeding and the amount or estimated amount thereof (which amount or estimated amount shall not
be conclusive of the final amount, if any, of such Proceeding) (a “Claim Notice”), together
with copies of all notices and documents (including court papers) served on or received by the
Indemnified Party in the case of a Third Party Claim; provided that a delay in
notifying the Indemnifying Party shall not relieve the Indemnifying Party of its obligations under
this Article VIII except to the extent that (and only to the extent that) the Indemnifying
Party shall have been materially prejudiced by such failure to give such notice, in which case the
Indemnifying Party shall be relieved of its obligations under this Article VIII to the
extent of such prejudice.

          (c) In the event of a Third Party Claim, the Indemnifying Party shall have the right to defend
the Indemnified Party against such Third Party Claim and be entitled to appoint experts,
consultants and/or counsel of the Indemnifying Party’s choice at the expense of the Indemnifying
Party to represent the Indemnified Party in connection with such Proceeding (in which case the
Indemnifying Party shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by any Indemnified Party or any other costs or expenses with respect to the
defense of a Third Party Claim except as set forth below); provided that such
experts, consultation and/or counsel is reasonably acceptable to the Indemnified Party.
Notwithstanding an Indemnifying Party’s election to defend such Third Party Claim and appoint
counsel acceptable to the Indemnified Party to represent an Indemnified Party in connection with a
Third Party Claim, an Indemnified Party shall have the right to engage separate counsel, but the
Indemnifying Party shall bear the reasonable fees, costs and expenses of such separate counsel only
if (i) the use of counsel selected by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest or (ii) the Indemnifying Party shall not
have engaged counsel to represent the Indemnified Party within a reasonable time after notice of
the institution of such Third Party Claim; provided that, notwithstanding such
failure to engage counsel within a reasonable time, the Indemnifying Party shall have the right to
assume the defense of such Third Party Claim by appointment of counsel reasonably acceptable to the
Indemnified Party and shall thereafter cease to be responsible for the fees and expenses of
separate counsel appointed by the Indemnified Party. Nothing in this Section 8.4(c) shall
require the Indemnifying Party to be responsible for the fees and expenses of more than one counsel
at any time in connection with the defense against a Third Party Claim. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in defending and contesting any Proceeding which the Indemnifying Party defends, or, if
appropriate and related to the Proceeding in question, in making any counterclaim against the
person asserting the Third Party Claim, or any cross-complaint against any Person. No Third Party
Claim may be settled or compromised (i) by the Indemnified Party without the prior written consent
of the Indemnifying Party (which consent shall not be unreasonably withheld, delayed or
conditioned) or (ii) by the Indemnifying Party without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld, delayed or conditioned), unless, in the
case of this clause (ii), the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party (if such claim against the Indemnified Party for such indemnification is
successful) and a full and unconditional release is provided to the Indemnified Party. In the
event any Indemnified Party settles or compromises or consents to the entry of any judgment with
respect to any Third Party Claim without the prior written consent of the Indemnifying Party
(except in the event the Indemnifying Party unreasonably withheld, delayed

42

 

or conditioned its consent), each Indemnified Party shall be deemed to have waived all rights
against the Indemnifying Party for indemnification under this Article VIII with respect to
such Third Party Claim only to the extent the Indemnifying Party is actually prejudiced by such
settlement, compromise or consent.

          (d) In the event of a Direct Claim, the Indemnifying Party shall notify the Indemnified Party
within 30 days of receipt of a Claim Notice whether the Indemnifying Party disputes such Claim.
From and after the delivery of a Claim Notice under this Agreement, at the reasonable request of
the Indemnifying Party, each Indemnified Party shall grant the Indemnifying Party and its
representatives reasonable access to the books, records, employees, representatives and properties
of such Indemnified Party to the extent reasonably related to the matters to which the Claim Notice
relates. If the Indemnified Party is Purchaser, Purchaser shall cause the Transelec Entities to
grant to the Indemnifying Party the access described in the immediately preceding sentence. All
such access shall be granted during normal business hours and shall be granted under conditions
which will not unreasonably interfere with the business and operations of such Indemnified Party.

     8.5 Limitations on Claims

          (a) Liability Threshold for Indemnified Parties. Notwithstanding anything in this
Article VIII to the contrary but subject to Section 8.5(d)(iv), no Purchaser
Indemnified Party or Sellers Indemnified Party shall be entitled to indemnification pursuant to
Sections 8.1 or 8.3, as applicable, unless and until the aggregate amount of
Damages incurred by such Party for which indemnification is available under Sections 8.1 or
8.3, as applicable, exceeds an amount equal to $[**] (the “Liability Threshold”),
and then, subject to Section 8.5(b), the Purchaser Indemnified Parties or the Sellers
Indemnified Parties, as applicable, shall be entitled to the benefit of the indemnity under
Sections 8.1 or 8.3 as applicable, [**].

          (b) Threshold for Damages. Notwithstanding anything in this Article VIII to
the contrary, no Purchaser Indemnified Party or Seller Indemnified Party shall be entitled to make
any single claim or series of similar or related claims with respect to a breach of a
representation or warranty pursuant to Sections 8.1 or 8.3, as applicable, unless
the Damages with respect to any such single claim or series of similar or related claims,
individually or in the aggregate, exceed $[**] (the “Minimum Threshold Amount”).

          (c) Maximum Liability. Notwithstanding anything in this Agreement to the contrary but
subject to Section 8.5(d)(iv), the aggregate amount of Damages payable by either Sellers or
Purchaser pursuant to Sections 8.1 or 8.3, as applicable, shall not exceed an
amount equal to $[**] (the “Cap”).

          (d) Additional Limitations.

               (i) The amount of any Damages incurred by the Indemnified Party shall be reduced by the
net amount the Indemnified Party or any of its Affiliates actually recovers (after deducting
all attorneys’ fees, expenses and other costs of recovery) from any insurer or other party
liable for such Damages (other than the Indemnifying Party). The Indemnified Party shall use commercially reasonable efforts to effect any such
recovery.

43

 

               (ii) The amount of any Damages incurred by the Indemnified Party shall be reduced by
the net amount of any Tax benefit actually realized by the Indemnified Party arising from
the recognition of Damages (after taking into account any Tax Liability incurred by the
Indemnified Party in connection with the receipt of any indemnification payment therefore).
For greater certainty, the Indemnifying Party shall be obliged to pay the full amount of the
Damages, without taking into account the adjustments made pursuant to this paragraph
8.5(d)(ii), until any net Tax refund is actually received or effective tax savings
is assessed; thereafter, the Indemnified Party shall refund the Indemnifying Party an amount
equal to the amount by which the amount actually paid to the Indemnified Party exceeds the
amount that would have been payable taking into account the adjustments made pursuant to
this paragraph 8.5(d)(ii).

               (iii) Any liability for indemnification under this Agreement shall be determined
without duplication of recovery by reason of the state of facts giving rise to such
liability constituting a breach of more than one representation, warranty, covenant or
agreement hereunder.

               (iv) Notwithstanding anything to the contrary herein, the amount of any Damages
incurred by any Indemnified Party in respect of any breach of Sections 2.2,
3.2(b), 3.5, 5.1(d), 5.6(b), 5.10, or 11.18 shall be
determined and payable without regard to the Liability Threshold, the Minimum Threshold
Amount and the Cap. In addition, none of the thresholds and limitations set forth in this
Section 8.5 (including the Liability Threshold, the Minimum Threshold Amount and the
Cap) shall apply to any adjustments to the Purchase Price provided for in Sections
1.6, 1.7 and 1.8.

               (v) Notwithstanding anything to the contrary in this Agreement, the Purchaser
Indemnified Parties shall not be entitled to any indemnification pursuant to Section
8.1 for Damages arising out of or relating to any inaccuracy or breach of any
representation or warranty of Sellers contained in Article III which was disclosed
to the Purchaser on or prior to Closing to the extent that any event, fact or circumstance
causing such inaccuracy or breach, individually or in the aggregate, constituted a Transelec
Material Adverse Effect as disclosed and identified as such by Sellers in writing to
Purchaser on or prior to Closing, and Sellers shall not, under such circumstances, have any
liability to any Purchaser Indemnified Parties with respect to such Damages and Transelec
Material Adverse Effect in the event that the Closing occurs.

          (e) Exclusive Remedy. Except to the extent provided in Section 11.13 and
Section 11.18, from and after the Closing, the indemnities provided for in this Article
VIII shall be the exclusive remedies of the Parties and their respective officers, directors,
employees, Affiliates, agents, representatives, successors and assigns for any breach of or
inaccuracy in any representation or warranty or breach of or non-compliance with any covenant or
agreement contained in this Agreement and the Parties shall not be entitled to a rescission of this
Agreement or to any further indemnification or other rights or claims of any nature whatsoever in
respect

44

 

thereof, all of which the Parties hereto hereby waive; provided, however, that
the foregoing shall not limit the right of any Party to assert a claim based on fraud, bad faith or
willful misconduct.

     8.6 Characterization of Indemnification Payments. Purchaser and Sellers agree to treat any
indemnification payment made under this Agreement as an adjustment to the Purchase Price.

     8.7 Limitation on Damages. No Party shall, under any circumstance, have any liability to
any other Party for any special, indirect, consequential or punitive damages claimed by such other
Party under the terms of or due to any breach or non-performance of this Agreement, including lost
profits, loss of revenue or income, cost of capital, or loss of business reputation or opportunity,
except in respect of any such damages relating to, arising from or in connection with a breach of
Section 11.18 or in the event an Indemnified Party is required to pay any such damages to a
third party in connection with a Third Party Claim.

ARTICLE IX

GUARANTEES

     9.1 Purchaser Guaranty

          (a) Guaranty. Purchaser Guarantor hereby unconditionally and irrevocably guarantees
to Sellers, on the terms and conditions set forth in this Section 9.1 (the “Purchaser
Guaranty”), the prompt performance, when due, of Purchaser’s obligations under this Agreement,
including payment of the Purchase Price at the Closing (the “Purchaser Guaranteed
Obligations”).

          (b) Demand. If Purchaser shall fail to fulfill any of the Purchaser Guaranteed
Obligations, when and as the same shall become due, then Sellers shall be entitled to make a demand
upon Purchaser Guarantor hereunder in writing specifying in reasonable detail (i) the provision of
this Agreement of which Purchaser is in breach, (ii) in what manner and in what amount Purchaser
has failed to perform pursuant to this Agreement and (iii) an explanation of why such payment is
due with a specific statement by an officer of Sellers that Sellers are demanding performance by
Purchaser Guarantor under the Purchaser Guaranty (hereinafter referred to as a “Purchaser
Demand”). A single written Purchaser Demand shall be effective as to any specific default
during the continuance of such default, until Purchaser or Purchaser Guarantor has cured such
default, and additional written Purchaser Demands concerning such default shall not be required
unless such default is cured and subsequently recurs.

          (c) Payment. Purchaser Guarantor shall, within ten Business Days following receipt of
a Purchaser Demand, fully pay and perform such Purchaser Guaranteed Obligations then due and owing
as set forth in the Purchaser Demand to such account as Sellers may specify in writing to Purchaser
Guarantor from time to time. Any payment made by Purchaser Guarantor hereunder shall, to the
extent so made, discharge the obligations of Purchaser Guarantor hereunder with respect to such
amounts paid.

45

 

          (d) Representation and Warranties. Purchaser Guarantor represents and warrants to
Sellers as follows:

               (i) Purchaser Guarantor is a sociedad de responsabilidad limitada duly organized,
validly existing, and in good standing under the laws of the Republic of Chile.

               (ii) Purchaser Guarantor has full power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution, delivery and performance
by Purchaser Guarantor of this Agreement and the consummation by Purchaser Guarantor of the
transactions contemplated hereby have been duly and validly authorized by all requisite
action on the part of Purchaser Guarantor, and no other proceedings or approvals on the part
of Purchaser Guarantor are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and delivered by
Purchaser Guarantor and, assuming the due authorization, execution and delivery hereof by
each other Party, constitutes the legal, valid and binding obligation of Purchaser
Guarantor, enforceable against Purchaser Guarantor in accordance with its terms, except as
limited by Laws affecting the enforcement of creditors’ rights generally or by general
equitable principles.

          (e) Purchaser Guarantor’s Obligations Unconditional. The obligations of Purchaser
Guarantor hereunder shall remain in full force and effect notwithstanding any act, omission, event
or circumstance whatsoever, until full, valid and proper performance of the Purchaser Guaranteed
Obligations.

          (f) Independent Obligations. The obligations of Purchaser Guarantor hereunder are
independent of the obligations of Purchaser.

          (g) Waiver of Notice. Purchaser Guarantor unconditionally waives:

               (i) demands, protests, or notices as the same pertain to Purchaser;

               (ii) any right to require Sellers to proceed against Purchaser or to exhaust any
security held by Sellers or to pursue any other remedy; and

               (iii) any defense based upon an election of remedies by Sellers, unless the same would
excuse performance by Purchaser under this Agreement.

          (h) Subrogation. Purchaser Guarantor agrees with respect to the Purchaser Guaranty
that it shall have no right of subrogation, reimbursement, contribution or indemnity, nor any right
of recourse to security for the Purchaser Guaranteed Obligations until all of the Purchaser
Guaranteed Obligations have been paid in full.

          (i) Discharge; Reinstatement; Preference. If at any time any payment by or on behalf
of Purchaser in respect of the Purchaser Guaranteed Obligations is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of Purchaser or otherwise,
Purchaser Guarantor’s obligations with respect to such payment shall be reinstated

46

 

at such time as though such payment had been due but not made at such time. If any payment by
Purchaser Guarantor to Sellers is held to constitute a preference under any applicable bankruptcy
laws, or if under applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws of general application with respect to creditors, Sellers are
required to refund part or all of any payment or pay the amount thereof to any other party, such
payment to Sellers shall not constitute a release from any liability hereunder, and Purchaser
Guarantor’s liability hereunder shall be reinstated to the extent of such refund or payment to
another party.

          (j) Expenses. Purchaser Guarantor agrees to pay all reasonable costs, expenses and
fees, including all reasonable attorneys’ fees and expenses, that may be incurred by Sellers in
enforcing the Purchaser Guaranty following any default on the part of Purchaser, if and to the
extent Purchaser Guarantor fails to perform its obligations under the Purchaser Guaranty when due.

     9.2 Sellers Guaranty

          (a) Guaranty. Sellers Guarantor hereby unconditionally and irrevocably guarantees to
Purchaser, on the terms and conditions set forth in this Section 9.2 (the “Sellers
Guaranty”), the prompt performance, when due, of Sellers’ obligations under this Agreement (the
“Sellers Guaranteed Obligations”).

          (b) Demand. If Sellers shall fail to fulfill any of the Sellers Guaranteed
Obligations, when and as the same shall become due, then Purchasers shall be entitled to make a
demand upon Sellers Guarantor hereunder in writing specifying in reasonable detail (i) the
provision of this Agreement of which Sellers are in breach, (ii) in what manner and in what amount
Sellers have failed to perform pursuant to this Agreement and (iii) an explanation of why such
payment is due with a specific statement by an officer of Purchaser that Purchaser is demanding
performance by Sellers Guarantor under the Sellers Guaranty (hereinafter referred to as a
“Sellers Demand”). A single written Sellers Demand shall be effective as to any specific
default during the continuance of such default, until Sellers or Sellers Guarantor has cured such
default, and additional written Sellers Demands concerning such default shall not be required
unless such default is cured and subsequently recurs.

          (c) Payment. Sellers Guarantor shall, within ten Business Days following receipt of a
Sellers Demand, fully pay and perform such Seller Guaranteed Obligations then due and owing as set
forth in the Sellers Demand to such account as Purchaser may specify in writing to Sellers
Guarantor from time to time. Any payment made by Sellers Guarantor hereunder shall, to the extent
so made, discharge the obligations of Sellers Guarantor hereunder with respect to such amounts
paid.

          (d) Representation and Warranties. Sellers Guarantor represents and warrants to
Purchaser as follows:

               (i) Sellers Guarantor is a body corporate, duly organized, validly existing, and in
good standing under the laws of the Province of Québec.

47

 

               (ii) Sellers Guarantor has full power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and performance by
Sellers Guarantor of this Agreement and the consummation by Sellers Guarantor of the
transactions contemplated hereby have been duly and validly authorized by all requisite
action on the part of Sellers Guarantor, and no other proceedings or approvals on the part
of Sellers Guarantor are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and delivered by
Sellers Guarantor and, assuming the due authorization, execution and delivery hereof by each
other Party, constitutes the legal, valid and binding obligation of Sellers Guarantor,
enforceable against Sellers Guarantor in accordance with its terms, except as limited by
Laws affecting the enforcement of creditors’ rights generally or by general equitable
principles.

          (e) Sellers Guarantor’s Obligations Unconditional. The obligations of Sellers
Guarantor hereunder shall remain in full force and effect notwithstanding any act, omission, event
or circumstance whatsoever, until full, valid and proper performance of the Sellers Guaranteed
Obligations.

          (f) Independent Obligations. The obligations of Sellers Guarantor hereunder are
independent of the obligations of Sellers.

          (g) Waiver of Notice. Sellers Guarantor unconditionally waives:

               (i) demands, protests, or notices as the same pertain to Sellers;

               (ii) any right to require Purchaser to proceed against Sellers or to exhaust any
security held by Purchaser or to pursue any other remedy; and

               (iii) any defense based upon an election of remedies by Purchaser, unless the same
would excuse performance by Sellers under this Agreement.

          (h) Subrogation. Sellers Guarantor agrees with respect to the Sellers Guaranty that
it shall have no right of subrogation, reimbursement, contribution or indemnity, nor any right of
recourse to security for the Sellers Guaranteed Obligations until all of the Sellers Guaranteed
Obligations have been paid in full.

          (i) Discharge; Reinstatement; Preference. If at any time any payment by or on behalf
of Sellers in respect of the Sellers Guaranteed Obligations is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of any of the Sellers or
otherwise, Sellers Guarantor’s obligations with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time. If any payment by Sellers
Guarantor to Purchaser is held to constitute a preference under any applicable bankruptcy laws, or
if under applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
other similar laws of general application with respect to creditors, Purchaser is required to
refund part or all of any payment or pay the amount thereof to any other party, such payment to
Sellers shall not constitute a release from any liability hereunder, and

48

 

Sellers Guarantor’s liability hereunder shall be reinstated to the extent of such refund or
payment to another party.

          (j) Expenses. Sellers Guarantor agrees to pay all reasonable costs, expenses and
fees, including all reasonable attorneys’ fees and expenses, that may be incurred by Purchaser in
enforcing the Sellers Guaranty following any default on the part of Sellers, if and to the extent
Sellers Guarantor fails to perform its obligations under the Sellers Guaranty when due.

ARTICLE X

DEFINITIONS AND INTERPRETATION

     10.1 Defined Terms. The following terms are defined in the corresponding Sections of this
Agreement:

	 	 	 
	Defined Term	 	Section Reference
	Actual Closing Date Working Capital

	 	Section 1.6(b)
	 

	 	 
	Affiliate Contracts

	 	Section 3.13
	 

	 	 
	Agreement

	 	Preamble
	 

	 	 
	Assignment Agreement

	 	Section 1.4(b)
	 

	 	 
	Breach Notice

	 	Section 7.1(d)
	 

	 	 
	Brookfield

	 	Recitals
	 

	 	 
	Cap

	 	Section 8.5(c)
	 

	 	 
	Claim Notice

	 	Section 8.4(b)
	 

	 	 
	Claims

	 	Section 8.4(b)
	 

	 	 
	Closing

	 	Section 1.3
	 

	 	 
	Closing Date

	 	Section 1.3
	 

	 	 
	Confidential Information

	 	Section 11.18(c)
	 

	 	 
	Contract

	 	Section 2.1(c)
	 

	 	 
	Damages

	 	Section 8.1
	 

	 	 
	Direct Claim

	 	Section 8.4(b)
	 

	 	 
	Drag-Along Notice

	 	Section 5.13
	 

	 	 
	Easements

	 	Section 3.9(a)
	 

	 	 
	Escrow Agent

	 	Section 1.5
	 

	 	 
	Escrow Agreement

	 	Section 1.5
	 

	 	 
	Escrow Amount

	 	Section 1.5
	 

	 	 
	Estimated Closing Date Working Capital

	 	Section 1.6(a)
	 

	 	 
	Final Termination Date

	 	Section 7.1(c)
	 

	 	 
	Financing Arrangements

	 	Section 4.3
	 

	 	 
	HQ Letter of Guarantee

	 	Section 6.2(i)
	 

	 	 
	HQI

	 	Preamble
	 

	 	 
	IFC

	 	Recitals
	 

	 	 
	IFC Shares

	 	Section 2.3
	 

	 	 
	Indemnified Party

	 	Section 8.4(a)
	 

	 	 
	Indemnifying Party

	 	Section 8.4(a)
	 

	 	 

49

 

	 	 	 
	Defined Term	 	Section Reference
	Initial Termination Date

	 	Section 7.1(c)
	 

	 	 
	Insurance Policies

	 	Section 3.14(a)
	 

	 	 
	Intellectual Property

	 	Section 3.12(a)
	 

	 	 
	Leased Real Property

	 	Section 3.9(a)
	 

	 	 
	Liability Threshold

	 	Section 8.5(a)
	 

	 	 
	Material Agreement

	 	Section 3.10(c)
	 

	 	 
	Minimum Threshold Amount

	 	Section 8.5(b)
	 

	 	 
	Minority Norte Purchase Price

	 	Section 1.2
	 

	 	 
	Minority Norte Shares

	 	Recitals
	 

	 	 
	Negative Estimated Working Capital Adjustment

	 	Section 1.6(a)
	 

	 	 
	Negative Final Working Capital Adjustment

	 	Section 1.6(e)
	 

	 	 
	Norte

	 	Recitals
	 

	 	 
	Norte Shares

	 	Recitals
	 

	 	 
	Owned Real Property

	 	Section 3.9(a)
	 

	 	 
	Party

	 	Preamble
	 

	 	 
	Positive Estimated Working Capital Adjustment

	 	Section 1.6(a)
	 

	 	 
	Positive Final Working Capital Adjustment

	 	Section 1.6(e)
	 

	 	 
	Proceeding

	 	Section 8.4(b)
	 

	 	 
	Puno

	 	Preamble
	 

	 	 
	Purchase Price

	 	Section 1.2
	 

	 	 
	Purchaser

	 	Preamble
	 

	 	 
	Purchaser Demand

	 	Section 9.1(b)
	 

	 	 
	Purchaser Guaranteed Obligations

	 	Section 9.1(a)
	 

	 	 
	Purchaser Guarantor

	 	Preamble
	 

	 	 
	Purchaser Guaranty

	 	Section 9.1(a)
	 

	 	 
	Purchaser Required Consents

	 	Section 4.2(b)
	 

	 	 
	Purchaser Required Statutory Approvals

	 	Section 4.2(c)
	 

	 	 
	Release Letter

	 	Section 6.2(g)
	 

	 	 
	Restricted Business

	 	Section 11.18(a)
	 

	 	 
	Restricted Matters

	 	Section 5.2(b)(ii)
	 

	 	 
	Restricted Period

	 	Section 11.18(a)
	 

	 	 
	Sellers

	 	Preamble
	 

	 	 
	Sellers Demand

	 	Section 9.2(b)
	 

	 	 
	Sellers Guaranteed Obligations

	 	Section 9.2(a)
	 

	 	 
	Sellers Guarantor

	 	Preamble
	 

	 	 
	Sellers Guaranty

	 	Section 9.2(a)
	 

	 	 
	Sellers Required Consents

	 	Section 2.1(c)
	 

	 	 
	Sellers Required Statutory Approvals

	 	Section 2.1(d)
	 

	 	 
	Shareholders Agreement

	 	Section 5.13
	 

	 	 
	Subject Shares

	 	Recitals
	 

	 	 

50

 

	 	 	 
	Defined Term	 	Section Reference
	Termination and Release Agreement

	 	Section 6.2(e)
	 

	 	 
	Third Party Claim

	 	Section 8.4(b)
	 

	 	 
	Transaction

	 	Section 1.1(b)
	 

	 	 
	Transelec

	 	Recitals
	 

	 	 
	Transelec Entities

	 	Section 3.1(a)
	 

	 	 
	Transelec Financial Statements

	 	Section 3.3(a)
	 

	 	 
	Transelec Material Contracts

	 	Section 3.10(a)
	 

	 	 
	Transelec Permits

	 	Section 3.8(a)
	 

	 	 
	Transelec Required Consents

	 	Section 3.1(b)
	 

	 	 
	Transelec Required Statutory Approvals

	 	Section 3.1(c)
	 

	 	 
	Transition Period

	 	Section 1.8(a)
	 

	 	 
	Transition Period Adjustment Amount

	 	Section 1.8(a)
	 

	 	 
	Transition Period Adjustment Costs

	 	Section 1.8(a)
	 

	 	 
	Transmisión

	 	Preamble
	 

	 	 
	VI Adjustment

	 	Section 1.7(a)
	 

	 	 
	VI Adjustment Accountant Statement

	 	Section 1.7(b)
	 

	 	 
	VI Adjustment Amount

	 	Section 1.7(d)
	 

	 	 
	VI Adjustment Sellers Statement

	 	Section 1.7(a)
	 

	 	 
	VI Adjustment Statement

	 	Section 1.7(a)
	 

	 	 
	VI Adjustment Statement of Objection

	 	Section 1.7(a)
	 

	 	 
	Working Capital Accountant Statement

	 	Section 1.6(c)
	 

	 	 
	Working Capital Closing Date Statement

	 	Section 1.6(b)
	 

	 	 
	Working Capital Sellers Statement

	 	Section 1.6(b)
	 

	 	 
	Working Capital Statement of Objection

	 	Section 1.6(b)
	 

	 	 

     10.2 Definitions. Except as otherwise expressly provided in this Agreement, or unless the
context otherwise requires, whenever used in this Agreement (including the Schedules), the
following terms will have the meanings indicated below:

     “2006 Trunk Transmission Study” means the study of trunk transmission assets performed
by Synex/Electronet/CESI as required under the Short Law and approved by the Ministry of Economy
(Ministerio de Economía, Fomento y Reconstrucción) concerning the period from 2004-2008 as
specified therein.

     “Affiliate” means, with respect to any Person or group of Persons, a Person that
directly or indirectly through one or more intermediaries, controls, is controlled by, or is under
common control with such Person or group of Persons.

     “Agreed Working Capital” means $30,000,000.

     “Alternative Proposal” means any merger, acquisition, consolidation, reorganization,
share exchange, tender offer, exchange offer or similar transaction, other than pursuant to this
Agreement, involving the Transelec Entities or any proposal or offer to acquire in any manner,
directly or indirectly, a substantial Equity Interest in or a substantial portion of the
assets of the Transelec Entities.

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     “Auditors” means the firm of auditors selected by mutual agreement of Sellers and
Purchaser.

     “Benefit Plans” means all written and all material unwritten plans, arrangements,
agreements, programs or policies, whether funded or unfunded and whether or not mandated by any
Governmental Entity, relating to the employees of the Transelec Entities to which any of the
Transelec Entities is a party or by which any of them are bound or under which any of them has any
liability or contingent liability and relating to (i) retirement savings or pensions, or
(ii) employee welfare benefits, including hospitalization, health, disability, life, termination,
past service or severance pay benefits or insurance, but excluding any such plan, arrangement,
agreement, program or policy relating to the employees of the Transelec Entities that is
administered by a Governmental Entity or other Person and that does not require any of the
Transelec Entities to make any monetary contribution and any such benefit established in the
collective bargaining agreements of the Transelec Entities.

     “Business Day” means a day other than a Saturday, or Sunday or any other day on which
banks are not required to be open or are authorized to close in Santiago, Chile, Montréal, Canada
and Toronto, Ontario.

     “Chilean GAAP” means Chilean generally accepted accounting principles in effect from
time to time, provided, however, that for purposes of determining the Actual
Closing Date Working Capital, Chilean GAAP means Chilean generally accepted accounting principles
as of the date hereof.

     “Confidentiality Agreement” means the Confidentiality Agreement, dated as of December
20, 2005, between HQI and Brookfield.

     “Consent” means any written consent, approval, authorization, order, filing,
registration or qualification of, by or with any Person.

     “Environmental Law” means any foreign, federal, state, or local Law relating to
(a) the treatment, disposal, emission, discharge, Release or threatened Release of Hazardous
Substances, (b) the preservation and protection of the environment (including natural resources,
air and surface or subsurface land or waters) or (c) the protection of human health and safety.

     “Equity Interests” means any shares of capital stock, membership interests,
partnership interests, joint venture interests or other equity interests, or any right to receive
any economic benefit or right similar to or derived from the foregoing.

     “Final Order” means an action by the relevant Governmental Entity which has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting
period prescribed by Law before the transactions contemplated hereby may be consummated has
expired, and as to which all conditions to the consummation of such transactions prescribed by Law,
regulation or order have been satisfied.

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     “Governmental Entity” means any supranational, national, federal, state, municipal or
local governmental or quasi-governmental or regulatory authority (including a national securities
exchange or other self-regulatory body), agency, governmental department, court, commission, board,
bureau or other similar entity, domestic or foreign, or any arbitrator or arbitral body.

     “Governmental Order” means any order, decree, ruling, injunction, judgment or similar
act of or by any Governmental Entity.

     “Hazardous Substance” means (a) any material, substance or waste (whether liquid,
gaseous or solid) that (i) requires removal, remediation or reporting under any Environmental Law,
or is listed, classified or regulated as a “hazardous waste” or “hazardous
substance” (or other similar term) pursuant to any applicable Environmental Law or (ii) is
regulated under applicable Environmental Laws as being, toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and (b) any petroleum
product or by-product, petroleum-derived substances wastes or breakdown products, asbestos or
polychlorinated biphenyls.

     “Knowledge” when used with respect to the Transelec Entities, means the knowledge of
any fact, circumstance or condition of those officers of the relevant Transelec Entities set forth
on Schedule 10.2(a) actually possessed by them after reasonable inquiry; when used with
respect to Sellers, means the knowledge of any fact, circumstance or condition of those officers of
Sellers or its Affiliates set forth on Schedule 10.2(b) actually possessed by them after
reasonable inquiry; and when used with respect to Purchaser, means the knowledge of any fact,
circumstance or condition of those officers of Purchaser or its Affiliates set forth on
Schedule 10.2(c) actually possessed by them after reasonable inquiry.

     “Law” means any law, statute, code, ordinance, regulation, rule, administrative order,
constitution, principle of common law or civil law or treaty of or by any Governmental Entity or
any arbitrator.

     “Liabilities” means any and all liabilities, debts, damages, adverse claims, fines,
penalties, indebtedness or other obligations of any nature (whether direct or indirect, absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or unaccrued, matured or
unmatured, asserted or unasserted, determined or determinable and whenever or however arising), and
including all reasonable costs and expenses relating thereto, including all fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and costs of investigation.

     “Lien” means any mortgage, hypothec, lien, pledge, assessment, claim, charge, security
interest, restriction on transfer, proxy or other voting agreement, or other legal or equitable
encumbrances, or any other adverse claim.

     “Material” when used with respect to (i) any of the Transelec Entities, means material
to the Transelec Entities taken as a whole, (ii) Purchaser, means material to Purchaser and its
subsidiaries, if any, taken as a whole, or (iii) any of Sellers, means material to Sellers taken as
a whole.

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     “Ordinary Course of Business” means the ordinary course of business consistent with
past custom and practice of the Transelec Business (including with respect to quantity and
frequency), as applicable, in a manner not inconsistent with customs and practices reflected in the
statements of income and cash flows included in the Transelec Financial Statements.

     “Organizational Documents” means articles of incorporation, certificate of
incorporation, charter, bylaws, articles of organization, formation or association, regulations,
operating agreement, certificate of limited partnership, partnership agreement, and all other
similar documents, instruments or certificates executed, adopted, or filed in connection with the
creation, formation, or organization of a Person, including any amendments thereto.

     “Permits” means all permits, concessions (including electric transmission
concessions), licenses, franchises, registrations, exemptions, variances, authorizations, consents,
orders, certificates and approvals required by, obtained from or otherwise made available by any
Governmental Entity or pursuant to any Law.

     “Permitted Liens” means (a) Liens for Taxes (i) not due and payable or (ii) which are
being contested in good faith by appropriate proceeding, (b) Liens of warehousemen, mechanics,
materialmen, Persons taking part in the construction or renovation of real property and other
similar statutory Liens incurred in the Ordinary Course of Business with respect to a liability
that is not yet due or delinquent or which is being contested in good faith and as to which
adequate reserves are maintained, (c) any Liens that do not, individually or in the aggregate,
materially detract from the value of any of the applicable property, rights or assets of the
businesses of the Transelec Entities or materially interfere with the use thereof as currently
used, (d) zoning, entitlement, conservation, restriction or other land use or environmental
regulation by any Governmental Entity and (e) any Lien arising under (i) the Organizational
Documents of the Transelec Entities, (ii) any shareholders or similar agreement to which any of the
Transelec Entities is a party or by which it is bound, (iii) easements, rights of way and similar
encumbrances affecting real property granted to third parties in the Ordinary Course of Business,
or (iv) any applicable Law.

     “Person” means any natural person, firm, partnership, association, corporation,
limited liability company, joint venture, trust, business trust, unincorporated organization,
Governmental Entity or other entity.

     “Purchaser Disclosure Schedule” means the Schedules setting forth certain disclosures
of Purchaser, or qualifications or exceptions to any of Purchaser’s representations or warranties
set forth in Article IV, which Schedules are delivered simultaneously with the execution
and delivery of this Agreement.

     “Purchaser Indemnified Parties” means Purchaser, Purchaser’s Affiliates (excluding the
Transelec Entities) and their respective directors, officers and employees, and their respective
heirs, successors and assigns.

     “Purchaser Material Adverse Effect” means an event, fact or circumstance that
(i) results in or causes a material adverse change in the business, assets or financial condition
of (a) Purchaser and its subsidiaries, if any, taken as a whole or (b) Purchaser Guarantor and its

54

 

subsidiaries taken as a whole and (ii) materially and adversely affects the ability of
Purchaser or Purchaser Guarantor to consummate the transactions contemplated by this Agreement or
perform its obligations hereunder or under the Purchaser Guaranty, as the case may be.

     “Regulated Trunk Transmission Assets” means Bi-directional high voltage lines of 220
kilovolts or greater and related assets, including rights of way, with the exception of trunk
transmission assets and related assets which are covered by specific contractual bi-lateral
agreements.

     “Release” means the release, spill, emission, leaking, pumping, pouring, emptying,
escaping, dumping, injection, deposit, disposal, discharge, dispersal, leaching or migrating of any
Hazardous Substance into the environment.

     “Sellers Disclosure Schedule” means the Schedules setting forth certain disclosures of
Sellers, or qualifications or exceptions to any of Sellers’ representations or warranties set forth
in Article II or Article III, which Schedules are delivered simultaneously with the
execution and delivery of this Agreement.

     “Sellers Indemnified Parties” means Sellers, Sellers’ Affiliates, and their respective
directors, officers and employees, and their respective heirs, successors and assigns.

     “Sellers Material Adverse Effect” means, with respect to Sellers, an event, fact or
circumstance that materially and adversely affects the ability of Sellers to consummate the
transactions contemplated by this Agreement or perform its obligations hereunder.

     “Short Law” means the Chilean electricity statute that amended the Electricity Act of
1982 and enacted in March 2004 (law number 19.940).

     “Tax” or “Taxes” means any tax, duty, charge, assessments, reassessment or
other levy separately or jointly due or payable to, or levied or imposed by any Governmental
Entity, including income, gross receipts, license, wages, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duty, capital, franchise,
profits, withholding, social security, unemployment, disability, real property, personal property,
sales, use, transfer, transaction, registration, value added, alternative/add-on minimum, estimated
or other tax, duty, charge, or other levy of any kind whatsoever, including any interest, penalty,
or addition thereto, and any interest with respect to such addition or penalty.

     “Tax Authority” shall mean the Ministry of Finance (Ministerio de Hacienda) and any
other Governmental Entity of the Republic of Chile responsible for the administration of any Taxes.

     “Tax Returns” means all tax returns, declarations, statements, reports, schedules,
forms and information returns and any amendments to any of the foregoing required to be filed in
respect of any Taxes.

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     “Transaction Documents” means this Agreement, the Assignment Agreement, the
Termination and Release Agreement, the HQ Letter of Guarantee, the Escrow Agreement and the
Brookfield letter referred to in Section 6.3(h).

     “Transelec Business” means the electric transmission business conducted by the
Transelec Entities in the Republic of Chile, including the trunk transmission, sub-transmission and
additional systems (assets connecting generation facilities and certain industrial users to the
trunk system or sub-transmission system).

     “Transelec Material Adverse Effect” means an event, fact or circumstance that has or
could reasonably be expected to result in or cause a material adverse effect in the business,
assets, properties, liabilities, financial condition or results of operations of the Transelec
Entities, taken as a whole, except to the extent such material adverse effect results from or is
caused by [**].

     “Transfer Taxes” means any and all transfer Taxes resulting from the transfer of the
Subject Shares and the Minority Norte Shares (excluding Taxes (i) measured in whole or in part by
net income or (ii) gain on the disposition of the Subject Shares or the Minority Norte Shares),
including sales, use, excise, stock, stamp, documentary, filing, recording and similar Taxes, fees,
duties, levies, customs, tariffs, imposts, assessments, obligations and charges.

     “VI” has the meaning ascribed thereto in Schedule 1.7.

     “Violation” means any violation, breach, default, right of termination, cancellation
or acceleration of any obligation.

     “Working Capital” means assets minus liabilities as set out in
Schedule 10.2(d).

     10.3 Interpretation. In this Agreement, unless otherwise specified, the following rules of
interpretation apply:

          (a) references to Sections, Schedules, Exhibits and Parties are references to sections or
sub-sections, schedules and exhibits of, and Parties to, this Agreement;

          (b) the section and other headings contained in this Agreement are for reference purposes only
and do not affect the meaning or interpretation of this Agreement;

          (c) words importing the singular include the plural and vice versa;

          (d) for all purposes of and under this Agreement, the words “include,” “includes” and
“including,” when used herein, shall be deemed in each case to be followed by the words “without
limitation”;

          (e) the words “hereof”, “herein” and “hereunder” and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement;

          (f) references to “$” or “dollars” refer to United States dollars; and

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          (g) the Parties have participated jointly in the negotiation and drafting of this Agreement
and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise
favoring or disfavouring any party by virtue of the authorship or any provision of this Agreement.

ARTICLE XI

GENERAL PROVISIONS

     11.1 Survival of Representations, Warranties, Covenants and Agreements. The
representations and warranties of the Parties contained herein shall survive the Closing Date for a
period of [**] following the date thereof; provided, however, that (i) the
representations and warranties of Sellers contained in Sections 2.1(b) (Authority),
2.2 (Right and Title to Subject Shares, Norte Shares and Minority Norte Shares),
3.1(a) (Organization and Qualification) and 3.2 (Equity Interests; Capitalization)
shall survive the Closing indefinitely, (ii) the representations and warranties of Purchaser
contained in Sections 4.2(a) (Authority) shall survive the Closing indefinitely, (iii) the
representations and warranties of Sellers contained in Section 3.11 (Environmental Matters)
shall survive the Closing for a period of [**] following the date hereof, and (iv) the
representations and warranties of Sellers contained in Section 3.5 (Taxes), shall survive
the Closing until [**] (taking into account any extensions or waivers thereof) which for the
purpose of this Agreement shall commence upon the Closing Date. All covenants and agreements
contained in this Agreement that contemplate or provide for any rights, obligations or actions of
any Party after the Closing shall survive the Closing until they are fully performed or terminated
in accordance with their terms. No claim or cause of action for indemnification under Article
VIII arising out of the inaccuracy or breach of any representation or warranty of Sellers or
Purchaser may be made following the termination of the applicable survival period; it being
understood that in the event notice of any claim for indemnification under Section 8.1 or
Section 8.3 shall have been given within the applicable survival period, the
representations and warranties that are the subject of such indemnification claim shall survive
until such time as such claim is finally resolved. The Parties agree that, after the Closing Date,
with respect to Sellers and Purchaser, any claim or cause of action against any of the Parties, or
any of their respective directors, officers, employees, Affiliates, successors, permitted assigns,
advisors, agents, or representatives based upon, directly or indirectly, any of the
representations, warranties, covenants or agreements contained in this Agreement, or any other
agreement, document or instrument to be executed and delivered in connection with this Agreement
may be brought only as expressly provided in Article VIII.

     11.2 Notices. All notices, requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be deemed to have been
duly given if (a) delivered personally, (b) mailed by certified or registered mail with postage
prepaid, (c) sent by next-day or overnight mail or delivery, or (d) sent by fax, as follows:

          (a) if to Purchaser, Purchaser Guarantor, or Transelec Entities (post-Closing):

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c/o Brookfield Asset Management Inc.

BCE Place, Suite 300

181 Bay St., PO Box 762

Toronto, ON M5J 2T3

Fax: (416) 365-9642

Telephone: (416) 956-5173

Attention: Jeffrey Blidner

with a copy to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Fax: (212) 310-8007

Telephone: (212) 310-8000

Attention: S. Wade Angus

(b) if to Sellers:

Hydro-Québec International Inc.

75 René-Lévesque Blvd. West

5th Floor

Montréal, Québec H2Z 1A4

Canada

Fax: 514-289-3740

Telephone: 514-289-4304

Attention: Daniel Garant

with a copy to:

Hydro-Québec

75 René-Lévesque Blvd. West

4th Floor

Montréal, Québec H2Z 1A4

Canada

Fax:(514) 289-4215

Telephone:(514) 289-4080

Attention: Me Pierre Gagnon, General Counsel Legal Affairs

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with a copy to:

McCarthy Tétrault LLP

Suite 2500

1000 de La Gauchetière Street West

Montréal, Québec H3B 0A2

Canada

Fax: 514-875-6246

Telephone: 514-397-4299

Attention: Jean-René Gauthier

with a copy to:

Claro y Cia

Apoquindo 3721, 13th Floor, P.O. Box 1867

Santiago, Chile

Fax: +56-2 367 3003

Telephone: +56-2 367 3000

Attention: Jose Maria Eyzaguirre Jr.

          (c) If to the Transelec Entities (pre-Closing):

Hydro-Québec International Inc.

740, rue Notre-Dame ouest, Bureau 800

Montréal, Québec H3C 3X6

Canada

Fax: 514-940-3456

Telephone: 514-282-8401

Attention: Daniel Garant

or, in each case, at such other address as may be specified in writing to the other Parties.

     All such notices, requests, demands, waivers and other communications shall be deemed to have
been received, if by personal delivery, certified or registered mail or next-day or overnight mail
or delivery, on the day delivered or, if by fax, on the next Business Day following the day on
which such fax was sent, provided that a copy is also sent by certified or registered mail. For
the purposes of this Section 11.2, notice to the Transelec Entities shall not constitute
notice to Sellers, and vice versa.

     11.3 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective heirs, successors and permitted assigns.

     11.4 Assignment; Successors; Third-Party Beneficiaries. This Agreement is not assignable
by any Party without the prior written consent of all of the other Parties and any attempt to
assign this Agreement without such consent shall be void and of no effect. Notwithstanding the
foregoing, without the prior written consent of Sellers, Purchaser and its permitted assigns may at
any time, in its sole discretion, assign, in whole or in part, (a) its rights

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and obligations pursuant to this Agreement and the Transaction Documents, to one or more of its
Affiliates, or (b) its rights under this Agreement and the Transaction Documents, in each case, for
collateral security purposes to any lender providing financing to Purchaser or lessor pursuant to a
lease financing transaction, and any such lender or lessor (or collateral agent acting on its
behalf) may exercise all of the rights and remedies of Purchaser hereunder and thereunder, and
Sellers agree to, and shall cause its Affiliates to, execute and deliver a consent in favor of such
lenders or lessors (or collateral agent acting on their behalf) with respect to the collateral
assignments contemplated by this Section 11.4 in form and substance reasonably satisfactory
to Sellers and containing customary and reasonable provisions for similar nonrecourse financings.
Notwithstanding the foregoing, Purchaser shall not be released or novated from any obligations
assigned by Purchaser pursuant to this Section 11.4. This Agreement shall inure to the
benefit of, and be binding on and enforceable by and against, the successors and permitted assigns
of the respective Parties, whether or not so expressed. Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person other than the Parties any
right, remedy or claim under or by reason of this Agreement.

     11.5 Amendment; Waivers; Etc. No amendment, modification or discharge of this Agreement,
and no waiver under this Agreement, shall be valid or binding unless set forth in writing and duly
executed by the Party against whom enforcement of the amendment, modification, discharge or waiver
is sought. Any such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the Party granting such waiver
in any other respect or at any other time. The waiver by any of the Parties of a breach of or a
default under any of the provisions of this Agreement, or any failure or delay to exercise any
right or privilege under this Agreement, shall not be construed as a waiver thereof or otherwise
affect any of such provisions, rights or privileges under this Agreement.

     11.6 Entire Agreement. This Agreement (including the Schedules, Exhibits and certificates
referred to in or delivered under this Agreement), the other Transaction Documents and the
Confidentiality Agreement constitute the entire agreement and supersede all prior agreements,
understandings and discussions (including any and all prior drafts to this Agreement or any other
Transaction Documents), both written and oral, among the Parties with respect to their subject
matters.

     11.7 Interpretation; Schedules. Items disclosed on one particular section of the Sellers
Disclosure Schedule or the Purchaser Disclosure Schedule relating to one section of this Agreement
shall be deemed to be constructively disclosed or listed in other sections of the Sellers
Disclosure Schedule or the Purchaser Disclosure Schedule, as the case may be, relating to other
sections of this Agreement to the extent it is reasonably apparent on the face of such other
sections of the Sellers Disclosure Schedule or the Purchaser Disclosure Schedule that such
disclosure is applicable to such other sections of the Sellers Disclosure Schedule or the Purchaser
Disclosure Schedule, as the case may be. The fact that any item of information is contained in any
Schedule shall not be construed as an admission of liability under any applicable Law, or to mean
that such information is required to be disclosed in or by this Agreement, or to mean that such
information is Material. Such information shall not be used as a basis for interpreting the
term “Material,” “material,” “materially,” “materiality” or
“Transelec Material Adverse Effect,” or any similar qualification in this Agreement.

60

 

     11.8 Severability. Any term or provision of this Agreement that is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction
or other authority declares that any term or provision hereof is invalid, void or unenforceable,
the Parties agree that the court making such determination, to the greatest extent legally
permissible, shall have the power to reduce the scope, duration, area or applicability of the term
or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable
term or provision with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.

     11.9 Counterparts. This Agreement may be executed and delivered (including via facsimile)
in several counterparts, each of which shall be deemed an original and all of which shall together
constitute one and the same instrument.

     11.10 Governing Law. This Agreement will be governed by and construed in accordance with
the domestic laws of the Province of Ontario without giving effect to any choice or conflict of law
provision or rule (whether of the Province of Ontario or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the Province of Ontario.

     11.11 Venue. Each of the Parties submits to the jurisdiction of Toronto, Ontario, in any
action or proceeding arising out of or relating to this Agreement and agrees that all claims in
respect of the action or proceeding may be heard and determined there. Each Party also agrees not
to bring any action or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties 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. Each Party agrees that a final judgment in any action or proceeding so brought will
be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or
in equity.

     11.12 Waiver of Jury Trial; Waiver of Immunity

          (a) Each of the Parties irrevocably and unconditionally waives, to the fullest extent
permitted by applicable Law, any right it may have to a trial by jury in respect of any action,
suit or proceeding arising out of or relating to this Agreement.

          (b) Each Party agrees that in any legal action or proceeding against it or its assets in
connection with this Agreement, no immunity from such legal action or proceedings (which shall
include suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution
or other enforcement) shall be claimed by or on behalf of it or with respect to its assets,
irrevocably waives any such right of immunity which it or its assets now have or may hereafter
acquire or which may be attributed to it or its assets and consents generally in

61

 

respect of such legal action or proceedings to the giving of any relief or the issue of any
process in connection with such action or proceedings including the making, enforcement or
execution against any property whatsoever (irrespective of its use or intended use) of any order of
judgment which may be made or given in such action or proceedings.

     11.13 Enforcement. The Parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not to be performed in accordance with the terms
hereof and that the Parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.

     11.14 Non-Recourse. Except as expressly provided under this Agreement, no past, present or
future director, officer, employee, incorporator, member, partner, shareholder, affiliate, agent,
attorney or representative of Purchaser or any of its Affiliates on the one hand, or Sellers or its
Affiliates on the other hand, shall have any liability for any obligations or liabilities of
Purchaser or Sellers, as applicable, under this Agreement or the other documents delivered by
Purchaser or Sellers, as applicable, in connection herewith, of or for any claim based on, in
respect of, or by reason of, the transactions contemplated hereby and thereby.

     11.15 No Right of Set-Off. Each of Sellers and Purchaser, for itself and its successors
and permitted assigns, hereby unconditionally and irrevocably waives any rights of set-off,
netting, offset, recoupment, or similar rights that such Sellers or Purchaser, as the case may be,
or any of its successors and permitted assigns has or may have with respect to the payment of the
Purchase Price or any other payments to be made by Purchaser pursuant to this Agreement or any
other document or instrument delivered by Sellers or Purchaser, as the case may be, in connection
herewith.

     11.16 Currency

          (a) All amounts payable to or by any Party under this Agreement shall be paid in United States
Dollars, unless otherwise expressly specified. All amounts set forth in this Agreement are
denominated in United States Dollars unless otherwise expressly specified.

          (b) In the event any conversion between United States Dollars and the Chilean Peso is required
in connection with this Agreement for any reason, such conversion shall be based on the average of
the exchange rates between Pesos and Dollars (expressed in Dollars per Peso) calculated with
reference to the “dólar observado,” as published for such date by the Central Bank of Chile
pursuant to paragraph No. 6 of Chapter I of the Compendium of Rules on Foreign Exchange of the
Central Bank of Chile, or to another equivalent rate or, if no such rate is published by the
Central Bank of Chile or reported in Chile, then to the foreign exchange spot mid-rates for such
day reported in The Wall Street Journal, Eastern Edition, or, if not so reported, on the mid-market
foreign exchange spot closing rates for such day reported in the Financial Times, or, if not so
reported, to spot foreign exchange mid-market rates for trading among banks in amounts $1,000,000
and more as quoted or ascertained in good faith by Citibank, N.A. (or its successor) in New York
City, New York, on each of the five Business Days preceding the day on which such conversion is to
be calculated for the purposes of carrying out the terms of this Agreement.

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     11.17 Interest. Any amount payable under this Agreement shall bear interest from (and
including) the date payment is due hereunder to (and excluding) the date of payment calculated
daily at the annual rate of interest established by Citibank, N.A. (or its successor) in New York
City, New York, as being its reference rate then in effect for determining interest rates for
commercial loans dominated in dollars made in the United States of America plus 1%.

     11.18 Non-Competition; Non-Solicitation; Confidentiality

          (a) For a period of [**] (the “Restricted Period”), Sellers Guarantor agrees that
neither it nor any of its Affiliates shall, directly or indirectly, own, manage, engage in,
operate, control, work for, consult with, render services for, do business with, maintain any
interest in (proprietary, financial or otherwise) or participate in the ownership, management,
operation or control of, any business, whether in corporate, proprietorship or partnership form or
otherwise, that competes with the Transelec Business, in each case anywhere in the Republic of
Chile (a “Restricted Business”); provided, however, that given the
extensive lead time associated with the Aysén project, the Restricted Period with respect to the
Aysén project shall be deemed to be [**]; provided further, however, that
the restrictions contained in this Section 11.18(a) shall not (i) restrict the acquisition
by Sellers, directly or indirectly, of less than [**] (not more than [**] in the case of
Hydro-Québec Pension Funds) of the outstanding capital stock of any publicly traded company engaged
in a Restricted Business; (ii) prohibit the Seller Guarantor and its Affiliates to render
consulting services to any Governmental Entity relating directly or indirectly to the electric
transmission business in the Republic of Chile; (iii) prohibit Sellers Guarantor and its Affiliates
from owning an interest in or investing in any Person or participating in any joint bidding
arrangement or consortium so long as less than [**] of such Person’s, joint bidding arrangement’s
or consortium’s (X) annual revenues are from a Restricted Business or (Y) assets are directly or
indirectly used in connection with a Restricted Business; or (iv) be construed to restrict in any
manner the ability of the Sellers Guarantor and its Affiliates to carry any business outside the
Republic of Chile. Purchaser’s calculation of the Purchase Price is based, in part, on its
valuation of the future Transelec Business and Transelec’s opportunities with respect to [**], and
but for the covenants of the Parties contained in this Section 11.18, including the
Restricted Period in respect of [**], Purchaser would not have entered into or consummated the
transactions contemplated under this Agreement on the terms and conditions set forth herein.

          (b) For a period of [**], Sellers and Sellers Guarantor shall not, and shall cause their
Affiliates and their respective directors, officers, employees and representatives not to, directly
or indirectly: (i) cause, solicit, induce or encourage any employees of any of the Transelec
Entities to leave such employment or hire, employ or otherwise engage any such individual; or
(ii) cause, induce or encourage any material actual or prospective client, customer, supplier, or
licensor of any of the Transelec Entities (including any existing or former customer of any of the
Transelec Entities and any Person that becomes a client or customer of any of the Transelec
Entities after the Closing) or any other Person who has a material business relationship with any
of the Transelec Entities, to terminate or modify any such actual or prospective relationship. The
prohibition in (i) shall not prevent Sellers, Sellers Guarantor and their Affiliates from employing
(A) any such persons who contacts Sellers, Sellers Guarantor or any of their Affiliates on his or
her own initiative and without any direct solicitation by Sellers, Sellers Guarantor or any of
their Affiliates, (B) any such person who responds to general

63

 

solicitations of employment not specifically directed to employees of the Transelec Entities
and (C) the current Chief Executive Officer and Chief Financial Officer of Transelec.

          (c) From and after the Closing Date, Sellers and Sellers Guarantor shall not and shall cause
their directors, officers, employees and Affiliates not to, directly or indirectly, disclose,
reveal, divulge or communicate to any Person other than authorized officers, directors and
employees of Purchaser, any Confidential Information (as defined below). Sellers shall not have
any obligation to keep confidential (or cause its officers, directors or Affiliates to keep
confidential) any Confidential Information if and to the extent disclosure thereof is specifically
required by applicable Law; provided, however, that in the event disclosure is
required by applicable Law, Sellers shall, to the extent reasonably possible, provide Purchaser
with prompt notice of such requirement prior to making any disclosure so that Purchaser may seek an
appropriate protective order. For purposes of this Section 11.18(c), “Confidential
Information” means any information with respect to the Transelec Entities, except information
that (i) is generally available to the public on the date of this Agreement or (ii) becomes
generally available to the public other than as a result of a disclosure not otherwise permissible
hereunder.

          (d) The covenants and undertakings contained in this Section 11.18 relate to matters
which are of a special, unique and extraordinary character and a violation of any of the terms of
this Section 11.18 may cause irreparable injury to Purchaser, the amount of which may be
impossible to estimate or determine and which cannot be adequately compensated. Accordingly, the
remedy at law for any breach of this Section 11.18 may be inadequate. Therefore, Purchaser
may be entitled to a temporary and permanent injunction, restraining order or other equitable
relief from any court of competent jurisdiction in the event of any breach of this Section
11.18 without the necessity of proving actual damage or posting any bond whatsoever. The
rights and remedies provided by this Section 11.18 are cumulative and in addition to any
other rights and remedies which Purchaser may have hereunder or at law or in equity. In the event
that Purchaser were to seek damages for any breach of this Section 11.18, the portion of
the consideration delivered to Sellers hereunder which is allocated by the parties to the foregoing
covenant shall not be considered a measure of or limit on such damages.

          (e) The Parties agree that, if any court of competent jurisdiction determines that a specified
time period, a specified geographical area, a specified business limitation or any other relevant
feature of this Section 11.18 is unreasonable, arbitrary or against public policy, then a
lesser period of time, geographical area, business limitation or other relevant feature which is
determined by such court to be reasonable, not arbitrary and not against public policy may be
enforced against the applicable party.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first above
written.

	 	 	 	 	 
	 	HQ PUNO LTD.

 	 
	 	By:  	/s/ Daniel Garant
 	 
	 	 	Name:  Daniel Garant 	 
	 

	 	 	 	 	 
	 	HYDRO-QUÉBEC INTERNATIONAL 

TRANSMISIÓN SUDAMÉRICA
S.A.

 	 
	 	By:  	/s/ Daniel Garant
 	 
	 	 	Name:  Daniel Garant 	 
	 

	 	 	 	 	 
	 	HYDRO-QUÉBEC INTERNATIONAL INC.

 	 
	 	By:  	/s/ Daniel Garant
 	 
	 	 	Name:  Daniel Garant 	 
	 

	 	 	 	 	 
	 	RENTAS ELÉCTRICAS IV LIMITADA

 	 
	 	By:  	/s/ Jeffrey Blidner
 	 
	 	 	Name:  Jeffrey Blidner 	 
	 

	 	 	 	 	 
	 	RENTAS ELÉCTRICAS III LIMITADA

 	 
	 	By:  	/s/ Jeffrey Blidner
 	 
	 	 	Name:  Jeffrey Blidner 	 
	 

65

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